Intrinsic value of Pampa Energia ADR - PAM

Previous Close

$54.53

  Intrinsic Value

$1,547

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+5000%

Previous close

$54.53

 
Intrinsic value

$1,547

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

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

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 4.0

 

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
  3,205
  4,951
  7,405
  10,744
  15,158
  20,839
  27,972
  36,729
  47,262
  59,695
  74,128
  90,629
  109,238
  129,972
  152,824
  177,771
  204,777
  233,799
  264,790
  297,702
  332,494
  369,128
  407,577
  447,824
  489,862
  533,697
  579,347
  626,843
  676,229
  727,558
Variable operating expenses, $m
 
  1,570
  2,422
  3,619
  5,247
  7,401
  10,172
  13,651
  17,923
  23,061
  29,126
  36,160
  44,209
  53,287
  63,401
  74,548
  86,717
  99,891
  114,048
  129,166
  145,221
  162,192
  180,062
  198,818
  218,451
  238,957
  260,340
  282,608
  305,777
  329,868
  354,906
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
  1,861
  1,570
  2,422
  3,619
  5,247
  7,401
  10,172
  13,651
  17,923
  23,061
  29,126
  36,160
  44,209
  53,287
  63,401
  74,548
  86,717
  99,891
  114,048
  129,166
  145,221
  162,192
  180,062
  198,818
  218,451
  238,957
  260,340
  282,608
  305,777
  329,868
  354,906
Operating income, $m
  142
  1,635
  2,530
  3,786
  5,497
  7,758
  10,667
  14,321
  18,806
  24,201
  30,569
  37,968
  46,420
  55,951
  66,571
  78,276
  91,053
  104,886
  119,751
  135,624
  152,482
  170,302
  189,066
  208,759
  229,373
  250,905
  273,357
  296,739
  321,066
  346,361
  372,652
EBITDA, $m
  335
  1,935
  2,990
  4,471
  6,487
  9,153
  12,583
  16,890
  22,177
  28,536
  36,044
  44,758
  54,721
  65,958
  78,476
  92,274
  107,337
  123,643
  141,167
  159,879
  179,751
  200,758
  222,878
  246,093
  270,394
  295,776
  322,244
  349,807
  378,485
  408,304
  439,296
Interest expense (income), $m
  97
  122
  333
  640
  1,070
  1,656
  2,431
  3,428
  4,680
  6,217
  8,066
  10,248
  12,781
  15,677
  18,944
  22,583
  26,594
  30,972
  35,712
  40,806
  46,246
  52,022
  58,129
  64,559
  71,307
  78,371
  85,749
  93,443
  101,456
  109,792
  118,460
Earnings before tax, $m
  -86
  1,513
  2,197
  3,147
  4,426
  6,101
  8,236
  10,893
  14,126
  17,984
  22,503
  27,720
  33,638
  40,274
  47,627
  55,693
  64,460
  73,914
  84,038
  94,818
  106,236
  118,279
  130,937
  144,201
  158,066
  172,534
  187,608
  203,296
  219,611
  236,569
  254,192
Tax expense, $m
  -70
  409
  593
  850
  1,195
  1,647
  2,224
  2,941
  3,814
  4,856
  6,076
  7,484
  9,082
  10,874
  12,859
  15,037
  17,404
  19,957
  22,690
  25,601
  28,684
  31,935
  35,353
  38,934
  42,678
  46,584
  50,654
  54,890
  59,295
  63,874
  68,632
Net income, $m
  -1
  1,105
  1,603
  2,297
  3,231
  4,454
  6,012
  7,952
  10,312
  13,128
  16,428
  20,236
  24,556
  29,400
  34,768
  40,656
  47,056
  53,957
  61,348
  69,217
  77,552
  86,344
  95,584
  105,266
  115,388
  125,950
  136,954
  148,406
  160,316
  172,696
  185,560

