Intrinsic value of Navigators Group - NAVG

Previous Close

$49.65

  Intrinsic Value

$111.22

stock screener

  Rating & Target

str. buy

+124%

Previous close

$49.65

 
Intrinsic value

$111.22

 
Up/down potential

+124%

 
Rating

str. buy

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

We calculate the intrinsic value of NAVG 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  12.91
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
Revenue, $m
  0
  1,284
  1,374
  1,467
  1,564
  1,665
  1,770
  1,879
  1,992
  2,111
  2,235
  2,363
  2,498
  2,638
  2,785
  2,938
  3,098
  3,266
  3,441
  3,625
  3,817
  4,018
  4,228
  4,449
  4,680
  4,922
  5,176
  5,442
  5,721
  6,014
  6,321
Variable operating expenses, $m
 
  1,124
  1,202
  1,284
  1,368
  1,456
  1,548
  1,644
  1,743
  1,847
  1,955
  2,067
  2,184
  2,307
  2,435
  2,569
  2,710
  2,856
  3,009
  3,170
  3,338
  3,513
  3,698
  3,891
  4,093
  4,304
  4,526
  4,759
  5,003
  5,259
  5,528
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
  1,065
  1,124
  1,202
  1,284
  1,368
  1,456
  1,548
  1,644
  1,743
  1,847
  1,955
  2,067
  2,184
  2,307
  2,435
  2,569
  2,710
  2,856
  3,009
  3,170
  3,338
  3,513
  3,698
  3,891
  4,093
  4,304
  4,526
  4,759
  5,003
  5,259
  5,528
Operating income, $m
  133
  161
  172
  184
  196
  208
  221
  235
  249
  264
  280
  297
  313
  331
  350
  369
  389
  410
  432
  455
  479
  504
  531
  558
  587
  618
  650
  683
  718
  755
  793
EBITDA, $m
  138
  161
  172
  184
  196
  209
  222
  236
  250
  265
  280
  297
  313
  331
  350
  369
  389
  410
  432
  455
  479
  504
  531
  558
  587
  618
  650
  683
  718
  755
  793
Interest expense (income), $m
  15
  15
  30
  45
  61
  78
  96
  114
  133
  152
  173
  194
  216
  240
  264
  289
  316
  343
  372
  403
  434
  467
  502
  539
  577
  617
  659
  702
  748
  797
  847
Earnings before tax, $m
  118
  146
  142
  138
  134
  130
  126
  122
  117
  112
  107
  103
  97
  92
  86
  80
  73
  67
  60
  52
  45
  37
  28
  20
  11
  1
  -9
  -19
  -30
  -42
  -54
Tax expense, $m
  35
  39
  38
  37
  36
  35
  34
  33
  32
  30
  29
  28
  26
  25
  23
  21
  20
  18
  16
  14
  12
  10
  8
  5
  3
  0
  0
  0
  0
  0
  0
Net income, $m
  83
  106
  104
  101
  98
  95
  92
  89
  85
  82
  78
  75
  71
  67
  63
  58
  53
  49
  44
  38
  33
  27
  21
  14
  8
  1
  -9
  -19
  -30
  -42
  -54

