Intrinsic value of Covenant Transportation Group Cl A - CVTI

Previous Close

$22.00

  Intrinsic Value

$8.24

stock screener

  Rating & Target

str. sell

-63%

  Value-price divergence*

-28%

Previous close

$22.00

 
Intrinsic value

$8.24

 
Up/down potential

-63%

 
Rating

str. sell

 
Value-price divergence*

-28%

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

We calculate the intrinsic value of CVTI 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, %
  -7.32
  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
  671
  684
  700
  718
  738
  761
  785
  812
  841
  872
  906
  941
  980
  1,020
  1,064
  1,109
  1,158
  1,210
  1,264
  1,322
  1,382
  1,446
  1,514
  1,585
  1,660
  1,739
  1,822
  1,910
  2,002
  2,099
  2,201
Variable operating expenses, $m
 
  233
  238
  244
  251
  259
  267
  276
  286
  297
  308
  320
  333
  347
  362
  377
  394
  411
  430
  449
  470
  492
  515
  539
  564
  591
  620
  649
  681
  714
  748
Fixed operating expenses, $m
 
  431
  441
  452
  464
  475
  487
  499
  512
  525
  538
  551
  565
  579
  593
  608
  623
  639
  655
  671
  688
  705
  723
  741
  760
  779
  798
  818
  839
  859
  881
Total operating expenses, $m
  638
  664
  679
  696
  715
  734
  754
  775
  798
  822
  846
  871
  898
  926
  955
  985
  1,017
  1,050
  1,085
  1,120
  1,158
  1,197
  1,238
  1,280
  1,324
  1,370
  1,418
  1,467
  1,520
  1,573
  1,629
Operating income, $m
  32
  21
  21
  22
  24
  27
  31
  37
  43
  51
  60
  70
  82
  94
  109
  124
  141
  159
  179
  201
  224
  249
  276
  305
  336
  369
  405
  442
  483
  526
  572
EBITDA, $m
  104
  68
  69
  71
  74
  79
  85
  92
  101
  111
  122
  135
  149
  164
  181
  200
  220
  242
  266
  291
  319
  348
  380
  414
  450
  488
  529
  573
  620
  670
  722
Interest expense (income), $m
  8
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
Earnings before tax, $m
  27
  14
  13
  14
  16
  18
  22
  27
  33
  41
  49
  58
  69
  81
  94
  109
  125
  142
  161
  182
  204
  228
  254
  281
  311
  342
  376
  413
  451
  492
  536
Tax expense, $m
  10
  4
  4
  4
  4
  5
  6
  7
  9
  11
  13
  16
  19
  22
  25
  29
  34
  38
  44
  49
  55
  62
  68
  76
  84
  92
  102
  111
  122
  133
  145
Net income, $m
  17
  10
  10
  10
  11
  13
  16
  20
  24
  30
  36
  43
  50
  59
  69
  80
  91
  104
  118
  133
  149
  166
  185
  205
  227
  250
  275
  301
  329
  359
  392

