Intrinsic value of Petrobras Argentina ADR - PZE

Previous Close

$12.74

  Intrinsic Value

$269.60

stock screener

  Rating & Target

str. buy

+999%

Previous close

$12.74

 
Intrinsic value

$269.60

 
Up/down potential

+999%

 
Rating

str. buy

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

We calculate the intrinsic value of PZE 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 2015), $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 2.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2015(a)
   2016
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.88
  40.60
  37.04
  33.84
  30.95
  28.36
  26.02
  23.92
  22.03
  20.32
  18.79
  17.41
  16.17
  15.05
  14.05
  13.14
  12.33
  11.60
  10.94
  10.34
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
Revenue, $m
  1,405
  1,975
  2,707
  3,623
  4,745
  6,090
  7,675
  9,510
  11,605
  13,964
  16,588
  19,477
  22,626
  26,033
  29,690
  33,592
  37,734
  42,110
  46,716
  51,548
  56,604
  61,884
  67,389
  73,121
  79,084
  85,284
  91,728
  98,424
  105,383
  112,616
  120,135
Variable operating expenses, $m
 
  885
  1,213
  1,623
  2,126
  2,728
  3,438
  4,261
  5,199
  6,256
  7,432
  8,726
  10,137
  11,663
  13,301
  15,049
  16,905
  18,865
  20,929
  23,093
  25,359
  27,724
  30,190
  32,758
  35,430
  38,207
  41,094
  44,094
  47,212
  50,452
  53,820
Fixed operating expenses, $m
 
  685
  702
  719
  737
  756
  775
  794
  814
  834
  855
  876
  898
  921
  944
  967
  992
  1,016
  1,042
  1,068
  1,095
  1,122
  1,150
  1,179
  1,208
  1,238
  1,269
  1,301
  1,334
  1,367
  1,401
Total operating expenses, $m
  1,282
  1,570
  1,915
  2,342
  2,863
  3,484
  4,213
  5,055
  6,013
  7,090
  8,287
  9,602
  11,035
  12,584
  14,245
  16,016
  17,897
  19,881
  21,971
  24,161
  26,454
  28,846
  31,340
  33,937
  36,638
  39,445
  42,363
  45,395
  48,546
  51,819
  55,221
Operating income, $m
  123
  406
  793
  1,281
  1,882
  2,606
  3,462
  4,456
  5,592
  6,874
  8,302
  9,875
  11,591
  13,449
  15,445
  17,576
  19,838
  22,228
  24,745
  27,387
  30,151
  33,038
  36,049
  39,184
  42,446
  45,839
  49,365
  53,029
  56,838
  60,797
  64,913
EBITDA, $m
  291
  638
  1,110
  1,706
  2,439
  3,321
  4,363
  5,572
  6,955
  8,513
  10,249
  12,161
  14,248
  16,505
  18,931
  21,519
  24,268
  27,172
  30,230
  33,438
  36,796
  40,303
  43,960
  47,769
  51,731
  55,851
  60,133
  64,584
  69,210
  74,018
  79,017
Interest expense (income), $m
  13
  15
  41
  74
  115
  165
  225
  296
  378
  472
  577
  695
  824
  965
  1,117
  1,281
  1,455
  1,641
  1,837
  2,043
  2,259
  2,485
  2,721
  2,968
  3,224
  3,491
  3,768
  4,057
  4,356
  4,668
  4,991
Earnings before tax, $m
  119
  390
  752
  1,207
  1,767
  2,441
  3,237
  4,160
  5,214
  6,402
  7,724
  9,180
  10,767
  12,484
  14,328
  16,295
  18,382
  20,588
  22,909
  25,344
  27,892
  30,553
  33,328
  36,217
  39,222
  42,348
  45,596
  48,973
  52,482
  56,129
  59,922
Tax expense, $m
  62
  105
  203
  326
  477
  659
  874
  1,123
  1,408
  1,729
  2,086
  2,479
  2,907
  3,371
  3,869
  4,400
  4,963
  5,559
  6,185
  6,843
  7,531
  8,249
  8,998
  9,778
  10,590
  11,434
  12,311
  13,223
  14,170
  15,155
  16,179
Net income, $m
  55
  285
  549
  881
  1,290
  1,782
  2,363
  3,037
  3,806
  4,674
  5,639
  6,701
  7,860
  9,114
  10,459
  11,895
  13,419
  15,029
  16,723
  18,501
  20,361
  22,304
  24,329
  26,438
  28,632
  30,914
  33,285
  35,750
  38,312
  40,974
  43,743