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
  4,814
  5,158
  5,518
  5,892
  6,281
  6,686
  7,107
  7,545
  8,002
  8,478
  8,974
  9,491
  10,032
  10,595
  11,184
  11,800
  12,443
  13,116
  13,820
  14,557
  15,328
  16,135
  16,981
  17,867
  18,795
  19,768
  20,787
  21,856
  22,977
  24,152
  25,385
Adjusted assets (=assets-cash), $m
  4,814
  5,158
  5,518
  5,892
  6,281
  6,686
  7,107
  7,545
  8,002
  8,478
  8,974
  9,491
  10,032
  10,595
  11,184
  11,800
  12,443
  13,116
  13,820
  14,557
  15,328
  16,135
  16,981
  17,867
  18,795
  19,768
  20,787
  21,856
  22,977
  24,152
  25,385
Revenue / Adjusted assets
  0.000
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
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
  264
  522
  794
  1,076
  1,370
  1,676
  1,994
  2,325
  2,669
  3,029
  3,403
  3,794
  4,202
  4,628
  5,072
  5,537
  6,023
  6,531
  7,062
  7,618
  8,201
  8,810
  9,449
  10,117
  10,818
  11,553
  12,322
  13,130
  13,976
  14,863
  15,794
Total liabilities, $m
  3,636
  3,894
  4,166
  4,448
  4,742
  5,048
  5,366
  5,697
  6,041
  6,401
  6,775
  7,166
  7,574
  8,000
  8,444
  8,909
  9,395
  9,903
  10,434
  10,990
  11,573
  12,182
  12,821
  13,489
  14,190
  14,925
  15,694
  16,502
  17,348
  18,235
  19,166
Total equity, $m
  1,178
  1,264
  1,352
  1,444
  1,539
  1,638
  1,741
  1,849
  1,960
  2,077
  2,199
  2,325
  2,458
  2,596
  2,740
  2,891
  3,049
  3,214
  3,386
  3,566
  3,755
  3,953
  4,160
  4,377
  4,605
  4,843
  5,093
  5,355
  5,629
  5,917
  6,219
Total liabilities and equity, $m
  4,814
  5,158
  5,518
  5,892
  6,281
  6,686
  7,107
  7,546
  8,001
  8,478
  8,974
  9,491
  10,032
  10,596
  11,184
  11,800
  12,444
  13,117
  13,820
  14,556
  15,328
  16,135
  16,981
  17,866
  18,795
  19,768
  20,787
  21,857
  22,977
  24,152
  25,385
Debt-to-equity ratio
  0.224
  0.410
  0.590
  0.750
  0.890
  1.020
  1.140
  1.260
  1.360
  1.460
  1.550
  1.630
  1.710
  1.780
  1.850
  1.920
  1.980
  2.030
  2.090
  2.140
  2.180
  2.230
  2.270
  2.310
  2.350
  2.390
  2.420
  2.450
  2.480
  2.510
  2.540
Adjusted equity ratio
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  83
  106
  104
  101
  98
  95
  92
  89
  85
  82
  78
  75
  71
  67
  63
  58
  53
  49
  44
  38
  33
  27
  21
  14
  8
  1
  -9
  -19
  -30
  -42
  -54
Depreciation, amort., depletion, $m
  5
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  350
  107
  104
  102
  99
  96
  93
  89
  86
  82
  79
  75
  71
  67
  63
  58
  53
  49
  44
  38
  33
  27
  21
  14
  8
  1
  -9
  -19
  -30
  -42
  -54
Change in working capital, $m
  126
  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
  224
  107
  104
  102
  99
  96
  93
  89
  86
  82
  79
  75
  71
  67
  63
  58
  53
  49
  44
  38
  33
  27
  21
  14
  8
  1
  -9
  -19
  -30
  -42
  -54
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
  -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
Cash from investing activities, $m
  -211
  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
  13
  107
  104
  102
  99
  96
  93
  89
  86
  82
  79
  75
  71
  67
  63
  58
  53
  49
  44
  38
  33
  27
  21
  14
  8
  1
  -9
  -19
  -30
  -42
  -54
Issuance/(repayment) of debt, $m
  0
  258
  272
  283
  294
  306
  318
  331
  345
  359
  375
  391
  408
  426
  445
  465
  486
  508
  531
  556
  582
  610
  638
  669
  701
  734
  770
  807
  846
  887
  931
Issuance/(repurchase) of shares, $m
  2
  0
  0
  0
  0
  4
  11
  19
  27
  35
  43
  52
  61
  71
  82
  93
  104
  116
  129
  142
  156
  171
  186
  203
  220
  238
  259
  281
  305
  330
  356
Cash from financing (excl. dividends), $m  
  2
  258
  272
  283
  294
  310
  329
  350
  372
  394
  418
  443
  469
  497
  527
  558
  590
  624
  660
  698
  738
  781
  824
  872
  921
  972
  1,029
  1,088
  1,151
  1,217
  1,287
Total cash flow (excl. dividends), $m
  -1
  365
  376
  384
  392
  405
  422
  439
  457
  476
  497
  518
  540
  564
  589
  616
  643
  673
  704
  737
  771
  807
  846
  886
  928
  973
  1,020
  1,069
  1,121
  1,175
  1,233
Retained Cash Flow (-), $m
  -82
  -86
  -88
  -92
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -127
  -132
  -138
  -144
  -151
  -158
  -165
  -172
  -180
  -189
  -198
  -207
  -217
  -227
  -238
  -259
  -281
  -305
  -330
  -356
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
 
