Intrinsic value of Nabors Industries Ltd. - NBR

Previous Close

$2.04

  Intrinsic Value

$1.75

stock screener

  Rating & Target

hold

-14%

Previous close

$2.04

 
Intrinsic value

$1.75

 
Up/down potential

-14%

 
Rating

hold

We calculate the intrinsic value of NBR 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 0.7

 

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, %
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
Revenue, $m
  3,338
  3,640
  3,954
  4,282
  4,622
  4,976
  5,344
  5,726
  6,123
  6,536
  6,966
  7,412
  7,877
  8,361
  8,865
  9,391
  9,938
  10,510
  11,106
  11,729
  12,380
  13,060
  13,771
  14,514
  15,292
  16,106
  16,958
  17,850
  18,785
  19,764
Variable operating expenses, $m
  2,782
  3,032
  3,292
  3,563
  3,845
  4,138
  4,443
  4,759
  5,088
  5,430
  5,767
  6,137
  6,522
  6,923
  7,340
  7,775
  8,229
  8,702
  9,196
  9,711
  10,250
  10,813
  11,402
  12,017
  12,661
  13,335
  14,041
  14,779
  15,553
  16,364
Fixed operating expenses, $m
  802
  820
  838
  856
  875
  894
  914
  934
  955
  976
  997
  1,019
  1,042
  1,065
  1,088
  1,112
  1,136
  1,161
  1,187
  1,213
  1,240
  1,267
  1,295
  1,323
  1,353
  1,382
  1,413
  1,444
  1,476
  1,508
Total operating expenses, $m
  3,584
  3,852
  4,130
  4,419
  4,720
  5,032
  5,357
  5,693
  6,043
  6,406
  6,764
  7,156
  7,564
  7,988
  8,428
  8,887
  9,365
  9,863
  10,383
  10,924
  11,490
  12,080
  12,697
  13,340
  14,014
  14,717
  15,454
  16,223
  17,029
  17,872
Operating income, $m
  -246
  -212
  -176
  -138
  -98
  -57
  -13
  32
  80
  130
  201
  256
  313
  374
  437
  504
  573
  647
  724
  805
  890
  980
  1,074
  1,174
  1,278
  1,389
  1,505
  1,627
  1,756
  1,892
EBITDA, $m
  704
  823
  947
  1,077
  1,211
  1,352
  1,498
  1,651
  1,810
  1,975
  2,147
  2,327
  2,515
  2,710
  2,914
  3,128
  3,350
  3,583
  3,827
  4,082
  4,349
  4,629
  4,922
  5,229
  5,551
  5,889
  6,243
  6,615
  7,005
  7,415
Interest expense (income), $m
  184
  215
  245
  275
  307
  340
  375
  411
  448
  487
  527
  569
  613
  658
  705
  754
  805
  859
  914
  972
  1,033
  1,096
  1,162
  1,231
  1,303
  1,378
  1,457
  1,540
  1,626
  1,717
  1,812
Earnings before tax, $m
  -462
  -457
  -451
  -445
  -439
  -432
  -424
  -416
  -407
  -397
  -368
  -357
  -344
  -331
  -317
  -302
  -285
  -268
  -248
  -228
  -206
  -182
  -157
  -129
  -100
  -69
  -35
  1
  39
  81
Tax expense, $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
  11
  22
Net income, $m
  -462
  -457
  -451
  -445
  -439
  -432
  -424
  -416
  -407
  -397
  -368
  -357
  -344
  -331
  -317
  -302
  -285
  -268
  -248
  -228
  -206
  -182
  -157
  -129
  -100
  -69
  -35
  1
  29
  59

