Preview

Nabors Industries Case

Satisfactory Essays
Open Document
Open Document
470 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Nabors Industries Case
3. Cash Flow Analysis:

In June 2016, Nabors Industries’ share price was 18% higher than its share price in December 2015. Because Nabors Industries adjusted earnings were negative, Nabors Industries P/E ratio multiple was not meaningful in 2016 because of its negative earnings. Nabors Industries’ PE multiple fluctuated between 2009 and 2014.

Nabors Industries’ cash from operating activities started declining in 2014. NBR generated -$26.5M in CFO in the 3Q17. In comparison, in 3Q16, NBR’s CFO was $68M. A higher working capital requirement as a direct result of higher drilling activity led to deteriorating CFO in 3Q17 versus a year ago.

Nabors Industries capital expenditure rose from -867.1 in 2015 to -395.5 in 2016. A negative CFO, coupled with higher capex, led to negative and deteriorating free cash flow 2016. In 2016, Nabors Industries free cash flow 136.5 compared to -10.6 in 2015. In three of the last 8 years of free cash flows, the free cash flows have been negative on the statement of cash flows. …show more content…
William J. Restrepo, Nabors Industries CFO, commented on the third quarter of 2017 earnings call, “Our longer-term forecast continued to indicate material cash flow generation starting 2018 and ramping up through 2020. Our free cash flow will be allocated primarily to debt reduction.”

Quoted from Simply Wall St,

“The calculations below outline how an intrinsic value for Nabors Industries is arrived at by discounting future cash flows to their present value. These are estimates of cash flows going forward 5 years.”

5-Year Cash Flow Forecast 2017 2018 2019 2020 2021
Levered FCF (USD, Millions) $-431.99 $116.18 $201.84 $254.33 $213.64
Present Value Analyst 9 Analyst 7 Analyst 5 Analyst 3 Extrapolated @ (-16%, capped from
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Powerful Essays

    Busm 301 Ch1
    • 2183 Words
    • 9 Pages

    Busm 301 Ch1

    A firm’s intrinsic value is an estimate of a stock’s “true” value based on accurate risk and return data. It can be estimated but not measured precisely. A stock’s current price is its market price—the value based on perceived but…

    • 2183 Words
    • 9 Pages
    Powerful Essays
    Read More
  • Good Essays

    Fly by Night case
    • 694 Words
    • 3 Pages

    Fly by Night case

    Another reason why Fly-By-Night was facing cash flow problems by mid-year 14 is the increases in accounts receivable compared to the increases in sales. From year 11 to year 12 accounts receivables went up by 79.53 percent, 82.21 percent from year 12 to year 13 and from year 13 to year 14, they went up by 34.28 percent. Even though this isn’t the main reason why FBN is facing serious cash flow problems, it is definitely something that they should take care of. Those increases in accounts receivables could be justified if sales had increased in a greater proportion during that period, but in reality, sales went down by 7.74 percent between year 11 and 12, they went up by 76.30 percent from year 12 to year 13, less than the increase in accounts receivables, but improved from year 13 to year 14 went sales went up by 50.25 percent, more than the increase in accounts receivables.…

    • 694 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Week 4 Assignment from Textbook
    • 1277 Words
    • 10 Pages

    Week 4 Assignment from Textbook

    The following information is from the manufacturing budget and the budgeted financial statements of Fabor Fabrication:…

    • 1277 Words
    • 10 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    B120 tma03
    • 1125 Words
    • 5 Pages

    B120 tma03

    From looking at the statement I have found a few reasons for concern, the first I would like to point out is that even if the business is making a profit the margin from 2012 to 2013 in far less and has decreased nearly for 32%. This could mean less money to buy materials and pay out the debts. If the same decrease was to happen in 2014 the business will lose approximately 64% of income it made in 2012 and will not be able to pay out a debt. Another cause for concern is the amount of money being spent on staff wages. The cost has risen but there is no greater outcome in terms of profit. Lastly from looking at the Cost of goods, there are a combined total of 1,066,000 for opening stock and purchased, this is lots better than in the previous year what is a good sign. But they had 250,000 leftover so ordered less stoke in order…

