Intrinsic value of Lumos Networks - LMOS

Previous Close

$17.85

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$17.85

 
Intrinsic value premium content
 
Up/down potential premium content
 
Rating premium content
 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of LMOS 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 0.4

 

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, %
  1.47
  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
  207
  208
  213
  218
  224
  231
  239
  247
  256
  265
  275
  286
  298
  310
  323
  337
  352
  368
  384
  402
  420
  440
  460
  482
  505
  529
  554
  581
  609
  638
  669
Variable operating expenses, $m
 
  156
  159
  163
  167
  172
  177
  183
  189
  196
  203
  201
  209
  217
  227
  236
  247
  258
  269
  282
  295
  308
  323
  338
  354
  371
  388
  407
  427
  447
  469
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
  177
  156
  159
  163
  167
  172
  177
  183
  189
  196
  203
  201
  209
  217
  227
  236
  247
  258
  269
  282
  295
  308
  323
  338
  354
  371
  388
  407
  427
  447
  469
Operating income, $m
  30
  52
  54
  55
  57
  59
  61
  64
  66
  69
  72
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
EBITDA, $m
  82
  103
  105
  108
  111
  114
  118
  122
  126
  131
  136
  141
  147
  153
  160
  167
  174
  182
  190
  199
  208
  217
  227
  238
  249
  261
  274
  287
  301
  315
  331
Interest expense (income), $m
  0
  16
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  53
  55
  58
Earnings before tax, $m
  2
  36
  38
  39
  41
  42
  44
  45
  47
  49
  51
  63
  66
  68
  71
  74
  77
  80
  84
  87
  91
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142
Tax expense, $m
  2
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
Net income, $m
  -1
  26
  28
  29
  30
  31
  32
  33
  34
  36
  37
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
  104

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  72
  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
  753
  656
  672
  689
  708
  730
  753
  779
  807
  836
  869
  903
  940
  979
  1,020
  1,064
  1,111
  1,160
  1,212
  1,267
  1,326
  1,387
  1,452
  1,520
  1,592
  1,668
  1,748
  1,832
  1,920
  2,013
  2,111
Adjusted assets (=assets-cash), $m
  681
  656
  672
  689
  708
  730
  753
  779
  807
  836
  869
  903
  940
  979
  1,020
  1,064
  1,111
  1,160
  1,212
  1,267
  1,326
  1,387
  1,452
  1,520
  1,592
  1,668
  1,748
  1,832
  1,920
  2,013
  2,111
Revenue / Adjusted assets
  0.304
  0.317
  0.317
  0.316
  0.316
  0.316
  0.317
  0.317
  0.317
  0.317
  0.316
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
Average production assets, $m
  528
  487
  498
  511
  526
  541
  559
  578
  599
  621
  645
  670
  697
  726
  757
  790
  824
  861
  900
  941
  984
  1,029
  1,077
  1,128
  1,182
  1,238
  1,297
  1,359
  1,425
  1,494
  1,567
Working capital, $m
  54
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
Total debt, $m
  468
  444
  457
  473
  490
  510
  531
  554
  579
  606
  635
  666
  699
  734
  771
  811
  853
  897
  944
  994
  1,046
  1,101
  1,160
  1,221
  1,286
  1,354
  1,426
  1,502
  1,581
  1,665
  1,753
Total liabilities, $m
  618
  591
  604
  620
  637
  657
  678
  701
  726
  753
  782
  813
  846
  881
  918
  958
  1,000
  1,044
  1,091
  1,141
  1,193
  1,248
  1,307
  1,368
  1,433
  1,501
  1,573
  1,649
  1,728
  1,812
  1,900
Total equity, $m
  135
  66
  67
  69
  71
  73
  75
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
  159
  167
  175
  183
  192
  201
  211
Total liabilities and equity, $m
  753
  657
  671
  689
  708
  730
  753
  779
  807
  837
  869
  903
  940
  979
  1,020
  1,064
  1,111
  1,160
  1,212
  1,268
  1,326
  1,387
  1,452
  1,520
  1,592
  1,668
  1,748
  1,832
  1,920
  2,013
  2,111
Debt-to-equity ratio
  3.467
  6.760
  6.810
  6.870
  6.920
  6.990
  7.050
  7.110
  7.180
  7.240
  7.310
  7.370
  7.440
  7.500
  7.560
  7.620
  7.680
  7.730
  7.790
  7.840
  7.890
  7.940
  7.990
  8.030
  8.080
  8.120
  8.160
  8.200
  8.230
  8.270
  8.300
Adjusted equity ratio
  0.093
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  26
  28
  29
  30
  31
  32
  33
  34
  36
  37
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
  104
Depreciation, amort., depletion, $m
  52
  51
  52
  53
  54
  55
  57
  58
  60
  62
  64
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  119
  124
  131
Funds from operations, $m
  61
  77
  79
  81
  83
  86
  88
  91
  94
  98
  101
  102
  106
  110
  115
  120
  125
  130
  136
  142
  148
  155
  162
  170
  177
  186
  194
  204
  213
  223
  234
Change in working capital, $m
  -4
  0
  0
  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
  -1
Cash from operations, $m
  65
  110
  80
  82
  84
  86
  89
  92
  95
  98
  101
  103
  107
  111
  115
  120
  125
  131
  137
  143
  149
  156
  163
  171
  178
  187
  196
  205
  214
  225
  235
Maintenance CAPEX, $m
  0
  -40
  -41
  -42
  -43
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -119
  -124
New CAPEX, $m
  -84
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
  -73
Cash from investing activities, $m
  -33
  -50
  -52
  -55
  -57
  -60
  -62
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -111
  -116
  -121
  -128
  -134
  -141
  -147
  -154
  -162
  -170
  -179
  -188
  -197
Free cash flow, $m
  32
  60
  28
  27
  27
  26
  26
  26
  26
  26
  26
  23
  24
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
  30
  31
  32
  33
  34
  36
  37
  38
Issuance/(repayment) of debt, $m
  -11
  -13
  14
  16
  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
  84
  88
Issuance/(repurchase) of shares, $m
  -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
  0
Cash from financing (excl. dividends), $m  
  -12
  -13
  14
  16
  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
  84
  88
Total cash flow (excl. dividends), $m
  20
  47
  41
  43
  44
  46
  47
  49
  51
  53
  55
  54
  57
  59
  62
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  126
Retained Cash Flow (-), $m
  -4
  -27
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Prev. year cash balance distribution, $m
 
