Intrinsic value of Great Ajax - AJX

Previous Close

$14.52

  Intrinsic Value

$48.19

stock screener

  Rating & Target

str. buy

+232%

  Value-price divergence*

0%

Previous close

$14.52

 
Intrinsic value

$48.19

 
Up/down potential

+232%

 
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
  29.40
  26.96
  24.76
  22.79
  21.01
  19.41
  17.97
  16.67
  15.50
  14.45
  13.51
  12.66
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
Revenue, $m
  70
  91
  115
  143
  176
  213
  255
  300
  350
  405
  463
  526
  592
  663
  737
  815
  897
  982
  1,071
  1,164
  1,260
  1,361
  1,465
  1,574
  1,686
  1,803
  1,925
  2,052
  2,184
  2,321
  2,463
Variable operating expenses, $m
 
  43
  54
  68
  83
  100
  120
  141
  165
  191
  218
  248
  279
  312
  347
  384
  422
  463
  504
  548
  594
  641
  690
  741
  794
  849
  907
  966
  1,028
  1,093
  1,160
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
  54
  68
  83
  100
  120
  141
  165
  191
  218
  248
  279
  312
  347
  384
  422
  463
  504
  548
  594
  641
  690
  741
  794
  849
  907
  966
  1,028
  1,093
  1,160
Operating income, $m
  29
  48
  61
  76
  93
  113
  135
  159
  185
  214
  245
  278
  313
  351
  390
  431
  474
  519
  567
  616
  667
  720
  775
  832
  892
  954
  1,018
  1,085
  1,155
  1,228
  1,303
EBITDA, $m
  29
  48
  61
  76
  93
  113
  135
  159
  185
  214
  245
  278
  313
  351
  390
  431
  474
  519
  567
  616
  667
  720
  775
  832
  892
  954
  1,018
  1,085
  1,155
  1,228
  1,303
Interest expense (income), $m
  19
  24
  35
  48
  63
  80
  100
  122
  146
  172
  201
  232
  265
  300
  338
  377
  418
  462
  507
  554
  603
  654
  707
  762
  820
  880
  942
  1,006
  1,073
  1,143
  1,215
Earnings before tax, $m
  29
  24
  26
  28
  30
  33
  35
  37
  39
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  62
  64
  66
  68
  70
  72
  74
  77
  79
  82
  85
  88
Tax expense, $m
  0
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
Net income, $m
  28
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  35
  37
  38
  39
  41
  42
  44
  45
  47
  48
  50
  51
  53
  54
  56
  58
  60
  62
  64

