Intrinsic value of Pure Cycle Corporation - PCYO

Previous Close

$10.35

  Intrinsic Value

$0.73

stock screener

  Rating & Target

str. sell

-93%

Previous close

$10.35

 
Intrinsic value

$0.73

 
Up/down potential

-93%

 
Rating

str. sell

We calculate the intrinsic value of PCYO 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 0.2

 

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, %
  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
  11
  17
  26
  38
  53
  73
  98
  128
  165
  209
  259
  317
  382
  454
  534
  621
  716
  817
  925
  1,040
  1,162
  1,290
  1,424
  1,565
  1,712
  1,865
  2,025
  2,191
  2,363
  2,543
Variable operating expenses, $m
  8
  12
  18
  27
  38
  52
  70
  92
  118
  149
  185
  226
  273
  324
  381
  444
  511
  583
  661
  743
  830
  921
  1,017
  1,117
  1,222
  1,332
  1,446
  1,564
  1,687
  1,815
Fixed operating expenses, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Total operating expenses, $m
  10
  14
  20
  29
  40
  54
  72
  94
  120
  151
  188
  229
  276
  327
  384
  447
  514
  586
  664
  746
  833
  924
  1,020
  1,120
  1,225
  1,336
  1,450
  1,568
  1,691
  1,819
Operating income, $m
  1
  3
  5
  9
  13
  19
  26
  34
  45
  57
  72
  88
  107
  127
  150
  175
  202
  231
  262
  294
  329
  366
  404
  444
  486
  530
  575
  623
  672
  723
EBITDA, $m
  3
  6
  10
  16
  23
  33
  45
  59
  77
  98
  122
  150
  181
  216
  255
  296
  342
  391
  443
  498
  557
  618
  683
  751
  821
  895
  972
  1,052
  1,135
  1,221
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  15
  18
  20
  22
  25
  27
  30
  33
  36
  39
  42
  45
Earnings before tax, $m
  1
  3
  5
  8
  12
  18
  24
  33
  42
  54
  68
  83
  101
  120
  141
  165
  190
  217
  246
  277
  309
  344
  380
  417
  456
  497
  540
  584
  630
  678
Tax expense, $m
  0
  1
  1
  2
  3
  5
  7
  9
  11
  15
  18
  22
  27
  32
  38
  44
  51
  59
  66
  75
  84
  93
  102
  113
  123
  134
  146
  158
  170
  183
Net income, $m
  1
  2
  4
  6
  9
  13
  18
  24
  31
  40
  49
  61
  73
  88
  103
  120
  139
  159
  180
  202
  226
  251
  277
  305
  333
  363
  394
  427
  460
  495