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
  8,602
  9,380
  10,191
  11,035
  11,913
  12,825
  13,773
  14,758
  15,782
  16,846
  17,953
  19,104
  20,302
  21,549
  22,848
  24,203
  25,615
  27,088
  28,625
  30,230
  31,907
  33,659
  35,492
  37,408
  39,412
  41,510
  43,707
  46,006
  48,415
  50,938
Adjusted assets (=assets-cash), $m
  8,602
  9,380
  10,191
  11,035
  11,913
  12,825
  13,773
  14,758
  15,782
  16,846
  17,953
  19,104
  20,302
  21,549
  22,848
  24,203
  25,615
  27,088
  28,625
  30,230
  31,907
  33,659
  35,492
  37,408
  39,412
  41,510
  43,707
  46,006
  48,415
  50,938
Revenue / Adjusted assets
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
Average production assets, $m
  6,435
  7,017
  7,624
  8,255
  8,912
  9,594
  10,303
  11,040
  11,806
  12,602
  13,430
  14,291
  15,187
  16,120
  17,092
  18,105
  19,161
  20,263
  21,413
  22,614
  23,868
  25,179
  26,550
  27,983
  29,483
  31,052
  32,695
  34,416
  36,217
  38,105
Working capital, $m
  307
  335
  364
  394
  425
  458
  492
  527
  563
  601
  641
  682
  725
  769
  816
  864
  914
  967
  1,022
  1,079
  1,139
  1,202
  1,267
  1,335
  1,407
  1,482
  1,560
  1,642
  1,728
  1,818
Total debt, $m
  4,076
  4,587
  5,119
  5,672
  6,248
  6,847
  7,468
  8,115
  8,786
  9,484
  10,210
  10,966
  11,751
  12,570
  13,422
  14,310
  15,237
  16,203
  17,211
  18,264
  19,364
  20,514
  21,716
  22,973
  24,288
  25,664
  27,105
  28,613
  30,194
  31,849
Total liabilities, $m
  5,643
  6,154
  6,686
  7,239
  7,815
  8,413
  9,035
  9,681
  10,353
  11,051
  11,777
  12,532
  13,318
  14,136
  14,989
  15,877
  16,803
  17,769
  18,778
  19,831
  20,931
  22,081
  23,282
  24,539
  25,855
  27,231
  28,671
  30,180
  31,760
  33,415
Total equity, $m
  2,959
  3,227
  3,506
  3,796
  4,098
  4,412
  4,738
  5,077
  5,429
  5,795
  6,176
  6,572
  6,984
  7,413
  7,860
  8,326
  8,811
  9,318
  9,847
  10,399
  10,976
  11,579
  12,209
  12,868
  13,558
  14,280
  15,035
  15,826
  16,655
  17,523
Total liabilities and equity, $m
  8,602
  9,381
  10,192
  11,035
  11,913
  12,825
  13,773
  14,758
  15,782
  16,846
  17,953
  19,104
  20,302
  21,549
  22,849
  24,203
  25,614
  27,087
  28,625
  30,230
  31,907
  33,660
  35,491
  37,407
  39,413
  41,511
  43,706
  46,006
  48,415
  50,938
Debt-to-equity ratio
  1.380
  1.420
  1.460
  1.490
  1.520
  1.550
  1.580
  1.600
  1.620
  1.640
  1.650
  1.670
  1.680
  1.700
  1.710
  1.720
  1.730
  1.740
  1.750
  1.760
  1.760
  1.770
  1.780
  1.790
  1.790
  1.800
  1.800
  1.810
  1.810
  1.820
Adjusted equity ratio
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -462
  -457
  -451
  -445
  -439
  -432
  -424
  -416
  -407
  -397
  -368
  -357
  -344
  -331
  -317
  -302
  -285
  -268
  -248
  -228
  -206
  -182
  -157
  -129
  -100
  -69
  -35
  1
  29
  59
Depreciation, amort., depletion, $m
  951
  1,035
  1,123
  1,215
  1,310
  1,409
  1,512
  1,618
  1,729
  1,845
  1,946
  2,071
  2,201
  2,336
  2,477
  2,624
  2,777
  2,937
  3,103
  3,277
  3,459
  3,649
  3,848
  4,056
  4,273
  4,500
  4,738
  4,988
  5,249
  5,522
Funds from operations, $m
  489
  579
  672
  769
  871
  977
  1,088
  1,203
  1,323
  1,448
  1,578
  1,714
  1,857
  2,005
  2,160
  2,322
  2,492
  2,669
  2,855
  3,050
  3,253
  3,467
  3,691
  3,926
  4,173
  4,432
  4,703
  4,988
