Intrinsic value of AquaVenture Holdings - WAAS

Previous Close

$18.19

  Intrinsic Value

$3.67

stock screener

  Rating & Target

str. sell

-80%

Previous close

$18.19

 
Intrinsic value

$3.67

 
Up/down potential

-80%

 
Rating

str. sell

We calculate the intrinsic value of WAAS 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 0.5

 

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, %
  15.40
  14.36
  13.42
  12.58
  11.82
  11.14
  10.53
  9.97
  9.48
  9.03
  8.63
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
  5.92
  5.83
  5.75
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  140
  160
  181
  204
  228
  254
  280
  308
  338
  368
  400
  433
  467
  503
  540
  579
  619
  660
  704
  749
  796
  845
  896
  949
  1,004
  1,062
  1,122
  1,185
  1,250
  1,319
Variable operating expenses, $m
  143
  161
  179
  199
  220
  242
  265
  290
  315
  341
  347
  375
  405
  436
  468
  502
  537
  573
  610
  649
  690
  732
  776
  822
  870
  920
  973
  1,027
  1,084
  1,144
Fixed operating expenses, $m
  6
  6
  6
  7
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
Total operating expenses, $m
  149
  167
  185
  206
  227
  249
  272
  297
  322
  348
  355
  383
  413
  444
  476
  510
  546
  582
  619
  658
  699
  742
  786
  832
  880
  931
  984
  1,038
  1,095
  1,156
Operating income, $m
  -10
  -7
  -4
  -2
  2
  5
  8
  12
  15
  19
  46
  50
  54
  59
  64
  68
  74
  79
  85
  90
  96
  103
  109
  116
  123
  131
  138
  146
  155
  164
EBITDA, $m
  39
  45
  52
  59
  66
  74
  83
  92
  101
  110
  120
  131
  142
  153
  164
  177
  189
  202
  216
  230
  245
  260
  277
  293
  311
  329
  348
  368
  389
  410
Interest expense (income), $m
  11
  9
  11
  13
  15
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  80
  84
  89
  95
  100
  106
  112
Earnings before tax, $m
  -19
  -18
  -17
  -16
  -15
  -14
  -13
  -12
  -11
  -10
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
Net income, $m
  -19
  -18
  -17
  -16
  -15
  -14
  -13
  -12
  -11
  -10
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38

