Intrinsic value of Dorian LPG - LPG

Previous Close

$6.45

  Intrinsic Value

$9.33

stock screener

  Rating & Target

buy

+45%

  Value-price divergence*

+319%

Previous close

$6.45

 
Intrinsic value

$9.33

 
Up/down potential

+45%

 
Rating

buy

 
Value-price divergence*

+319%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LPG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  177.88
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  289
  295
  302
  309
  318
  328
  338
  350
  362
  376
  390
  405
  422
  439
  458
  478
  499
  521
  544
  569
  595
  623
  652
  683
  715
  749
  785
  823
  862
  904
  948
Variable operating expenses, $m
 
  91
  93
  95
  98
  101
  104
  108
  112
  116
  120
  125
  130
  135
  141
  147
  154
  160
  168
  175
  183
  192
  201
  210
  220
  231
  242
  253
  266
  278
  292
Fixed operating expenses, $m
 
  44
  45
  46
  47
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
  69
  70
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
Total operating expenses, $m
  131
  135
  138
  141
  145
  150
  154
  159
  164
  170
  175
  181
  188
  194
  202
  209
  218
  225
  235
  244
  253
  264
  275
  286
  298
  311
  324
  337
  352
  366
  382
Operating income, $m
  158
  160
  164
  168
  173
  178
  184
  191
  198
  206
  215
  224
  234
  245
  256
  268
  281
  295
  310
  325
  342
  359
  377
  397
  417
  439
  461
  485
  511
  538
  566
EBITDA, $m
  201
  204
  208
  214
  220
  227
  235
  243
  252
  262
  273
  284
  297
  310
  324
  339
  356
  373
  391
  410
  430
  451
  474
  498
  523
  550
  578
  608
  639
  672
  707
Interest expense (income), $m
  8
  27
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
Earnings before tax, $m
  130
  133
  136
  140
  144
  148
  154
  159
  165
  172
  180
  187
  196
  205
  215
  225
  236
  248
  260
  273
  287
  302
  318
  334
  352
  370
  389
  410
  432
  455
  479
Tax expense, $m
  0
  36
  37
  38
  39
  40
  41
  43
  45
  47
  48
  51
  53
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  95
  100
  105
  111
  117
  123
  129
Net income, $m
  130
  97
  99
  102
  105
  108
  112
  116
  121
  126
  131
  137
  143
  150
  157
  164
  172
  181
  190
  199
  210
  220
  232
  244
  257
  270
  284
  299
  315
  332
  349

