Intrinsic value of Town Sports International Holdings - CLUB

Previous Close

$5.95

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-67%

Previous close

$5.95

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-67%

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

We calculate the intrinsic value of CLUB 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 0.2

 

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, %
  -6.37
  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
  397
  405
  414
  425
  437
  450
  465
  480
  498
  516
  536
  557
  580
  604
  629
  656
  685
  716
  748
  782
  818
  856
  896
  938
  982
  1,029
  1,078
  1,130
  1,185
  1,242
  1,302
Variable operating expenses, $m
 
  381
  390
  400
  412
  424
  438
  453
  469
  486
  505
  525
  546
  569
  593
  618
  645
  674
  704
  736
  770
  806
  844
  883
  925
  969
  1,015
  1,064
  1,116
  1,170
  1,226
Fixed operating expenses, $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
Total operating expenses, $m
  365
  381
  390
  400
  412
  424
  438
  453
  469
  486
  505
  525
  546
  569
  593
  618
  645
  674
  704
  736
  770
  806
  844
  883
  925
  969
  1,015
  1,064
  1,116
  1,170
  1,226
Operating income, $m
  32
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
EBITDA, $m
  76
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
Interest expense (income), $m
  12
  10
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  26
  28
Earnings before tax, $m
  18
  13
  19
  20
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
Tax expense, $m
  10
  4
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
Net income, $m
  8
  10
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  25
  26
  27
  29
  30
  31
  32
  33
  35

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  46
  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
  236
  241
  246
  253
  260
  268
  276
  286
  296
  307
  319
  331
  345
  359
  374
  390
  407
  425
  445
  465
  486
  509
  533
  558
  584
  612
  641
  672
  704
  738
  774
Adjusted assets (=assets-cash), $m
  190
  241
  246
  253
  260
  268
  276
  286
  296
  307
  319
  331
  345
  359
  374
  390
  407
  425
  445
  465
  486
  509
  533
  558
  584
  612
  641
  672
  704
  738
  774
Revenue / Adjusted assets
  2.089
  1.680
  1.683
  1.680
  1.681
  1.679
  1.685
  1.678
  1.682
  1.681
  1.680
  1.683
  1.681
  1.682
  1.682
  1.682
  1.683
  1.685
  1.681
  1.682
  1.683
  1.682
  1.681
  1.681
  1.682
  1.681
  1.682
  1.682
  1.683
  1.683
  1.682
Average production assets, $m
  86
  87
  89
  91
  94
  97
  100
  103
  107
  111
  115
  120
  125
  130
  135
  141
  147
  154
  161
  168
  176
  184
  193
  202
  211
  221
  232
  243
  255
  267
  280
Working capital, $m
  -6
  -40
  -41
  -42
  -44
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
Total debt, $m
  197
  92
  97
  102
  109
  116
  124
  132
  141
  151
  162
  173
  185
  198
  212
  226
  242
  258
  275
  293
  313
  333
  354
  377
  401
  426
  452
  480
  509
  540
  572
Total liabilities, $m
  322
  217
  222
  227
  234
  241
  249
  257
  266
  276
  287
  298
  310
  323
  337
  351
  367
  383
  400
  418
  438
  458
  479
  502
  526
  551
  577
  605
  634
  665
  697
Total equity, $m
  -86
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  41
  43
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
Total liabilities and equity, $m
  236
  241
  247
  252
  260
  268
  277
  286
  296
  307
  319
  331
  344
  359
  374
  390
  408
  426
  444
  464
  487
  509
  532
  558
  584
  612
  641
  672
  704
  739
  774
Debt-to-equity ratio
  -2.291
  3.810
  3.920
  4.050
  4.190
  4.330
  4.470
  4.620
  4.770
  4.930
  5.080
  5.230
  5.370
  5.520
  5.660
  5.800
  5.930
  6.060
  6.190
  6.310
  6.430
  6.540
  6.650
  6.760
  6.860
  6.960
  7.050
  7.140
  7.230
  7.310
  7.390
Adjusted equity ratio
  -0.695
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  10
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  25
  26
  27
  29
  30
  31
  32
  33
  35
Depreciation, amort., depletion, $m
  44
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
Funds from operations, $m
  26
  18
  23
  24
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
Change in working capital, $m
  5
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Cash from operations, $m
  21
  19
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
Maintenance CAPEX, $m
  0
  -9
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
New CAPEX, $m
  -20
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -20
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -17
  -19
  -20
  -20
  -22
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -40
Free cash flow, $m
  1
  9
  13
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
Issuance/(repayment) of debt, $m
  -32
  -105
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
Issuance/(repurchase) of shares, $m
  0
  100
  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  
  -32
  -5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
Total cash flow (excl. dividends), $m
  -31
  4
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
Retained Cash Flow (-), $m
  -10
  -110
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
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
 