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  145
  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
  1,862
  2,415
  3,309
  4,429
  5,800
  7,445
  9,382
  11,626
  14,187
  17,071
  20,279
  23,810
  27,661
  31,825
  36,296
  41,067
  46,130
  51,480
  57,110
  63,017
  69,198
  75,653
  82,383
  89,390
  96,680
  104,260
  112,137
  120,323
  128,830
  137,672
  146,864
Adjusted assets (=assets-cash), $m
  1,717
  2,415
  3,309
  4,429
  5,800
  7,445
  9,382
  11,626
  14,187
  17,071
  20,279
  23,810
  27,661
  31,825
  36,296
  41,067
  46,130
  51,480
  57,110
  63,017
  69,198
  75,653
  82,383
  89,390
  96,680
  104,260
  112,137
  120,323
  128,830
  137,672
  146,864
Revenue / Adjusted assets
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
Average production assets, $m
  825
  1,160
  1,589
  2,127
  2,785
  3,575
  4,505
  5,583
  6,812
  8,197
  9,737
  11,433
  13,282
  15,281
  17,428
  19,719
  22,150
  24,719
  27,422
  30,259
  33,227
  36,326
  39,557
  42,922
  46,423
  50,062
  53,844
  57,775
  61,860
  66,105
  70,519
Working capital, $m
  236
  134
  184
  246
  323
  414
  522
  647
  789
  950
  1,128
  1,324
  1,539
  1,770
  2,019
  2,284
  2,566
  2,863
  3,177
  3,505
  3,849
  4,208
  4,582
  4,972
  5,378
  5,799
  6,238
  6,693
  7,166
  7,658
  8,169
Total debt, $m
  254
  669
  1,206
  1,878
  2,700
  3,687
  4,849
  6,196
  7,732
  9,463
  11,387
  13,506
  15,816
  18,315
  20,997
  23,860
  26,898
  30,108
  33,486
  37,030
  40,739
  44,612
  48,650
  52,854
  57,228
  61,776
  66,502
  71,414
  76,518
  81,823
  87,339
Total liabilities, $m
  1,034
  1,449
  1,986
  2,658
  3,480
  4,467
  5,629
  6,976
  8,512
  10,243
  12,167
  14,286
  16,596
  19,095
  21,777
  24,640
  27,678
  30,888
  34,266
  37,810
  41,519
  45,392
  49,430
  53,634
  58,008
  62,556
  67,282
  72,194
  77,298
  82,603
  88,119
Total equity, $m
  828
  966
  1,324
  1,772
  2,320
  2,978
  3,753
  4,651
  5,675
  6,828
  8,112
  9,524
  11,064
  12,730
  14,518
  16,427
  18,452
  20,592
  22,844
  25,207
  27,679
  30,261
  32,953
  35,756
  38,672
  41,704
  44,855
  48,129
  51,532
  55,069
  58,746
Total liabilities and equity, $m
  1,862
  2,415
  3,310
  4,430
  5,800
  7,445
  9,382
  11,627
  14,187
  17,071
  20,279
  23,810
  27,660
  31,825
  36,295
  41,067
  46,130
  51,480
  57,110
  63,017
  69,198
  75,653
  82,383
  89,390
  96,680
  104,260
  112,137
  120,323
  128,830
  137,672
  146,865
Debt-to-equity ratio
  0.307
  0.690
  0.910
  1.060
  1.160
  1.240
  1.290
  1.330
  1.360
  1.390
  1.400
  1.420
  1.430
  1.440
  1.450
  1.450
  1.460
  1.460
  1.470
  1.470
  1.470
  1.470
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.490
  1.490
Adjusted equity ratio
  0.398
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  285
  549
  881
  1,290
  1,782
  2,363
  3,037
  3,806
  4,674
  5,639
  6,701
  7,860
  9,114
  10,459
  11,895
  13,419
  15,029
  16,723
  18,501
  20,361
  22,304
  24,329
  26,438
  28,632
  30,914
  33,285
  35,750
  38,312
  40,974
  43,743
Depreciation, amort., depletion, $m
  168
  232
  318
  425
  557
  715
  901
  1,117
  1,362
  1,639
  1,947
  2,287
  2,656
  3,056
  3,486
  3,944
  4,430