  92
  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
 
  112
  40
  41
  42
  44
  45
  46
  48
  50
  52
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  106
  111
  117
Discount rate, %
 
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
 
  103
  33
  31
  28
  26
  23
  21
  19
  16
  14
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  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

Lumos Networks Corp., through its subsidiaries, provides fiber-based bandwidth infrastructure and service in the Mid-Atlantic region. It operates in three segments: Data, Residential and Small Business, and RLEC Access. The company provides data services, such as multiprotocol label switching based Ethernet, metro Ethernet, fiber to the cell site wireless backhaul, private line service and wavelength transport services, and dedicated Internet access, as well as dark fiber and data center/collocation services to carriers and enterprise customers, including healthcare providers, state and local government agencies, financial institutions, educational institutions, and other enterprises. It also offers fiber-to-the-premise broadband XL and DSL Internet, voice, video, and IP services to residential and small business customers. In addition, the company provides voice services, such as local lines, primary rate interface, long distance, toll and directory advertising, and other voice services. Further, it offers carrier customers with access to its network, which primarily includes switched access services. As of March 7, 2016, it had a fiber network of 8,607 fiber route miles and approximately 384,000 total fiber strand miles connecting 1,099 fiber to the cell sites, 1,440 total FTTC connections, 34 data centers, 1,732 on-net buildings, and approximately 2,800 total on-net locations. The company is headquartered in Waynesboro, Virginia.

FINANCIAL RATIOS  of  Lumos Networks (LMOS)

Valuation Ratios
P/E Ratio -421.4
Price to Sales 2
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow -22.2
Growth Rates
Sales Growth Rate 1.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -27.6%
Cap. Spend. - 3 Yr. Gr. Rate 4.3%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 336.3%
Total Debt to Equity 346.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital -0.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity -0.8%
Return On Equity - 3 Yr. Avg. 10.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 81.2%
Gross Margin - 3 Yr. Avg. 80.7%
EBITDA Margin 26.1%
EBITDA Margin - 3 Yr. Avg. 32.7%
Operating Margin 14.5%
Oper. Margin - 3 Yr. Avg. 19%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. 9.1%
Net Profit Margin -0.5%
Net Profit Margin - 3 Yr. Avg. 5.1%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 60%
Payout Ratio 0%

LMOS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LMOS stock intrinsic value calculation we used $204 million for the last fiscal year's total revenue generated by Lumos Networks. The default revenue input number comes from 2016 income statement of Lumos Networks. 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 LMOS 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 9%, whose default value for LMOS is calculated based on our internal credit rating of Lumos Networks, 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 Lumos Networks.
    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 LMOS stock the variable cost ratio is equal to 75%.

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 LMOS 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 Lumos Networks.

Corporate tax rate of 27% is the nominal tax rate for Lumos Networks. 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 LMOS 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 LMOS are equal to 234.1%.

Life of production assets of 12 years is the average useful life of capital assets used in Lumos Networks 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 LMOS is equal to -4.4%. 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 - $131 million for Lumos Networks - 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 23.55 million for Lumos Networks 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 Lumos Networks at the current share price and the inputted number of shares is $0.4 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
LVLT Level 3 Commun 60.20 prem.  prem.
VZ Verizon Commun 44.84 prem.  prem.
ZAYO Zayo Group Hol 31.51 prem.  prem.
T AT&T 37.70 prem.  prem.
CTL CenturyLink 24.56 prem.  prem.
FTR Frontier Commu 1.17 prem.  prem.
CMCSA Comcast Cl A 39.25 prem.  prem.
SHEN Shenandoah Tel 29.80 prem.  prem.
ALSK Alaska Communi 2.12 prem.  prem.

COMPANY NEWS

▶ ETFs with exposure to Lumos Networks Corp. : May 12, 2017   [May-12-17 04:10PM  Capital Cube]
▶ Lumos Networks reports 1Q loss   [May-08-17 08:06AM  Associated Press]
▶ [$$] EQT to Buy Telecommunications Company Lumos Networks   [01:39PM  at The Wall Street Journal]
▶ Why Shares of Lumos Networks Surged Today   [12:18PM  at Motley Fool]
▶ Here is What Hedge Funds Think About Lumos Networks Corp (LMOS)   [Dec-14-16 01:24AM  at Insider Monkey]
▶ Lumos Networks Joins Equinix Cloud Exchange   [07:15AM  Business Wire]
Stock chart of LMOS Financial statements of LMOS Annual reports of LMOS
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.