Intrinsic value of Cambium Learning Group - ABCD

Previous Close

$6.22

  Intrinsic Value

$1.07

stock screener

  Rating & Target

str. sell

-83%

  Value-price divergence*

+23%

Previous close

$6.22

 
Intrinsic value

$1.07

 
Up/down potential

-83%

 
Rating

str. sell

 
Value-price divergence*

+23%

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

We calculate the intrinsic value of ABCD 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 0.3

 

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, %
  4.83
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  152
  156
  160
  165
  171
  177
  183
  190
  197
  205
  213
  222
  231
  241
  252
  263
  275
  288
  301
  315
  329
  345
  361
  379
  397
  416
  436
  457
  479
  503
  527
Variable operating expenses, $m
 
  29
  29
  30
  31
  32
  33
  34
  35
  36
  37
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  70
  73
  77
  80
Fixed operating expenses, $m
 
  112
  115
  117
  120
  123
  126
  130
  133
  136
  140
  143
  147
  150
  154
  158
  162
  166
  170
  174
  179
  183
  188
  192
  197
  202
  207
  212
  218
  223
  229
Total operating expenses, $m
  134
  141
  144
  147
  151
  155
  159
  164
  168
  172
  177
  177
  182
  187
  192
  198
  204
  210
  216
  222
  229
  236
  243
  250
  257
  265
  273
  282
  291
  300
  309
Operating income, $m
  18
  16
  17
  18
  20
  21
  24
  26
  29
  33
  36
  45
  50
  54
  60
  65
  71
  78
  85
  93
  101
  109
  119
  129
  139
  150
  162
  175
  188
  203
  218
EBITDA, $m
  40
  26
  28
  29
  31
  33
  36
  38
  42
  45
  49
  54
  58
  64
  69
  75
  82
  89
  96
  105
  113
  123
  132
  143
  154
  166
  179
  192
  207
  222
  238
Interest expense (income), $m
  6
  5
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
Earnings before tax, $m
  11
  11
  17
  18
  19
  21
  23
  25
  28
  31
  34
  42
  46
  51
  55
  60
  66
  72
  78
  85
  93
  101
  109
  118
  128
  138
  149
  161
  173
  186
  200
Tax expense, $m
  1
  3
  5
  5
  5
  6
  6
  7
  7
  8
  9
  11
  12
  14
  15
  16
  18
  19
  21
  23
  25
  27
  29
  32
  35
  37
  40
  43
  47
  50
  54
Net income, $m
  10
  8
  12
  13
  14
  15
  17
  18
  20
  22
  25
  31
  34
  37
  40
  44
  48
  53
  57
  62
  68
  73
  80
  86
  93
  101
  109
  117
  126
  136
  146