  5,278
  5,581
Change in working capital, $m
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  78
  82
  86
  90
Cash from operations, $m
  463
  551
  643
  739
  840
  945
  1,054
  1,168
  1,286
  1,410
  1,539
  1,673
  1,814
  1,960
  2,114
  2,274
  2,441
  2,617
  2,800
  2,992
  3,194
  3,405
  3,626
  3,858
  4,101
  4,357
  4,625
  4,906
  5,192
  5,491
Maintenance CAPEX, $m
  -852
  -933
  -1,017
  -1,105
  -1,196
  -1,292
  -1,390
  -1,493
  -1,600
  -1,711
  -1,826
  -1,946
  -2,071
  -2,201
  -2,336
  -2,477
  -2,624
  -2,777
  -2,937
  -3,103
  -3,277
  -3,459
  -3,649
  -3,848
  -4,056
  -4,273
  -4,500
  -4,738
  -4,988
  -5,249
New CAPEX, $m
  -557
  -582
  -607
  -631
  -656
  -682
  -709
  -737
  -766
  -796
  -828
  -861
  -896
  -933
  -972
  -1,013
  -1,056
  -1,102
  -1,150
  -1,201
  -1,254
  -1,311
  -1,371
  -1,433
  -1,500
  -1,569
  -1,643
  -1,720
  -1,802
  -1,888
Cash from investing activities, $m
  -1,409
  -1,515
  -1,624
  -1,736
  -1,852
  -1,974
  -2,099
  -2,230
  -2,366
  -2,507
  -2,654
  -2,807
  -2,967
  -3,134
  -3,308
  -3,490
  -3,680
  -3,879
  -4,087
  -4,304
  -4,531
  -4,770
  -5,020
  -5,281
  -5,556
  -5,842
  -6,143
  -6,458
  -6,790
  -7,137
Free cash flow, $m
  -946
  -964
  -981
  -997
  -1,013
  -1,029
  -1,046
  -1,063
  -1,080
  -1,097
  -1,115
  -1,134
  -1,154
  -1,174
  -1,195
  -1,216
  -1,239
  -1,262
  -1,287
  -1,312
  -1,338
  -1,366
  -1,394
  -1,423
  -1,454
  -1,486
  -1,518
  -1,552
  -1,598
  -1,645
Issuance/(repayment) of debt, $m
  490
  511
  532
  554
  576
  598
  622
  646
  672
  698
  726
  755
  786
  818
  852
  888
  926
  966
  1,008
  1,053
  1,100
  1,150
  1,202
  1,257
  1,315
  1,376
  1,441
  1,509
  1,580
  1,655
Issuance/(repurchase) of shares, $m
  720
  725
  730
  736
  741
  745
  750
  755
  759
  763
  749
  753
  757
  760
  764
  768
  771
  774
  777
  780
  783
  785
  787
  789
  790
  790
  791
  790
  800
  809
Cash from financing (excl. dividends), $m  
  1,210
  1,236
  1,262
  1,290
  1,317
  1,343
  1,372
  1,401
  1,431
  1,461
  1,475
  1,508
  1,543
  1,578
  1,616
  1,656
  1,697
  1,740
  1,785
  1,833
  1,883
  1,935
  1,989
  2,046
  2,105
  2,166
  2,232
  2,299
  2,380
  2,464
Total cash flow (excl. dividends), $m
  264
  271
  282
  292
  303
  315
  326
  338
  351
  364
  359
  374
  389
  405
  422
  440
  458
  478
  499
  521
  544
  569
  595
  622
  651
  681
  713
  747
  782
  819
Retained Cash Flow (-), $m
  -720
  -725
  -730
  -736
  -741
  -745
  -750
  -755
  -759
  -763
  -749
  -753
  -757
  -760
  -764
  -768
  -771
  -774
  -777
  -780
  -783
  -785
  -787
  -789
  -790
  -790
  -791
  -791
  -829
  -868
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
  -456
  -453
  -449
  -443
  -437
  -431
  -424
  -416
  -408
  -399
  -389
  -379
  -368
  -355
  -342
  -328
  -313
  -296
  -278
  -259
  -238
  -216
  -192
  -166
  -139
  -109
  -78
  -44
  -47
  -49
Discount rate, %
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
  -420
  -382
  -343
  -305
  -268
  -232
  -199
  -169
  -141
  -116
  -94
  -74
  -58
  -44
  -33
  -24
  -17
  -12
  -8
  -5
  -3
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  72.4
  53.7
  40.5
  31.2
  24.4
  19.4
  15.6
  12.7
  10.5
  8.7
  7.4
  6.3
  5.4
  4.7
  4.1
  3.6
  3.1
  2.8
  2.5
  2.2
  2.0
  1.8
  1.7
  1.5
  1.4
  1.3
  1.2
  1.1
  1.0
  1.0

