Intrinsic value of Global Net Lease - GNL

Previous Close

$21.09

  Intrinsic Value

$5.02

stock screener

  Rating & Target

str. sell

-76%

Previous close

$21.09

 
Intrinsic value

$5.02

 
Up/down potential

-76%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as GNL.

We calculate the intrinsic value of GNL 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 1.4

 

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, %
  4.39
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  214
  223
  233
  244
  255
  267
  279
  292
  306
  321
  336
  352
  369
  387
  405
  425
  446
  468
  491
  515
  540
  567
  595
  624
  655
  687
  721
  757
  795
  834
  876
Variable operating expenses, $m
 
  188
  196
  205
  214
  224
  235
  246
  257
  270
  282
  296
  310
  325
  341
  358
  375
  393
  413
  433
  454
  476
  500
  525
  551
  578
  607
  637
  668
  701
  736
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
  154
  188
  196
  205
  214
  224
  235
  246
  257
  270
  282
  296
  310
  325
  341
  358
  375
  393
  413
  433
  454
  476
  500
  525
  551
  578
  607
  637
  668
  701
  736
Operating income, $m
  60
  36
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
  59
  61
  64
  68
  71
  74
  78
  82
  86
  90
  95
  99
  104
  109
  115
  120
  126
  133
  139
EBITDA, $m
  154
  134
  140
  146
  152
  159
  167
  175
  183
  192
  201
  210
  220
  231
  242
  254
  267
  280
  293
  308
  323
  339
  355
  373
  391
  411
  431
  453
  475
  499
  523
Interest expense (income), $m
  36
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  76
  80
  84
  89
  93
  98
  103
  108
  114
  119
  126
  132
  139
  146
  153
  161
  169
  178
  187
  196
Earnings before tax, $m
  52
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
Tax expense, $m
  4
  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
Net income, $m
  47
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  70
  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
  2,891
  2,940
  3,071
  3,209
  3,356
  3,510
  3,674
  3,845
  4,027
  4,218
  4,419
  4,630
  4,853
  5,088
  5,334
  5,594
  5,866
  6,153
  6,455
  6,772
  7,105
  7,455
  7,823
  8,209
  8,615
  9,042
  9,490
  9,961
  10,456
  10,975
  11,521
Adjusted assets (=assets-cash), $m
  2,821
  2,940
  3,071
  3,209
  3,356
  3,510
  3,674
  3,845
  4,027
  4,218
  4,419
  4,630
  4,853
  5,088
  5,334
  5,594
  5,866
  6,153
  6,455
  6,772
  7,105
  7,455
  7,823
  8,209
  8,615
  9,042
  9,490
  9,961
  10,456
  10,975
  11,521
Revenue / Adjusted assets
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
Average production assets, $m
  2,573
  2,686
  2,806
  2,933
  3,066
  3,208
  3,357
  3,514
  3,679
  3,854
  4,038
  4,231
  4,435
  4,649
  4,874
  5,111
  5,360
  5,623
  5,898
  6,188
  6,492
  6,812
  7,148
  7,501
  7,872
  8,262
  8,672
  9,102
  9,554
  10,028
  10,527
Working capital, $m
  0
  112
  117
  122
  128
  133
  140
  146
  153
  160
  168
  176
  184
  193
  203
  213
  223
  234
  245
  257
  270
  283
  297
  312
  327
  344
  361
  379
  397
  417
  438
Total debt, $m
  1,422
  1,414
  1,482
  1,554
  1,631
  1,711
  1,797
  1,886
  1,981
  2,081
  2,186
  2,296
  2,412
  2,535
  2,663
  2,799
  2,941
  3,091
  3,248
  3,414
  3,588
  3,770
  3,962
  4,164
  4,376
  4,599
  4,833
  5,079
  5,337
  5,608
  5,893
Total liabilities, $m
  1,544
  1,535
  1,603
  1,675
  1,752
  1,832
  1,918
  2,007
  2,102
  2,202
  2,307
  2,417
  2,533
  2,656
  2,784
  2,920
  3,062
  3,212
  3,369
  3,535
  3,709
  3,891