    • 1125 Words
    • 5 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Week 7
    • 406 Words
    • 2 Pages

    Week 7

    2. Net Operating Working Capital for 2011 is calculated through Taking your Current Assets less – Non-Interest Bearing Current Liabilities NOWC for 2011 = ($5.6 + $56.2 + $112.4) – ($11.2 + $28.1) = $134.9 million.…

    • 406 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Nucor Financial Analysis
    • 748 Words
    • 3 Pages

    Nucor Financial Analysis

    The cash flow analysis by which Nucor adheres to has relatively few requirements to undertake a new investment. The first must be that new plants are supposed to achieve 25% ROA within five years of start-up. We look at this by examining the parameters of cost and revenues and finding the net income given the 5th year and dividing by the total assets minus any depreciation. As it stands ROA would be give a return of 22.34% as the excel file shows. This would indicate how efficient management is using assets to generate earnings. Whether by design or industry comparison, this result does not meet the requirements that Nucor would approve.…

    • 748 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Testing
    • 471 Words
    • 2 Pages

    Testing

    23-Jan 1 Introduction 2 Review of financial statements 30-Jan 3 Analysis of financial statements 6-Feb 4 Introduction to the Time Value of Money 13-Feb Test via Moodle Chapters 2-4 20-Feb Midterm 1 27-Feb 5 Discounted Cash Flow Valuation 6 Bonds and Bond Valuation 6-Mar 13-Mar 7 Stocks and Stock Valuation Test via…

    • 471 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Warren Buffet Case Study
    • 1873 Words
    • 8 Pages

    Warren Buffet Case Study

    Intrinsic value is succinctly summed up by Warren Buffett as “the present value of future expected performance” (Bruner, Eades, & Schill, 2009). This intrinsic value can encapsulate how well the company is run, its cash flow and places a premium on management competency.…

    • 1873 Words
    • 8 Pages
    Better Essays
    Read More
  • Good Essays

    Ncb Office Products Inc. Case Analysis
    • 1822 Words
    • 8 Pages

    Ncb Office Products Inc. Case Analysis

    NCB is a manufacturer and distributer of a wide range of office products. In Canada, NCB uses several distributers in different regions. One of the major distributers is Harrison Stationary and Office Supply LTD. Harrison had distributed NCB’S products for over 50 years and NCB was the largest supplier of Harrison. In January 2003 Harrison was acquired by the president of the company and four senior officers. Most of the acquisition cost was financed by bank loans. Since the acquisition, Harrison had difficulties to pay NCB for the goods and the account receivable reached to unacceptable level. In September 2005 the Harrison account was 156 days old and amounted to $ 4.4 million. In addition, NCB’s credit management tried to receive financial information from Harrison’s management without great success. After 14 months of avoiding the requests of NCB’s credit department, Harrison’s management released the financial statements. The financial statements of Harrison revealed a very risky financial situation. The company had substantial losses and had an equity deficit position. Tutlte, NCB’s credit manager recommended to stop shipments to Harrison immediately and let them get bankrupt. However, Pam Bookman, vice-president sales had a different opinion. She was afraid to lose market share because the company didn’t have a contingency plan for another distributer. Now, NCB’s management is facing a big dilemma concerning this issue and must decide how to handle this situation. MNC’s decision will have a great impact on both companies.…

    • 1822 Words
    • 8 Pages
    Good Essays
    Read More
  • Good Essays

    Crystal Meadows of Tahoe
    • 770 Words
    • 4 Pages

    Crystal Meadows of Tahoe

    The income statement for CMOT for 1991 has the company showing a net income of $1,418,000. This figure is $747,000 higher than the previous year at $671,000 and more than doubles CMOT’s net income from 1990 to 1991. CMOT’s balance sheet for 1991 indicates that the company had $7,585,000 in retained earnings, which is $1,306,000 higher than 1990’s $6,279,000. Both provide bottom lines that make the CMOT appear to be profitable and in a growth cycle. An analysis of cash flows shows that CMOT has significant cash outflows for capital investments in PP&E, namely the purchase of new snow making equipment and other improvements. These outflows are nearly equivalent to cash taken in over the same period. In 1991, CMOT had $5,425,000 in net cash provided by operating activities. During the same…

