Valuation Mod-9 Oil and Gas Field Services

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Valuation Mod-9 Oil and Gas Field Services. Chris Jennis 3 /24/2014. Agenda Abnormal Growth Model Module 9 Summary Analyst Forecast Equity Valuation Adjusting Value Estimates Sensitivity Analysis Questions. Abnormal Enterprise Income Growth Model. Module 9 Valuation of Equity

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### Valuation Mod-9Oil and Gas Field Services

Chris Jennis

3/24/2014

Agenda

Abnormal Growth Model

Module 9 Summary

Analyst Forecast

Equity Valuation

Sensitivity Analysis

Questions

Module 9
• Valuation of Equity
• VEnt- VD = Veq
• Valuation Formulas for Equity
• Dividend Discount Model
• Residual Income Model
• Use of Analysts’ forecasts
• Provided earnings and dividends can indicate value
• Adjusting Valuation to Valuation Date
• Value today, not at date of last balance sheet
• Assuming payoffs occur evenly during year
• Sensitivity Analysis
• Refine analysis with different inputs
Equity Valuation using Residual Income Model

=72.08 (assuming g=3%)

When Veq=87.76 (PriceLine) g=5.4%

Analysis:

Long-term Growth in Earnings/Sales

g=5.4%

1.054= CI(t+1)-.01052*53.93

3.91

CI(t+1)= 10.110

1+gincome= 10.110/8.96 = 1.129 (growth rate outside of horizon)

[VJan2014*(1+r)^79/365]

[124,347*(1.1004)^79/365]

\$130,887

(1+rEnt)^.5

(1.1004)^.5

1.0502

126,948*1.0502= \$133,626

Sensitivity Analysis

Market Value= \$128,964

Enterprise Value > Market Value: Market Undervalued, Buy

Enterprise Value < Market Value: Market Overvalued, Sell