  -106
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  44
  46
  49
  51
  53
  55
  58
Discount rate, %
 
  14.60
  15.33
  16.10
  16.90
  17.75
  18.63
  19.57
  20.54
  21.57
  22.65
  23.78
  24.97
  26.22
  27.53
  28.91
  30.35
  31.87
  33.46
  35.14
  36.89
  38.74
  40.68
  42.71
  44.84
  47.09
  49.44
  51.91
  54.51
  57.23
  60.10
PV of cash for distribution, $m
 
  -92
  13
  12
  10
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
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Town Sports International Holdings, Inc., together with its subsidiaries, owns and operates fitness clubs in the Northeast and Mid-Atlantic regions of the United States. The company offers special purpose rooms for group fitness classes; and other exercise programs, as well as accommodates cardiovascular and strength-training equipment. It also provides amenities, including swimming pools, racquet and basketball courts, functional training zones, and babysitting services; and fee-based programs services, which comprise personal training, small group training, childrenÂ’s programs, and summer camps for kids. The company sells its memberships through direct sales at the club level, and corporate and group sales, as well as through its online Website. As of December 31, 2016, it operated 150 fitness clubs comprising 102 New York Sports Clubs, 28 Boston Sports Clubs, 12 Washington Sports Clubs, and 5 Philadelphia Sports Clubs, as well as 3 clubs located in Switzerland; and operated 1 partly-owned club in Washington. Town Sports International Holdings, Inc. was founded in 1973 and is based in New York, New York.

FINANCIAL RATIOS  of  Town Sports International Holdings (CLUB)

Valuation Ratios
P/E Ratio 19.8
Price to Sales 0.4
Price to Book -1.8
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 158
Growth Rates
Sales Growth Rate -6.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -8.4%
Financial Strength
Quick Ratio 23
Current Ratio 0
LT Debt to Equity -226.7%
Total Debt to Equity -229.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 5.7%
Ret/ On T. Cap. - 3 Yr. Avg. -4.3%
Return On Equity -8.8%
Return On Equity - 3 Yr. Avg. 18.9%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 53.4%
Gross Margin - 3 Yr. Avg. 54.9%
EBITDA Margin 18.6%
EBITDA Margin - 3 Yr. Avg. 15.4%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 0.9%
Net Profit Margin 2%
Net Profit Margin - 3 Yr. Avg. -2.7%
Effective Tax Rate 55.6%
Eff/ Tax Rate - 3 Yr. Avg. -158.6%
Payout Ratio 0%

CLUB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLUB stock intrinsic value calculation we used $397 million for the last fiscal year's total revenue generated by Town Sports International Holdings. The default revenue input number comes from 2016 income statement of Town Sports International Holdings. 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 CLUB 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 14.6%, whose default value for CLUB is calculated based on our internal credit rating of Town Sports International Holdings, 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 Town Sports International Holdings.
    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 CLUB stock the variable cost ratio is equal to 94.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CLUB 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 5.2% for Town Sports International Holdings.

Corporate tax rate of 27% is the nominal tax rate for Town Sports International Holdings. 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 CLUB 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 CLUB are equal to 21.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Town Sports International Holdings 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 CLUB 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 - $-86 million for Town Sports International Holdings - 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 27.417 million for Town Sports International Holdings 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 Town Sports International Holdings at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
PLNT Planet Fitness 24.24 4.68  str.sell

COMPANY NEWS

▶ Town Sports reports 2Q loss   [Jul-27-17 09:58PM  Associated Press]
▶ [$$] New York Sports Clubs Parent to Buy Lucille Roberts Gyms   [Jul-14-17 10:20AM  The Wall Street Journal]
▶ Are you cheating on your gym membership?   [May-11-17 06:48PM  Associated Press]
▶ Are you cheating on your gym membership?   [03:39PM  Associated Press]
▶ Town Sports reports 1Q loss   [Apr-26-17 04:59PM  Associated Press]
▶ Town Sports reports 4Q loss   [Feb-16-17 04:36PM  Associated Press]
▶ 5 Stocks to Buy as Q3 GDP Rises   [Dec-27-16 11:51AM  Zacks]
▶ Town Sports International Salutes First Responders   [Aug-01-16 12:01PM  PR Newswire]
▶ After-hours buzz: CMG, BUFF, PLNT & more   [Mar-08-16 05:59PM  at CNBC]
▶ Town Sports International's Financial Woes Continue   [Feb-18-16 01:57PM  at TheStreet]
▶ Ten things you can stop doing in 2016   [Jan-08-16 10:03AM  at MarketWatch]
▶ 5 Stocks Insiders Love Right Now   [Aug-26  03:03PM  at TheStreet]
Financial statements of CLUB
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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