Intrinsic value of Caesars Entertainment - CZR

Previous Close

$12.55

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$12.55

 
Intrinsic value premium content
 
Up/down potential premium content
 
Rating premium content
 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of CZR 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 1.9

 

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, %
  -1.32
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  3,877
  6,203
  9,584
  14,333
  20,796
  29,340
  40,336
  54,143
  71,093
  91,480
  115,546
  143,482
  175,421
  211,441
  251,573
  295,805
  344,093
  396,366
  452,541
  512,526
  576,231
  643,574
  714,483
  788,905
  866,807
  948,175
  1,033,022
  1,121,382
  1,213,316
  1,308,906
  1,408,260
Variable operating expenses, $m
 
  -4,091
  -6,409
  -9,664
  -14,094
  -19,951
  -27,489
  -36,953
  -48,572
  -62,546
  -79,043
  -98,354
  -120,247
  -144,938
  -172,447
  -202,767
  -235,867
  -271,699
  -310,205
  -351,324
  -394,992
  -441,154
  -489,760
  -540,775
  -594,175
  -649,951
  -708,111
  -768,680
  -831,698
  -897,223
  -965,327
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
  9,378
  -4,091
  -6,409
  -9,664
  -14,094
  -19,951
  -27,489
  -36,953
  -48,572
  -62,546
  -79,043
  -98,354
  -120,247
  -144,938
  -172,447
  -202,767
  -235,867
  -271,699
  -310,205
  -351,324
  -394,992
  -441,154
  -489,760
  -540,775
  -594,175
  -649,951
  -708,111
  -768,680
  -831,698
  -897,223
  -965,327
Operating income, $m
  -5,501
  10,295
  15,993
  23,997
  34,891
  49,292
  67,825
  91,096
  119,665
  154,026
  194,590
  241,836
  295,668
  356,379
  424,020
  498,573
  579,960
  668,065
  762,746
  863,850
  971,224
  1,084,728
  1,204,243
  1,329,680
  1,460,981
  1,598,126
  1,741,133
  1,890,063
  2,045,014
  2,206,129
  2,373,587
EBITDA, $m
  -5,062
  11,041
  17,058
  25,511
  37,015
  52,222
  71,794
  96,368
  126,537
  162,823
  205,658
  255,381
  312,228
  376,340
  447,770
  526,498
  612,443
  705,483
  805,468
  912,234
  1,025,622
  1,145,483
  1,271,693
  1,404,156
  1,542,811
  1,687,637
  1,838,654
  1,995,925
  2,159,556
  2,329,694
  2,506,532
Interest expense (income), $m
  634
  621
  738
  1,703
  3,059
  4,904
  7,344
  10,483
  14,425
  19,265
  25,086
  31,957
  39,933
  49,052
  59,337
  70,795
  83,424
  97,211
  112,136
  128,175
  145,302
  163,491
  182,718
  202,964
  224,213
  246,455
  269,687
  293,912
  319,141
  345,389
  372,682
Earnings before tax, $m
  -6,100
  9,674
  15,255
  22,294
  31,832
  44,387
  60,481
  80,613
  105,240
  134,761
  169,504
  209,879
  255,734
  307,327
  364,684
  427,778
  496,536
  570,854
  650,610
  735,675
  825,922
  921,237
  1,021,526
  1,126,717
  1,236,769
  1,351,671
  1,471,446
  1,596,150
  1,725,874
  1,860,740
  2,000,905
Tax expense, $m
  27
  2,612
  4,119
  6,019
  8,595
  11,985
  16,330
  21,765
  28,415
  36,385
  45,766
  56,667
  69,048
  82,978
  98,465
  115,500
  134,065
  154,131
  175,665
  198,632
  222,999
  248,734
  275,812
  304,213
  333,928
  364,951
  397,290
  430,961
  465,986
  502,400
  540,244
Net income, $m
  -3,569
  7,062
  11,136
  16,274
  23,237
  32,403
  44,151
  58,847
  76,825
  98,376
  123,738
  153,212
  186,686
  224,348
  266,219
  312,278
  362,471
  416,723
  474,946
  537,043
  602,923
  672,503
  745,714
  822,503
  902,841
  986,720
  1,074,156
  1,165,190
  1,259,888
  1,358,340
  1,460,661

