Intrinsic value of Altus Group Limited - AIF

Previous Close

$34.25

  Intrinsic Value

$30.82

stock screener

  Rating & Target

hold

-10%

  Value-price divergence*

0%

Previous close

$34.25

 
Intrinsic value

$30.82

 
Up/down potential

-10%

 
Rating

hold

 
Value-price divergence*

0%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AIF 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 1.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   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, %
  6.49
  17.30
  16.07
  14.96
  13.97
  13.07
  12.26
  11.54
  10.88
  10.29
  9.77
  9.29
  8.86
  8.47
  8.13
  7.81
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.79
  5.72
  5.64
  5.58
Revenue, $m
  443
  520
  603
  693
  790
  894
  1,003
  1,119
  1,241
  1,368
  1,502
  1,641
  1,787
  1,938
  2,096
  2,260
  2,430
  2,607
  2,790
  2,981
  3,180
  3,387
  3,602
  3,825
  4,058
  4,301
  4,554
  4,818
  5,093
  5,381
  5,681
Variable operating expenses, $m
 
  420
  484
  553
  627
  706
  790
  878
  971
  1,069
  1,171
  1,256
  1,367
  1,483
  1,604
  1,729
  1,859
  1,994
  2,135
  2,281
  2,433
  2,591
  2,756
  2,927
  3,105
  3,291
  3,484
  3,686
  3,897
  4,117
  4,346
Fixed operating expenses, $m
 
  58
  60
  61
  63
  64
  66
  68
  69
  71
  73
  75
  77
  79
  81
  83
  85
  87
  89
  91
  93
  96
  98
  101
  103
  106
  108
  111
  114
  117
  120
Total operating expenses, $m
  417
  478
  544
  614
  690
  770
  856
  946
  1,040
  1,140
  1,244
  1,331
  1,444
  1,562
  1,685
  1,812
  1,944
  2,081
  2,224
  2,372
  2,526
  2,687
  2,854
  3,028
  3,208
  3,397
  3,592
  3,797
  4,011
  4,234
  4,466
Operating income, $m
  26
  42
  60
  79
  101
  123
  147
  173
  200
  228
  258
  311
  343
  377
  412
  448
  486
  526
  567
  609
  654
  700
  748
  798
  850
  905
  961
  1,021
  1,083
  1,147
  1,215
EBITDA, $m
  59
  79
  99
  122
  146
  172
  199
  228
  258
  290
  324
  359
  395
  433
  473
  514
  557
  602
  648
  697
  747
  799
  853
  910
  969
  1,031
  1,095
  1,162
  1,232
  1,305
  1,381
Interest expense (income), $m
  4
  4
  6
  7
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  73
  78
  83
  88
  93
  99
Earnings before tax, $m
  21
  37
  54
  72
  92
  113
  135
  158
  183
  209
  236
  286
  316
  347
  379
  412
  447
  483
  521
  560
  601
  643
  687
  733
  781
  831
  883
  938
  994
  1,054
  1,116
Tax expense, $m
  7
  10
  15
  20
  25
  30
  36
  43
  49
  56
  64
  77
  85
  94
  102
  111
  121
  130
  141
  151
  162
  174
  186
  198
  211
  224
  238
  253
  269
  285
  301
Net income, $m
  14
  27
  40
  53
  67
  82
  98
  115
  133
  152
  172
  209
  231
  253
  277
  301
  326
  353
  380
  409
  439
  469
  502
  535
  570
  607
  645
  684
  726
  769
  815

