Intrinsic value of Global Net Lease - GNL

Previous Close

$21.37

  Intrinsic Value

$1.97

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-7%

Previous close

$21.37

 
Intrinsic value

$1.97

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-7%

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

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

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 3.7

 

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, %
  4.39
  14.50
  13.55
  12.70
  11.93
  11.23
  10.61
  10.05
  9.54
  9.09
  8.68
  8.31
  7.98
  7.68
  7.41
  7.17
  6.96
  6.76
  6.58
  6.43
  6.28
  6.15
  6.04
  5.94
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
Revenue, $m
  214
  245
  278
  314
  351
  390
  432
  475
  521
  568
  617
  668
  722
  777
  835
  895
  957
  1,022
  1,089
  1,159
  1,232
  1,308
  1,387
  1,469
  1,555
  1,644
  1,738
  1,835
  1,937
  2,043
  2,155
Variable operating expenses, $m
 
  206
  234
  264
  295
  328
  363
  400
  438
  478
  519
  562
  607
  654
  702
  752
  805
  859
  916
  975
  1,036
  1,100
  1,166
  1,235
  1,307
  1,383
  1,461
  1,543
  1,629
  1,719
  1,812
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
  206
  234
  264
  295
  328
  363
  400
  438
  478
  519
  562
  607
  654
  702
  752
  805
  859
  916
  975
  1,036
  1,100
  1,166
  1,235
  1,307
  1,383
  1,461
  1,543
  1,629
  1,719
  1,812
Operating income, $m
  60
  39
  44
  50
  56
  62
  69
  76
  83
  90
  98
  106
  115
  124
  133
  142
  152
  162
  173
  184
  196
  208
  220
  234
  247
  261
  276
  292
  308
  325
  343
EBITDA, $m
  157
  150
  170
  192
  215
  239
  265
  291
  319
  348
  378
  410
  442
  476
  512
  548
  586
  626
  667
  710
  755
  801
  850
  900
  953
  1,007
  1,065
  1,124
  1,187
  1,252
  1,320
Interest expense (income), $m
  36
  47
  55
  63
  71
  80
  90
  100
  110
  121
  132
  144
  156
  169
  183
  196
  211
  226
  241
  258
  274
  292
  310
  329
  349
  369
  391
  413
  437
  461
  487
Earnings before tax, $m
  52
  -8
  -10
  -13
  -15
  -18
  -21
  -24
  -27
  -31
  -34
  -38
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -79
  -84
  -90
  -96
  -102
  -108
  -115
  -122
  -129
  -136
  -144
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
  -8
  -10
  -13
  -15
  -18
  -21
  -24
  -27
  -31
  -34
  -38
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -79
  -84
  -90
  -96
  -102
  -108
  -115
  -122
  -129
  -136
  -144

