Intrinsic value of Alaris Royalty Corp. - AD

Previous Close

$16.00

  Intrinsic Value

$10.23

stock screener

  Rating & Target

sell

-36%

Previous close

$16.00

 
Intrinsic value

$10.23

 
Up/down potential

-36%

 
Rating

sell

We calculate the intrinsic value of AD stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  198
  307
  458
  665
  938
  1,290
  1,732
  2,274
  2,926
  3,696
  4,589
  5,611
  6,763
  8,046
  9,461
  11,005
  12,677
  14,474
  16,392
  18,430
  20,584
  22,852
  25,232
  27,724
  30,326
  33,040
  35,866
  38,806
  41,863
  45,041
Variable operating expenses, $m
  88
  136
  204
  295
  417
  573
  769
  1,010
  1,299
  1,641
  2,038
  2,491
  3,003
  3,573
  4,201
  4,886
  5,629
  6,426
  7,278
  8,183
  9,139
  10,146
  11,203
  12,309
  13,465
  14,670
  15,924
  17,230
  18,587
  19,998
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  88
  136
  204
  295
  417
  573
  769
  1,010
  1,299
  1,641
  2,038
  2,491
  3,003
  3,573
  4,201
  4,886
  5,629
  6,426
  7,278
  8,183
  9,139
  10,146
  11,203
  12,309
  13,465
  14,670
  15,924
  17,230
  18,587
  19,998
Operating income, $m
  110
  170
  255
  370
  522
  717
  963
  1,264
  1,627
  2,055
  2,552
  3,119
  3,760
  4,474
  5,260
  6,119
  7,049
  8,047
  9,114
  10,247
  11,445
  12,706
  14,029
  15,414
  16,861
  18,370
  19,941
  21,576
  23,276
  25,043
EBITDA, $m
  111
  172
  257
  373
  526
  723
  971
  1,275
  1,641
  2,072
  2,574
  3,146
  3,792
  4,512
  5,306
  6,172
  7,109
  8,117
  9,193
  10,335
  11,543
  12,815
  14,150
  15,547
  17,007
  18,529
  20,114
  21,762
  23,477
  25,259
Interest expense (income), $m
  6
  7
  12
  20
  31
  46
  65
  91
  123
  162
  209
  264
  329
  403
  486
  578
  680
  792
  912
  1,042
  1,180
  1,327
  1,483
  1,646
  1,818
  1,998
  2,186
  2,381
  2,585
  2,797
  3,018
Earnings before tax, $m
  104
  158
  235
  339
  476
  652
  872
  1,142
  1,465
  1,846
  2,287
  2,791
  3,357
  3,988
  4,682
  5,439
  6,257
  7,135
  8,072
  9,067
  10,117
  11,223
  12,383
  13,596
  14,863
  16,184
  17,560
  18,991
  20,479
  22,025
Tax expense, $m
  28
  43
  63
  92
  129
  176
  235
  308
  396
  498
  618
  753
  907
  1,077
  1,264
  1,468
  1,689
  1,926
  2,179
  2,448
  2,732
  3,030
  3,343
  3,671
  4,013
  4,370
  4,741
  5,128
  5,529
  5,947
Net income, $m
  76
  116
  172
  247
  347
  476
  637
  833
  1,069
  1,348
  1,670
  2,037
  2,451
  2,911
  3,418
  3,970
  4,567
  5,209
  5,893
  6,619
  7,386
  8,193
  9,039
  9,925
  10,850
  11,815
  12,819
  13,863
  14,949
  16,078

