Intrinsic value of Pampa Energia ADR - PAM

Previous Close

$66.60

  Intrinsic Value

$1,560

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

-176%

Previous close

$66.60

 
Intrinsic value

$1,560

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

-176%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PAM 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 2016), $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 4.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  337.34
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  2,003
  3,205
  4,951
  7,405
  10,744
  15,158
  20,839
  27,972
  36,729
  47,262
  59,695
  74,128
  90,629
  109,238
  129,972
  152,824
  177,771
  204,777
  233,799
  264,790
  297,702
  332,494
  369,128
  407,577
  447,824
  489,862
  533,697
  579,347
  626,843
  676,229
  727,558
Variable operating expenses, $m
 
  1,570
  2,422
  3,619
  5,247
  7,401
  10,172
  13,651
  17,923
  23,061
  29,126
  36,160
  44,209
  53,287
  63,401
  74,548
  86,717
  99,891
  114,048
  129,166
  145,221
  162,192
  180,062
  198,818
  218,451
  238,957
  260,340
  282,608
  305,777
  329,868
  354,906
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
  1,861
  1,570
  2,422
  3,619
  5,247
  7,401
  10,172
  13,651
  17,923
  23,061
  29,126
  36,160
  44,209
  53,287
  63,401
  74,548
  86,717
  99,891
  114,048
  129,166
  145,221
  162,192
  180,062
  198,818
  218,451
  238,957
  260,340
  282,608
  305,777
  329,868
  354,906
Operating income, $m
  142
  1,635
  2,530
  3,786
  5,497
  7,758
  10,667
  14,321
  18,806
  24,201
  30,569
  37,968
  46,420
  55,951
  66,571
  78,276
  91,053
  104,886
  119,751
  135,624
  152,482
  170,302
  189,066
  208,759
  229,373
  250,905
  273,357
  296,739
  321,066
  346,361
  372,652
EBITDA, $m
  335
  1,944
  3,004
  4,492
  6,518
  9,195
  12,642
  16,969
  22,281
  28,670
  36,213
  44,968
  54,978
  66,267
  78,845
  92,707
  107,841
  124,224
  141,829
  160,629
  180,595
  201,700
  223,923
  247,248
  271,663
  297,164
  323,756
  351,448
  380,261
  410,219
  441,357
Interest expense (income), $m
  97
  116
  323
  624
  1,046
  1,622
  2,382
  3,361
  4,590
  6,099
  7,914
  10,056
  12,543
  15,386
  18,592
  22,164
  26,102
  30,400
  35,053
  40,054
  45,393
  51,064
  57,058
  63,370
  69,995
  76,930
  84,173
  91,725
  99,591
  107,774
  116,283
Earnings before tax, $m
  -86
  1,519
  2,207
  3,163
  4,450
  6,136
  8,285
  10,960
  14,216
  18,102
  22,656
  27,912
  33,877
  40,566
  47,979
  56,111
  64,952
  74,486
  84,698
  95,570
  107,088
  119,238
  132,007
  145,389
  159,378
  173,975
  189,184
  205,014
  221,475
  238,587
  256,369
Tax expense, $m
  -70
  410
  596
  854
  1,202
  1,657
  2,237
  2,959
  3,838
  4,887
  6,117
  7,536
  9,147
  10,953
  12,954
  15,150
  17,537
  20,111
  22,868
  25,804
  28,914
  32,194
  35,642
  39,255
  43,032
  46,973
  51,080
  55,354
  59,798
  64,418
  69,220
Net income, $m
  -1
  1,109
  1,611
  2,309
  3,249
  4,479
  6,048
  8,001
  10,378
  13,214
  16,539
  20,376
  24,730
  29,613
  35,025
  40,961
  47,415
  54,375
  61,829
  69,766
  78,175
  87,044
  96,365
  106,134
  116,346
  127,002
  138,105
  149,660
  161,677
  174,168
  187,149