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,513
  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
  14,894
  21,390
  33,048
  49,423
  71,711
  101,174
  139,090
  186,700
  245,149
  315,447
  398,436
  494,767
  604,900
  729,107
  867,494
  1,020,019
  1,186,527
  1,366,779
  1,560,485
  1,767,331
  1,987,004
  2,219,220
  2,463,734
  2,720,363
  2,988,988
  3,269,569
  3,562,145
  3,866,836
  4,183,848
  4,513,469
  4,856,067
Adjusted assets (=assets-cash), $m
  13,381
  21,390
  33,048
  49,423
  71,711
  101,174
  139,090
  186,700
  245,149
  315,447
  398,436
  494,767
  604,900
  729,107
  867,494
  1,020,019
  1,186,527
  1,366,779
  1,560,485
  1,767,331
  1,987,004
  2,219,220
  2,463,734
  2,720,363
  2,988,988
  3,269,569
  3,562,145
  3,866,836
  4,183,848
  4,513,469
  4,856,067
Revenue / Adjusted assets
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
Average production assets, $m
  7,981
  12,766
  19,724
  29,497
  42,798
  60,382
  83,012
  111,426
  146,310
  188,265
  237,794
  295,287
  361,016
  435,146
  517,738
  608,768
  708,143
  815,721
  931,329
  1,054,778
  1,185,884
  1,324,475
  1,470,406
  1,623,567
  1,783,888
  1,951,344
  2,125,959
  2,307,805
  2,497,004
  2,693,729
  2,898,198
Working capital, $m
  -2,760
  -6,693
  -10,341
  -15,465
  -22,439
  -31,658
  -43,523
  -58,420
  -76,710
  -98,707
  -124,674
  -154,817
  -189,279
  -228,145
  -271,447
  -319,174
  -371,276
  -427,679
  -488,291
  -553,015
  -621,754
  -694,416
  -770,927
  -851,229
  -935,284
  -1,023,081
  -1,114,631
  -1,209,972
  -1,309,168
  -1,412,310
  -1,519,512
Total debt, $m
  6,838
  8,018
  18,510
  33,248
  53,307
  79,823
  113,948
  156,797
  209,401
  272,670
  347,359
  434,057
  533,177
  644,964
  769,511
  906,784
  1,056,641
  1,218,868
  1,393,204
  1,579,365
  1,777,071
  1,986,065
  2,206,128
  2,437,094
  2,678,856
  2,931,379
  3,194,697
  3,468,919
  3,754,231
  4,050,889
  4,359,228
Total liabilities, $m
  18,071
  19,251
  29,743
  44,481
  64,540
  91,056
  125,181
  168,030
  220,634
  283,903
  358,592
  445,290
  544,410
  656,197
  780,744
  918,017
  1,067,874
  1,230,101
  1,404,437
  1,590,598
  1,788,304
  1,997,298
  2,217,361
  2,448,327
  2,690,089
  2,942,612
  3,205,930
  3,480,152
  3,765,464
  4,062,122
  4,370,461
Total equity, $m
  -3,177
  2,139
  3,305
  4,942
  7,171
  10,117
  13,909
  18,670
  24,515
  31,545
  39,844
  49,477
  60,490
  72,911
  86,749
  102,002
  118,653
  136,678
  156,049
  176,733
  198,700
  221,922
  246,373
  272,036
  298,899
  326,957
  356,214
  386,684
  418,385
  451,347
  485,607
Total liabilities and equity, $m
  14,894
  21,390
  33,048
  49,423
  71,711
  101,173
  139,090
  186,700
  245,149
  315,448
  398,436
  494,767
  604,900
  729,108
  867,493
  1,020,019
  1,186,527
  1,366,779
  1,560,486
  1,767,331
  1,987,004
  2,219,220
  2,463,734
  2,720,363
  2,988,988
  3,269,569
  3,562,144
  3,866,836
  4,183,849
  4,513,469
  4,856,068
Debt-to-equity ratio
  -2.152
  3.750
  5.600
  6.730
  7.430
  7.890
  8.190
  8.400
  8.540
  8.640
  8.720
  8.770
  8.810
  8.850
  8.870
  8.890
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
Adjusted equity ratio
  -0.350
  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
  -3,569
  7,062
  11,136
  16,274
  23,237
  32,403
  44,151
  58,847
  76,825
  98,376
  123,738
  153,212
  186,686
  224,348
  266,219
  312,278
  362,471
  416,723
  474,946
  537,043
  602,923
  672,503
  745,714
  822,503
  902,841
  986,720
  1,074,156
  1,165,190
  1,259,888
  1,358,340
  1,460,661
Depreciation, amort., depletion, $m
  439
  746
  1,066
  1,514
  2,124
  2,931
  3,969
  5,272
  6,872
  8,797
  11,069
  13,545
  16,560
  19,961
  23,749
  27,925
  32,484
  37,418
  42,722
  48,384
  54,398
  60,756
  67,450
  74,476
  81,830
