Intrinsic value of Petrobras Argentina ADR - PZE

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$12.34

  Intrinsic Value

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  Value-price divergence*

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$12.34

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

We calculate the intrinsic value of PZE 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 2015), $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 2.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2015(a)
   2016
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.88
  40.50
  36.95
  33.76
  30.88
  28.29
  25.96
  23.87
  21.98
  20.28
  18.75
  17.38
  16.14
  15.03
  14.02
  13.12
  12.31
  11.58
  10.92
  10.33
  9.80
  9.32
  8.88
  8.50
  8.15
  7.83
  7.55
  7.29
  7.06
  6.86
  6.67
Revenue, $m
  1,405
  30,847
  42,245
  56,504
  73,953
  94,875
  119,507
  148,028
  180,564
  217,186
  257,915
  302,736
  351,599
  404,431
  461,147
  521,655
  585,866
  653,699
  725,085
  799,975
  878,337
  960,162
  1,045,467
  1,134,289
  1,226,692
  1,322,763
  1,422,612
  1,526,373
  1,634,201
  1,746,272
  1,862,785
Variable operating expenses, $m
 
  13,850
  18,968
  25,370
  33,205
  42,599
  53,659
  66,465
  81,073
  97,516
  115,804
  135,929
  157,868
  181,589
  207,055
  234,223
  263,054
  293,511
  325,563
  359,189
  394,373
  431,113
  469,415
  509,296
  550,785
  593,921
  638,753
  685,341
  733,756
  784,076
  836,391
Fixed operating expenses, $m
 
  10,702
  10,970
  11,244
  11,525
  11,813
  12,108
  12,411
  12,721
  13,039
  13,365
  13,699
  14,042
  14,393
  14,753
  15,122
  15,500
  15,887
  16,284
  16,692
  17,109
  17,537
  17,975
  18,424
  18,885
  19,357
  19,841
  20,337
  20,845
  21,367
  21,901
Total operating expenses, $m
  1,282
  24,552
  29,938
  36,614
  44,730
  54,412
  65,767
  78,876
  93,794
  110,555
  129,169
  149,628
  171,910
  195,982
  221,808
  249,345
  278,554
  309,398
  341,847
  375,881
  411,482
  448,650
  487,390
  527,720
  569,670
  613,278
  658,594
  705,678
  754,601
  805,443
  858,292
Operating income, $m
  123
  6,295
  12,307
  19,890
  29,223
  40,463
  53,740
  69,153
  86,770
  106,630
  128,746
  153,108
  179,689
  208,448
  239,339
  272,310
  307,312
  344,301
  383,238
  424,095
  466,855
  511,513
  558,077
  606,569
  657,022
  709,485
  764,018
  820,695
  879,599
  940,830
  1,004,494
EBITDA, $m
  291
  9,916
  17,267
  26,524
  37,905
  51,601
  67,770
  86,531
  107,968
  132,128
  159,025
  188,649
  220,967
  255,928
  293,478
  333,552
  376,093
  421,045
  468,363
  518,012
  569,971
  624,236
  680,815
  739,734
  801,036
  864,778
  931,033
  999,891
  1,071,454
  1,145,842
  1,223,185
Interest expense (income), $m
  13
  235
  626
  1,128
  1,755
  2,523
  3,444
  4,528
  5,783
  7,215
  8,827
  10,619
  12,592
  14,742
  17,068
  19,564
  22,227
  25,052
  28,038
  31,179
  34,475
  37,924
  41,525
  45,279
  49,188
  53,255
  57,483
  61,877
  66,444
  71,189
  76,122
Earnings before tax, $m
  119
  6,060
  11,681
  18,762
  27,468
  37,940
  50,296
  64,625
  80,986
  99,415
  119,919
  142,489
  167,097
  193,706
  222,271
  252,747
  285,086
  319,248
  355,200
  392,915
  432,379
  473,589
  516,552
  561,289
  607,834
  656,230
  706,535
  758,817
  813,155
  869,640
  928,372
Tax expense, $m
  62
  1,636
  3,154
  5,066
  7,416
  10,244
  13,580
  17,449
  21,866
  26,842
  32,378
  38,472
  45,116
  52,301
  60,013
  68,242
  76,973
  86,197
  95,904
  106,087
  116,742
  127,869
  139,469
  151,548
  164,115
  177,182
  190,765
  204,881
  219,552
  234,803
  250,661
Net income, $m
  55
  4,424
  8,527
  13,696
  20,051
  27,696
  36,716
  47,176
  59,120
  72,573
  87,541
  104,017
  121,981
  141,405
  162,258
  184,505
  208,113
  233,051
  259,296
  286,828
  315,637
  345,720
  377,083
  409,741
  443,719
  479,048
  515,771
  553,936
  593,603
  634,837
  677,712

