Intrinsic value of Great Ajax - AJX

Previous Close

$14.12

  Intrinsic Value

$49.16

stock screener

  Rating & Target

str. buy

+248%

  Value-price divergence*

0%

Previous close

$14.12

 
Intrinsic value

$49.16

 
Up/down potential

+248%

 
Rating

str. buy

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of AJX 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, %
  42.86
  31.30
  28.67
  26.30
  24.17
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.25
  12.43
  11.69
  11.02
  10.41
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
Revenue, $m
  70
  92
  118
  149
  185
  227
  273
  325
  382
  445
  512
  585
  662
  745
  832
  923
  1,020
  1,120
  1,225
  1,335
  1,449
  1,568
  1,691
  1,820
  1,953
  2,092
  2,236
  2,386
  2,542
  2,704
  2,872
Variable operating expenses, $m
 
  43
  56
  70
  87
  107
  129
  153
  180
  209
  241
  275
  312
  351
  392
  435
  480
  528
  577
  629
  683
  738
  797
  857
  920
  985
  1,053
  1,124
  1,197
  1,273
  1,353
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
  41
  43
  56
  70
  87
  107
  129
  153
  180
  209
  241
  275
  312
  351
  392
  435
  480
  528
  577
  629
  683
  738
  797
  857
  920
  985
  1,053
  1,124
  1,197
  1,273
  1,353
Operating income, $m
  29
  49
  63
  79
  98
  120
  145
  172
  202
  235
  271
  309
  350
  394
  440
  488
  539
  593
  648
  706
  767
  829
  895
  963
  1,033
  1,107
  1,183
  1,262
  1,344
  1,430
  1,519
EBITDA, $m
  29
  49
  63
  79
  98
  120
  145
  172
  202
  235
  271
  309
  350
  394
  440
  488
  539
  593
  648
  706
  767
  829
  895
  963
  1,033
  1,107
  1,183
  1,262
  1,344
  1,430
  1,519
Interest expense (income), $m
  19
  24
  36
  50
  66
  85
  107
  132
  159
  189
  222
  258
  297
  338
  381
  427
  476
  527
  580
  636
  694
  754
  817
  882
  950
  1,021
  1,094
  1,171
  1,250
  1,332
  1,418
Earnings before tax, $m
  29
  25
  27
  29
  32
  35
  38
  40
  43
  46
  49
  51
  54
  56
  59
  61
  64
  66
  68
  71
  73
  75
  78
  80
  83
  86
  89
  92
  95
  98
  101
Tax expense, $m
  0
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  26
  27
Net income, $m
  28
  18
  20
  22
  23
  25
  27
  29
  32
  34
  36
  37
  39
  41
  43
  45
  46
  48
  50
  52
  53
  55
  57
  59
  61
  63
  65
  67
  69
  71
  74

