Intrinsic value of Keane Group, Inc. - FRAC

Previous Close

$11.85

  Intrinsic Value

$7.38

stock screener

  Rating & Target

sell

-38%

Previous close

$11.85

 
Intrinsic value

$7.38

 
Up/down potential

-38%

 
Rating

sell

We calculate the intrinsic value of FRAC 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 1.2

 

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
  2,180
  2,230
  2,287
  2,352
  2,423
  2,501
  2,586
  2,678
  2,778
  2,884
  2,998
  3,120
  3,250
  3,387
  3,533
  3,688
  3,852
  4,026
  4,209
  4,402
  4,606
  4,821
  5,048
  5,287
  5,539
  5,804
  6,083
  6,376
  6,685
  7,010
Variable operating expenses, $m
  1,855
  1,897
  1,945
  1,999
  2,059
  2,125
  2,197
  2,275
  2,358
  2,448
  2,526
  2,628
  2,737
  2,853
  2,977
  3,107
  3,245
  3,391
  3,545
  3,708
  3,880
  4,061
  4,253
  4,454
  4,666
  4,889
  5,124
  5,371
  5,632
  5,905
Fixed operating expenses, $m
  231
  236
  241
  247
  252
  258
  263
  269
  275
  281
  287
  293
  300
  306
  313
  320
  327
  334
  342
  349
  357
  365
  373
  381
  389
  398
  407
  416
  425
  434
Total operating expenses, $m
  2,086
  2,133
  2,186
  2,246
  2,311
  2,383
  2,460
  2,544
  2,633
  2,729
  2,813
  2,921
  3,037
  3,159
  3,290
  3,427
  3,572
  3,725
  3,887
  4,057
  4,237
  4,426
  4,626
  4,835
  5,055
  5,287
  5,531
  5,787
  6,057
  6,339
Operating income, $m
  94
  97
  101
  106
  111
  118
  126
  135
  145
  155
  185
  198
  212
  227
  244
  261
  280
  300
  322
  345
  369
  395
  423
  452
  484
  517
  552
  589
  629
  671
EBITDA, $m
  234
  239
  246
  255
  265
  276
  288
  302
  317
  334
  352
  372
  393
  416
  440
  466
  494
  524
  556
  589
  625
  663
  704
  746
  792
  839
  890
  944
  1,001
  1,060
Interest expense (income), $m
  0
  37
  38
  40
  41
  43
  45
  47
  50
  52
  55
  58
  61
  65
  69
  72
  77
  81
  86
  90
  96
  101
  107
  113
  119
  126
  133
  140
  148
  157
  165
Earnings before tax, $m
  57
  59
  61
  64
  68
  73
  79
  85
  92
  100
  127
  137
  147
  159
  171
  185
  199
  215
  231
  249
  268
  288
  310
  333
  358
  384
  412
  441
  472
  505
Tax expense, $m
  15
  16
  16
  17
  18
  20
  21
  23
  25
  27
  34
  37
  40
  43
  46
  50
  54
  58
  62
  67
  72
  78
  84
  90
  97
  104
  111
  119
  128
  136
Net income, $m
  42
  43
  45
  47
  50
  53
  57
  62
  67
  73
  93
  100
  108
  116
  125
  135
  145
  157
  169
  182
  196
  211
  226
  243
  261
  280
  300
  322
  345
  369

