Intrinsic value of Golden Entertainment - GDEN

Previous Close

$22.00

  Intrinsic Value

$23.57

stock screener

  Rating & Target

hold

+7%

  Value-price divergence*

+5%

Previous close

$22.00

 
Intrinsic value

$23.57

 
Up/down potential

+7%

 
Rating

hold

 
Value-price divergence*

+5%

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

We calculate the intrinsic value of GDEN 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, %
  127.68
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
  5.59
Revenue, $m
  403
  474
  551
  635
  725
  822
  924
  1,032
  1,146
  1,265
  1,390
  1,521
  1,657
  1,798
  1,946
  2,099
  2,259
  2,424
  2,597
  2,776
  2,962
  3,155
  3,356
  3,566
  3,784
  4,011
  4,248
  4,495
  4,753
  5,022
  5,302
Variable operating expenses, $m
 
  426
  494
  567
  646
  731
  820
  915
  1,015
  1,120
  1,229
  1,333
  1,452
  1,577
  1,706
  1,841
  1,980
  2,126
  2,276
  2,433
  2,596
  2,766
  2,942
  3,126
  3,317
  3,517
  3,724
  3,941
  4,167
  4,402
  4,649
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
  390
  426
  494
  567
  646
  731
  820
  915
  1,015
  1,120
  1,229
  1,333
  1,452
  1,577
  1,706
  1,841
  1,980
  2,126
  2,276
  2,433
  2,596
  2,766
  2,942
  3,126
  3,317
  3,517
  3,724
  3,941
  4,167
  4,402
  4,649
Operating income, $m
  13
  48
  57
  68
  79
  91
  103
  117
  131
  145
  161
  187
  204
  222
  240
  259
  279
  299
  320
  342
  365
  389
  414
  440
  467
  495
  524
  554
  586
  619
  654
EBITDA, $m
  41
  77
  89
  103
  117
  133
  149
  167
  185
  205
  225
  246
  268
  291
  315
  340
  365
  392
  420
  449
  479
  511
  543
  577
  612
  649
  687
  727
  769
  813
  858
Interest expense (income), $m
  6
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  77
  81
  86
Earnings before tax, $m
  12
  42
  50
  59
  69
  79
  90
  102
  114
  126
  140
  164
  179
  194
  210
  226
  243
  261
  279
  298
  318
  339
  360
  382
  406
  430
  455
  482
  509
  538
  568
Tax expense, $m
  -4
  11
  14
  16
  19
  21
  24
  27
  31
  34
  38
  44
  48
  52
  57
  61
  66
  70
  75
  81
  86
  91
  97
  103
  110
  116
  123
  130
  137
  145
  153
Net income, $m
  16
  31
  37
  43
  50
  58
  66
  74
  83
  92
  102
  120
  131
  142
  153
  165
  177
  190
  204
  218
  232
  247
  263
  279
  296
  314
  332
  351
  372
  393
  414

