Discounted Cash Flow Calculation for DB:SOC 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.
DB:SOC 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.
Subsea 7's share price is below the future cash flow value, and at a moderate discount (> 20%).
Subsea 7's share price is below the future cash flow value, but not 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
Subsea 7's earnings available for a low price, and how does
this compare to other companies in the same industry?
Subsea 7's earnings are expected to grow significantly at over 20% yearly.
Subsea 7's revenue is expected to grow by 5.9% yearly, however this is not considered high growth (20% yearly).
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.
Subsea 7'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
1/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
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. Jean P. Cahuzac has been the Chief Executive Officer of Subsea 7 SA since April 14, 2008 and its Executive Director since May 23, 2008. Mr. Cahuzac served as a Controller of Steel Plus Network, Inc. He served as an Executive Vice President of Assets of Transocean Ltd. (formerly, Transocean Inc) from 2007 to February 26, 2008. He served as the Chief Operating Officer and Executive Vice President of Transocean Ltd. since October 2002 and also served as its President since October 18, 2006. He served as Executive Vice President of Operations at Transocean from February 2001 to October 2002. He served as an Executive Vice President and President of Europe, Middle East and Africa of Transocean. Mr. Cahuzac has over 29 years of experience within the oil and gas industry, having held various technical and senior management positions around the world. He served as a Vice President of Engineering of Schlumberger since 1989 and also served as its Vice President of Europe and Africa Business Unit since 1994. He was employed by Schlumberger since 1979. He served as President of Sedco Forex since January 1999. He served as Vice President of Operations Manager of Sedco Forex from May 1998 to January 1999, Region Manager of Europe, Africa and CIS of Sedco Forex from September 1994 to May 1998 and Vice President and General Manager of North Sea Region of Sedco Forex from February 1994 to September 1994. He serves as Active Member and a Director at the International Association of Drilling Contractors and a Member in the Society of Petroleum Engineers. Mr. Cahuzac holds a master in Mechanical Engineering from École des Mines de St Etienne and is graduated from the French Petroleum Institute in Paris.
Jean's compensation has been consistent with company performance over the past year, both up more than 20%.
Jean's remuneration is lower than average for companies of similar size in Germany.
Management Team Tenure
Average tenure and age of the
management team in years:
The average tenure for the Subsea 7 management team is over 5 years, this suggests they are a seasoned and experienced team.
CEO & Executive Director
Chief Financial Officer
Chief Operating Officer
Executive Vice President of Strategy & Commercial
Investor Relations Director
Executive Vice President of Human Resources
Senior Vice President of Brazil
Senior Vice President of Alliances
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The tenure for the Subsea 7 board of directors is about average.
Subsea 7 S.A. delivers offshore projects and services for the evolving energy industry worldwide. It provides subsea field development products and services, including project management, design and engineering, procurement, fabrication, survey, installation, and commissioning of production facilities on the seabed and the tie-back of its facilities to fixed or floating platforms or to the shore. The company also offers engineering, procurement, construction, and installation of subsea umbilicals, risers, and flowlines; life of field services, such as inspection, repair, maintenance, integrity management, and remote intervention of subsea infrastructure; conventional services comprising fabrication, installation, extension, and refurbishment of fixed and floating platforms and associated pipelines; hook-up services; and refurbishment of fixed and floating platforms in shallow water. In addition, it operates heavy lifting vessels and oil and gas structures; and installs offshore wind farm foundations and inter-array cables, as well as engages in the decommissioning of redundant offshore structures. Further, the company provides remotely operated vehicles (ROVs) and tooling services to support exploration and production activities. It has a fleet of 35 vessels; 2 vessels under construction; and 166 ROVs. Subsea 7 S.A. was incorporated in 1993 and is based in Luxembourg City, Luxembourg.
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