Intrinsic value of Gulf Island Fabrication - GIFI

Previous Close

$7.97

  Intrinsic Value

$3.65

stock screener

  Rating & Target

str. sell

-54%

Previous close

$7.97

 
Intrinsic value

$3.65

 
Up/down potential

-54%

 
Rating

str. sell

We calculate the intrinsic value of GIFI 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, %
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.62
  8.25
  7.93
  7.64
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
Revenue, $m
  201
  235
  271
  310
  351
  395
  442
  491
  543
  597
  653
  712
  773
  837
  904
  973
  1,044
  1,119
  1,196
  1,277
  1,360
  1,447
  1,538
  1,632
  1,731
  1,833
  1,940
  2,051
  2,168
  2,289
Variable operating expenses, $m
  73
  85
  98
  112
  127
  143
  160
  178
  197
  217
  237
  258
  281
  304
  328
  353
  379
  406
  434
  463
  494
  525
  558
  593
  628
  665
  704
  745
  787
  831
Fixed operating expenses, $m
  185
  189
  193
  197
  202
  206
  211
  215
  220
  225
  230
  235
  240
  245
  251
  256
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
Total operating expenses, $m
  258
  274
  291
  309
  329
  349
  371
  393
  417
  442
  467
  493
  521
  549
  579
  609
  641
  674
  708
  743
  780
  817
  857
  898
  940
  984
  1,030
  1,078
  1,127
  1,179
Operating income, $m
  -57
  -40
  -21
  0
  22
  46
  71
  97
  125
  155
  186
  219
  252
  288
  325
  363
  403
  445
  488
  534
  581
  630
  681
  735
  791
  849
  910
  974
  1,041
  1,110
EBITDA, $m
  -41
  -22
  0
  23
  48
  75
  104
  135
  167
  200
  236
  272
  311
  351
  393
  437
  482
  530
  579
  630
  684
  739
  798
  858
  922
  988
  1,057
  1,129
  1,205
  1,284
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
Earnings before tax, $m
  -57
  -40
  -22
  -2
  20
  43
  67
  93
  120
  149
  179
  211
  244
  278
  314
  351
  390
  431
  473
  517
  563
  611
  660
  712
  767
  824
  883
  945
  1,010
  1,078
Tax expense, $m
  0
  0
  0
  0
  5
  11
  18
  25
  32
  40
  48
  57
  66
  75
  85
  95
  105
  116
  128
  140
  152
  165
  178
  192
  207
  222
  238
  255
  273
  291
Net income, $m
  -57
  -40
  -22
  -2
  14
  31
  49
  68
  88
  109
  131
  154
  178
  203
  229
  256
  285
  314
  345
  377
  411
  446
  482
  520
  560
  601
  645
  690
  737
  787

