Intrinsic value of GWG Holdings - GWGH

Previous Close

$8.36

  Intrinsic Value

$14.77

stock screener

  Rating & Target

str. buy

+77%

Previous close

$8.36

 
Intrinsic value

$14.77

 
Up/down potential

+77%

 
Rating

str. buy

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

We calculate the intrinsic value of GWGH 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 0.0

 

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, %
  72.50
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  0
  70
  72
  74
  76
  78
  81
  84
  86
  90
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  187
  196
  206
  216
  226
Variable operating expenses, $m
 
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Fixed operating expenses, $m
 
  9
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  18
  19
Total operating expenses, $m
  26
  26
  27
  28
  29
  29
  30
  32
  32
  33
  35
  36
  37
  38
  40
  41
  42
  45
  46
  47
  50
  52
  53
  56
  58
  61
  63
  66
  69
  71
  75
Operating income, $m
  43
  44
  45
  46
  47
  49
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  97
  102
  107
  112
  118
  124
  131
  137
  144
  152
EBITDA, $m
  43
  44
  45
  46
  47
  49
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  97
  102
  107
  112
  118
  124
  131
  137
  144
  152
Interest expense (income), $m
  35
  42
  43
  44
  45
  47
  48
  50
  51
  53
  55
  58
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  123
  129
  136
Earnings before tax, $m
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
Tax expense, $m
  1
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
Net income, $m
  0
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  643
  658
  673
  690
  710
  731
  755
  780
  808
  838
  870
  905
  942
  981
  1,022
  1,066
  1,113
  1,162
  1,215
  1,270
  1,328
  1,390
  1,455
  1,523
  1,595
  1,671
  1,751
  1,836
  1,924
  2,017
  2,115
Adjusted assets (=assets-cash), $m
  643
  658
  673
  690
  710
  731
  755
  780
  808
  838
  870
  905
  942
  981
  1,022
  1,066
  1,113
  1,162
  1,215
  1,270
  1,328
  1,390
  1,455
  1,523
  1,595
  1,671
  1,751
  1,836
  1,924
  2,017
  2,115
Revenue / Adjusted assets
  0.000
  0.106
  0.107
  0.107
  0.107
  0.107
  0.107
  0.108
  0.106
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
Average production assets, $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
  0
Working capital, $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
  0
Total debt, $m
  554
  567
  581
  596
  614
  633
  654
  677
  702
  729
  758
  789
  822
  857
  894
  933
  975
  1,020
  1,066
  1,116
  1,168
  1,223
  1,282
  1,343
  1,408
  1,476
  1,547
  1,623
  1,702
  1,786
  1,873
Total liabilities, $m
  576
  589
  603
  618
  636
  655
  676
  699
  724
  751
  780
  811
  844
  879
  916
  955
  997
  1,042
  1,088
  1,138
  1,190
  1,245
  1,304
  1,365
  1,430
  1,498
  1,569
  1,645
  1,724
  1,808
  1,895
Total equity, $m
  67
  68
  70
  72
  74
  76
  78
  81
  84
  87
  91
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  145
  151
  158
  166
  174
  182
  191
  200
  210
  220
Total liabilities and equity, $m
  643
  657
  673
  690
  710
  731
  754
  780
  808
  838
  871
  905
  942
  981
  1,022
  1,066
  1,113
  1,163
  1,214
  1,270
  1,328
  1,390
  1,455
  1,523
  1,596
  1,672
  1,751
  1,836
  1,924
  2,018
  2,115
Debt-to-equity ratio
  8.269
  8.290
  8.300
  8.310
  8.320
  8.330
  8.340
  8.340
  8.350
  8.360
  8.370
  8.380
  8.390
  8.400
  8.410
  8.420
  8.430
  8.430
  8.440
  8.450
  8.460
  8.460
  8.470
  8.480
  8.480
  8.490
  8.490
  8.500
  8.510
  8.510
  8.520
Adjusted equity ratio
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
Depreciation, amort., depletion, $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
  0
Funds from operations, $m
  -142
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
Change in working capital, $m
  -76
  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
  -66
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
Maintenance CAPEX, $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
  0
New CAPEX, $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
  0
Cash from investing activities, $m
  -90
  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
Free cash flow, $m
  -156
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
Issuance/(repayment) of debt, $m
  188
  13
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  44
  47
  50
  52
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
Issuance/(repurchase) of shares, $m
  55
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  204
  13
  14
  15
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
  53
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
Total cash flow (excl. dividends), $m
  48
  15
  15
  17
  19
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  49
  52
  55
  58
  62
  65
  68
  72
  76
  80
  85
  90
  94
  100
Retained Cash Flow (-), $m
  -51
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
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
 
  13
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  44
  47
  50
  52
  55
  58
  61
  65
  68
  72
  76
  80
  85
  89
Discount rate, %
 