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,210
  1,869
  2,795
  4,056
  5,722
  7,866
  10,559
  13,865
  17,840
  22,534
  27,982
  34,211
  41,236
  49,062
  57,688
  67,105
  77,300
  88,255
  99,953
  112,377
  125,511
  139,339
  153,853
  169,046
  184,914
  201,461
  218,693
  236,622
  255,265
  274,641
Adjusted assets (=assets-cash), $m
  1,210
  1,869
  2,795
  4,056
  5,722
  7,866
  10,559
  13,865
  17,840
  22,534
  27,982
  34,211
  41,236
  49,062
  57,688
  67,105
  77,300
  88,255
  99,953
  112,377
  125,511
  139,339
  153,853
  169,046
  184,914
  201,461
  218,693
  236,622
  255,265
  274,641
Revenue / Adjusted assets
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
Average production assets, $m
  10
  15
  22
  32
  45
  62
  83
  109
  140
  177
  220
  269
  325
  386
  454
  528
  609
  695
  787
  885
  988
  1,097
  1,211
  1,331
  1,456
  1,586
  1,722
  1,863
  2,009
  2,162
Working capital, $m
  54
  84
  126
  182
  257
  353
  474
  623
  802
  1,013
  1,257
  1,537
  1,853
  2,205
  2,592
  3,015
  3,474
  3,966
  4,492
  5,050
  5,640
  6,261
  6,914
  7,596
  8,309
  9,053
  9,827
  10,633
  11,471
  12,341
Total debt, $m
  177
  292
  453
  673
  963
  1,336
  1,804
  2,379
  3,071
  3,888
  4,836
  5,920
  7,142
  8,504
  10,005
  11,643
  13,417
  15,323
  17,359
  19,521
  21,806
  24,212
  26,737
  29,381
  32,142
  35,021
  38,020
  41,139
  44,383
  47,754
Total liabilities, $m
  210
  325
  486
  706
  996
  1,369
  1,837
  2,412
  3,104
  3,921
  4,869
  5,953
  7,175
  8,537
  10,038
  11,676
  13,450
  15,356
  17,392
  19,554
  21,839
  24,245
  26,770
  29,414
  32,175
  35,054
  38,053
  41,172
  44,416
  47,787
Total equity, $m
  999
  1,544
  2,309
  3,350
  4,726
  6,498
  8,722
  11,452
  14,736
  18,613
  23,113
  28,258
  34,061
  40,525
  47,651
  55,429
  63,850
  72,899
  82,562
  92,824
  103,672
  115,094
  127,083
  139,632
  152,739
  166,407
  180,641
  195,450
  210,849
  226,853
Total liabilities and equity, $m
  1,209
  1,869
  2,795
  4,056
  5,722
  7,867
  10,559
  13,864
  17,840
  22,534
  27,982
  34,211
  41,236
  49,062
  57,689
  67,105
  77,300
  88,255
  99,954
  112,378
  125,511
  139,339
  153,853
  169,046
  184,914
  201,461
  218,694
  236,622
  255,265
  274,640
Debt-to-equity ratio
  0.180
  0.190
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
Adjusted equity ratio
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  76
  116
  172
  247
  347
  476
  637
  833
  1,069
  1,348
  1,670
  2,037
  2,451
  2,911
  3,418
  3,970
  4,567
  5,209
  5,893
  6,619
  7,386
  8,193
  9,039
  9,925
  10,850
  11,815
  12,819
  13,863
  14,949
  16,078
Depreciation, amort., depletion, $m
  1
  1
  2
  3
  5
  6
  8
  11
  14
  18
  22
  27
  32
  39
  45
  53
  61
  69
  79
  88
  99
  110
  121
  133
  146
  159
  172
  186
  201
  216
Funds from operations, $m
  77
  117
  174
  251
  352
  482
  645
  844
  1,083
  1,365
  1,692
  2,064
  2,483
  2,950
  3,463
  4,023
  4,628
  5,278
  5,971
  6,707
  7,484
  8,302
  9,160
  10,058
  10,996
  11,973
  12,991
  14,050
  15,150
  16,294
Change in working capital, $m
  20
  30
  42
  57
  75
  96
  121
  149
  179
  211
  245
  280
  316
  352
  388
  423
  458
  492
  526
  558
  590
  621
  652
  683
  713
  744
  774
  806
  838
  871
Cash from operations, $m
  56
  87
  132
  194
  277
  386
  524
  696
  905
  1,154
  1,447
  1,784
  2,168
  2,598
  3,076
  3,600
  4,170
  4,786
  5,446
  6,149
  6,894
  7,681
  8,508
  9,376
  10,283
  11,230
  12,217
  13,244
  14,313
  15,424
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -3
  -5
  -6
  -8
  -11
  -14
  -18
  -22
  -27
  -32
  -39
  -45
  -53
  -61
  -69
  -79
  -88
  -99
  -110
  -121
  -133
  -146
  -159
  -172
  -186
  -201
New CAPEX, $m
  -4
  -5
  -7
  -10
  -13
  -17
  -21
  -26
  -31
  -37
  -43
  -49
  -55
  -62
  -68
  -74
  -80
  -86
  -92
  -98
  -103
  -109
  -114
  -120
  -125
  -130
  -136
  -141
  -147
  -153
Cash from investing activities, $m
  -5
  -6
  -8
  -12
  -16
  -22
  -27
  -34
  -42
  -51
  -61
  -71
  -82
  -94
  -107
  -119
  -133
  -147
  -161
  -177
  -191
  -208
  -224
  -241
  -258
  -276
  -295
  -313
  -333
  -354
Free cash flow, $m
  52
  81
  123
  182
  261
  364
  496
  661
  863
  1,103
  1,386
  1,713
  2,086
  2,504
  2,969
  3,480
  4,037
  4,639
  5,284
  5,972
  6,702
  7,473
  8,284
  9,135
  10,025
  10,954
  11,922
  12,931
  13,980
  15,070
Issuance/(repayment) of debt, $m
  78
  115
  161
  219
  290
  373
  469
  575
  692
  817
  948
  1,084
  1,222
  1,362
  1,501
  1,639
  1,774
  1,906
  2,036
  2,162
  2,285
  2,406
  2,525
  2,643
  2,761
  2,879
  2,998
  3,120
  3,244
  3,371
Issuance/(repurchase) of shares, $m
  298
  429
  593
  794
  1,029
  1,295
  1,588
  1,897
  2,215
  2,529
  2,831
  3,108
  3,351
  3,554
  3,707
  3,808
  3,853
  3,840
  3,770
  3,644
  3,463
  3,230
  2,949
  2,624
  2,257
  1,853
  1,415
  946
  449
  0
Cash from financing (excl. dividends), $m  
  376
  544
  754
  1,013
  1,319
  1,668
  2,057
  2,472
  2,907
  3,346
  3,779
  4,192
  4,573
  4,916
  5,208
  5,447
  5,627
  5,746
  5,806
  5,806
  5,748
  5,636
  5,474
  5,267
  5,018
  4,732
  4,413
  4,066
  3,693
  3,371
Total cash flow (excl. dividends), $m
  428
  625
  878
  1,195
  1,580
  2,033
  2,553
  3,134
  3,769
  4,449
  5,165
  5,905
  6,659
  7,419
  8,177
  8,927
  9,664
  10,385
  11,090
  11,778
  12,450
  13,109
  13,759
  14,402
  15,043
  15,686
  16,336
  16,996
  17,672
  18,442
Retained Cash Flow (-), $m
  -373
  -545
  -765
  -1,041
  -1,376
  -1,771
  -2,224
  -2,730
  -3,284
  -3,877
  -4,500
  -5,145
  -5,802
  -6,465
  -7,125
  -7,778
  -8,421
  -9,049
  -9,663
  -10,262
  -10,848
  -11,423
  -11,989
  -12,549
  -13,107
  -13,668
  -14,234
  -14,809
  -15,398
  -16,005
Prev. year cash balance distribution, $m
  29
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  84
  80
  113
  154
  203
  262
  328
  403
  485
  573
  665
  760
  857
  955
  1,052
  1,149
  1,244
  1,336
  1,427
  1,515
  1,602
  1,687
  1,770
  1,853
  1,936
  2,018
  2,102
  2,187
  2,274
  2,437
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  80
  74
  98
  127
  158
  190
  222
  252
  279
  300
  316
  324
  326
  321
  309
  292
  271
  246
  220
  193
  166
  140
  116
  94
  75
  59
  45
  34
  25
  18
Current shareholders' claim on cash, %
  65.2
  44.0
  30.7
  22.2
  16.5
  12.6
  9.9
  7.9
  6.5
  5.5
  4.7
  4.1
  3.6
  3.2
  2.9
  2.7
  2.5
  2.3
  2.2
  2.1
  2.0
  1.9
  1.9
  1.8
  1.8
  1.8
  1.8
  1.8
  1.8
  1.8

