Intrinsic value of Acorn International ADR - ATV

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$12.46

  Intrinsic Value

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  Value-price divergence*

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$12.46

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

We calculate the intrinsic value of ATV 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, %
  -50.00
  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
  24
  49
  50
  51
  53
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  90
  95
  99
  103
  108
  113
  119
  124
  130
  137
  143
  150
  157
Variable operating expenses, $m
 
  54
  55
  57
  58
  60
  62
  64
  66
  69
  72
  74
  77
  81
  84
  88
  91
  96
  100
  104
  109
  114
  120
  125
  131
  137
  144
  151
  158
  166
  174
Fixed operating expenses, $m
 
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  50
  51
  52
  53
  55
  56
  58
  59
  60
  62
  64
  65
  67
  68
  70
  72
  74
  76
Total operating expenses, $m
  34
  91
  93
  96
  98
  101
  104
  107
  110
  114
  118
  121
  125
  131
  135
  140
  144
  151
  156
  162
  168
  174
  182
  189
  196
  204
  212
  221
  230
  240
  250
Operating income, $m
  -9
  -42
  -43
  -44
  -45
  -46
  -48
  -49
  -50
  -51
  -53
  -54
  -56
  -57
  -59
  -60
  -62
  -64
  -66
  -67
  -69
  -71
  -73
  -75
  -77
  -80
  -82
  -84
  -87
  -89
  -92
EBITDA, $m
  -5
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -45
  -46
  -47
  -49
  -50
  -51
  -52
  -54
  -55
  -57
  -58
  -60
  -61
  -63
  -64
  -66
  -68
  -69
  -71
  -73
  -75
  -77
  -79
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
Earnings before tax, $m
  9
  -42
  -43
  -44
  -45
  -47
  -48
  -49
  -51
  -52
  -53
  -55
  -57
  -58
  -60
  -62
  -63
  -65
  -67
  -69
  -71
  -74
  -76
  -78
  -80
  -83
  -85
  -88
  -91
  -94
  -97
Tax expense, $m
  5
  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
Net income, $m
  3
  -42
  -43
  -44
  -45
  -47
  -48
  -49
  -51
  -52
  -53
  -55
  -57
  -58
  -60
  -62
  -63
  -65
  -67
  -69
  -71
  -74
  -76
  -78
  -80
  -83
  -85
  -88
  -91
  -94
  -97

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  26
  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
  134
  233
  239
  245
  252
  259
  268
  277
  286
  297
  309
  321
  334
  348
  362
  378
  394
  412
  431
  450
  471
  493
  516
  540
  566
  592
  621
  651
  682
  715
  750
Adjusted assets (=assets-cash), $m
  108
  233
  239
  245
  252
  259
  268
  277
  286
  297
  309
  321
  334
  348
  362
  378
  394
  412
  431
  450
  471
  493
  516
  540
  566
  592
  621
  651
  682
  715
  750
Revenue / Adjusted assets
  0.222
  0.210
  0.209
  0.208
  0.210
  0.208
  0.209
  0.209
  0.210
  0.209
  0.210
  0.209
  0.210
  0.210
  0.210
  0.209
  0.211
  0.211
  0.209
  0.211
  0.210
  0.209
  0.209
  0.209
  0.210
  0.209
  0.209
  0.210
  0.210
  0.210
  0.209
Average production assets, $m
  8
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
  72
Working capital, $m
  18
  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 debt, $m
  0
  1
  3
  4
  6
  8
  11
  13
  16
  19
  22
  25
  29
  33
  37
  41
  45
  50
  55
  61
  66
  72
  79
  85
  93
  100
  108
  116
  125
  134
  143
Total liabilities, $m
  34
  64
  66
  67
  69
  71
  74
  76
  79
  82
  85
  88
  92
  96
  100
  104
  108
  113
  118
  124
  129
  135
  142
  148
  156
  163
  171
  179
  188
  197
  206
Total equity, $m
  99
  169
  173
  177
  182
  188
  194
  201
  208
  215
  224
  233
  242
  252
  263
  274
  286
  299
  312
  326
  341
  357
  374
  391
  410
  430
  450
  472
  494
  518
  544
Total liabilities and equity, $m
  133
  233
  239
  244
  251
  259
  268
  277
  287
  297
  309
  321
  334
  348
  363
  378
  394
  412
  430
  450
  470
  492
  516
  539
  566
  593
  621
  651
  682
  715
  750
Debt-to-equity ratio
  0.000
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.250
  0.260
  0.260
Adjusted equity ratio
  0.676
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  -42
  -43
  -44
  -45
  -47
  -48
  -49
  -51
  -52
  -53
  -55
  -57
  -58
  -60
  -62
  -63
  -65
  -67
  -69
  -71
  -74
  -76
  -78
  -80
  -83
  -85
  -88
  -91
  -94
  -97
Depreciation, amort., depletion, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
Funds from operations, $m
  -15
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -48
  -49
  -51
  -52
  -54
  -55
  -57
  -58
  -60
  -61
  -63
  -65
  -67
  -69
  -71
  -73
  -75
  -77
  -79
  -81
  -83
Change in working capital, $m
  7
  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 operations, $m
  -22
  -52
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -48
  -49
  -51
  -52
  -54
  -55
  -57
  -58
  -60
  -61
  -63
  -65
  -67
  -69
  -71
  -73
  -75
  -77
  -79
  -81
  -83
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
New CAPEX, $m
  -1
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  9
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -13
  -13
  -14
  -14
  -15
  -16
Free cash flow, $m
  -13
  -56
  -43
  -45
  -46
  -47
  -49
  -50
  -51
  -53
  -54
  -56
  -58
  -59
  -61
  -63
  -65
  -67
  -69
  -71
  -73
  -75
  -78
  -80
  -82
  -85
  -88
  -90
  -93
  -96
  -99
Issuance/(repayment) of debt, $m
  -9
  1
  1
  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
  9
  10
Issuance/(repurchase) of shares, $m
  0
  46
  46
  47
  49
  51
  52
  54
  56
  58
  60
  61
  63
  66
  68
  70
  72
  75
  77
  80
  82
  85
  88
  91
  94
  97
  100
  104
  107
  111
  115
Cash from financing (excl. dividends), $m  
  -9
  47
  47
  49
  51
  53
  54
  57
  59
  61
  63
  64
  67
  70
  72
  74
  77
  80
  82
  85
  88
  91
  94
  98
  101
  104
  108
  112
  116
  120
  125
Total cash flow (excl. dividends), $m
  -23
  -55
  -42
  -43
  -44
  -45
  -46
  -47
  -49
  -50
  -51
  -53
  -54
  -56
  -57
  -59
  -60
  -62
  -64
  -65
  -67
  -69
  -71
  -73
  -75
  -78
  -80
  -82
  -85
  -87
  -90
Retained Cash Flow (-), $m
  79
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Prev. year cash balance distribution, $m
 