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
  86
  133
  199
  289
  407
  560
  752
  987
  1,271
  1,605
  1,993
  2,436
  2,937
  3,494
  4,108
  4,779
  5,505
  6,285
  7,118
  8,003
  8,938
  9,923
  10,957
  12,039
  13,169
  14,347
  15,574
  16,851
  18,179
  19,559
Adjusted assets (=assets-cash), $m
  86
  133
  199
  289
  407
  560
  752
  987
  1,271
  1,605
  1,993
  2,436
  2,937
  3,494
  4,108
  4,779
  5,505
  6,285
  7,118
  8,003
  8,938
  9,923
  10,957
  12,039
  13,169
  14,347
  15,574
  16,851
  18,179
  19,559
Revenue / Adjusted assets
  0.128
  0.128
  0.131
  0.131
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
Average production assets, $m
  66
  102
  152
  220
  311
  428
  574
  754
  970
  1,225
  1,521
  1,860
  2,242
  2,667
  3,136
  3,648
  4,202
  4,798
  5,434
  6,109
  6,823
  7,575
  8,364
  9,190
  10,053
  10,952
  11,889
  12,864
  13,877
  14,930
Working capital, $m
  6
  9
  13
  19
  26
  36
  49
  64
  83
  104
  130
  158
  191
  227
  267
  311
  358
  409
  463
  520
  581
  645
  712
  783
  856
  933
  1,012
  1,095
  1,182
  1,271
Total debt, $m
  2
  4
  7
  11
  16
  23
  32
  43
  56
  71
  89
  110
  133
  158
  187
  217
  251
  287
  325
  366
  409
  454
  502
  551
  603
  658
  714
  773
  834
  897
Total liabilities, $m
  4
  6
  9
  13
  19
  26
  35
  45
  58
  74
  92
  112
  135
  161
  189
  220
  253
  289
  327
  368
  411
  456
  504
  554
  606
  660
  716
  775
  836
  900
Total equity, $m
  82
  127
  190
  276
  389
  534
  717
  942
  1,212
  1,531
  1,901
  2,324
  2,802
  3,333
  3,919
  4,559
  5,252
  5,996
  6,791
  7,635
  8,527
  9,467
  10,453
  11,485
  12,563
  13,687
  14,858
  16,076
  17,343
  18,659
Total liabilities and equity, $m
  86
  133
  199
  289
  408
  560
  752
  987
  1,270
  1,605
  1,993
  2,436
  2,937
  3,494
  4,108
  4,779
  5,505
  6,285
  7,118
  8,003
  8,938
  9,923
  10,957
  12,039
  13,169
  14,347
  15,574
  16,851
  18,179
  19,559
Debt-to-equity ratio
  0.020
  0.030
  0.040
  0.040
  0.040
  0.040
  0.040
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
Adjusted equity ratio
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  2
  4
  6
  9
  13
  18
  24
  31
  40
  49
  61
  73
  88
  103
  120
  139
  159
  180
  202
  226
  251
  277
  305
  333
  363
  394
  427
  460
  495
Depreciation, amort., depletion, $m
  2
  3
  5
  7
  10
  14
  19
  25
  32
  41
  51
  62
  75
  89
  105
  122
  140
  160
  181
  204
  227
  252
  279
  306
  335
  365
  396
  429
  463
  498
Funds from operations, $m
  3
  5
  9
  13
  19
  27
  37
  49
  63
  80
  100
  123
  148
  177
  208
  242
  279
  318
  361
  406
  453
  503
  556
  611
  668
  728
  790
  855
  923
  993
Change in working capital, $m
  2
  3
  4
  6
  8
  10
  12
  15
  18
  22
  25
  29
  33
  36
  40
  44
  47
  51
  54
  58
  61
  64
  67
  70
  73
  77
  80
  83
  86
  90
Cash from operations, $m
  1
  2
  4
  7
  12
  17
  24
  34
  45
  59
  75
  94
  116
  140
  168
  198
  232
  268
  307
  348
  393
  439
  489
  541
  595
  652
  711
  772
  836
  903
Maintenance CAPEX, $m
  -1
  -2
  -3
  -5
  -7
  -10
  -14
  -19
  -25
  -32
  -41
  -51
  -62
  -75
  -89
  -105
  -122
  -140
  -160
  -181
  -204
  -227
  -252
  -279
  -306
  -335
  -365
  -396
  -429
  -463
New CAPEX, $m
  -25
  -36
  -50
  -69
  -91
  -117
  -146
  -180
  -216
  -255
  -296
  -339
  -382
  -425
  -469
  -512
  -554
  -596
  -636
  -675
  -714
  -752
  -789
  -826
  -863
  -900
  -937
  -975
  -1,013
  -1,053
Cash from investing activities, $m
  -26
  -38
  -53
  -74
  -98
  -127
  -160
  -199
  -241
  -287
  -337
  -390
  -444
  -500
  -558
  -617
  -676
  -736
  -796
  -856
  -918
  -979
  -1,041
  -1,105
  -1,169
  -1,235
  -1,302
  -1,371
  -1,442
  -1,516
Free cash flow, $m
  -25
  -36
  -49
  -66
  -86
  -110
  -136
  -165
  -196
  -229
  -262
  -295
  -328
  -360
  -390
  -418
  -444
  -468
  -489
  -508
  -525
  -540
  -553
  -564
  -574
  -583
  -591
  -599
  -606
  -613
Issuance/(repayment) of debt, $m
  2
  2
  3
  4
  5
  7
  9
  11
  13
  15
  18
  20
  23
  26
  28
  31
  33
  36
  38
  41
  43
  45
  48
  50
  52
  54
  56
  59
  61
  63
Issuance/(repurchase) of shares, $m
  30
  43
  59
  80
  104
  133
  165
  201
  239
  279
  321
  362
  404
  444
  483
  520
  554
  586
  615
  642
  666
  689
  709
  728
  745
  761
  777
  792
  806
  821
Cash from financing (excl. dividends), $m  
  32
  45
  62
  84
  109
  140
  174
  212
  252
  294
  339
  382
  427
  470
  511
  551
  587
  622
  653
  683
  709
  734
  757
  778
  797
  815
  833
  851
  867
  884
Total cash flow (excl. dividends), $m
  7
  9
  13
  18
  23
  30
  38
  46
  56
  66
  76
  87
  99
  110
  121
  132
  143
  154
  164
  174
  184
  194
  204
  213
  223
  232
  242
  252
  262
  272
Retained Cash Flow (-), $m
  -31
  -45
  -63
  -86
  -113
  -146
  -183
  -225
  -270
  -319
  -370
  -423
  -477
  -532
  -586
  -640
  -693
  -744
  -795
  -844
  -892
  -940
  -986
  -1,032
  -1,078
  -1,124
  -1,171
  -1,218
  -1,267
  -1,316
Prev. year cash balance distribution, $m
  18
  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
  -6
  -36
  -50
  -68
  -90
  -116
  -145
  -178
  -214
  -253
  -294
  -336
  -379
  -422
  -465
  -508
  -550
  -591
  -631
  -670
  -708
  -745
  -782
  -819
  -855
  -892
  -929
  -966
  -1,005
  -1,044
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
  -6
  -33
  -43
  -56
  -70
  -84
  -98
  -111
  -123
  -133
  -139
  -143
  -144
  -142
  -137
  -129
  -120
  -109
  -97
  -85
  -73
  -62
  -51
  -42
  -33
  -26
  -20
  -15
  -11
  -8
Current shareholders' claim on cash, %
  85.8
  74.8
  66.1
  59.1
  53.4
  48.7
  44.8
  41.5
  38.8
  36.4
  34.4
  32.6
  31.1
  29.8
  28.6
  27.6
  26.7
  25.8
  25.1
  24.5
  23.9
  23.3
  22.9
  22.4
  22.0
  21.6
  21.3
  21.0
  20.7
  20.4

