Intrinsic value of USD Partners - USDP

Previous Close

$10.20

  Intrinsic Value

$9.01

stock screener

  Rating & Target

hold

-12%

  Value-price divergence*

-19%

Previous close

$10.20

 
Intrinsic value

$9.01

 
Up/down potential

-12%

 
Rating

hold

 
Value-price divergence*

-19%

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

We calculate the intrinsic value of USDP 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 0.2

 

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, %
  35.37
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  111
  120
  128
  138
  147
  157
  168
  178
  190
  201
  213
  226
  239
  253
  268
  283
  298
  315
  332
  350
  369
  388
  409
  430
  453
  476
  501
  527
  554
  583
  613
Variable operating expenses, $m
 
  78
  84
  90
  96
  102
  109
  115
  122
  130
  137
  142
  150
  159
  168
  177
  187
  197
  208
  219
  231
  244
  256
  270
  284
  299
  314
  331
  348
  366
  384
Fixed operating expenses, $m
 
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  10
Total operating expenses, $m
  78
  83
  89
  95
  102
  108
  115
  121
  128
  136
  143
  149
  157
  166
  175
  184
  194
  205
  216
  227
  239
  252
  265
  279
  293
  308
  324
  341
  358
  376
  394
Operating income, $m
  33
  36
  39
  43
  46
  50
  53
  57
  61
  65
  70
  78
  82
  87
  93
  98
  104
  110
  116
  122
  129
  136
  144
  151
  160
  168
  177
  187
  197
  207
  218
EBITDA, $m
  56
  61
  66
  71
  76
  81
  87
  93
  99
  105
  112
  119
  126
  133
  141
  149
  158
  167
  176
  186
  196
  207
  218
  230
  242
  255
  268
  282
  297
  313
  329
Interest expense (income), $m
  9
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Earnings before tax, $m
  23
  27
  30
  32
  35
  38
  40
  43
  46
  50
  53
  60
  63
  67
  71
  75
  80
  84
  89
  94
  99
  104
  110
  116
  122
  129
  135
  143
  150
  158
  166
Tax expense, $m
  -1
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
Net income, $m
  24
  20
  22
  24
  25
  27
  30
  32
  34
  36
  39
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  85
  89
  94
  99
  104
  110
  115
  121

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17
  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
  306
  329
  354
  379
  406
  433
  462
  491
  522
  554
  588
  623
  659
  697
  737
  778
  822
  867
  914
  964
  1,015
  1,069
  1,126
  1,185
  1,247
  1,312
  1,381
  1,452
  1,527
  1,605
  1,688
Adjusted assets (=assets-cash), $m
  289
  329
  354
  379
  406
  433
  462
  491
  522
  554
  588
  623
  659
  697
  737
  778
  822
  867
  914
  964
  1,015
  1,069
  1,126
  1,185
  1,247
  1,312
  1,381
  1,452
  1,527
  1,605
  1,688
Revenue / Adjusted assets
  0.384
  0.365
  0.362
  0.364
  0.362
  0.363
  0.364
  0.363
  0.364
  0.363
  0.362
  0.363
  0.363
  0.363
  0.364
  0.364
  0.363
  0.363
  0.363
  0.363
  0.364
  0.363
  0.363
  0.363
  0.363
  0.363
  0.363
  0.363
  0.363
  0.363
  0.363
Average production assets, $m
  248
  267
  287
  308
  329
  351
  374
  398
  424
  450
  477
  505
  535
  566
  598
  631
  666
  703
  741
  781
  823
  867
  913
  961
  1,012
  1,064
  1,120
  1,177
  1,238
  1,302
  1,369
Working capital, $m
  -2
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -61
Total debt, $m
  221
  241
  261
  283
  305
  328
  353
  378
  404
  431
  459
  489
  520
  552
  586
  621
  657
  695
  735
  777
  821
  867
  915
  965
  1,017
  1,072
  1,130
  1,190
  1,254
  1,320
  1,390
Total liabilities, $m
  259
  279
  299
  321
  343
  366
  391
  416
  442
  469
  497
  527
  558
  590
  624
  659
  695
  733
  773
  815
  859
  905
  953
  1,003
  1,055
  1,110
  1,168
  1,228
  1,292
  1,358
  1,428
Total equity, $m
  47
  51
  54
  58
  62
  67
  71
  76
  80
  85
  91
  96
  102
  107
  114
  120
  127
  133
  141
  148
  156
  165
  173
  183
  192
  202
  213
  224
  235
  247
  260
Total liabilities and equity, $m
  306
  330
  353
  379
  405
  433
  462
  492
  522
  554
  588
  623
  660
  697
  738
  779
  822
  866
  914
  963
  1,015
  1,070
  1,126
  1,186
  1,247
  1,312
  1,381
  1,452
  1,527
  1,605
  1,688
Debt-to-equity ratio
  4.702
  4.740
  4.800
  4.840
  4.890
  4.920
  4.960
  4.990
  5.020
  5.050
  5.070
  5.100
  5.120
  5.140
  5.160
  5.180
  5.190
  5.210
  5.220
  5.240
  5.250
  5.260
  5.270
  5.290
  5.300
  5.310
  5.310
  5.320
  5.330
  5.340
  5.350
Adjusted equity ratio
  0.104
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  20
  22
  24
  25
  27
  30
  32
  34
  36
  39
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  85
  89
  94
  99
  104
  110
  115
  121
Depreciation, amort., depletion, $m
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  41
  43
  46
  49
  51
  54
  57
  60
  64
  67
  71
  74
  78
  82
  87
  91
  96
  101
  106
  111
Funds from operations, $m
  51
  45
  48
  52
  56
  59
  63
  67
  72
  76
  81
  85
  90
  95
  100
  106
  112
  118
  125
  132
  139
  147
  154
  163
  171
  180
  190
  200
  210
  221
  233
Change in working capital, $m
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
Cash from operations, $m
  53
  46
  49
  53
  57
  60
  64
  69
  73
  77
  82
  86
  91
  96
  102
  108
  114
  120
  127
  134
  141
  149
  157
  165
  174
  183
  192
  202
  213
  224
  236
Maintenance CAPEX, $m
  0
  -20
  -22
  -23
  -25
  -27
  -29
  -30
  -32
  -34
  -37
  -39
  -41
  -43
  -46
  -49
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
New CAPEX, $m
  0
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
Cash from investing activities, $m
  0
  -39
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -71
  -74
  -78
  -83
  -86
  -91
  -95
  -100
  -106
  -111
  -117
  -122
  -128
  -135
  -142
  -149
  -157
  -165
  -173
Free cash flow, $m
  53
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  19
  20
  22
  24
  26
  27
  29
  31
  33
  36
  38
  40
  43
  45
  48
  51
  53
  57
  60
  63
Issuance/(repayment) of debt, $m
  -22
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  70
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  
  -51
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  70
Total cash flow (excl. dividends), $m
  1
  26
  29
  30
  33
  35
  37
  39
  42
  44
  47
  48
  51
  54
  57
  61
  64
  68
  71
  75
  79
  84
  88
  93
  98
  103
  108
  114
  120
  126
  133
Retained Cash Flow (-), $m
  3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
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
  25
  27
  28
  30
  32
  35
  37
  39
  41
  43
  46
  48
  51
  54
  57
  61
  64
  68
  71
  75
  79
  84
  88
  93
  98
  103
  108
  114
  120
Discount rate, %
 
