Intrinsic value of ECN Capital Corp. - ECN

Previous Close

$3.96

  Intrinsic Value

$4.02

stock screener

  Rating & Target

hold

+2%

  Value-price divergence*

0%

Previous close

$3.96

 
Intrinsic value

$4.02

 
Up/down potential

+2%

 
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 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 1.5

 

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
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
Revenue, $m
  395
  429
  464
  500
  538
  577
  618
  660
  704
  750
  797
  847
  899
  952
  1,009
  1,067
  1,128
  1,192
  1,258
  1,328
  1,401
  1,477
  1,556
  1,639
  1,726
  1,817
  1,913
  2,013
  2,118
  2,227
  2,342
Variable operating expenses, $m
 
  264
  285
  307
  330
  354
  380
  406
  433
  461
  490
  520
  552
  585
  619
  655
  692
  731
  772
  815
  860
  906
  955
  1,006
  1,059
  1,115
  1,174
  1,235
  1,300
  1,367
  1,438
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
  264
  285
  307
  330
  354
  380
  406
  433
  461
  490
  520
  552
  585
  619
  655
  692
  731
  772
  815
  860
  906
  955
  1,006
  1,059
  1,115
  1,174
  1,235
  1,300
  1,367
  1,438
Operating income, $m
  31
  165
  179
  193
  207
  222
  238
  254
  271
  289
  308
  327
  347
  368
  390
  412
  436
  460
  486
  513
  541
  570
  601
  633
  667
  702
  739
  777
  818
  860
  905
EBITDA, $m
  99
  169
  183
  197
  212
  228
  244
  260
  278
  296
  315
  334
  354
  376
  398
  421
  445
  470
  496
  524
  552
  582
  614
  647
  681
  717
  755
  794
  835
  879
  924
Interest expense (income), $m
  164
  165
  179
  194
  209
  225
  242
  259
  277
  296
  316
  336
  357
  379
  402
  426
  451
  477
  504
  532
  562
  593
  625
  659
  695
  732
  771
  811
  854
  898
  945
Earnings before tax, $m
  31
  0
  0
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
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
  0
  0
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40