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  145
  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
  1,862
  37,710
  51,644
  69,076
  90,407
  115,984
  146,096
  180,964
  220,739
  265,508
  315,300
  370,093
  429,827
  494,414
  563,749
  637,720
  716,218
  799,143
  886,413
  977,964
  1,073,761
  1,173,792
  1,278,077
  1,386,661
  1,499,623
  1,617,069
  1,739,135
  1,865,982
  1,997,800
  2,134,807
  2,277,244
Adjusted assets (=assets-cash), $m
  1,717
  37,710
  51,644
  69,076
  90,407
  115,984
  146,096
  180,964
  220,739
  265,508
  315,300
  370,093
  429,827
  494,414
  563,749
  637,720
  716,218
  799,143
  886,413
  977,964
  1,073,761
  1,173,792
  1,278,077
  1,386,661
  1,499,623
  1,617,069
  1,739,135
  1,865,982
  1,997,800
  2,134,807
  2,277,244
Revenue / Adjusted assets
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
Average production assets, $m
  825
  18,107
  24,798
  33,168
  43,410
  55,692
  70,150
  86,893
  105,991
  127,488
  151,396
  177,706
  206,388
  237,401
  270,693
  306,211
  343,903
  383,721
  425,625
  469,585
  515,584
  563,615
  613,689
  665,828
  720,068
  776,462
  835,073
  895,981
  959,276
  1,025,062
  1,093,455
Working capital, $m
  236
  2,067
  2,830
  3,786
  4,955
  6,357
  8,007
  9,918
  12,098
  14,551
  17,280
  20,283
  23,557
  27,097
  30,897
  34,951
  39,253
  43,798
  48,581
  53,598
  58,849
  64,331
  70,046
  75,997
  82,188
  88,625
  95,315
  102,267
  109,491
  117,000
  124,807
Total debt, $m
  254
  10,436
  18,796
  29,256
  42,054
  57,400
  75,468
  96,388
  120,253
  147,115
  176,990
  209,866
  245,706
  284,458
  326,059
  370,442
  417,541
  467,296
  519,658
  574,589
  632,067
  692,085
  754,656
  819,807
  887,584
  958,052
  1,031,291
  1,107,399
  1,186,490
  1,268,694
  1,354,156
Total liabilities, $m
  1,034
  22,626
  30,986
  41,446
  54,244
  69,590
  87,658
  108,578
  132,443
  159,305
  189,180
  222,056
  257,896
  296,648
  338,249
  382,632
  429,731
  479,486
  531,848
  586,779
  644,257
  704,275
  766,846
  831,997
  899,774
  970,242
  1,043,481
  1,119,589
  1,198,680
  1,280,884
  1,366,346
Total equity, $m
  828
  15,084
  20,658
  27,630
  36,163
  46,394
  58,439
  72,386
  88,296
  106,203
  126,120
  148,037
  171,931
  197,766
  225,500
  255,088
  286,487
  319,657
  354,565
  391,186
  429,504
  469,517
  511,231
  554,664
  599,849
  646,828
  695,654
  746,393
  799,120
  853,923
  910,897
Total liabilities and equity, $m
  1,862
  37,710
  51,644
  69,076
  90,407
  115,984
  146,097
  180,964
  220,739
  265,508
  315,300
  370,093
  429,827
  494,414
  563,749
  637,720
  716,218
  799,143
  886,413
  977,965
  1,073,761
  1,173,792
  1,278,077
  1,386,661
  1,499,623
  1,617,070
  1,739,135
  1,865,982
  1,997,800
  2,134,807
  2,277,243
Debt-to-equity ratio
  0.307
  0.690
  0.910
  1.060
  1.160
  1.240
  1.290
  1.330
  1.360
  1.390
  1.400
  1.420
  1.430
  1.440
  1.450
  1.450
  1.460
  1.460
  1.470
  1.470
  1.470
  1.470
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.490
  1.490
Adjusted equity ratio
  0.398
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  4,424
  8,527
  13,696
  20,051
  27,696
  36,716
  47,176
  59,120
  72,573
  87,541
  104,017
  121,981
  141,405
  162,258
  184,505
  208,113
  233,051
  259,296
  286,828
  315,637
  345,720
  377,083
  409,741
  443,719
  479,048
  515,771
  553,936
  593,603
  634,837
  677,712
Depreciation, amort., depletion, $m
  168
  3,621
  4,960
  6,634
  8,682
  11,138
  14,030
  17,379
  21,198
  25,498
  30,279
  35,541
  41,278
  47,480
  54,139
  61,242
  68,781
  76,744
  85,125
