Intrinsic value of Pampa Energia ADR - PAM

Previous Close

$38.40

  Intrinsic Value

$6.97

stock screener

  Rating & Target

str. sell

-82%

Previous close

$38.40

 
Intrinsic value

$6.97

 
Up/down potential

-82%

 
Rating

str. sell

We calculate the intrinsic value of PAM 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  337.34
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  2,003
  3,136
  4,845
  7,246
  10,513
  14,833
  20,392
  27,372
  35,941
  46,247
  58,414
  72,537
  88,683
  106,893
  127,182
  149,543
  173,955
  200,381
  228,780
  259,105
  291,311
  325,356
  361,204
  398,828
  438,210
  479,346
  522,240
  566,910
  613,386
  661,712
  711,939
Variable operating expenses, $m
 
  2,799
  4,318
  6,451
  9,355
  13,193
  18,132
  24,334
  31,949
  41,107
  51,918
  64,454
  78,801
  94,982
  113,010
  132,880
  154,571
  178,053
  203,287
  230,233
  258,851
  289,102
  320,955
  354,387
  389,381
  425,933
  464,047
  503,740
  545,038
  587,978
  632,609
Fixed operating expenses, $m
 
  217
  221
  226
  231
  236
  242
  247
  252
  258
  264
  269
  275
  281
  288
  294
  300
  307
  314
  321
  328
  335
  342
  350
  357
  365
  373
  382
  390
  398
  407
Total operating expenses, $m
  1,861
  3,016
  4,539
  6,677
  9,586
  13,429
  18,374
  24,581
  32,201
  41,365
  52,182
  64,723
  79,076
  95,263
  113,298
  133,174
  154,871
  178,360
  203,601
  230,554
  259,179
  289,437
  321,297
  354,737
  389,738
  426,298
  464,420
  504,122
  545,428
  588,376
  633,016
Operating income, $m
  142
  120
  306
  568
  928
  1,404
  2,018
  2,791
  3,740
  4,883
  6,233
  7,813
  9,607
  11,630
  13,884
  16,370
  19,083
  22,021
  25,179
  28,551
  32,133
  35,919
  39,906
  44,091
  48,472
  53,048
  57,819
  62,788
  67,959
  73,335
  78,923
EBITDA, $m
  335
  443
  798
  1,298
  1,980
  2,883
  4,047
  5,510
  7,307
  9,469
  12,023
  14,987
  18,377
  22,201
  26,462
  31,159
  36,287
  41,839
  47,805
  54,177
  60,943
  68,097
  75,629
  83,535
  91,811
  100,455
  109,469
  118,856
  128,623
  138,778
  149,334
Interest expense (income), $m
  97
  390
  988
  1,856
  3,075
  4,734
  6,928
  9,751
  13,296
  17,648
  22,882
  29,061
  36,233
  44,433
  53,681
  63,984
  75,341
  87,738
  101,159
  115,581
  130,982
  147,338
  164,628
  182,833
  201,940
  221,941
  242,832
  264,615
  287,301
  310,904
  335,446
Earnings before tax, $m
  -86
  -270
  -682
  -1,287
  -2,147
  -3,330
  -4,910
  -6,961
  -9,556
  -12,765
  -16,649
  -21,247
  -26,626
  -32,803
  -39,797
  -47,615
  -56,258
  -65,717
  -75,980
  -87,030
  -98,849
  -111,419
  -124,721
  -138,742
  -153,469
  -168,893
  -185,012
  -201,827
  -219,342
  -237,569
  -256,523
Tax expense, $m
  -70
  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
  -1
  -270
  -682
  -1,287
  -2,147
  -3,330
  -4,910
  -6,961
  -9,556
  -12,765
  -16,649
  -21,247
  -26,626
  -32,803
  -39,797
  -47,615
  -56,258
  -65,717
  -75,980
  -87,030
  -98,849
  -111,419
  -124,721
  -138,742
  -153,469
  -168,893
  -185,012
  -201,827
  -219,342
  -237,569
  -256,523

