Intrinsic value of Liberty Broadband Cl A - LBRDA

Previous Close

$91.98

  Intrinsic Value

$11.49

stock screener

  Rating & Target

str. sell

-88%

Previous close

$91.98

 
Intrinsic value

$11.49

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of LBRDA 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 16.9

 

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, %
  -65.93
  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
  31
  32
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  102
Variable operating expenses, $m
 
  13
  14
  14
  14
  15
  15
  16
  16
  17
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
  40
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
  -719
  13
  14
  14
  14
  15
  15
  16
  16
  17
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
  40
Operating income, $m
  750
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  56
  59
  61
EBITDA, $m
  754
  21
  22
  22
  23
  24
  25
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
Interest expense (income), $m
  14
  14
  18
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  65
  69
  73
  77
  82
  87
  92
Earnings before tax, $m
  1,476
  5
  1
  1
  1
  0
  0
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30
Tax expense, $m
  559
  1
  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
  917
  3
  1
  1
  0
  0
  0
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  206
  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
  9,591
  10,540
  10,782
  11,060
  11,371
  11,715
  12,094
  12,505
  12,951
  13,432
  13,947
  14,499
  15,087
  15,713
  16,379
  17,086
  17,835
  18,627
  19,465
  20,351
  21,286
  22,273
  23,313
  24,410
  25,566
  26,783
  28,064
  29,413
  30,832
  32,326
  33,896
Adjusted assets (=assets-cash), $m
  9,385
  10,540
  10,782
  11,060
  11,371
  11,715
  12,094
  12,505
  12,951
  13,432
  13,947
  14,499
  15,087
  15,713
  16,379
  17,086
  17,835
  18,627
  19,465
  20,351
  21,286
  22,273
  23,313
  24,410
  25,566
  26,783
  28,064
  29,413
  30,832
  32,326
  33,896
Revenue / Adjusted assets
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
  0.003
Average production assets, $m
  12
  12
  12
  12
  13
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
Working capital, $m
  -154
  16
  16
  17
  17
  18
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
Total debt, $m
  599
  503
  527
  554
  584
  617
  654
  694
  737
  784
  834
  887
  944
  1,005
  1,070
  1,138
  1,211
  1,288
  1,369
  1,455
  1,546
  1,641
  1,742
  1,849
  1,961
  2,079
  2,203
  2,334
  2,472
  2,617
  2,769
Total liabilities, $m
  1,118
  1,022
  1,046
  1,073
  1,103
  1,136
  1,173
  1,213
  1,256
  1,303
  1,353
  1,406
  1,463
  1,524
  1,589
  1,657
  1,730
  1,807
  1,888
  1,974
  2,065
  2,160
  2,261
  2,368
  2,480
  2,598
  2,722
  2,853
  2,991
  3,136
  3,288
Total equity, $m
  8,473
  9,518
  9,737
  9,987
  10,268
  10,579
  10,921
  11,292
  11,695
  12,129
  12,594
  13,092
  13,624
  14,189
  14,791
  15,429
  16,105
  16,820
  17,577
  18,377
  19,221
  20,112
  21,052
  22,042
  23,086
  24,185
  25,342
  26,560
  27,842
  29,190
  30,608
Total liabilities and equity, $m
  9,591
  10,540
  10,783
  11,060
  11,371
  11,715
  12,094
  12,505
  12,951
  13,432
  13,947
  14,498
  15,087
  15,713
  16,380
  17,086
  17,835
  18,627
  19,465
  20,351
  21,286
  22,272
  23,313
  24,410
  25,566
  26,783
  28,064
  29,413
  30,833
  32,326
  33,896
Debt-to-equity ratio
  0.071
  0.050
  0.050
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
Adjusted equity ratio
  0.881
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903
  0.903