  14.30
  15.02
  15.77
  16.55
  17.38
  18.25
  19.16
  20.12
  21.13
  22.18
  23.29
  24.46
  25.68
  26.96
  28.31
  29.73
  31.22
  32.78
  34.41
  36.14
  37.94
  39.84
  41.83
  43.92
  46.12
  48.42
  50.85
  53.39
  56.06
  58.86
PV of cash for distribution, $m
 
  12
  10
  10
  9
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.7
  99.1
  98.2
  97.1
  95.9
  94.6
  93.3
  91.9
  90.6
  89.2
  87.9
  86.7
  85.6
  84.5
  83.5
  82.6
  81.9
  81.2
  80.7
  80.2
  79.9
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7

GWG Holdings, Inc. is the parent company of GWG Life, is a financial services company. The Company is focused on transforming the life insurance industry through its products and services. The Company has developed a new suite of options for the life insurance secondary market called LifeCare Xchange (LCX). This new capability provides seniors with the exchange value of their life insurance policies they can apply to long-term care and other post-retirement needs. Through its subsidiary GWG Life, LLC, seeks to further transform the industry by applying proprietary M-Panel epigenetic technology to disrupt traditional life insurance underwriting practices.

FINANCIAL RATIOS  of  GWG Holdings (GWGH)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.7
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow -0.8
Price to Free Cash Flow -0.8
Growth Rates
Sales Growth Rate 72.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 826.9%
Total Debt to Equity 826.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 1.5%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -18.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 52.2%
EBITDA Margin - 3 Yr. Avg. 39.1%
Operating Margin 62.3%
Oper. Margin - 3 Yr. Avg. 58.3%
Pre-Tax Margin 1.4%
Pre-Tax Margin - 3 Yr. Avg. -15.9%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -10.8%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 56.5%
Payout Ratio 0%

GWGH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GWGH stock intrinsic value calculation we used $69 million for the last fiscal year's total revenue generated by GWG Holdings. The default revenue input number comes from 2016 income statement of GWG Holdings. 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 GWGH stock valuation model: a) initial revenue growth rate of 2% 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 14.3%, whose default value for GWGH is calculated based on our internal credit rating of GWG Holdings, 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 GWG Holdings.
    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 GWGH stock the variable cost ratio is equal to 24.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9 million in the base year in the intrinsic value calculation for GWGH 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 7.6% for GWG Holdings.

Corporate tax rate of 27% is the nominal tax rate for GWG Holdings. 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 GWGH 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 GWGH are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in GWG Holdings 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 GWGH is equal to 0%. 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 - $67 million for GWG Holdings - 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 5.784 million for GWG Holdings 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 GWG Holdings at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
CIA Citizens Cl A 7.58 10.23  buy
PRI Primerica 104.00 288.78  str.buy
TMK Torchmark 89.63 125.99  str.buy
FFG FBL Financial 70.85 219.54  str.buy
AEL American Equit 32.20 281.82  str.buy
UNM Unum Group 56.65 108.80  str.buy

COMPANY NEWS

▶ GWG Holdings Inc to Host Earnings Call   [Nov-09-17 02:10PM  ACCESSWIRE]
▶ GWG Holdings to Report Third Quarter 2017 Financial Results   [Oct-26-17 04:05PM  GlobeNewswire]
▶ Would Warren Buffett Buy This Half-Priced Insurer?   [Sep-21-17 01:10PM  GuruFocus.com]
▶ GWG Holdings Hires Steven Reed to Lead West Region Sales   [Sep-19-17 11:15AM  GlobeNewswire]
▶ GWG Holdings Reports Second Quarter 2017 Financial Results   [Aug-10-17 08:15AM  GlobeNewswire]
▶ GWG Holdings Announces Special Cash Dividend   [04:05PM  GlobeNewswire]
▶ GWG Holdings to Report Third Quarter 2016 Financial Results   [Oct-25-16 08:30AM  GlobeNewswire]
▶ GWG Closes Second Senior Bank Credit Facility   [Sep-19-16 08:15AM  GlobeNewswire]
▶ GWG Holdings to Present at the 2016 Aegis Growth Conference   [Sep-14-16 08:30AM  GlobeNewswire]
▶ GWG Announces DTC Eligibility for L Bond Offering   [Sep-13-16 10:15AM  GlobeNewswire]
▶ GWG Marks Life Insurance Awareness Month   [Aug-25-16 02:47PM  GlobeNewswire]
▶ GWG Announces Interest Rate Changes to L Bond Offering   [Aug-02-16 12:54PM  GlobeNewswire]
▶ GWG Wins Best of Show Award in Insurance Marketing   [Jul-06-16 08:30AM  GlobeNewswire]
▶ GWG ranks among top purchasers of life insurance policies   [Jun-16-16 08:30AM  GlobeNewswire]
▶ GWG Portfolio of Life Insurance Policies Tops $1 Billion   [May-12-16 08:30AM  GlobeNewswire]
▶ GWG Expands Business Development Team   [May-05-16 09:31AM  GlobeNewswire]
▶ GWG Holdings to Report First Quarter 2016 Financial Results   [Apr-21-16 08:30AM  GlobeNewswire]
Financial statements of GWGH
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.