Intrinsic value of Natural Resource Partners LP - NRP

Previous Close

$34.15

  Intrinsic Value

$161.79

stock screener

  Rating & Target

str. buy

+374%

Previous close

$34.15

 
Intrinsic value

$161.79

 
Up/down potential

+374%

 
Rating

str. buy

We calculate the intrinsic value of NRP 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 0.4

 

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
  285
  291
  299
  307
  316
  327
  338
  350
  363
  377
  391
  407
  424
  442
  461
  482
  503
  526
  549
  575
  601
  629
  659
  690
  723
  758
  794
  832
  873
  915
Variable operating expenses, $m
  79
  79
  79
  79
  79
  79
  79
  79
  79
  79
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
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
  79
  79
  79
  79
  79
  79
  79
  79
  79
  79
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Operating income, $m
  206
  212
  220
  228
  237
  248
  259
  271
  284
  297
  391
  407
  424
  442
  461
  481
  502
  525
  549
  574
  601
  629
  658
  689
  722
  757
  793
  831
  872
  914
EBITDA, $m
  299
  306
  313
  322
  332
  343
  354
  367
  381
  395
  411
  428
  445
  464
  484
  506
  528
  552
  577
  603
  631
  661
  692
  725
  759
  796
  834
  874
  916
  961
Interest expense (income), $m
  84
  64
  66
  68
  70
  73
  76
  80
  83
  87
  92
  96
  101
  107
  112
  118
  125
  131
  138
  146
  154
  162
  171
  181
  190
  201
  212
  223
  235
  248
  262
Earnings before tax, $m
  142
  146
  152
  158
  164
  171
  179
  187
  196
  206
  295
  306
  317
  329
  343
  356
  371
  386
  403
  420
  438
  457
  478
  499
  521
  545
  570
  596
  624
  652
Tax expense, $m
  38
  40
  41
  43
  44
  46
  48
  51
  53
  56
  80
  83
  86
  89
  92
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  147
  154
  161
  168
  176
Net income, $m
  103
  107
  111
  115
  120
  125
  131
  137
  143
  150
  215
  223
  232
  241
  250
  260
  271
  282
  294
  307
  320
  334
  349
  364
  381
  398
  416
  435
  455
  476