  89,511
  97,521
  105,863
  114,541
  123,566
  132,945
Funds from operations, $m
  6,417
  7,808
  12,202
  17,788
  25,361
  35,333
  48,120
  64,119
  83,697
  107,172
  134,807
  166,757
  203,246
  244,309
  289,969
  340,203
  394,955
  454,142
  517,667
  585,427
  657,321
  733,259
  813,163
  896,979
  984,671
  1,076,231
  1,171,677
  1,271,052
  1,374,429
  1,481,906
  1,593,605
Change in working capital, $m
  5,829
  -2,510
  -3,648
  -5,124
  -6,974
  -9,219
  -11,865
  -14,898
  -18,289
  -21,997
  -25,968
  -30,143
  -34,462
  -38,866
  -43,303
  -47,727
  -52,102
  -56,403
  -60,613
  -64,724
  -68,738
  -72,663
  -76,511
  -80,302
  -84,056
  -87,797
  -91,550
  -95,341
  -99,196
  -103,142
  -107,202
Cash from operations, $m
  588
  10,217
  15,850
  22,912
  32,335
  44,553
  59,985
  79,017
  101,987
  129,169
  160,775
  196,900
  237,708
  283,175
  333,271
  387,929
  447,057
  510,545
  578,280
  650,151
  726,059
  805,921
  889,675
  977,280
  1,068,726
  1,164,028
  1,263,227
  1,366,393
  1,473,626
  1,585,047
  1,700,808
Maintenance CAPEX, $m
  0
  -366
  -586
  -905
  -1,353
  -1,963
  -2,770
  -3,808
  -5,111
  -6,711
  -8,636
  -10,908
  -13,545
  -16,560
  -19,961
  -23,749
  -27,925
  -32,484
  -37,418
  -42,722
  -48,384
  -54,398
  -60,756
  -67,450
  -74,476
  -81,830
  -89,511
  -97,521
  -105,863
  -114,541
  -123,566
New CAPEX, $m
  -220
  -4,786
  -6,958
  -9,773
  -13,302
  -17,584
  -22,630
  -28,414
  -34,884
  -41,955
  -49,529
  -57,492
  -65,730
  -74,130
  -82,592
  -91,030
  -99,375
  -107,578
  -115,608
  -123,450
  -131,106
  -138,591
  -145,931
  -153,161
  -160,321
  -167,456
  -174,615
  -181,846
  -189,199
  -196,724
  -204,469
Cash from investing activities, $m
  4,258
  -5,152
  -7,544
  -10,678
  -14,655
  -19,547
  -25,400
  -32,222
  -39,995
  -48,666
  -58,165
  -68,400
  -79,275
  -90,690
  -102,553
  -114,779
  -127,300
  -140,062
  -153,026
  -166,172
  -179,490
  -192,989
  -206,687
  -220,611
  -234,797
  -249,286
  -264,126
  -279,367
  -295,062
  -311,265
  -328,035
Free cash flow, $m
  4,846
  5,065
  8,306
  12,234
  17,681
  25,005
  34,585
  46,795
  61,992
  80,503
  102,610
  128,499
  158,433
  192,485
  230,718
  273,150
  319,756
  370,483
  425,254
  483,980
  546,570
  612,932
  682,988
  756,669
  833,930
  914,742
  999,100
  1,087,026
  1,178,564
  1,273,781
  1,372,773
Issuance/(repayment) of debt, $m
  -148
  1,269
  10,492
  14,738
  20,059
  26,517
  34,125
  42,849
  52,604
  63,268
  74,689
  86,698
  99,120
  111,787
  124,548
  137,272
  149,857
  162,227
  174,335
  186,161
  197,706
  208,994
  220,063
  230,966
  241,763
  252,523
  263,318
  274,222
  285,311
  296,659
  308,338
Issuance/(repurchase) of shares, $m
  -1,126
  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  
  -1,609
  1,269
  10,492
  14,738
  20,059
  26,517
  34,125
  42,849
  52,604
  63,268
  74,689
  86,698
  99,120
  111,787
  124,548
  137,272
  149,857
  162,227
  174,335
  186,161
  197,706
  208,994
  220,063
  230,966
  241,763
  252,523
  263,318
  274,222
  285,311
  296,659
  308,338
Total cash flow (excl. dividends), $m
  3,237
  6,334
  18,798
  26,972
  37,739
  51,522
  68,710
  89,643
  114,596
  143,771
  177,299
  215,197
  257,553
  304,272
  355,266
  410,422
  469,613
  532,710
  599,589
  670,141
  744,276
  821,926
  903,051
  987,635
  1,075,693
  1,167,264
  1,262,418
  1,361,249
  1,463,875
  1,570,440
  1,681,111
Retained Cash Flow (-), $m
  4,164
  -6,740
  -1,166
  -1,638
  -2,229
  -2,946
  -3,792
  -4,761
  -5,845
  -7,030
  -8,299
  -9,633
  -11,013
  -12,421
  -13,839
  -15,252
  -16,651
  -18,025
  -19,371
  -20,685
  -21,967
  -23,222
  -24,451
  -25,663
  -26,863
  -28,058
  -29,258
  -30,469
  -31,701
  -32,962
  -34,260
Prev. year cash balance distribution, $m
 
