Intrinsic value of Isramco, Inc. - ISRL

Previous Close

$121.24

  Intrinsic Value

$254.69

stock screener

  Rating & Target

str. buy

+110%

Previous close

$121.24

 
Intrinsic value

$254.69

 
Up/down potential

+110%

 
Rating

str. buy

We calculate the intrinsic value of ISRL 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 0.3

 

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, %
  37.80
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.26
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
Revenue, $m
  91
  122
  161
  208
  263
  327
  400
  482
  575
  676
  788
  908
  1,038
  1,176
  1,323
  1,479
  1,642
  1,814
  1,994
  2,182
  2,379
  2,583
  2,795
  3,016
  3,246
  3,485
  3,733
  3,991
  4,259
  4,538
Variable operating expenses, $m
  12
  14
  17
  20
  24
  29
  34
  41
  47
  55
  58
  66
  76
  86
  97
  108
  120
  133
  146
  160
  174
  189
  205
  221
  238
  255
  273
  292
  312
  332
Fixed operating expenses, $m
  35
  36
  36
  37
  38
  39
  40
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  53
  54
  55
  56
  57
  59
  60
  61
  63
  64
  65
Total operating expenses, $m
  47
  50
  53
  57
  62
  68
  74
  81
  88
  97
  101
  110
  121
  132
  144
  156
  169
  183
  197
  213
  228
  244
  261
  278
  297
  315
  334
  355
  376
  397
Operating income, $m
  44
  73
  108
  150
  200
  259
  326
  401
  486
  579
  687
  797
  917
  1,044
  1,179
  1,322
  1,473
  1,631
  1,797
  1,970
  2,151
  2,339
  2,535
  2,738
  2,950
  3,170
  3,399
  3,636
  3,883
  4,140
EBITDA, $m
  57
  88
  126
  173
  227
  291
  364
  447
  540
  641
  753
  874
  1,004
  1,143
  1,290
  1,446
  1,611
  1,784
  1,964
  2,153
  2,351
  2,556
  2,770
  2,992
  3,223
  3,463
  3,712
  3,971
  4,241
  4,521
Interest expense (income), $m
  4
  5
  5
  8
  10
  13
  17
  22
  27
  32
  39
  46
  53
  61
  70
  80
  90
  101
  112
  124
  136
  149
  162
  176
  191
  206
  222
  238
  255
  273
  291
Earnings before tax, $m
  39
  67
  100
  140
  187
  241
  304
  375
  454
  541
  641
  744
  855
  973
  1,099
  1,232
  1,372
  1,519
  1,673
  1,834
  2,002
  2,177
  2,358
  2,547
  2,744
  2,948
  3,160
  3,381
  3,610
  3,849
Tax expense, $m
  11
  18
  27
  38
  50
  65
  82
  101
  123
  146
  173
  201
  231
  263
  297
  333
  371
  410
  452
  495
  541
  588
  637
  688
  741
  796
  853
  913
  975
  1,039
Net income, $m
  29
  49
  73
  102
  136
  176
  222
  274
  331
  395
  468
  543
  624
  711
  802
  900
  1,002
  1,109
  1,222
  1,339
  1,461
  1,589
  1,722
  1,860
  2,003
  2,152
  2,307
  2,468
  2,636
  2,810

