Intrinsic value of Perma-Fix Environmental Services - PESI

Previous Close

$3.40

  Intrinsic Value

$0.72

stock screener

  Rating & Target

str. sell

-79%

  Value-price divergence*

+31%

Previous close

$3.40

 
Intrinsic value

$0.72

 
Up/down potential

-79%

 
Rating

str. sell

 
Value-price divergence*

+31%

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

We calculate the intrinsic value of PESI 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 0.0

 

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, %
  -17.74
  30.00
  27.50
  25.25
  23.23
  21.40
  19.76
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
Revenue, $m
  51
  66
  85
  106
  130
  158
  190
  224
  262
  304
  348
  396
  447
  501
  558
  618
  680
  746
  814
  886
  960
  1,037
  1,117
  1,200
  1,287
  1,377
  1,471
  1,568
  1,669
  1,775
  1,884
Variable operating expenses, $m
 
  65
  83
  104
  128
  155
  186
  220
  257
  298
  341
  388
  438
  491
  547
  605
  667
  731
  798
  868
  941
  1,016
  1,095
  1,176
  1,261
  1,350
  1,441
  1,537
  1,636
  1,739
  1,846
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
  67
  65
  83
  104
  128
  155
  186
  220
  257
  298
  341
  388
  438
  491
  547
  605
  667
  731
  798
  868
  941
  1,016
  1,095
  1,176
  1,261
  1,350
  1,441
  1,537
  1,636
  1,739
  1,846
Operating income, $m
  -16
  1
  2
  2
  3
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  29
  31
  33
  35
  38
EBITDA, $m
  -12
  6
  7
  9
  11
  13
  16
  19
  22
  26
  30
  34
  38
  42
  47
  52
  58
  63
  69
  75
  81
  88
  95
  102
  109
  117
  125
  133
  141
  150
  160
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  20
  22
  24
  26
  27
  29
  31
  34
  36
  38
Earnings before tax, $m
  -16
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Tax expense, $m
  -3
  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
  -13
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  65
  84
  108
  135
  166
  202
  242
  286
  334
  387
  444
  505
  570
  638
  711
  787
  867
  950
  1,037
  1,128
  1,223
  1,321
  1,423
  1,529
  1,640
  1,754
  1,874
  1,997
  2,126
  2,261
  2,400
Adjusted assets (=assets-cash), $m
  65
  84
  108
  135
  166
  202
  242
  286
  334
  387
  444
  505
  570
  638
  711
  787
  867
  950
  1,037
  1,128
  1,223
  1,321
  1,423
  1,529
  1,640
  1,754
  1,874
  1,997
  2,126
  2,261
  2,400
Revenue / Adjusted assets
  0.785
  0.786
  0.787
  0.785
  0.783
  0.782
  0.785
  0.783
  0.784
  0.786
  0.784
  0.784
  0.784
  0.785
  0.785
  0.785
  0.784
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
Average production assets, $m
  33
  43
  55
  69
  84
  102
  123
  145
  170
  197
  225
  256
  289
  324
  361
  400
  440
  483
  527
  573
  621
  671
  723
  777
  833
  891
  952
  1,015
  1,080
  1,148
  1,219
Working capital, $m
  -2
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -38
Total debt, $m
  9
  19
  30
  43
  59
  76
  96
  118
  141
  167
  195
  225
  257
  291
  327
  364
  403
  445
  487
  532
  579
  627
  677
  729
  784
  840
  899
  960
  1,023
  1,089
  1,158
Total liabilities, $m
  32
  42
  53
  66
  82
  99
  119
  141
  164
  190
  218
  248
  280
  314
  350
  387
  426
  468
  510
  555
