Intrinsic value of Approach Resources Inc. - AREX

Previous Close

$0.19

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$0.19

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of AREX 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 0001), $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
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  27.20
  24.98
  22.98
  21.18
  19.57
  18.11
  16.80
  15.62
  14.56
  13.60
  12.74
  11.97
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
Revenue, $m
  134
  167
  205
  249
  297
  351
  410
  474
  543
  617
  696
  779
  867
  959
  1,056
  1,157
  1,263
  1,373
  1,487
  1,606
  1,730
  1,858
  1,992
  2,130
  2,275
  2,425
  2,581
  2,743
  2,912
  3,088
Variable operating expenses, $m
  170
  186
  203
  224
  246
  271
  299
  328
  360
  395
  323
  361
  402
  445
  490
  536
  585
  636
  689
  744
  802
  861
  923
  988
  1,054
  1,124
  1,196
  1,272
  1,350
  1,431
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
  170
  186
  203
  224
  246
  271
  299
  328
  360
  395
  323
  361
  402
  445
  490
  536
  585
  636
  689
  744
  802
  861
  923
  988
  1,054
  1,124
  1,196
  1,272
  1,350
  1,431
Operating income, $m
  -37
  -19
  2
  25
  51
  80
  112
  146
  183
  223
  373
  418
  465
  515
  567
  621
  677
  736
  798
  861
  928
  997
  1,068
  1,143
  1,220
  1,301
  1,384
  1,471
  1,562
  1,656
EBITDA, $m
  161
  202
  248
  301
  360
  425
  496
  574
  657
  746
  841
  942
  1,048
  1,160
  1,277
  1,399
  1,527
  1,659
  1,798
  1,941
  2,091
  2,246
  2,408
  2,575
  2,750
  2,931
  3,120
  3,316
  3,520
  3,733
Interest expense (income), $m
  26
  20
  28
  36
  46
  57
  69
  83
  98
  115
  132
  151
  171
  192
  215
  238
  263
  288
  315
  343
  372
  403
  434
  467
  501
  536
  573
  611
  651
  692
  735
Earnings before tax, $m
  -57
  -46
  -34
  -21
  -6
  11
  29
  48
  69
  91
  222
  247
  273
  300
  329
  358
  389
  421
  454
  489
  525
  563
  601
  642
  684
  728
  773
  821
  870
  921
Tax expense, $m
  0
  0
  0
  0
  0
  3
  8
  13
  19
  25
  60
  67
  74
  81
  89
  97
  105
  114
  123
  132
  142
  152
  162
  173
  185
  196
  209
  222
  235
  249
Net income, $m
  -57
  -46
  -34
  -21
  -6
  8
  21
  35
  50
  66
  162
  180
  199
  219
  240
  261
  284
  307
  332
  357
  383
  411
  439
  469
  499
  531
  564
  599
  635
  672

