Intrinsic value of Entravision Communications - EVC

Previous Close

$7.50

  Intrinsic Value

$4.48

stock screener

  Rating & Target

sell

-40%

Previous close

$7.50

 
Intrinsic value

$4.48

 
Up/down potential

-40%

 
Rating

sell

We calculate the intrinsic value of EVC 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 0.7

 

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, %
  1.97
  9.20
  8.78
  8.40
  8.06
  7.76
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.34
  5.30
  5.27
  5.24
  5.22
  5.20
Revenue, $m
  259
  283
  308
  334
  360
  388
  417
  448
  479
  512
  545
  581
  617
  656
  695
  737
  780
  825
  872
  921
  973
  1,026
  1,082
  1,141
  1,202
  1,266
  1,333
  1,404
  1,477
  1,554
  1,635
Variable operating expenses, $m
 
  221
  240
  260
  281
  302
  324
  347
  371
  396
  422
  444
  472
  501
  532
  563
  597
  631
  667
  704
  744
  785
  828
  872
  919
  968
  1,020
  1,073
  1,130
  1,189
  1,250
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
  210
  221
  240
  260
  281
  302
  324
  347
  371
  396
  422
  444
  472
  501
  532
  563
  597
  631
  667
  704
  744
  785
  828
  872
  919
  968
  1,020
  1,073
  1,130
  1,189
  1,250
Operating income, $m
  49
  62
  67
  73
  80
  86
  93
  100
  108
  115
  123
  137
  145
  154
  164
  173
  184
  194
  205
  217
  229
  241
  255
  268
  283
  298
  314
  330
  348
  366
  385
EBITDA, $m
  64
  81
  88
  95
  103
  111
  119
  127
  136
  146
  155
  165
  176
  187
  198
  210
  222
  235
  248
  262
  277
  292
  308
  325
  342
  361
  380
  400
  421
  443
  466
Interest expense (income), $m
  15
  14
  16
  17
  19
  21
  23
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  48
  50
  53
  57
  60
  63
  67
  71
  75
  79
  83
  87
  92
  97
Earnings before tax, $m
  34
  47
  52
  56
  61
  66
  71
  76
  81
  87
  93
  104
  110
  117
  124
  131
  139
  147
  155
  163
  172
  182
  191
  202
  212
  223
  235
  247
  260
  274
  288
Tax expense, $m
  14
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  28
  30
  32
  33
  35
  37
  40
  42
  44
  46
  49
  52
  54
  57
  60
  63
  67
  70
  74
  78
Net income, $m
  20
  34
  38
  41
  44
  48
  52
  55
  59
  64
  68
  76
  81
  85
  91
  96
  101
  107
  113
  119
  126
  133
  140
  147
  155
  163
  172
  181
  190
  200
  210