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  360
  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
  4,946
  7,743
  11,963
  17,891
  25,959
  36,624
  50,350
  67,585
  88,743
  114,191
  144,232
  179,103
  218,971
  263,934
  314,029
  369,242
  429,517
  494,768
  564,889
  639,766
  719,287
  803,348
  891,861
  984,759
  1,082,001
  1,183,570
  1,289,481
  1,399,778
  1,514,535
  1,633,856
  1,757,875
Adjusted assets (=assets-cash), $m
  4,586
  7,743
  11,963
  17,891
  25,959
  36,624
  50,350
  67,585
  88,743
  114,191
  144,232
  179,103
  218,971
  263,934
  314,029
  369,242
  429,517
  494,768
  564,889
  639,766
  719,287
  803,348
  891,861
  984,759
  1,082,001
  1,183,570
  1,289,481
  1,399,778
  1,514,535
  1,633,856
  1,757,875
Revenue / Adjusted assets
  0.437
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
Average production assets, $m
  1,836
  3,102
  4,792
  7,166
  10,398
  14,670
  20,167
  27,071
  35,546
  45,738
  57,771
  71,739
  87,708
  105,717
  125,783
  147,898
  172,041
  198,177
  226,263
  256,255
  288,107
  321,777
  357,230
  394,440
  433,390
  474,073
  516,495
  560,674
  606,639
  654,433
  704,108
Working capital, $m
  -442
  -1,671
  -2,582
  -3,862
  -5,604
  -7,906
  -10,869
  -14,589
  -19,156
  -24,650
  -31,135
  -38,662
  -47,268
  -56,974
  -67,788
  -79,706
  -92,718
  -106,803
  -121,940
  -138,103
  -155,269
  -173,415
  -192,522
  -212,575
  -233,566
  -255,491
  -278,354
  -302,163
  -326,935
  -352,692
  -379,464
Total debt, $m
  1,662
  4,115
  7,732
  12,812
  19,726
  28,866
  40,629
  55,399
  73,532
  95,340
  121,086
  150,971
  185,137
  223,670
  266,602
  313,920
  365,576
  421,495
  481,589
  545,759
  613,908
  685,948
  761,804
  841,418
  924,754
  1,011,798
  1,102,564
  1,197,089
  1,295,435
  1,397,694
  1,503,978
Total liabilities, $m
  4,238
  6,636
  10,253
  15,333
  22,247
  31,387
  43,150
  57,920
  76,053
  97,861
  123,607
  153,492
  187,658
  226,191
  269,123
  316,441
  368,096
  424,016
  484,110
  548,279
  616,429
  688,469
  764,325
  843,939
  927,274
  1,014,319
  1,105,085
  1,199,609
  1,297,956
  1,400,214
  1,506,499
Total equity, $m
  707
  1,107
  1,711
  2,558
  3,712
  5,237
  7,200
  9,665
  12,690
  16,329
  20,625
  25,612
  31,313
  37,743
  44,906
  52,802
  61,421
  70,752
  80,779
  91,487
  102,858
  114,879
  127,536
  140,821
  154,726
  169,250
  184,396
  200,168
  216,578
  233,641
  251,376
Total liabilities and equity, $m
  4,945
  7,743
  11,964
  17,891
  25,959
  36,624
  50,350
  67,585
  88,743
  114,190
  144,232
  179,104
  218,971
  263,934
  314,029
  369,243
  429,517
  494,768
  564,889
  639,766
  719,287
  803,348
  891,861
  984,760
  1,082,000
  1,183,569
  1,289,481
  1,399,777
  1,514,534
  1,633,855
  1,757,875
Debt-to-equity ratio
  2.351
  3.720
  4.520
  5.010
  5.310
  5.510
  5.640
  5.730
  5.790
  5.840
  5.870
  5.890
  5.910
  5.930
  5.940
  5.950
  5.950
  5.960
  5.960
  5.970
  5.970
  5.970
  5.970
  5.980
  5.980
  5.980
  5.980
  5.980
  5.980
  5.980
  5.980
Adjusted equity ratio
  0.087
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  -270
  -682
  -1,287
  -2,147
  -3,330
  -4,910
  -6,961
  -9,556
  -12,765
  -16,649
  -21,247
  -26,626
  -32,803
  -39,797
  -47,615
  -56,258
  -65,717
  -75,980
  -87,030
  -98,849
  -111,419
  -124,721
  -138,742
  -153,469
  -168,893
  -185,012
  -201,827
  -219,342
  -237,569
  -256,523
Depreciation, amort., depletion, $m
  193
  323
  492
  729
  1,052
  1,480
  2,029
  2,720
  3,567
  4,586
  5,790
  7,174
  8,771
  10,572
  12,578
  14,790
  17,204
  19,818
  22,626
  25,626
  28,811
  32,178
  35,723
  39,444
  43,339
  47,407
  51,649
  56,067
  60,664
  65,443
  70,411
Funds from operations, $m
  484
  53
  -190
  -558
  -1,095