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  1,406
  1,757
  2,161
  2,619
  3,131
  3,698
  4,319
  4,994
  5,721
  6,499
  7,327
  8,203
  9,128
  10,100
  11,117
  12,181
  13,292
  14,448
  15,652
  16,904
  18,206
  19,558
  20,964
  22,424
  23,943
  25,521
  27,163
  28,872
  30,651
  32,504
Adjusted assets (=assets-cash), $m
  1,406
  1,757
  2,161
  2,619
  3,131
  3,698
  4,319
  4,994
  5,721
  6,499
  7,327
  8,203
  9,128
  10,100
  11,117
  12,181
  13,292
  14,448
  15,652
  16,904
  18,206
  19,558
  20,964
  22,424
  23,943
  25,521
  27,163
  28,872
  30,651
  32,504
Revenue / Adjusted assets
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
  0.095
Average production assets, $m
  1,383
  1,729
  2,126
  2,577
  3,081
  3,639
  4,250
  4,913
  5,629
  6,394
  7,209
  8,072
  8,981
  9,937
  10,939
  11,985
  13,078
  14,216
  15,400
  16,632
  17,913
  19,243
  20,626
  22,064
  23,557
  25,111
  26,726
  28,408
  30,158
  31,981
Working capital, $m
  -10
  -12
  -15
  -18
  -21
  -25
  -30
  -34
  -39
  -44
  -50
  -56
  -62
  -69
  -76
  -83
  -91
  -99
  -107
  -116
  -125
  -134
  -143
  -153
  -164
  -175
  -186
  -197
  -210
  -222
Total debt, $m
  513
  671
  852
  1,057
  1,286
  1,540
  1,818
  2,121
  2,446
  2,795
  3,166
  3,559
  3,973
  4,408
  4,864
  5,341
  5,838
  6,356
  6,896
  7,457
  8,040
  8,646
  9,275
  9,930
  10,610
  11,317
  12,053
  12,818
  13,615
  14,445
Total liabilities, $m
  630
  787
  968
  1,173
  1,403
  1,657
  1,935
  2,237
  2,563
  2,911
  3,282
  3,675
  4,089
  4,525
  4,981
  5,457
  5,955
  6,473
  7,012
  7,573
  8,156
  8,762
  9,392
  10,046
  10,726
  11,434
  12,169
  12,935
  13,732
  14,562
Total equity, $m
  776
  970
  1,193
  1,446
  1,728
  2,041
  2,384
  2,757
  3,158
  3,587
  4,044
  4,528
  5,039
  5,575
  6,137
  6,724
  7,337
  7,975
  8,640
  9,331
  10,049
  10,796
  11,572
  12,378
  13,216
  14,088
  14,994
  15,937
  16,919
  17,942
Total liabilities and equity, $m
  1,406
  1,757
  2,161
  2,619
  3,131
  3,698
  4,319
  4,994
  5,721
  6,498
  7,326
  8,203
  9,128
  10,100
  11,118
  12,181
  13,292
  14,448
  15,652
  16,904
  18,205
  19,558
  20,964
  22,424
  23,942
  25,522
  27,163
  28,872
  30,651
  32,504
Debt-to-equity ratio
  0.660
  0.690
  0.710
  0.730
  0.740
  0.750
  0.760
  0.770
  0.770
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.810
Adjusted equity ratio
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -57
  -46
  -34
  -21
  -6
  8
  21
  35
  50
  66
  162
  180
  199
  219
  240
  261
  284
  307
  332
  357
  383
  411
  439
  469
  499
  531
  564
  599
  635
  672
Depreciation, amort., depletion, $m
  198
  221
  246
  276
  308
  345
  384
  427
  474
  524
  468
  524
  583
  645
  710
  778
  849
  923
  1,000
  1,080
  1,163
  1,250
  1,339
  1,433
  1,530
  1,631
  1,735
  1,845
  1,958
  2,077
Funds from operations, $m
  141
  174
  212
  255
  303
  352
  405
  462
  524
  590
  630
  705
  782
  864
  950
  1,040
  1,133
  1,230
  1,332
  1,437
  1,546
  1,660
  1,778
  1,901
  2,029
  2,162
  2,300
  2,444
  2,593
  2,749
Change in working capital, $m
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from operations, $m
  143
  176
  215
  258
  306
  356
  409
  467
  529
  595
  636
  711
  789
  871
  957
  1,047
  1,141
  1,238
  1,340
  1,446
  1,555
  1,669
  1,788
  1,911
  2,039
  2,173
  2,311
  2,455
  2,605
  2,762
Maintenance CAPEX, $m
  -71
  -90
  -112
  -138
  -167
  -200
  -236
  -276
  -319
  -365
  -415
  -468
  -524
  -583
  -645
  -710
  -778
  -849
  -923
  -1,000
  -1,080
  -1,163
  -1,250
  -1,339
  -1,433
  -1,530
  -1,631
  -1,735
  -1,845
  -1,958
New CAPEX, $m
  -296
  -346
  -397
  -450
  -504
  -558
  -611
  -664
  -715
  -766
  -815
  -863
  -910
  -956
  -1,002
  -1,047
  -1,092
  -1,138
  -1,184
  -1,232
  -1,281
  -1,331
  -1,383
  -1,437
  -1,494
  -1,553
  -1,616
  -1,681
  -1,750
  -1,823
Cash from investing activities, $m
  -367
  -436
  -509
  -588
  -671
  -758
  -847
  -940
  -1,034
  -1,131
  -1,230
  -1,331
  -1,434
  -1,539
  -1,647
  -1,757
  -1,870
  -1,987
  -2,107
  -2,232
  -2,361
  -2,494
  -2,633
  -2,776
  -2,927
  -3,083
  -3,247
  -3,416
  -3,595
  -3,781
Free cash flow, $m
  -223
  -259
  -295
  -331
  -365
  -402
  -438
  -473
  -505
  -536
  -594
  -620
  -645
  -668
  -690
  -710
  -730
  -749
  -768
  -786
  -805
  -824
  -844
  -865
  -887
  -910
  -935
  -962
  -990
  -1,020
Issuance/(repayment) of debt, $m
  138
  157
  181
  205
  230
  254
  278
  302
  326
  349
  371
  393
  414
  435
  456
  477
  497
  518
  539
  561
  583
  606
  630
  654
  680
  707
  736
  766
  797
  830
Issuance/(repurchase) of shares, $m
  226
  240
  257
  274
  289
  305
  322
  337
  351
  363
  295
  304
  311
  317
  322
  326
  329
  331
  333
  334
  335
  336
  337
  338
  339
  340
  342
  344
  347
  350
Cash from financing (excl. dividends), $m  
  364
  397
  438
  479
  519
  559
  600
  639
  677
  712
  666
  697
  725
  752
  778
  803
  826
  849
  872
  895
  918
  942
  967
  992
  1,019
  1,047
  1,078
  1,110
  1,144
  1,180
Total cash flow (excl. dividends), $m
  140
  139
  143
  148
  153
  158
  162
  167
  171
  176
  72
  76
  80
  84
  88
  92
  96
  100
  105
  109
  113
  117
  122
  127
  132
  137
  143
  148
  154
  161
Retained Cash Flow (-), $m
  -226
  -240
  -257
  -274
  -289
  -313
  -343
  -372
  -401
  -429
  -457
  -484
  -510
  -536
  -562
  -587
  -613
  -638
  -665
  -691
  -718
  -747
  -776
  -806
  -838
  -871
  -906
  -943
  -982
  -1,023
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
  -86
  -102
  -114
  -125
  -136
  -155
  -181
  -206
  -230
  -254
  -385
  -408
  -430
  -452
  -474
  -495
  -516
  -538
  -560
  -582
  -605
  -629
  -654
  -679
  -706
  -734
  -764
  -795
  -828
  -862
Discount rate, %
  7.50
  7.88
  8.27
  8.68
  9.12
  9.57
  10.05
  10.55
  11.08
  11.63
  12.22
  12.83
  13.47
  14.14
  14.85
  15.59
  16.37
  17.19
  18.05
  18.95
  19.90
  20.89
  21.94
  23.04
  24.19
  25.40
  26.67
  28.00
  29.40
  30.87
PV of cash for distribution, $m
  -80
  -87
  -90
  -90
  -88
  -90
  -92
  -92
  -89
  -84
  -108
  -96
  -83
  -71
  -59
  -49
  -39
  -31
  -24
  -18
  -13
  -10
  -7
  -5
  -3
  -2
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  65.3
  45.3
  32.8
  24.7
  19.3
  15.4
  12.5
  10.4
  8.8
  7.6
  6.8
  6.1
  5.6
  5.1
  4.7
  4.4
  4.1
  3.9
  3.6
  3.5
  3.3
  3.1
  3.0
  2.9
  2.8
  2.7
  2.6
  2.5
  2.4
  2.4