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
  1,076
  1,101
  1,129
  1,161
  1,196
  1,234
  1,277
  1,322
  1,371
  1,424
  1,480
  1,540
  1,604
  1,672
  1,744
  1,820
  1,901
  1,987
  2,077
  2,173
  2,274
  2,380
  2,492
  2,610
  2,734
  2,865
  3,002
  3,147
  3,300
  3,460
Adjusted assets (=assets-cash), $m
  1,076
  1,101
  1,129
  1,161
  1,196
  1,234
  1,277
  1,322
  1,371
  1,424
  1,480
  1,540
  1,604
  1,672
  1,744
  1,820
  1,901
  1,987
  2,077
  2,173
  2,274
  2,380
  2,492
  2,610
  2,734
  2,865
  3,002
  3,147
  3,300
  3,460
Revenue / Adjusted assets
  2.026
  2.025
  2.026
  2.026
  2.026
  2.027
  2.025
  2.026
  2.026
  2.025
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
  2.026
Average production assets, $m
  606
  620
  636
  654
  674
  695
  719
  745
  772
  802
  834
  867
  903
  942
  982
  1,025
  1,071
  1,119
  1,170
  1,224
  1,281
  1,340
  1,403
  1,470
  1,540
  1,613
  1,691
  1,773
  1,858
  1,949
Working capital, $m
  39
  40
  41
  42
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  72
  76
  79
  83
  87
  91
  95
  100
  104
  109
  115
  120
  126
Total debt, $m
  363
  376
  391
  408
  427
  448
  471
  495
  521
  550
  580
  612
  647
  683
  722
  763
  807
  853
  901
  953
  1,007
  1,064
  1,124
  1,188
  1,255
  1,325
  1,399
  1,477
  1,559
  1,645
Total liabilities, $m
  579
  592
  607
  624
  643
  664
  687
  711
  738
  766
  796
  829
  863
  900
  938
  979
  1,023
  1,069
  1,118
  1,169
  1,223
  1,280
  1,341
  1,404
  1,471
  1,541
  1,615
  1,693
  1,775
  1,861
Total equity, $m
  497
  508
  522
  536
  552
  570
  590
  611
  633
  658
  684
  711
  741
  772
  806
  841
  878
  918
  960
  1,004
  1,050
  1,099
  1,151
  1,206
  1,263
  1,323
  1,387
  1,454
  1,524
  1,599
Total liabilities and equity, $m
  1,076
  1,100
  1,129
  1,160
  1,195
  1,234
  1,277
  1,322
  1,371
  1,424
  1,480
  1,540
  1,604
  1,672
  1,744
  1,820
  1,901
  1,987
  2,078
  2,173
  2,273
  2,379
  2,492
  2,610
  2,734
  2,864
  3,002
  3,147
  3,299
  3,460
Debt-to-equity ratio
  0.730
  0.740
  0.750
  0.760
  0.770
  0.790
  0.800
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.880
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  0.990
  1.000
  1.010
  1.020
  1.020
  1.030
Adjusted equity ratio
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  42
  43
  45
  47
  50
  53
  57
  62
  67
  73
  93
  100
  108
  116
  125
  135
  145
  157
  169
  182
  196
  211
  226
  243
  261
  280
  300
  322
  345
  369
Depreciation, amort., depletion, $m
  140
  142
  146
  149
  153
  157
  162
  167
  173
  179
  167
  173
  181
  188
  196
  205
  214
  224
  234
  245
  256
  268
  281
  294
  308
  323
  338
  355
  372
  390
Funds from operations, $m
  181
  185
  190
  196
  203
  211
  220
  229
  240
  252
  260
  273
  288
  304
  321
  340
  360
  380
  403
  427
  452
  479
  507
  537
  569
  603
  639
  676
  716
  759
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  180
  184
  189
  195
  202
  209
  218
  228
  238
  250
  257
  271
  286
  302
  319
  337
  357
  377
  399
  423
  448
  475
  503
  533
  565
  598
  634
  671
  711
  753
Maintenance CAPEX, $m
  -119
  -121
  -124
  -127
  -131
  -135
  -139
  -144
  -149
  -154
  -160
  -167
  -173
  -181
  -188
  -196
  -205
  -214
  -224
  -234
  -245
  -256
  -268
  -281
  -294
  -308
  -323
  -338
  -355
  -372
New CAPEX, $m
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -90
Cash from investing activities, $m
  -131
  -135
  -140
  -145
  -151
  -157
  -163
  -170
  -177
  -184
  -192
  -201
  -209
  -219
  -229
  -239
  -251
  -262
  -275
  -288
  -302
  -316
  -331
  -347
  -364
  -382
  -401
  -420
  -441
  -462
Free cash flow, $m
  49
  49
  49
  50
  51
  53
  55
  58
  62
  66
  65
  71
  76
  83
  90
  98
  106
  115
  125
  135
  147
  159
  172
  186
  201
  216
  233
  251
  271
  291
Issuance/(repayment) of debt, $m
  11
  13
  15
  17
  19
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
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
Cash from financing (excl. dividends), $m  
  11
  13
  15
  17
  19
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
Total cash flow (excl. dividends), $m
  61
  62
  64
  67
  70
  74
  78
  83
  88
  94
  96
  103
  111
  119
  129
  139
  149
  161
  173
  187
  201
  216
  232
  249
  267
  287
  307
  329
  353
  377
Retained Cash Flow (-), $m
  -10
  -11
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -47
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -70
  -74
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
  51
  51
  51
  52
  54
  56
  58
  62
  65
  70
  70
  75
  81
  88
  95
  103
  112
  121
  132
  143
  154
  167
  180
  195
  210
  226
  244
  262
  282
  303
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  49
  47
  45
  43
  42
  41
  39
  39
  38
  37
  33
  32
  31
  30
  28
  26
  24
  22
  20
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Current shareholders' claim on cash, %
  100.0
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  100.0
  100.0
  100.0
  100.0
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  100.0
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  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
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  100.0
  100.0
  100.0
  100.0
  100.0

