Intrinsic value of Scorpio Tankers - STNG

Previous Close

$3.37

  Intrinsic Value

$1.95

stock screener

  Rating & Target

sell

-42%

  Value-price divergence*

+49%

Previous close

$3.37

 
Intrinsic value

$1.95

 
Up/down potential

-42%

 
Rating

sell

 
Value-price divergence*

+49%

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

We calculate the intrinsic value of STNG 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 0.6

 

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, %
  -30.82
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  523
  533
  546
  560
  576
  593
  612
  633
  656
  680
  706
  734
  764
  795
  829
  865
  903
  943
  985
  1,030
  1,077
  1,127
  1,180
  1,235
  1,294
  1,356
  1,420
  1,489
  1,561
  1,636
  1,716
Variable operating expenses, $m
 
  63
  65
  67
  68
  71
  73
  75
  78
  81
  84
  87
  91
  95
  99
  103
  107
  112
  117
  123
  128
  134
  140
  147
  154
  161
  169
  177
  186
  195
  204
Fixed operating expenses, $m
 
  377
  387
  396
  406
  416
  427
  437
  448
  460
  471
  483
  495
  507
  520
  533
  546
  560
  574
  588
  603
  618
  634
  649
  666
  682
  699
  717
  735
  753
  772
Total operating expenses, $m
  446
  440
  452
  463
  474
  487
  500
  512
  526
  541
  555
  570
  586
  602
  619
  636
  653
  672
  691
  711
  731
  752
  774
  796
  820
  843
  868
  894
  921
  948
  976
Operating income, $m
  77
  93
  94
  97
  101
  106
  112
  120
  129
  139
  151
  164
  178
  193
  210
  229
  249
  271
  294
  319
  346
  375
  406
  439
  474
  512
  552
  595
  640
  688
  740
EBITDA, $m
  198
  216
  220
  226
  234
  243
  254
  267
  281
  297
  314
  333
  355
  377
  402
  429
  458
  489
  522
  558
  596
  636
  679
  725
  774
  826
  881
  939
  1,001
  1,067
  1,137
Interest expense (income), $m
  69
  62
  64
  65
  67
  69
  71
  73
  76
  79
  82
  85
  88
  92
  96
  100
  104
  109
  113
  119
  124
  130
  136
  142
  149
  156
  164
  172
  180
  189
  198
Earnings before tax, $m
  -25
  30
  30
  32
  34
  37
  42
  47
  53
  61
  69
  79
  90
  102
  115
  129
  145
  162
  181
  201
  222
  245
  270
  297
  325
  356
  388
  423
  460
  500
  542
Tax expense, $m
  0
  8
  8
  9
  9
  10
  11
  13
  14
  16
  19
  21
  24
  27
  31
  35
  39
  44
  49
  54
  60
  66
  73
  80
  88
  96
  105
  114
  124
  135
  146
Net income, $m
  -25
  22
  22
  23
  25
  27
  30
  34
  39
  44
  51
  58
  66
  74
  84
  94
  106
  118
  132
  146
  162
  179
  197
  217
  237
  260
  284
  309
  336
  365
  395

