Intrinsic value of Vertex Energy, Inc - VTNR

Previous Close

$1.43

  Intrinsic Value

$0.09

stock screener

  Rating & Target

str. sell

-94%

Previous close

$1.43

 
Intrinsic value

$0.09

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of VTNR 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 0.1

 

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
  185
  189
  194
  199
  205
  212
  219
  227
  235
  244
  254
  264
  275
  287
  299
  312
  326
  341
  356
  373
  390
  408
  428
  448
  469
  492
  515
  540
  566
  594
Variable operating expenses, $m
  144
  147
  151
  155
  160
  165
  170
  176
  183
  190
  196
  204
  212
  221
  231
  241
  252
  263
  275
  288
  301
  315
  330
  346
  362
  379
  398
  417
  437
  458
Fixed operating expenses, $m
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
  71
  72
  74
  75
  77
  79
Total operating expenses, $m
  186
  190
  195
  200
  206
  212
  218
  225
  233
  241
  248
  257
  266
  277
  288
  299
  311
  324
  337
  351
  366
  381
  398
  415
  433
  451
  472
  492
  514
  537
Operating income, $m
  -1
  -1
  -1
  -1
  0
  0
  1
  2
  3
  3
  6
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  36
  40
  44
  48
  52
  57
EBITDA, $m
  7
  7
  7
  8
  8
  9
  10
  11
  12
  13
  15
  16
  18
  20
  22
  24
  26
  29
  32
  35
  38
  41
  45
  48
  53
  57
  61
  66
  72
  77
Interest expense (income), $m
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
Earnings before tax, $m
  -4
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -3
  -3
  -1
  0
  1
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
Net income, $m
  -4
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -3
  -3
  -1
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24

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
  88
  90
  93
  95
  98
  102
  105
  109
  114
  118
  123
  128
  133
  139
  145
  152
  159
  166
  173
  181
  190
  199
  208
  218
  229
  240
  251
  263
  276
Adjusted assets (=assets-cash), $m
  86
  88
  90
  93
  95
  98
  102
  105
  109
  114
  118
  123
  128
  133
  139
  145
  152
  159
  166
  173
  181
  190
  199
  208
  218
  229
  240
  251
  263
  276
Revenue / Adjusted assets
  2.151
  2.148
  2.156
  2.140
  2.158
  2.163
  2.147
  2.162
  2.156
  2.140
  2.153
  2.146
  2.148
  2.158
  2.151
  2.152
  2.145
  2.145
  2.145
  2.156
  2.155
  2.147
  2.151
  2.154
  2.151
  2.148
  2.146
  2.151
  2.152
  2.152
Average production assets, $m
  56
  57
  59
  60
  62
  64
  66
  69
  71
  74
  77
  80
  83
  87
  90
  94
  99
  103
  108
  113
  118
  123
  129
  135
  142
  148
  156
  163
  171
  179
Working capital, $m
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Total debt, $m
  21
  22
  24
  26
  28
  30
  32
  34
  37
  40
  43
  46
  50
  53
  57
  61
  66
  70
  75
  80
  86
  91
  97
  104
  110
  117
  125
  133
  141
  149
Total liabilities, $m
  58
  59
  61
  63
  64
  66
  69
  71
  74
  77
  80
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  141
  147
  154
  162
  169
  178
  186
Total equity, $m
  28
  29
  29
  30
  31
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
Total liabilities and equity, $m
  86
  88
  90
  93
  95
  98
  102
  105
  110
  114
  118
  123
  128
  133
  139
  145
  151
  159
  166
  173
  181
  190
  199
  209
  218
  228
  240
  251
  264
  276
Debt-to-equity ratio
  0.760
  0.790
  0.820
  0.850
  0.890
  0.930
  0.960
  1.000
  1.040
  1.080
  1.120
  1.150
  1.190
  1.230
  1.260
  1.300
  1.330
  1.360
  1.390
  1.420
  1.450
  1.480
  1.510
  1.530
  1.560
  1.580
  1.600
  1.630
  1.650
  1.670
Adjusted equity ratio
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -3
  -3
  -1
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
Depreciation, amort., depletion, $m
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
Funds from operations, $m
  3
  3
  3
  4
  4
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  20
  21
  23
  26
  28
  30
  33
  35
  38
  42
  45
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  3
  3
  3
  3
  4
  4
  5
  5
  6
  7
  8
  9
  9
  11
  12
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
Maintenance CAPEX, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
New CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
Cash from investing activities, $m
  -7
  -7
  -7
  -9
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -24
  -26
  -27
  -27
Free cash flow, $m
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
Issuance/(repayment) of debt, $m
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
Issuance/(repurchase) of shares, $m
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  6
  6
  7
  7
  7
  7
  7
  7
  7
  7
  5
  5
  4
  5
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
Total cash flow (excl. dividends), $m
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  1
  2
  2
  2
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
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
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -2
  -2
  -1
  -1
  0
  0
  0
  0
  1
  2
  2
  3
  4
  5
  7
  8
  9
  11
  12
  14
  16
  18
  20
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  92.2
  84.7
  77.8
  71.6
  66.0
  61.1
  56.8
  53.2
  50.1
  47.6
  46.3
  45.4
  44.8
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5

