Intrinsic value of Emerge Energy Services LP - EMES

Previous Close

$2.51

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$2.51

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of EMES 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 0.1

 

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, %
  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
  371
  380
  390
  401
  413
  426
  441
  456
  473
  491
  511
  531
  554
  577
  602
  628
  656
  686
  717
  750
  785
  821
  860
  901
  943
  989
  1,036
  1,086
  1,139
  1,194
Variable operating expenses, $m
  213
  218
  224
  230
  237
  244
  253
  262
  272
  282
  293
  305
  317
  331
  345
  360
  376
  393
  411
  430
  450
  471
  493
  516
  541
  567
  594
  623
  653
  685
Fixed operating expenses, $m
  150
  154
  157
  160
  164
  168
  171
  175
  179
  183
  187
  191
  195
  199
  204
  208
  213
  217
  222
  227
  232
  237
  242
  248
  253
  259
  265
  270
  276
  282
Total operating expenses, $m
  363
  372
  381
  390
  401
  412
  424
  437
  451
  465
  480
  496
  512
  530
  549
  568
  589
  610
  633
  657
  682
  708
  735
  764
  794
  826
  859
  893
  929
  967
Operating income, $m
  8
  8
  9
  10
  12
  14
  17
  19
  23
  27
  31
  36
  41
  47
  53
  60
  67
  75
  84
  93
  103
  113
  124
  136
  149
  163
  177
  193
  209
  227
EBITDA, $m
  30
  31
  32
  34
  37
  40
  43
  47
  51
  56
  61
  67
  74
  81
  89
  97
  106
  116
  126
  137
  149
  162
  175
  190
  205
  222
  239
  258
  277
  298
Interest expense (income), $m
  17
  22
  19
  20
  20
  22
  23
  24
  25
  27
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
  51
  55
  58
  61
  65
  69
  73
  77
  82
  86
  91
Earnings before tax, $m
  -14
  -10
  -10
  -10
  -10
  -9
  -7
  -6
  -4
  -2
  1
  4
  7
  11
  15
  19
  24
  29
  35
  41
  48
  55
  63
  71
  80
  90
  100
  111
  123
  135
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  37
Net income, $m
  -14
  -10
  -10
  -10
  -10
  -9
  -7
  -6
  -4
  -2
  1
  3
  5
  8
  11
  14
  18
  21
  26
  30
  35
  40
  46
  52
  59
  66
  73
  81
  90
  99

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
  315
  322
  331
  340
  350
  362
  374
  387
  402
  417
  434
  451
  470
  490
  511
  533
  557
  582
  609
  637
  666
  697
  730
  764
  801
  839
  880
  922
  967
  1,014
Adjusted assets (=assets-cash), $m
  315
  322
  331
  340
  350
  362
  374
  387
  402
  417
  434
  451
  470
  490
  511
  533
  557
  582
  609
  637
  666
  697
  730
  764
  801
  839
  880
  922
  967
  1,014
Revenue / Adjusted assets
  1.178
  1.180
  1.178
  1.179
  1.180
  1.177
  1.179
  1.178
  1.177
  1.177
  1.177
  1.177
  1.179
  1.178
  1.178
  1.178
  1.178
  1.179
  1.177
  1.177
  1.179
  1.178
  1.178
  1.179
  1.177
  1.179
  1.177
  1.178
  1.178
  1.178
Average production assets, $m
  181
  185
  190
  195
  201
  208
  215
  223
  231
  240
  249
  259
  270
  282
  294
  307
  320
  335
  350
  366
  383
  401
  420
  439
  460
  482
  506
  530
  556
  583
Working capital, $m
  43
  44
  46
  47
  48
  50
  52
  53
  55
  57
  60
  62
  65
  68
  70
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  140
Total debt, $m
  151
  158
  165
  173
  183
  193
  204
  216
  229
  243
  258
  273
  290
  308
  327
  347
  369
  391
  415
  440
  467
  495
  524
  556
  588
  623
  659
  697
  737
  780
Total liabilities, $m
  284
  290
  298
  306
  315
  325
  337
  349
  361
  375
  390
  406
  423
  441
  460
  480
  501
  524
  548
  573
  599
  627
  657
  688
  721
  755
  792
  830
  870
  912
Total equity, $m
  32
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  97
  101
Total liabilities and equity, $m
  316
  322
  331
  340
  350
  361
  374
  388
  401
  417
  433
  451
  470
  490
  511
  533
  557
  582
  609
  637
  666
  697
  730
  764
  801
  839
  880
  922
  967
  1,013
Debt-to-equity ratio
  4.790
  4.890
  4.990
  5.100
  5.220
  5.330
  5.460
  5.580
  5.700
  5.820
  5.940
  6.060
  6.180
  6.290
  6.410
  6.510
  6.620
  6.720
  6.820
  6.920
  7.010
  7.100
  7.180
  7.270
  7.350
  7.420
  7.490
  7.560
  7.630
  7.690
Adjusted equity ratio
  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
  -14
  -10
  -10
  -10
  -10
  -9
  -7
  -6
  -4
  -2
  1
  3
  5
  8
  11
  14
  18
  21
  26
  30
  35
  40
  46
  52
  59
  66
  73
  81
  90
  99
Depreciation, amort., depletion, $m
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
Funds from operations, $m
  8
  12
  13
  14
  15
  17
  19
  21
  24
  28
  31
  34
  38
  42
  47
  51
  57
  62
  68
  75
  82
  89
  97
  106
  115
  124
  135
  146
  158
  170
Change in working capital, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
Cash from operations, $m
  8
  11
  12
  13
  14
  15
  17
  20
  22
  26
  29
  32
  36
  39
  44
  48
  53
  59
  65
  71
  78
  85
  93
  101
  110
  119
  129
  140
  151
  163
Maintenance CAPEX, $m
  -22
  -22
  -23
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
New CAPEX, $m
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
Cash from investing activities, $m
  -26
  -26
  -28
  -28
  -30
  -32
  -32
  -34
  -35
  -37
  -38
  -40
  -43
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -91
  -95
Free cash flow, $m
  -18
  -15
  -16
  -16
  -16
  -16
  -15
  -14
  -13
  -11
  -10
  -8
  -7
  -5
  -3
  0
  2
  5
  9
  12
  16
  20
  25
  30
  35
  41
  47
  54
  61
  69
Issuance/(repayment) of debt, $m
  -25
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
Issuance/(repurchase) of shares, $m
  45
  11
  11
  11
  11
  10
  9
  7
  5
  3
  1
  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  
  20
  18
  18
  19
  20
  20
  20
  19
  18
  17
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
Total cash flow (excl. dividends), $m
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  10
  13
  16
  20
  24
  28
  32
  37
  43
  48
  54
  61
  68
  75
  84
  92
  101
  111
Retained Cash Flow (-), $m
  -45
  -11
  -11
  -11
  -11
  -10
  -9
  -7
  -5
  -3
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
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
  -43
  -8
  -8
  -8
  -7
  -6
  -4
  -2
  0
  2
  4
  6
  8
  11
  14
  18
  21
  25
  30
  34
  40
  45
  51
  57
  64
  72
  79
  88
  97
  106
Discount rate, %
  15.30
  16.07
  16.87
  17.71
  18.60
  19.53
  20.50
  21.53
  22.61
  23.74
  24.92
  26.17
  27.48
  28.85
  30.29
  31.81
  33.40
  35.07
  36.82
  38.66
  40.60
  42.63
  44.76
  46.99
  49.34
  51.81
  54.40
  57.12
  59.98
  62.98
PV of cash for distribution, $m
  -37
  -6
  -5
  -4
  -3
  -2
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  36.9
  27.3
  20.4
  15.6
  12.2
  9.8
  8.2
  7.2
  6.7
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5

