Intrinsic value of Nordic American Tankers Limited - NAT

Previous Close

$2.05

  Intrinsic Value

$1.25

stock screener

  Rating & Target

sell

-39%

Previous close

$2.05

 
Intrinsic value

$1.25

 
Up/down potential

-39%

 
Rating

sell

We calculate the intrinsic value of NAT 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, %
  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
  303
  310
  318
  327
  337
  348
  359
  372
  386
  401
  417
  434
  452
  471
  491
  513
  535
  559
  585
  612
  640
  670
  702
  735
  770
  807
  845
  886
  929
  974
Variable operating expenses, $m
  258
  264
  271
  278
  287
  296
  306
  317
  329
  342
  355
  369
  385
  401
  418
  437
  456
  477
  498
  521
  545
  571
  598
  626
  656
  687
  720
  755
  792
  830
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
  258
  264
  271
  278
  287
  296
  306
  317
  329
  342
  355
  369
  385
  401
  418
  437
  456
  477
  498
  521
  545
  571
  598
  626
  656
  687
  720
  755
  792
  830
Operating income, $m
  45
  46
  47
  48
  50
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  138
  144
EBITDA, $m
  147
  150
  154
  159
  163
  169
  174
  181
  187
  195
  202
  210
  219
  228
  238
  249
  260
  272
  284
  297
  311
  325
  340
  357
  374
  391
  410
  430
  451
  473
Interest expense (income), $m
  10
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
Earnings before tax, $m
  24
  24
  25
  26
  27
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
Tax expense, $m
  6
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
Net income, $m
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54

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
  1,130
  1,156
  1,186
  1,219
  1,256
  1,297
  1,341
  1,389
  1,440
  1,496
  1,555
  1,618
  1,685
  1,757
  1,832
  1,913
  1,998
  2,088
  2,183
  2,283
  2,389
  2,500
  2,618
  2,742
  2,872
  3,010
  3,154
  3,307
  3,467
  3,635
Adjusted assets (=assets-cash), $m
  1,130
  1,156
  1,186
  1,219
  1,256
  1,297
  1,341
  1,389
  1,440
  1,496
  1,555
  1,618
  1,685
  1,757
  1,832
  1,913
  1,998
  2,088
  2,183
  2,283
  2,389
  2,500
  2,618
  2,742
  2,872
  3,010
  3,154
  3,307
  3,467
  3,635
Revenue / Adjusted assets
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
Average production assets, $m
  1,022
  1,045
  1,072
  1,102
  1,136
  1,172
  1,212
  1,256
  1,302
  1,352
  1,406
  1,463
  1,523
  1,588
  1,656
  1,729
  1,806
  1,887
  1,973
  2,064
  2,159
  2,260
  2,366
  2,479
  2,596
  2,721
  2,851
  2,989
  3,134
  3,286
Working capital, $m
  44
  45
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  136
  142
Total debt, $m
  397
  408
  419
  432
  446
  462
  479
  498
  518
  539
  562
  587
  613
  640
  670
  701
  734
  769
  806
  845
  886
  929
  975
  1,023
  1,073
  1,127
  1,183
  1,242
  1,304
  1,369
Total liabilities, $m
  439
  449
  460
  473
  487
  503
  520
  539
  559
  580
  603
  628
  654
  682
  711
  742
  775
  810
  847
  886
  927
  970
  1,016
  1,064
  1,114
  1,168
  1,224
  1,283
  1,345
  1,410
Total equity, $m
  692
  708
  726
  746
  769
  794
  821
  850
  882
  915
  952
  990
  1,031
  1,075
  1,121
  1,171
  1,223
  1,278
  1,336
  1,397
  1,462
  1,530
  1,602
  1,678
  1,758
  1,842
  1,931
  2,024
  2,122
  2,225
Total liabilities and equity, $m
  1,131
  1,157
  1,186
  1,219
  1,256
  1,297
  1,341
  1,389
  1,441
  1,495
  1,555
  1,618
  1,685
  1,757
  1,832
  1,913
  1,998
  2,088
  2,183
  2,283
  2,389
  2,500
  2,618
  2,742
  2,872
  3,010
  3,155
  3,307
  3,467
  3,635
Debt-to-equity ratio
  0.570
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.620
Adjusted equity ratio
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
Depreciation, amort., depletion, $m
  102
  105
  107
  110
  114
  117
  121
  126
  130
  135
  141
  146
  152
  159
  166
  173
  181
  189
  197
  206
  216
  226
  237
  248
  260
  272
  285
  299
  313
  329
Funds from operations, $m
  120
  122
  125
  129
  133
  137
  142
  147
  152
  158
  164
  171
  178
  186
  193
  202
  211
  220
  230
  241
  252
  263
  276
  289
  303
  317
  332
  348
  365
  382
Change in working capital, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
Cash from operations, $m
  119
  121
  124
  128
  131
  136
  140
  145
  150
  156
  162
  168
  175
  183
  190
  199
  207
  217
  226
  237
  248
  259
  271
  284
  297
  312
  326
  342
  359
  376
Maintenance CAPEX, $m
  -100
  -102
  -105
  -107
  -110
  -114
  -117
  -121
  -126
  -130
  -135
  -141
  -146
  -152
  -159
  -166
  -173
  -181
  -189
  -197
  -206
  -216
  -226
  -237
  -248
  -260
  -272
  -285
  -299
  -313
New CAPEX, $m
  -20
  -24
  -27
  -30
  -33
  -37
  -40
  -43
  -47
  -50
  -53
  -57
  -61
  -65
  -68
  -73
  -77
  -81
  -86
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -131
  -138
  -145
  -152
Cash from investing activities, $m
  -120
  -126
  -132
  -137
  -143
  -151
  -157
  -164
  -173
  -180
  -188
  -198
  -207
  -217
  -227
  -239
  -250
  -262
  -275
  -288
  -302
  -317
  -332
  -349
  -366
  -384
  -403
  -423
  -444
  -465
Free cash flow, $m
  -2
  -4
  -7
  -10
  -12
  -15
  -17
  -19
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -58
  -61
  -65
  -68
  -72
  -76
  -81
  -85
  -90
Issuance/(repayment) of debt, $m
  9
  10
  12
  13
  14
  16
  17
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  65
Issuance/(repurchase) of shares, $m
  0
  0
  0
  2
  3
  5
  6
  8
  9
  11
  12
  14
  15
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
Cash from financing (excl. dividends), $m  
  9
  10
  12
  15
  17
  21
  23
  27
  29
  32
  35
  38
  41
  45
  48
  51
  55
  59
  62
  66
  70
  74
  79
  83
  88
  92
  98
  103
  109
  114
Total cash flow (excl. dividends), $m
  7
  6
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
Retained Cash Flow (-), $m
  -14
  -16
  -18
  -20
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
Prev. year cash balance distribution, $m
  33
  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
  26
  -10
  -14
  -16
  -17
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
Discount rate, %
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
  25
  -9
  -11
  -11
  -11
  -11
  -11
  -11
  -10
  -9
  -9
  -8
  -7
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  99.7
  99.1
  98.2
  97.1
  95.7
  94.2
  92.6
  90.8
  89.0
  87.0
  85.0
  83.0
  80.9
  78.8
  76.7
  74.6
  72.5
  70.4
  68.4
  66.3
  64.3
  62.4
  60.4
  58.5
  56.7
  54.9
  53.1