  93,917
  103,117
  112,723
  122,738
  133,166
  144,014
  155,292
  167,015
  179,196
  191,855
  205,012
  218,691
Funds from operations, $m
  148
  8,045
  13,487
  20,330
  28,733
  38,834
  50,746
  64,554
  80,318
  98,070
  117,820
  139,558
  163,258
  188,886
  216,397
  245,747
  276,893
  309,796
  344,421
  380,745
  418,754
  458,443
  499,821
  542,907
  587,732
  634,340
  682,785
  733,133
  785,459
  839,850
  896,403
Change in working capital, $m
  -123
  596
  764
  955
  1,169
  1,402
  1,650
  1,911
  2,180
  2,454
  2,729
  3,003
  3,274
  3,540
  3,800
  4,054
  4,302
  4,545
  4,783
  5,018
  5,250
  5,482
  5,715
  5,951
  6,191
  6,437
  6,690
  6,952
  7,224
  7,509
  7,806
Cash from operations, $m
  271
  8,742
  12,723
  19,375
  27,564
  37,433
  49,096
  62,643
  78,138
  95,617
  115,091
  136,555
  159,985
  185,346
  212,597
  241,693
  272,591
  305,251
  339,638
  375,728
  413,503
  452,961
  494,105
  536,956
  581,541
  627,904
  676,095
  726,181
  778,234
  832,341
  888,596
Maintenance CAPEX, $m
  0
  -2,576
  -3,621
  -4,960
  -6,634
  -8,682
  -11,138
  -14,030
  -17,379
  -21,198
  -25,498
  -30,279
  -35,541
  -41,278
  -47,480
  -54,139
  -61,242
  -68,781
  -76,744
  -85,125
  -93,917
  -103,117
  -112,723
  -122,738
  -133,166
  -144,014
  -155,292
  -167,015
  -179,196
  -191,855
  -205,012
New CAPEX, $m
  -350
  -5,226
  -6,691
  -8,370
  -10,242
  -12,281
  -14,459
  -16,742
  -19,099
  -21,497
  -23,908
  -26,310
  -28,682
  -31,012
  -33,292
  -35,518
  -37,692
  -39,818
  -41,904
  -43,960
  -45,998
  -48,032
  -50,074
  -52,139
  -54,241
  -56,394
  -58,612
  -60,908
  -63,295
  -65,786
  -68,393
Cash from investing activities, $m
  -296
  -7,802
  -10,312
  -13,330
  -16,876
  -20,963
  -25,597
  -30,772
  -36,478
  -42,695
  -49,406
  -56,589
  -64,223
  -72,290
  -80,772
  -89,657
  -98,934
  -108,599
  -118,648
  -129,085
  -139,915
  -151,149
  -162,797
  -174,877
  -187,407
  -200,408
  -213,904
  -227,923
  -242,491
  -257,641
  -273,405
Free cash flow, $m
  -25
  940
  2,411
  6,045
  10,689
  16,469
  23,499
  31,871
  41,661
  52,922
  65,685
  79,966
  95,761
  113,056
  131,824
  152,036
  173,657
  196,652
  220,990
  246,642
  273,588
  301,812
  331,309
  362,079
  394,135
  427,496
  462,192
  498,258
  535,743
  574,700
  615,191
Issuance/(repayment) of debt, $m
  -4
  6,526
  8,360
  10,459
  12,798
  15,346
  18,067
  20,921
  23,865
  26,862
  29,875
  32,876
  35,840
  38,752
  41,601
  44,383
  47,099
  49,755
  52,362
  54,931
  57,478
  60,019
  62,570
  65,151
  67,777
  70,468
  73,239
  76,108
  79,091
  82,204
  85,462
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  
  -5
  6,526
  8,360
  10,459
  12,798
  15,346
  18,067
  20,921
  23,865
  26,862
  29,875
  32,876
  35,840
  38,752
  41,601
  44,383
  47,099
  49,755
  52,362
  54,931
  57,478
  60,019
  62,570
  65,151
  67,777
  70,468
  73,239
  76,108
  79,091
  82,204
  85,462
Total cash flow (excl. dividends), $m
  7
  7,466
  10,771
  16,504
  23,487
  31,816
  41,566
  52,792
  65,526
  79,783
  95,561
  112,842
  131,602
  151,808
  173,425
  196,419
  220,756
  246,407
  273,352
  301,574
  331,066
  361,831
  393,879
  427,230
  461,913
  497,964
  535,431
  574,367
  614,834
  656,904
  700,653
Retained Cash Flow (-), $m
  -87
  -4,359
  -5,574
  -6,973
  -8,532
  -10,231
  -12,045
  -13,947
  -15,910
  -17,908
  -19,917
  -21,917
  -23,894
  -25,835
  -27,734
  -29,588
  -31,399
  -33,170
  -34,908
  -36,621
  -38,319
  -40,013
  -41,714
  -43,434
  -45,185
  -46,978
  -48,826
  -50,739
  -52,728
  -54,803
  -56,975
Prev. year cash balance distribution, $m
 