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  62
  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
  518
  498
  542
  587
  635
  684
  735
  788
  843
  901
  960
  1,022
  1,087
  1,154
  1,224
  1,297
  1,373
  1,453
  1,535
  1,622
  1,712
  1,807
  1,905
  2,008
  2,116
  2,229
  2,347
  2,471
  2,601
  2,736
  2,879
Adjusted assets (=assets-cash), $m
  456
  498
  542
  587
  635
  684
  735
  788
  843
  901
  960
  1,022
  1,087
  1,154
  1,224
  1,297
  1,373
  1,453
  1,535
  1,622
  1,712
  1,807
  1,905
  2,008
  2,116
  2,229
  2,347
  2,471
  2,601
  2,736
  2,879
Revenue / Adjusted assets
  0.568
  0.568
  0.568
  0.569
  0.567
  0.567
  0.567
  0.569
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
Average production assets, $m
  293
  319
  347
  377
  407
  438
  471
  505
  541
  578
  616
  656
  697
  740
  785
  832
  881
  932
  985
  1,040
  1,098
  1,159
  1,222
  1,288
  1,357
  1,430
  1,505
  1,585
  1,668
  1,755
  1,846
Working capital, $m
  96
  42
  45
  49
  53
  57
  61
  66
  70
  75
  80
  85
  91
  96
  102
  108
  115
  121
  128
  135
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
Total debt, $m
  290
  317
  348
  381
  416
  451
  489
  527
  567
  609
  652
  697
  744
  793
  844
  897
  952
  1,010
  1,070
  1,133
  1,198
  1,267
  1,338
  1,413
  1,491
  1,573
  1,659
  1,749
  1,843
  1,942
  2,045
Total liabilities, $m
  334
  362
  393
  426
  461
  496
  534
  572
  612
  654
  697
  742
  789
  838
  889
  942
  997
  1,055
  1,115
  1,178
  1,243
  1,312
  1,383
  1,458
  1,536
  1,618
  1,704
  1,794
  1,888
  1,987
  2,090
Total equity, $m
  183
  136
  148
  161
  174
  187
  201
  216
  231
  247
  263
  280
  298
  316
  335
  355
  376
  398
  421
  444
  469
  495
  522
  550
  580
  611
  643
  677
  713
  750
  789
Total liabilities and equity, $m
  517
  498
  541
  587
  635
  683
  735
  788
  843
  901
  960
  1,022
  1,087
  1,154
  1,224
  1,297
  1,373
  1,453
  1,536
  1,622
  1,712
  1,807
  1,905
  2,008
  2,116
  2,229
  2,347
  2,471
  2,601
  2,737
  2,879
Debt-to-equity ratio
  1.585
  2.320
  2.350
  2.370
  2.390
  2.410
  2.430
  2.440
  2.450
  2.470
  2.480
  2.490
  2.500
  2.510
  2.520
  2.520
  2.530
  2.540
  2.540
  2.550
  2.550
  2.560
  2.560
  2.570
  2.570
  2.580
  2.580
  2.580
  2.590
  2.590
  2.590
Adjusted equity ratio
  0.265
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  34
  38
  41
  44
  48
  52
  55
  59
  64
  68
  76
  81
  85
  91
  96
  101
  107
  113
  119
  126
  133
  140
  147
  155
  163
  172
  181
  190
  200
  210
Depreciation, amort., depletion, $m
  15
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  29
  31
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  56
  60
  63
  66
  70
  73
  77
  81
Funds from operations, $m
  60
  53
  58
  62
  67
  72
  77
  83
  88
  94
  100
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
  204
  214
  226
  238
  250
  263
  277
  291
Change in working capital, $m
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Cash from operations, $m
  57
  50
  54
  59
  63
  68
  73
  78
  83
  89
  95
  100
  106
  112
  119
  126
  134
  141
  149
  158
  166
  175
  185
  195
  205
  216
  228
  240
  252
  265
  279
Maintenance CAPEX, $m
  0
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -31
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -56
  -60
  -63
  -66
  -70
  -73
  -77
New CAPEX, $m
  -9
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
Cash from investing activities, $m
  -10
  -40
  -42
  -44
  -47
  -50
  -52
  -55
  -57
  -61
  -63
  -67
  -70
  -74
  -77
  -81
  -85
  -90
  -94
  -98
  -104
  -109
  -114
  -120
  -125
  -132
  -139
  -145
  -153
  -160
  -168
Free cash flow, $m
  47
  10
  12
  14
  16
  19
  21
  23
  26
  29
  31
  33
  36
  39
  42
  45
  48
  52
  55
  59
  63
  67
  71
  75
  80
  84
  89
  94
  100
  105
  111
Issuance/(repayment) of debt, $m
  -24
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  99
  103
Issuance/(repurchase) of shares, $m
  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
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -23
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  99
  103
Total cash flow (excl. dividends), $m
  25
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  78
  83
  87
  93
  98
  103
  109
  115
  122
  128
  135
  143
  150
  158
  166
  175
  184
  194
  204
  214
Retained Cash Flow (-), $m
  -16
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
Prev. year cash balance distribution, $m
 
  58
  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
 
  87
  32
  35
  38
  41
  44
  47
  51
  54
  58
  61
  65
  69
  73
  78
  83
  88
  93
  98
  104
  109
  116
  122
  129
  135
  143
  150
  158
  167
  175
Discount rate, %
 