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  37
  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
  957
  1,209
  1,556
  1,965
  2,440
  2,984
  3,596
  4,279
  5,031
  5,852
  6,741
  7,696
  8,716
  9,799
  10,944
  12,149
  13,415
  14,739
  16,123
  17,565
  19,068
  20,631
  22,256
  23,945
  25,700
  27,525
  29,421
  31,391
  33,441
  35,573
  37,793
Adjusted assets (=assets-cash), $m
  920
  1,209
  1,556
  1,965
  2,440
  2,984
  3,596
  4,279
  5,031
  5,852
  6,741
  7,696
  8,716
  9,799
  10,944
  12,149
  13,415
  14,739
  16,123
  17,565
  19,068
  20,631
  22,256
  23,945
  25,700
  27,525
  29,421
  31,391
  33,441
  35,573
  37,793
Revenue / Adjusted assets
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
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
  46
  12
  15
  19
  24
  29
  35
  42
  49
  57
  66
  75
  85
  96
  107
  119
  132
  145
  158
  172
  187
  202
  218
  235
  252
  270
  288
  308
  328
  349
  371
Total debt, $m
  443
  659
  917
  1,222
  1,576
  1,981
  2,437
  2,945
  3,506
  4,118
  4,780
  5,491
  6,251
  7,058
  7,911
  8,809
  9,752
  10,739
  11,769
  12,844
  13,963
  15,128
  16,339
  17,597
  18,905
  20,264
  21,676
  23,145
  24,672
  26,260
  27,914
Total liabilities, $m
  685
  901
  1,159
  1,464
  1,818
  2,223
  2,679
  3,187
  3,748
  4,360
  5,022
  5,733
  6,493
  7,300
  8,153
  9,051
  9,994
  10,981
  12,011
  13,086
  14,205
  15,370
  16,581
  17,839
  19,147
  20,506
  21,918
  23,387
  24,914
  26,502
  28,156
Total equity, $m
  272
  308
  397
  501
  622
  761
  917
  1,091
  1,283
  1,492
  1,719
  1,962
  2,222
  2,499
  2,791
  3,098
  3,421
  3,759
  4,111
  4,479
  4,862
  5,261
  5,675
  6,106
  6,554
  7,019
  7,502
  8,005
  8,527
  9,071
  9,637
Total liabilities and equity, $m
  957
  1,209
  1,556
  1,965
  2,440
  2,984
  3,596
  4,278
  5,031
  5,852
  6,741
  7,695
  8,715
  9,799
  10,944
  12,149
  13,415
  14,740
  16,122
  17,565
  19,067
  20,631
  22,256
  23,945
  25,701
  27,525
  29,420
  31,392
  33,441
  35,573
  37,793
Debt-to-equity ratio
  1.629
  2.140
  2.310
  2.440
  2.530
  2.600
  2.660
  2.700
  2.730
  2.760
  2.780
  2.800
  2.810
  2.820
  2.830
  2.840
  2.850
  2.860
  2.860
  2.870
  2.870
  2.880
  2.880
  2.880
  2.880
  2.890
  2.890
  2.890
  2.890
  2.890
  2.900
Adjusted equity ratio
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  18
  20
  22
  23
  25
  27
  29
  32
  34
  36
  37
  39
  41
  43
  45
  46
  48
  50
  52
  53
  55
  57
  59
  61
  63
  65
  67
  69
  71
  74
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
  -7
  18
  20
  22
  23
  25
  27
  29
  32
  34
  36
  37
  39
  41
  43
  45
  46
  48
  50
  52
  53
  55
  57
  59
  61
  63
  65
  67
  69
  71
  74
Change in working capital, $m
  -3
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
Cash from operations, $m
  -4
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  32
  33
  34
  35
  36
  37
  39
  40
  41
  42
  43
  45
  46
  48
  49
  51
  52
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
  -301
  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
  -305
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  32
  33
  34
  35
  36
  37
  39
  40
  41
  42
  43
  45
  46
  48
  49
  51
  52
Issuance/(repayment) of debt, $m
  302
  216
  258
  305
  354
  405
  456
  508
  560
  612
  662
  712
  760
  807
  853
  898
  943
  987
  1,031
  1,075
  1,119
  1,164
  1,211
  1,258
  1,308
  1,359
  1,412
  1,468
  1,527
  1,589
  1,653
Issuance/(repurchase) of shares, $m
  32
  55
  69
  83
  98
  113
  129
  145
  160
  176
  191
  206
  221
  235
  249
  263
  276
  290
  303
  316
  330
  344
  358
  372
  387
  403
  419
  436
  454
  472
  492
Cash from financing (excl. dividends), $m  
  328
  271
  327
  388
  452
  518
  585
  653
  720
  788
  853
  918
  981
  1,042
  1,102
  1,161
  1,219
  1,277
  1,334
  1,391
  1,449
  1,508
  1,569
  1,630
  1,695
  1,762
  1,831
  1,904
  1,981
  2,061
  2,145
Total cash flow (excl. dividends), $m
  23
  287
  343
  405
  470
  538
  607
  676
  745
  813
  880
  946
  1,010
  1,073
  1,134
  1,194
  1,253
  1,312
  1,370
  1,428
  1,488
  1,548
  1,609
  1,673
  1,738
  1,806
  1,877
  1,952
  2,030
  2,111
  2,198
Retained Cash Flow (-), $m
  -44
  -73
  -88
  -104
  -121
  -138
  -156
  -174
  -192
  -209
  -227
  -244
  -260
  -276
  -292
  -307
  -323
  -338
  -353
  -368
  -383
  -399
  -414
  -431
  -448
  -465
  -483
  -503
  -523
  -544
  -566
Prev. year cash balance distribution, $m
 