  4,083
  4,285
  4,497
  4,720
  4,954
  5,200
  5,458
  5,729
  6,014
Total equity, $m
  1,348
  1,405
  1,468
  1,534
  1,604
  1,678
  1,756
  1,838
  1,925
  2,016
  2,112
  2,213
  2,320
  2,432
  2,550
  2,674
  2,804
  2,941
  3,085
  3,237
  3,396
  3,563
  3,739
  3,924
  4,118
  4,322
  4,536
  4,761
  4,998
  5,246
  5,507
Total liabilities and equity, $m
  2,892
  2,940
  3,071
  3,209
  3,356
  3,510
  3,674
  3,845
  4,027
  4,218
  4,419
  4,630
  4,853
  5,088
  5,334
  5,594
  5,866
  6,153
  6,454
  6,772
  7,105
  7,454
  7,822
  8,209
  8,615
  9,042
  9,490
  9,961
  10,456
  10,975
  11,521
Debt-to-equity ratio
  1.055
  1.010
  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
  1.050
  1.060
  1.060
  1.060
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
  1.070
  1.070
Adjusted equity ratio
  0.473
  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
  47
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
Depreciation, amort., depletion, $m
  94
  98
  102
  107
  112
  117
  123
  128
  134
  141
  147
  154
  162
  170
  178
  187
  196
  205
  215
  226
  237
  249
  261
  274
  287
  302
  316
  332
  349
  366
  384
Funds from operations, $m
  109
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  246
  258
  270
  283
  297
  312
  327
Change in working capital, $m
  -5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
Cash from operations, $m
  114
  82
  85
  89
  92
  97
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  200
  209
  220
  230
  241
  253
  266
  278
  292
  306
Maintenance CAPEX, $m
  0
  -94
  -98
  -102
  -107
  -112
  -117
  -123
  -128
  -134
  -141
  -147
  -154
  -162
  -170
  -178
  -187
  -196
  -205
  -215
  -226
  -237
  -249
  -261
  -274
  -287
  -302
  -316
  -332
  -349
  -366
New CAPEX, $m
  0
  -113
  -120
  -127
  -134
  -141
  -149
  -157
  -166
  -174
  -184
  -193
  -204
  -214
  -225
  -237
  -249
  -262
  -275
  -290
  -304
  -320
  -336
  -353
  -371
  -390
  -410
  -430
  -452
  -475
  -499
Cash from investing activities, $m
  134
  -207
  -218
  -229
  -241
  -253
  -266
  -280
  -294
  -308
  -325
  -340
  -358
  -376
  -395
  -415
  -436
  -458
  -480
  -505
  -530
  -557
  -585
  -614
  -645
  -677
  -712
  -746
  -784
  -824
  -865
Free cash flow, $m
  248
  -126
  -133
  -140
  -148
  -157
  -165
  -174
  -184
  -194
  -204
  -215
  -226
  -238
  -251
  -264
  -278
  -292
  -307
  -323
  -340
  -357
  -375
  -394
  -415
  -436
  -458
  -481
  -506
  -531
  -558
Issuance/(repayment) of debt, $m
  -116
  62
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  116
  122
  129
  135
  142
  150
  157
  165
  174
  183
  192
  202
  212
  223
  234
  246
  258
  271
  285
Issuance/(repurchase) of shares, $m
  0
  69
  75
  79
  84
  89
  93
  99
  104
  110
  116
  122
  128
  135
  142
  150
  157
  166
  174
  183
  193
  203
  213
  224
  236
  248
  261
  274
  288
  302
  318
Cash from financing (excl. dividends), $m  
  -121
  131
  143
  151
  160
  170
  178
  189
  199
  210
  221
  233
  244
  257
  271
  285
  299
  316
  331
  348
  367
  386
  405
  426
  448
  471
  495
  520
  546
  573
  603
Total cash flow (excl. dividends), $m
  120
  5
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
  40
  42
  45
Retained Cash Flow (-), $m
  -143
  -69
  -75
  -79
  -84
  -89
  -93
  -99
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -150
  -157
  -166
  -174
  -183
  -193
  -203
  -213
  -224
  -236
  -248
  -261
  -274
  -288
  -302
  -318
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
 
