Intrinsic value of Associated Capital Group Cl A - AC

Previous Close

$37.65

  Intrinsic Value

$11.52

stock screener

  Rating & Target

str. sell

-69%

  Value-price divergence*

-27%

Previous close

$37.65

 
Intrinsic value

$11.52

 
Up/down potential

-69%

 
Rating

str. sell

 
Value-price divergence*

-27%

Our model is not good at valuating stocks of financial companies, such as AC.

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

We calculate the intrinsic value of AC 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 0.9

 

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, %
  34.78
  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
  31
  32
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  102
Variable operating expenses, $m
 
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
Fixed operating expenses, $m
 
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  28
  28
  29
  30
  30
  31
  32
  33
  34
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
Total operating expenses, $m
  43
  45
  46
  48
  48
  50
  51
  53
  55
  56
  58
  60
  61
  64
  66
  68
  70
  73
  76
  79
  81
  84
  87
  91
  94
  98
  102
  106
  110
  114
  118
Operating income, $m
  -12
  -13
  -14
  -14
  -14
  -15
  -15
  -15
  -15
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
EBITDA, $m
  -12
  -13
  -13
  -14
  -14
  -14
  -15
  -15
  -15
  -15
  -16
  -16
  -16
  -16
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
  -17
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Earnings before tax, $m
  14
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -17
  -17
  -18
  -18
  -18
  -19
  -19
  -19
  -20
  -20
  -20
  -20
  -21
  -21
  -21
  -21
  -22
  -22
  -22
Tax expense, $m
  4
  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
  10
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -17
  -17
  -18
  -18
  -18
  -19
  -19
  -19
  -20
  -20
  -20
  -20
  -21
  -21
  -21
  -21
  -22
  -22
  -22

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  314
  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
  953
  645
  660
  677
  696
  717
  740
  766
  793
  822
  854
  888
  924
  962
  1,003
  1,046
  1,092
  1,140
  1,192
  1,246
  1,303
  1,364
  1,427
  1,494
  1,565
  1,640
  1,718
  1,801
  1,888
  1,979
  2,075
Adjusted assets (=assets-cash), $m
  639
  645
  660
  677
  696
  717
  740
  766
  793
  822
  854
  888
  924
  962
  1,003
  1,046
  1,092
  1,140
  1,192
  1,246
  1,303
  1,364
  1,427
  1,494
  1,565
  1,640
  1,718
  1,801
  1,888
  1,979
  2,075
Revenue / Adjusted assets
  0.049
  0.050
  0.048
  0.049
  0.049
  0.049
  0.049
  0.050
  0.049
  0.049
  0.049
  0.048
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
  0.049
Average production assets, $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
  0
Working capital, $m
  0
  -310
  -317
  -325
  -335
  -345
  -356
  -368
  -381
  -395
  -410
  -427
  -444
  -462
  -482
  -503
  -525
  -548
  -573
  -599
  -626
  -655
  -686
  -718
  -752
  -788
  -826
  -865
  -907
  -951
  -997
Total debt, $m
  10
  1
  2
  4
  6
  8
  11
  14
  17
  20
  23
  27
  31
  35
  39
  44
  49
  54
  60
  66
  72
  78
  85
  92
  100
  108
  117
  125
  135
  145
  155
Total liabilities, $m
  79
  70
  71
  73
  75
  77
  80
  83
  86
  89
  92
  96
  100
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  161
  169
  177
  186
  194
  204
  214
  224
Total equity, $m
  874
  576
  589
  604
  621
  640
  660
  683
  707
  734
  762
  792
  824
  858
  895
  933
  974
  1,017
  1,063
  1,111
  1,162
  1,216
  1,273
  1,333
  1,396
  1,463
  1,533
  1,606
  1,684
  1,765
  1,851
Total liabilities and equity, $m
  953
  646
  660
  677
  696
  717
  740
  766
  793
  823
  854
  888
  924
  962
  1,003
  1,046
  1,092
  1,140
  1,192
  1,246
  1,303
  1,363
  1,427
  1,494
  1,565
  1,640
  1,719
  1,800
  1,888
  1,979
  2,075
Debt-to-equity ratio
  0.011
  0.000
  0.000
  0.010
  0.010
  0.010
  0.020
  0.020
  0.020
  0.030
  0.030
  0.030
  0.040
  0.040
  0.040
  0.050
  0.050
  0.050
  0.060
  0.060
  0.060
  0.060
  0.070
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.080
  0.080
Adjusted equity ratio
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -17
  -17
  -18
  -18
  -18
  -19
  -19
  -19
  -20
  -20
  -20
  -20
  -21
  -21
  -21
  -21
  -22
  -22
  -22
Depreciation, amort., depletion, $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
  0
Funds from operations, $m
  12
  -13
  -13
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -17
  -18
  -18
  -18
  -19
  -19
  -19
  -20
  -20
  -20
  -20
  -21
  -21
  -21
  -21
  -22
  -22
  -22
Change in working capital, $m
  5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
Cash from operations, $m
  7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -3
  -2
  -1
  -1
  0
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
Maintenance CAPEX, $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
  0
New CAPEX, $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
  0
Cash from investing activities, $m
  -4
  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
Free cash flow, $m
  3
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -3
  -2
  -1
  -1
  0
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
Issuance/(repayment) of debt, $m
  150
  1
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Issuance/(repurchase) of shares, $m
  -42
  19
  27
  29
  31
  34
  36
  38
  40
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  71
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
Cash from financing (excl. dividends), $m  
  109
  20
  29
  31
  33
  36
  39
  41
  43
  46
  48
  51
  53
  56
  58
  62
  64
  67
  71
  74
  77
  81
  84
  87
  92
  95
  99
  104
  108
  113
  118
Total cash flow (excl. dividends), $m
  111
  13
  22
  25
  28
  32
  35
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  85
  89
  94
  99
  105
  110
  116
  122
  129
  135
  142
Retained Cash Flow (-), $m
  -125
  -19
  -27
  -29
  -31
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -103
  -108
Prev. year cash balance distribution, $m
 