  4,944
  5,484
  6,052
  6,645
  7,265
  7,911
  8,584
  9,285
  10,012
  10,769
  11,555
  12,372
  13,221
  14,104
Funds from operations, $m
  148
  517
  867
  1,306
  1,847
  2,497
  3,264
  4,153
  5,169
  6,313
  7,586
  8,988
  10,517
  12,170
  13,945
  15,839
  17,849
  19,973
  22,208
  24,553
  27,007
  29,569
  32,241
  35,022
  37,917
  40,926
  44,054
  47,305
  50,684
  54,195
  57,847
Change in working capital, $m
  -123
  39
  50
  62
  76
  91
  108
  125
  142
  160
  178
  196
  214
  232
  249
  265
  282
  298
  313
  329
  344
  359
  374
  390
  405
  422
  438
  455
  473
  492
  511
Cash from operations, $m
  271
  478
  817
  1,244
  1,771
  2,406
  3,156
  4,028
  5,026
  6,153
  7,408
  8,792
  10,302
  11,938
  13,696
  15,574
  17,567
  19,675
  21,895
  24,224
  26,663
  29,210
  31,866
  34,633
  37,511
  40,505
  43,616
  46,850
  50,210
  53,704
  57,336
Maintenance CAPEX, $m
  0
  -165
  -232
  -318
  -425
  -557
  -715
  -901
  -1,117
  -1,362
  -1,639
  -1,947
  -2,287
  -2,656
  -3,056
  -3,486
  -3,944
  -4,430
  -4,944
  -5,484
  -6,052
  -6,645
  -7,265
  -7,911
  -8,584
  -9,285
  -10,012
  -10,769
  -11,555
  -12,372
  -13,221
New CAPEX, $m
  -350
  -335
  -430
  -538
  -658
  -790
  -930
  -1,078
  -1,230
  -1,385
  -1,540
  -1,696
  -1,849
  -1,999
  -2,147
  -2,291
  -2,431
  -2,569
  -2,704
  -2,836
  -2,968
  -3,099
  -3,231
  -3,365
  -3,500
  -3,639
  -3,783
  -3,931
  -4,085
  -4,246
  -4,414
Cash from investing activities, $m
  -296
  -500
  -662
  -856
  -1,083
  -1,347
  -1,645
  -1,979
  -2,347
  -2,747
  -3,179
  -3,643
  -4,136
  -4,655
  -5,203
  -5,777
  -6,375
  -6,999
  -7,648
  -8,320
  -9,020
  -9,744
  -10,496
  -11,276
  -12,084
  -12,924
  -13,795
  -14,700
  -15,640
  -16,618
  -17,635
Free cash flow, $m
  -25
  -22
  155
  389
  687
  1,059
  1,511
  2,050
  2,680
  3,406
  4,228
  5,149
  6,167
  7,282
  8,493
  9,797
  11,192
  12,676
  14,247
  15,903
  17,643
  19,465
  21,370
  23,357
  25,426
  27,581
  29,821
  32,150
  34,571
  37,086
  39,701
Issuance/(repayment) of debt, $m
  -4
  419
  537
  672
  823
  987
  1,162
  1,347
  1,537
  1,730
  1,925
  2,119
  2,310
  2,498
  2,683
  2,862
  3,038
  3,210
  3,378
  3,544
  3,709
  3,873
  4,038
  4,204
  4,374
  4,548
  4,727
  4,912
  5,104
  5,305
  5,515
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  
  -5
  419
  537
  672
  823
  987
  1,162
  1,347
  1,537
  1,730
  1,925
  2,119
  2,310
  2,498
  2,683
  2,862
  3,038
  3,210
  3,378
  3,544
  3,709
  3,873
  4,038
  4,204
  4,374
  4,548
  4,727
  4,912
  5,104
  5,305
  5,515
Total cash flow (excl. dividends), $m
  7
  397
  692
  1,061
  1,510
  2,046
  2,673
  3,396
  4,217
  5,136
  6,153
  7,267
  8,477
  9,781
  11,176
  12,660
  14,230
  15,886
  17,626
  19,448
  21,352
  23,338
  25,407
  27,561
  29,800
  32,128
  34,548
  37,062
  39,675
  42,391
  45,216
Retained Cash Flow (-), $m
  -87
  -279
  -358
  -448
  -548
  -658
  -775
  -898
  -1,024
  -1,153
  -1,283
  -1,412
  -1,540
  -1,666
  -1,788
  -1,908
  -2,025
  -2,140
  -2,252
  -2,363
  -2,473
  -2,582
  -2,692
  -2,803
  -2,916
  -3,032
  -3,151
  -3,274
  -3,403
  -3,537
  -3,677
Prev. year cash balance distribution, $m
 