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  47
  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
  419
  438
  509
  587
  670
  759
  853
  953
  1,058
  1,168
  1,283
  1,404
  1,530
  1,661
  1,797
  1,938
  2,086
  2,239
  2,398
  2,563
  2,735
  2,913
  3,099
  3,293
  3,494
  3,704
  3,922
  4,150
  4,388
  4,637
  4,896
Adjusted assets (=assets-cash), $m
  372
  438
  509
  587
  670
  759
  853
  953
  1,058
  1,168
  1,283
  1,404
  1,530
  1,661
  1,797
  1,938
  2,086
  2,239
  2,398
  2,563
  2,735
  2,913
  3,099
  3,293
  3,494
  3,704
  3,922
  4,150
  4,388
  4,637
  4,896
Revenue / Adjusted assets
  1.083
  1.082
  1.083
  1.082
  1.082
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.082
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
Average production assets, $m
  155
  182
  212
  245
  279
  316
  356
  397
  441
  487
  535
  585
  638
  692
  749
  808
  870
  933
  1,000
  1,069
  1,140
  1,215
  1,292
  1,373
  1,457
  1,544
  1,635
  1,731
  1,830
  1,933
  2,041
Working capital, $m
  32
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  10
  10
  11
Total debt, $m
  183
  201
  239
  279
  323
  369
  418
  470
  525
  583
  643
  706
  772
  840
  911
  985
  1,062
  1,142
  1,225
  1,311
  1,400
  1,494
  1,591
  1,692
  1,797
  1,906
  2,020
  2,140
  2,264
  2,393
  2,529
Total liabilities, $m
  210
  228
  266
  306
  350
  396
  445
  497
  552
  610
  670
  733
  799
  867
  938
  1,012
  1,089
  1,169
  1,252
  1,338
  1,427
  1,521
  1,618
  1,719
  1,824
  1,933
  2,047
  2,167
  2,291
  2,420
  2,556
Total equity, $m
  209
  209
  243
  280
  320
  363
  408
  455
  506
  558
  613
  671
  731
  794
  859
  927
  997
  1,070
  1,146
  1,225
  1,307
  1,393
  1,481
  1,574
  1,670
  1,770
  1,875
  1,984
  2,098
  2,216
  2,340
Total liabilities and equity, $m
  419
  437
  509
  586
  670
  759
  853
  952
  1,058
  1,168
  1,283
  1,404
  1,530
  1,661
  1,797
  1,939
  2,086
  2,239
  2,398
  2,563
  2,734
  2,914
  3,099
  3,293
  3,494
  3,703
  3,922
  4,151
  4,389
  4,636
  4,896
Debt-to-equity ratio
  0.876
  0.960
  0.980
  1.000
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
  1.060
  1.060
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
  1.080
  1.080
  1.080
  1.080
  1.080
  1.080
  1.080
Adjusted equity ratio
  0.435
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  31
  37
  43
  50
  58
  66
  74
  83
  92
  102
  120
  131
  142
  153
  165
  177
  190
  204
  218
  232
  247
  263
  279
  296
  314
  332
  351
  372
  393
  414
Depreciation, amort., depletion, $m
  28
  29
  32
  35
  39
  42
  46
  50
  55
  59
  64
  59
  64
  69
  75
  81
  87
  93
  100
  107
  114
  121
  129
  137
  146
  154
  164
  173
  183
  193
  204
Funds from operations, $m
  35
  59
  68
  78
  89
  100
  112
  124
  138
  152
  166
  179
  194
  211
  228
  246
  264
  284
  304
  325
  346
  369
  392
  416
  442
  468
  496
  525
  555
  586
  619
Change in working capital, $m
  -2
  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
  1
  1
  1
Cash from operations, $m
  37
  59
  68
  78
  89
  100
  112
  124
  137
  151
  166
  178
  194
  211
  228
  246
  264
  283
  303
  324
  346
  368
  392
  416
  441
  468
  495
  524
  554
  585
  618
Maintenance CAPEX, $m
  0
  -16
  -18
  -21
  -24
  -28
  -32
  -36
  -40
  -44
  -49
  -54
  -59
  -64
  -69
  -75
  -81
  -87
  -93
  -100
  -107
  -114
  -121
  -129
  -137
  -146
  -154
  -164
  -173
  -183
  -193
New CAPEX, $m
  -31
  -27
  -30
  -32
  -35
  -37
  -39
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -74
  -77
  -81
  -84
  -87
  -91
  -95
  -99
  -104
  -108
Cash from investing activities, $m
  -71
  -43
  -48
  -53
  -59
  -65
  -71
  -78
  -84
  -90
  -97
  -104
  -111
  -119
  -126
  -134
  -142
  -151
  -159
  -169
  -179
  -188
  -198
  -210
  -221
  -233
  -245
  -259
  -272
  -287
  -301
Free cash flow, $m
  -34
  16
  20
  25
  29
  35
  41
  47
  54
  61
  69
  74
  83
  92
  102
  112
  122
  133
  144
  155
  167
  180
  193
  206
  220
  235
  250
  265
  282
  299
  316
Issuance/(repayment) of debt, $m
  36
  34
  37
  40
  43
  46
  49
  52
  55
  58
  60
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  110
  114
  119
  124
  130
  135
Issuance/(repurchase) of shares, $m
  2
  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
Cash from financing (excl. dividends), $m  
  35
  35
  37
  40
  43
  46
  49
  52
  55
  58
  60
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  110
  114
  119
  124
  130
  135
Total cash flow (excl. dividends), $m
  2
  51
  58
  65
  73
  81
  90
  99
  109
  119
  129
  137
  149
  161
  173
  186
  199
  212
  227
  242
  257
  273
  290
  307
  325
  344
  364
  384
  406
  428
  452
Retained Cash Flow (-), $m
  1
  -31
  -34
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -124
Prev. year cash balance distribution, $m
 