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  917
  3
  1
  1
  0
  0
  0
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30
Depreciation, amort., depletion, $m
  4
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Funds from operations, $m
  -6
  6
  4
  4
  4
  3
  3
  3
  2
  2
  1
  0
  0
  -1
  -2
  -3
  -4
  -5
  -5
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
Change in working capital, $m
  6
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  -12
  6
  4
  3
  3
  3
  2
  2
  1
  1
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -16
  -18
  -19
  -21
  -23
  -25
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -4,991
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -9
Free cash flow, $m
  -5,003
  4
  1
  1
  0
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
Issuance/(repayment) of debt, $m
  152
  110
  24
  27
  30
  33
  37
  40
  43
  47
  50
  53
  57
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  152
Issuance/(repurchase) of shares, $m
  4,400
  1,041
  218
  250
  281
  311
  342
  373
  404
  436
  468
  501
  535
  570
  607
  645
  684
  724
  767
  811
  857
  905
  955
  1,007
  1,062
  1,119
  1,179
  1,242
  1,308
  1,376
  1,448
Cash from financing (excl. dividends), $m  
  4,553
  1,151
  242
  277
  311
  344
  379
  413
  447
  483
  518
  554
  592
  631
  672
  714
  757
  801
  848
  897
  948
  1,001
  1,056
  1,113
  1,174
  1,237
  1,303
  1,373
  1,446
  1,521
  1,600
Total cash flow (excl. dividends), $m
  -449
  1,155
  243
  277
  311
  345
  378
  412
  445
  480
  515
  550
  587
  625
  664
  705
  747
  791
  836
  884
  933
  984
  1,038
  1,094
  1,153
  1,214
  1,278
  1,346
  1,416
  1,490
  1,567
Retained Cash Flow (-), $m
  -5,325
  -1,045
  -219
  -250
  -281
  -311
  -342
  -373
  -404
  -436
  -468
  -501
  -535
  -570
  -607
  -645
  -684
  -724
  -767
  -811
  -857
  -905
  -955
  -1,007
  -1,062
  -1,119
  -1,179
  -1,242
  -1,308
  -1,376
  -1,448
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
 
  111
  24
  27
  30
  33
  36
  39
  41
  44
  47
  49
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  83
  87
  91
  95
  99
  104
  108
  113
  118
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  104
  21
  22
  23
  23
  23
  22
  21
  20
  19
  17
  16
  14
  13
  11
  9
  8
  7
  5
  4
  3
  3
  2
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  94.2
  93.1
  92.0
  90.7
  89.3
  87.9
  86.4
  84.9
  83.4
  81.8
  80.2
  78.6
  77.0
  75.4
  73.8
  72.2
  70.6
  69.0
  67.5
  65.9
  64.4
  62.9
  61.4
  60.0
  58.6
  57.2
  55.8
  54.5
  53.2
  51.9

Liberty Broadband Corporation holds interest in Charter Communications, Inc. (Charter) and its subsidiary Skyhook Holding, Inc. (Skyhook). The Company's segments include Skyhook, Charter, and Corporate and other. Skyhook provides a wireless fidelity (Wi-Fi)-based location platform focused on providing positioning technology and contextual location intelligence solutions. Charter is an equity method investment that provides cable services in the United States, offering a range of entertainment, information and communications solutions to residential and commercial customers. Charter offers its customers subscription-based video services, including video on demand (VOD), high definition television, and digital video recorder service, Internet services and voice services. Skyhook's Wi-Fi location solution can be used to help carriers and emergency personnel offer E-9-1-1 services domestically. Charter offers broadband communications solutions for businesses and carrier organizations.

FINANCIAL RATIOS  of  Liberty Broadband Cl A (LBRDA)

Valuation Ratios
P/E Ratio 18.2
Price to Sales 539.2
Price to Book 2
Price to Tangible Book
Price to Cash Flow -1393
Price to Free Cash Flow -1393
Growth Rates
Sales Growth Rate -65.9%
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 1
Current Ratio 0.1
LT Debt to Equity 2.3%
Total Debt to Equity 7.1%
Interest Coverage 106
Management Effectiveness
Return On Assets 14.1%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 14.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 15.8%
Return On Equity - 3 Yr. Avg. 3%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 33.3%
EBITDA Margin 4819.4%
EBITDA Margin - 3 Yr. Avg. 1492.8%
Operating Margin 2419.4%
Oper. Margin - 3 Yr. Avg. 762.7%
Pre-Tax Margin 4761.3%
Pre-Tax Margin - 3 Yr. Avg. 1463.9%
Net Profit Margin 2958.1%
Net Profit Margin - 3 Yr. Avg. 902.5%
Effective Tax Rate 37.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.2%
Payout Ratio 0%

LBRDA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LBRDA stock intrinsic value calculation we used $31 million for the last fiscal year's total revenue generated by Liberty Broadband Cl A. The default revenue input number comes from 2016 income statement of Liberty Broadband Cl A. 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 LBRDA 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 6.1%, whose default value for LBRDA is calculated based on our internal credit rating of Liberty Broadband Cl A, 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 Liberty Broadband Cl A.
    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 LBRDA stock the variable cost ratio is equal to 41.9%.

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 LBRDA 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 Liberty Broadband Cl A.

Corporate tax rate of 27% is the nominal tax rate for Liberty Broadband Cl A. 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 LBRDA 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 LBRDA are equal to 37.1%.

Life of production assets of 4.6 years is the average useful life of capital assets used in Liberty Broadband Cl A 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 LBRDA 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 - $8473 million for Liberty Broadband Cl A - 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 184.279 million for Liberty Broadband Cl A 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 Liberty Broadband Cl A at the current share price and the inputted number of shares is $16.9 billion.

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Financial statements of LBRDA
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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