Intrinsic value of Citizens Cl A - CIA

Previous Close

$8.07

  Intrinsic Value

$45.17

stock screener

  Rating & Target

str. buy

+460%

  Value-price divergence*

+76%

Previous close

$8.07

 
Intrinsic value

$45.17

 
Up/down potential

+460%

 
Rating

str. buy

 
Value-price divergence*

+76%

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

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

We calculate the intrinsic value of CIA 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, %
  3.81
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  0
  267
  291
  315
  340
  366
  393
  421
  451
  481
  513
  546
  580
  616
  653
  692
  732
  774
  819
  864
  912
  963
  1,015
  1,070
  1,127
  1,187
  1,250
  1,316
  1,385
  1,457
  1,533
Variable operating expenses, $m
 
  59
  64
  69
  74
  80
  85
  91
  98
  104
  111
  116
  124
  131
  139
  147
  156
  165
  174
  184
  194
  205
  216
  228
  240
  253
  266
  280
  295
  310
  327
Fixed operating expenses, $m
 
  196
  201
  206
  211
  216
  222
  227
  233
  239
  244
  251
  257
  263
  270
  277
  284
  291
  298
  305
  313
  321
  329
  337
  345
  354
  363
  372
  381
  391
  401
Total operating expenses, $m
  240
  255
  265
  275
  285
  296
  307
  318
  331
  343
  355
  367
  381
  394
  409
  424
  440
  456
  472
  489
  507
  526
  545
  565
  585
  607
  629
  652
  676
  701
  728
Operating income, $m
  5
  13
  26
  40
  55
  70
  86
  103
  120
  138
  157
  179
  200
  221
  244
  268
  293
  319
  346
  375
  405
  437
  470
  505
  542
  580
  621
  664
  709
  756
  806
EBITDA, $m
  8
  15
  29
  43
  58
  73
  89
  106
  123
  142
  161
  181
  201
  223
  246
  270
  295
  321
  349
  378
  408
  440
  473
  508
  545
  584
  625
  668
  713
  760
  810
Interest expense (income), $m
  0
  0
  4
  9
  13
  18
  23
  28
  33
  39
  45
  51
  57
  64
  71
  78
  85
  93
  101
  109
  118
  127
  137
  147
  157
  168
  179
  191
  204
  217
  231
Earnings before tax, $m
  5
  13
  22
  32
  42
  52
  63
  75
  87
  99
  113
  128
  143
  158
  174
  190
  208
  226
  246
  266
  287
  310
  333
  358
  385
  412
  442
  472
  505
  539
  575
Tax expense, $m
  3
  3
  6
  9
  11
  14
  17
  20
  23
  27
  30
  35
  38
  43
  47
  51
  56
  61
  66
  72
  78
  84
  90
  97
  104
  111
  119
  128
  136
  146
  155
Net income, $m
  2
  9
  16
  23
  30
  38
  46
  55
  63
  73
  82
  93
  104
  115
  127
  139
  152
  165
  179
  194
  210
  226
  243
  262
  281
  301
  322
  345
  369
  393
  420

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  1,584
  1,724
  1,874
  2,030
  2,193
  2,361
  2,536
  2,718
  2,908
  3,104
  3,309
  3,522
  3,743
  3,973
  4,214
  4,464
  4,725
  4,997
  5,281
  5,577
  5,887
  6,211
  6,549
  6,903
  7,273
  7,661
  8,066
  8,491
  8,936
  9,402
  9,890
Adjusted assets (=assets-cash), $m
  1,584
  1,724
  1,874
  2,030
  2,193
  2,361
  2,536
  2,718
  2,908
  3,104
  3,309
  3,522
  3,743
  3,973
  4,214
  4,464
  4,725
  4,997
  5,281
  5,577
  5,887
  6,211
  6,549
  6,903
  7,273
  7,661
  8,066
  8,491
  8,936
  9,402
  9,890
Revenue / Adjusted assets
  0.000
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
Average production assets, $m
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
Working capital, $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
Total debt, $m
  0
  119
  245
  377
  513
  655
  803
  957
  1,116
  1,282
  1,454
  1,634
  1,820
  2,015
  2,217
  2,428
  2,648
  2,877
  3,117
  3,367
  3,628
  3,901
  4,186
  4,484
  4,796
  5,123
  5,465
  5,823
  6,198
  6,591
  7,002
Total liabilities, $m
  1,335
  1,454
  1,580
  1,712
  1,848
  1,990
  2,138
  2,292
  2,451
  2,617
  2,789
  2,969
  3,155
  3,350
  3,552
  3,763
  3,983
  4,212
  4,452
  4,702
  4,963
  5,236
  5,521
  5,819
  6,131
  6,458
  6,800
  7,158
  7,533
  7,926
  8,337
Total equity, $m
  249
  271
  294
  319
  344
  371
  398
  427
  456
  487
  519
  553
  588
  624
  662
  701
  742
  784
  829
  876
  924
  975
  1,028
  1,084
  1,142
  1,203
  1,266
  1,333
  1,403
  1,476
  1,553
Total liabilities and equity, $m
  1,584
  1,725
  1,874
  2,031
  2,192
  2,361
  2,536
  2,719
  2,907
  3,104
  3,308
  3,522
  3,743
  3,974
  4,214
  4,464
  4,725
  4,996
  5,281
  5,578
  5,887
  6,211
  6,549
  6,903
  7,273
  7,661
  8,066
  8,491
  8,936
  9,402
  9,890
Debt-to-equity ratio
  0.000
  0.440
  0.830
  1.180
  1.490
  1.770
  2.020
  2.240
  2.440
  2.630
  2.800
  2.950
  3.100
  3.230
  3.350
  3.460
  3.570
  3.670
  3.760
  3.840
  3.930
  4.000
  4.070
  4.140
  4.200
  4.260
  4.320
  4.370
  4.420
  4.470
  4.510
Adjusted equity ratio
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  9
  16
  23
  30
  38
  46
  55
  63
  73
  82
  93
  104
  115
  127
  139
  152
  165
  179
  194
  210
  226
  243
  262
  281
  301
  322
  345
  369
  393
  420
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Funds from operations, $m
  193
  12
  19
  26
  33
  41
  49
  58
  66
  76
  85
  95
  106
  117
  129
  141
  154
  168
  182
  197
  213
  229
  247
  265
  284
  305
  326
  349
  373
  398
  425
Change in working capital, $m
  91
  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
  102
  12
  19
  26
  33
  41
  49
  58
  66
  76
  85
  95
  106
  117
  129
  141
  154
  168
  182
  197
  213
  229
  247
  265
  284
  305
  326
  349
  373
  398
  425
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
New CAPEX, $m
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -152
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
Free cash flow, $m
  -50
  10
  17
  24
  31
  39
  47
  55
  64
  73
  83
  93
  103
  114
  126
  138
  151
  164
  178
  193
  208
  225
  242
  260
  279
  299
  321
  343
  367
  391
  418
Issuance/(repayment) of debt, $m
  0
  119
  126
  131
  137
  142
  148
  153
  160
  166
  172
  179
  187
  194
  202
  211
  220
  229
  239
  250
  261
  273
  285
  298
  312
  327
  342
  358
  375
  393
  412
Issuance/(repurchase) of shares, $m
  0
  12
  7
  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
Cash from financing (excl. dividends), $m  
  2
  131
  133
  132
  137
  142
  148
  153
  160
  166
  172
  179
  187
  194
  202
  211
  220
  229
  239
  250
  261
  273
  285
  298
  312
  327
  342
  358
  375
  393
  412
Total cash flow (excl. dividends), $m
  -47
  141
  151
  157
  168
  181
  195
  209
  224
  239
  255
  272
  290
  308
  328
  349
  370
  393
  417
  443
  469
  498
  527
  558
  591
  626
  663
  701
  742
  784
  829
Retained Cash Flow (-), $m
  -2
  -22
  -24
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -77
Prev. year cash balance 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
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
 