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
  128
  173
  227
  293
  370
  461
  564
  680
  811
  954
  1,111
  1,281
  1,463
  1,659
  1,866
  2,085
  2,316
  2,559
  2,813
  3,078
  3,355
  3,643
  3,943
  4,254
  4,579
  4,915
  5,265
  5,629
  6,007
  6,400
Adjusted assets (=assets-cash), $m
  128
  173
  227
  293
  370
  461
  564
  680
  811
  954
  1,111
  1,281
  1,463
  1,659
  1,866
  2,085
  2,316
  2,559
  2,813
  3,078
  3,355
  3,643
  3,943
  4,254
  4,579
  4,915
  5,265
  5,629
  6,007
  6,400
Revenue / Adjusted assets
  0.711
  0.705
  0.709
  0.710
  0.711
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.710
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
Average production assets, $m
  74
  100
  131
  169
  214
  266
  326
  393
  468
  551
  642
  740
  846
  958
  1,078
  1,205
  1,338
  1,479
  1,625
  1,779
  1,939
  2,105
  2,278
  2,458
  2,646
  2,840
  3,042
  3,253
  3,471
  3,698
Working capital, $m
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  43
  45
Total debt, $m
  101
  141
  190
  249
  319
  400
  493
  598
  715
  844
  985
  1,138
  1,303
  1,478
  1,665
  1,862
  2,070
  2,289
  2,517
  2,756
  3,005
  3,264
  3,534
  3,815
  4,106
  4,409
  4,724
  5,052
  5,392
  5,746
Total liabilities, $m
  115
  155
  204
  263
  333
  414
  507
  612
  729
  859
  1,000
  1,153
  1,317
  1,493
  1,679
  1,877
  2,085
  2,303
  2,532
  2,770
  3,019
  3,279
  3,548
  3,829
  4,121
  4,424
  4,739
  5,066
  5,406
  5,760
Total equity, $m
  13
  17
  23
  29
  37
  46
  56
  68
  81
  95
  111
  128
  146
  166
  187
  209
  232
  256
  281
  308
  335
  364
  394
  425
  458
  492
  527
  563
  601
  640
Total liabilities and equity, $m
  128
  172
  227
  292
  370
  460
  563
  680
  810
  954
  1,111
  1,281
  1,463
  1,659
  1,866
  2,086
  2,317
  2,559
  2,813
  3,078
  3,354
  3,643
  3,942
  4,254
  4,579
  4,916
  5,266
  5,629
  6,007
  6,400
Debt-to-equity ratio
  7.880
  8.160
  8.370
  8.510
  8.610
  8.690
  8.740
  8.790
  8.820
  8.850
  8.870
  8.890
  8.900
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
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
  29
  49
  73
  102
  136
  176
  222
  274
  331
  395
  468
  543
  624
  711
  802
  900
  1,002
  1,109
  1,222
  1,339
  1,461
  1,589
  1,722
  1,860
  2,003
  2,152
  2,307
  2,468
  2,636
  2,810
Depreciation, amort., depletion, $m
  13
  15
  19
  23
  27
  33
  39
  46
  53
  62
  66
  76
  87
  99
  111
  124
  138
  152
  168
  183
  200
  217
  235
  253
  273
  293
  314
  335
  358
  381
Funds from operations, $m
  41
  65
  92
  125
  164
  209
  261
  319
  385
  457
  534
  620
  711
  809
  914
  1,024
  1,140
  1,262
  1,389
  1,522
  1,661
  1,806
  1,956
  2,113
  2,276
  2,445
  2,621
  2,803
  2,993
  3,191
Change in working capital, $m
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
Cash from operations, $m
  41
  64
  91
  124
  163
  208
  260
  319
  384
  456
  533
  618
  710
  808
  912
  1,022
  1,138
  1,260
  1,387
  1,520
  1,659
  1,804
  1,954
  2,111
  2,274
  2,443
  2,618
  2,801
  2,991
  3,188
Maintenance CAPEX, $m
  -6
  -8
  -10
  -14
  -17
  -22
  -27
  -34
  -41
  -48
  -57
  -66
  -76
  -87
  -99
  -111
  -124
  -138
  -152
  -168
  -183
  -200
  -217
  -235
  -253
  -273
  -293
  -314
  -335
  -358
New CAPEX, $m
  -20
  -26
  -31
  -38
  -45
  -52
  -60
  -67
  -75
  -83
  -91
  -98
  -106
  -113
  -120
  -127
  -133
  -140
  -147
  -153
  -160
  -166
  -173
  -180
  -187
  -195
  -202
  -210
  -218
  -227
Cash from investing activities, $m
  -26
  -34
  -41
  -52
  -62
  -74
  -87
  -101
  -116
  -131
  -148
  -164
  -182
  -200
  -219
  -238
  -257
  -278
  -299
  -321
  -343
  -366
  -390
  -415
  -440
  -468
  -495
  -524
  -553
  -585
Free cash flow, $m
  15
  31
  50
  73
  101
  134
  173
  218
  268
  325
  386
  454
  528
  608
  693
  784
  880
  982
  1,088
  1,200
  1,316
  1,438
  1,564
  1,696
  1,833
  1,975
  2,123
  2,277
  2,437
  2,603
Issuance/(repayment) of debt, $m
  5
  40
  49
  59
  70
  81
  93
  105
  117
  129
  141
  153
  164
  176
  187
  197
  208
  218
  229
  239
  249
  259
  270
  281
  292
  303
  315
  327
  340
  354
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  6
  40
  49
  59
  70
  81
  93
  105
  117
  129
  141
  153
  164
  176
  187
  197
  208
  218
  229
  239
  249
  259
  270
  281
  292
  303
  315
  327
  340
  354
Total cash flow (excl. dividends), $m
  22
  71
  99
  132
  171
  215
  266
  323
  385
  454
  527
  607
  693
  784
  880
  982
  1,088
  1,200
  1,317
  1,438
  1,565
  1,697
  1,834
  1,976
  2,124
  2,278
  2,438
  2,604
  2,777
  2,957
Retained Cash Flow (-), $m
  -30
  -4
  -5
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
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
  -8
  66
  93
  125
  163
  206
  256
  311
  372
  439
  511
  590
  674
  764
  859
  960
  1,065
  1,176
  1,291
  1,412
  1,537
  1,668
  1,804
  1,945
  2,092
  2,245
  2,403
  2,568
  2,739
  2,918
Discount rate, %
  10.00
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
PV of cash for distribution, $m
  -7
  54
  68
  81
  92
  100
  106
  108
  108
  104
  97
  89
  79
  68
  57
  47
  37
  29
  21
  16
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Isramco, Inc., together with its subsidiaries, is an independent oil and natural gas company. The Company is engaged in the exploration, development and production of oil and natural gas properties located onshore in the United States and offshore Israel. The Company operates through two segments: Oil and Gas Exploration and Production Segment, and Production services Segment. The Company also operates a production services company that provides a range of onshore production services to oil companies, and independent oil and natural gas production companies conducting operations in the United States. The Oil and Gas Exploration and Production Segment is engaged in the exploration and production of natural gas, crude oil, condensate and natural gas liquids (NGLs). The Production services Segment is engaged in rig-based and workover services, well completion and recompletion services, plugging and abandonment of wells and other ancillary oilfield services.