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  46
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,842
  1,831
  1,873
  1,921
  1,975
  2,035
  2,101
  2,172
  2,250
  2,333
  2,423
  2,519
  2,621
  2,730
  2,845
  2,968
  3,098
  3,236
  3,381
  3,535
  3,698
  3,869
  4,050
  4,240
  4,441
  4,653
  4,875
  5,109
  5,356
  5,615
  5,888
Adjusted assets (=assets-cash), $m
  1,796
  1,831
  1,873
  1,921
  1,975
  2,035
  2,101
  2,172
  2,250
  2,333
  2,423
  2,519
  2,621
  2,730
  2,845
  2,968
  3,098
  3,236
  3,381
  3,535
  3,698
  3,869
  4,050
  4,240
  4,441
  4,653
  4,875
  5,109
  5,356
  5,615
  5,888
Revenue / Adjusted assets
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
  0.161
Average production assets, $m
  1,243
  1,267
  1,296
  1,330
  1,367
  1,409
  1,454
  1,504
  1,557
  1,615
  1,677
  1,743
  1,814
  1,889
  1,969
  2,054
  2,144
  2,240
  2,340
  2,447
  2,559
  2,678
  2,803
  2,935
  3,074
  3,220
  3,374
  3,536
  3,707
  3,887
  4,075
Working capital, $m
  18
  39
  40
  41
  42
  43
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  75
  78
  82
  85
  89
  94
  98
  103
  108
  113
  118
  124
Total debt, $m
  813
  783
  802
  823
  848
  875
  904
  937
  972
  1,009
  1,050
  1,093
  1,139
  1,188
  1,240
  1,296
  1,354
  1,416
  1,482
  1,551
  1,625
  1,702
  1,783
  1,869
  1,960
  2,055
  2,156
  2,261
  2,373
  2,490
  2,613
Total liabilities, $m
  857
  826
  845
  866
  891
  918
  947
  980
  1,015
  1,052
  1,093
  1,136
  1,182
  1,231
  1,283
  1,339
  1,397
  1,459
  1,525
  1,594
  1,668
  1,745
  1,826
  1,912
  2,003
  2,098
  2,199
  2,304
  2,416
  2,533
  2,656
Total equity, $m
  986
  1,005
  1,028
  1,055
  1,084
  1,117
  1,153
  1,193
  1,235
  1,281
  1,330
  1,383
  1,439
  1,499
  1,562
  1,629
  1,701
  1,776
  1,856
  1,941
  2,030
  2,124
  2,223
  2,328
  2,438
  2,554
  2,676
  2,805
  2,940
  3,083
  3,233
Total liabilities and equity, $m
  1,843
  1,831
  1,873
  1,921
  1,975
  2,035
  2,100
  2,173
  2,250
  2,333
  2,423
  2,519
  2,621
  2,730
  2,845
  2,968
  3,098
  3,235
  3,381
  3,535
  3,698
  3,869
  4,049
  4,240
  4,441
  4,652
  4,875
  5,109
  5,356
  5,616
  5,889
Debt-to-equity ratio
  0.825
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
Adjusted equity ratio
  0.523
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  130
  97
  99
  102
  105
  108
  112
  116
  121
  126
  131
  137
  143
  150
  157
  164
  172
  181
  190
  199
  210
  220
  232
  244
  257
  270
  284
  299
  315
  332
  349
Depreciation, amort., depletion, $m
  43
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
Funds from operations, $m
  113
  141
  144
  148
  152
  157
  162
  168
  175
  182
  189
  197
  206
  215
  225
  235
  246
  258
  271
  284
  298
  313
  329
  345
  363
  382
  401
  422
  443
  466
  490
Change in working capital, $m
  -38
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Cash from operations, $m
  151
  140
  143
  147
  151
  156
  161
  167
  173
  180
  187
  195
  204
  213
  222
  233
  244
  255
  268
  281
  295
  309
  325
  341
  359
  377
  396
  417
  438
  461
  485
Maintenance CAPEX, $m
  0
  -43
  -44
  -45
  -46
  -47
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
  -106
  -111
  -117
  -122
  -128
  -134
New CAPEX, $m
  -896
  -25
  -29
  -33
  -37
  -41
  -45
  -50
  -54
  -58
  -62
  -66
  -71
  -75
  -80
  -85
  -90
  -95
  -101
  -106
  -112
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -171
  -180
  -189
Cash from investing activities, $m
  -910
  -68
  -73
  -78
  -83
  -88
  -94
  -100
  -106
  -112
  -118
  -124
  -131
  -138
  -145
  -153
  -161
  -169
  -178
  -187
  -197
  -208
  -218
  -229
  -241
  -252
  -265
  -279
  -293
  -308
  -323
Free cash flow, $m
  -759
  72
  70
  69
  68
  67
  67
  67
  67
  68
  69
  71
  73
  75
  77
  80
  83
  86
  90
  93
  98
  102
  107
  113
  118
  124
  131
  138
  145
  153
  161
Issuance/(repayment) of debt, $m
  636
  16
  19
  22
  24
  27
  30
  32
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  77
  82
  86
  91
  95
  100
  106
  111
  117
  123
Issuance/(repurchase) of shares, $m
  -21
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  601
  16
  19
  22
  24
  27
  30
  32
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  77
  82
  86
  91
  95
  100
  106
  111
  117
  123
Total cash flow (excl. dividends), $m
  -158
  88
  89
  90
  92
  94
  96
  99
  102
  106
  110
  114
  119
  124
  129
  135
  141
  148
  155
  163
  171
  180
  189
  199
  209
  220
  231
  244
  256
  270
  284
Retained Cash Flow (-), $m
  -113
  -19
  -23
  -26
  -30
  -33
  -36
  -39
  -43
  -46
  -49
  -53
  -56
  -60
  -64
  -67
  -71
  -76
  -80
  -84
  -89
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -135
  -142
  -150
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  69
  66
  64
  62
  61
  60
  60
  60
  60
  61
  61
  63
  64
  66
  68
  70
  72
  75
  78
  82
  86
  90
  94
  99
  104
  109
  115
  121
  128
  135
Discount rate, %
 
