Intrinsic value of Intrepid Potash, Inc - IPI

Previous Close

$3.56

  Intrinsic Value

$5.34

stock screener

  Rating & Target

str. buy

+50%

Previous close

$3.56

 
Intrinsic value

$5.34

 
Up/down potential

+50%

 
Rating

str. buy

We calculate the intrinsic value of IPI 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 0.5

 

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, %
  34.50
  31.55
  28.90
  26.51
  24.35
  22.42
  20.68
  19.11
  17.70
  16.43
  15.29
  14.26
  13.33
  12.50
  11.75
  11.07
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.61
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
Revenue, $m
  280
  368
  474
  600
  746
  914
  1,102
  1,313
  1,546
  1,799
  2,075
  2,370
  2,686
  3,022
  3,377
  3,751
  4,144
  4,555
  4,984
  5,432
  5,898
  6,384
  6,888
  7,413
  7,958
  8,524
  9,113
  9,725
  10,361
  11,023
Variable operating expenses, $m
  60
  79
  102
  130
  161
  197
  238
  284
  334
  389
  448
  512
  580
  653
  729
  810
  895
  984
  1,077
  1,173
  1,274
  1,379
  1,488
  1,601
  1,719
  1,841
  1,968
  2,101
  2,238
  2,381
Fixed operating expenses, $m
  160
  164
  168
  171
  175
  179
  183
  187
  191
  195
  199
  204
  208
  213
  218
  222
  227
  232
  237
  243
  248
  253
  259
  265
  271
  276
  283
  289
  295
  302
Total operating expenses, $m
  220
  243
  270
  301
  336
  376
  421
  471
  525
  584
  647
  716
  788
  866
  947
  1,032
  1,122
  1,216
  1,314
  1,416
  1,522
  1,632
  1,747
  1,866
  1,990
  2,117
  2,251
  2,390
  2,533
  2,683
Operating income, $m
  59
  125
  204
  299
  410
  537
  681
  843
  1,021
  1,216
  1,427
  1,654
  1,898
  2,156
  2,430
  2,718
  3,021
  3,339
  3,670
  4,016
  4,376
  4,751
  5,141
  5,547
  5,968
  6,407
  6,862
  7,336
  7,828
  8,341
EBITDA, $m
  102
  182
  278
  392
  526
  679
  853
  1,047
  1,261
  1,495
  1,749
  2,023
  2,315
  2,626
  2,955
  3,301
  3,665
  4,046
  4,445
  4,860
  5,293
  5,743
  6,212
  6,699
  7,205
  7,731
  8,278
  8,847
  9,438
  10,053
Interest expense (income), $m
  9
  3
  6
  9
  13
  17
  22
  28
  35
  42
  51
  60
  69
  80
  91
  103
  115
  129
  143
  157
  172
  188
  205
  222
  240
  258
  278
  298
  318
  340
  363
Earnings before tax, $m
  56
  119
  195
  286
  393
  515
  653
  808
  978
  1,165
  1,367
  1,585
  1,818
  2,065
  2,327
  2,603
  2,893
  3,196
  3,513
  3,844
  4,188
  4,547
  4,920
  5,307
  5,710
  6,129
  6,564
  7,017
  7,488
  7,978
Tax expense, $m
  15
  32
  53
  77
  106
  139
  176
  218
  264
  315
  369
  428
  491
  558
  628
  703
  781
  863
  949
  1,038
  1,131
  1,228
  1,328
  1,433
  1,542
  1,655
  1,772
  1,895
  2,022
  2,154
Net income, $m
  41
  87
  143
  209
  287
  376
  477
  590
  714
  850
  998
  1,157
  1,327
  1,508
  1,699
  1,900
  2,112
  2,333
  2,564
  2,806
  3,057
  3,319
  3,591
  3,874
  4,168
  4,474
  4,792
  5,123
  5,466
  5,824