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
  7,453
  11,515
  17,221
  24,986
  35,252
  48,463
  65,052
  85,417
  109,911
  138,827
  172,391
  210,765
  254,042
  302,260
  355,404
  413,421
  476,226
  543,719
  615,790
  692,331
  773,241
  858,437
  947,854
  1,041,451
  1,139,214
  1,241,156
  1,347,319
  1,457,775
  1,572,625
  1,691,996
Adjusted assets (=assets-cash), $m
  4,586
  7,453
  11,515
  17,221
  24,986
  35,252
  48,463
  65,052
  85,417
  109,911
  138,827
  172,391
  210,765
  254,042
  302,260
  355,404
  413,421
  476,226
  543,719
  615,790
  692,331
  773,241
  858,437
  947,854
  1,041,451
  1,139,214
  1,241,156
  1,347,319
  1,457,775
  1,572,625
  1,691,996
Revenue / Adjusted assets
  0.437
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
Average production assets, $m
  1,836
  2,936
  4,535
  6,783
  9,842
  13,885
  19,089
  25,623
  33,644
  43,292
  54,681
  67,901
  83,016
  100,062
  119,054
  139,987
  162,838
  187,576
  214,160
  242,547
  272,695
  304,564
  338,121
  373,341
  410,207
  448,714
  488,866
  530,682
  574,189
  619,426
  666,443
Working capital, $m
  -442
  -189
  -292
  -437
  -634
  -894
  -1,230
  -1,650
  -2,167
  -2,788
  -3,522
  -4,374
  -5,347
  -6,445
  -7,668
  -9,017
  -10,488
  -12,082
  -13,794
  -15,623
  -17,564
  -19,617
  -21,779
  -24,047
  -26,422
  -28,902
  -31,488
  -34,181
  -36,984
  -39,897
  -42,926
Total debt, $m
  1,662
  3,743
  7,188
  12,026
  18,611
  27,317
  38,520
  52,587
  69,857
  90,628
  115,148
  143,611
  176,151
  212,851
  253,740
  298,806
  348,004
  401,263
  458,497
  519,613
  584,519
  653,132
  725,378
  801,203
  880,574
  963,476
  1,049,923
  1,139,950
  1,233,617
  1,331,009
  1,432,236
Total liabilities, $m
  4,238
  6,320
  9,765
  14,603
  21,188
  29,894
  41,097
  55,164
  72,434
  93,205
  117,725
  146,188
  178,728
  215,428
  256,317
  301,383
  350,581
  403,840
  461,074
  522,190
  587,096
  655,709
  727,955
  803,780
  883,151
  966,053
  1,052,500
  1,142,527
  1,236,194
  1,333,586
  1,434,813
Total equity, $m
  707
  1,133
  1,750
  2,618
  3,798
  5,358
  7,366
  9,888
  12,983
  16,706
  21,102
  26,203
  32,036
  38,614
  45,944
  54,021
  62,840
  72,386
  82,645
  93,600
  105,234
  117,533
  130,482
  144,074
  158,301
  173,160
  188,656
  204,792
  221,582
  239,039
  257,183
Total liabilities and equity, $m
  4,945
  7,453
  11,515
  17,221
  24,986
  35,252
  48,463
  65,052
  85,417
  109,911
  138,827
  172,391
  210,764
  254,042
  302,261
  355,404
  413,421
  476,226
  543,719
  615,790
  692,330
  773,242
  858,437
  947,854
  1,041,452
  1,139,213
  1,241,156
  1,347,319
  1,457,776
  1,572,625
  1,691,996
Debt-to-equity ratio
  2.351
  3.300
  4.110
  4.590
  4.900
  5.100
  5.230
  5.320
  5.380
  5.420
  5.460
  5.480
  5.500
  5.510
  5.520
  5.530
  5.540
  5.540
  5.550
  5.550
  5.550
  5.560
  5.560
  5.560
  5.560
  5.560
  5.570
  5.570
  5.570
  5.570
  5.570
Adjusted equity ratio
  0.087
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  1,105
  1,603
  2,297
  3,231
  4,454
  6,012
  7,952
  10,312
  13,128
  16,428
  20,236
  24,556
  29,400
  34,768
  40,656
  47,056
  53,957
  61,348
  69,217
  77,552
  86,344
  95,584
  105,266
  115,388
  125,950
  136,954
  148,406
  160,316
  172,696
  185,560
Depreciation, amort., depletion, $m
  193
  300
  460
  685
  991
  1,395
  1,915
  2,569
  3,371
  4,336
  5,475
  6,790
  8,302
  10,006
  11,905
  13,999
  16,284
  18,758
  21,416
  24,255
  27,270