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
  1,191
  1,218
  1,249
  1,285
  1,323
  1,366
  1,413
  1,463
  1,517
  1,576
  1,638
  1,704
  1,775
  1,850
  1,930
  2,015
  2,104
  2,199
  2,299
  2,405
  2,516
  2,634
  2,758
  2,888
  3,026
  3,170
  3,323
  3,483
  3,652
  3,829
Adjusted assets (=assets-cash), $m
  1,191
  1,218
  1,249
  1,285
  1,323
  1,366
  1,413
  1,463
  1,517
  1,576
  1,638
  1,704
  1,775
  1,850
  1,930
  2,015
  2,104
  2,199
  2,299
  2,405
  2,516
  2,634
  2,758
  2,888
  3,026
  3,170
  3,323
  3,483
  3,652
  3,829
Revenue / Adjusted assets
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
Average production assets, $m
  437
  447
  458
  471
  485
  501
  518
  536
  556
  578
  601
  625
  651
  678
  708
  739
  772
  806
  843
  882
  922
  966
  1,011
  1,059
  1,109
  1,162
  1,218
  1,277
  1,339
  1,404
Working capital, $m
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Total debt, $m
  691
  714
  740
  770
  802
  838
  877
  919
  965
  1,014
  1,066
  1,122
  1,181
  1,244
  1,311
  1,382
  1,457
  1,536
  1,620
  1,708
  1,802
  1,900
  2,004
  2,114
  2,229
  2,350
  2,478
  2,612
  2,754
  2,902
Total liabilities, $m
  998
  1,021
  1,047
  1,076
  1,109
  1,145
  1,184
  1,226
  1,272
  1,320
  1,373
  1,428
  1,488
  1,551
  1,618
  1,688
  1,763
  1,843
  1,927
  2,015
  2,109
  2,207
  2,311
  2,420
  2,536
  2,657
  2,785
  2,919
  3,060
  3,209
Total equity, $m
  193
  197
  202
  208
  214
  221
  229
  237
  246
  255
  265
  276
  288
  300
  313
  326
  341
  356
  372
  390
  408
  427
  447
  468
  490
  514
  538
  564
  592
  620
Total liabilities and equity, $m
  1,191
  1,218
  1,249
  1,284
  1,323
  1,366
  1,413
  1,463
  1,518
  1,575
  1,638
  1,704
  1,776
  1,851
  1,931
  2,014
  2,104
  2,199
  2,299
  2,405
  2,517
  2,634
  2,758
  2,888
  3,026
  3,171
  3,323
  3,483
  3,652
  3,829
Debt-to-equity ratio
  3.580
  3.620
  3.660
  3.700
  3.740
  3.790
  3.830
  3.880
  3.930
  3.970
  4.020
  4.060
  4.110
  4.150
  4.190
  4.230
  4.270
  4.310
  4.350
  4.390
  4.420
  4.450
  4.490
  4.520
  4.550
  4.580
  4.600
  4.630
  4.650
  4.680
Adjusted equity ratio
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  103
  107
  111
  115
  120
  125
  131
  137
  143
  150
  215
  223
  232
  241
  250
  260
  271
  282
  294
  307
  320
  334
  349
  364
  381
  398
  416
  435
  455
  476
Depreciation, amort., depletion, $m
  93
  93
  94
  94
  95
  95
  96
  96
  97
  98
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
Funds from operations, $m
  197
  200
  205
  209
  215
  220
  227
  233
  240
  248
  235
  244
  253
  263
  274
  285
  297
  309
  322
  336
  351
  366
  382
  400
  418
  437
  457
  478
  500
  523
Change in working capital, $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 from operations, $m
  197
  200
  205
  209
  215
  220
  226
  233
  240
  248
  235
  244
  253
  263
  273
  285
  296
  309
  322
  336
  350
  366
  382
  399
  417
  436
  456
  477
  499
  523
Maintenance CAPEX, $m
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
New CAPEX, $m
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
Cash from investing activities, $m
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -35
  -38
  -40
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -82
  -85
  -90
  -95
  -100
  -105
  -110
Free cash flow, $m
  174
  176
  178
  181
  185
  188
  193
  197
  202
  208
  193
  199
  206
  214
  222
  230
  239
  248
  258
  269
  280
  292
  304
  318
  332
  346
  362
  378
  395
  413
Issuance/(repayment) of debt, $m
  18
  23
  26
  29
  33
  36
  39
  42
  45
  49
  52
  56
  59
  63
  67
  71
  75
  79
  84
  89
  93
  99
  104
  109
  115
  121
  128
  134
  141
  149
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  18
  23
  26
  29
  33
  36
  39
  42
  45
  49
  52
  56
  59
  63
  67
  71
  75
  79
  84
  89
  93
  99
  104
  109
  115
  121
  128
  134
  141
  149
Total cash flow (excl. dividends), $m
  192
  199
  204
  211
  217
  224
  232
  240
  248
  257
  245
  255
  266
  277
  288
  301
  314
  328
  342
  357
  374
  390
  408
  427
  447
  467
  489
  512
  536
  562
Retained Cash Flow (-), $m
  -3
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
Prev. year cash balance distribution, $m
  57
  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
  246
  194
  199
  205
  211
  217
  224
  231
  239
  247
  235
  244
  254
  265
  276
  287
  299
  312
  326
  340
  356
  371
  388
  406
  424
  444
  465
  486
  509
  533
Discount rate, %
  6.20
  6.51
  6.84
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.04
  20.00
  21.00
  22.05
  23.15
  24.30
  25.52
PV of cash for distribution, $m
  232
  171
  164
  155
  147
  138
  128
  119
  109
  99
  82
  73
  64
  56
  49
  41
  35
  29
  23
  19
  15
  11
  8
  6
  4
  3
  2
  1
  1
  1
Current shareholders' claim on cash, %
  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
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Natural Resource Partners L.P. owns, operates, manages and leases a portfolio of mineral properties in the United States, including interests in coal, trona and soda ash, construction aggregates and other natural resources. Coal Royalty and Other segment consists primarily of coal royalty and coal related transportation and processing assets. As of December 31, 2016, Soda Ash segment included the Company's 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin, Wyoming. VantaCore's operating businesses include Laurel Aggregates, located in Lake Lynn, Pennsylvania; Winn Materials/McIntosh Construction, located in Clarksville, Tennessee; Grand Rivers, located in Grand Rivers, Kentucky, and Southern Aggregates, located near Baton Rouge, Louisiana.

FINANCIAL RATIOS  of  Natural Resource Partners LP (NRP)

Valuation Ratios
P/E Ratio 4.3
Price to Sales 1.1
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow 4.1
Growth Rates
Sales Growth Rate -14.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -90.2%
Cap. Spend. - 3 Yr. Gr. Rate -41.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 651.3%
Total Debt to Equity 743.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 11.6%
Ret/ On Assets - 3 Yr. Avg. -1.2%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. -6.4%
Return On Equity 85.1%
Return On Equity - 3 Yr. Avg. -14%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 60.6%
EBITDA Margin - 3 Yr. Avg. 38.8%
Operating Margin 50.1%
Oper. Margin - 3 Yr. Avg. 20.5%
Pre-Tax Margin 25.6%
Pre-Tax Margin - 3 Yr. Avg. -2.2%
Net Profit Margin 26.1%
Net Profit Margin - 3 Yr. Avg. -24.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 22.7%

NRP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NRP stock intrinsic value calculation we used $279 million for the last fiscal year's total revenue generated by Natural Resource Partners LP. The default revenue input number comes from 0001 income statement of Natural Resource Partners LP. 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 NRP 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 6.2%, whose default value for NRP is calculated based on our internal credit rating of Natural Resource Partners LP, 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 Natural Resource Partners LP.
    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 NRP stock the variable cost ratio is equal to 28.3%.

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 NRP 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 9.5% for Natural Resource Partners LP.

Corporate tax rate of 27% is the nominal tax rate for Natural Resource Partners LP. 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 NRP 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 NRP are equal to 153.4%.

Life of production assets of 38.3 years is the average useful life of capital assets used in Natural Resource Partners LP 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 NRP is equal to 1.1%. 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 - $247.051 million for Natural Resource Partners LP - 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 12.261 million for Natural Resource Partners LP 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 Natural Resource Partners LP at the current share price and the inputted number of shares is $0.4 billion.

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