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  360
  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
  4,946
  7,334
  11,330
  16,945
  24,586
  34,687
  47,687
  64,010
  84,049
  108,150
  136,603
  169,630
  207,389
  249,973
  297,419
  349,711
  406,798
  468,598
  535,009
  605,926
  681,241
  760,855
  844,687
  932,671
  1,024,769
  1,120,966
  1,221,274
  1,325,737
  1,434,424
  1,547,434
  1,664,893
Adjusted assets (=assets-cash), $m
  4,586
  7,334
  11,330
  16,945
  24,586
  34,687
  47,687
  64,010
  84,049
  108,150
  136,603
  169,630
  207,389
  249,973
  297,419
  349,711
  406,798
  468,598
  535,009
  605,926
  681,241
  760,855
  844,687
  932,671
  1,024,769
  1,120,966
  1,221,274
  1,325,737
  1,434,424
  1,547,434
  1,664,893
Revenue / Adjusted assets
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
Average production assets, $m
  1,836
  2,936
  4,535
  6,783
  9,842
  13,885
  19,089
  25,623
  33,644
  43,292
  54,681
  67,901
  83,016
  100,062
  119,054
  139,987
  162,838
  187,576
  214,160
  242,547
  272,695
  304,564
  338,121
  373,341
  410,207
  448,714
  488,866
  530,682
  574,189
  619,426
  666,443
Working capital, $m
  -442
  -189
  -292
  -437
  -634
  -894
  -1,230
  -1,650
  -2,167
  -2,788
  -3,522
  -4,374
  -5,347
  -6,445
  -7,668
  -9,017
  -10,488
  -12,082
  -13,794
  -15,623
  -17,564
  -19,617
  -21,779
  -24,047
  -26,422
  -28,902
  -31,488
  -34,181
  -36,984
  -39,897
  -42,926
Total debt, $m
  1,662
  3,627
  7,009
  11,758
  18,223
  26,768
  37,766
  51,575
  68,528
  88,918
  112,989
  140,930
  172,874
  208,900
  249,039
  293,279
  341,574
  393,857
  450,041
  510,036
  573,753
  641,107
  712,028
  786,463
  864,377
  945,760
  1,030,621
  1,118,997
  1,210,946
  1,306,552
  1,405,923
Total liabilities, $m
  4,238
  6,204
  9,586
  14,335
  20,800
  29,345
  40,343
  54,152
  71,105
  91,495
  115,566
  143,507
  175,451
  211,477
  251,616
  295,856
  344,151
  396,434
  452,618
  512,613
  576,330
  643,684
  714,605
  789,040
  866,954
  948,337
  1,033,198
  1,121,574
  1,213,523
  1,309,129
  1,408,500
Total equity, $m
  707
  1,129
  1,745
  2,609
  3,786
  5,342
  7,344
  9,858
  12,944
  16,655
  21,037
  26,123
  31,938
  38,496
  45,802
  53,856
  62,647
  72,164
  82,391
  93,313
  104,911
  117,172
  130,082
  143,631
  157,814
  172,629
  188,076
  204,164
  220,901
  238,305
  256,394
Total liabilities and equity, $m
  4,945
  7,333
  11,331
  16,944
  24,586
  34,687
  47,687
  64,010
  84,049
  108,150
  136,603
  169,630
  207,389
  249,973
  297,418
  349,712
  406,798
  468,598
  535,009
  605,926
  681,241
  760,856
  844,687
  932,671
  1,024,768
  1,120,966
  1,221,274
  1,325,738
  1,434,424
  1,547,434
  1,664,894
Debt-to-equity ratio
  2.351
  3.210
  4.020
  4.510
  4.810
  5.010
  5.140
  5.230
  5.290
  5.340
  5.370
  5.390
  5.410
  5.430
  5.440
  5.450
  5.450
  5.460
  5.460
  5.470
  5.470
  5.470
  5.470
  5.480
  5.480
  5.480
  5.480
  5.480
  5.480
  5.480
  5.480
Adjusted equity ratio
  0.087
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  1,109
  1,611
  2,309
  3,249
  4,479
  6,048
  8,001
  10,378
  13,214
  16,539
  20,376
  24,730
  29,613
  35,025
  40,961
  47,415
  54,375
  61,829
  69,766
  78,175
  87,044
  96,365
  106,134
  116,346
  127,002
  138,105
  149,660
  161,677
  174,168
  187,149
Depreciation, amort., depletion, $m
  193
  309
  474
  706
  1,021
  1,438
  1,974
  2,648
  3,475
  4,469
  5,644
  7,000
  8,558
  10,316
  12,274
  14,432
  16,787
  19,338
  22,078
  25,005