  279
  288
  292
  297
  306
  319
  332
  345
  360
  375
  391
  408
  426
  445
  465
  486
  508
  531
  556
  582
  610
  638
  669
  701
  734
  761
  788
  816
  845
  877
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  266
  260
  250
  238
  229
  221
  212
  203
  192
  180
  168
  155
  142
  129
  116
  103
  90
  78
  67
  56
  47
  38
  31
  24
  19
  14
  10
  7
  5
  4
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  99.8
  99.2
  98.4
  97.3
  95.9
  94.3
  92.6
  90.7
  88.6
  86.4
  84.1
  81.8
  79.3
  76.9
  74.4
  71.8
  69.3
  66.8
  64.3
  61.8
  59.3
  56.9
  54.5
  52.1
  49.8
  47.5

The Navigators Group, Inc. is an insurance holding company. The Company is an international insurance company focused on marine insurance. The Company's segments include U.S. Insurance, International Insurance (Int'l Insurance), Global Reinsurance (GlobalRe) and Corporate. The Company's Property and Casualty (P&C) insurance business primarily offers general liability coverage, and umbrella and excess liability coverage to commercial enterprises through its U.S. Insurance and Int'l Insurance segments. It also offers reinsurance products through its GlobalRe segment. It distributes its products through international, national and regional, retail and wholesale insurance brokers. The Company's U.S. Insurance and Int'l Insurance segments consists of three segments, such as Marine, Property and Casualty (P&C) and Professional Liability. Its GlobalRe products include accident & health (A&H), marine, P&C and professional liability.

FINANCIAL RATIOS  of  Navigators Group (NAVG)

Valuation Ratios
P/E Ratio 17.4
Price to Sales 1.2
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 6.6
Growth Rates
Sales Growth Rate 12.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -16.7%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 22.4%
Total Debt to Equity 22.4%
Interest Coverage 9
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 5.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 7.3%
Return On Equity - 3 Yr. Avg. 8.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 13.4%
Operating Margin 11.1%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 11.5%
Net Profit Margin 6.9%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 29.7%
Eff/ Tax Rate - 3 Yr. Avg. 31%
Payout Ratio 4.8%

NAVG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NAVG stock intrinsic value calculation we used $1198 million for the last fiscal year's total revenue generated by Navigators Group. The default revenue input number comes from 2016 income statement of Navigators Group. 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 NAVG stock valuation model: a) initial revenue growth rate of 7.2% 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 4.9%, whose default value for NAVG is calculated based on our internal credit rating of Navigators Group, 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 Navigators Group.
    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 NAVG stock the variable cost ratio is equal to 87.5%.

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 NAVG 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 5.7% for Navigators Group.

Corporate tax rate of 27% is the nominal tax rate for Navigators Group. 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 NAVG 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 NAVG are equal to 0%.

Life of production assets of 1.3 years is the average useful life of capital assets used in Navigators Group 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 NAVG 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 - $1178 million for Navigators Group - 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 29.569 million for Navigators Group 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 Navigators Group at the current share price and the inputted number of shares is $1.5 billion.

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COMPANY NEWS

▶ Navigators to Acquire Belgian Specialty Insurer   [Dec-18-17 01:31AM  GlobeNewswire]
▶ New Strong Sell Stocks for November 3rd   [Nov-03-17 07:20AM  Zacks]
▶ Navigators reports 3Q loss   [Nov-02-17 05:44PM  Associated Press]
▶ Navigators Hires Jim Rhyner to Run Navigators Pro   [Aug-15-17 09:20AM  GlobeNewswire]
▶ Navigators Promotes Pat Milner to President of NavTech   [Aug-10-17 04:02PM  GlobeNewswire]
▶ Navigators Reports Second Quarter 2017 Earnings   [Aug-03-17 04:01PM  GlobeNewswire]
▶ Navigators Announces Second Quarter 2017 Dividend   [May-25-17 04:01PM  GlobeNewswire]
▶ Navigators posts 1Q profit   [May-04-17 07:01PM  Associated Press]
▶ New Strong Sell Stocks for March 14th   [Mar-14-17 10:45AM  Zacks]
▶ Navigators posts 4Q profit   [Feb-16-17 04:59PM  Associated Press]
▶ Navigators Appoints Jacob Ingerslev as Global Cyber Leader   [Feb-01-17 09:02AM  GlobeNewswire]
▶ Navigators Appoints Asia Leadership Team   [Jan-04-17 09:00AM  GlobeNewswire]
Financial statements of NAVG
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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