Intrinsic value of Patriot National - PN

Previous Close

$1.93

  Intrinsic Value

$0.91

stock screener

  Rating & Target

str. sell

-53%

  Value-price divergence*

0%

Previous close

$1.93

 
Intrinsic value

$0.91

 
Up/down potential

-53%

 
Rating

str. sell

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of PN 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 0.1

 

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, %
  10.95
  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
  0
  238
  243
  249
  256
  264
  273
  282
  292
  303
  314
  327
  340
  354
  369
  385
  402
  420
  439
  459
  480
  502
  526
  550
  576
  604
  633
  663
  695
  729
  764
Variable operating expenses, $m
 
  235
  240
  246
  253
  260
  268
  277
  287
  297
  308
  309
  322
  335
  349
  364
  380
  397
  415
  434
  454
  475
  497
  521
  545
  571
  599
  627
  658
  689
  723
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
  246
  235
  240
  246
  253
  260
  268
  277
  287
  297
  308
  309
  322
  335
  349
  364
  380
  397
  415
  434
  454
  475
  497
  521
  545
  571
  599
  627
  658
  689
  723
Operating income, $m
  -13
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
  41
EBITDA, $m
  2
  19
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
Interest expense (income), $m
  4
  8
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  34
  35
Earnings before tax, $m
  -19
  -6
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
Tax expense, $m
  -18
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Net income, $m
  -1
  -6
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4

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
  418
  427
  436
  448
  460
  474
  490
  506
  524
  544
  565
  587
  611
  636
  663
  692
  722
  754
  788
  824
  862
  902
  944
  988
  1,035
  1,084
  1,136
  1,191
  1,248
  1,309
  1,372
Adjusted assets (=assets-cash), $m
  418
  427
  436
  448
  460
  474
  490
  506
  524
  544
  565
  587
  611
  636
  663
  692
  722
  754
  788
  824
  862
  902
  944
  988
  1,035
  1,084
  1,136
  1,191
  1,248
  1,309
  1,372
Revenue / Adjusted assets
  0.000
  0.557
  0.557
  0.556
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.556
  0.557
  0.556
  0.557
  0.557
  0.556
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
Average production assets, $m
  74
  75
  77
  79
  81
  83
  86
  89
  92
  95
  99
  103
  107
  112
  116
  121
  127
  132
  138
  145
  151
  158
  166
  173
  182
  190
  199
  209
  219
  230
  241
Working capital, $m
  0
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Total debt, $m
  238
  218
  227
  237
  248
  261
  275
  290
  306
  323
  342
  362
  384
  406
  431
  457
  484
  513
  543
  575
  610
  645
  683
  723
  765
  810
  856
  906
  957
  1,012
  1,069
Total liabilities, $m
  403
  384
  393
  403
  414
  427
  441
  456
  472
  489
  508
  528
  550
  572
  597
  623
  650
  679
  709
  741
  776
  811
  849
  889
  931
  976
  1,022
  1,072
  1,123
  1,178
  1,235
Total equity, $m
  14
  43
  44
  45
  46
  47
  49
  51
  52
  54
  56
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  103
  108
  114
  119
  125
  131
  137
Total liabilities and equity, $m
  417
  427
  437
  448
  460
  474
  490
  507
  524
  543
  564
  587
  611
  636
  663
  692
  722
  754
  788
  823
  862
  901
  943
  988
  1,034
  1,084
  1,136
  1,191
  1,248
  1,309
  1,372
Debt-to-equity ratio
  17.000
  5.110
  5.200
  5.290
  5.390
  5.500
  5.610
  5.720
  5.830
  5.950
  6.060
  6.170
  6.280
  6.390
  6.500
  6.600
  6.700
  6.800
  6.890
  6.990
  7.070
  7.160
  7.240
  7.320
  7.400
  7.470
  7.540
  7.610
  7.670
  7.730
  7.790
Adjusted equity ratio
  0.033
  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
  -6
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
Depreciation, amort., depletion, $m
  15
  17
  17
  17
  17
  17
  17
  18
  18
  18
  19
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
Funds from operations, $m
  -24
  11
  12
  12
  12
  12
  13
  13
  13
  13
  14
  13
  13
  13
  14
  14
  15
  15
  15
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
Change in working capital, $m
  -27
  0
  0
  0
  0
  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
Cash from operations, $m
  3
  10
  12
  12
  12
  12
  12
  13
  13
  13
  13
  12
  12
  13
  13
  14
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -6
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -93
  -7
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -24
  -24
  -26
  -27
  -29
  -30
Free cash flow, $m
  -90
  3
  4
  4
  3
  3
  3
  3
  2
  2
  2
  0
  0
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
Issuance/(repayment) of debt, $m
  0
  -20
  9
  10
  11
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
Issuance/(repurchase) of shares, $m
  98
  35
  6
  6
  6
  6
  6
  7
  7
  7
  7
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
Cash from financing (excl. dividends), $m  
  94
  15
  15
  16
  17
  19
  20
  22
  23
  24
  26
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  45
  48
  50
  53
  56
  59
Total cash flow (excl. dividends), $m
  4
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
  41
  43
  45
  47
  50
  52
Retained Cash Flow (-), $m
  73
  -35
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
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
  13
  14
  15
  16
  17
  18
  19
  20
  21
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  34
  36
  37
  39
  41
  44
  46
Discount rate, %
 
