Intrinsic value of Permian Basin Royalty Trust - PBT

Previous Close

$8.14

  Intrinsic Value

$128.94

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

0%

Previous close

$8.14

 
Intrinsic value

$128.94

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

0%

Our model is not good at valuating stocks of financial companies, such as PBT.

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

We calculate the intrinsic value of PBT 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 0.4

 

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, %
  16.67
  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
  21
  34
  52
  78
  113
  159
  218
  293
  385
  496
  626
  777
  950
  1,145
  1,363
  1,602
  1,864
  2,147
  2,451
  2,776
  3,121
  3,486
  3,870
  4,273
  4,695
  5,136
  5,595
  6,074
  6,572
  7,090
  7,628
Variable 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
Fixed operating expenses, $m
 
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
Total operating expenses, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
Operating income, $m
  19
  32
  50
  75
  110
  157
  216
  291
  383
  493
  623
  775
  947
  1,143
  1,360
  1,599
  1,861
  2,144
  2,448
  2,773
  3,118
  3,483
  3,867
  4,270
  4,691
  5,132
  5,592
  6,070
  6,568
  7,086
  7,624
EBITDA, $m
  19
  32
  50
  76
  111
  157
  217
  292
  384
  495
  626
  778
  952
  1,148
  1,366
  1,607
  1,870
  2,154
  2,460
  2,786
  3,133
  3,499
  3,885
  4,290
  4,714
  5,157
  5,618
  6,099
  6,600
  7,120
  7,660
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  10
  11
  12
  14
  16
  17
  19
  21
  23
  25
  27
  29
  32
Earnings before tax, $m
  19
  32
  50
  75
  110
  156
  216
  290
  381
  491
  621
  772
  944
  1,138
  1,355
  1,593
  1,854
  2,136
  2,439
  2,762
  3,106
  3,469
  3,851
  4,252
  4,672
  5,111
  5,569
  6,045
  6,541
  7,056
  7,592
Tax expense, $m
  0
  9
  13
  20
  30
  42
  58
  78
  103
  133
  168
  208
  255
  307
  366
  430
  501
  577
  658
  746
  838
  937
  1,040
  1,148
  1,262
  1,380
  1,504
  1,632
  1,766
  1,905
  2,050
Net income, $m
  19
  23
  36
  55
  80
  114
  157
  212
  278
  359
  453
  563
  689
  831
  989
  1,163
  1,353
  1,559
  1,780
  2,016
  2,267
  2,532
  2,811
  3,104
  3,411
  3,731
  4,065
  4,413
  4,775
  5,151
  5,542