  28,113
  31,398
  34,858
  38,489
  42,289
  46,259
  50,399
  54,709
  59,195
  63,858
  68,706
Funds from operations, $m
  484
  1,418
  2,085
  3,014
  4,270
  5,917
  8,022
  10,648
  13,853
  17,684
  22,182
  27,376
  33,288
  39,929
  47,298
  55,393
  64,202
  73,712
  83,908
  94,771
  106,287
  118,442
  131,223
  144,622
  158,635
  173,261
  188,503
  204,369
  220,872
  238,027
  255,855
Change in working capital, $m
  101
  -71
  -103
  -145
  -197
  -260
  -335
  -421
  -517
  -621
  -734
  -852
  -974
  -1,098
  -1,223
  -1,348
  -1,472
  -1,593
  -1,712
  -1,828
  -1,942
  -2,053
  -2,161
  -2,269
  -2,375
  -2,480
  -2,586
  -2,693
  -2,802
  -2,914
  -3,028
Cash from operations, $m
  383
  1,489
  2,188
  3,159
  4,467
  6,177
  8,357
  11,069
  14,369
  18,305
  22,916
  28,228
  34,262
  41,026
  48,522
  56,741
  65,674
  75,306
  85,620
  96,600
  108,229
  120,495
  133,384
  146,891
  161,010
  175,741
  191,089
  207,063
  223,674
  240,940
  258,883
Maintenance CAPEX, $m
  0
  -189
  -303
  -468
  -699
  -1,015
  -1,431
  -1,968
  -2,642
  -3,468
  -4,463
  -5,637
  -7,000
  -8,558
  -10,316
  -12,274
  -14,432
  -16,787
  -19,338
  -22,078
  -25,005
  -28,113
  -31,398
  -34,858
  -38,489
  -42,289
  -46,259
  -50,399
  -54,709
  -59,195
  -63,858
New CAPEX, $m
  -460
  -1,100
  -1,600
  -2,247
  -3,059
  -4,043
  -5,204
  -6,534
  -8,021
  -9,648
  -11,389
  -13,220
  -15,115
  -17,046
  -18,992
  -20,932
  -22,851
  -24,738
  -26,584
  -28,387
  -30,148
  -31,869
  -33,557
  -35,220
  -36,866
  -38,507
  -40,153
  -41,816
  -43,507
  -45,237
  -47,018
Cash from investing activities, $m
  -719
  -1,289
  -1,903
  -2,715
  -3,758
  -5,058
  -6,635
  -8,502
  -10,663
  -13,116
  -15,852
  -18,857
  -22,115
  -25,604
  -29,308
  -33,206
  -37,283
  -41,525
  -45,922
  -50,465
  -55,153
  -59,982
  -64,955
  -70,078
  -75,355
  -80,796
  -86,412
  -92,215
  -98,216
  -104,432
  -110,876
Free cash flow, $m
  -336
  200
  286
  444
  709
  1,119
  1,722
  2,568
  3,706
  5,189
  7,063
  9,370
  12,147
  15,422
  19,214
  23,535
  28,391
  33,781
  39,698
  46,134
  53,077
  60,513
  68,429
  76,814
  85,655
  94,945
  104,677
  114,849
  125,458
  136,509
  148,007
Issuance/(repayment) of debt, $m
  682
  2,325
  3,381
  4,750
  6,464
  8,546
  10,998
  13,809
  16,953
  20,390
  24,071
  27,941
  31,944
  36,026
  40,139
  44,240
  48,296
  52,282
  56,184
  59,995
  63,716
  67,354
  70,921
  74,435
  77,915
  81,382
  84,861
  88,376
  91,949
  95,606
  99,370
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
  0
Cash from financing (excl. dividends), $m  
  378
  2,325
  3,381
  4,750
  6,464
  8,546
  10,998
  13,809
  16,953
  20,390
  24,071
  27,941
  31,944
  36,026
  40,139
  44,240
  48,296
  52,282
  56,184
  59,995
  63,716
  67,354
  70,921
  74,435
  77,915
  81,382
  84,861
  88,376
  91,949
  95,606
  99,370
Total cash flow (excl. dividends), $m
  63
  2,525
  3,667
  5,194
  7,173
  9,665
  12,720
  16,377
  20,659
  25,579
  31,134
  37,311
  44,091
  51,448
  59,353
  67,775
  76,686
  86,063
  95,882
  106,129
  116,793
  127,867
  139,350
  151,249
  163,570
  176,328
  189,539
  203,224
  217,407
  232,115
  247,377
Retained Cash Flow (-), $m
  -260
  -422
  -616
  -865
  -1,177
  -1,556
  -2,002
  -2,514
  -3,086
  -3,712
  -4,382
  -5,086
  -5,815
  -6,558
  -7,307
  -8,053
  -8,791
  -9,517
  -10,227
  -10,921
  -11,598
  -12,261
  -12,910
  -13,550
  -14,183
  -14,814
  -15,448
  -16,087
  -16,738
  -17,404
  -18,089
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
 
