Intrinsic value of Precision Drilling - PDS

Previous Close

$2.44

  Intrinsic Value

$1.10

stock screener

  Rating & Target

str. sell

-55%

Previous close

$2.44

 
Intrinsic value

$1.10

 
Up/down potential

-55%

 
Rating

str. sell

We calculate the intrinsic value of PDS 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 0.7

 

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, %
  -38.84
  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
  704
  1,126
  1,740
  2,603
  3,776
  5,328
  7,324
  9,831
  12,909
  16,611
  20,981
  26,054
  31,854
  38,394
  45,682
  53,713
  62,482
  71,974
  82,174
  93,066
  104,634
  116,863
  129,738
  143,252
  157,398
  172,173
  187,580
  203,625
  220,318
  237,676
  255,717
Variable operating expenses, $m
 
  1,464
  2,254
  3,363
  4,872
  6,868
  9,435
  12,660
  16,618
  21,380
  27,000
  33,509
  40,968
  49,380
  58,752
  69,082
  80,359
  92,567
  105,686
  119,695
  134,573
  150,300
  166,860
  184,240
  202,433
  221,436
  241,251
  261,887
  283,357
  305,681
  328,884
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
  820
  1,464
  2,254
  3,363
  4,872
  6,868
  9,435
  12,660
  16,618
  21,380
  27,000
  33,509
  40,968
  49,380
  58,752
  69,082
  80,359
  92,567
  105,686
  119,695
  134,573
  150,300
  166,860
  184,240
  202,433
  221,436
  241,251
  261,887
  283,357
  305,681
  328,884
Operating income, $m
  -115
  -338
  -513
  -760
  -1,096
  -1,540
  -2,111
  -2,828
  -3,709
  -4,768
  -6,019
  -7,455
  -9,114
  -10,986
  -13,071
  -15,369
  -17,878
  -20,593
  -23,512
  -26,629
  -29,938
  -33,437
  -37,121
  -40,988
  -45,035
  -49,263
  -53,671
  -58,262
  -63,039
  -68,005
  -73,167
EBITDA, $m
  175
  119
  184
  275
  399
  563
  775
  1,040
  1,365
  1,757
  2,219
  2,755
  3,369
  4,060
  4,831
  5,681
  6,608
  7,612
  8,690
  9,842
  11,066
  12,359
  13,721
  15,150
  16,646
  18,208
  19,838
  21,535
  23,300
  25,136
  27,044
Interest expense (income), $m
  103
  96
  167
  271
  416
  614
  876
  1,213
  1,637
  2,156
  2,781
  3,519
  4,375
  5,354
  6,458
  7,688
  9,044
  10,524
  12,126
  13,848
  15,686
  17,639
  19,703
  21,876
  24,158
  26,545
  29,039
  31,640
  34,348
  37,166
  40,096
Earnings before tax, $m
  -228
  -434
  -680
  -1,031
  -1,512
  -2,154
  -2,987
  -4,042
  -5,346
  -6,924
  -8,800
  -10,973
  -13,489
  -16,339
  -19,528
  -23,057
  -26,921
  -31,117
  -35,638
  -40,476
  -45,625
  -51,076
  -56,824
  -62,864
  -69,193
  -75,808
  -82,711
  -89,902
  -97,387
  -105,171
  -113,263
Tax expense, $m
  -113
  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
  -115
  -434
  -680
  -1,031
  -1,512
  -2,154
  -2,987
  -4,042
  -5,346
  -6,924
  -8,800
  -10,973
  -13,489
  -16,339
  -19,528
  -23,057
  -26,921
  -31,117
  -35,638
  -40,476
  -45,625
  -51,076
  -56,824
  -62,864
  -69,193
  -75,808
  -82,711
  -89,902
  -97,387
  -105,171
  -113,263