  141
  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
 
  259
  334
  613
  961
  1,388
  1,898
  2,499
  3,192
  3,982
  4,870
  5,855
  6,937
  8,115
  9,387
  10,751
  12,205
  13,746
  15,373
  17,085
  18,879
  20,756
  22,716
  24,758
  26,884
  29,097
  31,397
  33,787
  36,272
  38,855
  41,539
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
 
  249
  306
  533
  792
  1,076
  1,378
  1,688
  1,995
  2,288
  2,553
  2,780
  2,960
  3,086
  3,151
  3,156
  3,102
  2,991
  2,831
  2,631
  2,399
  2,147
  1,885
  1,623
  1,369
  1,132
  916
  725
  561
  424
  313
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

Petrobras Argentina SA, formerly Petrobras Energia SA, is an Argentina-based company primarily engaged in the petroleum refining sector. The Company’s activities are structured in four business segments: Oil and Gas Exploration and Production, including the acquisition, exploration, exploitation and maintenance of oil and gas reserves; Refining and Distribution, processing and marketing of petroleum products; Petrochemicals, comprising the production of styrene, polystyrene, bi-oriented polystyrene (BOPS) and synthetic rubber; as well as Gas and Energy, providing gas distribution, as well as fossil fuel and hydroelectric power energy generation. Its petroleum products include lubricants, diesel fuel, compressed natural gas (CNG) and asphalts, among others. The Company has operations established in Argentina, Bolivia, Ecuador, Venezuela, Mexico and Spain, among others. The Company is owned by Petrobras Participaciones SL. It operates throught Albares Renovables Argentina SA.

FINANCIAL RATIOS  of  Petrobras Argentina ADR (PZE)

Valuation Ratios
P/E Ratio 467.7
Price to Sales 18.3
Price to Book 31.1
Price to Tangible Book
Price to Cash Flow 94.9
Price to Free Cash Flow -325.6
Growth Rates
Sales Growth Rate 5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.7%
Cap. Spend. - 3 Yr. Gr. Rate 12.8%
Financial Strength
Quick Ratio 36
Current Ratio 0.1
LT Debt to Equity 30.2%
Total Debt to Equity 30.7%
Interest Coverage 10
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 5.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.9%
Return On Equity 7%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 29.2%
Gross Margin - 3 Yr. Avg. 28.6%
EBITDA Margin 21.4%
EBITDA Margin - 3 Yr. Avg. 22%
Operating Margin 8.8%
Oper. Margin - 3 Yr. Avg. 7.9%
Pre-Tax Margin 8.5%
Pre-Tax Margin - 3 Yr. Avg. 8%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 52.1%
Eff/ Tax Rate - 3 Yr. Avg. 49%
Payout Ratio 18.2%

PZE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PZE stock intrinsic value calculation we used $1405 million for the last fiscal year's total revenue generated by Petrobras Argentina ADR. The default revenue input number comes from 2015 income statement of Petrobras Argentina 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 PZE stock valuation model: a) initial revenue growth rate of 40.6% 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 PZE is calculated based on our internal credit rating of Petrobras Argentina 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 Petrobras Argentina 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 PZE stock the variable cost ratio is equal to 44.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $668 million in the base year in the intrinsic value calculation for PZE 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 6.1% for Petrobras Argentina ADR.

Corporate tax rate of 27% is the nominal tax rate for Petrobras Argentina 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 PZE 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 PZE are equal to 58.7%.

Life of production assets of 4.9 years is the average useful life of capital assets used in Petrobras Argentina 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 PZE is equal to 6.8%. 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 - $828 million for Petrobras Argentina 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 199.225 million for Petrobras Argentina 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 Petrobras Argentina ADR at the current share price and the inputted number of shares is $2.5 billion.

