Intrinsic value of Newtek Business Services - NEWT

Previous Close

$20.80

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$20.80

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of NEWT 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, %
  25.00
  25.70
  23.63
  21.77
  20.09
  18.58
  17.22
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
  5.97
Revenue, $m
  40
  49
  61
  74
  89
  105
  123
  143
  164
  187
  211
  237
  264
  293
  323
  355
  388
  422
  457
  495
  533
  573
  615
  658
  703
  750
  799
  849
  902
  957
  1,014
Variable operating expenses, $m
 
  25
  30
  36
  43
  51
  60
  69
  79
  90
  101
  112
  124
  138
  152
  167
  182
  198
  215
  233
  251
  270
  289
  310
  331
  353
  376
  399
  424
  450
  477
Fixed operating expenses, $m
 
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
  29
  30
  31
Total operating expenses, $m
  32
  41
  47
  53
  60
  69
  78
  88
  98
  109
  121
  132
  145
  159
  174
  189
  205
  221
  239
  257
  276
  295
  315
  336
  358
  381
  404
  428
  453
  480
  508
Operating income, $m
  8
  8
  14
  20
  28
  36
  45
  55
  66
  78
  90
  105
  119
  134
  149
  166
  183
  200
  219
  238
  258
  278
  300
  322
  345
  370
  395
  421
  448
  477
  506
EBITDA, $m
  8
  70
  90
  112
  138
  167
  198
  232
  269
  309
  351
  396
  443
  493
  545
  600
  657
  717
  779
  843
  911
  980
  1,053
  1,128
  1,206
  1,288
  1,373
  1,461
  1,553
  1,648
  1,748
Interest expense (income), $m
  7
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
  25
Earnings before tax, $m
  0
  -17
  -11
  -4
  3
  11
  21
  31
  42
  53
  66
  81
  95
  109
  125
  141
  158
  176
  194
  213
  233
  254
  275
  297
  321
  345
  370
  396
  423
  452
  482
Tax expense, $m
  0
  0
  0
  0
  1
  3
  6
  8
  11
  14
  18
  22
  26
  30
  34
  38
  43
  47
  52
  58
  63
  68
  74
  80
  87
  93
  100
  107
  114
  122
  130
Net income, $m
  0
  -17
  -11
  -4
  2
  8
  15
  22
  30
  39
  48
  59
  69
  80
  91
  103
  115
  128
  142
  156
  170
  185
  201
  217
  234
  252
  270
  289
  309
  330
  352

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  401
  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
Adjusted assets (=assets-cash), $m
  399
  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
Revenue / Adjusted assets
  0.100
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Average production assets, $m
  15
  600
  742
  904
  1,085
  1,287
  1,509
  1,750
  2,011
  2,291
  2,589
  2,905
  3,239
  3,590
  3,959
  4,344
  4,746
  5,166
  5,602
  6,057
  6,529
  7,020
  7,530
  8,060
  8,610
  9,183
  9,779
  10,398
  11,043
  11,715
  12,415
Working capital, $m
  0
  -280
  -346
  -421
  -505
  -599
  -703
  -815
  -936
  -1,067
  -1,206
  -1,353
  -1,508
  -1,672
  -1,844
  -2,023
  -2,210
  -2,406
  -2,609
  -2,821
  -3,041
  -3,269
  -3,507
  -3,753
  -4,010
  -4,277
  -4,554
  -4,843
  -5,143
  -5,456
  -5,782
Total debt, $m
  171
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
  457
Total liabilities, $m
  192
  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 equity, $m
  209
  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 liabilities and equity, $m
  401
  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
Debt-to-equity ratio
  0.818
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  0.519
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  -17
  -11
  -4
  2
  8
  15
  22
  30
  39
  48
  59
  69
  80
  91
  103
  115
  128
  142
  156
  170
  185
  201
  217
  234
  252
  270
  289
  309
  330
  352
Depreciation, amort., depletion, $m
  0
  62
  76
  92
  110
  130
  153
  177
  203
  231
  261
  291
  324
  359
  396
  434
  475
  517
  560
  606
  653
  702
  753
  806
  861
  918
  978
  1,040
  1,104
  1,172
  1,242
Funds from operations, $m
  20
  45
  65
  88
  113
  139
  168
  199
  233
  270
  309
  349
  393
  439
  487
  537
  590
  645
  702
  761
  823
  887
  954
  1,023
  1,095
  1,170
  1,248
  1,329
  1,414
  1,501
  1,593
Change in working capital, $m
  31
  -57
  -66
  -75
  -85
  -94
  -103
  -112
  -121
  -130
  -139
  -147
  -156
  -164
  -172
  -179
  -187
  -195
  -203
  -212
  -220
  -229
  -237
  -247
  -257
  -267
  -277
  -289
  -300
  -313
  -326
Cash from operations, $m
  -11
  102
  131
  163
  197
  233
  271
  312
  355
  400
  447
  497
  549
  602
  659
  717
  777
  840
  905
  973
  1,043
  1,116
  1,191
  1,270
  1,352
  1,437
  1,525
  1,618
  1,714
  1,814
  1,919
Maintenance CAPEX, $m
  0
  -48
  -60
  -74
  -90
  -109
  -129
  -151
  -175
  -201
  -229
  -259
  -291
  -324
  -359
  -396
  -434
  -475
  -517
  -560
  -606
  -653
  -702
  -753
  -806
  -861
  -918
  -978
  -1,040
  -1,104
  -1,172
New CAPEX, $m
  0
  -124
  -142
  -162
  -182
  -202
  -222
  -241
  -261
  -280
  -298
  -316
  -334
  -351
  -368
  -385
  -402
  -419
  -437
  -454
  -472
  -491
  -510
  -530
  -551
  -573
  -596
  -620
  -645
  -672
  -700
Cash from investing activities, $m
  0
  -172
  -202
  -236
  -272
  -311
  -351
  -392
  -436
  -481
  -527
  -575
  -625
  -675
  -727
  -781
  -836
  -894
  -954
  -1,014
  -1,078
  -1,144
  -1,212
  -1,283
  -1,357
  -1,434
  -1,514
  -1,598
  -1,685
  -1,776
  -1,872
Free cash flow, $m
  -11
  -69
  -71
  -73
  -75
  -78
  -79
  -81
  -81
  -81
  -80
  -78
  -76
  -73
  -69
  -64
  -59
  -54
  -48
  -42
  -35
  -28
  -21
  -13
  -5
  3
  11
  20
  29
  38
  48
Issuance/(repayment) of debt, $m
  41
  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
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  
  36
  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 cash flow (excl. dividends), $m
  25
  -69
  -71
  -73
  -75
  -78
  -79
  -81
  -81
  -81
  -80
  -78
  -76
  -73
  -69
  -64
  -59
  -54
  -48
  -42
  -35
  -28
  -21
  -13
  -5
  3
  11
  20
  29
  38
  48
Retained Cash Flow (-), $m
  -5
  -17
  -11
  -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
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
 