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  44
  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
  591
  642
  745
  856
  976
  1,103
  1,238
  1,381
  1,532
  1,689
  1,854
  2,026
  2,206
  2,393
  2,587
  2,790
  3,000
  3,218
  3,445
  3,681
  3,926
  4,181
  4,446
  4,722
  5,010
  5,310
  5,622
  5,948
  6,288
  6,643
  7,013
Adjusted assets (=assets-cash), $m
  547
  642
  745
  856
  976
  1,103
  1,238
  1,381
  1,532
  1,689
  1,854
  2,026
  2,206
  2,393
  2,587
  2,790
  3,000
  3,218
  3,445
  3,681
  3,926
  4,181
  4,446
  4,722
  5,010
  5,310
  5,622
  5,948
  6,288
  6,643
  7,013
Revenue / Adjusted assets
  0.810
  0.810
  0.809
  0.810
  0.809
  0.811
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
Average production assets, $m
  150
  175
  203
  234
  266
  301
  338
  377
  418
  461
  506
  553
  602
  653
  706
  761
  819
  878
  940
  1,005
  1,072
  1,141
  1,214
  1,289
  1,368
  1,449
  1,535
  1,624
  1,716
  1,813
  1,914
Working capital, $m
  81
  51
  60
  69
  78
  88
  99
  111
  123
  135
  149
  163
  177
  192
  207
  224
  241
  258
  276
  295
  315
  335
  357
  379
  402
  426
  451
  477
  504
  533
  562
Total debt, $m
  124
  159
  205
  254
  307
  364
  424
  487
  554
  624
  697
  774
  853
  936
  1,023
  1,113
  1,206
  1,303
  1,404
  1,508
  1,617
  1,730
  1,848
  1,971
  2,098
  2,232
  2,370
  2,515
  2,666
  2,823
  2,988
Total liabilities, $m
  250
  285
  331
  380
  433
  490
  550
  613
  680
  750
  823
  900
  979
  1,062
  1,149
  1,239
  1,332
  1,429
  1,530
  1,634
  1,743
  1,856
  1,974
  2,097
  2,224
  2,358
  2,496
  2,641
  2,792
  2,949
  3,114
Total equity, $m
  341
  357
  414
  476
  542
  613
  689
  768
  852
  939
  1,031
  1,127
  1,227
  1,330
  1,439
  1,551
  1,668
  1,789
  1,915
  2,047
  2,183
  2,325
  2,472
  2,626
  2,786
  2,952
  3,126
  3,307
  3,496
  3,693
  3,899
Total liabilities and equity, $m
  591
  642
  745
  856
  975
  1,103
  1,239
  1,381
  1,532
  1,689
  1,854
  2,027
  2,206
  2,392
  2,588
  2,790
  3,000
  3,218
  3,445
  3,681
  3,926
  4,181
  4,446
  4,723
  5,010
  5,310
  5,622
  5,948
  6,288
  6,642
  7,013
Debt-to-equity ratio
  0.364
  0.450
  0.490
  0.530
  0.570
  0.590
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.700
  0.710
  0.720
  0.720
  0.730
  0.730
  0.740
  0.740
  0.740
  0.750
  0.750
  0.750
  0.760
  0.760
  0.760
  0.760
  0.760
  0.770
Adjusted equity ratio
  0.543
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  27
  40
  53
  67
  82
  98
  115
  133
  152
  172
  209
  231
  253
  277
  301
  326
  353
  380
  409
  439
  469
  502
  535
  570
  607
  645
  684
  726
  769
  815
Depreciation, amort., depletion, $m
  33
  37
  40
  42
  45
  48
  51
  55
  58
  62
  66
  48
  52
  57
  61
  66
  71
  76
  82
  87
  93
  99
  106
  112
  119
  126
  133
  141
  149
  158
  166
Funds from operations, $m
  65
  65
  79
  95
  112
  130
  150
  170
  192
  215
  238
  257
  283
  310
  338
  367
  398
  429
  462
  496
  532
  569
  607
  647
  689
  733
  778
  826
  875
  927
  981
Change in working capital, $m
  -2
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
Cash from operations, $m
  67
  57
  71
  86
  103
  120
  139
  159
  180
  202
  225
  243
  269
  295
  322
  351
  381
  412
  444
  477
  512
  548
  586
  625
  666
  709
  753
  800
  848
  899
  951
Maintenance CAPEX, $m
  0
  -13
  -15
  -18
  -20
  -23
  -26
  -29
  -33
  -36
  -40
  -44
  -48
  -52
  -57
  -61
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -106
  -112
  -119
  -126
  -133
  -141
  -149
  -158
New CAPEX, $m
  -7
  -26
  -28
  -30
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -72
  -75
  -79
  -82
  -85
  -89
  -93
  -97
  -101
Cash from investing activities, $m
  -8
  -39
  -43
  -48
  -53
  -58
  -63
  -68
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -116
  -123
  -131
  -138
  -146
  -154
  -163
  -171
  -181
  -191
  -201
  -211
  -222
  -234
  -246
  -259
Free cash flow, $m
  59
  18
  28
  38
  50
  62
  76
  90
  106
  123
  140
  152
  172
  192
  213
  234
  257
  281
  306
  331
  358
  385
  414
  444
  475
  508
  542
  577
  614
  652
  693
Issuance/(repayment) of debt, $m
  -11
  42
  46
  49
  53
  57
  60
  63
  67
  70
  73
  76
  80
  83
  86
  90
  93
  97
  101
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
Issuance/(repurchase) of shares, $m
  -4
  25
  18
  9
  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 from financing (excl. dividends), $m  
  -15
  67
  64
  58
  53
  57
  60
  63
  67
  70
  73
  76
  80
  83
  86
  90
  93
  97
  101
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
Total cash flow (excl. dividends), $m
  43
  86
  91
  97
  103
  119
  136
  154
  173
  193
  213
  229
  251
  275
  299
  324
  351
  378
  406
  436
  467
  499
  532
  567
  603
  641
  681
  722
  765
  810
  857
Retained Cash Flow (-), $m
  10
  -53
  -57
  -62
  -66
  -71
  -75
  -79
  -84
  -88
  -92
  -96
  -100
  -104
  -108
  -112
  -117
  -121
  -126
  -131
  -136
  -142
  -148
  -154
  -160
  -167
  -174
  -181
  -189
  -197
  -206
Prev. year cash balance distribution, $m
 