  30,456
  33,812
  37,334
  41,021
  44,871
  48,887
  53,068
  57,419
  61,943
  66,644
Funds from operations, $m
  484
  1,405
  2,063
  2,982
  4,222
  5,849
  7,928
  10,520
  13,683
  17,464
  21,902
  27,026
  32,858
  39,406
  46,673
  54,654
  63,339
  72,714
  82,764
  93,472
  104,822
  116,800
  129,396
  142,600
  156,409
  170,821
  185,840
  201,474
  217,735
  234,638
  252,205
Change in working capital, $m
  101
  -71
  -103
  -145
  -197
  -260
  -335
  -421
  -517
  -621
  -734
  -852
  -974
  -1,098
  -1,223
  -1,348
  -1,472
  -1,593
  -1,712
  -1,828
  -1,942
  -2,053
  -2,161
  -2,269
  -2,375
  -2,480
  -2,586
  -2,693
  -2,802
  -2,914
  -3,028
Cash from operations, $m
  383
  1,475
  2,166
  3,126
  4,419
  6,109
  8,263
  10,941
  14,199
  18,085
  22,636
  27,877
  33,831
  40,504
  47,897
  56,003
  64,811
  74,308
  84,476
  95,300
  106,764
  118,853
  131,557
  144,869
  158,784
  173,301
  188,426
  204,167
  220,537
  237,552
  255,233
Maintenance CAPEX, $m
  0
  -184
  -294
  -454
  -678
  -984
  -1,389
  -1,909
  -2,562
  -3,364
  -4,329
  -5,468
  -6,790
  -8,302
  -10,006
  -11,905
  -13,999
  -16,284
  -18,758
  -21,416
  -24,255
  -27,270
  -30,456
  -33,812
  -37,334
  -41,021
  -44,871
  -48,887
  -53,068
  -57,419
  -61,943
New CAPEX, $m
  -460
  -1,100
  -1,600
  -2,247
  -3,059
  -4,043
  -5,204
  -6,534
  -8,021
  -9,648
  -11,389
  -13,220
  -15,115
  -17,046
  -18,992
  -20,932
  -22,851
  -24,738
  -26,584
  -28,387
  -30,148
  -31,869
  -33,557
  -35,220
  -36,866
  -38,507
  -40,153
  -41,816
  -43,507
  -45,237
  -47,018
Cash from investing activities, $m
  -719
  -1,284
  -1,894
  -2,701
  -3,737
  -5,027
  -6,593
  -8,443
  -10,583
  -13,012
  -15,718
  -18,688
  -21,905
  -25,348
  -28,998
  -32,837
  -36,850
  -41,022
  -45,342
  -49,803
  -54,403
  -59,139
  -64,013
  -69,032
  -74,200
  -79,528
  -85,024
  -90,703
  -96,575
  -102,656
  -108,961
Free cash flow, $m
  -336
  192
  273
  426
  682
  1,082
  1,671
  2,498
  3,616
  5,073
  6,917
  9,189
  11,926
  15,156
  18,898
  23,165
  27,961
  33,286
  39,135
  45,497
  52,361
  59,715
  67,544
  75,837
  84,584
  93,774
  103,402
  113,465
  123,962
  134,896
  146,273
Issuance/(repayment) of debt, $m
  682
  2,373
  3,444
  4,838
  6,585
  8,705
  11,203
  14,067
  17,270
  20,771
  24,520
  28,463
  32,541
  36,699
  40,889
  45,066
  49,198
  53,259
  57,234
  61,116
  64,907
  68,612
  72,246
  75,826
  79,370
  82,903
  86,447
  90,027
  93,667
  97,392
  101,227
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  378
  2,373
  3,444
  4,838
  6,585
  8,705
  11,203
  14,067
  17,270
  20,771
  24,520
  28,463
  32,541
  36,699
  40,889
  45,066
  49,198
  53,259
  57,234
  61,116
  64,907
  68,612
  72,246
  75,826
  79,370
  82,903
  86,447
  90,027
  93,667
  97,392
  101,227
Total cash flow (excl. dividends), $m
  63
  2,564
  3,718
  5,264
  7,267
  9,787
  12,874
  16,565
  20,885
  25,844
  31,438
  37,651
  44,467
  51,856
  59,787
  68,231
  77,159
  86,545
  96,369
  106,613
  117,268
  128,327
  139,790
  151,663
  163,954
  176,677
  189,849
  203,492
  217,629
  232,288
  247,499
Retained Cash Flow (-), $m
  -260
  -426
  -617
  -867
  -1,180
  -1,560
  -2,008
  -2,521
  -3,096
  -3,723
  -4,395
  -5,102
  -5,833
  -6,578
  -7,329
  -8,078
  -8,818
  -9,546
  -10,259
  -10,955
  -11,634
  -12,298
  -12,950
  -13,591
  -14,227
  -14,860
  -15,495
  -16,137
  -16,789
  -17,457
  -18,144
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
 
