Intrinsic value of Cambium Learning Group - ABCD

Previous Close

$5.15

  Intrinsic Value

$2.23

stock screener

  Rating & Target

str. sell

-57%

  Value-price divergence*

+121%

Previous close

$5.15

 
Intrinsic value

$2.23

 
Up/down potential

-57%

 
Rating

str. sell

 
Value-price divergence*

+121%

*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 0.2

 

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
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
Revenue, $m
  152
  161
  170
  180
  190
  201
  212
  224
  236
  248
  262
  276
  290
  305
  321
  338
  356
  374
  393
  414
  435
  457
  480
  505
  530
  557
  585
  615
  646
  679
  713
Variable operating expenses, $m
 
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  94
  98
  103
  109
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
  146
  149
  154
  158
  163
  169
  174
  179
  185
  185
  191
  197
  203
  210
  216
  223
  230
  237
  245
  253
  261
  269
  278
  287
  296
  306
  316
  326
  338
Operating income, $m
  18
  20
  25
  30
  36
  42
  48
  55
  62
  70
  78
  91
  99
  109
  118
  129
  140
  151
  163
  176
  190
  204
  219
  235
  252
  270
  289
  309
  330
  352
  376
EBITDA, $m
  40
  28
  33
  39
  45
  51
  57
  64
  72
  79
  87
  96
  105
  114
  125
  135
  146
  158
  171
  184
  198
  213
  229
  245
  262
  281
  300
  321
  342
  365
  389
Interest expense (income), $m
  6
  5
  0
  1
  1
  2
  3
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  22
  23
  25
  26
  28
Earnings before tax, $m
  11
  15
  25
  29
  35
  40
  46
  52
  58
  65
  72
  85
  93
  101
  110
  120
  130
  140
  152
  163
  176
  189
  203
  218
  234
  250
  268
  286
  305
  326
  348
Tax expense, $m
  1
  4
  7
  8
  9
  11
  12
  14
  16
  18
  20
  23
  25
  27
  30
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  82
  88
  94
Net income, $m
  10
  11
  18
  22
  25
  29
  34
  38
  43
  48
  53
  62
  68
  74
  81
  87
  95
  103
  111
  119
  128
  138
  148
  159
  171
  183
  195
  209
  223
  238
  254

