Intrinsic value of Global Water Resources - GWRS

Previous Close

$10.50

  Intrinsic Value

$0.58

stock screener

  Rating & Target

str. sell

-94%

Previous close

$10.50

 
Intrinsic value

$0.58

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of GWRS 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 0.2

 

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, %
  33.10
  30.29
  27.76
  25.48
  23.44
  21.59
  19.93
  18.44
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.07
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
Revenue, $m
  42
  54
  69
  87
  107
  130
  156
  185
  217
  251
  288
  328
  370
  415
  463
  513
  565
  620
  677
  737
  799
  863
  930
  1,000
  1,072
  1,147
  1,226
  1,307
  1,391
  1,479
Variable operating expenses, $m
  33
  43
  54
  68
  83
  101
  121
  143
  167
  193
  220
  251
  283
  318
  354
  392
  432
  474
  518
  564
  611
  660
  712
  765
  820
  878
  938
  1,000
  1,065
  1,132
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
  33
  43
  54
  68
  83
  101
  121
  143
  167
  193
  220
  251
  283
  318
  354
  392
  432
  474
  518
  564
  611
  660
  712
  765
  820
  878
  938
  1,000
  1,065
  1,132
Operating income, $m
  8
  11
  15
  19
  24
  29
  35
  42
  50
  58
  68
  77
  87
  98
  109
  120
  133
  146
  159
  173
  188
  203
  218
  235
  252
  270
  288
  307
  327
  348
EBITDA, $m
  19
  25
  32
  40
  50
  60
  73
  86
  101
  117
  134
  152
  172
  193
  215
  238
  262
  288
  314
  342
  371
  401
  432
  464
  498
  533
  569
  607
  646
  687
Interest expense (income), $m
  6
  6
  10
  14
  20
  27
  34
  43
  52
  63
  75
  88
  102
  117
  133
  149
  167
  186
  205
  226
  247
  269
  293
  317
  342
  368
  395
  423
  452
  483
  514
Earnings before tax, $m
  2
  2
  1
  -1
  -3
  -5
  -7
  -10
  -14
  -17
  -20
  -25
  -30
  -35
  -41
  -47
  -53
  -60
  -67
  -74
  -82
  -90
  -98
  -107
  -116
  -125
  -135
  -145
  -156
  -167
Tax expense, $m
  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
Net income, $m
  2
  1
  0
  -1
  -3
  -5
  -7
  -10
  -14
  -17
  -20
  -25
  -30
  -35
  -41
  -47
  -53
  -60
  -67
  -74
  -82
  -90
  -98
  -107
  -116
  -125
  -135
  -145
  -156
  -167

