A Look At The Intrinsic Value Of Transocean Ltd. (NYSE:RIG)
A Look At The Intrinsic Value Of Transocean Ltd. (NYSE:RIG)
Key Insights
- The projected fair value for Transocean is US$6.62 based on 2 Stage Free Cash Flow to Equity
- Current share price of US$5.80 suggests Transocean is potentially trading close to its fair value
- The US$7.26 analyst price target for RIG is 9.7% more than our estimate of fair value
How far off is Transocean Ltd. (NYSE:RIG) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by projecting its future cash flows and then discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex.
We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.
The Model
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$222.3m | US$887.2m | US$733.0m | US$648.2m | US$600.1m | US$573.1m | US$558.9m | US$553.1m | US$552.9m | US$556.5m |
Growth Rate Estimate Source | Analyst x3 | Analyst x5 | Analyst x1 | Est @ -11.58% | Est @ -7.42% | Est @ -4.50% | Est @ -2.47% | Est @ -1.04% | Est @ -0.04% | Est @ 0.66% |
Present Value ($, Millions) Discounted @ 11% | US$199 | US$714 | US$529 | US$420 | US$348 | US$298 | US$261 | US$232 | US$208 | US$188 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$3.4b
The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 11%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$557m× (1 + 2.3%) ÷ (11%– 2.3%) = US$6.2b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$6.2b÷ ( 1 + 11%)10= US$2.1b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$5.5b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of US$5.8, the company appears about fair value at a 12% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
The Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Transocean as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 11%, which is based on a levered beta of 2.000. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Transocean
- No major strengths identified for RIG.
- Shareholders have been diluted in the past year.
- Forecast to reduce losses next year.
- Current share price is below our estimate of fair value.
- Have RIG insiders been buying lately?
- Debt is not well covered by operating cash flow.
- Has less than 3 years of cash runway based on current free cash flow.
- Is RIG well equipped to handle threats?
Moving On:
Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Transocean, we've put together three further aspects you should further research:
- Risks: For instance, we've identified 1 warning sign for Transocean that you should be aware of.
- Future Earnings: How does RIG's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
關鍵見解
- 根據兩階段股權自由現金流,Transocean的預計公允價值爲6.62美元
- 目前5.80美元的股價表明越洋的交易價格可能接近其公允價值
- 分析師對RIG的目標股價爲7.26美元,比我們對公允價值的估計高出9.7%
越洋有限公司(紐約證券交易所代碼:RIG)距離其內在價值有多遠?使用最新的財務數據,我們將通過預測未來的現金流,然後將其折現爲今天的價值,來研究股票的定價是否合理。這將使用折扣現金流 (DCF) 模型來完成。儘管它可能看起來很複雜,但實際上並沒有那麼多。
我們要提醒的是,對公司進行估值的方法有很多,就像DCF一樣,每種技術在某些情況下都有優點和缺點。如果你對這種估值還有一些迫切的問題,可以看看 Simply Wall St 分析模型。
該模型
我們使用所謂的兩階段模型,這僅意味着公司的現金流有兩個不同的增長期。通常,第一階段是較高的增長階段,第二階段是較低的增長階段。首先,我們需要估計未來十年的現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
通常,我們假設今天的一美元比未來一美元更有價值,因此我們將這些未來現金流的價值折現爲以今天的美元計算的估計價值:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 222.3 億美元 | 887.2 億美元 | 7.33 億美元 | 648.2 億美元 | 600.1 億美元 | 573.1 億美元 | 5.589 億美元 | 553.1 億美元 | 552.9 億美元 | 556.5 億美元 |
增長率估算來源 | 分析師 x3 | 分析師 x5 | 分析師 x1 | 美國東部標準時間 @ -11.58% | 美國東部標準時間 @ -7.42% | 美國東部標準時間 @ -4.50% | Est @ -2.47% | Est @ -1.04% | Est @ -0.04% | Est @ 0.66% |
現值(美元,百萬)折扣 @ 11% | 199 美元 | 714 美元 | 529 美元 | 420 美元 | 348 美元 | 298 美元 | 261 美元 | 232 美元 | 208 美元 | 188 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
十年期現金流(PVCF)的現值 = 34 億美元
第二階段也稱爲終值,這是第一階段之後的企業現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們將未來的現金流折現爲今天的價值,使用11%的股本成本。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 5.57 億美元× (1 + 2.3%) ÷ (11% — 2.3%) = 62億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 62億美元÷ (1 + 11%)10= 21 億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲55億美元。爲了得出每股內在價值,我們將其除以已發行股票總數。相對於目前的5.8美元的股價,該公司的公允價值似乎比目前的股價折扣了12%。但請記住,這只是一個近似的估值,就像任何複雜的公式一樣,垃圾進出。
假設
上面的計算在很大程度上取決於兩個假設。第一個是貼現率,另一個是現金流。投資的一部分是自己對公司未來業績的評估,因此請自己嘗試計算並檢查自己的假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將越洋視爲潛在股東,因此使用權益成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了11%,這是基於2.000的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
越洋的 SWOT 分析
- 未確定 RIG 的主要優勢。
- 在過去的一年中,股東被稀釋了。
- 預計明年將減少損失。
- 目前的股價低於我們對公允價值的估計。
- RIG 內部人士最近有買入嗎?
- 運營現金流無法很好地覆蓋債務。
- 根據當前的自由現金流,現金流不足 3 年。
- RIG 有能力應對威脅嗎?
繼續前進:
就建立投資論點而言,估值只是硬幣的一面,理想情況下,它不會是你爲公司仔細研究的唯一分析內容。DCF模型不是完美的股票估值工具。取而代之的是,DCF模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。例如,公司權益成本或無風險利率的變化會對估值產生重大影響。對於越洋,我們彙總了您應該進一步研究的另外三個方面:
- 風險:例如,我們已經確定了Transocean的1個警告信號,你應該注意這一點。
- 未來收益:與同行和整個市場相比,RIG的增長率如何?通過與我們的免費分析師增長預期圖表互動,深入了解未來幾年的分析師共識數字。
- 其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
PS。Simply Wall St應用程序每天對紐約證券交易所的每隻股票進行折扣現金流估值。如果您想找到其他股票的計算方法,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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