Intrinsic value of Golden Entertainment - GDEN

Previous Close

$32.74

  Intrinsic Value

$17.18

stock screener

  Rating & Target

sell

-48%

Previous close

$32.74

 
Intrinsic value

$17.18

 
Up/down potential

-48%

 
Rating

sell

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 0.7

 

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, %
  127.68
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  403
  430
  459
  489
  519
  551
  585
  620
  656
  694
  733
  775
  818
  863
  910
  959
  1,011
  1,065
  1,121
  1,180
  1,242
  1,307
  1,375
  1,446
  1,521
  1,599
  1,681
  1,767
  1,857
  1,952
  2,051
Variable operating expenses, $m
 
  388
  413
  439
  466
  494
  523
  554
  586
  619
  654
  679
  717
  757
  798
  841
  886
  933
  983
  1,035
  1,089
  1,146
  1,205
  1,268
  1,333
  1,402
  1,474
  1,549
  1,628
  1,711
  1,798
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
  388
  413
  439
  466
  494
  523
  554
  586
  619
  654
  679
  717
  757
  798
  841
  886
  933
  983
  1,035
  1,089
  1,146
  1,205
  1,268
  1,333
  1,402
  1,474
  1,549
  1,628
  1,711
  1,798
Operating income, $m
  13
  42
  46
  50
  53
  57
  62
  66
  70
  75
  80
  96
  101
  106
  112
  118
  125
  131
  138
  146
  153
  161
  170
  178
  188
  197
  207
  218
  229
  241
  253
EBITDA, $m
  41
  71
  76
  81
  86
  91
  97
  103
  109
  115
  121
  128
  135
  143
  151
  159
  167
  176
  186
  195
  206
  216
  228
  239
  252
  265
  278
  293
  308
  323
  340
Interest expense (income), $m
  6
  6
  6
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  18
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
Earnings before tax, $m
  12
  36
  39
  43
  46
  49
  53
  57
  61
  65
  69
  84
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  148
  155
  163
  172
  180
  190
  199
  209
  220
Tax expense, $m
  -4
  10
  11
  12
  12
  13
  14
  15
  16
  17
  19
  23
  24
  25
  27
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  59
Net income, $m
  16
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  61
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  113
  119
  125
  132
  138
  145
  153
  161