  2,211
  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
 
  5,318
  5,198
  9,531
  14,955
  21,585
  29,521
  38,845
  49,616
  61,876
  75,644
  90,925
  107,708
  125,973
  145,691
  166,830
  189,357
  213,237
  238,444
  264,953
  292,747
  321,819
  352,165
  383,796
  416,728
  450,986
  486,605
  523,628
  562,107
  602,101
  643,678
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
 
  5,099
  4,758
  8,295
  12,314
  16,731
  21,425
  26,243
  31,011
  35,544
  39,657
  43,179
  45,963
  47,897
  48,911
  48,979
  48,120
  46,397
  43,912
  40,795
  37,199
  33,287
  29,220
  25,154
  21,225
  17,544
  14,197
  11,239
  8,697
  6,572
  4,847
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

Petrobras Argentina S.A. operates as an integrated energy company. It operates through four segments: Oil and Gas Exploration and Production, Refining and Distribution, Petrochemicals, and Gas and Energy. The Oil and Gas Exploration and Production segment is involved in the oil and gas exploration and production activities in Argentina, Venezuela, Bolivia, and Ecuador. As of December 31, 2015, this segment had interests in 20 oil and gas production blocks and 9 exploration blocks located within exploration areas or pending authorization for production; and liquid hydrocarbon and natural gas proved developed and undeveloped reserves of 183.1 million barrels of oil equivalent. The Refining and Distribution segment operates a refinery at Bahía Blanca that produces gasoline, diesel, fuel oil, asphalts and liquefied gases, and intermediate fuel oil. This segment also operated a network of 265 gas stations, including 79 owned gas stations and 186 franchised gas stations under the Petrobras and Spacio 1 brand names. The Petrochemicals segment produces and sells a range of products, such as intermediate gasoline, aromatic solvents, hexane and other hydrogenated paraffinic solvents, propellants for the cosmetic industry, monomer styrene, rubbers, and polymers. The Gas and Energy segment engages in the sale of gas; provision of brokerage and trading services for gas and liquefied petroleum gas; transportation of gas in southern Argentina; and processing and marketing of natural gas liquids, as well as generation and transmission of electricity through thermal power plant and the open cycle gas-fired turbine sources. The company was formerly known as Petrobras Energia S.A. and changed its name to Petrobras Argentina, S.A. in July 2010. The company was founded in 1946 and is based in Buenos Aires, Argentina. Petrobras Argentina SA operates as a subsidiary of Petrobras Participaciones, S.L.

FINANCIAL RATIOS  of  Petrobras Argentina ADR (PZE)

Valuation Ratios
P/E Ratio 453
Price to Sales 17.7
Price to Book 30.1
Price to Tangible Book
Price to Cash Flow 91.9
Price to Free Cash Flow -315.4
Growth Rates
Sales Growth Rate 5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.7%
Cap. Spend. - 3 Yr. Gr. Rate 12.8%
Financial Strength
Quick Ratio 36
Current Ratio 0.1
LT Debt to Equity 30.2%
Total Debt to Equity 30.7%
Interest Coverage 10
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 5.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.9%
Return On Equity 7%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 29.2%
Gross Margin - 3 Yr. Avg. 28.6%
EBITDA Margin 21.4%
EBITDA Margin - 3 Yr. Avg. 22%
Operating Margin 8.8%
Oper. Margin - 3 Yr. Avg. 7.9%
Pre-Tax Margin 8.5%
Pre-Tax Margin - 3 Yr. Avg. 8%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 52.1%
Eff/ Tax Rate - 3 Yr. Avg. 49%
Payout Ratio 18.2%

PZE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PZE stock intrinsic value calculation we used $21955 million for the last fiscal year's total revenue generated by Petrobras Argentina ADR. The default revenue input number comes from 2015 income statement of Petrobras Argentina 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 PZE stock valuation model: a) initial revenue growth rate of 40.5% 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 PZE is calculated based on our internal credit rating of Petrobras Argentina 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 Petrobras Argentina 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 PZE stock the variable cost ratio is equal to 44.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10441 million in the base year in the intrinsic value calculation for PZE 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% for Petrobras Argentina ADR.

