Intrinsic value of National CineMedia - NCMI

Previous Close

$6.92

  Intrinsic Value

$0.17

stock screener

  Rating & Target

str. sell

-97%

Previous close

$6.92

 
Intrinsic value

$0.17

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of NCMI 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, %
  0.22
  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
  448
  457
  467
  479
  493
  508
  524
  542
  562
  582
  605
  629
  654
  681
  710
  741
  773
  808
  844
  882
  923
  966
  1,011
  1,058
  1,108
  1,161
  1,217
  1,275
  1,337
  1,401
  1,470
Variable operating expenses, $m
 
  306
  313
  321
  330
  340
  351
  363
  376
  390
  405
  421
  438
  456
  476
  496
  518
  541
  565
  591
  618
  647
  677
  709
  743
  778
  815
  854
  896
  939
  985
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
  285
  306
  313
  321
  330
  340
  351
  363
  376
  390
  405
  421
  438
  456
  476
  496
  518
  541
  565
  591
  618
  647
  677
  709
  743
  778
  815
  854
  896
  939
  985
Operating income, $m
  163
  151
  154
  158
  163
  168
  173
  179
  185
  192
  200
  207
  216
  225
  234
  244
  255
  267
  278
  291
  305
  319
  334
  349
  366
  383
  402
  421
  441
  462
  485
EBITDA, $m
  199
  188
  192
  197
  202
  208
  215
  223
  230
  239
  248
  258
  268
  280
  291
  304
  317
  332
  346
  362
  379
  396
  415
  434
  455
  477
  499
  523
  549
  575
  603
Interest expense (income), $m
  53
  53
  21
  22
  24
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  50
  54
  58
  62
  66
  70
  75
  80
  85
  91
  96
  102
  109
  116
  123
  130
Earnings before tax, $m
  96
  98
  133
  136
  139
  142
  146
  150
  154
  159
  164
  169
  175
  181
  187
  194
  201
  209
  217
  225
  234
  244
  254
  264
  275
  287
  299
  312
  325
  340
  355
Tax expense, $m
  9
  26
  36
  37
  38
  38
  39
  41
  42
  43
  44
  46
  47
  49
  51
  52
  54
  56
  59
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
Net income, $m
  25
  72
  97
  99
  101
  104
  107
  110
  113
  116
  120
  124
  128
  132
  137
  142
  147
  152
  158
  165
  171
  178
  185
  193
  201
  209
  218
  228
  238
  248
  259

