Intrinsic value of ATA ADR - ATAI

Previous Close

$4.82

  Intrinsic Value

$17.25

stock screener

  Rating & Target

str. buy

+258%

  Value-price divergence*

+3397%

Previous close

$4.82

 
Intrinsic value

$17.25

 
Up/down potential

+258%

 
Rating

str. buy

 
Value-price divergence*

+3397%

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

We calculate the intrinsic value of ATAI 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, %
  17.65
  25.00
  23.00
  21.20
  19.58
  18.12
  16.81
  15.63
  14.57
  13.61
  12.75
  11.97
  11.28
  10.65
  10.08
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
Revenue, $m
  60
  75
  92
  112
  134
  158
  184
  213
  244
  278
  313
  351
  390
  432
  475
  521
  568
  617
  669
  722
  778
  836
  896
  959
  1,023
  1,091
  1,161
  1,234
  1,310
  1,389
  1,472
Variable operating expenses, $m
 
  59
  72
  87
  104
  123
  144
  166
  190
  216
  243
  272
  303
  335
  369
  404
  441
  479
  519
  561
  604
  649
  696
  744
  795
  847
  901
  958
  1,017
  1,079
  1,143
Fixed operating expenses, $m
 
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
Total operating expenses, $m
  53
  65
  78
  93
  111
  130
  151
  173
  197
  223
  251
  280
  311
  343
  377
  413
  450
  488
  528
  571
  614
  659
  706
  755
  806
  858
  912
  970
  1,029
  1,091
  1,156
Operating income, $m
  7
  10
  14
  18
  23
  28
  34
  40
  47
  54
  62
  71
  79
  88
  98
  108
  118
  129
  140
  152
  164
  177
  190
  204
  218
  233
  248
  264
  281
  299
  317
EBITDA, $m
  8
  11
  15
  20
  25
  30
  36
  43
  50
  58
  66
  75
  84
  93
  103
  114
  125
  136
  148
  160
  173
  186
  200
  215
  230
  245
  261
  278
  296
  314
  333
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  7
  10
  14
  18
  23
  28
  33
  39
  46
  53
  61
  69
  77
  86
  95
  105
  115
  126
  137
  148
  160
  172
  185
  198
  212
  227
  242
  257
  274
  290
  308
Tax expense, $m
  3
  3
  4
  5
  6
  7
  9
  11
  12
  14
  16
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  47
  50
  54
  57
  61
  65
  69
  74
  78
  83
Net income, $m
  4
  7
  10
  13
  16
  20
  24
  29
  34
  39
  44
  50
  56
  63
  70
  77
  84
  92
  100
  108
  117
  126
  135
  145
  155
  165
  176
  188
  200
  212
  225