  2,103
  3,051
  4,329
  5,996
  8,109
  10,718
  13,863
  17,573
  21,867
  26,753
  32,224
  38,276
  44,890
  52,046
  59,722
  67,895
  76,546
  85,655
  95,208
  105,194
  115,606
  126,440
  137,699
  149,387
  161,513
  174,091
  187,137
  200,669
  214,712
  229,289
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  1,941
  2,582
  3,329
  4,154
  5,015
  5,858
  6,626
  7,262
  7,721
  7,968
  7,987
  7,783
  7,374
  6,797
  6,095
  5,318
  4,514
  3,727
  2,992
  2,334
  1,769
  1,301
  928
  642
  429
  278
  174
  105
  61
  34
Current shareholders' claim on cash, %
  100
  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
  100.0

Pampa Energia S.A. is an integrated electricity company. The Company, through its subsidiaries, is engaged in the generation, transmission and distribution of electricity in Argentina. Its segments include generation, transmission, distribution, oil and gas, and holding and others. Its generation segment includes a direct and indirect equity interest in Central Piedra Buena S.A., Central Termica Guemes S.A., Central Termica Loma de la Lata S.A. and Pampa Comercializadora S.A, among others, and investments in companies in the electricity generation sector. Its transmission segment includes an indirect equity interest through Compania Inversora en Transmision Electrica Citelec S.A. Its distribution segment includes an indirect equity interest in Electricidad Argentina S.A. and Empresa Distribuidora y Comercializadora Norte S.A. Its Oil and gas segment includes a direct interest in Petrolera Pampa S.A. Its holding and others segment includes financial investment operations, among others.

FINANCIAL RATIOS  of  Pampa Energia ADR (PAM)

Valuation Ratios
P/E Ratio -112944.3
Price to Sales 56.4
Price to Book 159.8
Price to Tangible Book
Price to Cash Flow 294.9
Price to Free Cash Flow -1466.8
Growth Rates
Sales Growth Rate 337.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 49.8%
Cap. Spend. - 3 Yr. Gr. Rate 43%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 138.3%
Total Debt to Equity 235.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 12.8%
Return On Equity -0.2%
Return On Equity - 3 Yr. Avg. 30.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 37.1%
Gross Margin - 3 Yr. Avg. 14.8%
EBITDA Margin 10.2%
EBITDA Margin - 3 Yr. Avg. 39.7%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 24%
Pre-Tax Margin -4.3%
Pre-Tax Margin - 3 Yr. Avg. 22.6%
Net Profit Margin -0%
Net Profit Margin - 3 Yr. Avg. 18.3%
Effective Tax Rate 81.4%
Eff/ Tax Rate - 3 Yr. Avg. 36.6%
Payout Ratio -500%