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  100
  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
  3,230
  3,194
  3,268
  3,352
  3,446
  3,551
  3,665
  3,790
  3,925
  4,071
  4,227
  4,394
  4,572
  4,762
  4,964
  5,178
  5,405
  5,645
  5,899
  6,168
  6,451
  6,750
  7,066
  7,398
  7,748
  8,117
  8,505
  8,914
  9,344
  9,797
  10,273
Adjusted assets (=assets-cash), $m
  3,130
  3,194
  3,268
  3,352
  3,446
  3,551
  3,665
  3,790
  3,925
  4,071
  4,227
  4,394
  4,572
  4,762
  4,964
  5,178
  5,405
  5,645
  5,899
  6,168
  6,451
  6,750
  7,066
  7,398
  7,748
  8,117
  8,505
  8,914
  9,344
  9,797
  10,273
Revenue / Adjusted assets
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
Average production assets, $m
  3,136
  3,198
  3,272
  3,356
  3,450
  3,555
  3,669
  3,794
  3,930
  4,075
  4,232
  4,399
  4,578
  4,768
  4,970
  5,184
  5,411
  5,652
  5,906
  6,175
  6,459
  6,758
  7,074
  7,407
  7,757
  8,127
  8,515
  8,925
  9,355
  9,808
  10,285
Working capital, $m
  -227
  27
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
Total debt, $m
  1,883
  1,821
  1,863
  1,912
  1,967
  2,027
  2,094
  2,166
  2,245
  2,329
  2,420
  2,517
  2,620
  2,730
  2,847
  2,971
  3,103
  3,242
  3,390
  3,545
  3,710
  3,883
  4,066
  4,259
  4,462
  4,676
  4,901
  5,138
  5,388
  5,650
  5,926
Total liabilities, $m
  1,915
  1,853
  1,895
  1,944
  1,999
  2,059
  2,126
  2,198
  2,277
  2,361
  2,452
  2,549
  2,652
  2,762
  2,879
  3,003
  3,135
  3,274
  3,422
  3,577
  3,742
  3,915
  4,098
  4,291
  4,494
  4,708
  4,933
  5,170
  5,420
  5,682
  5,958
Total equity, $m
  1,315
  1,342
  1,372
  1,408
  1,447
  1,491
  1,539
  1,592
  1,649
  1,710
  1,775
  1,846
  1,920
  2,000
  2,085
  2,175
  2,270
  2,371
  2,478
  2,590
  2,710
  2,835
  2,968
  3,107
  3,254
  3,409
  3,572
  3,744
  3,925
  4,115
  4,315
Total liabilities and equity, $m
  3,230
  3,195
  3,267
  3,352
  3,446
  3,550
  3,665
  3,790
  3,926
  4,071
  4,227
  4,395
  4,572
  4,762
  4,964
  5,178
  5,405
  5,645
  5,900
  6,167
  6,452
  6,750
  7,066
  7,398
  7,748
  8,117
  8,505
  8,914
  9,345
  9,797
  10,273
Debt-to-equity ratio
  1.432
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
Adjusted equity ratio
  0.388
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -25
  22
  22
  23
  25
  27
  30
  34
  39
  44
  51
  58
  66
  74
  84
  94
  106
  118
  132
  146
  162
  179
  197
  217
  237
  260
  284
  309
  336
  365
  395
Depreciation, amort., depletion, $m
  121
  123
  126
  130
  133
  137
  142
  147
  152
  157
  163
  170
  177
  184
  192
  200
  209
  218
  228
  238
  249
  261
  273
  286
  300
  314
  329
  345
  361
  379
  397
Funds from operations, $m
  191
  146
  149
  153
  158
  164
  172
  181
  191
  202
  214
  227
  242
  258
  276
  295
  315
  337
  360
  385
  411
  440
  470
  503
  537
  574
  612
  654
  697
  744
  793
Change in working capital, $m
  12
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
Cash from operations, $m
  179
  145
  148
  152
  157
  164
  171
  180
  190
  201
  213
  226
  241
  257
  274
  293
  313
  334
  358
  383
  409
  437
  468
  500
  534
  570
  609
  650
  694
  740
  789
Maintenance CAPEX, $m
  0
  -121
  -123
  -126
  -130
  -133
  -137
  -142
  -147
  -152
  -157
  -163
  -170
  -177
  -184
  -192
  -200
  -209
  -218
  -228
  -238
  -249
  -261
  -273
  -286
  -300
  -314
  -329
  -345
  -361
  -379
New CAPEX, $m
  0
  -63
  -74
  -84
  -94
  -105
  -115
  -125
  -135
  -146
  -156
  -167
  -179
  -190
  -202
  -214
  -227
  -240
  -254
  -269
  -284
  -299
  -316
  -333
  -351
  -369
  -389
  -409
  -431
  -453
  -477
Cash from investing activities, $m
  31
  -184
  -197
  -210
  -224
  -238
  -252
  -267
  -282
  -298
  -313
  -330
  -349
  -367
  -386
  -406
  -427
  -449
  -472
  -497
  -522
  -548
  -577
  -606
  -637
  -669
  -703
  -738
  -776
  -814
  -856
Free cash flow, $m
  210
  -39
  -49
  -58
  -67
  -74
  -81
  -87
  -92
  -97
  -101
  -105
  -108
  -110
  -112
  -114
  -115
  -115
  -115
  -114
  -113
  -111
  -109
  -106
  -103
  -98
  -94
  -88
  -82
  -75
  -67
Issuance/(repayment) of debt, $m
  -197
  38
  43
  49
  55
  61
  66
  72
  78
  84
  91
  97
  103
  110
  117
  124
  132
  139
  147
  156
  164
  173
  183
  193
  203
  214
  225
  237
  249
  262
  276
Issuance/(repurchase) of shares, $m
  -17
  4
  9
  12
  15
  17
  18
  18
  18
  17
  15
  13
  9
  6
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -224
  42
  52
  61
  70
  78
  84
  90
  96
  101
  106
  110
  112
  116
  118
  124
  132
  139
  147
  156
  164
  173
  183
  193
  203
  214
  225
  237
  249
  262
  276
Total cash flow (excl. dividends), $m
  -14
  4
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  11
  17
  24
  32
  41
  51
  62
  74
  87
  101
  116
  132
  149
  168
  188
  209
Retained Cash Flow (-), $m
  99
  -27
  -31
  -35
  -40
  -44
  -48
  -52
  -57
  -61
  -66
  -70
  -75
  -80
  -85
  -90
  -95
  -101
  -107
  -113
  -119
  -126
  -132
  -140
  -147
  -155
  -163
  -172
  -181
  -190
  -200
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
 