  602
  650
  700
  752
  807
  863
  922
  983
  1,046
  1,112
  1,181
Total equity, $m
  33
  43
  55
  69
  84
  102
  123
  145
  170
  197
  225
  256
  289
  324
  361
  400
  440
  483
  527
  573
  621
  671
  723
  777
  833
  891
  952
  1,015
  1,080
  1,148
  1,219
Total liabilities and equity, $m
  65
  85
  108
  135
  166
  201
  242
  286
  334
  387
  443
  504
  569
  638
  711
  787
  866
  951
  1,037
  1,128
  1,223
  1,321
  1,423
  1,529
  1,640
  1,754
  1,874
  1,998
  2,126
  2,260
  2,400
Debt-to-equity ratio
  0.273
  0.430
  0.550
  0.630
  0.700
  0.740
  0.780
  0.810
  0.830
  0.850
  0.870
  0.880
  0.890
  0.900
  0.900
  0.910
  0.920
  0.920
  0.920
  0.930
  0.930
  0.930
  0.940
  0.940
  0.940
  0.940
  0.940
  0.950
  0.950
  0.950
  0.950
Adjusted equity ratio
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -13
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Depreciation, amort., depletion, $m
  4
  4
  5
  7
  8
  10
  12
  15
  17
  20
  23
  26
  29
  32
  36
  40
  44
  48
  53
  57
  62
  67
  72
  78
  83
  89
  95
  101
  108
  115
  122
Funds from operations, $m
  3
  5
  6
  8
  9
  11
  13
  15
  18
  20
  23
  26
  30
  33
  37
  41
  45
  49
  53
  58
  63
  67
  73
  78
  83
  89
  95
  101
  108
  114
  121
Change in working capital, $m
  3
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  0
  5
  7
  8
  10
  12
  14
  16
  19
  21
  24
  27
  31
  34
  38
  42
  46
  50
  55
  59
  64
  69
  74
  80
  85
  91
  97
  103
  110
  117
  124
Maintenance CAPEX, $m
  0
  -3
  -4
  -5
  -7
  -8
  -10
  -12
  -15
  -17
  -20
  -23
  -26
  -29
  -32
  -36
  -40
  -44
  -48
  -53
  -57
  -62
  -67
  -72
  -78
  -83
  -89
  -95
  -101
  -108
  -115
New CAPEX, $m
  0
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -65
  -68
  -71
Cash from investing activities, $m
  0
  -13
  -16
  -19
  -23
  -26
  -30
  -34
  -40
  -44
  -49
  -54
  -59
  -64
  -69
  -75
  -81
  -86
  -92
  -99
  -105
  -112
  -119
  -126
  -134
  -141
  -150
  -158
  -166
  -176
  -186
Free cash flow, $m
  0
  -8
  -9
  -11
  -13
  -15
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
Issuance/(repayment) of debt, $m
  -1
  10
  11
  13
  15
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  37
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
Issuance/(repurchase) of shares, $m
  0
  9
  11
  13
  15
  17
  19
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
Cash from financing (excl. dividends), $m  
  -1
  19
  22
  26
  30
  35
  39
  44
  48
  52
  56
  60
  64
  68
  72
  75
  79
  83
  87
  91
  94
  98
  102
  106
  110
  114
  120
  124
  129
  134
  140
Total cash flow (excl. dividends), $m
  -1
  11
  13
  15
  17
  20
  22
  25
  27
  29
  32
  34
  36
  38
  40
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
Retained Cash Flow (-), $m
  13
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
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
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  7
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  81.0
  66.5
  55.3
  46.6
  39.8
  34.3
  29.8
  26.2
  23.2
  20.7
  18.6
  16.8
  15.3
  14.0
  12.8
  11.8
  10.9
  10.2
  9.5
  8.9
  8.3
  7.8
  7.3
  6.9
  6.5
  6.2
  5.8
  5.5
  5.3
  5.0

