Intrinsic value of North American Energy Partners - NOA

Previous Close

$3.90

  Intrinsic Value

$0.93

stock screener

  Rating & Target

str. sell

-76%

  Value-price divergence*

-52%

Previous close

$3.90

 
Intrinsic value

$0.93

 
Up/down potential

-76%

 
Rating

str. sell

 
Value-price divergence*

-52%

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

We calculate the intrinsic value of NOA 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 0.1

 

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, %
  -24.04
  19.00
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
Revenue, $m
  158
  188
  221
  257
  296
  338
  383
  431
  481
  534
  590
  648
  709
  773
  839
  908
  979
  1,054
  1,131
  1,211
  1,295
  1,382
  1,472
  1,566
  1,664
  1,765
  1,871
  1,982
  2,097
  2,217
  2,343
Variable operating expenses, $m
 
  187
  220
  256
  295
  336
  381
  428
  478
  531
  587
  645
  705
  768
  834
  902
  974
  1,048
  1,124
  1,204
  1,287
  1,373
  1,463
  1,557
  1,654
  1,755
  1,860
  1,970
  2,085
  2,204
  2,329
Fixed operating expenses, $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
Total operating expenses, $m
  155
  187
  220
  256
  295
  336
  381
  428
  478
  531
  587
  645
  705
  768
  834
  902
  974
  1,048
  1,124
  1,204
  1,287
  1,373
  1,463
  1,557
  1,654
  1,755
  1,860
  1,970
  2,085
  2,204
  2,329
Operating income, $m
  3
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
EBITDA, $m
  34
  24
  28
  33
  38
  43
  49
  55
  61
  68
  75
  82
  90
  98
  106
  115
  124
  134
  144
  154
  164
  175
  187
  199
  211
  224
  237
  252
  266
  281
  297
Interest expense (income), $m
  4
  3
  5
  6
  8
  9
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
Earnings before tax, $m
  0
  -2
  -3
  -4
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -60
  -64
  -68
  -72
  -76
Tax expense, $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
  0
Net income, $m
  0
  -2
  -3
  -4
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -60
  -64
  -68
  -72
  -76

