Intrinsic value of Profire Energy - PFIE

Previous Close

$1.86

  Intrinsic Value

$0.21

stock screener

  Rating & Target

str. sell

-89%

Previous close

$1.86

 
Intrinsic value

$0.21

 
Up/down potential

-89%

 
Rating

str. sell

We calculate the intrinsic value of PFIE 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 0.1

 

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, %
  -40.74
  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
  16
  26
  40
  59
  86
  121
  166
  223
  293
  378
  477
  592
  724
  873
  1,038
  1,221
  1,420
  1,636
  1,868
  2,115
  2,378
  2,656
  2,949
  3,256
  3,577
  3,913
  4,263
  4,628
  5,007
  5,402
  5,812
Variable operating expenses, $m
 
  26
  39
  59
  85
  120
  166
  222
  292
  375
  474
  588
  719
  867
  1,032
  1,213
  1,411
  1,626
  1,856
  2,102
  2,363
  2,639
  2,930
  3,235
  3,555
  3,889
  4,237
  4,599
  4,976
  5,368
  5,775
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
  16
  26
  39
  59
  85
  120
  166
  222
  292
  375
  474
  588
  719
  867
  1,032
  1,213
  1,411
  1,626
  1,856
  2,102
  2,363
  2,639
  2,930
  3,235
  3,555
  3,889
  4,237
  4,599
  4,976
  5,368
  5,775
Operating income, $m
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  5
  5
  6
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
  27
  29
  31
  34
  36
EBITDA, $m
  1
  2
  2
  4
  5
  8
  10
  14
  18
  23
  30
  37
  45
  54
  65
  76
  88
  102
  116
  131
  148
  165
  183
  202
  222
  243
  265
  288
  311
  336
  361
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  22
  23
Earnings before tax, $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Net income, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  15
  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
  43
  45
  69
  104
  150
  212
  292
  391
  514
  661
  835
  1,037
  1,268
  1,528
  1,818
  2,138
  2,487
  2,865
  3,271
  3,704
  4,165
  4,651
  5,164
  5,702
  6,265
  6,853
  7,466
  8,105
  8,769
  9,460
  10,178
Adjusted assets (=assets-cash), $m
  28
  45
  69
  104
  150
  212
  292
  391
  514
  661
  835
  1,037
  1,268
  1,528
  1,818
  2,138
  2,487
  2,865
  3,271
  3,704
  4,165
  4,651
  5,164
  5,702
  6,265
  6,853
  7,466
  8,105
  8,769
  9,460
  10,178
Revenue / Adjusted assets
  0.571
  0.578
  0.580
  0.567
  0.573
  0.571
  0.568
  0.570
  0.570
  0.572
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
Average production assets, $m
  9
  14
  21
  31
  46
  64
  88
  119
  156
  200
  253
  314
  384
  463
  551
  648
  754
  869
  992
  1,123
  1,263
  1,410
  1,566
  1,729
  1,900
  2,078
  2,264
  2,457
  2,659
  2,868
  3,086
Working capital, $m
  27
  13
  20
  30
  43
  61
  83
  112
  147
  189
  238
  296
  362
  436
  519
  610
  710
  818
  934
  1,058
  1,189
  1,328
  1,474
  1,628
  1,789
  1,957
  2,132
  2,314
  2,504
  2,701
  2,906
Total debt, $m
  0
  1
  3
  5
  9
  13
  19
  26
  34
  45
  57
  72
  88
  107
  127
  150
  175
  201
  230
  261
  294
  328
  365
  403
  443
  485
  528
  573
  621
  670
  721
Total liabilities, $m
  2
  3
  5
  7
  11
  15
  21
  28
  36
  47
  59
  74
  90
  109
  129
  152
  177
  203
  232
  263
  296
  330
  367
  405
  445
  487
  530
  575
  623
  672
  723
Total equity, $m
  41
  42
  64
  96
  140
  197
  271
  364
  477
  614
  776
  963
  1,178
