Intrinsic value of Asta Funding - ASFI

Previous Close

$7.50

  Intrinsic Value

$5.84

stock screener

  Rating & Target

sell

-22%

  Value-price divergence*

0%

Previous close

$7.50

 
Intrinsic value

$5.84

 
Up/down potential

-22%

 
Rating

sell

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of ASFI 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 0.1

 

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, %
  34.09
  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
  59
  60
  62
  63
  65
  67
  69
  71
  74
  77
  80
  83
  86
  90
  94
  98
  102
  106
  111
  116
  122
  127
  133
  139
  146
  153
  160
  168
  176
  185
  194
Variable operating expenses, $m
 
  24
  25
  26
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  59
  61
  64
  67
  71
  74
  78
Fixed operating expenses, $m
 
  23
  23
  24
  24
  25
  26
  26
  27
  27
  28
  29
  30
  30
  31
  32
  33
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
Total operating expenses, $m
  45
  47
  48
  50
  50
  52
  54
  55
  57
  58
  60
  62
  65
  66
  69
  71
  74
  76
  79
  82
  85
  88
  91
  95
  99
  102
  106
  110
  115
  119
  124
Operating income, $m
  14
  13
  13
  14
  14
  15
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  70
EBITDA, $m
  15
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  70
Interest expense (income), $m
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Earnings before tax, $m
  14
  10
  10
  10
  11
  11
  12
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  55
  58
Tax expense, $m
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
Net income, $m
  8
  7
  7
  7
  8
  8
  9
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  43

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  19
  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
  256
  242
  247
  254
  261
  269
  277
  287
  297
  308
  320
  332
  346
  360
  376
  392
  409
  427
  446
  467
  488
  511
  535
  560
  586
  614
  644
  674
  707
  741
  777
Adjusted assets (=assets-cash), $m
  237
  242
  247
  254
  261
  269
  277
  287
  297
  308
  320
  332
  346
  360
  376
  392
  409
  427
  446
  467
  488
  511
  535
  560
  586
  614
  644
  674
  707
  741
  777
Revenue / Adjusted assets
  0.249
  0.248
  0.251
  0.248
  0.249
  0.249
  0.249
  0.247
  0.249
  0.250
  0.250
  0.250
  0.249
  0.250
  0.250
  0.250
  0.249
  0.248
  0.249
  0.248
  0.250
  0.249
  0.249
  0.248
  0.249
  0.249
  0.248
  0.249
  0.249
  0.250
  0.250
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
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
Total debt, $m
  67
  68
  70
  72
  74
  77
  79
  82
  85
  89
  93
  96
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  159
  166
  175
  183
  192
  202
  212
  222
  233
Total liabilities, $m
  73
  74
  76
  78
  80
  83
  85
  88
  91
  95
  99
  102
  107
  111
  116
  121
  126
  132
  137
  144
  150
  157
  165
  172
  181
  189
  198
  208
  218
  228
  239
Total equity, $m
  183
  167
  171
  175
  180
  186
  192
  198
  206
  213
  221
  230
  239
  249
  260
  271
  283
  296
  309
  323
  338
  353
  370
  387
  406
  425
  445
  467
  489
  513
  538
Total liabilities and equity, $m
  256
  241
  247
  253
  260
  269
  277
  286
  297
  308
  320
  332
  346
  360
  376
  392
  409
  428
  446
  467
  488
  510
  535
  559
  587
  614
  643
  675
  707
  741
  777
Debt-to-equity ratio
  0.366
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
Adjusted equity ratio
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  7
  7
  7
  8
  8
  9
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  43
Depreciation, amort., depletion, $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
Funds from operations, $m
  13
  7
  8
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  43
Change in working capital, $m
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  5
  8
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  36
  38
  41
  44
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
  -15
  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
  -10
  8
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  36
  38
  41
  44
Issuance/(repayment) of debt, $m
  16
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Issuance/(repurchase) of shares, $m
  -10
  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  
  4
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Total cash flow (excl. dividends), $m
  -6
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  40
  43
  45
  48
  51
  55
Retained Cash Flow (-), $m
  -1
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
Prev. year cash balance distribution, $m
 