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
  6,913
  7,476
  8,062
  8,670
  9,303
  9,960
  10,644
  11,354
  12,093
  12,861
  13,661
  14,495
  15,363
  16,267
  17,211
  18,196
  19,223
  20,297
  21,418
  22,590
  23,816
  25,098
  26,439
  27,843
  29,313
  30,853
  32,465
  34,154
  35,925
  37,780
Adjusted assets (=assets-cash), $m
  6,390
  6,913
  7,476
  8,062
  8,670
  9,303
  9,960
  10,644
  11,354
  12,093
  12,861
  13,661
  14,495
  15,363
  16,267
  17,211
  18,196
  19,223
  20,297
  21,418
  22,590
  23,816
  25,098
  26,439
  27,843
  29,313
  30,853
  32,465
  34,154
  35,925
  37,780
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
  18
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  61
  64
  67
  71
  75
  78
  83
  87
  91
  96
Working capital, $m
  0
  214
  232
  250
  269
  288
  309
  330
  352
  375
  399
  424
  449
  476
  504
  534
  564
  596
  629
  664
  700
  738
  778
  820
  863
  909
  956
  1,006
  1,059
  1,114
  1,171
Total debt, $m
  4,505
  4,832
  5,234
  5,652
  6,087
  6,538
  7,008
  7,496
  8,003
  8,530
  9,079
  9,650
  10,245
  10,865
  11,511
  12,185
  12,888
  13,622
  14,388
  15,189
  16,026
  16,901
  17,816
  18,774
  19,776
  20,826
  21,925
  23,076
  24,282
  25,546
  26,871
Total liabilities, $m
  4,609
  4,936
  5,338
  5,756
  6,191
  6,642
  7,112
  7,600
  8,107
  8,634
  9,183
  9,754
  10,349
  10,969
  11,615
  12,289
  12,992
  13,726
  14,492
  15,293
  16,130
  17,005
  17,920
  18,878
  19,880
  20,930
  22,029
  23,180
  24,386
  25,650
  26,975
Total equity, $m
  1,827
  1,977
  2,138
  2,306
  2,480
  2,661
  2,849
  3,044
  3,247
  3,459
  3,678
  3,907
  4,145
  4,394
  4,652
  4,922
  5,204
  5,498
  5,805
  6,126
  6,461
  6,811
  7,178
  7,562
  7,963
  8,384
  8,824
  9,285
  9,768
  10,274
  10,805
Total liabilities and equity, $m
  6,436
  6,913
  7,476
  8,062
  8,671
  9,303
  9,961
  10,644
  11,354
  12,093
  12,861
  13,661
  14,494
  15,363
  16,267
  17,211
  18,196
  19,224
  20,297
  21,419
  22,591
  23,816
  25,098
  26,440
  27,843
  29,314
  30,853
  32,465
  34,154
  35,924
  37,780
Debt-to-equity ratio
  2.466
  2.440
  2.450
  2.450
  2.450
  2.460
  2.460
  2.460
  2.460
  2.470
  2.470
  2.470
  2.470
  2.470
  2.470
  2.480
  2.480
  2.480
  2.480
  2.480
  2.480
  2.480
  2.480
  2.480
  2.480
  2.480
  2.480
  2.490
  2.490
  2.490
  2.490
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
  0
  0
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
Depreciation, amort., depletion, $m
  68
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
Funds from operations, $m
  -446
  4
  4
  4
  3
  2
  2
  1
  0
  0
  -1
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -9
  -10
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
Change in working capital, $m
  -338
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
Cash from operations, $m
  -108
  -13
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
New CAPEX, $m
  -4
  -2
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
Cash from investing activities, $m
  24
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Free cash flow, $m
  -84
  -18
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -102
Issuance/(repayment) of debt, $m
  -69
  373
  402
  418
  435
  452
  469
  488
  507
  527
  549
  571
  595
  620
  646
  674
  703
  734
  766
  801
  837
  875
  915
  958
  1,002
  1,050
  1,099
  1,151
  1,206
  1,264
  1,325
Issuance/(repurchase) of shares, $m
  199
  150
  161
  169
  176
  184
  192
  200
  209
  218
  228
  238
  248
  259
  271
  284
  297
  310
  325
  340
  356
  373
  391
  410
  429
  450
  472
  495
  519
  544
  571
Cash from financing (excl. dividends), $m  
  130
  523
  563
  587
  611
  636
  661
  688
  716
  745
  777
  809
  843
  879
  917
  958
  1,000
  1,044
  1,091
  1,141
  1,193
  1,248
  1,306
  1,368
  1,431
  1,500
  1,571
  1,646
  1,725
  1,808
  1,896
Total cash flow (excl. dividends), $m
  46
  505
  545
  567
  589
  612
  636
  661
  687
  715
  744
  774
  806
  839
  875
  912
  952
  994
  1,038
  1,084
  1,133
  1,185
  1,240
  1,297
  1,358
  1,421
  1,488
  1,559
  1,634
  1,712
  1,794
Retained Cash Flow (-), $m
  -236
  -150
  -161
  -169
  -176
  -184
  -192
  -200
  -209
  -218
  -228
  -238
  -248
  -259
  -271
  -284
  -297
  -310
  -325
  -340
  -356
  -373
  -391
  -410
  -429
  -450
  -472
  -495
  -519
  -544
  -571
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
 
  355
  384
  398
  413
  428
  444
  461
  478
  497
  516
  536
  557
  580
  604
  629
  655
  683
  713
  744
  777
  812
  849
  887
  928
  971
  1,017
  1,064
  1,115
  1,167
  1,223
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
 
  318
  306
  278
  251
  223
  195
  169
  144
  121
  100
  81
  65
  51
  39
  29
  21
  15
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  91.1
  83.1
  76.0
  69.7
  64.1
  59.0
  54.5
  50.4
  46.7
  43.3
  40.2
  37.4
  34.8
  32.4
  30.3
  28.2
  26.4
  24.6
  23.0
  21.6
  20.2
  18.9
  17.7
  16.6
  15.5
  14.6
  13.7
  12.8
  12.0
  11.3

ECN Capital Corp is a Canada-based independent commercial finance company. The Company operates across North America in the following verticals of the commercial finance market: Rail Finance, Commercial and Vendor (C&V) Finance, and Commercial Aviation Finance. Through its C&V vertical, the Company provides financing and leasing solutions to manufacturers, dealers, distributors and end-users of capital equipment across a range of industries such as food service, transportation, construction, manufacturing, healthcare, office equipment and technology products. Through its Rail and Commercial Aviation verticals, ECN Capital Corp is focused on originating, arranging, funding, structuring and managing portfolios of finance assets secured by leased equipment in these transportation industries.

FINANCIAL RATIOS  of  ECN Capital Corp. (ECN)

Valuation Ratios
P/E Ratio 46.5
Price to Sales 3.9
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -14.2
Price to Free Cash Flow -13.7
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 8.5% 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 389.333 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 $1.5 billion.

RELATED COMPANIES Price Int.Val. Rating
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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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