  37
  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
 
  250
  255
  301
  349
  399
  450
  502
  553
  604
  653
  702
  750
  796
  842
  886
  930
  974
  1,017
  1,061
  1,104
  1,149
  1,195
  1,242
  1,291
  1,341
  1,394
  1,449
  1,507
  1,568
  1,632
Discount rate, %
 
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
  43.22
PV of cash for distribution, $m
 
  226
  207
  217
  221
  219
  212
  200
  184
  165
  144
  124
  103
  84
  67
  52
  40
  29
  21
  15
  10
  7
  4
  3
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  80.3
  65.2
  53.6
  44.6
  37.5
  31.9
  27.4
  23.8
  20.8
  18.4
  16.3
  14.6
  13.2
  11.9
  10.9
  10.0
  9.2
  8.4
  7.8
  7.3
  6.8
  6.3
  5.9
  5.6
  5.2
  4.9
  4.6
  4.4
  4.1
  3.9

Great Ajax Corp. focuses primarily on acquiring, investing in, and managing a portfolio of re-performing and non-performing mortgage loans secured by single-family residences and single-family properties. It also invests in loans secured by multi-family residential and commercial mixed use retail/residential properties, as well as in the properties directly. The company elected to be taxed as a real estate investment trust for U.S. federal income tax purposes. It generally would not be subject to federal corporate income tax, if it distributes at least 90% of its taxable income to its stockholders. Great Ajax Corp. was founded in 2014 and is headquartered in Beaverton, Oregon.

FINANCIAL RATIOS  of  Great Ajax (AJX)

Valuation Ratios
P/E Ratio 9.1
Price to Sales 3.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow -64
Price to Free Cash Flow -64
Growth Rates
Sales Growth Rate 42.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 162.9%
Total Debt to Equity 162.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 4.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 11.2%
Return On Equity - 3 Yr. Avg. 9.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 47.1%
Gross Margin - 3 Yr. Avg. 59.3%
EBITDA Margin 68.6%
EBITDA Margin - 3 Yr. Avg. 70.5%
Operating Margin 41.4%
Oper. Margin - 3 Yr. Avg. 50.5%
Pre-Tax Margin 41.4%
Pre-Tax Margin - 3 Yr. Avg. 50.5%
Net Profit Margin 40%
Net Profit Margin - 3 Yr. Avg. 44.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 60.7%

AJX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AJX stock intrinsic value calculation we used $70 million for the last fiscal year's total revenue generated by Great Ajax. The default revenue input number comes from 2016 income statement of Great Ajax. 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 AJX stock valuation model: a) initial revenue growth rate of 31.3% 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 10.5%, whose default value for AJX is calculated based on our internal credit rating of Great Ajax, 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 Great Ajax.
    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 AJX stock the variable cost ratio is equal to 47.1%.

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 AJX 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 5.4% for Great Ajax.

Corporate tax rate of 27% is the nominal tax rate for Great Ajax. 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 AJX 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 AJX are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Great Ajax 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 AJX is equal to 12.9%. 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 - $272 million for Great Ajax - 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 18.546 million for Great Ajax 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 Great Ajax at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Great Ajax misses 2Q profit forecasts   [Aug-01-17 09:59PM  Associated Press]
▶ Great Ajaxs Dividend Performance   [12:09PM  Market Realist]
▶ Great Ajax misses 1Q profit forecasts   [May-02-17 05:34PM  Associated Press]
▶ Great Ajax misses 4Q profit forecasts   [Mar-01-17 04:16PM  Associated Press]
▶ Great Ajax Corp. Announces Public Offering of Common Stock   [Jun-09-16 04:46PM  Business Wire]
▶ Hedge Funds Are Dumping Great Ajax Corp (AJX)   [Dec-09  01:31PM  at Insider Monkey]
▶ Great Ajax Corp. Prices Initial Public Offering   [Feb-17  04:42AM  at noodls]
▶ Biotechs and Chinese E-Commerce Firm on IPO Calendar Next Week   [Feb-14  09:20AM  at 24/7 Wall St.]
▶ Great Ajax Corp. Prices Initial Public Offering   [Feb-13  11:00AM  PR Newswire]
Stock chart of AJX Financial statements of AJX
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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