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  36
  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
  68
  40
  49
  60
  71
  84
  98
  114
  130
  148
  167
  187
  208
  230
  253
  278
  303
  329
  357
  385
  415
  446
  478
  511
  546
  582
  619
  658
  699
  741
  785
Adjusted assets (=assets-cash), $m
  32
  40
  49
  60
  71
  84
  98
  114
  130
  148
  167
  187
  208
  230
  253
  278
  303
  329
  357
  385
  415
  446
  478
  511
  546
  582
  619
  658
  699
  741
  785
Revenue / Adjusted assets
  1.875
  1.875
  1.878
  1.867
  1.887
  1.881
  1.878
  1.868
  1.877
  1.878
  1.874
  1.877
  1.875
  1.878
  1.877
  1.874
  1.875
  1.875
  1.874
  1.875
  1.875
  1.874
  1.874
  1.877
  1.874
  1.875
  1.876
  1.875
  1.874
  1.874
  1.875
Average production assets, $m
  9
  11
  13
  16
  19
  22
  26
  30
  35
  39
  44
  50
  55
  61
  67
  74
  81
  88
  95
  103
  110
  119
  127
  136
  145
  155
  165
  175
  186
  197
  209
Working capital, $m
  35
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
Total debt, $m
  0
  3
  6
  10
  14
  18
  23
  28
  34
  40
  46
  53
  61
  68
  76
  85
  93
  102
  112
  122
  132
  142
  153
  165
  177
  189
  202
  215
  229
  244
  259
Total liabilities, $m
  11
  14
  17
  21
  25
  29
  34
  39
  45
  51
  57
  64
  72
  79
  87
  96
  104
  113
  123
  133
  143
  153
  164
  176
  188
  200
  213
  226
  240
  255
  270
Total equity, $m
  57
  26
  32
  39
  47
  55
  65
  75
  85
  97
  110
  123
  136
  151
  166
  182
  199
  216
  234
  253
  272
  292
  314
  335
  358
  382
  406
  432
  458
  486
  515
Total liabilities and equity, $m
  68
  40
  49
  60
  72
  84
  99
  114
  130
  148
  167
  187
  208
  230
  253
  278
  303
  329
  357
  386
  415
  445
  478
  511
  546
  582
  619
  658
  698
  741
  785
Debt-to-equity ratio
  0.000
  0.110
  0.180
  0.240
  0.290
  0.330
  0.350
  0.380
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
Adjusted equity ratio
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  7
  10
  13
  16
  20
  24
  29
  34
  39
  44
  50
  56
  63
  70
  77
  84
  92
  100
  108
  117
  126
  135
  145
  155
  165
  176
  188
  200
  212
  225
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  2
  2
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
Funds from operations, $m
  11
  9
  12
  15
  18
  22
  27
  32
  37
  42
  48
  54
  61
  68
  75
  83
  91
  99
  107
  116
  126
  135
  145
  156
  167
  178
  190
  202
  215
  228
  242
Change in working capital, $m
  2
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  9
  9
  12
  15
  19
  23
  27
  32
  37
  43
  49
  55
  62
  68
  76
  83
  91
  100
  108
  117
  127
  136
  146
  157
  168
  179
  191
  203
  216
  229
  243
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
New CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
Cash from investing activities, $m
  -5
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -6
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -13
  -13
  -14
  -16
  -16
  -17
  -18
  -19
  -20
  -22
  -22
  -23
  -25
  -26
  -28
Free cash flow, $m
  4
  6
  9
  11
  14
  18
  22
  26
  30
  35
  41
  46
  52
  58
  65
  72
  79
  86
  94
  102
  110
  119
  128
  138
  148
  158
  168
  180
  191
  203
  216
Issuance/(repayment) of debt, $m
  0
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  -3
  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  
  -3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
Total cash flow (excl. dividends), $m
  1
  9
  12
  15
  18
  22
  27
  31
  36
  41
  47
  53
  59
  66
  73
  80
  87
  95
  103
  112
  121
  130
  139
  149
  160
  170
  181
  193
  205
  218
  231
Retained Cash Flow (-), $m
  -2
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
Prev. year cash balance distribution, $m
 
  36
  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
 
  40
  6
  8
  11
  14
  17
  21
  25
  30
  35
  40
  45
  51
  57
  64
  71
  78
  85
  93
  101
  110
  118
  127
  137
  147
  157
  167
  178
  190
  202
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
 
  38
  5
  7
  9
  11
  13
  14
  16
  17
  18
  19
  19
  19
  19
  19
  18
  17
  16
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  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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ATA Inc., through its subsidiaries, provides computer-based testing services in the People’s Republic of China. The company offers services for the creation and delivery of computer-based tests utilizing its test delivery platform and proprietary testing technologies that are used for professional licensure and certification tests in various industries, including IT services, banking, teaching, and insurance, as well as administrative services, such as test registration, scheduling, fee collection, and certification fulfillment. Its e-testing platform integrates aspects of the test delivery process for computer-based tests from test form compilation to test scoring and results analysis; and patented mobile test administration platform for test administration. The company also offers HR Select, an employee assessment solution that enables corporate human resources departments to test, benchmark, and analyze job applicants; and online education services to test candidates preparing to take professional certification tests, as well as candidates aiming to fulfill their post qualification. In addition, it provides online education platform for the securities industries; and online education and training Website for professionals. As of March 31, 2016, the company operated 3,035 authorized test centers. It serves governmental agencies, professional associations, and IT vendors, as well as individual online education services consumers. ATA Inc. was founded in 1999 and is headquartered in Beijing, the People’s Republic of China.

