Intrinsic value of Entravision Communications - EVC

Previous Close

$5.50

  Intrinsic Value

$3.92

stock screener

  Rating & Target

sell

-29%

  Value-price divergence*

+472%

Previous close

$5.50

 
Intrinsic value

$3.92

 
Up/down potential

-29%

 
Rating

sell

 
Value-price divergence*

+472%

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

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 0.5

 

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
  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
  259
  264
  270
  277
  285
  294
  303
  313
  325
  337
  350
  363
  378
  394
  411
  428
  447
  467
  488
  510
  534
  558
  584
  612
  641
  671
  703
  737
  773
  810
  850
Variable operating expenses, $m
 
  207
  212
  217
  223
  230
  237
  245
  253
  262
  272
  278
  289
  301
  314
  327
  342
  357
  373
  390
  408
  427
  447
  468
  490
  513
  538
  564
  591
  620
  650
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
  207
  212
  217
  223
  230
  237
  245
  253
  262
  272
  278
  289
  301
  314
  327
  342
  357
  373
  390
  408
  427
  447
  468
  490
  513
  538
  564
  591
  620
  650
Operating income, $m
  49
  57
  59
  60
  62
  64
  66
  69
  71
  74
  77
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  137
  144
  151
  158
  166
  173
  182
  191
  200
EBITDA, $m
  64
  75
  77
  79
  81
  84
  86
  89
  92
  96
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  183
  191
  200
  210
  220
  231
  242
Interest expense (income), $m
  15
  14
  15
  15
  15
  16
  17
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  50
Earnings before tax, $m
  34
  43
  44
  45
  47
  48
  50
  52
  54
  56
  58
  65
  68
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  119
  125
  131
  137
  144
  150
Tax expense, $m
  14
  12
  12
  12
  13
  13
  13
  14
  14
  15
  16
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
Net income, $m
  20
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  48
  50
  52
  54
  56
  58
  61
  64
  67
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110

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
  465
  476
  488
  502
  517
  534
  552
  572
  593
  615
  640
  666
  693
  723
  754
  787
  822
  859
  898
  939
  983
  1,029
  1,077
  1,128
  1,182
  1,238
  1,298
  1,361
  1,426
  1,496
Adjusted assets (=assets-cash), $m
  456
  465
  476
  488
  502
  517
  534
  552
  572
  593
  615
  640
  666
  693
  723
  754
  787
  822
  859
  898
  939
  983
  1,029
  1,077
  1,128
  1,182
  1,238
  1,298
  1,361
  1,426
  1,496
Revenue / Adjusted assets
  0.568
  0.568
  0.567
  0.568
  0.568
  0.569
  0.567
  0.567
  0.568
  0.568
  0.569
  0.567
  0.568
  0.569
  0.568
  0.568
  0.568
  0.568
  0.568
  0.568
  0.569
  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
  298
  305
  313
  322
  332
  342
  354
  366
  380
  395
  410
  427
  445
  463
  483
  505
  527
  551
  576
  602
  630
  660
  691
  723
  758
  794
  832
  872
  915
  959
Working capital, $m
  96
  39
  40
  41
  42
  43
  45
  46
  48
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  99
  103
  108
  114
  119
  125
Total debt, $m
  290
  293
  300
  309
  319
  330
  342
  356
  370
  385
  402
  419
  438
  458
  480
  502
  526
  552
  579
  607
  637
  669
  702
  737
  774
  813
  854
  897
  943
  991
  1,041
Total liabilities, $m
  334
  338
  345
  354
  364
  375
  387
  401
  415
  430
  447
  464
  483
  503
  525
  547
  571
  597
  624
  652
  682
  714
  747
  782
  819
  858
  899
  942
  988
  1,036
  1,086
Total equity, $m
  183
  127
  130
  134
  137
  142
  146
  151
  157
  162
  169
  175
  182
  190
  198
  207
  216
  225
  235
  246
  257
  269
  282
  295
  309
  324
  339
  356
  373
  391
  410
Total liabilities and equity, $m
  517
  465
  475
  488
  501
  517
  533
  552
  572
  592
  616
  639
  665
  693
  723
  754
  787
  822
  859
  898
  939
  983
  1,029
  1,077
  1,128
  1,182
  1,238
  1,298
  1,361
  1,427
  1,496
Debt-to-equity ratio
  1.585
  2.300
  2.300
  2.310
  2.320
  2.330
  2.340
  2.350
  2.360
  2.370
  2.380
  2.390
  2.400
  2.410
  2.420
  2.430
  2.440
  2.450
  2.460
  2.470
  2.470
  2.480
  2.490
  2.500
  2.500
  2.510
  2.520
  2.520
  2.530
  2.530
  2.540
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
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  48
  50
  52
  54
  56
  58
  61
  64
  67
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
Depreciation, amort., depletion, $m
  15
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
Funds from operations, $m
  60
  49
  50
  52
  53
  55
  56
  58
  60
  62
  65
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
Change in working capital, $m
  3
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
Cash from operations, $m
  57
  49
  50
  51
  52
  53
  55
  57
  59
  61
  63
  64
  66
  69
  72
  75
  78
  81
  85
  88
  92
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
Maintenance CAPEX, $m
  0
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
New CAPEX, $m
  -9
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
Cash from investing activities, $m
  -10
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -80
  -84
Free cash flow, $m
  47
  30
  30
  29
  29
  30
  30
  30
  30
  31
  31
  31
  32
  32
  33
  34
  35
  37
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
Issuance/(repayment) of debt, $m
  -24
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
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
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
Total cash flow (excl. dividends), $m
  25
  37
  37
  38
  39
  41
  42
  43
  45
  46
  48
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
Retained Cash Flow (-), $m
  -16
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
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
 
  92
  34
  35
  36
  36
  37
  38
  39
  40
  42
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
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
 
  86
  30
  28
  26
  24
  22
  20
  18
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  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
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Entravision Communications Corporation operates as a media company that reaches and engages Hispanics across media channels and advertising platforms in the United States and certain border markets of Mexico. The company operates through three segments: Television Broadcasting, Radio Broadcasting, and Digital Media. It owns and operates television stations that broadcast drama shows, talk shows, novelas, entertainment magazines, news magazines, national news, specials, late news, childrenÂ’s programs, sports, reality, comedy shows, and movies. The company also owns and operates radio stations that broadcast advertising, news, traffic, weather, promotions, and community events. In addition, it operates a proprietary technology and data platform that delivers digital advertising solutions in various advertising formats. As of December 31, 2015, the company owned and/or operated 56 primary television stations located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New Mexico, Texas, and Washington, D.C.; and 49 operational radio stations consisting of 38 FM and 11 AM in 18 markets located primarily in Arizona, California, Colorado, Florida, Nevada, New Mexico, and Texas. Entravision Communications Corporation was founded in 1996 and is headquartered in Santa Monica, California.

FINANCIAL RATIOS  of  Entravision Communications (EVC)

Valuation Ratios
P/E Ratio 24.8
Price to Sales 1.9
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 10.3
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 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 88.036 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 $0.5 billion.

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COMPANY NEWS

▶ 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]
Stock chart of EVC 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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