Perma-Fix Environmental Services, Inc., through its subsidiaries, operates as an environmental and technology know-how company in the United States. Its Treatment segment offers nuclear, low-level radioactive, mixed, hazardous, and non-hazardous waste treatment, processing, and disposal services through licensed and permitted treatment and storage facilities. This segment also engages in the research and development activities to identify, develop, and implement waste processing techniques for problematic waste streams. The company’s Services segment provides on-site waste management services to commercial and government customers; and owns an equipment calibration and maintenance laboratory that services, maintains, calibrates, and sources health physics and industrial hygiene, as well as customized nuclear, environmental, and occupational safety and health instrumentation. This segment also offers technical services that include professional radiological measurement and site survey; integrated occupational safety and health; and consulting, engineering, project and waste management, environmental, decontamination and decommissioning (D&D) field, technical, and management personnel services. In addition, this segment provides nuclear services comprising technology-based services, including engineering, D&D, specialty services, construction, logistics, transportation, processing, and disposal services; and remediation of nuclear licensed and federal facilities, as well as cleanup of nuclear legacy sites. Its Medical segment is involved in the research and development of medical isotope production technology. The company serves research institutions, commercial companies, public utilities, and governmental agencies through direct sales to customers or through intermediaries. Perma-Fix Environmental Services, Inc. was founded in 1990 and is based in Atlanta, Georgia.

FINANCIAL RATIOS  of  Perma-Fix Environmental Services (PESI)

Valuation Ratios
P/E Ratio -3.1
Price to Sales 0.8
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -17.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 24.2%
Total Debt to Equity 27.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -17.6%
Ret/ On Assets - 3 Yr. Avg. -5.9%
Return On Total Capital -26.5%
Ret/ On T. Cap. - 3 Yr. Avg. -10%
Return On Equity -32.9%
Return On Equity - 3 Yr. Avg. -12.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 13.7%
Gross Margin - 3 Yr. Avg. 19.1%
EBITDA Margin -23.5%
EBITDA Margin - 3 Yr. Avg. -4%
Operating Margin -31.4%
Oper. Margin - 3 Yr. Avg. -11.1%
Pre-Tax Margin -31.4%
Pre-Tax Margin - 3 Yr. Avg. -12.2%
Net Profit Margin -25.5%
Net Profit Margin - 3 Yr. Avg. -9.6%
Effective Tax Rate 18.8%
Eff/ Tax Rate - 3 Yr. Avg. 6.3%
Payout Ratio 0%

PESI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PESI stock intrinsic value calculation we used $51 million for the last fiscal year's total revenue generated by Perma-Fix Environmental Services. The default revenue input number comes from 2016 income statement of Perma-Fix Environmental Services. 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 PESI stock valuation model: a) initial revenue growth rate of 30% 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 7.3%, whose default value for PESI is calculated based on our internal credit rating of Perma-Fix Environmental Services, 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 Perma-Fix Environmental Services.
    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 PESI stock the variable cost ratio is equal to 98%.

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 PESI 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 Perma-Fix Environmental Services.

Corporate tax rate of 27% is the nominal tax rate for Perma-Fix Environmental Services. 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 PESI 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 PESI are equal to 64.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Perma-Fix Environmental Services 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 PESI is equal to -2%. 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 - $33 million for Perma-Fix Environmental Services - 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 11.473 million for Perma-Fix Environmental Services 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 Perma-Fix Environmental Services at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Gabelli & Companys Waste & Environmental Services Symposium   [Feb-15-17 07:00AM  Business Wire]
▶ Perma-Fix to Present at the LD Micro Invitational   [Jun-06-16 10:37AM  Accesswire]
▶ Gabelli & Companys Waste & Environmental Services Symposium   [Feb-29-16 10:03AM  Business Wire]
▶ Gabelli & Companys Waste & Environmental Services Symposium   [Feb-24-16 07:30AM  Business Wire]
▶ Gabelli & Companys Waste & Environmental Services Symposium   [Jan-27-16 07:00AM  Business Wire]
▶ 10-Q for Perma-Fix Environmental Services, Inc.   [Aug-08  08:10PM  at Company Spotlight]
Stock chart of PESI Financial statements of PESI
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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