    • 770 Words
    • 4 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Case 13-6 Butler Lumber Company
    • 682 Words
    • 3 Pages

    Case 13-6 Butler Lumber Company

    Despite the lower gross profit margin, Butler Lumber is able to limit its downside effect on the profitability with a lower operating expense relative to the revenue, reflecting a good cost management.…

    • 682 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    American Chemical Corporation Case
    • 364 Words
    • 2 Pages

    American Chemical Corporation Case

    GROUP SUBMISSION: Due 27 June 2011 Midnight American Chemical Corporation CASE QUESTIONS Read the American Chemical Corporation case that was handed to you. The underlying question to be answered is should Dixon acquire the Collinsville plant. In your case write-up, you can discuss the questions given below. Please note that the given questions are to be used only as a guide for your discussion. You do not need to answer the questions in the sequence they are presented. You can use the spreadsheet called AmericanChemCorp.xls (posted on instructor) to do your computations. Financial analysis 1. Extract all the important information given in the case study (text, footnotes and exhibits) that you will need as part of your set of assumptions in cash flow analysis, e.g. the marginal tax rate, net working capital, salvage value of the Collinsville plant, etc. 2. Using the information extracted in (1) above and relevant tables in the exhibits, estimate the expected incremental free cash flows associated with the acquisition of the Collinsville plant a. Without the laminate technology. b. With the laminate technology. 3. What is the IRR for the Collinsville investment with and without the laminate technology? Using the IRR, which of the two options is better? Estimating the discount rate 4. What is the appropriate beta for the Collinsville project? 5. Estimate the cost of equity capital appropriate for the evaluation of the incremental cash flows associated with the Collinsville investment. 6. Determine the after-tax cost of debt for the project. 7. Estimate the weighted average cost of capital (WACC) appropriate for the valuation of the Collinsville investment. Project Valuation 8. Using the discount rate determined above, estimate the net present value (NPV) of the Collinsville investments a. without the laminate technology b. with the laminate technology 9. Should Dixon Corporation acquire the plant? Is the Collinsville investment attractive on economic grounds?…

    • 364 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    World Wrestling Entertainment, Inc.
    • 4229 Words
    • 17 Pages

    World Wrestling Entertainment, Inc.

    WWE had cash flows from operating activities for the fiscal years ended April 30, 2004 of $61.9 million. There working capital which consist of current assets less current liabilities, was $265.6 million. They used $111.0 million in investing activities. As of June 25, 2004, they had approximately $224.8 million invested primarily in fixed income mutual funds and short-term U.S. Treasury notes. The company faces a rising interest rate environment will incur some capital loss. They plan to offset this loss by earning higher interest rates on short-term securities and mutual funds. In fiscal 2004, they had capital expenditures of approximately $5.3 million. The company used $30.9 cash flows for financing activities for the fiscal year ended April 30, 2004. In June 2003, they purchased approximately 2.0 million shares of our common stock from Viacom, Inc. for approximately $19.2 million (Edger WWE 10K, 2004).…

    • 4229 Words
    • 17 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Depreciation and New Machine
    • 362 Words
    • 2 Pages

    Depreciation and New Machine

    Bo Humphries , chief financial officer of Clark upholstery company, expects the firm’s net operating profit after taxes for the next 5 years to be as shown in the following table.…

    • 362 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Framedia
    • 1572 Words
    • 7 Pages

    Framedia

    If we want to do the stand-alone-valuation for Framedia at the end of 2005, we should calculate the free cash flow to firm after 2005 and the residual value of Framedia and then discount all the cash flows to the end of 2005.…

    • 1572 Words
    • 7 Pages
    Satisfactory Essays
    Read More

Related Topics