Vertex Energy, Inc. is an environmental services company that recycles industrial waste streams and off-specification commercial chemical products. The Company focuses on recycling used motor oil and other petroleum by-products. The Company's segments include the Black Oil, Refining and Marketing, and Recovery divisions. The Company's product categories include Used Motor Oil, Fuel Oil, pyrolysis gasoline (Pygas), Gasoline Blendstock and Base Oil. The Black Oil division is engaged in operations across the used motor oil recycling value chain, including collection, aggregation, transportation, storage, refinement and sales of aggregated feedstock and re-refined products to end users. The Refining and Marketing division is engaged in the aggregation of feedstock, re-refining it into end products, and selling these products to customers. The Recovery division is a provider of generator solutions for the recovery and management of hydrocarbon streams.

FINANCIAL RATIOS  of  Vertex Energy, Inc (VTNR)

Valuation Ratios
P/E Ratio -11.9
Price to Sales 0.5
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -3.4
Price to Free Cash Flow -3
Growth Rates
Sales Growth Rate -33.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 1.7%
Total Debt to Equity 24.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -2.2%
Ret/ On Assets - 3 Yr. Avg. -6.9%
Return On Total Capital -5.3%
Ret/ On T. Cap. - 3 Yr. Avg. -13%
Return On Equity -7.2%
Return On Equity - 3 Yr. Avg. -20.3%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 16.3%
Gross Margin - 3 Yr. Avg. 9.5%
EBITDA Margin 4.1%
EBITDA Margin - 3 Yr. Avg. 0.1%
Operating Margin -10.2%
Oper. Margin - 3 Yr. Avg. -8.1%
Pre-Tax Margin -4.1%
Pre-Tax Margin - 3 Yr. Avg. -6%
Net Profit Margin -4.1%
Net Profit Margin - 3 Yr. Avg. -7.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -11.8%
Payout Ratio 0%

VTNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VTNR stock intrinsic value calculation we used $181 million for the last fiscal year's total revenue generated by Vertex Energy, Inc. The default revenue input number comes from 0001 income statement of Vertex Energy, Inc. 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 VTNR 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 5.8%, whose default value for VTNR is calculated based on our internal credit rating of Vertex Energy, Inc, 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 Vertex Energy, Inc.
    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 VTNR stock the variable cost ratio is equal to 77.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $41 million in the base year in the intrinsic value calculation for VTNR 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 16.5% for Vertex Energy, Inc.

Corporate tax rate of 27% is the nominal tax rate for Vertex Energy, Inc. 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 VTNR 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 VTNR are equal to 30.2%.

Life of production assets of 8.8 years is the average useful life of capital assets used in Vertex Energy, Inc 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 VTNR is equal to 4.9%. 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 - $27.370831 million for Vertex Energy, Inc - 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 40.174 million for Vertex Energy, Inc 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 Vertex Energy, Inc at the current share price and the inputted number of shares is $0.1 billion.

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