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  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
  259
  296
  348
  405
  467
  533
  604
  679
  758
  842
  929
  1,021
  1,117
  1,217
  1,321
  1,430
  1,542
  1,660
  1,781
  1,908
  2,039
  2,176
  2,318
  2,466
  2,620
  2,780
  2,947
  3,121
  3,303
  3,492
  3,690
Adjusted assets (=assets-cash), $m
  249
  296
  348
  405
  467
  533
  604
  679
  758
  842
  929
  1,021
  1,117
  1,217
  1,321
  1,430
  1,542
  1,660
  1,781
  1,908
  2,039
  2,176
  2,318
  2,466
  2,620
  2,780
  2,947
  3,121
  3,303
  3,492
  3,690
Revenue / Adjusted assets
  0.635
  0.635
  0.635
  0.635
  0.634
  0.634
  0.634
  0.635
  0.635
  0.634
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
Average production assets, $m
  191
  227
  267
  311
  358
  409
  463
  521
  582
  646
  714
  784
  858
  934
  1,014
  1,098
  1,184
  1,274
  1,368
  1,465
  1,566
  1,671
  1,780
  1,893
  2,011
  2,134
  2,263
  2,396
  2,535
  2,681
  2,832
Working capital, $m
  0
  17
  20
  23
  26
  30
  34
  38
  43
  48
  53
  58
  63
  69
  75
  81
  87
  94
  101
  108
  115
  123
  131
  139
  148
  157
  167
  176
  187
  197
  209
Total debt, $m
  75
  90
  117
  147
  179
  214
  251
  291
  333
  377
  423
  471
  522
  574
  629
  686
  745
  807
  871
  938
  1,007
  1,079
  1,153
  1,231
  1,312
  1,396
  1,484
  1,576
  1,671
  1,771
  1,875
Total liabilities, $m
  141
  156
  183
  213
  245
  280
  317
  357
  399
  443
  489
  537
  588
  640
  695
  752
  811
  873
  937
  1,004
  1,073
  1,145
  1,219
  1,297
  1,378
  1,462
  1,550
  1,642
  1,737
  1,837
  1,941
Total equity, $m
  118
  140
  165
  192
  221
  253
  286
  322
  359
  399
  441
  484
  530
  577
  626
  678
  731
  787
  844
  904
  967
  1,031
  1,099
  1,169
  1,242
  1,318
  1,397
  1,479
  1,565
  1,655
  1,749
Total liabilities and equity, $m
  259
  296
  348
  405
  466
  533
  603
  679
  758
  842
  930
  1,021
  1,118
  1,217
  1,321
  1,430
  1,542
  1,660
  1,781
  1,908
  2,040
  2,176
  2,318
  2,466
  2,620
  2,780
  2,947
  3,121
  3,302
  3,492
  3,690
Debt-to-equity ratio
  0.636
  0.640
  0.710
  0.770
  0.810
  0.850
  0.880
  0.900
  0.930
  0.940
  0.960
  0.970
  0.990
  1.000
  1.000
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
  1.070
Adjusted equity ratio
  0.434
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  -2
  -3
  -4
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -60
  -64
  -68
  -72
  -76
Depreciation, amort., depletion, $m
  31
  23
  27
  31
  36
  41
  46
  52
  58
  65
  71
  78
  86
  93
  101
  110
  118
  127
  137
  146
  157
  167
  178
  189
  201
  213
  226
  240
  254
  268
  283
Funds from operations, $m
  25
  21
  23
  27
  30
  34
  38
  42
  46
  51
  56
  61
  66
  71
  77
  83
  89
  96
  102
  109
  117
  124
  132
  140
  148
  157
  166
  176
  186
  196
  207
Change in working capital, $m
  -4
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
Cash from operations, $m
  29
  18
  21
  23
  27
  30
  34
  38
  42
  46
  51
  56
  61
  66
  71
  77
  83
  89
  96
  102
  109
  116
  124
  132
  140
  148
  157
  166
  176
  185
  196
Maintenance CAPEX, $m
  0
  -19
  -23
  -27
  -31
  -36
  -41
  -46
  -52
  -58
  -65
  -71
  -78
  -86
  -93
  -101
  -110
  -118
  -127
  -137
  -146
  -157
  -167
  -178
  -189
  -201
  -213
  -226
  -240
  -254
  -268
New CAPEX, $m
  -20
  -36
  -40
  -44
  -47
  -51
  -54
  -58
  -61
  -64
  -67
  -71
  -74
  -77
  -80
  -83
  -87
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -118
  -123
  -128
  -134
  -139
  -145
  -152
Cash from investing activities, $m
  -8
  -55
  -63
  -71
  -78
  -87
  -95
  -104
  -113
  -122
  -132
  -142
  -152
  -163
  -173
  -184
  -197
  -208
  -220
  -234
  -247
  -262
  -276
  -292
  -307
  -324
  -341
  -360
  -379
  -399
  -420
Free cash flow, $m
  21
  -38
  -42
  -47
  -52
  -57
  -61
  -66
  -71
  -76
  -81
  -86
  -91
  -97
  -102
  -108
  -113
  -119
  -125
  -132
  -138
  -145
  -152
  -160
  -168
  -176
  -185
  -194
  -203
  -213
  -224
Issuance/(repayment) of debt, $m
  -25
  25
  27
  30
  32
  35
  37
  39
  42
  44
  46
  48
  50
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  92
  95
  100
  104
Issuance/(repurchase) of shares, $m
  -9
  25
  28
  31
  35
  39
  42
  46
  50
  53
  57
  61
  65
  69
  74
  78
  83
  87
  92
  97
  102
  108
  114
  120
  126
  132
  139
  146
  154
  162
  170
Cash from financing (excl. dividends), $m  
  -35
  50
  55
  61
  67
  74
  79
  85
  92
  97
  103
  109
  115
  122
  129
  135
  142
  149
  156
  164
  171
  180
  189
  198
  207
  216
  227
  238
  249
  262
  274
Total cash flow (excl. dividends), $m
  -13
  12
  13
  14
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  46
  48
  50
Retained Cash Flow (-), $m
  9
  -25
  -28
  -31
  -35
  -39
  -42
  -46
  -50
  -53
  -57
  -61
  -65
  -69
  -74
  -78
  -83
  -87
  -92
  -97
  -102
  -108
  -114
  -120
  -126
  -132
  -139
  -146
  -154
  -162
  -170
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
 