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  86
  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
  3,201
  4,984
  7,700
  11,516
  16,709
  23,574
  32,409
  43,502
  57,121
  73,501
  92,838
  115,283
  140,945
  169,886
  202,131
  237,670
  276,467
  318,467
  363,602
  411,798
  462,983
  517,091
  574,064
  633,860
  696,451
  761,828
  830,000
  900,995
  974,860
  1,051,664
  1,131,491
Adjusted assets (=assets-cash), $m
  3,115
  4,984
  7,700
  11,516
  16,709
  23,574
  32,409
  43,502
  57,121
  73,501
  92,838
  115,283
  140,945
  169,886
  202,131
  237,670
  276,467
  318,467
  363,602
  411,798
  462,983
  517,091
  574,064
  633,860
  696,451
  761,828
  830,000
  900,995
  974,860
  1,051,664
  1,131,491
Revenue / Adjusted assets
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
Average production assets, $m
  2,787
  4,458
  6,888
  10,301
  14,946
  21,087
  28,990
  38,913
  51,095
  65,747
  83,044
  103,122
  126,076
  151,964
  180,808
  212,598
  247,302
  284,871
  325,245
  368,357
  414,142
  462,542
  513,505
  566,993
  622,981
  681,461
  742,441
  805,947
  872,020
  940,722
  1,012,128
Working capital, $m
  171
  136
  211
  315
  457
  645
  886
  1,190
  1,562
  2,010
  2,539
  3,153
  3,854
  4,646
  5,527
  6,499
  7,560
  8,709
  9,943
  11,261
  12,661
  14,140
  15,698
  17,334
  19,045
  20,833
  22,697
  24,639
  26,659
  28,759
  30,942
Total debt, $m
  1,411
  2,458
  3,982
  6,122
  9,036
  12,887
  17,843
  24,067
  31,707
  40,896
  51,744
  64,336
  78,732
  94,968
  113,057
  132,995
  154,760
  178,322
  203,643
  230,681
  259,396
  289,750
  321,712
  355,257
  390,371
  427,048
  465,292
  505,120
  546,559
  589,645
  634,428
Total liabilities, $m
  1,748
  2,796
  4,320
  6,460
  9,374
  13,225
  18,181
  24,405
  32,045
  41,234
  52,082
  64,674
  79,070
  95,306
  113,395
  133,333
  155,098
  178,660
  203,981
  231,019
  259,734
  290,088
  322,050
  355,595
  390,709
  427,386
  465,630
  505,458
  546,897
  589,983
  634,766
Total equity, $m
  1,452
  2,188
  3,380
  5,055
  7,335
  10,349
  14,227
  19,097
  25,076
  32,267
  40,756
  50,609
  61,875
  74,580
  88,735
  104,337
  121,369
  139,807
  159,621
  180,779
  203,250
  227,003
  252,014
  278,264
  305,742
  334,443
  364,370
  395,537
  427,964
  461,680
  496,725
Total liabilities and equity, $m
  3,200
  4,984
  7,700
  11,515
  16,709
  23,574
  32,408
  43,502
  57,121
  73,501
  92,838
  115,283
  140,945
  169,886
  202,130
  237,670
  276,467
  318,467
  363,602
  411,798
  462,984
  517,091
  574,064
  633,859
  696,451
  761,829
  830,000
  900,995
  974,861
  1,051,663
  1,131,491
Debt-to-equity ratio
  0.972
  1.120
  1.180
  1.210
  1.230
  1.250
  1.250
  1.260
  1.260
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
Adjusted equity ratio
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -115
  -434
  -680
  -1,031
  -1,512
  -2,154
  -2,987
  -4,042
  -5,346
  -6,924
  -8,800
  -10,973
  -13,489
  -16,339
  -19,528
  -23,057
  -26,921
  -31,117
  -35,638
  -40,476
  -45,625
  -51,076
  -56,824
  -62,864
  -69,193
  -75,808
  -82,711
  -89,902
  -97,387
  -105,171
  -113,263
Depreciation, amort., depletion, $m
  290
  457
  697
  1,035
  1,495
  2,103
  2,886
  3,868
  5,074
  6,525
  8,238
  10,210
  12,483
  15,046
  17,902
  21,049
  24,485
  28,205
  32,202
  36,471
  41,004
  45,796
  50,842
  56,138
  61,681
  67,471
  73,509
  79,797
  86,339
  93,141
  100,211
Funds from operations, $m
  -7
  23
  17
  4
  -17
  -51
  -102
  -174
  -271
  -399
  -562
  -763