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
  320
  416
  532
  667
  824
  1,002
  1,201
  1,423
  1,666
  1,931
  2,217
  2,523
  2,849
  3,195
  3,561
  3,945
  4,347
  4,768
  5,208
  5,666
  6,143
  6,639
  7,154
  7,690
  8,247
  8,826
  9,427
  10,053
  10,703
  11,380
Adjusted assets (=assets-cash), $m
  320
  416
  532
  667
  824
  1,002
  1,201
  1,423
  1,666
  1,931
  2,217
  2,523
  2,849
  3,195
  3,561
  3,945
  4,347
  4,768
  5,208
  5,666
  6,143
  6,639
  7,154
  7,690
  8,247
  8,826
  9,427
  10,053
  10,703
  11,380
Revenue / Adjusted assets
  0.131
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
Average production assets, $m
  286
  373
  476
  597
  737
  896
  1,075
  1,273
  1,491
  1,728
  1,983
  2,258
  2,550
  2,859
  3,186
  3,530
  3,890
  4,267
  4,660
  5,070
  5,496
  5,940
  6,402
  6,881
  7,379
  7,897
  8,435
  8,995
  9,577
  10,183
Working capital, $m
  -6
  -8
  -10
  -13
  -16
  -19
  -23
  -27
  -32
  -37
  -42
  -48
  -54
  -61
  -68
  -75
  -83
  -91
  -100
  -108
  -117
  -127
  -137
  -147
  -158
  -169
  -180
  -192
  -205
  -217
Total debt, $m
  178
  265
  369
  491
  632
  792
  972
  1,171
  1,390
  1,629
  1,886
  2,161
  2,455
  2,766
  3,095
  3,441
  3,803
  4,182
  4,578
  4,990
  5,419
  5,865
  6,330
  6,812
  7,313
  7,834
  8,375
  8,938
  9,524
  10,133
Total liabilities, $m
  288
  375
  479
  601
  741
  902
  1,081
  1,281
  1,500
  1,738
  1,995
  2,271
  2,564
  2,876
  3,204
  3,550
  3,912
  4,291
  4,687
  5,099
  5,528
  5,975
  6,439
  6,921
  7,422
  7,943
  8,485
  9,047
  9,633
  10,242
Total equity, $m
  32
  42
  53
  67
  82
  100
  120
  142
  167
  193
  222
  252
  285
  320
  356
  394
  435
  477
  521
  567
  614
  664
  715
  769
  825
  883
  943
  1,005
  1,070
  1,138
Total liabilities and equity, $m
  320
  417
  532
  668
  823
  1,002
  1,201
  1,423
  1,667
  1,931
  2,217
  2,523
  2,849
  3,196
  3,560
  3,944
  4,347
  4,768
  5,208
  5,666
  6,142
  6,639
  7,154
  7,690
  8,247
  8,826
  9,428
  10,052
  10,703
  11,380
Debt-to-equity ratio
  5.580
  6.370
  6.940
  7.360
  7.670
  7.910
  8.090
  8.230
  8.340
  8.430
  8.510
  8.570
  8.620
  8.660
  8.690
  8.720
  8.750
  8.770
  8.790
  8.810
  8.820
  8.840
  8.850
  8.860
  8.870
  8.880
  8.880
  8.890
  8.900
  8.900
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
  2
  1
  0
  -1
  -3
  -5
  -7
  -10
  -14
  -17
  -20
  -25
  -30
  -35
  -41
  -47
  -53
  -60
  -67
  -74
  -82
  -90
  -98
  -107
  -116
  -125
  -135
  -145
  -156
  -167
Depreciation, amort., depletion, $m
  11
  14
  17
  21
  26
  31
  37
  44
  51
  59
  66
  75
  85
  95
  106
  118
  130
  142
  155
  169
  183
  198
  213
  229
  246
  263
  281
  300
  319
  339
Funds from operations, $m
  12
  15
  18
  20
  23
  26
  30
  33
  37
  41
  46
  50
  55
  60
  66
  71
  77
  82
  89
  95
  101
  108
  115
  122
  130
  138
  146
  155
  163
  173