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
  397
  424
  451
  480
  509
  540
  572
  606
  641
  677
  715
  755
  797
  840
  886
  933
  983
  1,035
  1,090
  1,147
  1,207
  1,269
  1,335
  1,404
  1,476
  1,552
  1,631
  1,715
  1,802
  1,894
Adjusted assets (=assets-cash), $m
  372
  397
  424
  451
  480
  509
  540
  572
  606
  641
  677
  715
  755
  797
  840
  886
  933
  983
  1,035
  1,090
  1,147
  1,207
  1,269
  1,335
  1,404
  1,476
  1,552
  1,631
  1,715
  1,802
  1,894
Revenue / Adjusted assets
  1.083
  1.083
  1.083
  1.084
  1.081
  1.083
  1.083
  1.084
  1.083
  1.083
  1.083
  1.084
  1.083
  1.083
  1.083
  1.082
  1.084
  1.083
  1.083
  1.083
  1.083
  1.083
  1.084
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
  1.083
Average production assets, $m
  155
  166
  177
  188
  200
  212
  225
  239
  253
  267
  282
  298
  315
  332
  350
  369
  389
  410
  432
  454
  478
  503
  529
  557
  585
  616
  647
  680
  715
  751
  790
Working capital, $m
  32
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Total debt, $m
  183
  180
  194
  208
  223
  239
  255
  272
  289
  307
  327
  346
  367
  389
  412
  435
  460
  486
  513
  542
  572
  603
  636
  670
  706
  744
  783
  825
  868
  914
  962
Total liabilities, $m
  210
  207
  221
  235
  250
  266
  282
  299
  316
  334
  354
  373
  394
  416
  439
  462
  487
  513
  540
  569
  599
  630
  663
  697
  733
  771
  810
  852
  895
  941
  989
Total equity, $m
  209
  190
  203
  216
  229
  243
  258
  274
  290
  306
  324
  342
  361
  381
  402
  423
  446
  470
  495
  521
  548
  577
  607
  638
  671
  706
  742
  780
  820
  861
  905
Total liabilities and equity, $m
  419
  397
  424
  451
  479
  509
  540
  573
  606
  640
  678
  715
  755
  797
  841
  885
  933
  983
  1,035
  1,090
  1,147
  1,207
  1,270
  1,335
  1,404
  1,477
  1,552
  1,632
  1,715
  1,802
  1,894
Debt-to-equity ratio
  0.876
  0.950
  0.960
  0.970
  0.970
  0.980
  0.990
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.060
  1.060
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
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  61
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  113
  119
  125
  132
  138
  145
  153
  161
Depreciation, amort., depletion, $m
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  33
  35
  37
  39
  41
  43
  45
  47
  50
  53
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
Funds from operations, $m
  35
  55
  59
  62
  66
  70
  74
  78
  83
  87
  92
  94
  99
  105
  110
  116
  122
  129
  136
  143
  150
  158
  166
  175
  184
  193
  203
  213
  224
  235
  247
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
  0
  0
  0
Cash from operations, $m
  37
  55
  59
  62
  66
  70
  74
  78
  82
  87
  92
  94
  99
  104
  110
  116
  122
  129
  135
  143
  150
  158
  166
  174
  183
  193
  203
  213
  224
  235
  247
Maintenance CAPEX, $m
  0
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
New CAPEX, $m
  -31
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
Cash from investing activities, $m
  -71
  -28
  -29
  -30
  -33
  -34
  -36
  -38
  -40
  -43
  -44
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -81
  -85
  -90
  -94
  -100
  -104
  -110
  -115
  -121
Free cash flow, $m
  -34
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  47
  50
  52
  55
  59
  62
  65
  69
  72
  76
  80
  84
  89
  94
  98
  103
  109
  114
  120
  126
Issuance/(repayment) of debt, $m
  36
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  41
  43
  46
  48
Issuance/(repurchase) of shares, $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
  0
  0
  0
Cash from financing (excl. dividends), $m  
  35
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  41
  43
  46
  48
Total cash flow (excl. dividends), $m
  2
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  67
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
  117
  123
  130
  136
  143
  150
  158
  166
  174
Retained Cash Flow (-), $m
  1
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
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
 
  60
  31
  33
  35
  37
  39
  41
  44
  46
  49
  49
  51
  54
  57
  61
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  107
  112
  118
  124
  130
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
 
  57
  27
  27
  26
  25
  25
  23
  22
  21
  19
  17
  15
  13
  12
  10
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
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Golden Entertainment, Inc. is a group of gaming companies. The Company focuses on distributed gaming, including tavern gaming, and casino and resort operations. It operates through two segments: Distributed Gaming and Casinos. Its Distributed Gaming segment involves the installation, maintenance and operation of gaming and amusement devices in certain strategic, high-traffic, non-casino locations (such as grocery stores, convenience stores, restaurants, bars, taverns, saloons and liquor stores) in Nevada and Montana, and the operation of traditional, branded taverns targeting local patrons, primarily in the greater Las Vegas, Nevada metropolitan area. As of December 31, 2016, its distributed gaming operations consisted of approximately 10,400 gaming devices in approximately 960 locations. Its Casinos segment consists of the Rocky Gap Casino Resort in Flintstone, Maryland and three casinos in Pahrump, Nevada: Pahrump Nugget Hotel Casino, Gold Town Casino and Lakeside Casino & RV Park.

FINANCIAL RATIOS  of  Golden Entertainment (GDEN)

Valuation Ratios
P/E Ratio 45.5
Price to Sales 1.8
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 19.7
Price to Free Cash Flow 121.3
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 6.8% 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 9.1 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 22.322 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 $0.7 billion.

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COMPANY NEWS

▶ Golden Entertainment posts 3Q profit   [Nov-08-17 05:37PM  Associated Press]
▶ Golden Entertainment Names Two New Senior Executives   [Oct-30-17 07:00AM  Business Wire]
▶ Golden Entertainment posts 2Q profit   [Aug-04-17 10:05PM  Associated Press]
▶ 3 Casino Stocks to Buy Now   [Jun-06-17 02:00PM  Zacks]
▶ 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]
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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