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
  520
  594
  674
  759
  849
  943
  1,043
  1,147
  1,255
  1,369
  1,487
  1,609
  1,737
  1,870
  2,008
  2,151
  2,300
  2,455
  2,616
  2,784
  2,958
  3,140
  3,329
  3,526
  3,732
  3,946
  4,170
  4,404
  4,648
  4,903
Adjusted assets (=assets-cash), $m
  520
  594
  674
  759
  849
  943
  1,043
  1,147
  1,255
  1,369
  1,487
  1,609
  1,737
  1,870
  2,008
  2,151
  2,300
  2,455
  2,616
  2,784
  2,958
  3,140
  3,329
  3,526
  3,732
  3,946
  4,170
  4,404
  4,648
  4,903
Revenue / Adjusted assets
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.268
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
Average production assets, $m
  251
  287
  325
  366
  410
  455
  503
  553
  606
  660
  717
  777
  838
  902
  969
  1,038
  1,110
  1,185
  1,263
  1,344
  1,428
  1,515
  1,607
  1,702
  1,801
  1,904
  2,012
  2,125
  2,243
  2,366
Working capital, $m
  18
  20
  23
  26
  29
  32
  36
  39
  43
  47
  51
  55
  60
  64
  69
  74
  79
  85
  90
  96
  102
  108
  115
  121
  128
  136
  144
  152
  160
  169
Total debt, $m
  205
  239
  275
  313
  354
  396
  441
  488
  537
  588
  641
  697
  754
  814
  877
  941
  1,008
  1,078
  1,151
  1,227
  1,305
  1,387
  1,472
  1,561
  1,654
  1,751
  1,852
  1,957
  2,067
  2,182
Total liabilities, $m
  234
  268
  304
  342
  383
  425
  470
  517
  566
  617
  670
  726
  783
  843
  906
  970
  1,037
  1,107
  1,180
  1,256
  1,334
  1,416
  1,501
  1,590
  1,683
  1,780
  1,881
  1,986
  2,096
  2,211
Total equity, $m
  285
  326
  370
  417
  466
  518
  572
  629
  689
  751
  816
  884
  954
  1,027
  1,102
  1,181
  1,263
  1,348
  1,436
  1,528
  1,624
  1,724
  1,828
  1,936
  2,049
  2,167
  2,289
  2,418
  2,552
  2,692
Total liabilities and equity, $m
  519
  594
  674
  759
  849
  943
  1,042
  1,146
  1,255
  1,368
  1,486
  1,610
  1,737
  1,870
  2,008
  2,151
  2,300
  2,455
  2,616
  2,784
  2,958
  3,140
  3,329
  3,526
  3,732
  3,947
  4,170
  4,404
  4,648
  4,903
Debt-to-equity ratio
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.770
  0.780
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
Adjusted equity ratio
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -19
  -18
  -17
  -16
  -15
  -14
  -13
  -12
  -11
  -10
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
Depreciation, amort., depletion, $m
  48
  52
  56
  60
  65
  70
  75
  80
  85
  91
  75
  81
  87
  94
  101
  108
  116
  123
  132
  140
  149
  158
  167
  177
  188
  198
  210
  221
  234
  246
Funds from operations, $m
  29
  34
  39
  44
  49
  55
  61
  68
  74
  81
  85
  92
  99
  107
  115
  124
  132
  141
  151
  160
  171
  181
  192
  204
  216
  229
  242
  255
  270
  285
Change in working capital, $m
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  27
  31
  36
  41
  46
  52
  58
  64
  71
  77
  81
  88
  95
  103
  110
  119
  127
  136
  145
  155
  165
  175
  186
  197
  209
  221
  234
  247
  261
  276
Maintenance CAPEX, $m
  -23
  -26
  -30
  -34
  -38
  -43
  -47
  -52
  -58
  -63
  -69
  -75
  -81
  -87
  -94
  -101
  -108
  -116
  -123
  -132
  -140
  -149
  -158
  -167
  -177
  -188
  -198
  -210
  -221
  -234
New CAPEX, $m
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -123
Cash from investing activities, $m
  -57
  -62
  -69
  -75
  -81
  -89
  -95
  -102
  -110
  -118
  -126
  -134
  -143
  -151
  -161
  -170
  -180
  -191
  -201
  -213
  -224
  -237
  -249
  -262
  -276
  -291
  -306
  -323
  -339
  -357
Free cash flow, $m
  -30
  -31
  -32
  -34
  -35
  -36
  -37
  -38
  -39
  -40
  -45
  -46
  -48
  -49
  -50
  -52
  -53
  -54
  -56
  -58
  -59
  -61
  -63
  -65
  -68
  -70
  -72
  -75
  -78
  -81
Issuance/(repayment) of debt, $m
  31
  34
  36
  38
  40
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
Issuance/(repurchase) of shares, $m
  57
  59
  61
  63
  65
  66
  68
  69
  71
  72
  55
  56
  58
  60
  61
  63
  65
  67
  69
  71
  74
  76
  79
  82
  85
  88
  91
  94
  98
  102
Cash from financing (excl. dividends), $m  
  88
  93
  97
  101
  105
  109
  113
  116
  120
  123
  108
  111
  116
  120
  123
  128
  132
  137
  142
  147
  153
  158
  164
  171
  178
  185
  192
  199
  208
  217
Total cash flow (excl. dividends), $m
  59
  62
  65
  67
  70
  73
  75
  78
  80
  83
  63
  66
  68
  71
  74
  76
  79
  83
  86
  89
  93
  97
  101
  105
  110
  114
  119
  125
  130
  136
Retained Cash Flow (-), $m
  -57
  -59
  -61
  -63
  -65
  -66
  -68
  -69
  -71
  -72
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -88
  -92
  -96
  -100
  -104
  -108
  -113
  -118
  -123
  -128
  -134
  -140
Prev. year cash balance distribution, $m
  97
  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
  99
  3
  4
  4
  5
  6
  7
  8
  10
  11
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  94
  2
  3
  4
  4
  4
  5
  5
  5
  5
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  85.8
  74.8
  66.0
  58.8
  53.0
  48.1
  44.0
  40.5
  37.5
  34.9
  33.2
  31.7
  30.2
  28.9
  27.8
  26.7
  25.7
  24.7
  23.9
  23.0
  22.3
  21.6
  20.9
  20.2
  19.6
  19.0
  18.5
  18.0
  17.5
  17.0