  37
  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
 
  70
  34
  35
  36
  48
  61
  74
  89
  105
  121
  133
  151
  171
  191
  212
  234
  256
  280
  305
  330
  357
  385
  413
  443
  474
  507
  541
  576
  613
  651
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
 
  67
  31
  30
  30
  37
  44
  50
  56
  60
  64
  63
  65
  65
  64
  62
  59
  56
  52
  47
  42
  37
  32
  27
  23
  18
  15
  12
  9
  7
  5
Current shareholders' claim on cash, %
  100
  97.9
  96.7
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1

Altus Group Ltd provides independent advisory services, software and data solutions. The Company's segments include Property Tax Consulting (Property Tax); Research, Valuation & Advisory (RVA); ARGUS Software; Geomatics, and Cost Consulting & Project Management (Cost). The Property Tax segment performs property tax assessment reviews and appeals, and assists with property tax compliance filings. The RVA segment performs real estate valuations, litigation support, financial due diligence, research and real estate-related services. The ARGUS Software segment offers software and solutions for analysis and management of commercial real estate investments. The Geomatics segment provides geomatics solutions, such as geographic information systems, digital mapping, remote sensing, three-dimensional laser scanning and orthophoto maps. The Cost segment provides construction cost planning, loan monitoring and project management services to construction companies and financial institutions.

FINANCIAL RATIOS  of  Altus Group Limited (AIF)

Valuation Ratios
P/E Ratio 90.9
Price to Sales 2.9
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 19
Price to Free Cash Flow 21.2
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 7%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 34.3%
Total Debt to Equity 36.4%
Interest Coverage 6
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 2.9%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 4%
Return On Equity - 3 Yr. Avg. 4.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 13.1%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 5.9%
Oper. Margin - 3 Yr. Avg. 7.2%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 4.2%
Net Profit Margin 3.2%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 25%
Payout Ratio 135.7%

AIF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AIF stock intrinsic value calculation we used $443 million for the last fiscal year's total revenue generated by Altus Group Limited. The default revenue input number comes from 2016 income statement of Altus Group Limited. 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 AIF stock valuation model: a) initial revenue growth rate of 17.3% 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 AIF is calculated based on our internal credit rating of Altus Group Limited, 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 Altus Group Limited.
    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 AIF stock the variable cost ratio is equal to 81.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $57 million in the base year in the intrinsic value calculation for AIF 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 3.5% for Altus Group Limited.

Corporate tax rate of 27% is the nominal tax rate for Altus Group Limited. 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 AIF 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 AIF are equal to 33.7%.

Life of production assets of 11.5 years is the average useful life of capital assets used in Altus Group Limited 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 AIF is equal to 9.9%. 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 - $341 million for Altus Group Limited - 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 38.66 million for Altus Group Limited 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 Altus Group Limited at the current share price and the inputted number of shares is $1.3 billion.

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Financial statements of AIF
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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