Approach Resources Inc. is an independent energy company. The Company is focused on the exploration, development, production and acquisition of unconventional oil and gas reserves in the Midland Basin of the greater Permian Basin in West Texas. The Company's business segment is the exploration and production of oil, natural gas liquids (NGLs) and natural gas. The Company's assets cover an area of approximately 126,000 net acres. Its proved reserves are approximately 166.6 million barrels of oil equivalent. The Company's proved reserves are primarily located in Crockett and Schleicher Counties, Texas. The Company's Permian Basin acreage is known as the Project Pangea. The Company owns and operates approximately 800 producing oil and gas wells in the Permian Basin. The Company, through a joint venture with EnCana Oil & Gas (USA) Inc., holds interests in the approximately 3,000 gross acre project in Limestone and Robertson Counties, Texas, in the East Texas Cotton Valley trend.

FINANCIAL RATIOS  of  Approach Resources Inc. (AREX)

Valuation Ratios
P/E Ratio -0.2
Price to Sales 0.1
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0.3
Price to Free Cash Flow 1.3
Growth Rates
Sales Growth Rate -31.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -86.8%
Cap. Spend. - 3 Yr. Gr. Rate -41.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 88.5%
Total Debt to Equity 88.5%
Interest Coverage -2
Management Effectiveness
Return On Assets -3%
Ret/ On Assets - 3 Yr. Avg. -3.3%
Return On Total Capital -4.8%
Ret/ On T. Cap. - 3 Yr. Avg. -5%
Return On Equity -8.9%
Return On Equity - 3 Yr. Avg. -8.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 70%
Gross Margin - 3 Yr. Avg. 73.5%
EBITDA Margin 31.1%
EBITDA Margin - 3 Yr. Avg. 3.9%
Operating Margin -51.1%
Oper. Margin - 3 Yr. Avg. -75%
Pre-Tax Margin -85.6%
Pre-Tax Margin - 3 Yr. Avg. -85.1%
Net Profit Margin -57.8%
Net Profit Margin - 3 Yr. Avg. -56.3%
Effective Tax Rate 32.5%
Eff/ Tax Rate - 3 Yr. Avg. 35.1%
Payout Ratio 0%

AREX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AREX stock intrinsic value calculation we used $105 million for the last fiscal year's total revenue generated by Approach Resources Inc.. The default revenue input number comes from 0001 income statement of Approach Resources Inc.. 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 AREX stock valuation model: a) initial revenue growth rate of 27.2% 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 7.5%, whose default value for AREX is calculated based on our internal credit rating of Approach Resources Inc., 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 Approach Resources Inc..
    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 AREX stock the variable cost ratio is equal to 149.5%.

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 AREX 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 5.4% for Approach Resources Inc..

Corporate tax rate of 27% is the nominal tax rate for Approach Resources Inc.. 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 AREX 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 AREX are equal to 1035.7%.

Life of production assets of 15.4 years is the average useful life of capital assets used in Approach Resources Inc. 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 AREX is equal to -7.2%. 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 - $607.416 million for Approach Resources Inc. - 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 94.505 million for Approach Resources Inc. 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 Approach Resources Inc. at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
FANG Diamondback En 97.26 20.84  str.sell
CXO Concho Resourc 71.63 20.60  str.sell
CPE Callon Petrole 4.51 2.68  str.sell
LPI Laredo Petrole 2.82 10.46  str.buy
EPE EP Energy Corp 0.210 23.03  str.buy
MTDR Matador Resour 15.02 13.68  sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.