RE:A little reminder....and it is open to all scrutinydb
Interesting post. Valuation ratios factoring in capital structure is an interesting subject, partly because it is very appropriate to calculate enterprise values factoring in debt levels (as you have done) as opposed to just using market cap in calculating valuation ratios and ignoring debt, but also because net asset values also become an important consideration within the calculation.
Ithaca is currently trading at a c15% discount to TBV according to my figures which also includes the debt of course. This figure is now highly conservative IMO due to GSA drilling progress, although Ithaca mgt will want to keep it that way so as to discourage bidder interest pre GSA oil - I support Ithaca mgt in this as a takeover pre-GSA would deprive shareholders of the major long term gains.
Consequently, your enterprise value to cash flow is very conservative indeed IMO as it does not consider TBV but only debt - although many accountants and economists would argue that your approach is still the correct one.
Once GSA oil flows, debt will be decreasing rapidly, TBV will probably be reassessed giving a huge and growing (due to debt reduction) share price to TBV discount and the forward growth potential of Ithaca will be unlocked giving a likely multi-bagging share price over over the next 2 to 3 years.
Doug