  -17
  -11
  -4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  3
  11
  20
  29
  38
  48
Discount rate, %
 
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
  32.85
  34.49
  36.21
  38.02
  39.93
  41.92
  44.02
  46.22
  48.53
  50.96
  53.50
  56.18
  58.99
  61.94
  65.03
PV of cash for distribution, $m
 
  -14
  -8
  -3
  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
Current shareholders' claim on cash, %
  100
  100.0
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Newtek Business Services Corp. is an internally managed non-diversified closed-end management investment company. The Company's investment objective is to generate both current income and capital appreciation primarily through loans originated by its small business finance platform and its equity investments in certain portfolio companies that it controls. The Company is a national non-bank lender that provides, together with its controlled portfolio companies, a range of business services and financial products under the Newtek brand to the small and medium-sized business (SMB) market. The Company issues debt and makes equity investments in portfolio companies in various industries. Its products and services include Business Lending including the United States Small Business Administration (SBA) 7(a) and 504 lending, Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), Data Backup, and Payroll and Benefits Solutions to SMB accounts across all industries.

FINANCIAL RATIOS  of  Newtek Business Services (NEWT)

Valuation Ratios
P/E Ratio 0
Price to Sales 7.6
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow -27.6
Price to Free Cash Flow -27.6
Growth Rates
Sales Growth Rate 25%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 81.8%
Total Debt to Equity 81.8%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0.6%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 1.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 50%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 14.3%
Operating Margin 20%
Oper. Margin - 3 Yr. Avg. 17.9%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

NEWT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEWT stock intrinsic value calculation we used $39 million for the last fiscal year's total revenue generated by Newtek Business Services. The default revenue input number comes from 2016 income statement of Newtek Business Services. 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 NEWT stock valuation model: a) initial revenue growth rate of 25.7% 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 15.8%, whose default value for NEWT is calculated based on our internal credit rating of Newtek Business Services, 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 Newtek Business Services.
    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 NEWT stock the variable cost ratio is equal to 51.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $16 million in the base year in the intrinsic value calculation for NEWT 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 5.4% for Newtek Business Services.

Corporate tax rate of 27% is the nominal tax rate for Newtek Business Services. 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 NEWT 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 NEWT are equal to 1224.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Newtek Business Services 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 NEWT is equal to -570.3%. 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 - $0 million for Newtek Business Services - 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 17 million for Newtek Business Services 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 Newtek Business Services at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Newtek: 1Q Earnings Snapshot   [May-03-18 05:11AM  Associated Press]
▶ Juno soars, Newater's Blockchain play, Adient warns   [Jan-17-18 12:52PM  Yahoo Finance Video]
▶ Newtek misses 3Q profit forecasts   [Nov-01-17 06:53PM  Associated Press]
▶ Newtek Business Credit Acquires the Talent of Tony Zara   [Oct-30-17 12:58PM  GlobeNewswire]
▶ 3 BDCs Paying 10%-Plus: 1 Sell, 1 Maybe, 1 Buy   [Sep-09-17 08:47AM  Forbes]
▶ Newtek posts 2Q profit   [Aug-02-17 09:43PM  Associated Press]
▶ New Strong Buy Stocks for July 6th   [Jul-06-17 10:31AM  Zacks]
▶ Newtek posts 1Q profit   [May-04-17 09:51AM  Associated Press]
▶ Newtek Declares First Quarter Dividend of $0.36 Per Share   [Mar-06-17 04:10PM  GlobeNewswire]
Financial statements of NEWT
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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