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
  140
  148
  156
  165
  174
  184
  194
  205
  216
  227
  239
  252
  265
  279
  294
  309
  325
  341
  359
  377
  397
  417
  438
  460
  484
  508
  534
  561
  589
  619
Adjusted assets (=assets-cash), $m
  127
  140
  148
  156
  165
  174
  184
  194
  205
  216
  227
  239
  252
  265
  279
  294
  309
  325
  341
  359
  377
  397
  417
  438
  460
  484
  508
  534
  561
  589
  619
Revenue / Adjusted assets
  1.197
  1.150
  1.149
  1.154
  1.152
  1.155
  1.152
  1.155
  1.151
  1.148
  1.154
  1.155
  1.151
  1.151
  1.151
  1.150
  1.152
  1.151
  1.152
  1.153
  1.154
  1.151
  1.151
  1.153
  1.152
  1.151
  1.152
  1.152
  1.152
  1.153
  1.152
Average production assets, $m
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  53
  55
  58
  61
  65
  68
  71
  75
  79
  83
  87
  92
  96
  101
  106
  112
  117
  123
  130
  136
Working capital, $m
  -72
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -71
Total debt, $m
  74
  7
  14
  22
  30
  38
  47
  56
  65
  75
  86
  96
  108
  120
  132
  145
  159
  173
  188
  204
  221
  238
  256
  275
  295
  316
  338
  362
  386
  411
  438
Total liabilities, $m
  193
  126
  133
  141
  149
  157
  166
  175
  184
  194
  205
  215
  227
  239
  251
  264
  278
  292
  307
  323
  340
  357
  375
  394
  414
  435
  457
  481
  505
  530
  557
Total equity, $m
  -61
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
Total liabilities and equity, $m
  132
  140
  148
  157
  166
  174
  184
  194
  204
  216
  228
  239
  252
  266
  279
  293
  309
  324
  341
  359
  378
  397
  417
  438
  460
  483
  508
  534
  561
  589
  619
Debt-to-equity ratio
  -1.213
  0.480
  0.950
  1.390
  1.790
  2.180
  2.530
  2.870
  3.190
  3.480
  3.760
  4.030
  4.280
  4.510
  4.740
  4.950
  5.150
  5.340
  5.520
  5.690
  5.850
  6.000
  6.150
  6.280
  6.420
  6.540
  6.660
  6.770
  6.880
  6.980
  7.080
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
  11
  18
  22
  25
  29
  34
  38
  43
  48
  53
  62
  68
  74
  81
  87
  95
  103
  111
  119
  128
  138
  148
  159
  171
  183
  195
  209
  223
  238
  254
Depreciation, amort., depletion, $m
  22
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Funds from operations, $m
  54
  19
  26
  30
  34
  38
  42
  47
  52
  57
  63
  67
  73
  80
  87
  94
  102
  110
  118
  127
  137
  147
  158
  169
  181
  193
  207
  221
  235
  251
  267
Change in working capital, $m
  10
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  44
  20
  27
  31
  35
  39
  43
  48
  53
  58
  64
  69
  75
  81
  88
  96
  103
  111
  120
  129
  139
  149
  160
  171
  183
  196
  209
  223
  238
  254
  271
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
New CAPEX, $m
  -20
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
Cash from investing activities, $m
  -20
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -20
Free cash flow, $m
  24
  15
  22
  26
  29
  33
  38
  42
  47
  52
  57
  61
  67
  73
  79
  86
  94
  101
  109
  118
  127
  137
  147
  157
  169
  181
  193
  207
  221
  236
  251
Issuance/(repayment) of debt, $m
  -29
  -67
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Issuance/(repurchase) of shares, $m
  1
  64
  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
  -3
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Total cash flow (excl. dividends), $m
  -4
  12
  29
  33
  37
  42
  46
  51
  56
  61
  67
  72
  78
  85
  92
  99
  107
  116
  124
  134
  144
  154
  165
  176
  189
  202
  215
  230
  245
  261
  278
Retained Cash Flow (-), $m
  -13
  -75
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
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
  29
  32
  36
  41
  45
  50
  55
  60
  66
  71
  77
  83
  90
  98
  106
  114
  123
  132
  142
  152
  163
  174
  187
  199
  213
  227
  242
  258
  275
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
 
  -57
  23
  24
  24
  23
  22
  21
  19
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  1
  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
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Cambium Learning Group, Inc. operates as an educational solutions and services company in the United States and internationally. The company operates through three segments: Learning A-Z, Voyager Sopris Learning, and ExploreLearning. The Learning A-Z segment provides preK-6 education technology. It operates subscription-based Websites, such as Reading A-Z, Raz-Kids Raz-Kids, Headsprout, Science A-Z, Writing A-Z, Vocabulary A-Z, and ReadyTest A-Z that offers online supplemental books, lessons, assessments, and other instructional resources for individual classrooms, schools, and districts. The Voyager Sopris Learning segment provides assessments, professional development and school improvement services, and literacy and math instructional tools. It also offers literacy and learning solutions, including Kurzweil 3000+firefly that provides literacy support for students; and Kurzweil 1000, a scan and read software that makes printed or electronic text accessible to people who are blind or visually impaired. The ExploreLearning segment develops online solutions to enhance student learning in math and science. Its products include Gizmos, a library of online simulations for math and science in grades 3-12; and Reflex, an online system for math fact fluency development for grades 2-8. The company sells its products to public school districts, private and charter schools, teachers, home school and parent consumers, and other companies through sales force, e-commerce and Internet, and catalogs. Cambium Learning Group, Inc. was incorporated in 2009 and is based in Dallas, Texas.

FINANCIAL RATIOS  of  Cambium Learning Group (ABCD)

Valuation Ratios
P/E Ratio 23.8
Price to Sales 1.6
Price to Book -3.9
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 9.9
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 5.9% 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 10 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 -10%. 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 45.37 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 $0.2 billion.

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TRI Thomson Reuter 45.94 40.22  hold
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COMPANY NEWS

▶ 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]
Stock chart of ABCD 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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