Intrinsic value of Citizens Cl A - CIA

Previous Close

$7.85

  Intrinsic Value

$10.41

stock screener

  Rating & Target

buy

+33%

Previous close

$7.85

 
Intrinsic value

$10.41

 
Up/down potential

+33%

 
Rating

buy

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

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
  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
  0
  250
  256
  262
  270
  278
  287
  297
  307
  318
  331
  344
  358
  373
  388
  405
  423
  442
  462
  483
  505
  528
  553
  579
  606
  635
  665
  697
  731
  766
  804
Variable operating expenses, $m
 
  55
  56
  58
  59
  61
  63
  65
  67
  70
  72
  73
  76
  79
  83
  86
  90
  94
  98
  103
  108
  113
  118
  123
  129
  135
  142
  149
  156
  163
  171
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
  251
  257
  264
  270
  277
  285
  292
  300
  309
  316
  324
  333
  342
  353
  363
  374
  385
  396
  408
  421
  434
  447
  460
  474
  489
  505
  521
  537
  554
  572
Operating income, $m
  5
  -1
  -1
  -1
  0
  1
  2
  5
  7
  10
  14
  20
  25
  30
  36
  42
  49
  57
  65
  74
  84
  95
  106
  118
  132
  146
  161
  177
  194
  212
  232
EBITDA, $m
  8
  2
  1
  2
  2
  4
  5
  7
  10
  13
  17
  21
  26
  31
  37
  44
  51
  59
  67
  76
  86
  97
  108
  121
  134
  148
  163
  179
  197
  215
  235
Interest expense (income), $m
  0
  0
  1
  2
  3
  5
  6
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  34
  37
  41
  45
  49
  54
  58
  63
  69
  74
  80
  86
  92
  99
Earnings before tax, $m
  5
  -1
  -2
  -3
  -4
  -4
  -4
  -3
  -2
  -1
  0
  4
  6
  9
  12
  15
  19
  23
  28
  33
  39
  45
  52
  60
  68
  77
  87
  97
  108
  120
  133
Tax expense, $m
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  2
  3
  4
  5
  6
  8
  9
  11
  12
  14
  16
  18
  21
  23
  26
  29
  32
  36
Net income, $m
  2
  -1
  -2
  -3
  -4
  -4
  -4
  -3
  -2
  -1
  0
  3
  4
  6
  8
  11
  14
  17
  20
  24
  29
  33
  38
  44
  50
  56
  63
  71
  79
  87
  97