  31
  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
 
  51
  23
  28
  33
  39
  45
  51
  59
  66
  74
  80
  89
  98
  108
  118
  128
  139
  151
  163
  175
  188
  201
  215
  229
  244
  259
  275
  292
  310
  328
Discount rate, %
 
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
 
  48
  21
  23
  25
  27
  28
  29
  30
  30
  29
  27
  26
  24
  22
  20
  18
  16
  13
  11
  9
  7
  6
  4
  3
  2
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8

Golden Entertainment, Inc., together with its subsidiaries, focuses on distributed gaming, and casino and resort operations in the United States. It operates through two segments, Distributed Gaming and Casinos. The Distributed Gaming segment is involved in the installation, maintenance, and operation of gaming devices in non-casino locations, such as grocery stores, convenience stores, restaurants, bars, taverns, saloons, and liquor stores; and operation of branded taverns targeting local patrons primarily in the greater Las Vegas, Nevada metropolitan area. The Casinos segment owns and operates 3 casinos, including Pahrump Nugget Hotel Casino that offers 513 gaming devices, 14 table games, a race and sports book, a 208-seat bingo facility, and a bowling center, as well as with 70 hotel rooms; Gold Town Casino with 288 gaming devices and a 125-seat bingo facility; and Lakeside Casino & RV Park with 192 gaming devices and a recreational vehicle park in Pahrump, Nevada. This segment also operates Rocky Gap casino resort with 631 gaming devices, 19 table games, 2 casino bars, 3 restaurants, a spa, and the Jack Nicklaus signature golf course in Flintstone, Maryland. The company was formerly known as Lakes Entertainment, Inc. and changed its name to Golden Entertainment, Inc. in July 2015. Golden Entertainment, Inc. was founded in 1998 and is based in Las Vegas, Nevada.

FINANCIAL RATIOS  of  Golden Entertainment (GDEN)

Valuation Ratios
P/E Ratio 30.6
Price to Sales 1.2
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 13.2
Price to Free Cash Flow 81.5
Growth Rates
Sales Growth Rate 127.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 287.5%
Cap. Spend. - 3 Yr. Gr. Rate 8.1%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 79.9%
Total Debt to Equity 87.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital 4.3%
Ret/ On T. Cap. - 3 Yr. Avg. -1.4%
Return On Equity 7.6%
Return On Equity - 3 Yr. Avg. 0.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 28%
Gross Margin - 3 Yr. Avg. 33.8%
EBITDA Margin 11.4%
EBITDA Margin - 3 Yr. Avg. -3%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. -10.3%
Pre-Tax Margin 3%
Pre-Tax Margin - 3 Yr. Avg. -11.3%
Net Profit Margin 4%
Net Profit Margin - 3 Yr. Avg. -9.1%
Effective Tax Rate -33.3%
Eff/ Tax Rate - 3 Yr. Avg. -33.3%
Payout Ratio 150%

GDEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GDEN stock intrinsic value calculation we used $403 million for the last fiscal year's total revenue generated by Golden Entertainment. The default revenue input number comes from 2016 income statement of Golden 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 GDEN stock valuation model: a) initial revenue growth rate of 17.6% 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 6.3%, whose default value for GDEN is calculated based on our internal credit rating of Golden 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 Golden 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 GDEN stock the variable cost ratio is equal to 90.3%.

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 GDEN 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 3.6% for Golden Entertainment.

Corporate tax rate of 27% is the nominal tax rate for Golden 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 GDEN 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 GDEN are equal to 38.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Golden 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 GDEN is equal to 0.2%. 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 - $209 million for Golden 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 21.364 million for Golden 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 Golden Entertainment at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Golden Entertainment posts 2Q profit   [Aug-04-17 10:05PM  Associated Press]
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▶ Top Ranked Momentum Stocks to Buy for May 22nd   [May-22-17 09:23AM  Zacks]
▶ Golden Entertainment posts 1Q profit   [May-09-17 06:44PM  Associated Press]
▶ Golden Entertainment posts 4Q profit   [Mar-13-17 04:22PM  Associated Press]
▶ Hedge Funds Are Crazy About Phoenix New Media Ltd ADR (FENG)   [Dec-12-16 04:26PM  Insider Monkey]
Stock chart of GDEN Financial statements of GDEN
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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