Intrinsic value of Westmoreland Resource Partners - WMLP

Previous Close

$2.90

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-65%

Previous close

$2.90

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-65%

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

We calculate the intrinsic value of WMLP 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, %
  -9.35
  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
  349
  356
  364
  374
  384
  396
  408
  422
  437
  454
  471
  490
  510
  531
  553
  577
  602
  629
  657
  687
  719
  752
  787
  824
  863
  905
  948
  993
  1,041
  1,092
  1,145
Variable operating expenses, $m
 
  361
  369
  379
  389
  401
  414
  428
  444
  460
  478
  497
  517
  538
  561
  585
  611
  638
  667
  697
  729
  763
  798
  836
  876
  917
  961
  1,007
  1,056
  1,107
  1,161
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
  340
  361
  369
  379
  389
  401
  414
  428
  444
  460
  478
  497
  517
  538
  561
  585
  611
  638
  667
  697
  729
  763
  798
  836
  876
  917
  961
  1,007
  1,056
  1,107
  1,161
Operating income, $m
  9
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
EBITDA, $m
  59
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
Interest expense (income), $m
  29
  30
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  50
  53
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  93
Earnings before tax, $m
  -32
  -35
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -109
Tax expense, $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
Net income, $m
  -32
  -35
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -109

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
  387
  395
  404
  414
  426
  439
  453
  468
  485
  503
  522
  543
  565
  588
  613
  640
  668
  697
  729
  762
  797
  834
  873
  914
  957
  1,003
  1,051
  1,101
  1,154
  1,210
  1,269
Adjusted assets (=assets-cash), $m
  372
  395
  404
  414
  426
  439
  453
  468
  485
  503
  522
  543
  565
  588
  613
  640
  668
  697
  729
  762
  797
  834
  873
  914
  957
  1,003
  1,051
  1,101
  1,154
  1,210
  1,269
Revenue / Adjusted assets
  0.938
  0.901
  0.901
  0.903
  0.901
  0.902
  0.901
  0.902
  0.901
  0.903
  0.902
  0.902
  0.903
  0.903
  0.902
  0.902
  0.901
  0.902
  0.901
  0.902
  0.902
  0.902
  0.901
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
Average production assets, $m
  285
  290
  297
  304
  313
  322
  333
  344
  356
  370
  384
  399
  415
  433
  451
  470
  491
  513
  536
  560
  586
  613
  642
  672
  704
  737
  772
  810
  849
  890
  933
Working capital, $m
  20
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  24
  25
  26
  27
  28
  30
Total debt, $m
  318
  258
  266
  276
  286
  298
  311
  324
  339
  356
  373
  392
  411
  433
  455
  479
  504
  531
  559
  589
  620
  654
  689
  726
  765
  806
  849
  894
  942
  992
  1,045
Total liabilities, $m
  415
  355
  363
  373
  383
  395
  408
  421
  436
  453
  470
  489
  508
  530
  552
  576
  601
  628
  656
  686
  717
  751
  786
  823
  862
  903
  946
  991
  1,039
  1,089
  1,142
Total equity, $m
  -28
  39
  40
  41
  43
  44
  45
  47
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  115
  121
  127
Total liabilities and equity, $m
  387
  394
  403
  414
  426
  439
  453
  468
  484
  503
  522
  543
  564
  589
  613
  640
  668
  698
  729
  762
  797
  834
  873
  914
  958
  1,003
  1,051
  1,101
  1,154
  1,210
  1,269
Debt-to-equity ratio
  -11.357
  6.540
  6.600
  6.660
  6.720
  6.790
  6.860
  6.930
  7.000
  7.070
  7.140
  7.210
  7.280
  7.350
  7.420
  7.480
  7.550
  7.610
  7.670
  7.730
  7.780
  7.840
  7.890
  7.940
  7.990
  8.030
  8.080
  8.120
  8.160
  8.200
  8.240
Adjusted equity ratio
  -0.116
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -32
  -35
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -109
Depreciation, amort., depletion, $m
  50
  29
  30
  30
  31
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
Funds from operations, $m
  40
  -6
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
Change in working capital, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  41
  -6
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
Maintenance CAPEX, $m
  0
  -28
  -29
  -30
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
New CAPEX, $m
  -12
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
Cash from investing activities, $m
  -15
  -34
  -36
  -38
  -39
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -61
  -64
  -68
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -132
Free cash flow, $m
  26
  -40
  -36
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -150
Issuance/(repayment) of debt, $m
  -5
  -60
  8
  9
  10
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
Issuance/(repurchase) of shares, $m
  0
  102
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
  69
  73
  76
  80
  85
  89
  94
  99
  104
  109
  115
Cash from financing (excl. dividends), $m  
  -5
  42
  38
  40
  42
  46
  48
  51
  53
  56
  59
  63
  66
  69
  73
  77
  81
  86
  90
  95
  101
  106
  111
  117
  124
  130
  137
  144
  152
  159
  168
Total cash flow (excl. dividends), $m
  21
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
Retained Cash Flow (-), $m
  41
  -102
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -109
  -115
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
 