  -1,851
  -2,881
  -4,241
  -5,989
  -8,178
  -10,859
  -14,073
  -17,856
  -22,232
  -27,218
  -32,825
  -39,053
  -45,899
  -53,354
  -61,405
  -70,039
  -79,241
  -88,998
  -99,298
  -110,130
  -121,486
  -133,363
  -145,760
  -158,678
  -172,126
  -186,113
Change in working capital, $m
  101
  -627
  -911
  -1,280
  -1,742
  -2,302
  -2,963
  -3,720
  -4,567
  -5,493
  -6,485
  -7,528
  -8,606
  -9,706
  -10,814
  -11,919
  -13,011
  -14,085
  -15,137
  -16,163
  -17,166
  -18,146
  -19,107
  -20,054
  -20,991
  -21,925
  -22,862
  -23,809
  -24,772
  -25,757
  -26,771
Cash from operations, $m
  383
  679
  721
  722
  647
  451
  82
  -521
  -1,421
  -2,685
  -4,374
  -6,546
  -9,250
  -12,526
  -16,405
  -20,907
  -26,042
  -31,814
  -38,217
  -45,241
  -52,873
  -61,095
  -69,891
  -79,244
  -89,139
  -99,561
  -110,501
  -121,950
  -133,906
  -146,369
  -159,341
Maintenance CAPEX, $m
  0
  -194
  -310
  -479
  -717
  -1,040
  -1,467
  -2,017
  -2,707
  -3,555
  -4,574
  -5,777
  -7,174
  -8,771
  -10,572
  -12,578
  -14,790
  -17,204
  -19,818
  -22,626
  -25,626
  -28,811
  -32,178
  -35,723
  -39,444
  -43,339
  -47,407
  -51,649
  -56,067
  -60,664
  -65,443
New CAPEX, $m
  -460
  -1,163
  -1,690
  -2,374
  -3,232
  -4,272
  -5,498
  -6,903
  -8,475
  -10,193
  -12,033
  -13,968
  -15,969
  -18,010
  -20,065
  -22,115
  -24,143
  -26,136
  -28,087
  -29,992
  -31,852
  -33,670
  -35,454
  -37,210
  -38,949
  -40,683
  -42,422
  -44,179
  -45,965
  -47,794
  -49,675
Cash from investing activities, $m
  -719
  -1,357
  -2,000
  -2,853
  -3,949
  -5,312
  -6,965
  -8,920
  -11,182
  -13,748
  -16,607
  -19,745
  -23,143
  -26,781
  -30,637
  -34,693
  -38,933
  -43,340
  -47,905
  -52,618
  -57,478
  -62,481
  -67,632
  -72,933
  -78,393
  -84,022
  -89,829
  -95,828
  -102,032
  -108,458
  -115,118
Free cash flow, $m
  -336
  -677
  -1,280
  -2,132
  -3,301
  -4,860
  -6,882
  -9,440
  -12,603
  -16,433
  -20,981
  -26,291
  -32,392
  -39,306
  -47,042
  -55,600
  -64,975
  -75,154
  -86,121
  -97,859
  -110,350
  -123,576
  -137,523
  -152,177
  -167,532
  -183,583
  -200,330
  -217,779
  -235,939
  -254,826
  -274,460
Issuance/(repayment) of debt, $m
  682
  2,489
  3,617
  5,080
  6,914
  9,140
  11,763
  14,770
  18,133
  21,809
  25,745
  29,885
  34,167
  38,533
  42,932
  47,318
  51,656
  55,920
  60,093
  64,170
  68,149
  72,040
  75,856
  79,614
  83,336
  87,045
  90,766
  94,524
  98,347
  102,258
  106,284
Issuance/(repurchase) of shares, $m
  0
  685
  1,285
  2,135
  3,301
  4,856
  6,873
  9,425
  12,582
  16,404
  20,945
  26,234
  32,327
  39,233
  46,960
  55,510
  64,877
  75,048
  86,007
  97,738
  110,221
  123,440
  137,379
  152,026
  167,374
  183,418
  200,158
  217,599
  235,753
  254,632
  274,258
Cash from financing (excl. dividends), $m  
  378
  3,174
  4,902
  7,215
  10,215
  13,996
  18,636
  24,195
  30,715
  38,213
  46,690
  56,119
  66,494
  77,766
  89,892
  102,828
  116,533
  130,968
  146,100
  161,908
  178,370
  195,480
  213,235
  231,640
  250,710
  270,463
  290,924
  312,123
  334,100
  356,890
  380,542
Total cash flow (excl. dividends), $m
  63
  2,497
  3,622
  5,083
  6,914
  9,136
  11,753
  14,755
  18,111
  21,780
  25,709
  29,828
  34,102
  38,460
  42,850
  47,228
  51,558
  55,814
  59,979
  64,048
  68,020
  71,904
  75,712
  79,463
  83,178
  86,880
  90,594
  94,345
  98,160
  102,064
  106,083
Retained Cash Flow (-), $m
  -260
  -685
  -1,285
  -2,135
  -3,301
  -4,856
  -6,873
  -9,425
  -12,582
  -16,404
  -20,945
  -26,234
  -32,327
  -39,233
  -46,960
  -55,510
  -64,877
  -75,048
  -86,007
  -97,738
  -110,221
  -123,440
  -137,379
  -152,026
  -167,374
  -183,418
  -200,158
  -217,599
  -235,753
  -254,632
  -274,258
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
 