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
  3,224
  3,661
  4,126
  4,618
  5,136
  5,681
  6,252
  6,849
  7,472
  8,120
  8,795
  9,497
  10,227
  10,985
  11,773
  12,592
  13,443
  14,328
  15,249
  16,207
  17,205
  18,244
  19,327
  20,456
  21,633
  22,863
  24,146
  25,487
  26,888
  28,353
Adjusted assets (=assets-cash), $m
  2,821
  3,224
  3,661
  4,126
  4,618
  5,136
  5,681
  6,252
  6,849
  7,472
  8,120
  8,795
  9,497
  10,227
  10,985
  11,773
  12,592
  13,443
  14,328
  15,249
  16,207
  17,205
  18,244
  19,327
  20,456
  21,633
  22,863
  24,146
  25,487
  26,888
  28,353
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
  2,946
  3,345
  3,770
  4,219
  4,693
  5,191
  5,713
  6,258
  6,827
  7,420
  8,036
  8,678
  9,345
  10,037
  10,757
  11,506
  12,284
  13,092
  13,934
  14,809
  15,721
  16,670
  17,660
  18,691
  19,768
  20,891
  22,063
  23,289
  24,569
  25,907
Working capital, $m
  0
  123
  139
  157
  175
  195
  216
  238
  260
  284
  309
  334
  361
  389
  417
  447
  478
  511
  544
  579
  616
  654
  693
  734
  777
  822
  869
  918
  968
  1,022
  1,077
Total debt, $m
  1,422
  1,562
  1,790
  2,033
  2,289
  2,560
  2,845
  3,143
  3,454
  3,779
  4,118
  4,470
  4,836
  5,217
  5,613
  6,024
  6,452
  6,896
  7,358
  7,839
  8,339
  8,860
  9,402
  9,967
  10,557
  11,172
  11,813
  12,483
  13,183
  13,914
  14,679
Total liabilities, $m
  1,544
  1,683
  1,911
  2,154
  2,410
  2,681
  2,966
  3,264
  3,575
  3,900
  4,239
  4,591
  4,957
  5,338
  5,734
  6,145
  6,573
  7,017
  7,479
  7,960
  8,460
  8,981
  9,523
  10,088
  10,678
  11,293
  11,934
  12,604
  13,304
  14,035
  14,800
Total equity, $m
  1,348
  1,541
  1,750
  1,972
  2,207
  2,455
  2,716
  2,989
  3,274
  3,571
  3,881
  4,204
  4,540
  4,888
  5,251
  5,627
  6,019
  6,426
  6,849
  7,289
  7,747
  8,224
  8,720
  9,238
  9,778
  10,341
  10,928
  11,542
  12,183
  12,852
  13,553
Total liabilities and equity, $m
  2,892
  3,224
  3,661
  4,126
  4,617
  5,136
  5,682
  6,253
  6,849
  7,471
  8,120
  8,795
  9,497
  10,226
  10,985
  11,772
  12,592
  13,443
  14,328
  15,249
  16,207
  17,205
  18,243
  19,326
  20,456
  21,634
  22,862
  24,146
  25,487
  26,887
  28,353
Debt-to-equity ratio
  1.055
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.050
  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
  1.080
  1.080
  1.080
  1.080
  1.080
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
  -8
  -10
  -13
  -15
  -18
  -21
  -24
  -27
  -31
  -34
  -38
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -79
  -84
  -90
  -96
  -102
  -108
  -115
  -122
  -129
  -136
  -144
Depreciation, amort., depletion, $m
  97
  111
  126
  142
  159
  177
  196
  216
  236
  258
  280
  303
  327
  353
  379
  406
  434
  464
  494
  526
  559
  593
  629
  666
  705
  746
  788
  833
  879
  927
  978
Funds from operations, $m
  109
  103
  116
  129
  144
  159
  175
  192
  209
  227
  246
  265
  286
  307
  329
  352
  375
  400
  426
  453
  480
  509
  539
  571
  604
  638
  674
  711
  750
  791
  833
Change in working capital, $m
  -5
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
Cash from operations, $m
  114
  87
  99
  112
  125
  139
  154
  170
  186
  203
  221
  240
  259
  279
  300
  322
  344
  368
  392
  418
  444
  471
  500
  530
  561
  593
  627
  662
  699
  737
  778
Maintenance CAPEX, $m
  0
  -97
  -111
  -126
  -142
  -159
  -177
  -196
  -216
  -236
  -258
  -280
  -303
  -327
  -353
  -379
  -406
  -434
  -464
  -494
  -526
  -559
  -593
  -629
  -666
  -705
  -746
  -788
  -833
  -879
  -927
New CAPEX, $m
  0
  -373
  -399
  -425
  -450
  -474
  -498
  -522
  -545
  -569
  -593
  -617
  -641
  -667
  -693
  -720
  -748
  -778
  -809
  -841
  -875
  -912
  -949
  -989
  -1,032
  -1,076
  -1,123
  -1,173
  -1,225
  -1,280
  -1,338
Cash from investing activities, $m
  134
  -470
  -510
  -551
  -592
  -633
  -675
  -718
  -761
  -805
  -851
  -897
  -944
  -994
  -1,046
  -1,099
  -1,154
  -1,212
  -1,273
  -1,335
  -1,401
  -1,471
  -1,542
  -1,618
  -1,698
  -1,781
  -1,869
  -1,961
  -2,058
  -2,159
  -2,265
Free cash flow, $m
  248
  -383
  -411
  -439
  -467
  -494
  -521
  -548
  -575
  -602
  -629
  -657
  -686
  -715
  -745
  -777
  -810
  -844
  -880
  -918
  -957
  -999
  -1,043
  -1,089
  -1,137
  -1,188
  -1,242
  -1,299
  -1,359
  -1,422
  -1,488
Issuance/(repayment) of debt, $m
  -116
  210
  228
  243
  257
  271
  284
  298
  311
  325
  339
  352
  366
  381
  396
  411
  427
  444
  462
  481
  500
  521
  542
  565
  589
  615
  642
  670
  700
  731
  765
Issuance/(repurchase) of shares, $m
  0
  201
  219
  235
  251
  266
  281
  297
  312
  328
  344
  360
  377
  394
  412
  431
  450
  470
  491
  513
  537
  561
  586
  613
  641
  671
  702
  735
  770
  806
  845
Cash from financing (excl. dividends), $m  
  -121
  411
  447
  478
  508
  537
  565
  595
  623
  653
  683
  712
  743
  775
  808
  842
  877
  914
  953
  994
  1,037
  1,082
  1,128
  1,178
  1,230
  1,286
  1,344
  1,405
  1,470
  1,537
  1,610
Total cash flow (excl. dividends), $m
  120
  29
  36
  38
  41
  43
  45
  47
  49
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  93
  97
  102
  106
  111
  116
  121
Retained Cash Flow (-), $m
  -143
  -201
  -219
  -235
  -251
  -266
  -281
  -297
  -312
  -328
  -344
  -360
  -377
  -394
  -412
  -431
  -450
  -470
  -491
  -513
  -537
  -561
  -586
  -613
  -641
  -671
  -702
  -735
  -770
  -806
  -845
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
 