  13.50
  14.18
  14.88
  15.63
  16.41
  17.23
  18.09
  19.00
  19.95
  20.94
  21.99
  23.09
  24.24
  25.46
  26.73
  28.07
  29.47
  30.94
  32.49
  34.11
  35.82
  37.61
  39.49
  41.47
  43.54
  45.72
  48.00
  50.40
  52.92
  55.57
PV of cash for distribution, $m
 
  -15
  10
  9
  8
  7
  6
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  59.6
  57.4
  55.3
  53.2
  51.3
  49.5
  47.7
  46.1
  44.5
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  43.0
  42.9
  42.9
  42.8
  42.6
  42.5
  42.3
  42.2

Patriot National, Inc., together with its subsidiaries, provides technology-enabled outsourcing solutions within the workersÂ’ compensation marketplace for insurance carriers, local governments, reinsurance captives, and other employers in the United States. The company offers front-end services, including general agency services, specialty underwriting, and policyholder services to insurance carrier clients; produces and administers traditional and alternative market workersÂ’ compensation insurance programs within risk classes and geographies specified by its insurance carrier clients; and provides reinsurance captive entity design and management services comprising formation and management of segregated portfolio cell captives. It also provides back-end services, such as claims administration services that are related to the administration and resolution of workersÂ’ compensation claims, which are designed to reduce costs for its clients; and various specialty services, such as healthcare cost containment, onsite investigations, loss control, transportation and translation, lien resolution, and legal bill review services. The company was formerly known as Old Guard Risk Services, Inc. and changed its name to Patriot National, Inc. in September 2014. Patriot National, Inc. was founded in 2003 and is headquartered in Fort Lauderdale, Florida.

FINANCIAL RATIOS  of  Patriot National (PN)

Valuation Ratios
P/E Ratio -51.8
Price to Sales 0.2
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 17.3
Price to Free Cash Flow -17.3
Growth Rates
Sales Growth Rate 11%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 200%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 1650%
Total Debt to Equity 1700%
Interest Coverage -4
Management Effectiveness
Return On Assets -0.2%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital -0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 5.3%
Return On Equity -2%
Return On Equity - 3 Yr. Avg. -17.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin -5.6%
Oper. Margin - 3 Yr. Avg. 7.9%
Pre-Tax Margin -8.2%
Pre-Tax Margin - 3 Yr. Avg. 3.5%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 94.7%
Eff/ Tax Rate - 3 Yr. Avg. 49.8%
Payout Ratio 0%

PN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PN stock intrinsic value calculation we used $233 million for the last fiscal year's total revenue generated by Patriot National. The default revenue input number comes from 2016 income statement of Patriot National. 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 PN 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 13.5%, whose default value for PN is calculated based on our internal credit rating of Patriot National, 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 Patriot National.
    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 PN stock the variable cost ratio is equal to 99.1%.

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 PN 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 Patriot National.

Corporate tax rate of 27% is the nominal tax rate for Patriot National. 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 PN 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 PN are equal to 31.5%.

Life of production assets of 12.3 years is the average useful life of capital assets used in Patriot National 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 PN is equal to 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 - $14 million for Patriot National - 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 26.454 million for Patriot National 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 Patriot National at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Patriot National sees stock price rise after Mariano resigns as CEO   [Jul-14-17 03:30PM  American City Business Journals]
▶ Patriot National founder Steven Mariano resigns   [09:15AM  American City Business Journals]
▶ Patriot National Announces Review of Strategic Alternatives   [May-30-17 06:45AM  GlobeNewswire]
Stock chart of PN Financial statements of PN
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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