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
  319
  372
  429
  491
  556
  626
  700
  778
  860
  946
  1,035
  1,128
  1,226
  1,327
  1,432
  1,541
  1,655
  1,773
  1,896
  2,023
  2,156
  2,294
  2,437
  2,587
  2,743
  2,905
  3,074
  3,251
  3,435
  3,628
Adjusted assets (=assets-cash), $m
  319
  372
  429
  491
  556
  626
  700
  778
  860
  946
  1,035
  1,128
  1,226
  1,327
  1,432
  1,541
  1,655
  1,773
  1,896
  2,023
  2,156
  2,294
  2,437
  2,587
  2,743
  2,905
  3,074
  3,251
  3,435
  3,628
Revenue / Adjusted assets
  0.630
  0.632
  0.632
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
Average production assets, $m
  174
  203
  234
  267
  303
  341
  381
  424
  468
  515
  564
  614
  667
  722
  780
  839
  901
  965
  1,032
  1,102
  1,174
  1,249
  1,327
  1,409
  1,494
  1,582
  1,674
  1,770
  1,871
  1,975
Working capital, $m
  101
  117
  135
  155
  176
  198
  221
  246
  271
  298
  327
  356
  387
  419
  452
  486
  522
  559
  598
  638
  680
  724
  769
  816
  865
  917
  970
  1,026
  1,084
  1,145
Total debt, $m
  9
  19
  30
  42
  54
  68
  82
  96
  112
  128
  145
  163
  182
  201
  221
  241
  263
  286
  309
  333
  358
  384
  412
  440
  470
  501
  533
  566
  601
  638
Total liabilities, $m
  61
  71
  82
  93
  106
  119
  133
  148
  163
  180
  197
  214
  233
  252
  272
  293
  314
  337
  360
  384
  410
  436
  463
  492
  521
  552
  584
  618
  653
  689
Total equity, $m
  259
  301
  348
  397
  451
  507
  567
  630
  697
  766
  838
  914
  993
  1,075
  1,160
  1,248
  1,340
  1,436
  1,535
  1,639
  1,746
  1,858
  1,974
  2,095
  2,222
  2,353
  2,490
  2,633
  2,783
  2,938
Total liabilities and equity, $m
  320
  372
  430
  490
  557
  626
  700
  778
  860
  946
  1,035
  1,128
  1,226
  1,327
  1,432
  1,541
  1,654
  1,773
  1,895
  2,023
  2,156
  2,294
  2,437
  2,587
  2,743
  2,905
  3,074
  3,251
  3,436
  3,627
Debt-to-equity ratio
  0.040
  0.060
  0.090
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.190
  0.200
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
Adjusted equity ratio
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -57
  -40
  -22
  -2
  14
  31
  49
  68
  88
  109
  131
  154
  178
  203
  229
  256
  285
  314
  345
  377
  411
  446
  482
  520
  560
  601
  645
  690
  737
  787
Depreciation, amort., depletion, $m
  15
  18
  21
  23
  27
  30
  33
  37
  41
  45
  49
  54
  59
  63
  68
  74
  79
  85
  91
  97
  103
  110
  116
  124
  131
  139
  147
  155
  164
  173
Funds from operations, $m
  -41
  -22
  -1
  22
  41
  61
  82
  105
  129
  154
  180
  208
  236
  266
  298
  330
  364
  399
  436
  474
  514
  555
  599
  644
  691
  740
  791
  845
  901
  960
Change in working capital, $m
  15
  17
  18
  19
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
Cash from operations, $m
  -57
  -39
  -19
  2
  20
  39
  59
  80
  103
  127
  152
  178
  206
  234
  264
  295
  328
  362
  397
  434
  472
  512
  553
  596
  642
  689
  738
  789
  843
  899
Maintenance CAPEX, $m
  -13
  -15
  -18
  -21
  -23
  -27
  -30
  -33
  -37
  -41
  -45
  -49
  -54
  -59
  -63
  -68
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -116
  -124
  -131
  -139
  -147
  -155
  -164
New CAPEX, $m
  -26
  -29
  -31
  -33
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -105
Cash from investing activities, $m
  -39
  -44
  -49
  -54
  -59
  -65
  -70
  -75
  -82
  -88
  -94
  -100
  -107
  -114
  -120
  -128
  -136
  -143
  -152
  -160
  -169
  -178
  -188
  -197
  -209
  -219
  -231
  -243
  -255
  -269
Free cash flow, $m
  -96
  -83
  -68
  -52
  -39
  -26
  -11
  5
  21
  39
  58
  78
  99
  121
  144
  168
  192
  218
  246
  274
  303
  334
  365
  399
  433
  469
  507
  546
  588
  631
Issuance/(repayment) of debt, $m
  9
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
Issuance/(repurchase) of shares, $m
  96
  83
  68
  52
  39
  26
  11
  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  
  105
  93
  79
  64
  51
  39
  25
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
Total cash flow (excl. dividends), $m
  9
  10
  11
  12
  12
  13
  14
  19
  37
  55
  75
  96
  117
  140
  164
  188
  214
  241
  269
  298
  328
  360
  393
  427
  463
  500
  539
  580
  623
  667
Retained Cash Flow (-), $m
  -96
  -83
  -68
  -52
  -53
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -99
  -103
  -107
  -112
  -116
  -121
  -126
  -131
  -137
  -143
  -149
  -156
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
  -87
  -73
  -57
  -40
  -41
  -43
  -46
  -44
  -29
  -14
  3
  20
  39
  58
  78
  100
  122
  145
  169
  195
  221
  248
  276
  306
  337
  369
  402
  437
  473
  511
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
  -83
  -67
  -50
  -33
  -32
  -32
  -31
  -27
  -17
  -7
  1
  9
  15
  19
  23
  25
  27
  27
  26
  25
  23
  21
  18
  16
  13
  11
  9
  7
  5
  4
Current shareholders' claim on cash, %
  61.6
  42.3
  32.0
  26.4
  23.1
  21.4
  20.8
  20.8
  20.8
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Gulf Island Fabrication, Inc. (Gulf Island) is a holding company. The Company, along with its subsidiaries, is a fabricator of steel platforms and other specialized structures for customers in the offshore oil and gas industry. It also performs onshore and offshore construction and fabrication services for customers in the marine industry. Its primary activity is the fabrication of offshore drilling and production platforms and other steel structures for customers in the oil and gas and marine industries, including jackets and deck sections of fixed production platforms, hull, tendon, and/or deck sections of floating production platforms, piles, wellhead protectors. It conducts its operations through its subsidiaries, which include Gulf Island, L.L.C.; Gulf Marine Fabricators, L.P.; Gulf Island Marine Fabricators, L.L.C.; Gulf Island Shipyards, L.L.C.; Dolphin Services, L.L.C.; and Dolphin Steel Sales, L.L.C.