Pure Cycle Corporation is an integrated water company that provides wholesale water and wastewater services. The Company provides its services to wholesale customers, which include industrial customers and local governmental entities that provide water and wastewater services to their end-use customers located in the Denver, Colorado metropolitan area. The Company is engaged in selling water service to customers, using water rights owned or controlled by the Company and developing infrastructure to divert, treat and distribute that water and collect, treat and reuse wastewater. The Company owns a portfolio of water rights located in the Denver, Colorado metropolitan area, Southeastern Colorado in the Arkansas River, and the Western Slope of Colorado in the Colorado River. The Company's Denver area assets include Rangeview Water, the Lowry Range Property, Sky Ranch and Arapahoe County Fairgrounds.

FINANCIAL RATIOS  of  Pure Cycle Corporation (PCYO)

Valuation Ratios
P/E Ratio -122.9
Price to Sales 245.8
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow -245.8
Price to Free Cash Flow -27.3
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 300%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. -9.9%
Return On Total Capital -2.9%
Ret/ On T. Cap. - 3 Yr. Avg. -10.7%
Return On Equity -2.9%
Return On Equity - 3 Yr. Avg. -11%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -100%
EBITDA Margin - 3 Yr. Avg. -66.7%
Operating Margin -200%
Oper. Margin - 3 Yr. Avg. -133.3%
Pre-Tax Margin -200%
Pre-Tax Margin - 3 Yr. Avg. -100%
Net Profit Margin -200%
Net Profit Margin - 3 Yr. Avg. -833.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PCYO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCYO stock intrinsic value calculation we used $7 million for the last fiscal year's total revenue generated by Pure Cycle Corporation. The default revenue input number comes from 0001 income statement of Pure Cycle Corporation. 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 PCYO 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 4.3%, whose default value for PCYO is calculated based on our internal credit rating of Pure Cycle Corporation, 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 Pure Cycle Corporation.
    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 PCYO stock the variable cost ratio is equal to 71.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2 million in the base year in the intrinsic value calculation for PCYO 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 Pure Cycle Corporation.

Corporate tax rate of 27% is the nominal tax rate for Pure Cycle Corporation. 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 PCYO 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 PCYO are equal to 587.2%.

Life of production assets of 45.5 years is the average useful life of capital assets used in Pure Cycle Corporation 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 PCYO is equal to 50%. 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 - $69.453219 million for Pure Cycle Corporation - 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 23.797 million for Pure Cycle Corporation 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 Pure Cycle Corporation at the current share price and the inputted number of shares is $0.2 billion.

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