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $m
 
  21
  20
  20
  19
  17
  16
  15
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
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

USD Partners LP acquires, develops, and operates energy-related rail terminals and other midstream infrastructure assets and businesses in the United States and Canada. The company operates through two segments, Terminalling Services and Fleet Services. The Terminalling Services segment owns and operates Hardisty terminal, an origination terminal for loading various grades of crude oil received from the Western Canada Sedimentary Basin onto railcars for transportation to end markets; Casper terminal, a crude oil storage, blending, and railcar loading terminal located in Casper, Wyoming; and terminals in San Antonio, Texas and West Colton, California, which are unit train-capable destination terminals that transload ethanol received by rail from producers onto trucks. The Fleet Services segment provides railcar services; and fleet services related to the transportation of liquid hydrocarbons and biofuels. As of December 31, 2015, it operated a fleet of 3,306 railcars. USD Partners GP LLC serves as the general partner of the company. The company was founded in 2014 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  USD Partners (USDP)

Valuation Ratios
P/E Ratio 10.5
Price to Sales 2.3
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 4.8
Price to Free Cash Flow 4.8
Growth Rates
Sales Growth Rate 35.4%
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 NaN
Current Ratio 0.1
LT Debt to Equity 470.2%
Total Debt to Equity 470.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 10.5%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 8.6%
Ret/ On T. Cap. - 3 Yr. Avg. 3.2%
Return On Equity 49.5%
Return On Equity - 3 Yr. Avg. 17.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 66.7%
Gross Margin - 3 Yr. Avg. 52.7%
EBITDA Margin 49.5%
EBITDA Margin - 3 Yr. Avg. 29.9%
Operating Margin 29.7%
Oper. Margin - 3 Yr. Avg. 20.2%
Pre-Tax Margin 20.7%
Pre-Tax Margin - 3 Yr. Avg. 9.8%
Net Profit Margin 21.6%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate -4.3%
Eff/ Tax Rate - 3 Yr. Avg. 1%
Payout Ratio 0%

USDP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USDP stock intrinsic value calculation we used $111 million for the last fiscal year's total revenue generated by USD Partners. The default revenue input number comes from 2016 income statement of USD Partners. 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 USDP stock valuation model: a) initial revenue growth rate of 7.7% 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 9.7%, whose default value for USDP is calculated based on our internal credit rating of USD Partners, 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 USD Partners.
    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 USDP stock the variable cost ratio is equal to 65.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 million in the base year in the intrinsic value calculation for USDP 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 3.9% for USD Partners.

Corporate tax rate of 27% is the nominal tax rate for USD Partners. 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 USDP 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 USDP are equal to 223.4%.

Life of production assets of 12.3 years is the average useful life of capital assets used in USD Partners 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 USDP is equal to -10%. 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 - $47 million for USD Partners - 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 22.644 million for USD Partners 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 USD Partners at the current share price and the inputted number of shares is $0.2 billion.

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Stock chart of USDP Financial statements of USDP
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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