FINANCIAL RATIOS  of  ATA ADR (ATAI)

Valuation Ratios
P/E Ratio 55.1
Price to Sales 3.7
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 24.5
Price to Free Cash Flow 24.5
Growth Rates
Sales Growth Rate 17.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.5%
Return On Equity 7.1%
Return On Equity - 3 Yr. Avg. 6.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 50.3%
EBITDA Margin 13.3%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 10.7%
Pre-Tax Margin 11.7%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 6.7%
Net Profit Margin - 3 Yr. Avg. 6.6%
Effective Tax Rate 42.9%
Eff/ Tax Rate - 3 Yr. Avg. 41.9%
Payout Ratio 0%

ATAI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATAI stock intrinsic value calculation we used $60 million for the last fiscal year's total revenue generated by ATA ADR. The default revenue input number comes from 2016 income statement of ATA ADR. 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 ATAI stock valuation model: a) initial revenue growth rate of 25% 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 ATAI is calculated based on our internal credit rating of ATA ADR, 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 ATA ADR.
    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 ATAI stock the variable cost ratio is equal to 78.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for ATAI 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 ATA ADR.

Corporate tax rate of 27% is the nominal tax rate for ATA ADR. 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 ATAI 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 ATAI are equal to 14.2%.

Life of production assets of 12.5 years is the average useful life of capital assets used in ATA ADR 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 ATAI is equal to -1.7%. 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 - $57 million for ATA ADR - 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 22.099 million for ATA ADR 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 ATA ADR at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Ata Inc. reports 4Q loss   [Jun-01-17 05:18PM  Associated Press]
▶ ATA Declares Cash Dividend of $0.41 per ADS   [04:06PM  GlobeNewswire]
▶ ATA Appoints Ms. Amy Tung as Chief Financial Officer   [Mar-01-17 08:00AM  GlobeNewswire]
▶ Ata Inc. posts 3Q profit   [Feb-21-17 08:55AM  Associated Press]
▶ ATA Inc to Present at the LD Micro Invitational   [May-24-16 08:30AM  Accesswire]
▶ ATA Announces Approval of Share Repurchase Plan   [Sep-24  05:10PM  Marketwired]
▶ ATA Announces New URL for Corporate Website   [Jul-16  10:15AM  Marketwired]
▶ ATA Inc. forms joint venture with New Oriental in China   [Jul-22  09:16AM  at theflyonthewall.com]
▶ Dividend Stocks With No Debt, High Yields And Under $15   [Jul-11  01:17PM  at Seeking Alpha]
▶ Growth: Small Fry To King Salmon? Part II   [Mar-13  02:27PM  at Seeking Alpha]
▶ Growth: Small Fry To King Salmon?   [Dec-12  02:13PM  at Seeking Alpha]
▶ ATA's CEO Discusses F2Q2014 Results - Earnings Call Transcript   [Nov-08  11:08AM  at Seeking Alpha]
▶ /C O R R E C T I O N -- ATA Inc./   [12:17AM  PR Newswire]
▶ ATA Announces Closing of Xing Wei Acquisition   [Nov-06  08:30AM  PR Newswire]
▶ DeVry Programs Get ETAC Renewal   [Sep-05  05:55PM  Zacks]
Stock chart of ATAI Financial statements of ATAI Annual reports of ATAI
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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