  1,811
  2,337
  2,948
  3,613
  4,280
  4,881
  5,329
  5,529
  5,376
  4,764
  3,594
  1,774
  -773
  -4,110
  -8,282
  -13,319
  -19,234
  -26,028
  -33,690
  -42,201
  -51,536
  -61,667
  -72,563
  -84,196
  -96,538
  -109,564
  -123,254
  -137,592
  -152,568
  -168,175
Discount rate, %
 
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
 
  1,710
  2,072
  2,440
  2,774
  3,027
  3,157
  3,129
  2,921
  2,534
  1,985
  1,310
  560
  -209
  -939
  -1,579
  -2,092
  -2,453
  -2,654
  -2,703
  -2,620
  -2,431
  -2,168
  -1,864
  -1,547
  -1,240
  -961
  -721
  -522
  -366
  -247
Current shareholders' claim on cash, %
  100
  91.0
  81.5
  72.5
  64.2
  56.8
  50.2
  44.4
  39.3
  34.8
  30.8
  27.3
  24.3
  21.6
  19.2
  17.1
  15.2
  13.6
  12.1
  10.8
  9.6
  8.6
  7.7
  6.9
  6.1
  5.5
  4.9
  4.4
  3.9
  3.5
  3.1

Pampa Energia S.A. is an integrated electricity company. The Company, through its subsidiaries, is engaged in the generation, transmission and distribution of electricity in Argentina. Its segments include generation, transmission, distribution, oil and gas, and holding and others. Its generation segment includes a direct and indirect equity interest in Central Piedra Buena S.A., Central Termica Guemes S.A., Central Termica Loma de la Lata S.A. and Pampa Comercializadora S.A, among others, and investments in companies in the electricity generation sector. Its transmission segment includes an indirect equity interest through Compania Inversora en Transmision Electrica Citelec S.A. Its distribution segment includes an indirect equity interest in Electricidad Argentina S.A. and Empresa Distribuidora y Comercializadora Norte S.A. Its Oil and gas segment includes a direct interest in Petrolera Pampa S.A. Its holding and others segment includes financial investment operations, among others.