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -92
  -97
  -102
  -108
  -114
  -120
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -17
  -17
  -17
  -16
  -15
  -14
  -13
  -12
  -11
  -10
  -9
  -8
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  100
  83.4
  70.1
  59.3
  50.5
  43.3
  37.4
  32.4
  28.3
  24.7
  21.8
  19.2
  17.0
  15.1
  13.5
  12.0
  10.8
  9.7
  8.7
  7.8
  7.1
  6.4
  5.8
  5.2
  4.8
  4.3
  3.9
  3.6
  3.2
  3.0
  2.7

North American Energy Partners Inc., through its subsidiaries, provides a range of mining and heavy construction services to customers in the resource development and industrial construction sectors primarily in Western Canada. The company offers construction and operations support services through various stages of an oil sands project's lifecycle. Its services include site clearing and access road construction; site development and underground utility installation; construction and relocation of mine site infrastructure; stripping, muskeg removal, and overburden removal; heavy equipment and labor supply; material hauling; and mine reclamation, and tailings pond construction and maintenance. The company also provides site development services for plants and refineries, including in situ oil sands facilities; and heavy and light civil construction services for various resource infrastructure projects. North American Energy Partners Inc. was founded in 1953 and is headquartered in Edmonton, Canada.

FINANCIAL RATIOS  of  North American Energy Partners (NOA)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 3.8
Price to Free Cash Flow 12.3
Growth Rates
Sales Growth Rate -24%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate -4.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 43.2%
Total Debt to Equity 63.6%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -1.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 15.2%
Gross Margin - 3 Yr. Avg. 12.5%
EBITDA Margin 22.2%
EBITDA Margin - 3 Yr. Avg. 16.5%
Operating Margin 1.9%
Oper. Margin - 3 Yr. Avg. 1.6%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. -1.1%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -1.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

NOA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NOA stock intrinsic value calculation we used $158 million for the last fiscal year's total revenue generated by North American Energy Partners. The default revenue input number comes from 2016 income statement of North American Energy Partners. 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 NOA stock valuation model: a) initial revenue growth rate of 19% 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 5%, whose default value for NOA is calculated based on our internal credit rating of North American Energy Partners, 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 North American Energy Partners.
    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 NOA stock the variable cost ratio is equal to 99.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NOA 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 5.1% for North American Energy Partners.

Corporate tax rate of 27% is the nominal tax rate for North American Energy Partners. 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 NOA 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 NOA are equal to 120.9%.

Life of production assets of 10 years is the average useful life of capital assets used in North American Energy Partners 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 NOA is equal to 8.9%. 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 - $118 million for North American Energy Partners - 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 31.67 million for North American Energy Partners 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 North American Energy Partners at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ North American Energy Partners posts 2Q loss   [Aug-03-17 03:40PM  Associated Press]
▶ North American Energy Partners posts 1Q profit   [May-03-17 05:02AM  Associated Press]
▶ IIROC Trade Resumption - NOA.DB   [Mar-15-17 08:59AM  PR Newswire]
▶ IIROC Trade Resumption - NGD NOA SPB   [Feb-23-17 08:06AM  CNW Group]
▶ IIROC Trading Halt - NOA (all issues)   [Feb-22-17 05:11PM  CNW Group]
▶ North American Energy Partners posts 4Q loss   [Feb-14-17 06:42PM  Associated Press]
▶ The Final Days and Deals of Aubrey McClendon   [Mar-13-16 10:53AM  at Fortune]
▶ Do Hedge Funds Love Key Energy Services, Inc. (KEG)?   [Nov-26  12:03PM  at Insider Monkey]
▶ Hedge Funds Have Mixed Feelings On These Two Energy Stocks   [Sep-18  12:06PM  at Insider Monkey]
Stock chart of NOA Financial statements of NOA
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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