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COMPANY NEWS

▶ Statoil Sees RS Rating Rise To 73   [Aug-30-17 03:00AM  Investor's Business Daily]
▶ Dodge & Cox's Global Stock Fund 4th Quarter Commentary   [Jan-17-17 03:36PM  GuruFocus.com]
▶ Is Petrobras Argentina SA ADR (PZE) A Good Stock To Buy?   [Dec-12-16 07:58AM  Insider Monkey]
▶ OPEC Deal Likely, But Will Oil React?   [Nov-23-16 02:01PM  at Barrons.com]
▶ Goldman On OPEC & Oil Risk In 2017   [Nov-18-16 05:04PM  at Barrons.com]
▶ Petrobras CEO on future of company   [Nov-15-16 04:44PM  CNBC Videos]
▶ Rio Olympics Likely a Magnet for Cybercriminals   [May-06-16 11:26AM  at The Wall Street Journal]
▶ PETROBRAS ARGENTINA S.A. Financials   [01:04PM  EDGAR Online Financials]
▶ Petrobras Jumps: More Oil Asset Sales, Says Blog Leak   [May-04-16 12:17PM  at Barrons.com]
▶ [$$] Petrobras Sells Stakes in Argentina and Chile Units   [11:42AM  at The Wall Street Journal]
▶ [$$] Petrobras Sells Stakes in Argentine and Chilean Units   [May-03-16 09:07PM  at The Wall Street Journal]
▶ YPF & Petrobras Argentina: Oil Trickles As Gas Output Rises   [Mar-28-16 01:04PM  at Barrons.com]
▶ Argentina: Credit Upgraded As Obama Visits, Bond Sale Nears   [Mar-23-16 01:39PM  at Barrons.com]
▶ Petrobras Upgrade: Forget Oil & Debt Fundamentals?   [Mar-22-16 02:34PM  at Barrons.com]
▶ Brazil's Lula to take government role: Report   [Mar-15-16 11:39AM  at CNBC]
▶ Brazil's Petrobras To Sell Argentina Oil & Gas Assets   [Mar-02-16 10:06AM  at Barrons.com]
▶ Petrobras In Brazil & Argentina Downgraded By Moody's   [Feb-24-16 06:38PM  at Barrons.com]
▶ Why Would Iran Agree To Saudi-Russian Oil Limits?   [Feb-17-16 05:36PM  at Barrons.com]
▶ Argentina: Will Oil, Gas Fracking Bring YPF 50% Upside?   [Jan-26-16 04:25PM  at Barrons.com]
▶ Why Petrobras Argentina & YPF Zig When Oil Prices Zag   [Jan-12-16 12:21PM  at Barrons.com]
▶ Oil At New Lows: Asia Currencies & U.S. Equities Correlated   [Jan-06-16 03:30PM  at Barrons.com]
▶ The Geopolitical Battle Behind Oil Price Drop   [Dec-07  04:01PM  at Barrons.com]
▶ Is Synergy Resources Corp (SYRG) A Good Stock To Buy?   [Nov-24  01:16PM  at Insider Monkey]
▶ In Argentina Election Euphoria, YPF & Oil Stocks Tumble   [Nov-23  04:01PM  at Barrons.com]
▶ YPF Stock Closes Higher on CFO's Comments   [Oct-07  04:03PM  at TheStreet]
▶ Argentina Upgraded: Election May Bring Holdout Bond Deal   [Sep-29  03:04PM  at Barrons.com]
▶ Petrobras 100-Year Bond Loss Smarts For Pimco, Fidelity   [Sep-14  01:03PM  at Barrons.com]
▶ 4 Integrated Oil and Gas Stocks to Buy   [Jul-29  08:29AM  at TheStreet]
▶ Neon Liberty Capital Managements Top 3 Stock Picks For Q3   [Jul-28  08:57AM  at Insider Monkey]
▶ Argentina Local Bonds: Small Signs of Success?   [Jul-01  01:32PM  at Barrons.com]
▶ Stocks could rally this week   [May-11  05:58AM  at CNBC]
▶ Stocks could rally next week   [May-08  06:18PM  at CNBC]
▶ Cramer Remix: This is what I think of Netflix   [Apr-13  07:16PM  at CNBC]
▶ Shell rolls the dice on BG takeover   [Apr-09  10:32AM  at Fortune]
Financial statements of PZE
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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