Intrinsic value of Cogeco Communications Inc. Subordinate V - CCA

Previous Close

$64.02

  Intrinsic Value

$9.97

stock screener

  Rating & Target

str. sell

-84%

Previous close

$64.02

 
Intrinsic value

$9.97

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of CCA 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 2017), $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 3.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,272
  2,324
  2,384
  2,451
  2,525
  2,606
  2,695
  2,791
  2,895
  3,006
  3,125
  3,251
  3,387
  3,530
  3,682
  3,844
  4,014
  4,195
  4,386
  4,587
  4,800
  5,024
  5,261
  5,510
  5,772
  6,048
  6,339
  6,645
  6,967
  7,305
Variable operating expenses, $m
  2,254
  2,303
  2,360
  2,423
  2,493
  2,571
  2,655
  2,746
  2,844
  2,949
  2,959
  3,079
  3,207
  3,343
  3,487
  3,640
  3,802
  3,973
  4,154
  4,345
  4,546
  4,758
  4,982
  5,218
  5,467
  5,728
  6,003
  6,293
  6,598
  6,918
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
  2,254
  2,303
  2,360
  2,423
  2,493
  2,571
  2,655
  2,746
  2,844
  2,949
  2,959
  3,079
  3,207
  3,343
  3,487
  3,640
  3,802
  3,973
  4,154
  4,345
  4,546
  4,758
  4,982
  5,218
  5,467
  5,728
  6,003
  6,293
  6,598
  6,918
Operating income, $m
  18
  21
  24
  27
  31
  36
  40
  45
  51
  57
  165
  172
  179
  187
  195
  203
  213
  222
  232
  243
  254
  266
  278
  292
  306
  320
  336
  352
  369
  387
EBITDA, $m
  479
  490
  503
  517
  533
  550
  569
  589
  611
  634
  659
  686
  715
  745
  777
  811
  847
  885
  926
  968
  1,013
  1,060
  1,110
  1,163
  1,218
  1,277
  1,338
  1,402
  1,470
  1,542
Interest expense (income), $m
  120
  108
  111
  115
  119
  124
  129
  135
  141
  148
  155
  163
  172
  181
  190
  201
  212
  223
  235
  248
  262
  276
  291
  307
  324
  342
  361
  381
  401
  423
  446
Earnings before tax, $m
  -90
  -90
  -91
  -91
  -92
  -93
  -94
  -96
  -97
  -99
  2
  0
  -2
  -4
  -6
  -8
  -11
  -13
  -16
  -19
  -22
  -25
  -29
  -33
  -37
  -41
  -45
  -50
  -54
  -59
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -90
  -90
  -91
  -91
  -92
  -93
  -94
  -96
  -97
  -99
  2
  0
  -2
  -4
  -6
  -8
  -11
  -13
  -16
  -19
  -22
  -25
  -29
  -33
  -37
  -41
  -45
  -50
  -54
  -59

