Intrinsic value of Franklin Covey - FC

Previous Close

$24.40

  Intrinsic Value

$12.66

stock screener

  Rating & Target

sell

-48%

Previous close

$24.40

 
Intrinsic value

$12.66

 
Up/down potential

-48%

 
Rating

sell

We calculate the intrinsic value of FC 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.50
  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
  185
  189
  193
  198
  204
  210
  217
  224
  232
  240
  250
  260
  270
  281
  293
  306
  319
  333
  348
  364
  381
  399
  417
  437
  458
  479
  502
  527
  552
  579
  607
Variable operating expenses, $m
 
  175
  179
  183
  188
  194
  200
  206
  213
  221
  229
  229
  239
  249
  259
  270
  282
  295
  308
  322
  337
  352
  369
  386
  404
  424
  444
  465
  488
  511
  536
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
  194
  175
  179
  183
  188
  194
  200
  206
  213
  221
  229
  229
  239
  249
  259
  270
  282
  295
  308
  322
  337
  352
  369
  386
  404
  424
  444
  465
  488
  511
  536
Operating income, $m
  -9
  14
  14
  15
  15
  16
  17
  18
  19
  20
  21
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  71
EBITDA, $m
  -2
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  97
  101
Interest expense (income), $m
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  -11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  44
  46
  48
  51
  53
Tax expense, $m
  -4
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
Net income, $m
  -7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  18
  19
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  211
  215
  220
  225
  232
  239
  246
  255
  264
  274
  284
  295
  307
  320
  334
  348
  363
  379
  396
  415
  434
  454
  475
  497
  521
  546
  572
  599
  628
  658
  690
Adjusted assets (=assets-cash), $m
  202
  215
  220
  225
  232
  239
  246
  255
  264
  274
  284
  295
  307
  320
  334
  348
  363
  379
  396
  415
  434
  454
  475
  497
  521
  546
  572
  599
  628
  658
  690
Revenue / Adjusted assets
  0.916
  0.879
  0.877
  0.880
  0.879
  0.879
  0.882
  0.878
  0.879
  0.876
  0.880
  0.881
  0.879
  0.878
  0.877
  0.879
  0.879
  0.879
  0.879
  0.877
  0.878
  0.879
  0.878
  0.879
  0.879
  0.877
  0.878
  0.880
  0.879
  0.880
  0.880
Average production assets, $m
  71
  95
  98
  100
  103
  106
  110
  113
  117
  122
  126
  131
  137
  142
  148
  155
  162
  169
  176
  184
  193
  202
  211
  221
  232
  243
  254
  266
  279
  293
  307
Working capital, $m
  11
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
Total debt, $m
  46
  49
  52
  55
  59
  63
  67
  72
  78
  84
  90
  97
  104
  111
  119
  128
  137
  147
  157
  168
  179
  191
  204
  217
  231
  246
  261
  278
  295
  313
  332
Total liabilities, $m
  126
  128
  131
  134
  138
  142
  147
  152
  157
  163
  169
  176
  183
  191
  199
  207
  216
  226
  236
  247
  258
  270
  283
  296
  310
  325
  341
  357
  374
  392
  411
Total equity, $m
  85
  87
  89
  91
  94
  96
  100
  103
  107
  111
  115
  119
  124
  129
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  231
  242
  254
  266
  279
Total liabilities and equity, $m
  211
  215
  220
  225
  232
  238
  247
  255
  264
  274
  284
  295
  307
  320
  334
  348
  363
  379
  396
  414
  433
  453
  475
  497
  520
  545
  572
  599
  628
  658
  690
Debt-to-equity ratio
  0.541
  0.560
  0.580
  0.600
  0.630
  0.650
  0.680
  0.700
  0.730
  0.760
  0.780
  0.810
  0.840
  0.860
  0.890
  0.910
  0.930
  0.960
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.130
  1.150
  1.160
  1.180
  1.190
Adjusted equity ratio
  0.376
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  18
  19
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
Depreciation, amort., depletion, $m
  7
  18
  18
  18
  19
  19
  19
  20
  20
  20
  21
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
Funds from operations, $m
  34
  26
  26
  27
  28
  28
  29
  30
  31
  32
  33
  31
  33
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
Change in working capital, $m
  17
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  17
  26
  26
  27
  28
  28
  29
  30
  31
  32
  33
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
Maintenance CAPEX, $m
  0
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
New CAPEX, $m
  -8
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
Cash from investing activities, $m
  -22
  -11
  -12
  -13
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -40
  -42
  -43
Free cash flow, $m
  -5
  15
  15
  15
  15
  15
  15
  15
  16
  16
  16
  14
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
Issuance/(repayment) of debt, $m
  8
  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
  16
  16
  17
  18
  19
Issuance/(repurchase) of shares, $m
  -5
  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  
  3
  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
  16
  16
  17
  18
  19
Total cash flow (excl. dividends), $m
  -2
  17
  18
  18
  19
  19
  20
  20
  21
  22
  22
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
Retained Cash Flow (-), $m
  9
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
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
 
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
Cash available for distribution, $m
 
  15
  16
  16
  16
  16
  17
  17
  17
  18
  18
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  15
  14
  14
  13
  12
  12
  11
  10
  10
  9
  7
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  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

Franklin Covey Co. is a global company specializing in performance improvement. The Company's segments are Direct Offices, Strategic Markets, Education practice and International Licensees. The Direct Offices segment consists of its geographic sales offices that serve the United States and Canada, its international sales offices located in Japan, the United Kingdom and Australia, and its public programs group. The Strategic Markets segment includes its government services office, the Sales Performance practice, the Customer Loyalty practice, and a new Global 50 group, which is specifically focused on sales to large, multi-national organizations. The Education practice segment consists of its domestic and international Education practice operations, which are centered on sales to educational institutions, such as elementary schools, high schools, and colleges and universities. The International Licensees segment consists of its international licensees' royalty revenues.