  7.50
  7.88
  8.27
  8.68
  9.12
  9.57
  10.05
  10.55
  11.08
  11.63
  12.22
  12.83
  13.47
  14.14
  14.85
  15.59
  16.37
  17.19
  18.05
  18.95
  19.90
  20.89
  21.94
  23.04
  24.19
  25.40
  26.67
  28.00
  29.40
  30.87
PV of cash for distribution, $m
 
  81
  27
  27
  27
  26
  25
  24
  23
  21
  19
  17
  15
  13
  12
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  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

Entravision Communications Corporation is a media company. The Company reaches and engages Hispanics in the United States and certain border markets of Mexico across media channels and advertising platforms. The Company operates through three segments: television broadcasting, radio broadcasting and digital media. As of December 31, 2016, the Company owned and operated 54 television stations located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New Mexico, Texas and Washington, District of Columbia. It owns and operates Spanish-language radio stations in the United States. As of December 31, 2016, its radio stations consisted of 38 frequency modulation (FM) and 11 amplitude modulation (AM) stations located in Arizona, California, Colorado, Florida, Nevada, New Mexico and Texas. The digital media segment provides digital advertising solutions that allow advertisers to reach online Hispanic audiences throughout the United States and Mexico.

FINANCIAL RATIOS  of  Entravision Communications (EVC)

Valuation Ratios
P/E Ratio 33.8
Price to Sales 2.6
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 11.9
Price to Free Cash Flow 14.1
Growth Rates
Sales Growth Rate 2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.7%
Cap. Spend. - 3 Yr. Gr. Rate -2.1%
Financial Strength
Quick Ratio 16
Current Ratio 0
LT Debt to Equity 156.3%
Total Debt to Equity 158.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 11.4%
Return On Equity - 3 Yr. Avg. 15.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 52.5%
Gross Margin - 3 Yr. Avg. 53.9%
EBITDA Margin 24.7%
EBITDA Margin - 3 Yr. Avg. 27.9%
Operating Margin 18.9%
Oper. Margin - 3 Yr. Avg. 21.7%
Pre-Tax Margin 13.1%
Pre-Tax Margin - 3 Yr. Avg. 16.2%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 41.2%
Eff/ Tax Rate - 3 Yr. Avg. 40.2%
Payout Ratio 55%

EVC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EVC stock intrinsic value calculation we used $259 million for the last fiscal year's total revenue generated by Entravision Communications. The default revenue input number comes from 2016 income statement of Entravision Communications. 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 EVC stock valuation model: a) initial revenue growth rate of 9.2% 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 7.5%, whose default value for EVC is calculated based on our internal credit rating of Entravision Communications, 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 Entravision Communications.
    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 EVC stock the variable cost ratio is equal to 78.4%.

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 EVC 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% for Entravision Communications.

Corporate tax rate of 27% is the nominal tax rate for Entravision Communications. 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 EVC 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 EVC are equal to 112.9%.

Life of production assets of 22.8 years is the average useful life of capital assets used in Entravision Communications 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 EVC is equal to 14.7%. 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 - $183 million for Entravision Communications - 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 90.419 million for Entravision Communications 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 Entravision Communications at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Entravision Communications posts 3Q profit   [05:38AM  Associated Press]
▶ Entravision Communications posts 2Q profit   [02:50AM  Associated Press]
▶ Gabelli & Companys Broadcasting Symposium   [Jul-20-17 07:00AM  Business Wire]
▶ Entravision Communications posts 1Q profit   [05:02AM  Associated Press]
▶ Why Entravision Communication Stock Popped Today   [Mar-03-17 02:37PM  Motley Fool]
▶ Entravision Communications posts 4Q profit   [04:49PM  Associated Press]
▶ [$$] Growing Hispanic Market Favors Entravision   [Dec-03-16 12:01AM  at Barrons.com]
▶ Is Entravision Communication (EVC) A Good Stock To Buy?   [Nov-29-16 11:43AM  at Insider Monkey]
Financial statements of EVC
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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