Intrinsic value of Golden Entertainment - GDEN

Previous Close

$28.91

  Intrinsic Value

$13.38

stock screener

  Rating & Target

str. sell

-54%

Previous close

$28.91

 
Intrinsic value

$13.38

 
Up/down potential

-54%

 
Rating

str. 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

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
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
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  403
  418
  435
  452
  471
  491
  512
  534
  558
  583
  609
  637
  667
  698
  730
  765
  801
  840
  880
  922
  967
  1,014
  1,063
  1,115
  1,170
  1,227
  1,287
  1,351
  1,417
  1,487
  1,561
Variable operating expenses, $m
 
  377
  392
  407
  423
  441
  459
  479
  500
  521
  545
  559
  584
  612
  640
  671
  702
  736
  771
  808
  848
  889
  932
  978
  1,025
  1,076
  1,128
  1,184
  1,242
  1,304
  1,368
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
  377
  392
  407
  423
  441
  459
  479
  500
  521
  545
  559
  584
  612
  640
  671
  702
  736
  771
  808
  848
  889
  932
  978
  1,025
  1,076
  1,128
  1,184
  1,242
  1,304
  1,368
Operating income, $m
  13
  41
  43
  45
  47
  50
  53
  55
  58
  61
  65
  79
  82
  86
  90
  94
  99
  104
  108
  114
  119
  125
  131
  137
  144
  151
  159
  167
  175
  183
  192
EBITDA, $m
  41
  69
  72
  75
  78
  81
  85
  88
  92
  97
  101
  106
  110
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  185
  194
  203
  213
  224
  235
  246
  258
Interest expense (income), $m
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
Earnings before tax, $m
  12
  35
  37
  39
  41
  43
  45
  47
  50
  53
  55
  69
  72
  75
  79
  83
  86
  91
  95
  99
  104
  109
  114
  120
  126
  132
  138
  145
  152
  160
  168
Tax expense, $m
  -4
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
Net income, $m
  16
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  117
  122

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
  386
  401
  418
  435
  453
  473
  493
  515
  538
  562
  588
  615
  644
  674
  706
  740
  775
  812
  852
  893
  936
  982
  1,030
  1,080
  1,133
  1,189
  1,247
  1,309
  1,373
  1,441
Adjusted assets (=assets-cash), $m
  372
  386
  401
  418
  435
  453
  473
  493
  515
  538
  562
  588
  615
  644
  674
  706
  740
  775
  812
  852
  893
  936
  982
  1,030
  1,080
  1,133
  1,189
  1,247
  1,309
  1,373
  1,441
Revenue / Adjusted assets
  1.083
  1.083
  1.085
  1.081
  1.083
  1.084
  1.082
  1.083
  1.083
  1.084
  1.084
  1.083
  1.085
  1.084
  1.083
  1.084
  1.082
  1.084
  1.084
  1.082
  1.083
  1.083
  1.082
  1.083
  1.083
  1.083
  1.082
  1.083
  1.083
  1.083
  1.083
Average production assets, $m
  155
  161
  167
  174
  181
  189
  197
  206
  215
  224
  235
  245
  257
  269
  281
  294
  308
  323
  339
  355
  372
  390
  409
  429
  450
  472
  496
  520
  546
  573
  601
Working capital, $m
  32
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Total debt, $m
  183
  175
  183
  191
  200
  210
  220
  230
  242
  254
  267
  280
  294
  309
  325
  342
  359
  378
  397
  417
  439
  462
  485
  510
  537
  564
  593
  624
  656
  690
  725
Total liabilities, $m
  210
  202
  210
  218
  227
  237
  247
  257
  269
  281
  294
  307
  321
  336
  352
  369
  386
  405
  424
  444
  466
  489
  512
  537
  564
  591
  620
  651
  683
  717
  752
Total equity, $m
  209
  185
  192
  200
  208
  217
  226
  236
  246
  257
  269
  281
  294
  308
  322
  338
  354
  371
  388
  407
  427
  447
  469
  492
  516
  542
  568
  596
  625
  656
  689
Total liabilities and equity, $m
  419
  387
  402
  418
  435
  454
  473
  493
  515
  538
  563
  588
  615
  644
  674
  707
  740
  776
  812
  851
  893
  936
  981
  1,029
  1,080
  1,133
  1,188
  1,247
  1,308
  1,373
  1,441
Debt-to-equity ratio
  0.876
  0.950
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
  0.990
  1.000
  1.000
  1.000
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.030
  1.040
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.050
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
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  117
  122
Depreciation, amort., depletion, $m
  28
  28
  29
  30
  31
  31
  32
  33
  34
  35
  36
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
Funds from operations, $m
  35
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  77
  81
  85
  89
  93
  97
  102
  106
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
  180
  188
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
  54
  56
  58
  60
  62
  65
  68
  71
  74
  77
  77
  81
  85
  88
  93
  97
  102
  106
  112
  117
  123
  128
  135
  141
  148
  155
  163
  171
  179
  188
Maintenance CAPEX, $m
  0
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
New CAPEX, $m
  -31
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Cash from investing activities, $m
  -71
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -43
  -44
  -46
  -49
  -52
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -83
  -87
  -91
Free cash flow, $m
  -34
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  41
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
Issuance/(repayment) of debt, $m
  36
  8
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
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
  8
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
Total cash flow (excl. dividends), $m
  2
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
  104
  109
  115
  120
  126
  132
Retained Cash Flow (-), $m
  1
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
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
 
  63
  32
  33
  35
  36
  37
  38
  40
  41
  43
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  95
  100
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
 
  59
  29
  27
  26
  25
  23
  22
  20
  19
  17
  14
  13
  11
  10
  9
  7
  6
  5
  4
  3
  3
  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

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 October 23, 2017, its distributed gaming operations consisted of approximately 16,000 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 40.2
Price to Sales 1.6
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 17.4
Price to Free Cash Flow 107.1
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 3.8% 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 26.783 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 $0.8 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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