An Intrinsic Calculation For Northern Oil and Gas, Inc. (NYSE:NOG) Suggests It's 38% Undervalued
An Intrinsic Calculation For Northern Oil and Gas, Inc. (NYSE:NOG) Suggests It's 38% Undervalued
Key Insights
- Northern Oil and Gas' estimated fair value is US$70.07 based on 2 Stage Free Cash Flow to Equity
- Northern Oil and Gas' US$43.11 share price signals that it might be 38% undervalued
- The US$50.29 analyst price target for NOG is 28% less than our estimate of fair value
Does the April share price for Northern Oil and Gas, Inc. (NYSE:NOG) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by projecting its future cash flows and then discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.
Is Northern Oil and Gas Fairly Valued?
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) forecast
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$547.2m | US$557.2m | US$589.7m | US$511.9m | US$500.0m | US$495.9m | US$496.4m | US$500.2m | US$506.3m | US$514.1m |
Growth Rate Estimate Source | Analyst x6 | Analyst x6 | Analyst x4 | Analyst x1 | Analyst x1 | Est @ -0.83% | Est @ 0.11% | Est @ 0.76% | Est @ 1.22% | Est @ 1.54% |
Present Value ($, Millions) Discounted @ 8.6% | US$504 | US$472 | US$460 | US$368 | US$331 | US$302 | US$278 | US$258 | US$241 | US$225 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$3.4b
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.3%. We discount the terminal cash flows to today's value at a cost of equity of 8.6%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$514m× (1 + 2.3%) ÷ (8.6%– 2.3%) = US$8.3b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$8.3b÷ ( 1 + 8.6%)10= US$3.6b
The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$7.1b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$43.1, the company appears quite good value at a 38% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.
The Assumptions
We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual 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 Northern Oil and Gas 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 8.6%, which is based on a levered beta of 1.374. 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 Northern Oil and Gas
- Earnings growth over the past year exceeded the industry.
- Debt is well covered by earnings and cashflows.
- Balance sheet summary for NOG.
- Earnings growth over the past year is below its 5-year average.
- Dividend is low compared to the top 25% of dividend payers in the Oil and Gas market.
- Shareholders have been diluted in the past year.
- Good value based on P/E ratio and estimated fair value.
- Paying a dividend but company has no free cash flows.
- Annual earnings are forecast to decline for the next 3 years.
- See NOG's dividend history.
Next Steps:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Why is the intrinsic value higher than the current share price? For Northern Oil and Gas, we've compiled three fundamental items you should further research:
- Risks: We feel that you should assess the 5 warning signs for Northern Oil and Gas (2 are a bit unpleasant!) we've flagged before making an investment in the company.
- Future Earnings: How does NOG'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock 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
- 根據兩階段的股本自由現金流,北方石油天然氣公司的公允價值估計爲70.07美元
- 北方石油天然氣公司43.11美元的股價表明其估值可能被低估了38%
- 分析師對NOG的目標股價爲50.29美元,比我們對公允價值的估計低28%
北方石油天然氣公司(紐約證券交易所代碼:NOG)4月份的股價是否反映了其真正價值?今天,我們將通過預測股票的未來現金流來估算股票的內在價值,然後將其折現爲今天的價值。實現這一目標的一種方法是使用折扣現金流(DCF)模型。聽起來可能很複雜,但實際上很簡單!
但請記住,估算公司價值的方法有很多,而差價合約只是一種方法。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。
北方石油和天然氣的估值是否合理?
我們將使用兩階段的DCF模型,顧名思義,該模型考慮了兩個增長階段。第一階段通常是較高的增長期,在第二個 “穩步增長” 時期逐漸趨於平穩,最終值是第二個 “穩定增長” 時期。在第一階段,我們需要估算未來十年的業務現金流。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,因此這些未來現金流的總和將折現爲今天的價值:
10 年自由現金流 (FCF) 預測
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 547.2 億美元 | 5.572 億美元 | 589.7 億美元 | 511.9 億美元 | 500.0 億美元 | 4.959 億美元 | 4.964 億美元 | 500.2 萬美元 | 5.063 億美元 | 5.141 億美元 |
增長率估算來源 | 分析師 x6 | 分析師 x6 | 分析師 x4 | 分析師 x1 | 分析師 x1 | Est @ -0.83% | 美國東部標準時間 @ 0.11% | Est @ 0.76% | 東部時間 @ 1.22% | 美國東部時間 @ 1.54% |
現值(美元,百萬)折扣 @ 8.6% | 504 美元 | 472 美元 | 460 美元 | 368 美元 | 331 美元 | 302 美元 | 278 美元 | 258 美元 | 241 美元 | 225 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
在計算了最初10年期內未來現金流的現值之後,我們需要計算終值,該終值涵蓋了第一階段以後的所有未來現金流。戈登增長公式用於計算終值,其未來年增長率等於10年期國債收益率2.3%的5年平均水平。我們將終端現金流折現爲今天的價值,股本成本爲8.6%。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 5.14億美元× (1 + 2.3%) ÷ (8.6% — 2.3%) = 83億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 83億美元÷ (1 + 8.6%)10= 36 億美元
總價值是未來十年的現金流總額加上貼現的終端價值,由此得出總權益價值,在本例中爲71億美元。最後一步是將股票價值除以已發行股票的數量。與目前的43.1美元股價相比,該公司看起來物有所值,與目前的股價相比折扣了38%。任何計算中的假設都會對估值產生重大影響,因此最好將其視爲粗略的估計,而不是精確到最後一美分。
假設
我們要指出的是,貼現現金流的最重要投入是貼現率,當然還有實際的現金流。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。鑑於我們將北方石油和天然氣公司視爲潛在股東,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8.6%,這是基於1.374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。
北方石油和天然氣的 SWOT 分析
- 過去一年的收益增長超過了該行業。
- 收益和現金流足以彌補債務。
- NOG 的資產負債表摘要。
- 過去一年的收益增長低於其5年平均水平。
- 與石油和天然氣市場前25%的股息支付者相比,股息很低。
- 在過去的一年中,股東被稀釋了。
- 根據市盈率和估計的公允價值,物有所值。
- 支付股息,但公司沒有自由現金流。
- 預計未來三年的年收入將下降。
- 查看 NOG 的股息歷史記錄。
後續步驟:
儘管公司的估值很重要,但它不應該是你在研究公司時唯一考慮的指標。使用DCF模型不可能獲得萬無一失的估值。最好你運用不同的案例和假設,看看它們將如何影響公司的估值。如果一家公司以不同的速度增長,或者其股本成本或無風險利率急劇變化,則產出可能會大不相同。爲什麼內在價值高於當前股價?對於北方石油和天然氣公司,我們整理了三項基本內容,你應該進一步研究:
- 風險:我們認爲你應該評估北方石油和天然氣公司的5個警告信號(2個有點不愉快!)在對公司進行投資之前,我們已經進行了舉報。
- 未來收益:與同行和整個市場相比,NOG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。
- 其他高質量的替代品:你喜歡一個優秀的全能選手嗎?瀏覽我們的高品質股票互動清單,了解您可能還會錯過什麼!
PS。Simply Wall St每天都會更新每隻美國股票的差價合約計算結果,因此,如果您想找到任何其他股票的內在價值,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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