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  621
  625
  639
  656
  674
  695
  717
  742
  768
  797
  827
  860
  895
  932
  971
  1,013
  1,058
  1,105
  1,154
  1,207
  1,262
  1,321
  1,383
  1,448
  1,516
  1,588
  1,664
  1,744
  1,828
  1,917
  2,010
Adjusted assets (=assets-cash), $m
  613
  625
  639
  656
  674
  695
  717
  742
  768
  797
  827
  860
  895
  932
  971
  1,013
  1,058
  1,105
  1,154
  1,207
  1,262
  1,321
  1,383
  1,448
  1,516
  1,588
  1,664
  1,744
  1,828
  1,917
  2,010
Revenue / Adjusted assets
  1.095
  1.094
  1.095
  1.095
  1.095
  1.095
  1.095
  1.094
  1.095
  1.094
  1.096
  1.094
  1.095
  1.094
  1.096
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
Average production assets, $m
  460
  469
  480
  492
  506
  521
  538
  556
  576
  597
  620
  645
  671
  699
  729
  760
  793
  829
  866
  905
  947
  991
  1,037
  1,086
  1,137
  1,191
  1,248
  1,308
  1,371
  1,438
  1,508
Working capital, $m
  47
  67
  69
  70
  72
  75
  77
  80
  82
  85
  89
  92
  96
  100
  104
  109
  113
  119
  124
  130
  135
  142
  148
  155
  163
  170
  179
  187
  196
  206
  216
Total debt, $m
  216
  215
  224
  234
  246
  258
  272
  287
  303
  321
  340
  360
  381
  404
  428
  454
  481
  510
  541
  573
  607
  643
  681
  721
  763
  808
  855
  904
  955
  1,010
  1,067
Total liabilities, $m
  384
  384
  393
  403
  415
  427
  441
  456
  472
  490
  509
  529
  550
  573
  597
  623
  650
  679
  710
  742
  776
  812
  850
  890
  932
  977
  1,024
  1,073
  1,124
  1,179
  1,236
Total equity, $m
  236
  241
  246
  253
  260
  267
  276
  286
  296
  307
  318
  331
  344
  359
  374
  390
  407
  425
  444
  465
  486
  509
  532
  557
  584
  611
  641
  672
  704
  738
  774
Total liabilities and equity, $m
  620
  625
  639
  656
  675
  694
  717
  742
  768
  797
  827
  860
  894
  932
  971
  1,013
  1,057
  1,104
  1,154
  1,207
  1,262
  1,321
  1,382
  1,447
  1,516
  1,588
  1,665
  1,745
  1,828
  1,917
  2,010
Debt-to-equity ratio
  0.915
  0.900
  0.910
  0.930
  0.950
  0.970
  0.990
  1.010
  1.030
  1.050
  1.070
  1.090
  1.110
  1.130
  1.150
  1.160
  1.180
  1.200
  1.220
  1.230
  1.250
  1.270
  1.280
  1.290
  1.310
  1.320
  1.330
  1.350
  1.360
  1.370
  1.380
Adjusted equity ratio
  0.372
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  17
  10
  10
  10
  11
  13
  16
  20
  24
  30
  36
  43
  50
  59
  69
  80
  91
  104
  118
  133
  149
  166
  185
  205
  227
  250
  275
  301
  329
  359
  392
Depreciation, amort., depletion, $m
  72
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Funds from operations, $m
  115
  57
  58
  59
  62
  65
  70
  75
  82
  89
  98
  107
  118
  129
  142
  156
  171
  187
  204
  223
  244
  265
  289
  314
  341
  369
  400
  432
  467
  503
  542
Change in working capital, $m
  13
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
Cash from operations, $m
  102
  56
  56
  58
  60
  63
  68
  73
  79
  86
  94
  104
  114
  125
  138
  151
  166
  182
  199
  218
  238
  259
  282
  307
  333
  361
  391
  423
  458
  494
  532
Maintenance CAPEX, $m
  0
  -46
  -47
  -48
  -49
  -51
  -52
  -54
  -56
  -58
  -60
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -99
  -104
  -109
  -114
  -119
  -125
  -131
  -137
  -144
New CAPEX, $m
  -113
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
Cash from investing activities, $m
  -47
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -90
  -95
  -100
  -104
  -109
  -114
  -120
  -126
  -133
  -139
  -145
  -153
  -160
  -168
  -176
  -185
  -194
  -203
  -214
Free cash flow, $m
  55
  0
  -2
  -3
  -3
  -3
  -1
  1
  4
  7
  12
  17
  23
  30
  38
  47
  56
  67
  79
  92
  106
  121
  137
  154
  173
  194
  215
  239
  264
  290
  319
Issuance/(repayment) of debt, $m
  -51
  7
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -52
  7
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
Total cash flow (excl. dividends), $m
  3
  8
  7
  7
  8
  10
  12
  16
  20
  25
  31
  37
  45
  53
  62
  73
  84
  96
  109
  124
  140
  157
  175
  194
  215
  238
  262
  288
  315
  345
  376
Retained Cash Flow (-), $m
  -34
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
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
 