AquaVenture Holdings Limited is a multinational provider of Water-as-a-Service solutions. The Company's segments are Seven Seas Water and Quench. The Seven Seas Water segment provides outsourced desalination solutions and wastewater treatment for governmental, municipal, industrial and hospitality customers. The Quench segment provides bottleless filtered water coolers and other products that use filtered water as an input, such as ice machines, sparkling water dispensers and coffee brewers, to customers throughout the United States typically under multi-year contracts. The Company's solutions utilize seawater reverse osmosis and other purification technologies to produce potable and industrial process water in high volumes for customers operating in regions with limited access to potable water. As of December 31, 2016, it operated 10 water treatment facilities in the Caribbean region and South America producing approximately eight billion gallons of purified water per year.

FINANCIAL RATIOS  of  AquaVenture Holdings (WAAS)

Valuation Ratios
P/E Ratio -24
Price to Sales 4.2
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 34.3
Price to Free Cash Flow -120
Growth Rates
Sales Growth Rate 14%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.3%
Cap. Spend. - 3 Yr. Gr. Rate -15.6%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 31.5%
Total Debt to Equity 39.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.9%
Ret/ On Assets - 3 Yr. Avg. -3.5%
Return On Total Capital -4.4%
Ret/ On T. Cap. - 3 Yr. Avg. -5.4%
Return On Equity -6.3%
Return On Equity - 3 Yr. Avg. -7.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 49.1%
Gross Margin - 3 Yr. Avg. 48.5%
EBITDA Margin 18.4%
EBITDA Margin - 3 Yr. Avg. 10.9%
Operating Margin -9.6%
Oper. Margin - 3 Yr. Avg. -12.7%
Pre-Tax Margin -17.5%
Pre-Tax Margin - 3 Yr. Avg. -20.8%
Net Profit Margin -17.5%
Net Profit Margin - 3 Yr. Avg. -20.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 14.1%
Payout Ratio 0%

WAAS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WAAS stock intrinsic value calculation we used $121.151 million for the last fiscal year's total revenue generated by AquaVenture Holdings. The default revenue input number comes from 0001 income statement of AquaVenture Holdings. 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 WAAS stock valuation model: a) initial revenue growth rate of 15.4% 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 4.6%, whose default value for WAAS is calculated based on our internal credit rating of AquaVenture Holdings, 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 AquaVenture Holdings.
    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 WAAS stock the variable cost ratio is equal to 105%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for WAAS 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 AquaVenture Holdings.

Corporate tax rate of 27% is the nominal tax rate for AquaVenture Holdings. 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 WAAS 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 WAAS are equal to 179.4%.

Life of production assets of 9.6 years is the average useful life of capital assets used in AquaVenture Holdings 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 WAAS is equal to 12.8%. 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 - $344.196 million for AquaVenture Holdings - 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 26.581 million for AquaVenture Holdings 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 AquaVenture Holdings at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Quench Announces Acquisition of Alpine Water Systems   [Aug-06-18 04:05PM  PR Newswire]
▶ CEO of Tampa water services firm rings NYSE bell to highlight global water woes   [Mar-22-18 06:56AM  American City Business Journals]
▶ AquaVenture Holdings Limited to Host Earnings Call   [Mar-01-18 06:15AM  ACCESSWIRE]
▶ AquaVenture reports 3Q loss   [Nov-09-17 06:17AM  Associated Press]
▶ AquaVenture reports 2Q loss   [Aug-09-17 04:46PM  Associated Press]
▶ AquaVenture reports 1Q loss   [May-09-17 06:50PM  Associated Press]
▶ AquaVenture Holdings Celebrates Earth Day 2017   [Apr-21-17 08:00AM  PR Newswire]
▶ Quench Named an Approved Supplier for Avendra   [Mar-28-17 04:05PM  PR Newswire]
▶ [$$] Can Richard Branson's Green Fund Renew Hope?   [Feb-10-17 01:34PM  Barrons.com]
▶ How Tampas newest public company just elevated its profile   [Dec-19-16 11:10AM  at bizjournals.com]

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