FINANCIAL RATIOS  of  Pampa Energia ADR (PAM)

Valuation Ratios
P/E Ratio -65121
Price to Sales 32.5
Price to Book 92.1
Price to Tangible Book
Price to Cash Flow 170
Price to Free Cash Flow -845.7
Growth Rates
Sales Growth Rate 337.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 49.8%
Cap. Spend. - 3 Yr. Gr. Rate 43%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 138.3%
Total Debt to Equity 235.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 12.8%
Return On Equity -0.2%
Return On Equity - 3 Yr. Avg. 30.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 37.1%
Gross Margin - 3 Yr. Avg. 14.8%
EBITDA Margin 10.2%
EBITDA Margin - 3 Yr. Avg. 39.7%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 24%
Pre-Tax Margin -4.3%
Pre-Tax Margin - 3 Yr. Avg. 22.6%
Net Profit Margin -0%
Net Profit Margin - 3 Yr. Avg. 18.3%
Effective Tax Rate 81.4%
Eff/ Tax Rate - 3 Yr. Avg. 36.6%
Payout Ratio -500%

PAM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PAM stock intrinsic value calculation we used $1960 million for the last fiscal year's total revenue generated by Pampa Energia ADR. The default revenue input number comes from 2016 income statement of Pampa Energia ADR. 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 PAM stock valuation model: a) initial revenue growth rate of 60% 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 5.9%, whose default value for PAM is calculated based on our internal credit rating of Pampa Energia ADR, 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 Pampa Energia ADR.
    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 PAM stock the variable cost ratio is equal to 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $212 million in the base year in the intrinsic value calculation for PAM 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 24% for Pampa Energia ADR.

Corporate tax rate of 27% is the nominal tax rate for Pampa Energia ADR. 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 PAM 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 PAM are equal to 98.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Pampa Energia ADR 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 PAM is equal to -53.3%. 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 - $692 million for Pampa Energia ADR - 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 1696 million for Pampa Energia ADR 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 Pampa Energia ADR at the current share price and the inputted number of shares is $65.1 billion.

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COMPANY NEWS

▶ Pampa posts 4Q profit   [Mar-13-18 05:03AM  Associated Press]
▶ Bear of the Day: El Paso Energy (EE)   [Jan-30-18 07:00AM  Zacks]
▶ [$$] Argentina Makes Progress on Economic Reforms   [Sep-15-17 11:35PM  Barrons.com]
▶ Pampa reports 2Q loss   [Aug-11-17 07:33PM  Associated Press]
▶ ETFs with exposure to Pampa Energía SA : July 31, 2017   [Jul-31-17 05:02PM  Capital Cube]
▶ ETFs with exposure to Pampa Energía SA : July 11, 2017   [Jul-11-17 02:54PM  Capital Cube]
▶ Oil Down, Everything Else Up on the Day   [May-25-17 06:50PM  Zacks]
▶ Pampa posts 1Q profit   [May-12-17 05:01AM  Associated Press]
▶ Top Ranked Momentum Stocks to Buy for May 3rd   [May-03-17 11:00AM  Zacks]
▶ ETFs with exposure to Pampa Energía SA : April 13, 2017   [Apr-13-17 12:37PM  Capital Cube]
▶ New Strong Buy Stocks for April 12th   [Apr-12-17 10:09AM  Zacks]
▶ Pampa Energias Mindlin Says Vaca Muerta Will Boom   [Apr-07-17 12:34PM  Bloomberg]
▶ Pampa posts 4Q profit   [Mar-14-17 05:16PM  Associated Press]
▶ Pampas Mindlin: Current Bond Sale is Testing Market   [Jan-10-17 02:45PM  Bloomberg]
▶ LATAM CLOSE-No LatAm deals in first week of 2017   [Jan-06-17 01:40PM  Reuters]
▶ Hedge Funds Are Dumping Norbord Inc. (OSB)   [Dec-12-16 08:18AM  Insider Monkey]
▶ Hedge Funds Are Dumping Norbord Inc. (OSB)   [08:18AM  at Insider Monkey]
▶ Hedge Funds Are Betting On Rowan Companies PLC (RDC)   [Dec-05-16 02:28PM  at Insider Monkey]
▶ Hedge Funds Are Gaining Confidence in Cavium Inc (CAVM)   [Nov-27-16 06:15PM  at Insider Monkey]
▶ Argentinas Pampa to Spend More on Tight Sands Gas   [Sep-20-16 11:18AM  at Bloomberg]
Financial statements of PAM
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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