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
  1,192
  1,513
  1,888
  2,318
  2,805
  3,349
  3,951
  4,610
  5,325
  6,094
  6,918
  7,793
  8,720
  9,697
  10,723
  11,797
  12,921
  14,093
  15,313
  16,584
  17,905
  19,278
  20,705
  22,188
  23,729
  25,332
  26,998
  28,730
  30,534
  32,411
Adjusted assets (=assets-cash), $m
  920
  1,192
  1,513
  1,888
  2,318
  2,805
  3,349
  3,951
  4,610
  5,325
  6,094
  6,918
  7,793
  8,720
  9,697
  10,723
  11,797
  12,921
  14,093
  15,313
  16,584
  17,905
  19,278
  20,705
  22,188
  23,729
  25,332
  26,998
  28,730
  30,534
  32,411
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
  23
  28
  33
  39
  45
  52
  60
  68
  76
  85
  95
  105
  116
  127
  138
  150
  163
  176
  189
  203
  218
  233
  248
  265
  282
  299
  318
Total debt, $m
  443
  646
  885
  1,164
  1,485
  1,848
  2,253
  2,702
  3,192
  3,725
  4,298
  4,912
  5,564
  6,254
  6,982
  7,746
  8,547
  9,384
  10,257
  11,166
  12,113
  13,097
  14,120
  15,183
  16,288
  17,436
  18,630
  19,871
  21,162
  22,506
  23,905
Total liabilities, $m
  685
  888
  1,127
  1,406
  1,727
  2,090
  2,495
  2,944
  3,434
  3,967
  4,540
  5,154
  5,806
  6,496
  7,224
  7,988
  8,789
  9,626
  10,499
  11,408
  12,355
  13,339
  14,362
  15,425
  16,530
  17,678
  18,872
  20,113
  21,404
  22,748
  24,147
Total equity, $m
  272
  304
  386
  481
  591
  715
  854
  1,008
  1,176
  1,358
  1,554
  1,764
  1,987
  2,224
  2,473
  2,734
  3,008
  3,295
  3,594
  3,905
  4,229
  4,566
  4,916
  5,280
  5,658
  6,051
  6,460
  6,884
  7,326
  7,786
  8,265
Total liabilities and equity, $m
  957
  1,192
  1,513
  1,887
  2,318
  2,805
  3,349
  3,952
  4,610
  5,325
  6,094
  6,918
  7,793
  8,720
  9,697
  10,722
  11,797
  12,921
  14,093
  15,313
  16,584
  17,905
  19,278
  20,705
  22,188
  23,729
  25,332
  26,997
  28,730
  30,534
  32,412
Debt-to-equity ratio
  1.629
  2.130
  2.290
  2.420
  2.510
  2.580
  2.640
  2.680
  2.720
  2.740
  2.770
  2.780
  2.800
  2.810
  2.820
  2.830
  2.840
  2.850
  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
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
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  35
  37
  38
  39
  41
  42
  44
  45
  47
  48
  50
  51
  53
  54
  56
  58
  60
  62
  64
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
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  35
  37
  38
  39
  41
  42
  44
  45
  47
  48
  50
  51
  53
  54
  56
  58
  60
  62
  64
Change in working capital, $m
  -3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
Cash from operations, $m
  -4
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  44
  46
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
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  44
  46
Issuance/(repayment) of debt, $m
  302
  203
  239
  279
  321
  363
  406
  448
  491
  532
  573
  613
  652
  690
  728
  764
  801
  837
  873
  909
  946
  984
  1,023
  1,063
  1,105
  1,148
  1,194
  1,241
  1,291
  1,344
  1,399
Issuance/(repurchase) of shares, $m
  32
  51
  63
  75
  88
  100
  113
  126
  139
  152
  164
  176
  188
  200
  211
  222
  233
  244
  255
  266
  277
  289
  301
  313
  325
  339
  352
  367
  382
  398
  415
Cash from financing (excl. dividends), $m  
  328
  254
  302
  354
  409
  463
  519
  574
  630
  684
  737
  789
  840
  890
  939
  986
  1,034
  1,081
  1,128
  1,175
  1,223
  1,273
  1,324
  1,376
  1,430
  1,487
  1,546
  1,608
  1,673
  1,742
  1,814
Total cash flow (excl. dividends), $m
  23
  269
  318
  371
  426
  482
  539
  596
  652
  708
  762
  815
  867
  918
  967
  1,016
  1,064
  1,112
  1,160
  1,209
  1,258
  1,308
  1,360
  1,413
  1,468
  1,526
  1,586
  1,650
  1,716
  1,786
  1,859
Retained Cash Flow (-), $m
  -44
  -69
  -82
  -96
  -110
  -124
  -139
  -153
  -168
  -182
  -196
  -210
  -223
  -236
  -249
  -262
  -274
  -286
  -299
  -311
  -324
  -337
  -350
  -364
  -378
  -393
  -409
  -425
  -442
  -460
  -479
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
 
  237
  236
  275
  316
  358
  400
  442
  484
  525
  566
  605
  644
  681
  718
  754
  790
  826
  862
  897
  934
  971
  1,010
  1,049
  1,090
  1,133
  1,178
  1,225
  1,274
  1,326
  1,380
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
 
  215
  192
  198
  200
  196
  188
  176
  161
  143
  125
  107
  89
  72
  57
  44
  34
  25
  18
  12
  8
  6
  4
  2
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  81.7
  67.3
  56.1
  47.3
  40.3
  34.6
  30.1
  26.3
  23.3
  20.7
  18.5
  16.7
  15.1
  13.8
  12.6
  11.6
  10.7
  9.9
  9.2
  8.6
  8.0
  7.5
  7.1
  6.6
  6.3
  5.9
  5.6
  5.3
  5.0
  4.7

Great Ajax Corp. is an externally managed real estate company. The Company is focused 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. Its segment is focused on non-performing mortgages and re-performing mortgages. It also invests in loans secured by multi-family residential and commercial mixed use retail/residential properties, as well as in the properties directly. It also holds real estate-owned properties (REO) acquired upon the foreclosure or other settlement of its owned non-performing loans, as well as through outright purchases. It is managed by Thetis Asset Management LLC, an affiliated entity. Its mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity. The Company conducts its business through its operating partnership, Great Ajax Operating Partnership L.P.

FINANCIAL RATIOS  of  Great Ajax (AJX)

Valuation Ratios
P/E Ratio 9.4
Price to Sales 3.8
Price to Book 1
Price to Tangible Book
Price to Cash Flow -65.8
Price to Free Cash Flow -65.8
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 29.4% 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 18.248 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]
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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