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
  5,186
  5,305
  5,442
  5,595
  5,764
  5,951
  6,153
  6,373
  6,609
  6,863
  7,134
  7,423
  7,732
  8,059
  8,407
  8,775
  9,165
  9,578
  10,014
  10,474
  10,959
  11,471
  12,011
  12,579
  13,178
  13,809
  14,473
  15,171
  15,906
  16,679
Adjusted assets (=assets-cash), $m
  5,186
  5,305
  5,442
  5,595
  5,764
  5,951
  6,153
  6,373
  6,609
  6,863
  7,134
  7,423
  7,732
  8,059
  8,407
  8,775
  9,165
  9,578
  10,014
  10,474
  10,959
  11,471
  12,011
  12,579
  13,178
  13,809
  14,473
  15,171
  15,906
  16,679
Revenue / Adjusted assets
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
Average production assets, $m
  3,053
  3,123
  3,203
  3,294
  3,393
  3,503
  3,622
  3,751
  3,891
  4,040
  4,200
  4,370
  4,551
  4,744
  4,949
  5,166
  5,395
  5,638
  5,895
  6,166
  6,451
  6,753
  7,070
  7,405
  7,758
  8,129
  8,520
  8,931
  9,363
  9,818
Working capital, $m
  -420
  -430
  -441
  -453
  -467
  -482
  -499
  -516
  -536
  -556
  -578
  -602
  -627
  -653
  -681
  -711
  -743
  -776
  -811
  -849
  -888
  -930
  -973
  -1,019
  -1,068
  -1,119
  -1,173
  -1,229
  -1,289
  -1,351
Total debt, $m
  2,518
  2,603
  2,700
  2,809
  2,930
  3,062
  3,206
  3,362
  3,530
  3,710
  3,903
  4,109
  4,328
  4,561
  4,808
  5,070
  5,348
  5,641
  5,951
  6,278
  6,623
  6,987
  7,371
  7,775
  8,201
  8,649
  9,121
  9,618
  10,140
  10,689
Total liabilities, $m
  3,687
  3,772
  3,869
  3,978
  4,099
  4,231
  4,375
  4,531
  4,699
  4,879
  5,072
  5,278
  5,497
  5,730
  5,977
  6,239
  6,517
  6,810
  7,120
  7,447
  7,792
  8,156
  8,540
  8,944
  9,370
  9,818
  10,290
  10,787
  11,309
  11,858
Total equity, $m
  1,499
  1,533
  1,573
  1,617
  1,666
  1,720
  1,778
  1,842
  1,910
  1,983
  2,062
  2,145
  2,234
  2,329
  2,430
  2,536
  2,649
  2,768
  2,894
  3,027
  3,167
  3,315
  3,471
  3,635
  3,809
  3,991
  4,183
  4,384
  4,597
  4,820
Total liabilities and equity, $m
  5,186
  5,305
  5,442
  5,595
  5,765
  5,951
  6,153
  6,373
  6,609
  6,862
  7,134
  7,423
  7,731
  8,059
  8,407
  8,775
  9,166
  9,578
  10,014
  10,474
  10,959
  11,471
  12,011
  12,579
  13,179
  13,809
  14,473
  15,171
  15,906
  16,678
Debt-to-equity ratio
  1.680
  1.700
  1.720
  1.740
  1.760
  1.780
  1.800
  1.830
  1.850
  1.870
  1.890
  1.920
  1.940
  1.960
  1.980
  2.000
  2.020
  2.040
  2.060
  2.070
  2.090
  2.110
  2.120
  2.140
  2.150
  2.170
  2.180
  2.190
  2.210
  2.220
Adjusted equity ratio
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289
  0.289

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -90
  -90
  -91
  -91
  -92
  -93
  -94
  -96
  -97
  -99
  2
  0
  -2
  -4
  -6
  -8
  -11
  -13
  -16
  -19
  -22
  -25
  -29
  -33
  -37
  -41
  -45
  -50
  -54
  -59
Depreciation, amort., depletion, $m
  461
  470
  479
  490
  502
  514
  528
  544
  560
  578
  494
  514
  535
  558
  582
  608
  635
  663
  693
  725
  759
  794
  832
  871
  913
  956
  1,002
  1,051
  1,102
  1,155
Funds from operations, $m
  372
  380
  389
  398
  409
  421
  434
  448
  463
  479
  496
  514
  534
  555
  576
  600
  624
  650
  677
  706
  737
  769
  803
  839
  876
  916
  957
  1,001
  1,047
  1,096
Change in working capital, $m
  -8
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
Cash from operations, $m
  380
  389
  400
  411
  423
  436
  451
  466
  482
  500
  518
  538
  559
  581
  605
  630
  656
  684
  713
  744
  776
  810
  847
  885
  925
  967
  1,011
  1,058
  1,107
  1,158
Maintenance CAPEX, $m
  -352
  -359
  -367
  -377
  -387
  -399
  -412
  -426
  -441
  -458
  -475
  -494
  -514
  -535
  -558
  -582
  -608
  -635
  -663
  -693
  -725
  -759
  -794
  -832
  -871
  -913
  -956
  -1,002
  -1,051
  -1,102
New CAPEX, $m
  -60
  -70
  -80
  -90
  -100
  -110
  -119
  -129
  -139
  -149
  -160
  -170
  -181
  -193
  -205
  -217
  -230
  -243
  -257
  -271
  -286
  -301
  -318
  -335
  -353
  -371
  -391
  -411
  -433
  -455
Cash from investing activities, $m
  -412
  -429
  -447
  -467
  -487
  -509
  -531
  -555
  -580
  -607
  -635
  -664
  -695
  -728
  -763
  -799
  -838
  -878
  -920
  -964
  -1,011
  -1,060
  -1,112
  -1,167
  -1,224
  -1,284
  -1,347
  -1,413
  -1,484
  -1,557
Free cash flow, $m
  -32
  -40
  -48
  -56
  -64
  -73
  -81
  -89
  -98
  -107
  -117
  -127
  -137
  -147
  -158
  -170
  -182
  -194
  -207
  -221
  -235
  -250
  -266
  -282
  -299
  -317
  -336
  -356
  -376
  -398
Issuance/(repayment) of debt, $m
  74
  85
  97
  109
  121
  132
  144
  156
  168
  180
  193
  206
  219
  233
  247
  262
  277
  293
  310
  327
  345
  364
  384
  404
  426
  448
  472
  497
  522
  549
Issuance/(repurchase) of shares, $m
  118
  125
  130
  136
  141
  147
  153
  159
  165
  172
  77
  83
  91
  98
  106
  115
  123
  132
  142
  152
  162
  173
  185
  197
  210
  223
  237
  251
  267
  283
Cash from financing (excl. dividends), $m  
  192
  210
  227
  245
  262
  279
  297
  315
  333
  352
  270
  289
  310
  331
  353
  377
  400
  425
  452
  479
  507
  537
  569
  601
  636
  671
  709
  748
  789
  832
Total cash flow (excl. dividends), $m
  160
  169
  179
  188
  198
  207
  216
  226
  235
  245
  152
  163
  173
  184
  195
  207
  219
  232
  245
  258
  273
  288
  303
  319
  336
  354
  373
  392
  413
  434
Retained Cash Flow (-), $m
  -118
  -125
  -130
  -136
  -141
  -147
  -153
  -159
  -165
  -172
  -78
  -84
  -91
  -98
  -106
  -115
  -123
  -132
  -142
  -152
  -162
  -173
  -185
  -197
  -210
  -223
  -237
  -251
  -267
  -283
Prev. year cash balance distribution, $m
  129
  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
  171
  45
  49
  53
  56
  60
  63
  66
  70
  73
  74
  79
  83
  86
  89
  92
  96
  99
  103
  106
  110
  114
  118
  122
  127
  131
  136
  141
  146
  151
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  160
  39
  40
  39
  38
  37
  35
  33
  30
  28
  24
  22
  19
  17
  14
  12
  10
  8
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  96.1
  92.2
  88.4
  84.8
  81.2
  77.7
  74.4
  71.2
  68.1
  65.1
  63.9
  62.6
  61.3
  60.0
  58.6
  57.2
  55.9
  54.5
  53.1
  51.8
  50.4
  49.0
  47.7
  46.4
  45.1
  43.8
  42.5
  41.2
  40.0
  38.8