FINANCIAL RATIOS  of  Gulf Island Fabrication (GIFI)

Valuation Ratios
P/E Ratio 29.3
Price to Sales 0.4
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 16.7
Growth Rates
Sales Growth Rate -6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. -0.7%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. -0.8%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. -0.8%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 8.7%
Gross Margin - 3 Yr. Avg. 4.2%
EBITDA Margin 10.8%
EBITDA Margin - 3 Yr. Avg. 5.5%
Operating Margin 1.7%
Oper. Margin - 3 Yr. Avg. -2.1%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. -2%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. -1.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.6%
Payout Ratio 25%

GIFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GIFI stock intrinsic value calculation we used $171.022 million for the last fiscal year's total revenue generated by Gulf Island Fabrication. The default revenue input number comes from 0001 income statement of Gulf Island Fabrication. 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 GIFI stock valuation model: a) initial revenue growth rate of 17.8% 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 GIFI is calculated based on our internal credit rating of Gulf Island Fabrication, 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 Gulf Island Fabrication.
    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 GIFI stock the variable cost ratio is equal to 36.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $181 million in the base year in the intrinsic value calculation for GIFI 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 Gulf Island Fabrication.

Corporate tax rate of 27% is the nominal tax rate for Gulf Island Fabrication. 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 GIFI 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 GIFI are equal to 86.3%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Gulf Island Fabrication 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 GIFI is equal to 50%. 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 - $219.493 million for Gulf Island Fabrication - 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 15.043 million for Gulf Island Fabrication 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 Gulf Island Fabrication at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Gulf Island Completes Sale of Texas North Yard   [Nov-15-18 06:10PM  GlobeNewswire]
▶ Gulf Island Fabrication: 3Q Earnings Snapshot   [05:06AM  Associated Press]
▶ Gulf Island Fabrication, Inc. Reports Third Quarter Results   [Nov-08-18 05:02PM  GlobeNewswire]
▶ Gulf Island Fabrication, Inc. Announces Project Award   [Sep-14-18 12:00PM  GlobeNewswire]
▶ Gulf Island Fabrication, Inc. to Host Earnings Call   [Aug-10-18 08:00AM  ACCESSWIRE]
▶ Gulf Island Fabrication: 2Q Earnings Snapshot   [Aug-09-18 02:31PM  Associated Press]
▶ Gulf Island Fabrication, Inc. to Host Earnings Call   [Apr-27-18 08:00AM  ACCESSWIRE]
▶ Gulf Island Fabrication: 1Q Earnings Snapshot   [06:11PM  Associated Press]
▶ Gulf Island Fabrication, Inc. Announces Project Awards   [Mar-19-18 04:35PM  GlobeNewswire]
▶ Gulf Island Fabrication posts 4Q loss   [05:01AM  Associated Press]
▶ Gulf Island Fabrication Reports Fourth Quarter Results   [Feb-26-18 04:35PM  GlobeNewswire]
▶ GULF ISLAND FABRICATION INC to Host Earnings Call   [Oct-27-17 07:20AM  ACCESSWIRE]
▶ Gulf Island Fabrication posts 3Q loss   [Oct-26-17 07:54PM  Associated Press]
▶ Gulf Island Fabrication posts 2Q loss   [Jul-27-17 10:17PM  Associated Press]
▶ Gulf Island Fabrication, Inc. Announces Contract Award   [Jun-01-17 08:16AM  Business Wire]
▶ Gulf Island Fabrication posts 1Q loss   [Apr-26-17 07:04PM  Associated Press]
▶ Gulf Island Fabrication posts 4Q loss   [Feb-23-17 07:31PM  Associated Press]
▶ [$$] Facebook for Stockpickers   [Dec-24-16 12:01AM  at Barrons.com]

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