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
 
  64
  57
  51
  46
  40
  36
  32
  28
  24
  21
  18
  16
  13
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Dorian LPG Ltd. operates as a liquefied petroleum gas (LPG) shipping company worldwide. The company engages in the transportation of LPG. It primarily serves energy companies and commodity traders through its fleet of 22 very large gas carriers. Dorian LPG Ltd. was founded in 2013 and is headquartered in Stamford, Connecticut.

FINANCIAL RATIOS  of  Dorian LPG (LPG)

Valuation Ratios
P/E Ratio 2.8
Price to Sales 1.3
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow -0.5
Growth Rates
Sales Growth Rate 177.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 184.4%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 75.8%
Total Debt to Equity 82.5%
Interest Coverage 17
Management Effectiveness
Return On Assets 9.4%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 6.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 95.8%
Gross Margin - 3 Yr. Avg. 84.2%
EBITDA Margin 62.6%
EBITDA Margin - 3 Yr. Avg. 45.4%
Operating Margin 54.7%
Oper. Margin - 3 Yr. Avg. 33%
Pre-Tax Margin 45%
Pre-Tax Margin - 3 Yr. Avg. 28.2%
Net Profit Margin 45%
Net Profit Margin - 3 Yr. Avg. 28.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

LPG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LPG stock intrinsic value calculation we used $289 million for the last fiscal year's total revenue generated by Dorian LPG. The default revenue input number comes from 2016 income statement of Dorian LPG. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LPG stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.1%, whose default value for LPG is calculated based on our internal credit rating of Dorian LPG, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Dorian LPG.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LPG stock the variable cost ratio is equal to 30.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $43 million in the base year in the intrinsic value calculation for LPG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Dorian LPG.

Corporate tax rate of 27% is the nominal tax rate for Dorian LPG. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LPG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LPG are equal to 429.9%.

Life of production assets of 28.9 years is the average useful life of capital assets used in Dorian LPG operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LPG is equal to 13.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $986 million for Dorian LPG - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 53.825 million for Dorian LPG is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Dorian LPG at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Dorian LPG reports 1Q loss   [Jul-31-17 11:02PM  Associated Press]
▶ ETFs with exposure to Dorian LPG Ltd. : June 30, 2017   [Jun-30-17 03:08PM  Capital Cube]
▶ Correction Is an Opportunity to Accumulate Dorian LPG   [Jun-28-17 02:05PM  GuruFocus.com]
▶ ETFs with exposure to Dorian LPG Ltd. : June 20, 2017   [Jun-20-17 03:05PM  Capital Cube]
▶ Dorian LPG posts 4Q profit   [06:28AM  Associated Press]
▶ Dorian LPG Ltd. Announces Amendment To Debt Facility   [Jun-01-17 08:00AM  PR Newswire]
▶ ETFs with exposure to Dorian LPG Ltd. : April 25, 2017   [Apr-25-17 03:39PM  Capital Cube]
▶ Dorian LPG misses 3Q profit forecasts   [06:08AM  Associated Press]
▶ Know the Most Explosive Stocks of 2017   [Jan-25-17 01:04PM  GuruFocus.com]
▶ How Dorian LPG Ltd (LPG) Stocks Up Against Its Peers   [Dec-12-16 08:35PM  at Insider Monkey]
Stock chart of LPG Financial statements of LPG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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