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
  1,612
  1,649
  1,692
  1,739
  1,792
  1,850
  1,913
  1,981
  2,055
  2,133
  2,218
  2,308
  2,404
  2,505
  2,614
  2,728
  2,849
  2,978
  3,113
  3,256
  3,407
  3,566
  3,734
  3,911
  4,097
  4,293
  4,499
  4,716
  4,945
  5,185
Adjusted assets (=assets-cash), $m
  1,584
  1,612
  1,649
  1,692
  1,739
  1,792
  1,850
  1,913
  1,981
  2,055
  2,133
  2,218
  2,308
  2,404
  2,505
  2,614
  2,728
  2,849
  2,978
  3,113
  3,256
  3,407
  3,566
  3,734
  3,911
  4,097
  4,293
  4,499
  4,716
  4,945
  5,185
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
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
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
  24
  55
  91
  131
  176
  224
  278
  335
  397
  463
  535
  610
  691
  777
  868
  965
  1,067
  1,175
  1,289
  1,410
  1,537
  1,671
  1,813
  1,962
  2,119
  2,284
  2,458
  2,641
  2,833
  3,036
Total liabilities, $m
  1,335
  1,359
  1,390
  1,426
  1,466
  1,511
  1,559
  1,613
  1,670
  1,732
  1,798
  1,870
  1,945
  2,026
  2,112
  2,203
  2,300
  2,402
  2,510
  2,624
  2,745
  2,872
  3,006
  3,148
  3,297
  3,454
  3,619
  3,793
  3,976
  4,168
  4,371
Total equity, $m
  249
  253
  259
  266
  273
  281
  290
  300
  311
  323
  335
  348
  362
  377
  393
  410
  428
  447
  467
  489
  511
  535
  560
  586
  614
  643
  674
  706
  740
  776
  814
Total liabilities and equity, $m
  1,584
  1,612
  1,649
  1,692
  1,739
  1,792
  1,849
  1,913
  1,981
  2,055
  2,133
  2,218
  2,307
  2,403
  2,505
  2,613
  2,728
  2,849
  2,977
  3,113
  3,256
  3,407
  3,566
  3,734
  3,911
  4,097
  4,293
  4,499
  4,716
  4,944
  5,185
Debt-to-equity ratio
  0.000
  0.100
  0.210
  0.340
  0.480
  0.620
  0.770
  0.920
  1.080
  1.230
  1.380
  1.540
  1.680
  1.830
  1.980
  2.120
  2.250
  2.390
  2.510
  2.640
  2.760
  2.870
  2.990
  3.090
  3.200
  3.290
  3.390
  3.480
  3.570
  3.650
  3.730
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
  -1
  -2
  -3
  -4
  -4
  -4
  -3
  -2
  -1
  0
  3
  4
  6
  8
  11
  14
  17
  20
  24
  29
  33
  38
  44
  50
  56
  63
  71
  79
  87
  97
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Funds from operations, $m
  193
  2
  1
  0
  -1
  -1
  -1
  0
  0
  2
  3
  4
  6
  8
  10
  12
  15
  19
  22
  26
  30
  35
  40
  46
  52
  59
  66
  73
  82
  90
  100
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
  2
  1
  0
  -1
  -1
  -1
  0
  0
  2
  3
  4
  6
  8
  10
  12
  15
  19
  22
  26
  30
  35
  40
  46
  52
  59
  66
  73
  82
  90
  100
Maintenance CAPEX, $m
  0
  -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
  -2
  -3
  -3
  -3
  -3
New CAPEX, $m
  -2
  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
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -152
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Free cash flow, $m
  -50
  1
  0
  -1
  -2
  -2
  -2
  -2
  -1
  0
  1
  2
  4
  6
  8
  10
  13
  16
  20
  24
  28
  33
  38
  43
  49
  55
  62
  70
  78
  87
  96
Issuance/(repayment) of debt, $m
  0
  24
  31
  36
  40
  44
  49
  53
  57
  62
  66
  71
  76
  81
  86
  91
  97
  102
  108
  114
  121
  127
  134
  141
  149
  157
  165
  174
  183
  193
  203
Issuance/(repurchase) of shares, $m
  0
  5
  8
  10
  11
  12
  13
  13
  13
  13
  12
  11
  10
  9
  8
  6
  4
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2
  29
  39
  46
  51
  56
  62
  66
  70
  75
  78
  82
  86
  90
  94
  97
  101
  104
  108
  114
  121
  127
  134
  141
  149
  157
  165
  174
  183
  193
  203
Total cash flow (excl. dividends), $m
  -47
  30
  39
  44
  49
  54
  59
  64
  70
  75
  80
  84
  90
  95
  101
  108
  114
  121
  128
  138
  148
  160
  172
  184
  198
  212
  228
  244
  261
  279
  298
Retained Cash Flow (-), $m
  -2
  -5
  -8
  -10
  -11
  -12
  -13
  -13
  -13
  -13
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
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
 
  25
  31
  34
  38
  42
  47
  51
  56
  62
  68
  71
  75
  80
  85
  91
  96
  102
  108
  117
  126
  136
  147
  158
  170
  183
  197
  211
  227
  243
  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
 
  24
  28
  30
  31
  33
  34
  35
  35
  36
  36
  34
  32
  31
  29
  27
  24
  22
  20
  18
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  98.8
  96.9
  94.6
  92.2
  89.7
  87.2
  84.7
  82.4
  80.3
  78.4
  76.9
  75.6
  74.4
  73.5
  72.8
  72.3
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1
  72.1

Citizens, Inc. is an insurance holding company. The Company operates in three business segments: Life Insurance, Home Service and Other Non-Insurance Enterprises. The Life Insurance segment issues ordinary whole life insurance in the United States and in the United States Dollar-denominated amounts to foreign residents. It operates this segment through its subsidiaries, including CICA Life Insurance Company of America (CICA) and Citizens National Life Insurance Company (CNLIC). The Home Service segment sells limited-liability, named peril property policies covering dwelling and contents. Its home service insurance products consist of small face amount ordinary whole life and pre-need policies, which are designed to fund final expenses for the insured, primarily consisting of funeral and burial costs. The Other Non-insurance Enterprises segment includes Computing Technology, Inc. and Insurance Investors, Inc. This segment also includes the results of Citizens, Inc., the parent company.

FINANCIAL RATIOS  of  Citizens Cl A (CIA)

Valuation Ratios
P/E Ratio 196.6
Price to Sales 1.6
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow 3.9
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 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 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 8.2 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 50.081 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

▶ Is Citizens Inc (CIA) A Financial Leader?   [Nov-07-17 06:58PM  Simply Wall St.]
▶ Who Are The Largest Shareholders In Citizens Inc (CIA)?   [Oct-30-17 03:31PM  Simply Wall St.]
▶ What You Must Know About Citizens Incs (CIA) Risks   [Oct-16-17 12:57PM  Simply Wall St.]
▶ ETFs with exposure to Citizens, Inc. : October 10, 2017   [Oct-10-17 11:09AM  Capital Cube]
▶ 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]
Financial statements 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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