Nordic American Tankers Limited is an international tanker company. The Company owns approximately 26 vessels, including approximately two new buildings under construction, of approximately 156,000 deadweight tonnage (dwt) each. The Company's Suezmaxes tankers can carry over one million barrels of oil. The vessels in the Company's fleet are homogenous and interchangeable. The Company's vessels are employed in the spot market. The Company's vessels include Nordic Harrier, Nordic Hawk, Nordic Hunter, Nordic Voyager, Nordic Fighter, Nordic Freedom, Nordic Discovery, Nordic Saturn, Nordic Jupiter, Nordic Moon, Nordic Apollo, Nordic Cosmos, Nordic Sprite, Nordic Mistral, Nordic Passat, Nordic Vega, Nordic Breeze, Nordic Zenith, Nordic Sprinter, Nordic Skier and Nordic Light.

FINANCIAL RATIOS  of  Nordic American Tankers Limited (NAT)

Valuation Ratios
P/E Ratio -52.3
Price to Sales 0.6
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 1.6
Price to Free Cash Flow -20.9
Growth Rates
Sales Growth Rate -20%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12.2%
Cap. Spend. - 3 Yr. Gr. Rate 44.4%
Financial Strength
Quick Ratio NaN
Current Ratio 1.7
LT Debt to Equity 50.9%
Total Debt to Equity 50.9%
Interest Coverage 5
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity -0.5%
Return On Equity - 3 Yr. Avg. 3.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 42.3%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 40.1%
EBITDA Margin - 3 Yr. Avg. 36.2%
Operating Margin 14.8%
Oper. Margin - 3 Yr. Avg. 14%
Pre-Tax Margin 11.8%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin -1.1%
Net Profit Margin - 3 Yr. Avg. 7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -3150%

NAT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NAT stock intrinsic value calculation we used $297 million for the last fiscal year's total revenue generated by Nordic American Tankers Limited. The default revenue input number comes from 0001 income statement of Nordic American Tankers Limited. 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 NAT 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 6.9%, whose default value for NAT is calculated based on our internal credit rating of Nordic American Tankers Limited, 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 Nordic American Tankers Limited.
    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 NAT stock the variable cost ratio is equal to 85.2%.

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 NAT 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 Nordic American Tankers Limited.

Corporate tax rate of 27% is the nominal tax rate for Nordic American Tankers Limited. 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 NAT 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 NAT are equal to 337.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Nordic American Tankers Limited 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 NAT is equal to 14.6%. 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 - $711.064 million for Nordic American Tankers Limited - 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 141.971 million for Nordic American Tankers Limited 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 Nordic American Tankers Limited at the current share price and the inputted number of shares is $0.3 billion.

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