Intrinsic value of American Public Education - APEI

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$21.75

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$21.75

 
Intrinsic value

$37.63

 
Up/down potential

+73%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of APEI 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 0.4

 

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, %
  -4.57
  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
  313
  319
  327
  335
  344
  355
  366
  379
  392
  407
  422
  439
  457
  476
  496
  518
  540
  564
  590
  616
  645
  675
  706
  739
  774
  811
  850
  891
  934
  979
  1,027
Variable operating expenses, $m
 
  54
  55
  56
  58
  60
  61
  63
  65
  68
  70
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
  141
  148
  155
  162
Fixed operating expenses, $m
 
  233
  238
  244
  251
  257
  263
  270
  277
  283
  291
  298
  305
  313
  321
  329
  337
  345
  354
  363
  372
  381
  391
  401
  411
  421
  431
  442
  453
  465
  476
Total operating expenses, $m
  275
  287
  293
  300
  309
  317
  324
  333
  342
  351
  361
  367
  377
  388
  399
  411
  422
  434
  447
  460
  474
  488
  503
  518
  533
  549
  565
  583
  601
  620
  638
Operating income, $m
  38
  33
  33
  34
  36
  39
  42
  46
  50
  56
  62
  72
  79
  88
  97
  107
  118
  130
  142
  156
  171
  187
  204
  222
  241
  262
  284
  308
  333
  360
  388
EBITDA, $m
  57
  50
  51
  53
  55
  58
  62
  66
  71
  77
  84
  92
  100
  109
  119
  130
  142
  155
  169
  184
  200
  217
  235
  255
  276
  299
  322
  348
  375
  404
  434
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
Earnings before tax, $m
  38
  33
  33
  34
  36
  38
  41
  45
  50
  55
  61
  71
  79
  87
  96
  106
  117
  128
  141
  154
  169
  185
  201
  219
  239
  259
  281
  305
  329
  356
  384
Tax expense, $m
  15
  9
  9
  9
  10
  10
  11
  12
  13
  15
  16
  19
  21
  23
  26
  29
  31
  35
  38
  42
  46
  50
  54
  59
  64
  70
  76
  82
  89
  96
  104
Net income, $m
  24
  24
  24
  25
  26
  28
  30
  33
  36
  40
  45
  52
  57
  63
  70
  77
  85
  94
  103
  113
  123
  135
  147
  160
  174
  189
  205
  222
  240
  260
  280

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  146
  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
  321
  178
  183
  187
  193
  198
  205
  212
  219
  227
  236
  245
  255
  266
  277
  289
  302
  315
  330
  345
  360
  377
  395
  413
  433
  453
  475
  498
  522
  547
  574
Adjusted assets (=assets-cash), $m
  175
  178
  183
  187
  193
  198
  205
  212
  219
  227
  236
  245
  255
  266
  277
  289
  302
  315
  330
  345
  360
  377
  395
  413
  433
  453
  475
  498
  522
  547
  574
Revenue / Adjusted assets
  1.789
  1.792
  1.787
  1.791
  1.782
  1.793
  1.785
  1.788
  1.790
  1.793
  1.788
  1.792
  1.792
  1.789
  1.791
  1.792
  1.788
  1.790
  1.788
  1.786
  1.792
  1.790
  1.787
  1.789
  1.788
  1.790
  1.789
  1.789
  1.789
  1.790
  1.789
Average production assets, $m
  106
  108
  110
  113
  116
  120
  123
  128
  132
  137
  142
  148
  154
  160
  167
  174
  182
  190
  199
  208
  217
  227
  238
  249
  261
  273
  286
  300
  315
  330
  346
Working capital, $m
  122
  -25
  -25
  -26
  -27
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -69
  -72
  -75
  -79
Total debt, $m
  0
  1
  2
  4
  6
  7
  10
  12
  14
  17
  20
  23
  26
  29
  33
  37
  41
  45
  49
  54
  59
  65
  70
  76
  83
  89
  96
  103
  111
  119
  128
Total liabilities, $m
  56
  57
  58
  60
  62
  63
  66
  68
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
  121
  126
  132
  139
  145
  152
  159
  167
  175
  184
Total equity, $m
  265
  121
  124
  127
  131
  135
  139
  144
  149
  155
  161
  167
  174
  181
  189
  197
  205
  214
  224
  234
  245
  256
  268
  281
  294
  308
  323
  339
  355
  372
  390
Total liabilities and equity, $m
  321
  178
  182
  187
  193
  198
  205
  212
  219
  228
  237
  246
  256
  266
  278
  290
  302
  315
  329
  344
  360
  377
  394
  413
  433
  453
  475
  498
  522
  547
  574
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.030
  0.040
  0.060
  0.070
  0.080
  0.100
  0.110
  0.120
  0.140
  0.150
  0.160
  0.170
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.330
Adjusted equity ratio
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  24
  24
  25
  26
  28
  30
  33
  36
  40
  45
  52
  57
  63
  70
  77
  85
  94
  103
  113
  123
  135
  147
  160
  174
  189
  205
  222
  240
  260
  280
Depreciation, amort., depletion, $m
  19
  18
  18
  18
  19
  19
  20
  20
  21
  22
  22
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
Funds from operations, $m
  53
  42
  42
  43
  45
  47
  50
  54
  57
  62
  67
  72
  78
  85
  92
  100
  109
  119
  129
  140
  152
  165
  179
  193
  209
  226
  243
  262
  282
  304
  326
Change in working capital, $m
  -3
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Cash from operations, $m
  56
  39
  43
  44
  46
  48
  51
  54
  58
  63
  68
  73
  79
  86
  94
  102
  111
  121
  131
  142
  154
  167
  181
  196
  212
  229
  246
  265
  286
  307
  330
Maintenance CAPEX, $m
  0
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
New CAPEX, $m
  -16
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Cash from investing activities, $m
  -14
  -16
  -16
  -18
  -18
  -19
  -20
  -20
  -22
  -23
  -23
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
Free cash flow, $m
  42
  22
  26
  26
  28
  29
  31
  34
  37
  41
  45
  48
  54
  59
  66
  73
  80
  88
  97
  107
  117
  128
  140
  153
  167
  181
  197
  214
  231
  250
  270
Issuance/(repayment) of debt, $m
  0
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
Issuance/(repurchase) of shares, $m
  -1
  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 financing (excl. dividends), $m  
  -2
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
Total cash flow (excl. dividends), $m
  41
  24
  27
  28
  29
  31
  33
  36
  39
  43
  47
  51
  57
  63
  69
  76
  84
  93
  102
  112
  122
  134
  146
  159
  173
  188
  204
  221
  239
  258
  279
Retained Cash Flow (-), $m
  -28
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
Prev. year cash balance distribution, $m
 