Change in working capital, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
Cash from operations, $m
  14
  17
  20
  23
  26
  30
  34
  38
  42
  47
  51
  56
  62
  67
  73
  78
  84
  91
  97
  104
  110
  118
  125
  133
  141
  149
  158
  167
  176
  186
Maintenance CAPEX, $m
  -7
  -10
  -12
  -16
  -20
  -25
  -30
  -36
  -42
  -50
  -58
  -66
  -75
  -85
  -95
  -106
  -118
  -130
  -142
  -155
  -169
  -183
  -198
  -213
  -229
  -246
  -263
  -281
  -300
  -319
New CAPEX, $m
  -73
  -87
  -103
  -121
  -140
  -159
  -179
  -198
  -218
  -237
  -256
  -274
  -292
  -310
  -327
  -344
  -360
  -377
  -393
  -410
  -427
  -444
  -461
  -480
  -498
  -518
  -538
  -560
  -582
  -606
Cash from investing activities, $m
  -80
  -97
  -115
  -137
  -160
  -184
  -209
  -234
  -260
  -287
  -314
  -340
  -367
  -395
  -422
  -450
  -478
  -507
  -535
  -565
  -596
  -627
  -659
  -693
  -727
  -764
  -801
  -841
  -882
  -925
Free cash flow, $m
  -66
  -79
  -96
  -114
  -134
  -154
  -175
  -196
  -218
  -240
  -262
  -284
  -306
  -328
  -350
  -371
  -394
  -416
  -439
  -462
  -485
  -509
  -534
  -560
  -587
  -615
  -644
  -674
  -706
  -739
Issuance/(repayment) of debt, $m
  64
  87
  104
  122
  141
  160
  180
  199
  219
  238
  257
  276
  294
  311
  329
  346
  362
  379
  396
  412
  429
  446
  464
  482
  501
  521
  541
  563
  585
  609
Issuance/(repurchase) of shares, $m
  15
  8
  11
  14
  18
  23
  27
  32
  38
  44
  49
  55
  62
  70
  77
  85
  93
  102
  111
  120
  130
  139
  150
  161
  172
  183
  195
  208
  221
  234
Cash from financing (excl. dividends), $m  
  79
  95
  115
  136
  159
  183
  207
  231
  257
  282
  306
  331
  356
  381
  406
  431
  455
  481
  507
  532
  559
  585
  614
  643
  673
  704
  736
  771
  806
  843
Total cash flow (excl. dividends), $m
  14
  16
  19
  22
  25
  29
  32
  35
  39
  42
  44
  47
  50
  53
  56
  59
  62
  65
  68
  71
  74
  76
  79
  83
  86
  89
  93
  96
  100
  104
Retained Cash Flow (-), $m
  -17
  -10
  -12
  -14
  -18
  -23
  -27
  -32
  -38
  -44
  -49
  -55
  -62
  -70
  -77
  -85
  -93
  -102
  -111
  -120
  -130
  -139
  -150
  -161
  -172
  -183
  -195
  -208
  -221
  -234
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
  -3
  7
  8
  8
  7
  6
  5
  3
  1
  -2
  -5
  -8
  -12
  -16
  -21
  -26
  -31
  -37
  -43
  -49
  -56
  -63
  -70
  -78
  -86
  -94
  -103
  -111
  -121
  -130
Discount rate, %
  12.30
  12.92
  13.56
  14.24
  14.95
  15.70
  16.48
  17.31
  18.17
  19.08
  20.04
  21.04
  22.09
  23.19
  24.35
  25.57
  26.85
  28.19
  29.60
  31.08
  32.64
  34.27
  35.98
  37.78
  39.67
  41.65
  43.73
  45.92
  48.22
  50.63
PV of cash for distribution, $m
  -3
  5
  5
  5
  4
  3
  2
  1
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  90.6
  88.3
  86.0
  83.7
  81.5
  79.3
  77.2
  75.2
  73.2
  71.4
  69.6
  67.9
  66.3
  64.7
  63.2
  61.7
  60.3
  58.9
  57.5
  56.2
  55.0
  53.8
  52.6
  51.4
  50.3
  49.2
  48.1
  47.1
  46.1
  45.1