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
  706
  929
  1,198
  1,515
  1,884
  2,307
  2,784
  3,316
  3,903
  4,544
  5,239
  5,986
  6,784
  7,631
  8,528
  9,472
  10,464
  11,502
  12,586
  13,717
  14,895
  16,120
  17,395
  18,719
  20,096
  21,526
  23,013
  24,558
  26,165
  27,837
Adjusted assets (=assets-cash), $m
  706
  929
  1,198
  1,515
  1,884
  2,307
  2,784
  3,316
  3,903
  4,544
  5,239
  5,986
  6,784
  7,631
  8,528
  9,472
  10,464
  11,502
  12,586
  13,717
  14,895
  16,120
  17,395
  18,719
  20,096
  21,526
  23,013
  24,558
  26,165
  27,837
Revenue / Adjusted assets
  0.397
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
Average production assets, $m
  478
  629
  811
  1,026
  1,275
  1,561
  1,884
  2,244
  2,641
  3,075
  3,545
  4,051
  4,591
  5,165
  5,771
  6,411
  7,082
  7,784
  8,518
  9,283
  10,080
  10,910
  11,772
  12,669
  13,600
  14,568
  15,574
  16,620
  17,708
  18,839
Working capital, $m
  104
  137
  176
  223
  278
  340
  410
  488
  575
  669
  772
  882
  999
  1,124
  1,256
  1,395
  1,541
  1,694
  1,854
  2,021
  2,194
  2,375
  2,562
  2,758
  2,960
  3,171
  3,390
  3,618
  3,854
  4,101
Total debt, $m
  87
  133
  188
  254
  330
  417
  515
  625
  746
  878
  1,021
  1,175
  1,339
  1,514
  1,698
  1,893
  2,097
  2,311
  2,534
  2,767
  3,010
  3,262
  3,525
  3,798
  4,081
  4,376
  4,682
  5,001
  5,332
  5,676
Total liabilities, $m
  146
  191
  247
  312
  388
  475
  574
  683
  804
  936
  1,079
  1,233
  1,397
  1,572
  1,757
  1,951
  2,156
  2,369
  2,593
  2,826
  3,068
  3,321
  3,583
  3,856
  4,140
  4,434
  4,741
  5,059
  5,390
  5,734
Total equity, $m
  561
  738
  951
  1,203
  1,496
  1,832
  2,210
  2,633
  3,099
  3,608
  4,160
  4,753
  5,386
  6,059
  6,771
  7,521
  8,308
  9,132
  9,993
  10,891
  11,827
  12,800
  13,811
  14,863
  15,956
  17,092
  18,272
  19,499
  20,775
  22,102
Total liabilities and equity, $m
  707
  929
  1,198
  1,515
  1,884
  2,307
  2,784
  3,316
  3,903
  4,544
  5,239
  5,986
  6,783
  7,631
  8,528
  9,472
  10,464
  11,501
  12,586
  13,717
  14,895
  16,121
  17,394
  18,719
  20,096
  21,526
  23,013
  24,558
  26,165
  27,836
Debt-to-equity ratio
  0.160
  0.180
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
Adjusted equity ratio
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  41
  87
  143
  209
  287
  376
  477
  590
  714
  850
  998
  1,157
  1,327
  1,508
  1,699
  1,900
  2,112
  2,333
  2,564
  2,806
  3,057
  3,319
  3,591
  3,874
  4,168
  4,474
  4,792
  5,123
  5,466
  5,824
Depreciation, amort., depletion, $m
  43
  57
  74
  93
  116
  142
  171
  204
  240
  280
  322
  368
  417
  470
  525
  583
  644
  708
  774
  844
  916
  992
  1,070
  1,152
  1,236
  1,324
  1,416
  1,511
  1,610
  1,713
Funds from operations, $m
  84
  144
  216
  302
  403
  518
  648
  794
  954
  1,130
  1,320
  1,525
  1,744
  1,977
  2,223
  2,483
  2,755
  3,041
  3,339
  3,650
  3,974
  4,311
  4,661
  5,026
  5,405
  5,799
  6,208
  6,633
  7,076
  7,537
Change in working capital, $m
  27
  33
  40
  47
  54
  62
  70
  78
  86
  94
  102
  110
  118
  125
  132
  139
  146
  153
  160
  167
  174
  181
  188
  195
  203
  211
  219
  228
  237
  246
Cash from operations, $m
  57
  111
  177
  256
  348
  456
  578
  715
  868
  1,035
  1,218
  1,415
  1,627
  1,852
  2,091
  2,344
  2,609
  2,888
  3,179
  3,483
  3,800
  4,130
  4,474
  4,831
  5,202
  5,588
  5,989
  6,406
  6,839
  7,290
Maintenance CAPEX, $m
  -32
  -43
  -57
  -74
  -93
  -116
  -142
  -171
  -204
  -240
  -280
  -322
  -368
  -417
  -470
  -525
  -583
  -644
  -708
  -774
  -844
  -916
  -992
  -1,070
  -1,152
  -1,236
  -1,324
  -1,416
  -1,511
  -1,610
New CAPEX, $m
  -123
  -151
  -182
  -215
  -250
  -286
  -323
  -360
  -397
  -434
  -470
  -505
  -540
  -574
  -607
  -639
  -671
  -702
  -734
  -765
  -797
  -829
  -862
  -896
  -932
  -968
  -1,006
  -1,046
  -1,088
  -1,131
Cash from investing activities, $m
  -155
  -194
  -239
  -289
  -343
  -402
  -465
  -531
  -601
  -674
  -750
  -827
  -908
  -991
  -1,077
  -1,164
  -1,254
  -1,346
  -1,442
  -1,539
  -1,641
  -1,745
  -1,854
  -1,966
  -2,084
  -2,204
  -2,330
  -2,462
  -2,599
  -2,741
Free cash flow, $m
  -98
  -83
  -62
  -33
  5
  54
  113
  184
  267
  361
  468
  588
  719
  861
  1,015
  1,180
  1,356
  1,542
  1,738
  1,944
  2,159
  2,385
  2,620
  2,864
  3,119
  3,383
  3,658
  3,944
  4,241
  4,549
Issuance/(repayment) of debt, $m
  38
  46
  55
  65
  76
  87
  98
  110
  121
  132
  143
  154
  164
  175
  185
  195
  204
  214
  223
  233
  243
  252
  263
  273
  284
  295
  306
  318
  331
  344
Issuance/(repurchase) of shares, $m
  103
  90
  71
  43
  6
  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  
  141
  136
  126
  108
  82
  87
  98
  110
  121
  132
  143
  154
  164
  175
  185
  195
  204
  214
  223
  233
  243
  252
  263
  273
  284
  295
  306
  318
  331
  344
Total cash flow (excl. dividends), $m
  43
  53
  64
  75
  88
  141
  211
  293
  387
  494
  612
  741
  883
  1,036
  1,200
  1,375
  1,560
  1,755
  1,961
  2,177
  2,402
  2,637
  2,882
  3,137
  3,402
  3,678
  3,965
  4,262
  4,572
  4,894
Retained Cash Flow (-), $m
  -144
  -177
  -213
  -252
  -293
  -335
  -379
  -422
  -466
  -509
  -552
  -593
  -634
  -673
  -712
  -750
  -787
  -824
  -861
  -898
  -935
  -973
  -1,012
  -1,052
  -1,093
  -1,136
  -1,180
  -1,227
  -1,276
  -1,327
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
  -101
  -124
  -149
  -177
  -205
  -195
  -167
  -129
  -79
  -16
  60
  148
  249
  363
  488
  625
  773
  931
  1,100
  1,279
  1,467
  1,664
  1,870
  2,085
  2,310
  2,542
  2,784
  3,035
  3,296
  3,566
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
  -97
  -114
  -130
  -146
  -159
  -141
  -113
  -81
  -45
  -8
  28
  63
  95
  122
  143
  159
  168
  171
  169
  162
  152
  138
  123
  106
  90
  74
  60
  47
  36
  27
Current shareholders' claim on cash, %
  81.9
  71.5
  65.9
  63.3
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0
  63.0