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5
  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
  132
  130
  134
  138
  143
  147
  153
  158
  165
  171
  178
  185
  193
  202
  211
  220
  230
  240
  251
  263
  275
  288
  302
  316
  331
  347
  364
  382
  400
  420
  440
Adjusted assets (=assets-cash), $m
  127
  130
  134
  138
  143
  147
  153
  158
  165
  171
  178
  185
  193
  202
  211
  220
  230
  240
  251
  263
  275
  288
  302
  316
  331
  347
  364
  382
  400
  420
  440
Revenue / Adjusted assets
  1.197
  1.200
  1.194
  1.196
  1.196
  1.204
  1.196
  1.203
  1.194
  1.199
  1.197
  1.200
  1.197
  1.193
  1.194
  1.195
  1.196
  1.200
  1.199
  1.198
  1.196
  1.198
  1.195
  1.199
  1.199
  1.199
  1.198
  1.196
  1.198
  1.198
  1.198
Average production assets, $m
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  92
  96
  101
Working capital, $m
  -72
  -72
  -74
  -76
  -79
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -107
  -111
  -116
  -121
  -127
  -133
  -139
  -145
  -152
  -159
  -167
  -175
  -183
  -192
  -201
  -211
  -221
  -232
  -243
Total debt, $m
  74
  -2
  2
  5
  9
  14
  18
  24
  29
  35
  41
  48
  55
  62
  70
  79
  88
  97
  107
  118
  129
  140
  153
  166
  179
  194
  209
  225
  241
  259
  277
Total liabilities, $m
  193
  117
  121
  124
  128
  133
  137
  143
  148
  154
  160
  167
  174
  181
  189
  198
  207
  216
  226
  237
  248
  259
  272
  285
  298
  313
  328
  344
  360
  378
  396
Total equity, $m
  -61
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
Total liabilities and equity, $m
  132
  130
  134
  138
  142
  148
  152
  159
  164
  171
  178
  186
  193
  201
  210
  220
  230
  240
  251
  263
  276
  288
  302
  317
  331
  348
  364
  382
  400
  420
  440
Debt-to-equity ratio
  -1.213
  -0.130
  0.120
  0.380
  0.650
  0.930
  1.210
  1.490
  1.770
  2.040
  2.320
  2.580
  2.840
  3.100
  3.350
  3.590
  3.820
  4.050
  4.260
  4.470
  4.680
  4.870
  5.060
  5.240
  5.410
  5.570
  5.730
  5.880
  6.030
  6.170
  6.300
Adjusted equity ratio
  -0.520
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  8
  12
  13
  14
  15
  17
  18
  20
  22
  25
  31
  34
  37
  40
  44
  48
  53
  57
  62
  68
  73
  80
  86
  93
  101
  109
  117
  126
  136
  146
Depreciation, amort., depletion, $m
  22
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  8
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
Funds from operations, $m
  54
  19
  23
  24
  25
  27
  28
  30
  33
  35
  38
  39
  43
  46
  50
  54
  59
  63
  69
  74
  80
  87
  93
  101
  108
  117
  125
  135
  145
  155
  166
Change in working capital, $m
  10
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Cash from operations, $m
  44
  21
  25
  26
  28
  29
  31
  34
  36
  39
  42
  43
  47
  51
  55
  59
  64
  69
  75
  81
  87
  94
  101
  109
  117
  125
  135
  145
  155
  166
  178
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
New CAPEX, $m
  -20
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
Cash from investing activities, $m
  -20
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -19
  -20
  -21
  -21
  -22
  -24
Free cash flow, $m
  24
  14
  18
  19
  20
  22
  23
  25
  27
  30
  32
  34
  37
  40
  44
  48
  52
  56
  61
  67
  72
  78
  85
  92
  99
  107
  115
  124
  133
  143
  154
Issuance/(repayment) of debt, $m
  -29
  -71
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
Issuance/(repurchase) of shares, $m
  1
  66
  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 from financing (excl. dividends), $m  
  -28
  -5
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
Total cash flow (excl. dividends), $m
  -4
  9
  22
  23
  24
  26
  28
  30
  33
  35
  38
  40
  44
  48
  52
  56
  61
  66
  71
  77
  83
  90
  97
  104
  113
  121
  130
  140
  150
  161
  172
Retained Cash Flow (-), $m
  -13
  -74
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
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
 
  -65
  21
  23
  24
  26
  28
  30
  32
  35
  38
  40
  43
  47
  51
  55
  60
  65
  70
  76
  82
  89
  96
  103
  111
  119
  128
  138
  148
  159
  170
Discount rate, %
 
  9.90
  10.40
  10.91
  11.46
  12.03
  12.64
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.83
  25.02
  26.27
  27.58
  28.96
  30.41
  31.93
  33.52
  35.20
  36.96
  38.81
  40.75
PV of cash for distribution, $m
 