Keane Group, Inc. is provider of integrated well completion services in the United States, with a focus on demanding completion solutions. The Company’s segments include Completion Services, which comprises hydraulic fracturing and wireline divisions, and Other Services, which consists of coiled tubing, cementing and drilling divisions. It provides hydraulic fracturing and wireline services pursuant to contractual arrangements, such as term contracts and pricing agreements, or on a spot market basis. It provides certain complementary services such as coiled tubing, cementing and drilling pursuant to contractual arrangements, such as term contracts on a spot basis. Its primary services include horizontal and vertical fracturing, wireline perforation and logging and engineered solutions, as well as other value-added service offerings. As of July 3, 2017, the Company had approximately 1.2 million hydraulic horsepower spread across 23 hydraulic fracturing fleets and 31 wireline trucks.

FINANCIAL RATIOS  of  Keane Group, Inc. (FRAC)

Valuation Ratios
P/E Ratio -6.5
Price to Sales 2.9
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow -22.6
Price to Free Cash Flow -15.9
Growth Rates
Sales Growth Rate 15%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.5%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 10
Current Ratio 0
LT Debt to Equity 168.5%
Total Debt to Equity 171.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -43.4%
Ret/ On Assets - 3 Yr. Avg. -27.6%
Return On Total Capital -50.9%
Ret/ On T. Cap. - 3 Yr. Avg. -31.9%
Return On Equity -154.5%
Return On Equity - 3 Yr. Avg. -91.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 4.3%
Gross Margin - 3 Yr. Avg. 13.8%
EBITDA Margin -20.4%
EBITDA Margin - 3 Yr. Avg. -4.5%
Operating Margin -35.6%
Oper. Margin - 3 Yr. Avg. -18.6%
Pre-Tax Margin -44.4%
Pre-Tax Margin - 3 Yr. Avg. -24.6%
Net Profit Margin -44.4%
Net Profit Margin - 3 Yr. Avg. -24.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

FRAC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FRAC stock intrinsic value calculation we used $2137 million for the last fiscal year's total revenue generated by Keane Group, Inc.. The default revenue input number comes from 0001 income statement of Keane Group, 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 FRAC 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 4.3%, whose default value for FRAC is calculated based on our internal credit rating of Keane Group, 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 Keane Group, 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 FRAC stock the variable cost ratio is equal to 85.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $226 million in the base year in the intrinsic value calculation for FRAC 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 10.6% for Keane Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Keane Group, 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 FRAC 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 FRAC are equal to 27.8%.

Life of production assets of 2.7 years is the average useful life of capital assets used in Keane Group, 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 FRAC is equal to 1.8%. 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 - $487.181 million for Keane Group, 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 104.082 million for Keane Group, 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 Keane Group, Inc. at the current share price and the inputted number of shares is $1.2 billion.

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