  304
  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
 
  298
  -5
  -4
  -3
  -2
  -1
  0
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  17
  19
  21
  23
  25
  27
  30
  32
  35
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
 
  285
  -4
  -3
  -2
  -2
  -1
  0
  0
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  96.9
  92.7
  88.5
  84.3
  80.1
  76.0
  72.0
  68.1
  64.4
  60.8
  57.4
  54.2
  51.1
  48.2
  45.4
  42.8
  40.3
  38.0
  35.8
  33.7
  31.8
  29.9
  28.2
  26.6
  25.1
  23.7
  22.4
  21.1
  19.9
  18.8

Associated Capital Group, Inc. is a parent operating company for the spin-off of GAMCO Investors, Inc.'s (GAMCO's) alternative investment management business, institutional research services operations and certain cash and other assets. The Company, through its subsidiaries, provides alternative investment management services and institutional research services, as well as management of its investment portfolio. It operates through the investment advisory and asset management business segment. Gabelli & Company Investment Advisers, Inc. (GCIA) is a subsidiary of the Company. GCIA and its subsidiary, Gabelli & Partners, LLC (Gabelli & Partners), collectively serve as general partners, co-general partners or investment managers to investment funds, including limited partnerships and offshore companies (collectively, Investment Partnerships), and separate accounts. It primarily manages assets in equity event-driven value strategies, across a range of risk and event arbitrage portfolios.

FINANCIAL RATIOS  of  Associated Capital Group Cl A (AC)

Valuation Ratios
P/E Ratio 91.3
Price to Sales 29.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow 130.5
Price to Free Cash Flow 130.5
Growth Rates
Sales Growth Rate 34.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 31
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 1.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.1%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital 1.2%
Ret/ On T. Cap. - 3 Yr. Avg. 0.6%
Return On Equity 1.2%
Return On Equity - 3 Yr. Avg. 0.6%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 45.2%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin -38.7%
Oper. Margin - 3 Yr. Avg. -49.1%
Pre-Tax Margin 45.2%
Pre-Tax Margin - 3 Yr. Avg. 10.7%
Net Profit Margin 32.3%
Net Profit Margin - 3 Yr. Avg. 15.5%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.7%
Payout Ratio 30%

AC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AC stock intrinsic value calculation we used $31 million for the last fiscal year's total revenue generated by Associated Capital Group Cl A. The default revenue input number comes from 2016 income statement of Associated Capital Group Cl A. 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 AC 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 4.3%, whose default value for AC is calculated based on our internal credit rating of Associated Capital Group Cl A, 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 Associated Capital Group Cl A.
    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 AC stock the variable cost ratio is equal to 74.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $21 million in the base year in the intrinsic value calculation for AC 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 Associated Capital Group Cl A.

Corporate tax rate of 27% is the nominal tax rate for Associated Capital Group Cl A. 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 AC 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 AC are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Associated Capital Group Cl A 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 AC is equal to -980.6%. 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 - $874 million for Associated Capital Group Cl A - 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 24.112 million for Associated Capital Group Cl A 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 Associated Capital Group Cl A at the current share price and the inputted number of shares is $0.9 billion.

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Financial statements of AC
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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