  -100
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -97
Discount rate, %
 
  14.10
  14.81
  15.55
  16.32
  17.14
  18.00
  18.90
  19.84
  20.83
  21.87
  22.97
  24.12
  25.32
  26.59
  27.92
  29.31
  30.78
  32.32
  33.93
  35.63
  37.41
  39.28
  41.25
  43.31
  45.47
  47.75
  50.13
  52.64
  55.27
  58.04
PV of cash for distribution, $m
 
  -88
  -21
  -18
  -16
  -13
  -11
  -9
  -8
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  28.3
  15.9
  8.9
  5.0
  2.8
  1.5
  0.8
  0.5
  0.3
  0.1
  0.1
  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
  0.0
  0.0
  0.0

Westmoreland Resource Partners, LP produces and markets thermal coal in the United States. It also produces surface mined coal in Ohio. As of December 31, 2015, the company managed 16 active surface mines; and managed these mines as 5 mining complexes located in eastern Ohio, as well as 1 mine situated in Wyoming. It markets its coal primarily to large electric utilities with coal-fired and base-load scrubbed power plants under coal sales contracts; and electric cooperatives, municipalities, and industrial customers in Indiana, Wyoming, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Westmoreland Resources GP, LLC operates as the general partner of the company. The company was formerly known as Oxford Resource Partners, LP and changed its name to Westmoreland Resource Partners, LP in January 2015. Westmoreland Resource Partners, LP was founded in 1985 and is based in Englewood, Colorado.

FINANCIAL RATIOS  of  Westmoreland Resource Partners (WMLP)

Valuation Ratios
P/E Ratio -0.1
Price to Sales 0
Price to Book -0.1
Price to Tangible Book
Price to Cash Flow 0.1
Price to Free Cash Flow 0.1
Growth Rates
Sales Growth Rate -9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate -8.8%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity -1121.4%
Total Debt to Equity -1135.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.7%
Ret/ On Assets - 3 Yr. Avg. -3.8%
Return On Total Capital -10.6%
Ret/ On T. Cap. - 3 Yr. Avg. -11.3%
Return On Equity 426.7%
Return On Equity - 3 Yr. Avg. 103.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 24.6%
Gross Margin - 3 Yr. Avg. 21%
EBITDA Margin 13.5%
EBITDA Margin - 3 Yr. Avg. 9.2%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin -9.2%
Pre-Tax Margin - 3 Yr. Avg. -9%
Net Profit Margin -9.2%
Net Profit Margin - 3 Yr. Avg. -8.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -31.3%

WMLP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WMLP stock intrinsic value calculation we used $349 million for the last fiscal year's total revenue generated by Westmoreland Resource Partners. The default revenue input number comes from 2016 income statement of Westmoreland Resource 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 WMLP 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 14.1%, whose default value for WMLP is calculated based on our internal credit rating of Westmoreland Resource 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 Westmoreland Resource 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 WMLP stock the variable cost ratio is equal to 101.4%.

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 WMLP 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 9.4% for Westmoreland Resource Partners.

Corporate tax rate of 27% is the nominal tax rate for Westmoreland Resource 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 WMLP 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 WMLP are equal to 81.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Westmoreland Resource 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 WMLP is equal to 2.6%. 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 - $-28 million for Westmoreland Resource 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 1.24 million for Westmoreland Resource 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 Westmoreland Resource Partners at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Alerian Index Series June 2017 Index Review   [Jun-09-17 08:30AM  PR Newswire]
▶ Westmoreland to Release First Quarter 2017 Results   [May-05-17 08:00AM  GlobeNewswire]
▶ Westmoreland Resource Partners, LP Files Form 10-K   [Mar-31-17 04:01PM  GlobeNewswire]
▶ Westmoreland Announces CFO Transition   [08:00AM  GlobeNewswire]
▶ Westmoreland to Release Third Quarter 2016 Results   [Oct-18-16 05:46PM  GlobeNewswire]
▶ Westmoreland to Release Second Quarter 2016 Results   [Jul-19-16 07:00AM  GlobeNewswire]
▶ Westmoreland Successfully Amends Revolving Credit Facility   [Jun-29-16 09:19AM  GlobeNewswire]
▶ Westmoreland Announces 2015 Earnings Conference Call   [Feb-24-16 04:44PM  Business Wire]
▶ Westmoreland Resource Partners, LP Wins Mining Award   [Sep-02  02:08PM  Business Wire]
▶ 3 Stocks to Watch in Mining   [05:01PM  at Motley Fool]
▶ Westmoreland Announces 2015 Guidance   [Feb-11  07:00AM  Business Wire]
Stock chart of WMLP Financial statements of WMLP
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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