  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
 
  -64
  -64
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -150
  -157
  -166
  -174
  -183
  -193
  -203
  -213
  -224
  -235
  -247
  -260
  -273
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  -59
  -54
  -51
  -49
  -45
  -42
  -38
  -35
  -31
  -27
  -24
  -20
  -17
  -14
  -11
  -9
  -7
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  95.4
  90.7
  86.3
  82.0
  77.9
  74.0
  70.2
  66.7
  63.2
  60.0
  56.8
  53.9
  51.0
  48.3
  45.8
  43.4
  41.0
  38.9
  36.8
  34.8
  32.9
  31.2
  29.5
  27.9
  26.4
  24.9
  23.6
  22.3
  21.1
  19.9

Global Net Lease, Inc. is a real estate investment trust. The Company's business consists of owning, managing, operating, leasing, acquiring, investing in and disposing of real estate assets. It owns and invests in commercial properties principally in the United States, the United Kingdom and continental Europe that are then leased to companies. It was formed to primarily acquire a portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant net-leased commercial properties. As of December 31, 2016, it owned 310 properties consisting of 22 million rentable square feet. As of December 31, 2016, its owned 310 properties, including 241 properties located in the United States and Puerto Rico, 43 properties located in the United Kingdom and 26 properties located across continental Europe. It may also originate or acquire first mortgage loans secured by real estate. Its business is conducted through Global Net Lease Operating Partnership, L.P.

FINANCIAL RATIOS  of  Global Net Lease (GNL)

Valuation Ratios
P/E Ratio 29.7
Price to Sales 6.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow 12.3
Price to Free Cash Flow 12.3
Growth Rates
Sales Growth Rate 4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 55.6%
Total Debt to Equity 105.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. -0.4%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -0.8%
Return On Equity 3.7%
Return On Equity - 3 Yr. Avg. -1.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 81.8%
Gross Margin - 3 Yr. Avg. 85.7%
EBITDA Margin 85%
EBITDA Margin - 3 Yr. Avg. 45.2%
Operating Margin 28%
Oper. Margin - 3 Yr. Avg. -1.1%
Pre-Tax Margin 24.3%
Pre-Tax Margin - 3 Yr. Avg. -11%
Net Profit Margin 22%
Net Profit Margin - 3 Yr. Avg. -12.4%
Effective Tax Rate 7.7%
Eff/ Tax Rate - 3 Yr. Avg. 53.2%
Payout Ratio 255.3%

GNL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GNL stock intrinsic value calculation we used $214 million for the last fiscal year's total revenue generated by Global Net Lease. The default revenue input number comes from 2016 income statement of Global Net Lease. 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 GNL stock valuation model: a) initial revenue growth rate of 4.4% 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 8.9%, whose default value for GNL is calculated based on our internal credit rating of Global Net Lease, 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 Global Net Lease.
    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 GNL stock the variable cost ratio is equal to 84.1%.

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 GNL 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 3.5% for Global Net Lease.

Corporate tax rate of 27% is the nominal tax rate for Global Net Lease. 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 GNL 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 GNL are equal to 1202.3%.

Life of production assets of 27.4 years is the average useful life of capital assets used in Global Net Lease 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 GNL is equal to 50%. 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 - $1348 million for Global Net Lease - 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 67.12 million for Global Net Lease 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 Global Net Lease at the current share price and the inputted number of shares is $1.4 billion.

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COMPANY NEWS

▶ /C O R R E C T I O N -- Global Net Lease, Inc./   [Nov-06-17 11:42PM  PR Newswire]
▶ Global Net Lease reports 3Q results   [06:03PM  Associated Press]
▶ Global Net Lease reports 2Q results   [Aug-07-17 11:48PM  Associated Press]
▶ 5 Widely Held REITs You Should Dump Today   [Aug-06-17 08:33AM  Forbes]
▶ 5 Risky REITs to Sell Immediately, 2 Bargains to Buy Instead   [Aug-05-17 05:56AM  Harvest Exchange]
▶ Global Net Lease reports 1Q results   [May-08-17 06:18AM  Associated Press]
Financial statements of GNL
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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