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4
  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
  5
  7
  11
  16
  23
  31
  42
  55
  71
  89
  111
  136
  164
  195
  229
  266
  307
  350
  397
  446
  498
  553
  610
  671
  734
  799
  868
  939
  1,013
  1,090
Adjusted assets (=assets-cash), $m
  0
  5
  7
  11
  16
  23
  31
  42
  55
  71
  89
  111
  136
  164
  195
  229
  266
  307
  350
  397
  446
  498
  553
  610
  671
  734
  799
  868
  939
  1,013
  1,090
Revenue / Adjusted assets
  0.000
  6.800
  7.429
  7.091
  7.063
  6.913
  7.032
  6.976
  7.000
  6.986
  7.034
  7.000
  6.985
  6.982
  6.990
  6.996
  7.008
  6.993
  7.003
  6.992
  6.998
  7.000
  6.998
  7.005
  6.997
  6.997
  7.003
  6.998
  6.999
  6.999
  6.998
Average production assets, $m
  1
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  46
  55
  65
  77
  89
  103
  118
  133
  150
  167
  186
  205
  225
  247
  269
  292
  315
  340
  366
Working capital, $m
  0
  -3
  -5
  -8
  -11
  -16
  -22
  -29
  -39
  -50
  -63
  -78
  -95
  -115
  -136
  -160
  -186
  -215
  -245
  -278
  -312
  -349
  -387
  -427
  -470
  -514
  -560
  -607
  -657
  -709
  -763
Total debt, $m
  0
  1
  4
  7
  11
  17
  25
  35
  47
  61
  77
  97
  119
  144
  172
  203
  237
  273
  312
  354
  398
  445
  495
  546
  601
  657
  716
  778
  842
  909
  978
Total liabilities, $m
  4
  4
  7
  10
  14
  20
  28
  38
  50
  64
  80
  100
  122
  147
  175
  206
  240
  276
  315
  357
  401
  448
  498
  549
  604
  660
  719
  781
  845
  912
  981
Total equity, $m
  1
  0
  1
  1
  2
  2
  3
  4
  6
  7
  9
  11
  14
  16
  19
  23
  27
  31
  35
  40
  45
  50
  55
  61
  67
  73
  80
  87
  94
  101
  109
Total liabilities and equity, $m
  5
  4
  8
  11
  16
  22
  31
  42
  56
  71
  89
  111
  136
  163
  194
  229
  267
  307
  350
  397
  446
  498
  553
  610
  671
  733
  799
  868
  939
  1,013
  1,090
Debt-to-equity ratio
  0.000
  2.750
  4.950
  6.300
  7.140
  7.680
  8.040
  8.280
  8.450
  8.580
  8.660
  8.730
  8.780
  8.820
  8.850
  8.870
  8.890
  8.900
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
Adjusted equity ratio
  0.000
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  23
  36
  55
  80
  114
  157
  212
  278
  359
  453
  563
  689
  831
  989
  1,163
  1,353
  1,559
  1,780
  2,016
  2,267
  2,532
  2,811
  3,104
  3,411
  3,731
  4,065
  4,413
  4,775
  5,151
  5,542
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  4
  5
  5
  7
  8
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
Funds from operations, $m
  19
  23
  37
  55
  81
  115
  158
  213
  280
  361
  456
  567
  694
  836
  996
  1,171
  1,362
  1,569
  1,792
  2,030
  2,282
  2,549
  2,830
  3,125
  3,433
  3,756
  4,092
  4,442
  4,806
  5,185
  5,579
Change in working capital, $m
  0
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
Cash from operations, $m
  19
  24
  38
  58
  84
  119
  164
  221
  289
  372
  470
  582
  711
  856
  1,017
  1,195
  1,388
  1,598
  1,822
  2,062
  2,317
  2,585
  2,868
  3,165
  3,476
  3,800
  4,138
  4,490
  4,856
  5,237
  5,633
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -5
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
New CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Cash from investing activities, $m
  0
  -1
  -1
  -1
  -2
  -3
  -4
  -5
  -5
  -7
  -8
  -10
  -12
  -14
  -15
  -19
  -21
  -23
  -25
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -47
  -50
  -53
  -57
  -60
Free cash flow, $m
  19
  24
  37
  56
  82
  117
  161
  216
  284
  365
  461
  572
  699
  842
  1,001
  1,177
  1,368
  1,575
  1,797
  2,035
  2,287
  2,553
  2,833
  3,127
  3,435
  3,756
  4,091
  4,440
  4,803
  5,180
  5,573
Issuance/(repayment) of debt, $m
  0
  1
  2
  3
  5
  6
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  34
  36
  39
  42
  44
  47
  49
  52
  54
  57
  59
  62
  64
  67
  69
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  
  0
  1
  2
  3
  5
  6
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  34
  36
  39
  42
  44
  47
  49
  52
  54
  57
  59
  62
  64
  67
  69
Total cash flow (excl. dividends), $m
  19
  25
  40
  60
  87
  123
  168
  226
  295
  379
  478
  591
  721
  867
  1,029
  1,208
  1,402
  1,611
  1,837
  2,076
  2,331
  2,600
  2,882
  3,179
  3,489
  3,813
  4,150
  4,502
  4,867
  5,247
  5,642
Retained Cash Flow (-), $m
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
Prev. year cash balance distribution, $m
 