  1,420
  1,689
  1,986
  2,310
  2,661
  3,039
  3,441
  3,869
  4,321
  4,797
  5,297
  5,820
  6,366
  6,936
  7,529
  8,147
  8,788
  9,456
Total liabilities and equity, $m
  43
  45
  69
  103
  151
  212
  292
  392
  513
  661
  835
  1,037
  1,268
  1,529
  1,818
  2,138
  2,487
  2,864
  3,271
  3,704
  4,165
  4,651
  5,164
  5,702
  6,265
  6,853
  7,466
  8,104
  8,770
  9,460
  10,179
Debt-to-equity ratio
  0.000
  0.030
  0.050
  0.060
  0.060
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
Adjusted equity ratio
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
Depreciation, amort., depletion, $m
  1
  2
  2
  3
  5
  7
  9
  13
  16
  21
  27
  33
  40
  49
  58
  68
  79
  91
  104
  118
  133
  148
  165
  182
  200
  219
  238
  259
  280
  302
  325
Funds from operations, $m
  3
  2
  2
  4
  5
  7
  10
  13
  17
  22
  28
  34
  42
  51
  60
  71
  82
  94
  108
  122
  137
  153
  170
  188
  206
  225
  245
  266
  288
  311
  334
Change in working capital, $m
  1
  5
  7
  10
  13
  18
  23
  28
  35
  42
  50
  58
  66
  74
  83
  91
  100
  108
  116
  124
  131
  139
  146
  154
  161
  168
  175
  182
  190
  197
  205
Cash from operations, $m
  2
  -3
  -5
  -6
  -8
  -11
  -13
  -15
  -18
  -20
  -22
  -23
  -24
  -24
  -23
  -21
  -18
  -13
  -8
  -2
  6
  14
  24
  34
  45
  57
  70
  84
  98
  113
  129
Maintenance CAPEX, $m
  0
  -1
  -1
  -2
  -3
  -5
  -7
  -9
  -12
  -16
  -21
  -27
  -33
  -40
  -49
  -58
  -68
  -79
  -91
  -104
  -118
  -133
  -148
  -165
  -182
  -200
  -219
  -238
  -259
  -280
  -302
New CAPEX, $m
  0
  -5
  -7
  -10
  -14
  -19
  -24
  -30
  -37
  -45
  -53
  -61
  -70
  -79
  -88
  -97
  -106
  -115
  -123
  -131
  -140
  -148
  -155
  -163
  -171
  -178
  -186
  -194
  -201
  -209
  -218
Cash from investing activities, $m
  -11
  -6
  -8
  -12
  -17
  -24
  -31
  -39
  -49
  -61
  -74
  -88
  -103
  -119
  -137
  -155
  -174
  -194
  -214
  -235
  -258
  -281
  -303
  -328
  -353
  -378
  -405
  -432
  -460
  -489
  -520
Free cash flow, $m
  -9
  -9
  -13
  -19
  -26
  -34
  -44
  -55
  -68
  -81
  -96
  -111
  -127
  -143
  -159
  -176
  -192
  -207
  -223
  -238
  -252
  -266
  -280
  -294
  -307
  -321
  -334
  -348
  -362
  -376
  -390
Issuance/(repayment) of debt, $m
  0
  1
  2
  2
  3
  4
  6
  7
  9
  10
  12
  14
  16
  18
  21
  23
  25
  27
  29
  31
  33
  35
  36
  38
  40
  42
  44
  45
  47
  49
  51
Issuance/(repurchase) of shares, $m
  0
  16
  23
  32
  43
  57
  73
  92
  113
  136
  161
  186
  213
  240
  267
  295
  322
  348
  374
  399
  424
  448
  471
  494
  517
  540
  563
  586
  609
  633
  658
Cash from financing (excl. dividends), $m  
  -4
  17
  25
  34
  46
  61
  79
  99
  122
  146
  173
  200
  229
  258
  288
  318
  347
  375
  403
  430
  457
  483
  507
  532
  557
  582
  607
  631
  656
  682
  709
Total cash flow (excl. dividends), $m
  -12
  8
  11
  15
  21
  27
  35
  44
  54
  65
  77
  89
  102
  115
  129
  142
  155
  167
  180
  192
  204
  216
  227
  238
  250
  261
  272
  283
  294
  306
  318
Retained Cash Flow (-), $m
  4
  -16
  -23
  -32
  -43
  -57
  -74
  -93
  -114
  -137
  -162
  -188
  -214
  -242
  -269
  -297
  -324
  -351
  -377
  -403
  -428
  -452
  -476
  -500
  -523
  -546
  -570
  -593
  -617
  -642
  -667
Prev. year cash balance distribution, $m
 