Cogeco Communications Inc., formerly Cogeco Cable Inc., is a Canada-based communications company. The Company provides residential and business customers with video, Internet and telephony services through its two-way broadband fiber networks. The Company operates through three segments: Canadian broadband services, American broadband services and Business information and communications technology (Business ICT) services. The Canadian and American broadband services segments provide a range of video, Internet and telephony services primarily to residential customers and also provide business services to small and medium sized businesses across their coverage areas. The Business ICT services segment provides colocation, network connectivity, hosting, cloud and a portfolio of managed services primarily in Canada, the United States and Europe to small, medium and large enterprises around the world.

FINANCIAL RATIOS  of  Cogeco Communications Inc. Subordinate V (CCA)

Valuation Ratios
P/E Ratio 10.6
Price to Sales 1.4
Price to Book 2
Price to Tangible Book
Price to Cash Flow 3.3
Price to Free Cash Flow 6
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.5%
Cap. Spend. - 3 Yr. Gr. Rate 0.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 152.8%
Total Debt to Equity 161.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity 20.1%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 44.5%
EBITDA Margin - 3 Yr. Avg. 37.9%
Operating Margin 23.7%
Oper. Margin - 3 Yr. Avg. 15.9%
Pre-Tax Margin 17.8%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 13.4%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 24.7%
Eff/ Tax Rate - 3 Yr. Avg. -3.6%
Payout Ratio 28.4%

CCA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CCA stock intrinsic value calculation we used $2227 million for the last fiscal year's total revenue generated by Cogeco Communications Inc. Subordinate V. The default revenue input number comes from 2017 income statement of Cogeco Communications Inc. Subordinate V. 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 CCA stock valuation model: a) initial revenue growth rate of 2% 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 6.6%, whose default value for CCA is calculated based on our internal credit rating of Cogeco Communications Inc. Subordinate V, 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 Cogeco Communications Inc. Subordinate V.
    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 CCA stock the variable cost ratio is equal to 99.3%.

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 CCA 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 4.4% for Cogeco Communications Inc. Subordinate V.

Corporate tax rate of 27% is the nominal tax rate for Cogeco Communications Inc. Subordinate V. 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 CCA 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 CCA are equal to 134.4%.

Life of production assets of 8.5 years is the average useful life of capital assets used in Cogeco Communications Inc. Subordinate V 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 CCA is equal to -18.5%. 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 - $1599 million for Cogeco Communications Inc. Subordinate V - 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 49.491 million for Cogeco Communications Inc. Subordinate V 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 Cogeco Communications Inc. Subordinate V at the current share price and the inputted number of shares is $3.2 billion.

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