  -173
  -183
  -196
  -210
  -223
  -236
  -250
  -263
  -277
  -291
  -305
  -319
  -334
  -350
  -366
  -382
  -400
  -418
  -437
  -457
  -478
  -500
  -524
  -548
  -574
  -601
  -629
  -659
  -690
  -723
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
 
  -159
  -153
  -148
  -142
  -133
  -124
  -113
  -102
  -91
  -80
  -69
  -58
  -49
  -40
  -32
  -25
  -20
  -15
  -11
  -8
  -6
  -4
  -3
  -2
  -1
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  94.8
  90.0
  85.8
  82.0
  78.5
  75.3
  72.4
  69.7
  67.2
  64.9
  62.7
  60.7
  58.8
  57.1
  55.4
  53.8
  52.3
  50.8
  49.5
  48.2
  46.9
  45.7
  44.6
  43.4
  42.4
  41.3
  40.3
  39.4
  38.4
  37.5

Global Net Lease, Inc. is a real estate investment trust. The firm invests in the real estate markets across the globe. It focuses on acquiring and managing a globally-diversified portfolio of strategically-located commercial real estate properties. The firm was formerly known as American Realty Capital Global Trust, Inc. Global Net Lease, Inc. was founded on July 13, 2011 and is based in New York, New York.

FINANCIAL RATIOS  of  Global Net Lease (GNL)

Valuation Ratios
P/E Ratio 30.1
Price to Sales 6.6
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 12.4
Price to Free Cash Flow 12.4
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 86.4%
EBITDA Margin - 3 Yr. Avg. 46.5%
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 14.5% 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 26.5 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 170.937 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 $3.7 billion.

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COMPANY NEWS

▶ 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]
Stock chart of GNL 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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