Intrepid Potash, Inc. is a producer of muriate of potash (potassium chloride or potash) and langbeinite (sulfate of potash magnesia) in the United States, which it markets and sells as Trio. The Company operates in the extraction, production and sale of potassium-related products. Its products are potash and Trio. It sells potash into three markets, including the agricultural market as a fertilizer input; the industrial market as a component in drilling and fracturing fluids for oil and gas wells and an input to other industrial processes, and the animal feed market as a nutrient supplement. Trio, which it mines from langbeinite ore, is its specialty fertilizer that delivers potassium, sulfate and magnesium in a single particle and has low chloride. The Company also produces salt, magnesium chloride, metal recovery salts and brine containing salt and potassium from its mining processes. It produces potash from three solar evaporation solution mining facilities.

FINANCIAL RATIOS  of  Intrepid Potash, Inc (IPI)

Valuation Ratios
P/E Ratio -4
Price to Sales 1.3
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow -15
Price to Free Cash Flow -7.5
Growth Rates
Sales Growth Rate -26.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60.9%
Cap. Spend. - 3 Yr. Gr. Rate -40.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 36.6%
Total Debt to Equity 36.6%
Interest Coverage -7
Management Effectiveness
Return On Assets -9.8%
Ret/ On Assets - 3 Yr. Avg. -21.9%
Return On Total Capital -12.5%
Ret/ On T. Cap. - 3 Yr. Avg. -24.8%
Return On Equity -17%
Return On Equity - 3 Yr. Avg. -30.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin -13.7%
Gross Margin - 3 Yr. Avg. -2.9%
EBITDA Margin -7.6%
EBITDA Margin - 3 Yr. Avg. -27.2%
Operating Margin -27.5%
Oper. Margin - 3 Yr. Avg. -50.9%
Pre-Tax Margin -32.2%
Pre-Tax Margin - 3 Yr. Avg. -53.4%
Net Profit Margin -31.8%
Net Profit Margin - 3 Yr. Avg. -70.7%
Effective Tax Rate 1.5%
Eff/ Tax Rate - 3 Yr. Avg. -9.8%
Payout Ratio 0%

IPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IPI stock intrinsic value calculation we used $208 million for the last fiscal year's total revenue generated by Intrepid Potash, Inc. The default revenue input number comes from 0001 income statement of Intrepid Potash, 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 IPI stock valuation model: a) initial revenue growth rate of 34.5% 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 IPI is calculated based on our internal credit rating of Intrepid Potash, 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 Intrepid Potash, 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 IPI stock the variable cost ratio is equal to 21.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $157 million in the base year in the intrinsic value calculation for IPI 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 6.8% for Intrepid Potash, Inc.

Corporate tax rate of 27% is the nominal tax rate for Intrepid Potash, 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 IPI 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 IPI are equal to 170.9%.

Life of production assets of 11 years is the average useful life of capital assets used in Intrepid Potash, 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 IPI is equal to 37.2%. 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 - $417.263 million for Intrepid Potash, 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 130.841 million for Intrepid Potash, 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 Intrepid Potash, Inc at the current share price and the inputted number of shares is $0.5 billion.

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