Nabors Industries Ltd. owns and operates a land-based drilling rig fleet. The Company is a provider of offshore platform drilling rigs in the United States and multiple international markets. The Company conducts its Drilling & Rig Services business through four segments: U.S. Drilling, Canada Drilling, International Drilling and Rig Services. The Company provides wellbore placement services, drilling software and performance tools, drilling equipment and various technologies throughout the oil and gas markets. The Company's Drilling & Rig Services business comprises land-based and offshore drilling rig operations and other rig services, consisting of equipment manufacturing, rig instrumentation and optimization software. The Company is a provider of directional drilling and measurement while drilling (MWD) systems and services. The Company also provides drilling technology and equipment, and well-site services.

FINANCIAL RATIOS  of  Nabors Industries Ltd. (NBR)

Valuation Ratios
P/E Ratio -0.6
Price to Sales 0.3
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 1.1
Price to Free Cash Flow 4.2
Growth Rates
Sales Growth Rate -42.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -54.4%
Cap. Spend. - 3 Yr. Gr. Rate -19.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 110.2%
Total Debt to Equity 110.2%
Interest Coverage -6
Management Effectiveness
Return On Assets -9.9%
Ret/ On Assets - 3 Yr. Avg. -5.4%
Return On Total Capital -13.9%
Ret/ On T. Cap. - 3 Yr. Avg. -8.4%
Return On Equity -27.4%
Return On Equity - 3 Yr. Avg. -15.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 39.7%
Gross Margin - 3 Yr. Avg. 37.4%
EBITDA Margin -6.3%
EBITDA Margin - 3 Yr. Avg. 7.5%
Operating Margin -34.6%
Oper. Margin - 3 Yr. Avg. -15.2%
Pre-Tax Margin -53.8%
Pre-Tax Margin - 3 Yr. Avg. -24.6%
Net Profit Margin -46.2%
Net Profit Margin - 3 Yr. Avg. -21.9%
Effective Tax Rate 15.6%
Eff/ Tax Rate - 3 Yr. Avg. 9.4%
Payout Ratio -5%

NBR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NBR stock intrinsic value calculation we used $3048 million for the last fiscal year's total revenue generated by Nabors Industries Ltd.. The default revenue input number comes from 0001 income statement of Nabors Industries Ltd.. 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 NBR stock valuation model: a) initial revenue growth rate of 9.5% 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 8.5%, whose default value for NBR is calculated based on our internal credit rating of Nabors Industries Ltd., 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 Nabors Industries Ltd..
    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 NBR stock the variable cost ratio is equal to 83.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $785 million in the base year in the intrinsic value calculation for NBR 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% for Nabors Industries Ltd..

Corporate tax rate of 27% is the nominal tax rate for Nabors Industries Ltd.. 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 NBR 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 NBR are equal to 192.8%.

Life of production assets of 6.9 years is the average useful life of capital assets used in Nabors Industries Ltd. 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 NBR is equal to 9.2%. 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 - $2700.85 million for Nabors Industries Ltd. - 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 359.756 million for Nabors Industries Ltd. 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 Nabors Industries Ltd. at the current share price and the inputted number of shares is $0.7 billion.

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