  12
  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
 
  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
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
 
  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
Current shareholders' claim on cash, %
  100
  71.5
  51.5
  37.0
  26.5
  19.0
  13.6
  9.7
  7.0
  5.0
  3.6
  2.6
  1.8
  1.3
  1.0
  0.7
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Acorn International, Inc., an integrated multi-platform marketing company, develops, promotes, and sells a portfolio of proprietary-branded products; and third parties products in the People’s Republic of China. The company operates through two divisions, Direct-Sales Platforms and Nationwide Distribution Network. It engages primarily in direct sales, including TV direct sales, outbound calls, Internet sales, catalogs sales and direct sales through print media and radio, and distribution sales through its nationwide distribution network. The company, through its direct sales business platform, markets and sells products directly to consumers through its outbound marketing platform and Internet sales platform. It offers approximately 250 products under electronic learning, health, collectibles, mobile phone, and kitchen and household product categories. Acorn International, Inc. was founded in 1998 and is headquartered in Shanghai, the People’s Republic of China.

FINANCIAL RATIOS  of  Acorn International ADR (ATV)

Valuation Ratios
P/E Ratio 317.9
Price to Sales 39.7
Price to Book 9.6
Price to Tangible Book
Price to Cash Flow -43.3
Price to Free Cash Flow -41.5
Growth Rates
Sales Growth Rate -50%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
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 1.6%
Ret/ On Assets - 3 Yr. Avg. -16.5%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. -20.8%
Return On Equity 2.2%
Return On Equity - 3 Yr. Avg. -22.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 54.2%
EBITDA Margin - 3 Yr. Avg. -20.3%
Operating Margin -41.7%
Oper. Margin - 3 Yr. Avg. -57.5%
Pre-Tax Margin 37.5%
Pre-Tax Margin - 3 Yr. Avg. -30.4%
Net Profit Margin 12.5%
Net Profit Margin - 3 Yr. Avg. -39%
Effective Tax Rate 55.6%
Eff/ Tax Rate - 3 Yr. Avg. 17.7%
Payout Ratio 0%

ATV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATV stock intrinsic value calculation we used $48 million for the last fiscal year's total revenue generated by Acorn International ADR. The default revenue input number comes from 2016 income statement of Acorn International 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 ATV 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 ATV is calculated based on our internal credit rating of Acorn International 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 Acorn International 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 ATV stock the variable cost ratio is equal to 110.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $36 million in the base year in the intrinsic value calculation for ATV 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 Acorn International ADR.

Corporate tax rate of 27% is the nominal tax rate for Acorn International 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 ATV 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 ATV are equal to 45.8%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Acorn International 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 ATV is equal to 0%. 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 - $178 million for Acorn International 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 4.257 million for Acorn International 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 Acorn International ADR at the current share price and the inputted number of shares is $0.1 billion.


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COMPANY NEWS

▶ An Aging Video Gaming Industry Wars Against Slowing Growth   [Mar-17-17 08:00AM  Investor's Business Daily]
▶ Acorn International Announces Change of Auditor   [Oct-21-16 06:30AM  PR Newswire]
▶ Columbia Threadneedle Is Still Finding Its Way   [Jul-19-16 07:00AM  at Morningstar]
▶ Acorn International Announces Resignation of a Director   [Jun-24-16 04:30PM  PR Newswire]
▶ Keep an Eye on These 4 High-Flying Stocks Today   [Jan-11-16 12:47PM  at Insider Monkey]
▶ Why Are Investors Piling Into These Surging Stocks Today?   [Dec-04  01:57PM  at Insider Monkey]
▶ Congressman Questions VW's "Road of Deceit"   [Nov-03  02:19PM  at Investopedia]
▶ Acorn International Has No Comment on Trading Activity   [Sep-04  01:04PM  PR Newswire]
▶ /C O R R E C T I O N -- Acorn International, Inc./   [Aug-27  10:26AM  PR Newswire]
▶ EverQuest Landmark Could Save MMOs   [Nov-13  10:37AM  at Forbes]
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Stock chart of ATV Financial statements of ATV Annual reports of ATV
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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