  -1,006
  -1,293
  -1,627
  -2,007
  -2,436
  -2,912
  -3,435
  -4,005
  -4,621
  -5,280
  -5,982
  -6,727
  -7,512
  -8,337
  -9,201
  -10,105
  -11,048
  -12,030
  -13,052
Change in working capital, $m
  -98
  51
  74
  104
  142
  188
  242
  303
  372
  448
  529
  614
  702
  791
  882
  972
  1,061
  1,149
  1,234
  1,318
  1,400
  1,480
  1,558
  1,635
  1,712
  1,788
  1,864
  1,941
  2,020
  2,100
  2,183
Cash from operations, $m
  91
  -28
  -57
  -100
  -159
  -239
  -343
  -477
  -644
  -847
  -1,091
  -1,377
  -1,708
  -2,085
  -2,508
  -2,979
  -3,497
  -4,061
  -4,670
  -5,323
  -6,020
  -6,760
  -7,540
  -8,362
  -9,223
  -10,125
  -11,066
  -12,047
  -13,068
  -14,131
  -15,235
Maintenance CAPEX, $m
  0
  -276
  -441
  -682
  -1,020
  -1,480
  -2,088
  -2,870
  -3,853
  -5,059
  -6,510
  -8,222
  -10,210
  -12,483
  -15,046
  -17,902
  -21,049
  -24,485
  -28,205
  -32,202
  -36,471
  -41,004
  -45,796
  -50,842
  -56,138
  -61,681
  -67,471
  -73,509
  -79,797
  -86,339
  -93,141
New CAPEX, $m
  -151
  -1,672
  -2,430
  -3,413
  -4,645
  -6,141
  -7,903
  -9,923
  -12,182
  -14,652
  -17,297
  -20,078
  -22,955
  -25,888
  -28,843
  -31,790
  -34,704
  -37,569
  -40,373
  -43,112
  -45,786
  -48,400
  -50,963
  -53,488
  -55,988
  -58,480
  -60,980
  -63,505
  -66,073
  -68,701
  -71,406
Cash from investing activities, $m
  -158
  -1,948
  -2,871
  -4,095
  -5,665
  -7,621
  -9,991
  -12,793
  -16,035
  -19,711
  -23,807
  -28,300
  -33,165
  -38,371
  -43,889
  -49,692
  -55,753
  -62,054
  -68,578
  -75,314
  -82,257
  -89,404
  -96,759
  -104,330
  -112,126
  -120,161
  -128,451
  -137,014
  -145,870
  -155,040
  -164,547
Free cash flow, $m
  -67
  -1,976
  -2,929
  -4,195
  -5,824
  -7,859
  -10,334
  -13,270
  -16,679
  -20,558
  -24,897
  -29,677
  -34,872
  -40,456
  -46,398
  -52,671
  -59,251
  -66,115
  -73,248
  -80,638
  -88,277
  -96,163
  -104,300
  -112,692
  -121,350
  -130,286
  -139,517
  -149,061
  -158,938
  -169,171
  -179,782
Issuance/(repayment) of debt, $m
  -154
  1,047
  1,524
  2,141
  2,913
  3,851
  4,956
  6,223
  7,640
  9,189
  10,848
  12,592
  14,396
  16,236
  18,089
  19,937
  21,765
  23,562
  25,321
  27,038
  28,715
  30,354
  31,962
  33,545
  35,114
  36,676
  38,244
  39,828
  41,439
  43,087
  44,783
Issuance/(repurchase) of shares, $m
  1
  1,256
  1,873
  2,706
  3,792
  5,168
  6,866
  8,912
  11,324
  14,115
  17,288
  20,827
  24,754
  29,044
  33,684
  38,658
  43,953
  49,555
  55,452
  61,634
  68,095
  74,829
  81,836
  89,115
  96,671
  104,509
  112,638
  121,069
  129,814
  138,888
  148,307
Cash from financing (excl. dividends), $m  
  -162
  2,303
  3,397
  4,847
  6,705
  9,019
  11,822
  15,135
  18,964
  23,304
  28,136
  33,419
  39,150
  45,280
  51,773
  58,595
  65,718
  73,117
  80,773
  88,672
  96,810
  105,183
  113,798
  122,660
  131,785
  141,185
  150,882
  160,897
  171,253
  181,975
  193,090
Total cash flow (excl. dividends), $m
  -244
  327
  468
  651
  881
  1,160
  1,488
  1,865
  2,286
  2,746
  3,239
  3,742
  4,278
  4,825
  5,376
  5,925
  6,468
  7,002
  7,524
  8,035
  8,533
  9,020
  9,498
  9,969
  10,435
  10,899
  11,365
  11,836
  12,314
  12,804
  13,308
Retained Cash Flow (-), $m
  118
  -1,256
  -1,873
  -2,706
  -3,792
  -5,168
  -6,866
  -8,912
  -11,324
  -14,115
  -17,288
  -20,827
  -24,754
  -29,044
  -33,684
  -38,658
  -43,953
  -49,555
  -55,452
  -61,634
  -68,095
  -74,829
  -81,836
  -89,115
  -96,671
  -104,509
  -112,638
  -121,069
  -129,814
  -138,888
  -148,307
Prev. year cash balance distribution, $m
 