Emerge Energy Services LP owns, operates, acquires and develops a portfolio of energy service assets. The Company operates through Sand segment. The Company conducts its Sand operations through its subsidiary, Superior Silica Sands LLC (SSS). The Company's Sand business mines, processes and distributes silica sand, an input for the hydraulic fracturing of oil and gas wells. As of December 31, 2016, its Wisconsin facilities consisted of three dry plants located in Arland, Barron and New Auburn, Wisconsin, with a total permitted capacity of 6.3 million finished tons per year, and five wet plants and mine complexes. As of December 31, 2016, its dry plant in Kosse, Texas, had a capacity of 600,000 tons per year that is supplied by a separate mine and wet plant that processes local Texas sand. As of December 31, 2016, the Company also had 14 transload facilities located throughout North America in the basins where it delivers its sand, as well as a fleet of 5,573 railcars.

FINANCIAL RATIOS  of  Emerge Energy Services LP (EMES)

Valuation Ratios
P/E Ratio -1
Price to Sales 0.6
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -1.6
Price to Free Cash Flow -1.2
Growth Rates
Sales Growth Rate -52.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 254.5%
Total Debt to Equity 254.5%
Interest Coverage -6
Management Effectiveness
Return On Assets -16.7%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital -25.8%
Ret/ On T. Cap. - 3 Yr. Avg. -0.2%
Return On Equity -112.3%
Return On Equity - 3 Yr. Avg. -21.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin -35.9%
Gross Margin - 3 Yr. Avg. 9.1%
EBITDA Margin -58.6%
EBITDA Margin - 3 Yr. Avg. -3.9%
Operating Margin -70.3%
Oper. Margin - 3 Yr. Avg. -13.8%
Pre-Tax Margin -88.3%
Pre-Tax Margin - 3 Yr. Avg. -21.9%
Net Profit Margin -57%
Net Profit Margin - 3 Yr. Avg. -11.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0.4%
Payout Ratio 0%

EMES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EMES stock intrinsic value calculation we used $364 million for the last fiscal year's total revenue generated by Emerge Energy Services LP. The default revenue input number comes from 0001 income statement of Emerge Energy Services LP. 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 EMES 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 15.3%, whose default value for EMES is calculated based on our internal credit rating of Emerge Energy Services LP, 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 Emerge Energy Services LP.
    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 EMES stock the variable cost ratio is equal to 57.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $147 million in the base year in the intrinsic value calculation for EMES 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 12.4% for Emerge Energy Services LP.

Corporate tax rate of 27% is the nominal tax rate for Emerge Energy Services LP. 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 EMES 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 EMES are equal to 48.8%.

Life of production assets of 8.2 years is the average useful life of capital assets used in Emerge Energy Services LP 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 EMES is equal to 11.7%. 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 - $0 million for Emerge Energy Services LP - 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 31.036 million for Emerge Energy Services LP 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 Emerge Energy Services LP at the current share price and the inputted number of shares is $0.1 billion.

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