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  49
  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
  1,057
  1,029
  1,053
  1,080
  1,110
  1,144
  1,181
  1,221
  1,265
  1,312
  1,362
  1,416
  1,473
  1,534
  1,599
  1,668
  1,741
  1,819
  1,901
  1,987
  2,079
  2,175
  2,276
  2,384
  2,496
  2,615
  2,740
  2,872
  3,011
  3,156
  3,310
Adjusted assets (=assets-cash), $m
  1,008
  1,029
  1,053
  1,080
  1,110
  1,144
  1,181
  1,221
  1,265
  1,312
  1,362
  1,416
  1,473
  1,534
  1,599
  1,668
  1,741
  1,819
  1,901
  1,987
  2,079
  2,175
  2,276
  2,384
  2,496
  2,615
  2,740
  2,872
  3,011
  3,156
  3,310
Revenue / Adjusted assets
  0.444
  0.444
  0.443
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
Average production assets, $m
  592
  603
  617
  633
  651
  670
  692
  716
  741
  769
  798
  830
  863
  899
  937
  978
  1,021
  1,066
  1,114
  1,165
  1,218
  1,275
  1,334
  1,397
  1,463
  1,533
  1,606
  1,683
  1,764
  1,850
  1,940
Working capital, $m
  100
  52
  53
  55
  56
  58
  60
  62
  64
  66
  69
  72
  75
  78
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  126
  132
  139
  145
  152
  160
  168
Total debt, $m
  924
  370
  392
  416
  443
  474
  507
  543
  582
  624
  670
  718
  770
  825
  883
  946
  1,011
  1,081
  1,155
  1,232
  1,315
  1,401
  1,493
  1,589
  1,691
  1,798
  1,910
  2,029
  2,154
  2,285
  2,423
Total liabilities, $m
  1,480
  926
  948
  972
  999
  1,030
  1,063
  1,099
  1,138
  1,180
  1,226
  1,274
  1,326
  1,381
  1,439
  1,502
  1,567
  1,637
  1,711
  1,788
  1,871
  1,957
  2,049
  2,145
  2,247
  2,354
  2,466
  2,585
  2,710
  2,841
  2,979
Total equity, $m
  -423
  103
  105
  108
  111
  114
  118
  122
  126
  131
  136
  142
  147
  153
  160
  167
  174
  182
  190
  199
  208
  217
  228
  238
  250
  262
  274
  287
  301
  316
  331
Total liabilities and equity, $m
  1,057
  1,029
  1,053
  1,080
  1,110
  1,144
  1,181
  1,221
  1,264
  1,311
  1,362
  1,416
  1,473
  1,534
  1,599
  1,669
  1,741
  1,819
  1,901
  1,987
  2,079
  2,174
  2,277
  2,383
  2,497
  2,616
  2,740
  2,872
  3,011
  3,157
  3,310
Debt-to-equity ratio
  -2.184
  3.600
  3.720
  3.850
  3.990
  4.140
  4.290
  4.450
  4.600
  4.760
  4.920
  5.070
  5.230
  5.380
  5.520
  5.670
  5.810
  5.940
  6.070
  6.200
  6.320
  6.440
  6.560
  6.670
  6.770
  6.870
  6.970
  7.060
  7.150
  7.240
  7.320
Adjusted equity ratio
  -0.468
  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
  25
  72
  97
  99
  101
  104
  107
  110
  113
  116
  120
  124
  128
  132
  137
  142
  147
  152
  158
  165
  171
  178
  185
  193
  201
  209
  218
  228
  238
  248
  259
Depreciation, amort., depletion, $m
  36
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  103
  108
  113
  118
Funds from operations, $m
  87
  108
  135
  138
  141
  145
  149
  153
  158
  163
  168
  174
  180
  187
  194
  201
  209
  217
  226
  236
  245
  256
  267
  278
  290
  303
  316
  330
  345
  361
  377
Change in working capital, $m
  -47
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  134
  107
  134
  136
  140
  143
  147
  151
  156
  161
  166
  171
  177
  184
  191
  198
  205
  214
  222
  231
  241
  251
  261
  273
  284
  297
  310
  324
  338
  353
  369
Maintenance CAPEX, $m
  0
  -36
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
New CAPEX, $m
  -15
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -27
  -29
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -56
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -90
Cash from investing activities, $m
  -4
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -72
  -76
  -81
  -85
  -89
  -93
  -97
  -103
  -107
  -113
  -119
  -125
  -130
  -138
  -144
  -151
  -159
  -166
  -175
  -184
  -193
  -203
Free cash flow, $m
  130
  60
  83
  83
  83
  84
  84
  85
  87
  88
  89
  91
  93
  95
  98
  100
  103
  106
  109
  113
  116
  120
  124
  128
  133
  138
  143
  149
  154
  160
  167
Issuance/(repayment) of debt, $m
  -9
  -554
  21
  24
  27
  30
  33
  36
  39
  42
  45
  48
  52
  55
  59
  62
  66
  70
  74
  78
  82
  87
  91
  96
  102
  107
  113
  119
  125
  131
  138
Issuance/(repurchase) of shares, $m
  1
  503
  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  
  -83
  -51
  21
  24
  27
  30
  33
  36
  39
  42
  45
  48
  52
  55
  59
  62
  66
  70
  74
  78
  82
  87
  91
  96
  102
  107
  113
  119
  125
  131
  138
Total cash flow (excl. dividends), $m
  46
  9
  104
  107
  111
  114
  118
  122
  126
  130
  135
  140
  145
  150
  156
  162
  169
  176
  183
  190
  198
  207
  216
  225
  235
  245
  256
  267
  279
  292
  305
Retained Cash Flow (-), $m
  16
  -575
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
Prev. year cash balance distribution, $m
 
  49
  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
 
  -517
  102
  105
  107
  111
  114
  118
  121
  125
  130
  134
  139
  144
  150
  155
  161
  168
  175
  182
  189
  197
  205
  214
  223
  233
  243
  254
  265
  277
  289
Discount rate, %
 
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.71
  24.89
  26.14
  27.44
  28.81
  30.25
  31.77
  33.36
  35.02
  36.77
  38.61
  40.54
  42.57
  44.70
  46.93
  49.28
  51.75
  54.33
PV of cash for distribution, $m
 
  -456
  79
  70
  61
  53
  45
  38
  31
  25
  20
  16
  12
  9
  7
  5
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