  1,424
  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
 
  1,018
  17,633
  25,335
  35,511
  48,576
  64,919
  84,882
  108,751
  136,741
  169,000
  205,564
  246,540
  291,851
  341,428
  395,170
  452,963
  514,685
  580,218
  649,456
  722,308
  798,705
  878,599
  961,972
  1,048,830
  1,139,206
  1,233,161
  1,330,780
  1,432,174
  1,537,478
  1,646,851
Discount rate, %
 
  14.80
  15.54
  16.32
  17.13
  17.99
  18.89
  19.83
  20.83
  21.87
  22.96
  24.11
  25.31
  26.58
  27.91
  29.30
  30.77
  32.31
  33.92
  35.62
  37.40
  39.27
  41.23
  43.29
  45.46
  47.73
  50.12
  52.62
  55.26
  58.02
  60.92
PV of cash for distribution, $m
 
  887
  13,208
  16,099
  18,864
  21,242
  22,989
  23,921
  23,943
  23,065
  21,392
  19,106
  16,441
  13,629
  10,883
  8,369
  6,195
  4,412
  3,022
  1,988
  1,256
  761
  442
  245
  130
  66
  32
  15
  6
  3
  1
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

Caesars Entertainment Corporation, through its subsidiaries, provides casino-entertainment and hospitality services in the United States and internationally. The company operates through two segments, Caesars Entertainment Resort Properties, and Caesars Growth Partners Casino Properties and Developments. It operates 15,000 slot machines and 1,200 table games, as well as other games comprising keno, poker, and race and sports books; and buffets, restaurants, bars, nightclubs, and lounges located throughout the company's casinos, as well as banquets and room service. As of December 31, 2016, the company owned and operated 12 casinos. It also operates online gaming business that provides real money games; and owns the World Series of Poker tournaments and brand. In addition, the company provides various retail and entertainment offerings in its casinos, as well as The LINQ promenade, an open-air dining, entertainment, and retail development; and operates The AXIS theater at Planet Hollywood, and The High Roller, a 550-foot observation wheel. The company was formerly known as Harrah's Entertainment Inc. and changed its name to Caesars Entertainment Corporation in November 2010. Caesars Entertainment Corporation was founded in 1937 and is based in Las Vegas, Nevada.

FINANCIAL RATIOS  of  Caesars Entertainment (CZR)

Valuation Ratios
P/E Ratio -0.5
Price to Sales 0.5
Price to Book -0.6
Price to Tangible Book
Price to Cash Flow 3.1
Price to Free Cash Flow 5
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.5%
Cap. Spend. - 3 Yr. Gr. Rate -21.2%
Financial Strength
Quick Ratio 17
Current Ratio 0.4
LT Debt to Equity -212.4%
Total Debt to Equity -215.2%
Interest Coverage -9
Management Effectiveness
Return On Assets -21.6%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital -61.5%
Ret/ On T. Cap. - 3 Yr. Avg. -10.4%
Return On Equity 325.9%
Return On Equity - 3 Yr. Avg. 33.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 54.6%
Gross Margin - 3 Yr. Avg. 51.6%
EBITDA Margin -129.7%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin -141.9%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin -157.3%
Pre-Tax Margin - 3 Yr. Avg. -17.3%
Net Profit Margin -92.1%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate -0.4%
Eff/ Tax Rate - 3 Yr. Avg. 5.2%
Payout Ratio 0%