FINANCIAL RATIOS  of  Isramco, Inc. (ISRL)

Valuation Ratios
P/E Ratio 47.1
Price to Sales 6.1
Price to Book 47.1
Price to Tangible Book
Price to Cash Flow 20.6
Price to Free Cash Flow 22
Growth Rates
Sales Growth Rate -18.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -80%
Cap. Spend. - 3 Yr. Gr. Rate -45.1%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 1371.4%
Total Debt to Equity 1500%
Interest Coverage 3
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 6.2%
Ret/ On T. Cap. - 3 Yr. Avg. -1.8%
Return On Equity 200%
Return On Equity - 3 Yr. Avg. 14.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 74.1%
Gross Margin - 3 Yr. Avg. 71.7%
EBITDA Margin 37%
EBITDA Margin - 3 Yr. Avg. 18.7%
Operating Margin 25.9%
Oper. Margin - 3 Yr. Avg. 2%
Pre-Tax Margin 16.7%
Pre-Tax Margin - 3 Yr. Avg. -6.8%
Net Profit Margin 13%
Net Profit Margin - 3 Yr. Avg. -2.5%
Effective Tax Rate 44.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.3%
Payout Ratio 0%

ISRL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ISRL stock intrinsic value calculation we used $66 million for the last fiscal year's total revenue generated by Isramco, Inc.. The default revenue input number comes from 0001 income statement of Isramco, 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 ISRL stock valuation model: a) initial revenue growth rate of 37.8% 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 10%, whose default value for ISRL is calculated based on our internal credit rating of Isramco, 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 Isramco, 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 ISRL stock the variable cost ratio is equal to 15.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $34 million in the base year in the intrinsic value calculation for ISRL 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 Isramco, Inc..

Corporate tax rate of 27% is the nominal tax rate for Isramco, 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 ISRL 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 ISRL are equal to 81.5%.

Life of production assets of 9.7 years is the average useful life of capital assets used in Isramco, 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 ISRL is equal to 1%. 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 - $-17.254 million for Isramco, 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 2.718 million for Isramco, 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 Isramco, Inc. at the current share price and the inputted number of shares is $0.3 billion.

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