  15
  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
 
  7
  -12
  -17
  -23
  -30
  -39
  -48
  -59
  -71
  -84
  -98
  -112
  -126
  -141
  -155
  -170
  -184
  -197
  -211
  -224
  -236
  -249
  -261
  -274
  -286
  -298
  -310
  -323
  -336
  -349
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
 
  7
  -11
  -14
  -19
  -23
  -28
  -33
  -37
  -41
  -44
  -47
  -48
  -48
  -47
  -46
  -43
  -40
  -36
  -32
  -28
  -24
  -21
  -17
  -14
  -11
  -9
  -7
  -5
  -4
  -3
Current shareholders' claim on cash, %
  100
  78.6
  63.0
  51.5
  42.8
  36.1
  30.9
  26.7
  23.4
  20.7
  18.5
  16.7
  15.2
  13.9
  12.8
  11.9
  11.1
  10.3
  9.7
  9.2
  8.7
  8.3
  7.9
  7.5
  7.2
  6.9
  6.6
  6.4
  6.2
  6.0
  5.8

Profire Energy, Inc. is an oilfield technology company. The Company is primarily engaged in the business of developing combustion management technologies for the oil and gas industry. It specializes in the creation of burner-management systems, used on a range of oilfield natural-draft fire tube vessels. It offers burner-management systems, which help to ignite, monitor and manage the burner flame. Its solution, the PF3100, helps manage and synchronize custom applications helping oilfield producers meet deadlines through an off-the-shelf solution with dynamic customization. It also sells complementary oilfield products. Such products help manage fuel flow (such as valves and fuel trains), meter air flow (such as airplates), generate power on-site (such as solar packages), ignite and direct flame (such as flare stack igniter and nozzles), and other functions. In addition to the burner-management systems and complementary technologies, it also offers chemical-management systems.

FINANCIAL RATIOS  of  Profire Energy (PFIE)

Valuation Ratios
P/E Ratio 0
Price to Sales 5.9
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 47.2
Price to Free Cash Flow 47.2
Growth Rates
Sales Growth Rate -40.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 6.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 51.6%
EBITDA Margin 6.3%
EBITDA Margin - 3 Yr. Avg. 9.9%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 5.2%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 5.9%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 11.1%
Payout Ratio 0%

PFIE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PFIE stock intrinsic value calculation we used $16 million for the last fiscal year's total revenue generated by Profire Energy. The default revenue input number comes from 2016 income statement of Profire Energy. 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 PFIE 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 PFIE is calculated based on our internal credit rating of Profire Energy, 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 Profire Energy.
    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 PFIE stock the variable cost ratio is equal to 100%.

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 PFIE 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 Profire Energy.

Corporate tax rate of 27% is the nominal tax rate for Profire Energy. 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 PFIE 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 PFIE are equal to 53.1%.

Life of production assets of 9.5 years is the average useful life of capital assets used in Profire Energy 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 PFIE is equal to 50%. 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 - $41 million for Profire Energy - 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 48.554 million for Profire Energy 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 Profire Energy at the current share price and the inputted number of shares is $0.1 billion.

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Financial statements of PFIE
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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