Discounted Cash Flow Calculation for DB:NWP using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
Note: Free cash flow to equity valuations ignore the company's cash or debt.
DB:NWP DCF 1st Stage: Next 10 year cash flow forecast
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Newpark Resources's share price is below the future cash flow value, and at a moderate discount (> 20%).
Newpark Resources's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Newpark Resources's earnings available for a low price, and how does
this compare to other companies in the same industry?
Newpark Resources is not considered high growth as it is expected to be loss making for the next 1-3 years.
Newpark Resources's revenue is expected to decrease over the next 1-3 years, this is not considered high growth.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Newpark Resources's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
0/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Newpark Resources's finances.
The net worth of a company is the difference between its assets and liabilities.
Newpark Resources is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Newpark Resources's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of
Newpark Resources's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
High level of physical assets or inventory.
Debt is covered by short term assets, assets are 3x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. Paul L. Howes has been the Chief Executive Officer and President of Newpark Resources, Inc. since March 22, 2006 and June 2006 respectively. Mr. Howes has experience in the defense industry, chemicals and plastics manufacturing and the packaging industry. Following the sale of his former company in October 2005 until he joined Newpark Resources, Inc. Board of Directors in March 2006, Mr. Howes was working privately as an inventor and engaging in consulting and private investing activities. From 2002 to October 2005, he served as the President and Chief Executive Officer at Astaris LLC. From 1997 to 2002, he served as Vice President and General Manager of Packaging Division of Flint Ink Corporation, a global ink company headquartered in Ann Arbor, Michigan with operations in North America, Europe, Asia Pacific and Latin America. His experience includes leadership positions with BFGoodrich Specialty Chemicals, Defiance Vangarde and Martin Marietta Aerospace, where his first assignment was in propulsion Engineering. He has been an Executive Director at Newpark Resources, Inc. since March 22, 2006. He has been a Director at Newpark Drilling Fluids, LLC since March 2006. He served as a Director of The American Cleaning Institute (known as The Soap and Detergent Association). Mr. Howes holds a Bachelor of Science degree in Engineering from Michigan State University in 1980.
Paul's compensation has been consistent with company performance over the past year, both up more than 20%.
Paul's remuneration is higher than average for companies of similar size in Germany.
Management Team Tenure
Average tenure and age of the
management team in years:
The tenure for the Newpark Resources management team is about average.
Senior VP & CFO
VP, General Counsel
VP and President of the Mats & Integrated Services
Corporate Controller & Chief Accounting Officer
Director of Investor Relations
Corporate VP & President of Fluids Systems Business
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The tenure for the Newpark Resources board of directors is about average.
Board of Directors
Independent Chairman of the Board
Who owns this company?
Recent Insider Trading
No 3 month open market individual insider trading information.
Newpark Resources, Inc. supplies products, rentals, and services primarily to the oil and natural gas exploration and production industry. The company operates through two segments, Fluids Systems; and Mats and Integrated Services. The Fluids Systems segment offers drilling and completion fluids products, technical services, and other minerals to customers in the North America, Europe, the Middle East, Africa, Latin America, and the Asia Pacific regions. The Mats and Integrated Services segment offers composite mat rental, construction, and related site services to customers in various markets, including oil and gas exploration and production, electrical transmission and distribution, pipeline, solar, petrochemical, and construction industries in North America and Europe. This segment also provides access road construction, site planning and preparation, environmental protection, fluids and spill containment, erosion control, and site restoration services. Newpark Resources, Inc. was founded in 1932 and is headquartered in The Woodlands, Texas.
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