Intrinsic value of ECN Capital Corp. - ECN

Previous Close

$4.00

  Intrinsic Value

$1.53

stock screener

  Rating & Target

str. sell

-62%

  Value-price divergence*

0%

Previous close

$4.00

 
Intrinsic value

$1.53

 
Up/down potential

-62%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of ECN 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 1.6

 

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, %
  8.52
  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
  395
  403
  412
  423
  435
  448
  462
  478
  495
  513
  533
  554
  577
  601
  626
  653
  682
  712
  744
  778
  814
  851
  891
  933
  977
  1,024
  1,073
  1,124
  1,179
  1,236
  1,296
Variable operating expenses, $m
 
  248
  253
  260
  267
  275
  284
  294
  304
  316
  328
  340
  354
  369
  384
  401
  418
  437
  457
  477
  499
  523
  547
  573
  600
  628
  658
  690
  723
  758
  795
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
  364
  248
  253
  260
  267
  275
  284
  294
  304
  316
  328
  340
  354
  369
  384
  401
  418
  437
  457
  477
  499
  523
  547
  573
  600
  628
  658
  690
  723
  758
  795
Operating income, $m
  31
  155
  159
  163
  167
  172
  178
  184
  191
  198
  205
  214
  223
  232
  242
  252
  263
  275
  287
  300
  314
  329
  344
  360
  377
  395
  414
  434
  455
  477
  500
EBITDA, $m
  99
  159
  163
  167
  171
  177
  182
  189
  195
  203
  210
  219
  227
  237
  247
  258
  269
  281
  294
  307
  321
  336
  352
  368
  385
  404
  423
  444
  465
  487
  511
Interest expense (income), $m
  164
  165
  168
  172
  176
  181
  187
  193
  200
  207
  215
  223
  232
  242
  252
  263
  274
  287
  300
  313
  328
  343
  359
  376
  394
  413
  432
  453
  475
  498
  523
Earnings before tax, $m
  31
  -10
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Tax expense, $m
  -2
  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
Net income, $m
  33
  -10
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  46
  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
  6,436
  6,498
  6,648
  6,819
  7,011
  7,223
  7,456
  7,710
  7,985
  8,281
  8,599
  8,939
  9,302
  9,688
  10,099
  10,534
  10,996
  11,485
  12,001
  12,547
  13,124
  13,732
  14,374
  15,050
  15,762
  16,513
  17,303
  18,134
  19,010
  19,930
  20,899
Adjusted assets (=assets-cash), $m
  6,390
  6,498
  6,648
  6,819
  7,011
  7,223
  7,456
  7,710
  7,985
  8,281
  8,599
  8,939
  9,302
  9,688
  10,099
  10,534
  10,996
  11,485
  12,001
  12,547
  13,124
  13,732
  14,374
  15,050
  15,762
  16,513
  17,303
  18,134
  19,010
  19,930
  20,899
Revenue / Adjusted assets
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
  0.062
Average production assets, $m
  16
  17
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
Working capital, $m
  0
  201
  206
  211
  217
  224
  231
  239
  248
  257
  267
  277
  288
  300
  313
  327
  341
  356
  372
  389
  407
  426
  446
  467
  489
  512
  536
  562
  589
  618
  648
Total debt, $m
  4,505
  4,536
  4,643
  4,765
  4,902
  5,053
  5,220
  5,401
  5,597
  5,809
  6,036
  6,278
  6,537
  6,813
  7,106
  7,417
  7,747
  8,096
  8,465
  8,855
  9,266
  9,701
  10,159
  10,642
  11,150
  11,686
  12,250
  12,844
  13,469
  14,126
  14,818
Total liabilities, $m
  4,609
  4,640
  4,747
  4,869
  5,006
  5,157
  5,324
  5,505
  5,701
  5,913
  6,140
  6,382
  6,641
  6,917
  7,210
  7,521
  7,851
  8,200
  8,569
  8,959
  9,370
  9,805
  10,263
  10,746
  11,254
  11,790
  12,354
  12,948
  13,573
  14,230
  14,922
Total equity, $m
  1,827
  1,859
  1,901
  1,950
  2,005
  2,066
  2,132
  2,205
  2,284
  2,368
  2,459
  2,557
  2,660
  2,771
  2,888
  3,013
  3,145
  3,285
  3,432
  3,589
  3,753
  3,927
  4,111
  4,304
  4,508
  4,723
  4,949
  5,186
  5,437
  5,700
  5,977
Total liabilities and equity, $m
  6,436
  6,499
  6,648
  6,819
  7,011
  7,223
  7,456
  7,710
  7,985
  8,281
  8,599
  8,939
  9,301
  9,688
  10,098
  10,534
  10,996
  11,485
  12,001
  12,548
  13,123
  13,732
  14,374
  15,050
  15,762
  16,513
  17,303
  18,134
  19,010
  19,930
  20,899
Debt-to-equity ratio
  2.466
  2.440
  2.440
  2.440
  2.440
  2.450
  2.450
  2.450
  2.450
  2.450
  2.450
  2.460
  2.460
  2.460
  2.460
  2.460
  2.460
  2.460
  2.470
  2.470
  2.470
  2.470
  2.470
  2.470
  2.470
  2.470
  2.480
  2.480
  2.480
  2.480
  2.480
Adjusted equity ratio
  0.279
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  -10
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Depreciation, amort., depletion, $m
  68
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
Funds from operations, $m
  -446
  -6
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
Change in working capital, $m
  -338
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
Cash from operations, $m
  -108
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -37
  -39
  -42
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
New CAPEX, $m
  -4
  -1
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  24
  -4
  -3
  -3
  -3
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
Free cash flow, $m
  -84
  -14
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
Issuance/(repayment) of debt, $m
  -69
  77
  107
  122
  137
  152
  167
  181
  196
  211
  227
  243
  259
  276
  293
  311
  330
  349
  369
  390
  412
  434
  458
  483
  509
  536
  564
  594
  625
  657
  691
Issuance/(repurchase) of shares, $m
  199
  41
  52
  58
  64
  70
  76
  82
  88
  94
  100
  106
  113
  120
  128
  135
  143
  151
  160
  169
  178
  188
  198
  209
  220
  232
  244
  257
  270
  284
  299
Cash from financing (excl. dividends), $m  
  130
  118
  159
  180
  201
  222
  243
  263
  284
  305
  327
  349
  372
  396
  421
  446
  473
  500
  529
  559
  590
  622
  656
  692
  729
  768
  808
  851
  895
  941
  990
Total cash flow (excl. dividends), $m
  46
  105
  145
  166
  186
  206
  226
  246
  266
  287
  308
  329
  351
  374
  397
  421
  446
  473
  500
  528
  557
  588
  620
  654
  689
  726
  764
  804
  846
  890
  936
Retained Cash Flow (-), $m
  -236
  -41
  -52
  -58
  -64
  -70
  -76
  -82
  -88
  -94
  -100
  -106
  -113
  -120
  -128
  -135
  -143
  -151
  -160
  -169
  -178
  -188
  -198
  -209
  -220
  -232
  -244
  -257
  -270
  -284
  -299
Prev. year cash balance distribution, $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 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
 