  -59
  18
  17
  16
  15
  14
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
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Cambium Learning Group, Inc. is an educational solutions and services company. The Company's product lines include Learning A-Z (www.learninga-z.com), ExploreLearning (www.explorelearning.com), Voyager Sopris Learning (www.voyagersopris.com) and Kurzweil Education (www.kurzweiledu.com). It operates through three segments: Learning A-Z, Voyager Sopris Learning and ExploreLearning. The product lines provide technology solutions for online learning and professional support; intervention and supplemental instructional materials; professional development and school-improvement services; valid assessments, and materials. Learning A-Z is a preK-6 educational technology provider of digitally delivered resources and tools that support instruction and student growth in reading, writing, and science. Voyager Sopris Learning segment includes its Voyager Sopris Learning and Kurzweil Education brands. ExploreLearning develops online solutions to improve student learning in math and science.

FINANCIAL RATIOS  of  Cambium Learning Group (ABCD)

Valuation Ratios
P/E Ratio 28.7
Price to Sales 1.9
Price to Book -4.7
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 12
Growth Rates
Sales Growth Rate 4.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 4.6%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity -109.8%
Total Debt to Equity -121.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 11.3%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 48.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.9%
Return On Equity -14.8%
Return On Equity - 3 Yr. Avg. 0.3%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 68.4%
Gross Margin - 3 Yr. Avg. 65.1%
EBITDA Margin 25.7%
EBITDA Margin - 3 Yr. Avg. 24.6%
Operating Margin 11.8%
Oper. Margin - 3 Yr. Avg. 8.3%
Pre-Tax Margin 7.2%
Pre-Tax Margin - 3 Yr. Avg. 0.1%
Net Profit Margin 6.6%
Net Profit Margin - 3 Yr. Avg. -0.4%
Effective Tax Rate 9.1%
Eff/ Tax Rate - 3 Yr. Avg. -0.7%
Payout Ratio 0%

ABCD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABCD stock intrinsic value calculation we used $152 million for the last fiscal year's total revenue generated by Cambium Learning Group. The default revenue input number comes from 2016 income statement of Cambium Learning Group. 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 ABCD stock valuation model: a) initial revenue growth rate of 2.6% 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 9.9%, whose default value for ABCD is calculated based on our internal credit rating of Cambium Learning Group, 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 Cambium Learning Group.
    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 ABCD stock the variable cost ratio is equal to 18.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $109 million in the base year in the intrinsic value calculation for ABCD 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 Cambium Learning Group.

Corporate tax rate of 27% is the nominal tax rate for Cambium Learning Group. 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 ABCD 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 ABCD are equal to 19.1%.

Life of production assets of 3.5 years is the average useful life of capital assets used in Cambium Learning Group 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 ABCD is equal to -46.1%. 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 - $-61 million for Cambium Learning Group - 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 47.09 million for Cambium Learning Group 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 Cambium Learning Group at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Voyager Sopris Learning Names New VP of Research   [Sep-21-17 06:00AM  GlobeNewswire]
▶ 3 Top Education Stocks to Buy in 2017   [Sep-18-17 07:03AM  Motley Fool]
▶ Cambium Learning posts 2Q profit   [Aug-10-17 09:24PM  Associated Press]
▶ ExploreLearning announces new free Gizmos accounts   [Aug-08-17 06:00AM  GlobeNewswire]
▶ Cambium Learning posts 1Q profit   [06:22AM  Associated Press]
▶ ExploreLearning Gizmos wins 2017 REVERE Award   [Mar-28-17 06:00AM  GlobeNewswire]
▶ Cambium Learning posts 4Q profit   [06:16AM  Associated Press]
▶ Cambium Learning Group to Present at September Conferences   [Aug-31-16 04:05PM  GlobeNewswire]
▶ Cambium Learning Group Wins Three SIIA CODiE Awards   [May-31-16 05:00AM  GlobeNewswire]
▶ Cambium Learning Group Wins 13 ComputED Awards   [Apr-26-16 05:00AM  GlobeNewswire]
▶ ExploreLearning Gizmos Library Converted to HTML5   [Mar-23-16 05:11AM  at noodls]
Financial statements of ABCD
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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