  19
  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
 
  25
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
Discount rate, %
 
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
 
  23
  5
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  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
  100.0

Asta Funding, Inc., together with its subsidiaries, engages in the consumer receivable business in the United States. The company operates through four segments: Consumer Receivables, Personal Injury Claims, Structured Settlements, and GAR Disability Advocacy. The Consumer Receivables segment involved in the purchase, management, and servicing distressed consumer receivables, including charged-off receivables consisting of accounts that have been written-off by the originators and might have been previously serviced by collection agencies; semi-performing receivables, including accounts where the debtor is currently making partial or irregular monthly payments, but the accounts might have been written-off by the originators; performing receivables comprising accounts where the debtor is making regular monthly payments that might or might not have been delinquent in the past. Its distressed consumer receivables include MasterCard, Visa, and other credit card accounts, which were charged-off by the issuers or providers for non-payment. The Personal Injury Claims segment invests in funding personal injury claims. The Structured Settlements segment purchases periodic structured settlements and annuity policies from individuals in exchange for a lump sum payment. The GAR Disability Advocacy segment obtains and represents individuals in their claims for social security disability and supplemental security income benefits from the social security administration. Asta Funding, Inc. was founded in 1994 and is headquartered in Englewood Cliffs, New Jersey.

FINANCIAL RATIOS  of  Asta Funding (ASFI)

Valuation Ratios
P/E Ratio 11.1
Price to Sales 1.5
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 17.8
Price to Free Cash Flow 17.8
Growth Rates
Sales Growth Rate 34.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 36.6%
Total Debt to Equity 36.6%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 3.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity 4.4%
Return On Equity - 3 Yr. Avg. 3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 93.2%
Gross Margin - 3 Yr. Avg. 95.7%
EBITDA Margin 30.5%
EBITDA Margin - 3 Yr. Avg. 22.1%
Operating Margin 23.7%
Oper. Margin - 3 Yr. Avg. 17.8%
Pre-Tax Margin 23.7%
Pre-Tax Margin - 3 Yr. Avg. 17.8%
Net Profit Margin 13.6%
Net Profit Margin - 3 Yr. Avg. 9.4%
Effective Tax Rate 21.4%
Eff/ Tax Rate - 3 Yr. Avg. 35.6%
Payout Ratio 0%

ASFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASFI stock intrinsic value calculation we used $59 million for the last fiscal year's total revenue generated by Asta Funding. The default revenue input number comes from 2016 income statement of Asta Funding. 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 ASFI 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 7.1%, whose default value for ASFI is calculated based on our internal credit rating of Asta Funding, 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 Asta Funding.
    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 ASFI stock the variable cost ratio is equal to 40.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $22 million in the base year in the intrinsic value calculation for ASFI 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% for Asta Funding.

Corporate tax rate of 27% is the nominal tax rate for Asta Funding. 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 ASFI 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 ASFI are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Asta Funding 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 ASFI 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 - $183 million for Asta Funding - 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 11.75 million for Asta Funding 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 Asta Funding at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Asta Funding posts 3Q profit   [Aug-09-17 11:39PM  Associated Press]
▶ ETFs with exposure to Asta Funding, Inc. : July 13, 2017   [Jul-13-17 03:29PM  Capital Cube]
▶ ETFs with exposure to Asta Funding, Inc. : June 19, 2017   [Jun-19-17 02:56PM  Capital Cube]
▶ Asta Funding reports 2Q loss   [May-26-17 08:12AM  Associated Press]
▶ Asta Funding reports 1Q loss   [08:38AM  Associated Press]
▶ Asta Funding Inc (ASFI): Hedge Fund Mangrove Partners Snapping Up   [Mar-02-16 04:26PM  at Insider Monkey]
Stock chart of ASFI Financial statements of ASFI
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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