  -23
  -29
  -33
  -37
  -41
  -45
  -49
  -53
  -57
  -61
  -65
  -70
  -74
  -79
  -79
  -78
  -76
  -74
  -71
  -68
  -63
  -59
  -53
  -47
  -39
  -31
  -23
  -13
  -2
  10
Discount rate, %
 
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
 
  -21
  -24
  -24
  -24
  -24
  -23
  -21
  -19
  -17
  -15
  -13
  -11
  -10
  -8
  -6
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.5
  98.6
  97.4
  95.9
  94.4
  92.8
  91.2
  89.8
  88.5
  87.4
  86.5
  85.9
  85.6
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5

Scorpio Tankers Inc., together with its subsidiaries, engages in the seaborne transportation of refined petroleum products and crude oil worldwide. As of March 17, 2016, it owned 78 tankers comprising 18 LR2 tankers, 14 Handymax tankers, and 46 MR tankers with an average age of approximately 1.5 years; and 11 time chartered-in tankers, including 3 LR2, 1 LR1, 4 MR, and 3 Handymax tankers. The company was founded in 2009 and is based in Monaco.

FINANCIAL RATIOS  of  Scorpio Tankers (STNG)

Valuation Ratios
P/E Ratio -23.5
Price to Sales 1.1
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 3.3
Price to Free Cash Flow 3.3
Growth Rates
Sales Growth Rate -30.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 116.3%
Total Debt to Equity 143.2%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital -0.8%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity -1.8%
Return On Equity - 3 Yr. Avg. 6.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 49.1%
Gross Margin - 3 Yr. Avg. 49.9%
EBITDA Margin 31.5%
EBITDA Margin - 3 Yr. Avg. 39.3%
Operating Margin 14.7%
Oper. Margin - 3 Yr. Avg. 25.3%
Pre-Tax Margin -4.8%
Pre-Tax Margin - 3 Yr. Avg. 13.1%
Net Profit Margin -4.8%
Net Profit Margin - 3 Yr. Avg. 13.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -348%

STNG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STNG stock intrinsic value calculation we used $523 million for the last fiscal year's total revenue generated by Scorpio Tankers. The default revenue input number comes from 2016 income statement of Scorpio Tankers. 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 STNG stock valuation model: a) initial revenue growth rate of 2% 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 9.5%, whose default value for STNG is calculated based on our internal credit rating of Scorpio Tankers, 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 Scorpio Tankers.
    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 STNG stock the variable cost ratio is equal to 11.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $368 million in the base year in the intrinsic value calculation for STNG 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 Scorpio Tankers.

Corporate tax rate of 27% is the nominal tax rate for Scorpio Tankers. 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 STNG 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 STNG are equal to 599.5%.

Life of production assets of 25.9 years is the average useful life of capital assets used in Scorpio Tankers 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 STNG is equal to 5%. 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 - $1315 million for Scorpio Tankers - 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 168.503 million for Scorpio Tankers 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 Scorpio Tankers at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ ETFs with exposure to Scorpio Tankers, Inc. : May 4, 2017   [May-04-17 04:20PM  Capital Cube]
▶ Why Scorpio Tankers Stock Popped 11%   [Apr-27-17 05:51PM  Motley Fool]
▶ Scorpio Tankers reports 1Q loss   [Apr-26-17 06:24PM  Associated Press]
▶ Loan Commitment   [Feb-28-17 10:16AM  Investopedia]
▶ Why Scorpio Tankers Inc. Stock Sank 16% in January   [Feb-09-17 02:36PM  at Motley Fool]
▶ Should You Avoid Dennys Corporation (DENN)?   [03:39AM  at Insider Monkey]
▶ [$$] Shipping Industry Feels Shock Waves From Trump Election   [Nov-09-16 02:05PM  at The Wall Street Journal]
▶ Scorpio: A Bargain-Priced Shipper Yielding 11%   [Sep-16-16 04:49PM  at Barrons.com]
▶ Merrill Lynch Has 4 Buy-Rated Stocks That Yield at Least 9%   [Sep-02-16 09:55AM  at 24/7 Wall St.]
Stock chart of STNG Financial statements of STNG
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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