  86
  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
 
  -843
  -1,405
  -2,054
  -2,911
  -4,008
  -5,378
  -7,047
  -9,039
  -11,369
  -14,049
  -17,085
  -20,476
  -24,220
  -28,308
  -32,734
  -37,485
  -42,553
  -47,928
  -53,600
  -59,562
  -65,809
  -72,338
  -79,146
  -86,236
  -93,610
  -101,273
  -109,233
  -117,500
  -126,084
  -134,999
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  -779
  -1,191
  -1,585
  -2,025
  -2,492
  -2,960
  -3,397
  -3,773
  -4,062
  -4,242
  -4,302
  -4,239
  -4,060
  -3,782
  -3,427
  -3,021
  -2,590
  -2,159
  -1,750
  -1,378
  -1,054
  -783
  -563
  -393
  -265
  -173
  -109
  -66
  -39
  -22
Current shareholders' claim on cash, %
  100
  43.2
  19.4
  9.1
  4.4
  2.2
  1.1
  0.6
  0.3
  0.2
  0.1
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0

Precision Drilling Corporation (Precision) is an oilfield services company. The Company provides onshore drilling and completion and production services to exploration and production companies in the oil and natural gas industry. The Company operates through two segments: Contract Drilling Services, and Completion and Production Services. The Contract Drilling Services segment operates its rigs in Canada, the United States and internationally. The Completion and Production Services segment provides completion and workover services and ancillary services to oil and natural gas exploration and production companies in Canada and the United States. As of December 31, 2016, the Contract Drilling Services segment consisted of 255 land drilling rigs, including 135 in Canada, 103 in the United States, five in Mexico, four in Saudi Arabia, five in Kuwait, two in the Kurdistan region of Iraq and one in the country of Georgia.

FINANCIAL RATIOS  of  Precision Drilling (PDS)

Valuation Ratios
P/E Ratio -6.2
Price to Sales 1
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow -11.9
Growth Rates
Sales Growth Rate -38.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55.6%
Cap. Spend. - 3 Yr. Gr. Rate -17.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 97.2%
Total Debt to Equity 97.2%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.9%
Ret/ On Assets - 3 Yr. Avg. -1.1%
Return On Total Capital -3.8%
Ret/ On T. Cap. - 3 Yr. Avg. -3.8%
Return On Equity -7.6%
Return On Equity - 3 Yr. Avg. -7.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 36.2%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 23.4%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin -16.5%
Oper. Margin - 3 Yr. Avg. -13.9%
Pre-Tax Margin -32.4%
Pre-Tax Margin - 3 Yr. Avg. -22.6%
Net Profit Margin -16.3%
Net Profit Margin - 3 Yr. Avg. -12.8%
Effective Tax Rate 49.6%
Eff/ Tax Rate - 3 Yr. Avg. 9.7%
Payout Ratio 0%

PDS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PDS stock intrinsic value calculation we used $704 million for the last fiscal year's total revenue generated by Precision Drilling. The default revenue input number comes from 2016 income statement of Precision Drilling. 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 PDS 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 8.2%, whose default value for PDS is calculated based on our internal credit rating of Precision Drilling, 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 Precision Drilling.
    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 PDS stock the variable cost ratio is equal to 130.8%.

