Intrinsic value of NCS Multistage Holdings - NCSM

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$6.91

  Intrinsic Value

$6.79

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  Rating & Target

hold

-2%

Previous close

$6.91

 
Intrinsic value

$6.79

 
Up/down potential

-2%

 
Rating

hold

We calculate the intrinsic value of NCSM 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, %
  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
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
Revenue, $m
  237
  276
  319
  364
  413
  464
  519
  576
  636
  699
  765
  834
  906
  980
  1,058
  1,138
  1,222
  1,309
  1,399
  1,493
  1,591
  1,693
  1,799
  1,909
  2,024
  2,143
  2,268
  2,398
  2,534
  2,676
Variable operating expenses, $m
  166
  188
  212
  237
  265
  294
  324
  357
  391
  426
  432
  470
  511
  553
  596
  642
  689
  738
  789
  842
  897
  955
  1,014
  1,076
  1,141
  1,208
  1,279
  1,352
  1,429
  1,509
Fixed operating expenses, $m
  47
  48
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  70
  71
  73
  74
  76
  78
  79
  81
  83
  85
  86
  88
Total operating expenses, $m
  213
  236
  261
  287
  316
  346
  378
  412
  447
  483
  490
  530
  572
  615
  660
  707
  756
  806
  859
  913
  970
  1,029
  1,090
  1,154
  1,220
  1,289
  1,362
  1,437
  1,515
  1,597
Operating income, $m
  24
  40
  58
  76
  97
  118
  141
  164
  189
  216
  275
  304
  334
  365
  398
  431
  466
  503
  541
  580
  621
  664
  709
  755
  803
  854
  906
  961
  1,019
  1,079
EBITDA, $m
  74
  92
  113
  135
  158
  183
  210
  238
  267
  298
  331
  364
  399
  436
  474
  513
  554
  597
  642
  688
  736
  786
  838
  892
  949
  1,008
  1,070
  1,134
  1,201
  1,271
Interest expense (income), $m
  5
  2
  3
  5
  6
  8
  10
  12
  14
  16
  18
  21
  23
  26
  28
  31
  34
  37
  40
  43
  47
  50
  54
  58
  61
  66
  70
  74
  79
  84
  89
Earnings before tax, $m
  22
  37
  53
  70
  89
  108
  129
  151
  174
  198
  255
  281
  308
  337
  367
  397
  430
  463
  498
  534
  571
  610
  651
  693
  738
  784
  832
  882
  935
  990
Tax expense, $m
  6
  10
  14
  19
  24
  29
  35
  41
  47
  53
  69
  76
  83
  91
  99
  107
  116
  125
  134
  144
  154
  165
  176
  187
  199
  212
  225
  238
  252
  267
Net income, $m
  16
  27
  39
  51
  65
  79
  94
  110
  127
  144
  186
  205
  225
  246
  268
  290
  314
  338
  363
  390
  417
  446
  475
  506
  539
  572
  607
  644
  682
  723