  146
  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
 
  167
  24
  25
  26
  27
  29
  31
  34
  38
  41
  45
  50
  56
  62
  68
  76
  84
  92
  101
  112
  122
  134
  146
  160
  174
  189
  205
  223
  241
  261
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
 
  160
  22
  22
  21
  21
  21
  21
  21
  22
  22
  21
  21
  21
  21
  20
  19
  18
  17
  16
  14
  13
  11
  10
  8
  7
  6
  4
  3
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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American Public Education, Inc., together with its subsidiaries, provides online and campus-based postsecondary education. The company operates through two segments, American Public Education and Hondros College of Nursing. It offers 100 degree programs and 95 certificate programs in fields of study related to national security, military studies, intelligence, homeland security, criminal justice, technology, business administration, education, health science, and liberal arts. The company also provides diploma in practical nursing and an associate degree in nursing; and an online registered nurse to Bachelor of Science in Nursing completion program. American Public Education, Inc. was founded in 1991 and is headquartered in Charles Town, West Virginia.

FINANCIAL RATIOS  of  American Public Education (APEI)

Valuation Ratios
P/E Ratio 14.6
Price to Sales 1.1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow 8.8
Growth Rates
Sales Growth Rate -4.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40.7%
Cap. Spend. - 3 Yr. Gr. Rate -5.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.7%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 9.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.9%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 1
Profitability Ratios
Gross Margin 62.6%
Gross Margin - 3 Yr. Avg. 63.6%
EBITDA Margin 18.2%
EBITDA Margin - 3 Yr. Avg. 21.3%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 15.6%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 39.5%
Eff/ Tax Rate - 3 Yr. Avg. 38.6%
Payout Ratio 0%

APEI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APEI stock intrinsic value calculation we used $313 million for the last fiscal year's total revenue generated by American Public Education. The default revenue input number comes from 2016 income statement of American Public Education. 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 APEI 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 APEI is calculated based on our internal credit rating of American Public Education, 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 American Public Education.
    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 APEI stock the variable cost ratio is equal to 16.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $227 million in the base year in the intrinsic value calculation for APEI 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 American Public Education.

Corporate tax rate of 27% is the nominal tax rate for American Public Education. 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 APEI 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 APEI are equal to 33.7%.

Life of production assets of 7.5 years is the average useful life of capital assets used in American Public Education 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 APEI is equal to -7.7%. 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 - $265 million for American Public Education - 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 16.277 million for American Public Education 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 American Public Education at the current share price and the inputted number of shares is $0.4 billion.


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COMPANY NEWS

▶ Hedge Funds Are Dumping Voyager Therapeutics Inc (VYGR)   [Dec-18-16 04:26PM  at Insider Monkey]
▶ Is American Public Education, Inc. (APEI) a Good Stock to Buy?   [Dec-09-16 04:51PM  at Insider Monkey]
Stock chart of APEI Financial statements of APEI
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