Alaris Royalty Corp. is a Canada-based company providing capital to private businesses (individually, a Private Company Partner and collectively the Partners). The Company's operations consist of investments in private operating entities in the form of preferred limited partnership interests, preferred interest in limited liability corporations in the United States, or long-term license and royalty arrangements. The Company is an equity provider to service a niche in the capital market, such as steady growth companies with an entrepreneurial management team, incentivized to grow and maintain control of their business. It forms partnerships with private companies where owners want to maintain control of their business (day-to-day operations, corporate culture and long-term objectives). It participates in the business of its Private Company Partners through non-control equity ownership. The Company's subsidiaries include Alaris Cooperatief, U.A. and Alaris USA Inc.

FINANCIAL RATIOS  of  Alaris Royalty Corp. (AD)

Valuation Ratios
P/E Ratio 8.7
Price to Sales 4.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 8
Growth Rates
Sales Growth Rate 53.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 15.1%
Total Debt to Equity 15.1%
Interest Coverage 15
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 9.2%
Return On Total Capital 8.9%
Ret/ On T. Cap. - 3 Yr. Avg. 9%
Return On Equity 10.1%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 74.2%
EBITDA Margin - 3 Yr. Avg. 86.9%
Operating Margin 81.5%
Oper. Margin - 3 Yr. Avg. 72.5%
Pre-Tax Margin 69.4%
Pre-Tax Margin - 3 Yr. Avg. 82.6%
Net Profit Margin 54%
Net Profit Margin - 3 Yr. Avg. 66.3%
Effective Tax Rate 22.1%
Eff/ Tax Rate - 3 Yr. Avg. 20%
Payout Ratio 88.1%

AD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AD stock intrinsic value calculation we used $124 million for the last fiscal year's total revenue generated by Alaris Royalty Corp.. The default revenue input number comes from 2016 income statement of Alaris Royalty Corp.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AD stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AD is calculated based on our internal credit rating of Alaris Royalty Corp., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Alaris Royalty Corp..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AD stock the variable cost ratio is equal to 44.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AD stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.8% for Alaris Royalty Corp..

Corporate tax rate of 27% is the nominal tax rate for Alaris Royalty Corp.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AD stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AD are equal to 4.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Alaris Royalty Corp. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AD is equal to 27.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $655 million for Alaris Royalty Corp. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 36.455 million for Alaris Royalty Corp. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Alaris Royalty Corp. at the current share price and the inputted number of shares is $0.6 billion.

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