  120
  127
  133
  143
  155
  167
  180
  194
  208
  223
  238
  255
  272
  290
  309
  330
  351
  373
  396
  421
  447
  474
  503
  533
  565
  599
  634
  672
  711
  753
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
 
  115
  117
  115
  118
  120
  121
  122
  121
  120
  117
  113
  109
  104
  97
  91
  84
  76
  69
  61
  53
  46
  39
  33
  27
  22
  17
  14
  10
  8
  6
Current shareholders' claim on cash, %
  100
  96.9
  95.2
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9

Citizens, Inc., through its subsidiaries, provides life insurance products in the United States and internationally. The company’s Life Insurance segment offers ordinary whole-life, burial insurance, pre-need, and accident and health related policies in the Midwest and southern United States, as well as ordinary whole-life policies and endowment policies to non-U.S. residents. This segment offers its products through third-party marketing organizations and independent marketing consultants. Its Home Service Insurance segment provides final expense, ordinary, and industrial life insurance services; and annuities, as well as limited liability property policies to middle and lower income individuals in Louisiana, Mississippi, and Arkansas. This segment markets its products through funeral homes and independent agents, as well as through a home service marketing distribution system. Citizens, Inc. was founded in 1969 and is based in Austin, Texas.

FINANCIAL RATIOS  of  Citizens Cl A (CIA)

Valuation Ratios
P/E Ratio 202.1
Price to Sales 1.6
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 4
Price to Free Cash Flow 4
Growth Rates
Sales Growth Rate 3.8%
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 NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.1%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital 0.8%
Ret/ On T. Cap. - 3 Yr. Avg. -0.9%
Return On Equity 0.8%
Return On Equity - 3 Yr. Avg. -0.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 3.3%
EBITDA Margin - 3 Yr. Avg. 1.4%
Operating Margin 2%
Oper. Margin - 3 Yr. Avg. 0.1%
Pre-Tax Margin 2%
Pre-Tax Margin - 3 Yr. Avg. 0.1%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. -1%
Effective Tax Rate 60%
Eff/ Tax Rate - 3 Yr. Avg. -63.3%
Payout Ratio 0%

CIA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CIA stock intrinsic value calculation we used $245 million for the last fiscal year's total revenue generated by Citizens Cl A. The default revenue input number comes from 2016 income statement of Citizens Cl A. 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 CIA stock valuation model: a) initial revenue growth rate of 9.1% 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 CIA is calculated based on our internal credit rating of Citizens Cl A, 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 Citizens Cl A.
    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 CIA stock the variable cost ratio is equal to 22%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $191 million in the base year in the intrinsic value calculation for CIA 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 Citizens Cl A.

Corporate tax rate of 27% is the nominal tax rate for Citizens Cl A. 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 CIA 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 CIA are equal to 3.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Citizens Cl A 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 CIA 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 - $249 million for Citizens Cl A - 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 47.927 million for Citizens Cl A 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 Citizens Cl A at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ ETFs with exposure to Citizens, Inc. : June 12, 2017   [Jun-12-17 01:54PM  Capital Cube]
▶ Citizens, Inc. Value Analysis (NYSE:CIA) : June 6, 2017   [Jun-06-17 11:54AM  Capital Cube]
▶ Citizens, Inc. Creates New Chief Accounting Officer Role   [May-15-17 06:29PM  PR Newswire]
Stock chart of CIA Financial statements of CIA Annual reports of CIA
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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