  63
  93
  108
  122
  136
  150
  164
  179
  193
  207
  222
  238
  253
  269
  286
  303
  321
  340
  359
  379
  400
  422
  445
  469
  494
  520
  547
  576
  606
  637
Discount rate, %
 
  11.50
  12.08
  12.68
  13.31
  13.98
  14.68
  15.41
  16.18
  16.99
  17.84
  18.73
  19.67
  20.65
  21.68
  22.77
  23.91
  25.10
  26.36
  27.68
  29.06
  30.51
  32.04
  33.64
  35.32
  37.09
  38.94
  40.89
  42.93
  45.08
  47.34
PV of cash for distribution, $m
 
  57
  74
  75
  74
  71
  66
  60
  54
  47
  40
  34
  28
  22
  17
  13
  10
  7
  5
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.4
  94.4
  91.1
  87.8
  84.4
  80.9
  77.5
  74.1
  70.7
  67.4
  64.1
  61.0
  57.9
  55.0
  52.1
  49.4
  46.8
  44.3
  41.9
  39.6
  37.4
  35.3
  33.4
  31.5
  29.7
  28.0
  26.4
  24.9
  23.5
  22.1

ECN Capital Corp. engages in the commercial finance business in North America. It provides commercial aviation finance, including financing and leasing solutions to customers in the transportation, construction, commercial, industrial, healthcare, franchise, technology, office products, and energy sectors. The company also offers rail finance solutions, such as railcar leasing and other secured financing for railcars for the North American rail industry; and participates in the secondary market. In addition, it focuses on arranging, co-investing in, and managing portfolios of commercial aviation funds on behalf of institutional investors; and manages re-leasing, servicing, and aircraft maintenance management through third parties. The company was founded in 2016 and is headquartered in Toronto, Canada.


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FINANCIAL RATIOS  of  ECN Capital Corp. (ECN)

Valuation Ratios
P/E Ratio 46.9
Price to Sales 3.9
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -14.3
Price to Free Cash Flow -13.8
Growth Rates
Sales Growth Rate 8.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 300%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 214.1%
Total Debt to Equity 246.6%
Interest Coverage 1
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2%
Return On Equity 1.9%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 66.6%
EBITDA Margin - 3 Yr. Avg. 66.1%
Operating Margin 7.8%
Oper. Margin - 3 Yr. Avg. 27.6%
Pre-Tax Margin 7.8%
Pre-Tax Margin - 3 Yr. Avg. 27.6%
Net Profit Margin 8.4%
Net Profit Margin - 3 Yr. Avg. 21.8%
Effective Tax Rate -6.5%
Eff/ Tax Rate - 3 Yr. Avg. 13.7%
Payout Ratio 0%

ECN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ECN stock intrinsic value calculation we used $395 million for the last fiscal year's total revenue generated by ECN Capital Corp.. The default revenue input number comes from 2016 income statement of ECN Capital 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 ECN 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 11.5%, whose default value for ECN is calculated based on our internal credit rating of ECN Capital 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 ECN Capital 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 ECN stock the variable cost ratio is equal to 61.5%.

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 ECN 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 3.7% for ECN Capital Corp..

Corporate tax rate of 27% is the nominal tax rate for ECN Capital 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 ECN 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 ECN are equal to 4.1%.

Life of production assets of 0.3 years is the average useful life of capital assets used in ECN Capital 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 ECN is equal to 50%. 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 - $1827 million for ECN Capital 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 392.573 million for ECN Capital 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 ECN Capital Corp. at the current share price and the inputted number of shares is $1.6 billion.

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Stock chart of ECN Financial statements of ECN
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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