PAM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PAM stock intrinsic value calculation we used $2003 million for the last fiscal year's total revenue generated by Pampa Energia ADR. The default revenue input number comes from 2016 income statement of Pampa Energia ADR. 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 PAM stock valuation model: a) initial revenue growth rate of 60% 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 8.3%, whose default value for PAM is calculated based on our internal credit rating of Pampa Energia ADR, 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 Pampa Energia ADR.
    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 PAM stock the variable cost ratio is equal to 49.1%.

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 PAM 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 8.9% for Pampa Energia ADR.

Corporate tax rate of 27% is the nominal tax rate for Pampa Energia ADR. 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 PAM 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 PAM are equal to 91.6%.

Life of production assets of 9.7 years is the average useful life of capital assets used in Pampa Energia ADR 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 PAM is equal to -5.9%. 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 - $707 million for Pampa Energia ADR - 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 72.51 million for Pampa Energia ADR 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 Pampa Energia ADR at the current share price and the inputted number of shares is $4.8 billion.

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COMPANY NEWS

▶ [$$] Argentina Makes Progress on Economic Reforms   [Sep-15-17 11:35PM  Barrons.com]
▶ Pampa reports 2Q loss   [Aug-11-17 07:33PM  Associated Press]
▶ ETFs with exposure to Pampa Energía SA : July 31, 2017   [Jul-31-17 05:02PM  Capital Cube]
▶ ETFs with exposure to Pampa Energía SA : July 11, 2017   [Jul-11-17 02:54PM  Capital Cube]
▶ Oil Down, Everything Else Up on the Day   [May-25-17 06:50PM  Zacks]
▶ Pampa posts 1Q profit   [May-12-17 05:01AM  Associated Press]
▶ Top Ranked Momentum Stocks to Buy for May 3rd   [May-03-17 11:00AM  Zacks]
▶ ETFs with exposure to Pampa Energía SA : April 13, 2017   [Apr-13-17 12:37PM  Capital Cube]
▶ New Strong Buy Stocks for April 12th   [Apr-12-17 10:09AM  Zacks]
▶ Pampa Energias Mindlin Says Vaca Muerta Will Boom   [Apr-07-17 12:34PM  Bloomberg]
▶ Pampa posts 4Q profit   [Mar-14-17 05:16PM  Associated Press]
▶ Pampas Mindlin: Current Bond Sale is Testing Market   [Jan-10-17 02:45PM  Bloomberg]
▶ LATAM CLOSE-No LatAm deals in first week of 2017   [Jan-06-17 01:40PM  Reuters]
▶ Hedge Funds Are Dumping Norbord Inc. (OSB)   [Dec-12-16 08:18AM  Insider Monkey]
▶ Hedge Funds Are Dumping Norbord Inc. (OSB)   [08:18AM  at Insider Monkey]
▶ Hedge Funds Are Betting On Rowan Companies PLC (RDC)   [Dec-05-16 02:28PM  at Insider Monkey]
▶ Hedge Funds Are Gaining Confidence in Cavium Inc (CAVM)   [Nov-27-16 06:15PM  at Insider Monkey]
▶ Argentinas Pampa to Spend More on Tight Sands Gas   [Sep-20-16 11:18AM  at Bloomberg]
▶ LATAM CLOSE-No deals price in LatAm primary market   [Aug-01-16 05:05PM  Reuters]
▶ PAMPA ENERGY INC. Financials   [May-06-16 01:04PM  EDGAR Online Financials]
▶ Petrobras Jumps: More Oil Asset Sales, Says Blog Leak   [May-04-16 12:17PM  at Barrons.com]
▶ Pampa Energia debt shelf sparks M&A talk   [Jan-26-16 12:28PM  Reuters]
Financial statements of PAM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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