  2,139
  3,100
  4,397
  6,087
  8,227
  10,866
  14,044
  17,790
  22,121
  27,042
  32,550
  38,634
  45,277
  52,458
  60,153
  68,340
  76,999
  86,110
  95,658
  105,633
  116,028
  126,841
  138,071
  149,727
  161,817
  174,354
  187,355
  200,840
  214,831
  229,355
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  1,975
  2,623
  3,381
  4,217
  5,087
  5,939
  6,712
  7,352
  7,810
  8,054
  8,068
  7,855
  7,438
  6,851
  6,139
  5,353
  4,541
  3,747
  3,006
  2,344
  1,776
  1,305
  931
  643
  430
  278
  174
  105
  61
  34
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

Pampa Energía S.A., an integrated electricity company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity in Argentina. The company operates hydroelectric and thermal generation facilities. It has an installed generating capacity of 2,217 MW. The company operates and maintains high-tension transmission network of 12,365 km of lines of its own in Argentina, as well as 6,158 km of Transba high voltage lines in the Province of Buenos Aires; and distributes electricity to approximately 2.8 million customers. It is also involved in the exploration and exploitation of oil and gas; operation of financial investment, as well as investing in other companies with complementary businesses; and authorization in acting as an agent and clearing member of ROFEX. The company was formerly known as Pampa Holding S.A. and changed its name to Pampa Energía S.A. in September 2008. Pampa Energía S.A. was founded in 1945 and is based in Buenos Aires, Argentina.

FINANCIAL RATIOS  of  Pampa Energia ADR (PAM)

Valuation Ratios
P/E Ratio -92475.2
Price to Sales 46.2
Price to Book 130.8
Price to Tangible Book
Price to Cash Flow 241.4
Price to Free Cash Flow -1201
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 $2003 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 8.3%, 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 49.1%.

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 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 8.9% 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 91.6%.

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 -5.9%. 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 - $707 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 73.884 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 $4.0 billion.

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COMPANY NEWS

▶ 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]
▶ LATAM CLOSE-No deals price in LatAm primary market   [Aug-01-16 05:05PM  Reuters]
▶ PAMPA ENERGY INC. Financials   [May-06-16 01:04PM  EDGAR Online Financials]
▶ Petrobras Jumps: More Oil Asset Sales, Says Blog Leak   [May-04-16 12:17PM  at Barrons.com]
▶ Pampa Energia debt shelf sparks M&A talk   [Jan-26-16 12:28PM  Reuters]
▶ Argentina's Market Dives Ahead Of Macri Inauguration   [04:59PM  at Investor's Business Daily]
▶ Interest In WSFS Financial Corporation (WSFS) Remains Tepid   [Nov-22  03:05PM  at Insider Monkey]
▶ Argentina Stocks Surge As Voters Support Opposition   [Oct-26  06:35PM  at Investor's Business Daily]
▶ [video]5 Breakout Stocks to Buy to Beat the Market   [Oct-20  06:37AM  at TheStreet]
Stock chart of PAM Financial statements of PAM Annual reports 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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