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
  536
  624
  719
  822
  931
  1,048
  1,171
  1,300
  1,436
  1,579
  1,728
  1,883
  2,045
  2,213
  2,388
  2,570
  2,759
  2,955
  3,159
  3,371
  3,592
  3,821
  4,060
  4,309
  4,568
  4,838
  5,120
  5,413
  5,720
  6,040
Adjusted assets (=assets-cash), $m
  536
  624
  719
  822
  931
  1,048
  1,171
  1,300
  1,436
  1,579
  1,728
  1,883
  2,045
  2,213
  2,388
  2,570
  2,759
  2,955
  3,159
  3,371
  3,592
  3,821
  4,060
  4,309
  4,568
  4,838
  5,120
  5,413
  5,720
  6,040
Revenue / Adjusted assets
  0.442
  0.442
  0.444
  0.443
  0.444
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
Average production assets, $m
  185
  215
  248
  283
  321
  361
  403
  448
  495
  544
  595
  649
  705
  763
  823
  886
  951
  1,018
  1,089
  1,162
  1,238
  1,317
  1,399
  1,485
  1,574
  1,667
  1,764
  1,866
  1,971
  2,082
Working capital, $m
  68
  79
  91
  104
  118
  132
  148
  164
  181
  199
  218
  238
  258
  279
  301
  324
  348
  373
  399
  426
  453
  482
  513
  544
  577
  611
  646
  683
  722
  763
Total debt, $m
  45
  64
  86
  109
  133
  159
  186
  215
  246
  277
  311
  345
  381
  419
  458
  498
  540
  584
  630
  677
  726
  777
  831
  886
  944
  1,004
  1,067
  1,132
  1,201
  1,272
Total liabilities, $m
  119
  139
  160
  183
  208
  234
  261
  290
  320
  352
  385
  420
  456
  493
  532
  573
  615
  659
  704
  752
  801
  852
  905
  961
  1,019
  1,079
  1,142
  1,207
  1,276
  1,347
Total equity, $m
  416
  485
  559
  638
  724
  814
  910
  1,010
  1,116
  1,227
  1,342
  1,463
  1,589
  1,719
  1,855
  1,997
  2,143
  2,296
  2,455
  2,619
  2,791
  2,969
  3,155
  3,348
  3,549
  3,759
  3,978
  4,206
  4,444
  4,693
Total liabilities and equity, $m
  535
  624
  719
  821
  932
  1,048
  1,171
  1,300
  1,436
  1,579
  1,727
  1,883
  2,045
  2,212
  2,387
  2,570
  2,758
  2,955
  3,159
  3,371
  3,592
  3,821
  4,060
  4,309
  4,568
  4,838
  5,120
  5,413
  5,720
  6,040
Debt-to-equity ratio
  0.110
  0.130
  0.150
  0.170
  0.180
  0.200
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
Adjusted equity ratio
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  27
  39
  51
  65
  79
  94
  110
  127
  144
  186
  205
  225
  246
  268
  290
  314
  338
  363
  390
  417
  446
  475
  506
  539
  572
  607
  644
  682
  723
Depreciation, amort., depletion, $m
  49
  52
  55
  58
  62
  66
  69
  74
  78
  82
  55
  60
  65
  71
  76
  82
  88
  94
  101
  108
  115
  122
  130
  138
  146
  154
  163
  173
  183
  193
Funds from operations, $m
  66
  79
  94
  110
  126
  144
  163
  184
  205
  227
  241
  265
  290
  317
  344
  372
  402
  432
  464
  497
  532
  567
  605
  644
  684
  727
  771
  817
  865
  915
Change in working capital, $m
  10
  11
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
Cash from operations, $m
  55
  68
  82
  97
  113
  130
  148
  167
  187
  209
  222
  246
  270
  295
  322
  349
  378
  407
  438
  470
  504
  539
  575
  612
  652
  693
  735
  780
  826
  875
Maintenance CAPEX, $m
  -15
  -17
  -20
  -23
  -26
  -30
  -33
  -37
  -41
  -46
  -50
  -55
  -60
  -65
  -71
  -76
  -82
  -88
  -94
  -101
  -108
  -115
  -122
  -130
  -138
  -146
  -154
  -163
  -173
  -183
New CAPEX, $m
  -28
  -30
  -33
  -35
  -38
  -40
  -42
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -101
  -106
  -110
Cash from investing activities, $m
  -43
  -47
  -53
  -58
  -64
  -70
  -75
  -82
  -88
  -95
  -101
  -109
  -116
  -123
  -131
  -139
  -147
  -156
  -164
  -174
  -184
  -194
  -204
  -216
  -227
  -239
  -251
  -264
  -279
  -293
Free cash flow, $m
  13
  21
  29
  38
  49
  60
  72
  85
  99
  114
  121
  137
  154
  172
  191
  210
  231
  252
  274
  296
  320
  345
  370
  397
  425
  454
  484
  515
  548
  582
Issuance/(repayment) of debt, $m
  18
  20
  21
  23
  24
  26
  27
  29
  30
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  66
  68
  71
Issuance/(repurchase) of shares, $m
  45
  41
  35
  28
  21
  12
  2
  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  
  63
  61
  56
  51
  45
  38
  29
  29
  30
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  66
  68
  71
Total cash flow (excl. dividends), $m
  76
  81
  86
  90
  94
  97
  101
  114
  129
  146
  154
  172
  190
  210
  230
  251
  273
  295
  319
  344
  369
  396
  424
  453
  483
  514
  547
  581
  616
  653
Retained Cash Flow (-), $m
  -62
  -68
  -74
  -80
  -85
  -90
  -96
  -101
  -106
  -111
  -116
  -121
  -126
  -131
  -136
  -141
  -147
  -153
  -159
  -165
  -171
  -178
  -186
  -193
  -201
  -210
  -219
  -228
  -238
  -249
Prev. year cash balance distribution, $m
  2
  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
  17
  13
  11
  10
  8
  7
  6
  13
  24
  35
  38
  51
  65
  79
  94
  110
  126
  143
  161
  179
  198
  218
  238
  259
  281
  304
  328
  352
  378
  405
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
  16
  12
  10
  8
  7
  5
  4
  8
  14
  18
  18
  22
  25
  26
  28
  28
  27
  26
  25
  23
  20
  18
  16
  13
  11
  9
  7
  5
  4
  3
Current shareholders' claim on cash, %
  87.2
  78.3
  72.2
  68.2
  65.8
  64.6
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5
  64.5