  1
  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
 
  26
  39
  59
  86
  122
  168
  225
  294
  378
  476
  589
  719
  864
  1,026
  1,204
  1,398
  1,607
  1,832
  2,072
  2,326
  2,595
  2,877
  3,173
  3,483
  3,807
  4,144
  4,495
  4,860
  5,240
  5,634
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  25
  36
  52
  71
  95
  122
  152
  184
  217
  249
  280
  307
  329
  345
  354
  355
  350
  337
  319
  296
  268
  239
  208
  177
  148
  121
  96
  75
  57
  42
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

Permian Basin Royalty Trust, an express trust, holds overriding royalty interests in various oil and gas properties in the United States. The company owns a 75% net overriding royalty interest in the Waddell Ranch properties comprising Dune, Judkins, McKnight, Tubb, University-Waddell, and Waddell fields located in Crane County, Texas. As of December 31, 2015, its Waddell Ranch properties contained 362 net productive oil wells, 66 net productive gas wells, and 120 net injection wells. The company also holds a 95% net overriding royalty in the Texas Royalty properties that consist of various producing oil fields, such as Yates, Wasson, Sand Hills, East Texas, Kelly-Snyder, Panhandle Regular, N. Cowden, Todd, Keystone, Kermit, McElroy, Howard-Glasscock, Seminole, and others located in 33 counties in Texas. Its Texas Royalty properties consist of approximately 125 separate royalty interests containing approximately 51,000 net producing acres. Permian Basin Royalty Trust was founded in 1980 and is based in Dallas, Texas.

FINANCIAL RATIOS  of  Permian Basin Royalty Trust (PBT)

Valuation Ratios
P/E Ratio 20
Price to Sales 18.1
Price to Book 379.4
Price to Tangible Book
Price to Cash Flow 20
Price to Free Cash Flow 20
Growth Rates
Sales Growth Rate 16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 633.3%
Ret/ On Assets - 3 Yr. Avg. 881.6%
Return On Total Capital 1900%
Ret/ On T. Cap. - 3 Yr. Avg. 2766.7%
Return On Equity 1900%
Return On Equity - 3 Yr. Avg. 2766.7%
Asset Turnover 7
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 90.5%
EBITDA Margin - 3 Yr. Avg. 92.4%
Operating Margin 90.5%
Oper. Margin - 3 Yr. Avg. 92.4%
Pre-Tax Margin 90.5%
Pre-Tax Margin - 3 Yr. Avg. 92.4%
Net Profit Margin 90.5%
Net Profit Margin - 3 Yr. Avg. 92.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 100%

PBT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PBT stock intrinsic value calculation we used $21 million for the last fiscal year's total revenue generated by Permian Basin Royalty Trust. The default revenue input number comes from 2016 income statement of Permian Basin Royalty Trust. 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 PBT 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 4.3%, whose default value for PBT is calculated based on our internal credit rating of Permian Basin Royalty Trust, 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 Permian Basin Royalty Trust.
    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 PBT stock the variable cost ratio is equal to 0%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2 million in the base year in the intrinsic value calculation for PBT 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 Permian Basin Royalty Trust.

Corporate tax rate of 27% is the nominal tax rate for Permian Basin Royalty Trust. 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 PBT 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 PBT are equal to 4.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Permian Basin Royalty Trust 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 PBT is equal to -10%. 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 - $1 million for Permian Basin Royalty Trust - 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 46.508 million for Permian Basin Royalty Trust 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 Permian Basin Royalty Trust at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
SBR Sabine Royalty 38.88 214.59  str.buy
CRT Cross Timbers 14.47 12.25  hold
SJT San Juan Basin 7.16 82.43  str.buy
TPL Texas Pacific 368.30 2,119.87  str.buy
VNOM Viper Energy P 16.00 1.59  str.sell

COMPANY NEWS

▶ Permian Basin Royalty posts 2Q profit   [Aug-10-17 12:03AM  Associated Press]
▶ Is Aerohive Networks Inc (HIVE) A Good Stock To Buy?   [Dec-09  03:24AM  at Insider Monkey]
▶ Is Genco Shipping & Trading Limited (GNK) A Good Stock To Buy?   [Nov-25  06:26PM  at Insider Monkey]
Stock chart of PBT Financial statements of PBT
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.