Corporate tax rate of 27% is the nominal tax rate for Petrobras Argentina 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 PZE 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 PZE are equal to 58.7%.

Life of production assets of 4.9 years is the average useful life of capital assets used in Petrobras Argentina 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 PZE is equal to 6.7%. 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 - $12936 million for Petrobras Argentina 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 201.047 million for Petrobras Argentina 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 Petrobras Argentina ADR at the current share price and the inputted number of shares is $2.5 billion.


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COMPANY NEWS

▶ Dodge & Cox's Global Stock Fund 4th Quarter Commentary   [Jan-17-17 03:36PM  GuruFocus.com]
▶ Is Petrobras Argentina SA ADR (PZE) A Good Stock To Buy?   [Dec-12-16 07:58AM  Insider Monkey]
▶ OPEC Deal Likely, But Will Oil React?   [Nov-23-16 02:01PM  at Barrons.com]
▶ Goldman On OPEC & Oil Risk In 2017   [Nov-18-16 05:04PM  at Barrons.com]
▶ Petrobras CEO on future of company   [Nov-15-16 04:44PM  CNBC Videos]
▶ Rio Olympics Likely a Magnet for Cybercriminals   [May-06-16 11:26AM  at The Wall Street Journal]
▶ PETROBRAS ARGENTINA S.A. Financials   [01:04PM  EDGAR Online Financials]
▶ Petrobras Jumps: More Oil Asset Sales, Says Blog Leak   [May-04-16 12:17PM  at Barrons.com]
▶ [$$] Petrobras Sells Stakes in Argentina and Chile Units   [11:42AM  at The Wall Street Journal]
▶ [$$] Petrobras Sells Stakes in Argentine and Chilean Units   [May-03-16 09:07PM  at The Wall Street Journal]
▶ YPF & Petrobras Argentina: Oil Trickles As Gas Output Rises   [Mar-28-16 01:04PM  at Barrons.com]
▶ Argentina: Credit Upgraded As Obama Visits, Bond Sale Nears   [Mar-23-16 01:39PM  at Barrons.com]
▶ Petrobras Upgrade: Forget Oil & Debt Fundamentals?   [Mar-22-16 02:34PM  at Barrons.com]
▶ Brazil's Lula to take government role: Report   [Mar-15-16 11:39AM  at CNBC]
▶ Brazil's Petrobras To Sell Argentina Oil & Gas Assets   [Mar-02-16 10:06AM  at Barrons.com]
▶ Petrobras In Brazil & Argentina Downgraded By Moody's   [Feb-24-16 06:38PM  at Barrons.com]
▶ Why Would Iran Agree To Saudi-Russian Oil Limits?   [Feb-17-16 05:36PM  at Barrons.com]
▶ Argentina: Will Oil, Gas Fracking Bring YPF 50% Upside?   [Jan-26-16 04:25PM  at Barrons.com]
▶ Why Petrobras Argentina & YPF Zig When Oil Prices Zag   [Jan-12-16 12:21PM  at Barrons.com]
▶ Oil At New Lows: Asia Currencies & U.S. Equities Correlated   [Jan-06-16 03:30PM  at Barrons.com]
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▶ In Argentina Election Euphoria, YPF & Oil Stocks Tumble   [Nov-23  04:01PM  at Barrons.com]
▶ YPF Stock Closes Higher on CFO's Comments   [Oct-07  04:03PM  at TheStreet]
▶ Argentina Upgraded: Election May Bring Holdout Bond Deal   [Sep-29  03:04PM  at Barrons.com]
▶ Petrobras 100-Year Bond Loss Smarts For Pimco, Fidelity   [Sep-14  01:03PM  at Barrons.com]
▶ 4 Integrated Oil and Gas Stocks to Buy   [Jul-29  08:29AM  at TheStreet]
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▶ Argentina Local Bonds: Small Signs of Success?   [Jul-01  01:32PM  at Barrons.com]
▶ Stocks could rally this week   [May-11  05:58AM  at CNBC]
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▶ Cramer Remix: This is what I think of Netflix   [Apr-13  07:16PM  at CNBC]
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Stock chart of PZE Financial statements of PZE Annual reports of PZE
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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