NCS Multistage Holdings, Inc. is a provider of engineered products and support services for oil and natural gas well completions and field development strategies. The Company’s products and services include Multistage Unlimited, casing-installed sliding sleeves, downhole frac isolation assembly, AirLock casing buoyancy system and liner hanger systems. The Company provides products and services primarily to exploration and production (E&P) companies for use in onshore wells, predominantly wells that have been drilled with horizontal laterals in unconventional oil and natural gas formations. The Company’s products and services are utilized in oil and natural gas basins throughout North America and in selected international markets, including Argentina, China and Russia.

FINANCIAL RATIOS  of  NCS Multistage Holdings (NCSM)

Valuation Ratios
P/E Ratio -16.7
Price to Sales 3.1
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 27.3
Price to Free Cash Flow 30.1
Growth Rates
Sales Growth Rate -14%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 18
Current Ratio 0.1
LT Debt to Equity 49.7%
Total Debt to Equity 50.3%
Interest Coverage -4
Management Effectiveness
Return On Assets -4.4%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital -6.7%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity -9.9%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 45.9%
Gross Margin - 3 Yr. Avg. 32.6%
EBITDA Margin 4.1%
EBITDA Margin - 3 Yr. Avg. 15.4%
Operating Margin -18.4%
Oper. Margin - 3 Yr. Avg. -7.9%
Pre-Tax Margin -27.6%
Pre-Tax Margin - 3 Yr. Avg. -5.7%
Net Profit Margin -18.4%
Net Profit Margin - 3 Yr. Avg. 2.1%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. -33.3%
Payout Ratio 0%

NCSM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCSM stock intrinsic value calculation we used $201.634 million for the last fiscal year's total revenue generated by NCS Multistage Holdings. The default revenue input number comes from 0001 income statement of NCS Multistage Holdings. 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 NCSM stock valuation model: a) initial revenue growth rate of 17.7% 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 NCSM is calculated based on our internal credit rating of NCS Multistage Holdings, 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 NCS Multistage Holdings.
    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 NCSM stock the variable cost ratio is equal to 72.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $46 million in the base year in the intrinsic value calculation for NCSM 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 7.4% for NCS Multistage Holdings.

Corporate tax rate of 27% is the nominal tax rate for NCS Multistage Holdings. 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 NCSM 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 NCSM are equal to 77.8%.

Life of production assets of 10.8 years is the average useful life of capital assets used in NCS Multistage Holdings 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 NCSM is equal to 28.5%. 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 - $356.847 million for NCS Multistage Holdings - 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 44.909 million for NCS Multistage Holdings 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 NCS Multistage Holdings at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ NCS Multistage Holdings, Inc. to Host Earnings Call   [Aug-08-18 06:30AM  ACCESSWIRE]
▶ Year in Review: Houston had most IPOs of any Texas city in 2017   [Dec-29-17 09:21AM  American City Business Journals]

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