Global Water Resources, Inc. is a water resource management company. The Company owns, operates and manages water, wastewater and recycled water utilities in strategically located communities, principally in metropolitan Phoenix, Arizona. The Company focuses on the issues of water supply and scarcity, and applies principles of water conservation through water reclamation and reuse. As of April 28, 2016, the Company owned nine water and wastewater utilities in communities principally in metropolitan Phoenix. As of April 28, 2016, the Company served over 50,000 people in approximately 20,000 homes within its 332 square miles of certificated service areas. The Company is creating renewable water systems where wastewater from homes is treated and used again for various outdoor applications.

FINANCIAL RATIOS  of  Global Water Resources (GWRS)

Valuation Ratios
P/E Ratio -68.5
Price to Sales 6.9
Price to Book 13.7
Price to Tangible Book
Price to Cash Flow 102.8
Price to Free Cash Flow -29.4
Growth Rates
Sales Growth Rate -6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 200%
Cap. Spend. - 3 Yr. Gr. Rate 12.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 760%
Total Debt to Equity 760%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.6%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital -2.4%
Ret/ On T. Cap. - 3 Yr. Avg. 21%
Return On Equity -17.1%
Return On Equity - 3 Yr. Avg. -843.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 93.3%
Gross Margin - 3 Yr. Avg. 92.7%
EBITDA Margin 26.7%
EBITDA Margin - 3 Yr. Avg. 133.9%
Operating Margin 16.7%
Oper. Margin - 3 Yr. Avg. 113.2%
Pre-Tax Margin -13.3%
Pre-Tax Margin - 3 Yr. Avg. 87.8%
Net Profit Margin -10%
Net Profit Margin - 3 Yr. Avg. 84.2%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 13.2%
Payout Ratio -166.7%

GWRS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GWRS stock intrinsic value calculation we used $31.208 million for the last fiscal year's total revenue generated by Global Water Resources. The default revenue input number comes from 0001 income statement of Global Water Resources. 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 GWRS stock valuation model: a) initial revenue growth rate of 33.1% 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 12.3%, whose default value for GWRS is calculated based on our internal credit rating of Global Water Resources, 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 Global Water Resources.
    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 GWRS stock the variable cost ratio is equal to 80.6%.

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 GWRS 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 Global Water Resources.

Corporate tax rate of 27% is the nominal tax rate for Global Water Resources. 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 GWRS 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 GWRS are equal to 688.3%.

Life of production assets of 31.8 years is the average useful life of capital assets used in Global Water Resources 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 GWRS is equal to -14.7%. 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 - $14.86 million for Global Water Resources - 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 21.456 million for Global Water Resources 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 Global Water Resources at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Global Water Resources Declares Monthly Dividend   [Oct-30-18 08:31AM  GlobeNewswire]
▶ 10 Small-Caps With Straight-A Potential   [Oct-12-18 03:17PM  InvestorPlace]
▶ Global Water Resources Declares Monthly Dividend   [Sep-28-18 08:31AM  GlobeNewswire]
▶ 7 Market-Beating Stocks to Buy to Weather a Trade War   [Sep-21-18 01:59PM  InvestorPlace]
▶ Global Water Resources, Inc. to Host Earnings Call   [Aug-09-18 11:00AM  ACCESSWIRE]
▶ Global Water Resources Reports Second Quarter 2018 Results   [Aug-08-18 06:51PM  GlobeNewswire]
▶ Global Water Resources Declares Monthly Dividend   [Jul-30-18 08:31AM  GlobeNewswire]
▶ Stay Safe as Trade War Escalates: 5 Top Defensive Stocks   [Jul-06-18 12:30PM  InvestorPlace]
▶ Global Water Resources Declares Monthly Dividend   [Jun-29-18 08:31AM  GlobeNewswire]
▶ Global Water to Acquire Water and Wastewater Utilities   [Jun-28-18 08:31AM  GlobeNewswire]
▶ Global Water Resources Declares Monthly Dividend   [May-30-18 08:31AM  GlobeNewswire]
▶ Global Water Resources Reports Results of Director Election   [May-18-18 05:00PM  GlobeNewswire]
▶ Global Water Resources Reports First Quarter 2018 Results   [May-09-18 04:01PM  GlobeNewswire]
▶ Global Water Resources Declares Monthly Dividend   [Apr-30-18 08:31AM  GlobeNewswire]
▶ Global Water Resources Declares Monthly Dividend   [Mar-29-18 08:31AM  GlobeNewswire]
▶ Global Water Resources Declares Monthly Dividend   [Feb-28-18 08:31AM  GlobeNewswire]

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