  3
  2
  1
  1
  2
  4
  6
  10
  14
  19
  25
  31
  39
  47
  56
  67
  78
  90
  104
  118
  134
  151
  169
  189
  210
  233
  257
  283
  311
  340
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  3
  2
  1
  1
  1
  2
  4
  5
  6
  8
  9
  9
  10
  10
  10
  10
  9
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  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
  100.0

Covenant Transportation Group, Inc., together with its subsidiaries, provides truckload transportation and brokerage services primarily in the continental United States. It offers long haul, dedicated, temperature-controlled, and regional solo-driver services; long haul, regional, and intermodal temperature-controlled services; and regional solo-driver and dedicated services. The company also provides services for its asset-based truckload services, including freight brokerage service. It serves transportation companies, such as freight forwarders, less-than-truckload carriers, and third-party logistics providers; and traditional truckload customers, including manufacturers, retailers, and food and beverage shippers. As of December 31, 2015, the company operated 2,656 tractors and 6,978 trailers. Covenant Transportation Group, Inc. was founded in 1986 and is headquartered in Chattanooga, Tennessee.

FINANCIAL RATIOS  of  Covenant Transportation Group Cl A (CVTI)

Valuation Ratios
P/E Ratio 23.6
Price to Sales 0.6
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow -36.5
Growth Rates
Sales Growth Rate -7.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.9%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 80.1%
Total Debt to Equity 91.5%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 3.7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 7.8%
Return On Equity - 3 Yr. Avg. 14.6%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 56.3%
Gross Margin - 3 Yr. Avg. 56.4%
EBITDA Margin 15.9%
EBITDA Margin - 3 Yr. Avg. 15.8%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 6.6%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. 3.6%
Effective Tax Rate 37%
Eff/ Tax Rate - 3 Yr. Avg. 39%
Payout Ratio 0%

CVTI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVTI stock intrinsic value calculation we used $671 million for the last fiscal year's total revenue generated by Covenant Transportation Group Cl A. The default revenue input number comes from 2016 income statement of Covenant Transportation Group 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 CVTI 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 6.1%, whose default value for CVTI is calculated based on our internal credit rating of Covenant Transportation Group 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 Covenant Transportation Group 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 CVTI stock the variable cost ratio is equal to 34%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $420 million in the base year in the intrinsic value calculation for CVTI 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 Covenant Transportation Group Cl A.

Corporate tax rate of 27% is the nominal tax rate for Covenant Transportation Group 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 CVTI 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 CVTI are equal to 68.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Covenant Transportation Group 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 CVTI is equal to 9.8%. 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 - $236 million for Covenant Transportation Group 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 18.086 million for Covenant Transportation Group 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 Covenant Transportation Group Cl A at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
CGI Celadon Group 4.45 11.63  str.buy
KNX Knight Transpo 37.35 14.01  str.sell
RRTS Roadrunner Tra 6.67 32.60  str.buy
ULH Universal Logi 14.80 59.98  str.buy
SWFT Swift Transpor 26.81 16.25  sell
WERN Werner Enterpr 30.95 36.07  buy
MRTN Marten Transpo 16.20 3.37  str.sell
USAK USA Truck 9.35 1.71  str.sell
PTSI P.A.M. Transpo 17.75 28.44  str.buy
HTLD Heartland Expr 21.10 10.71  str.sell

COMPANY NEWS

▶ Covenant Transportation posts 2Q profit   [Jul-25-17 04:48PM  Associated Press]
▶ Covenant Transportation posts 1Q profit   [Apr-20-17 04:14PM  Associated Press]
▶ Orders for New Big-Rigs Jump in January   [Feb-03-17 04:38PM  at The Wall Street Journal]
▶ Covenant Transportation posts 4Q profit   [Jan-26-17 05:00AM  Associated Press]
▶ Is Trevena Inc (TRVN) A Good Stock To Buy?   [Dec-15-16 11:02AM  at Insider Monkey]
▶ [$$] Amazon Can Help This Small Cap Stock Hit it Big   [Jan-29-16 01:07PM  at Barrons.com]
Stock chart of CVTI Financial statements of CVTI
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.