CZR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CZR stock intrinsic value calculation we used $3877 million for the last fiscal year's total revenue generated by Caesars Entertainment. The default revenue input number comes from 2016 income statement of Caesars Entertainment. 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 CZR stock valuation model: a) initial revenue growth rate of 60% 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 14.8%, whose default value for CZR is calculated based on our internal credit rating of Caesars Entertainment, 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 Caesars Entertainment.
    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 CZR stock the variable cost ratio is equal to -64.4%.

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 CZR 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 9.2% for Caesars Entertainment.

Corporate tax rate of 27% is the nominal tax rate for Caesars Entertainment. 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 CZR 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 CZR are equal to 205.8%.

Life of production assets of 21.8 years is the average useful life of capital assets used in Caesars Entertainment 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 CZR is equal to -107.9%. 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 - $-3177 million for Caesars Entertainment - 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 147.423 million for Caesars Entertainment 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 Caesars Entertainment at the current share price and the inputted number of shares is $1.9 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
ISLE Isle of Capri 25.63 prem.  prem.
FLL Full House Res 2.38 prem.  prem.
UWN Nevada Gold&Ca 2.10 prem.  prem.
MGM MGM Resorts In 33.25 prem.  prem.
ERI Eldorado Resor 20.15 prem.  prem.

COMPANY NEWS

▶ Caesars Entertainment seeing growth in Las Vegas   [Jun-07-17 09:49AM  Fox Business Videos]
▶ [$$] Effort to harmonise risky-loans rules in doubt   [Jun-05-17 11:02PM  Financial Times]
▶ [$$] Caesars, Exiting Bankruptcy, Seeks Growth Beyond Gambling   [May-26-17 11:33PM  The Wall Street Journal]
▶ Caesers on the Brink of Exiting Bankruptcy   [08:45AM  TheStreet.com]
▶ The new Vegas namaste: Yoga on a Ferris wheel, near dolphins   [May-15-17 06:30PM  Associated Press]
▶ Caesars Entertainment to Host Sell-Side Analyst Day   [May-12-17 08:13AM  PR Newswire]
▶ Caesars Entertainment Reprices $2.4 Billion Loan   [May-10-17 08:53AM  TheStreet.com]
▶ Caesars reports 1Q loss   [May-02-17 05:04PM  Associated Press]
▶ Caesars Entertainment Stock Up on Macquarie Rating   [Apr-20-17 02:40PM  TheStreet.com]
▶ [$$] Caesars Entertainment Unit's Bankruptcy Bills Near $400 Million   [Apr-18-17 12:20PM  The Wall Street Journal]
▶ Las Vegas Strip's New Growth Driver: Parking Fees   [Apr-16-17 12:14PM  Motley Fool]
▶ Britney Spears' 'Piece of Me' Las Vegas Show is Coming to an End   [Apr-08-17 08:13PM  Entertainment Tonight Videos]
▶ [$$] Caesars, National Retirement Fund Settle Pension Dispute   [Mar-21-17 02:06PM  The Wall Street Journal]
▶ [$$] Caesars, National Retirement Fund Settle Pension Dispute   [02:06PM  at The Wall Street Journal]
▶ Better Buy: Wynn Resorts Ltd. vs. Caesars Entertainment   [Mar-20-17 06:44PM  Motley Fool]
▶ These Are the Most Expensive Hotels in Las Vegas   [Mar-03-17 09:37AM  at Motley Fool]
▶ Apollo appoints new board of directors at Rackspace   [Mar-01-17 09:33AM  at bizjournals.com]
▶ [$$] Caesars Unit Secures New Loans as it Works Through Restructuring   [Feb-21-17 03:27PM  at The Wall Street Journal]
▶ [$$] Palank's Take: CEOC Restructuring Stings Caesars   [Feb-17-17 02:09PM  at The Wall Street Journal]
▶ New spa marks $6 million renovation at Horseshoe Tunica   [Jan-30-17 03:45PM  at bizjournals.com]
▶ George Soros' Best-Performing Stocks of 2017 So Far   [Jan-29-17 02:45PM  at Motley Fool]
Stock chart of CZR Financial statements of CZR Annual reports of CZR
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.