National CineMedia, Inc. (NCM, Inc.) is a holding company that manages its consolidated subsidiary National CineMedia, LLC (NCM LLC). The Company operates digital in-theater network in North America, allowing NCM LLC to sell advertising and certain third-party theater circuits under long-term network affiliate agreements. It is engaged in the sale of advertising to national, regional and local businesses in First Look, its cinema advertising and entertainment pre-show seen on movie screens across the United States It also sells advertising on its Lobby Entertainment Network (LEN), a series of screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. The Company sells online and mobile advertising through its Cinema Accelerator digital product to reach entertainment audiences beyond the theater. In-theater advertising and entertainment content is distributed across NCM LLC's national theater network.

FINANCIAL RATIOS  of  National CineMedia (NCMI)

Valuation Ratios
P/E Ratio 16.6
Price to Sales 0.9
Price to Book -1
Price to Tangible Book
Price to Cash Flow 3.1
Price to Free Cash Flow 3.5
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -4.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity -218.4%
Total Debt to Equity -218.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 5.9%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity -6%
Return On Equity - 3 Yr. Avg. -4.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 72.5%
Gross Margin - 3 Yr. Avg. 72%
EBITDA Margin 41.3%
EBITDA Margin - 3 Yr. Avg. 39.4%
Operating Margin 36.4%
Oper. Margin - 3 Yr. Avg. 36%
Pre-Tax Margin 21.4%
Pre-Tax Margin - 3 Yr. Avg. 19.7%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 4.1%
Effective Tax Rate 9.4%
Eff/ Tax Rate - 3 Yr. Avg. 14.8%
Payout Ratio 220%

NCMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCMI stock intrinsic value calculation we used $448 million for the last fiscal year's total revenue generated by National CineMedia. The default revenue input number comes from 2016 income statement of National CineMedia. 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 NCMI 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 13.2%, whose default value for NCMI is calculated based on our internal credit rating of National CineMedia, 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 National CineMedia.
    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 NCMI stock the variable cost ratio is equal to 67%.

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 NCMI 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 National CineMedia.

Corporate tax rate of 27% is the nominal tax rate for National CineMedia. 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 NCMI 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 NCMI are equal to 132%.

Life of production assets of 16.4 years is the average useful life of capital assets used in National CineMedia 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 NCMI is equal to 11.4%. 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 - $-423 million for National CineMedia - 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 62.916 million for National CineMedia 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 National CineMedia at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
RGC Regal Entertai 22.79 1.24  str.sell
CNK Cinemark Holdi 35.95 36.77  hold
AMC AMC Entertainm 15.15 166.23  str.buy
OMC Omnicom Group 73.71 75.72  hold
ISIG Insignia Syste 1.24 2.98  str.buy

COMPANY NEWS

▶ Stay Away! 3 Dividend Stocks That Are Yield Traps   [Dec-01-17 09:43AM  Motley Fool]
▶ These Ultra High-Yield Plays Are Very Cheap Right Now (BKCC)   [Nov-25-17 07:36AM  ETF Daily News]
▶ National CineMedia beats Street 3Q forecasts   [Nov-06-17 05:03PM  Associated Press]
▶ Will Moviepass Save The Movie Theater?   [Oct-31-17 03:28PM  Forbes]
▶ How National CineMedia, Inc. Stock Soared in September   [Oct-10-17 01:38PM  Motley Fool]
▶ National CineMedia misses Street 2Q forecasts   [Aug-07-17 11:59PM  Associated Press]
▶ New Strong Sell Stocks for July 17th   [Jul-17-17 09:17AM  Zacks]
▶ Hate Checking Your Portfolio? Try These 3 Stocks   [Jul-13-17 07:40AM  Motley Fool]
▶ National CineMedia (NCM) Acquiring Fantasy Movie League   [May-17-17 02:27PM  Business Wire]
▶ National CineMedia reports 1Q loss   [May-04-17 06:28PM  Associated Press]
▶ National CineMedia (NCM) Launches In Mediaocean   [May-03-17 10:00AM  Business Wire]
▶ National CineMedia (NCM) Expands Focus on Digital   [Apr-25-17 03:22PM  Business Wire]
▶ National CineMedia beats Street 4Q forecasts   [05:51PM  Associated Press]
▶ Feds sign off on AMC-Carmike deal with conditions   [03:16PM  at bizjournals.com]
Financial statements of NCMI
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.