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 PDS 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 6.8% for Precision Drilling.

Corporate tax rate of 27% is the nominal tax rate for Precision Drilling. 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 PDS 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 PDS are equal to 395.8%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Precision Drilling 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 PDS is equal to 12.1%. 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 - $1452 million for Precision Drilling - 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 294.168 million for Precision Drilling 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 Precision Drilling at the current share price and the inputted number of shares is $0.7 billion.

RELATED COMPANIES Price Int.Val. Rating
NBR Nabors Industr 6.70 2.70  str.sell
PTEN Patterson-UTI 18.92 2.63  str.sell
HP Helmerich&Payn 52.00 17.27  str.sell

COMPANY NEWS

▶ How Flotek Industries Reacted to Crude Oils Changes   [Oct-23-17 07:37AM  Market Realist]
▶ Halliburton Reacts to the Change in Crude Oil Prices   [Oct-11-17 07:38AM  Market Realist]
▶ Weatherford Reacted to Crude Oil Price Changes   [Oct-09-17 04:06PM  Market Realist]
▶ How Is Weatherford Reacting to Crude Oils Price Changes?   [Oct-03-17 10:41AM  Market Realist]
▶ How Bearish Are Investors on Basic Energy Services?   [Sep-27-17 10:38AM  Market Realist]
▶ Hows Weatherford Reacting to Crude Oil Price Changes?   [Sep-26-17 03:06PM  Market Realist]
▶ Will the Rise in Crude Oil Take Haliburton Higher?   [Sep-19-17 08:09AM  Market Realist]
▶ Weatherfords 7-Day Stock Price Forecast   [Sep-15-17 10:39AM  Market Realist]
▶ How Schlumberger Stock Correlates with Crude Oil   [Sep-12-17 09:07AM  Market Realist]
▶ Correlation between Crude Oil and Schlumberger on August 25   [Aug-29-17 07:39AM  Market Realist]
▶ Behind Baker Hughess Correlation with Crude in Mid-August   [Aug-22-17 09:07AM  Market Realist]
▶ How Schlumberger Correlates with Crude Oil   [Aug-08-17 08:10AM  Market Realist]
▶ Precision Drilling reports 2Q loss   [Jul-31-17 11:02PM  Associated Press]
▶ Correlation between Weatherford and Crude Oil on July 21   [Jul-25-17 07:39AM  Market Realist]
▶ Halliburtons Correlation with Crude Oil on July 14   [Jul-17-17 03:06PM  Market Realist]
▶ Schlumbergers 7-Day Stock Forecast as of June 16   [Jun-20-17 07:37AM  Market Realist]
▶ Whats NOVs Correlation with Crude Oil in June 2017?   [Jun-13-17 07:36AM  Market Realist]
▶ Schlumbergers 7-Day Stock Price Forecast on May 26   [May-30-17 12:06PM  Market Realist]
▶ What Was Schlumbergers Correlation with Crude Oil on May 22?   [May-23-17 02:36PM  Market Realist]
▶ Schlumbergers Correlation with Crude Oil on May 12   [May-15-17 04:35PM  Market Realist]
▶ Inside Halliburtons Correlation with Crude Oil on April 28   [May-02-17 07:40AM  Market Realist]
▶ Schlumbergers Correlation with Crude Oil on April 21   [Apr-25-17 09:09AM  Market Realist]
▶ Precision Drilling reports 1Q loss   [06:12AM  Associated Press]
▶ Whats NOVs Correlation with Crude Oil as of April 17?   [Apr-20-17 09:06AM  Market Realist]
▶ Whats NOVs 7-Day Stock Price Forecast as of April 17?   [Apr-19-17 10:37AM  Market Realist]
▶ Whats Weatherfords Correlation with Crude Oil?   [Mar-20-17 01:35PM  Market Realist]
▶ NOW Inc.'s Results Continue to Bounce Back   [Feb-15-17 01:21PM  at Motley Fool]
▶ How Risky Is Helmerich & Payne, Inc.?   [Feb-01-17 10:30AM  at Motley Fool]
▶ 3 Terrible Reasons to Sell Helmerich & Payne, Inc.   [Jan-25-17 09:57AM  at Motley Fool]
Financial statements of PDS
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.