FINANCIAL RATIOS  of  Franklin Covey (FC)

Valuation Ratios
P/E Ratio -47.5
Price to Sales 1.8
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 19.6
Price to Free Cash Flow 37
Growth Rates
Sales Growth Rate -7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 21.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 44.7%
Total Debt to Equity 54.1%
Interest Coverage -5
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.3%
Return On Equity -7.8%
Return On Equity - 3 Yr. Avg. 2.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 66.5%
Gross Margin - 3 Yr. Avg. 66.6%
EBITDA Margin -1.1%
EBITDA Margin - 3 Yr. Avg. 7.4%
Operating Margin -4.9%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin -5.9%
Pre-Tax Margin - 3 Yr. Avg. 2.7%
Net Profit Margin -3.8%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 36.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

FC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FC stock intrinsic value calculation we used $185 million for the last fiscal year's total revenue generated by Franklin Covey. The default revenue input number comes from 2017 income statement of Franklin Covey. 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 FC 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 4.6%, whose default value for FC is calculated based on our internal credit rating of Franklin Covey, 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 Franklin Covey.
    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 FC stock the variable cost ratio is equal to 92.8%.

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 FC 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 5.7% for Franklin Covey.

Corporate tax rate of 27% is the nominal tax rate for Franklin Covey. 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 FC stock is equal to 1.9%.

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 FC are equal to 50.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Franklin Covey 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 FC is equal to -3.1%. 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 - $85 million for Franklin Covey - 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 14 million for Franklin Covey 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 Franklin Covey at the current share price and the inputted number of shares is $0.3 billion.

RELATED COMPANIES Price Int.Val. Rating
TEDU Tarena Interna 8.42 20.12  str.buy
LINC Lincoln Educat 1.65 0.32  str.sell
CPLA Capella Educat 105.05 67.96  sell

COMPANY NEWS

▶ Franklin Covey: Fiscal 3Q Earnings Snapshot   [Jun-27-18 04:17PM  Associated Press]
▶ Franklin Covey Q3 Earnings Preview   [07:51AM  Benzinga]
▶ Is Franklin Covey Co (NYSE:FC) Undervalued?   [07:04AM  Simply Wall St.]
▶ Franklin Covey to Report Third-Quarter Fiscal 2018 Results   [Jun-14-18 05:15PM  Business Wire]
▶ FranklinCovey Launches The 4 Essential Roles of Leadership   [Apr-24-18 09:30AM  Business Wire]
▶ Franklin Covey reports 2Q loss   [Apr-04-18 04:20PM  Associated Press]
▶ Franklin Covey to Report Second-Quarter Fiscal 2018 Results   [Mar-22-18 05:50PM  Business Wire]
▶ 2 Stocks Jump on Friday   [Jan-05-18 04:47PM  GuruFocus.com]
▶ Franklin Covey reports 1Q loss   [Jan-04-18 04:32PM  Associated Press]
▶ Franklin Covey to Report First-Quarter Fiscal 2018 Results   [Dec-21-17 04:10PM  Business Wire]
▶ Franklin Covey misses Street 4Q forecasts   [Nov-09-17 05:53PM  Associated Press]
▶ Is It Time To Buy Franklin Covey Co (FC)?   [09:45AM  Simply Wall St.]
▶ Snap: Will It Pass The Test?   [Aug-10-17 02:51PM  Barrons.com]
▶ ETFs with exposure to Franklin Covey Co. : July 13, 2017   [Jul-13-17 04:01PM  Capital Cube]
▶ Franklin Covey Co. Acquires Jhana   [Jul-12-17 12:00PM  Business Wire]
▶ Franklin Covey reports 3Q loss   [Jun-29-17 09:37PM  Associated Press]
▶ Franklin Covey reports 3Q loss   [04:36PM  Associated Press]
▶ Franklin Covey to Report Third-Quarter 2017 Results   [Jun-15-17 06:00PM  Business Wire]
▶ Franklin Covey Co. Acquires Robert Gregory Partners   [May-18-17 04:03PM  Business Wire]
▶ ETFs with exposure to Franklin Covey Co. : April 12, 2017   [Apr-12-17 01:11PM  Capital Cube]
▶ What Happened in the Stock Market Today   [Mar-31-17 05:02PM  Motley Fool]
▶ Franklin Covey reports 2Q loss   [04:36PM  Associated Press]
▶ Should You Get Rid of Franklin Covey (FC) Now?   [Jan-31-17 08:51AM  Zacks]
▶ Franklin Covey to Report First-Quarter Fiscal 2017 Results   [Dec-22-16 05:46PM  Business Wire]
▶ Hedge Funds Arent Crazy About Syneron Medical Ltd. (ELOS) Anymore   [Dec-09-16 05:26AM  at Insider Monkey]
Financial statements of FC
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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