Intrinsic value of Scientific Games - SGMS

Previous Close

$26.85

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-244%

Previous close

$26.85

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-244%

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

We calculate the intrinsic value of SGMS 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 2.3

 

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, %
  4.49
  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
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  2,883
  3,065
  3,254
  3,451
  3,656
  3,870
  4,093
  4,326
  4,569
  4,823
  5,089
  5,366
  5,656
  5,960
  6,278
  6,610
  6,958
  7,323
  7,705
  8,105
  8,525
  8,965
  9,426
  9,909
  10,416
  10,947
  11,505
  12,090
  12,704
  13,347
  14,023
Variable operating expenses, $m
 
  4,183
  4,424
  4,674
  4,935
  5,207
  5,490
  5,786
  6,095
  6,418
  6,756
  6,819
  7,188
  7,574
  7,978
  8,400
  8,843
  9,306
  9,792
  10,301
  10,834
  11,393
  11,978
  12,593
  13,237
  13,912
  14,621
  15,364
  16,144
  16,962
  17,821
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
  2,728
  4,183
  4,424
  4,674
  4,935
  5,207
  5,490
  5,786
  6,095
  6,418
  6,756
  6,819
  7,188
  7,574
  7,978
  8,400
  8,843
  9,306
  9,792
  10,301
  10,834
  11,393
  11,978
  12,593
  13,237
  13,912
  14,621
  15,364
  16,144
  16,962
  17,821
Operating income, $m
  156
  -1,119
  -1,170
  -1,223
  -1,279
  -1,337
  -1,397
  -1,460
  -1,526
  -1,595
  -1,667
  -1,453
  -1,532
  -1,614
  -1,700
  -1,790
  -1,885
  -1,983
  -2,087
  -2,195
  -2,309
  -2,428
  -2,553
  -2,684
  -2,821
  -2,965
  -3,116
  -3,274
  -3,440
  -3,615
  -3,798
EBITDA, $m
  895
  -512
  -543
  -576
  -610
  -646
  -683
  -722
  -763
  -805
  -849
  -896
  -944
  -995
  -1,048
  -1,103
  -1,162
  -1,222
  -1,286
  -1,353
  -1,423
  -1,496
  -1,573
  -1,654
  -1,739
  -1,827
  -1,920
  -2,018
  -2,121
  -2,228
  -2,341
Interest expense (income), $m
  622
  614
  443
  475
  508
  542
  578
  616
  655
  696
  738
  783
  830
  878
  930
  983
  1,039
  1,097
  1,159
  1,223
  1,290
  1,361
  1,434
  1,512
  1,593
  1,678
  1,768
  1,861
  1,960
  2,063
  2,171
Earnings before tax, $m
  -479
  -1,732
  -1,613
  -1,698
  -1,787
  -1,879
  -1,976
  -2,076
  -2,181
  -2,291
  -2,405
  -2,236
  -2,362
  -2,493
  -2,630
  -2,773
  -2,923
  -3,081
  -3,245
  -3,418
  -3,599
  -3,788
  -3,987
  -4,196
  -4,414
  -4,643
  -4,884
  -5,136
  -5,400
  -5,678
  -5,969
Tax expense, $m
  -125
  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
Net income, $m
  -354
  -1,732
  -1,613
  -1,698
  -1,787
  -1,879
  -1,976
  -2,076
  -2,181
  -2,291
  -2,405
  -2,236
  -2,362
  -2,493
  -2,630
  -2,773
  -2,923
  -3,081
  -3,245
  -3,418
  -3,599
  -3,788
  -3,987
  -4,196
  -4,414
  -4,643
  -4,884
  -5,136
  -5,400
  -5,678
  -5,969

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  115
  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
  7,087
  7,530
  7,994
  8,478
  8,983
  9,508
  10,057
  10,629
  11,227
  11,851
  12,503
  13,185
  13,898
  14,644
  15,424
  16,241
  17,097
  17,993
  18,932
  19,915
  20,946
  22,026
  23,159
  24,346
  25,592
  26,898
  28,268
  29,705
  31,213
  32,795
  34,454
Adjusted assets (=assets-cash), $m
  6,972
  7,530
  7,994
  8,478
  8,983
  9,508
  10,057
  10,629
  11,227
  11,851
  12,503
  13,185
  13,898
  14,644
  15,424
  16,241
  17,097
  17,993
  18,932
  19,915
  20,946
  22,026
  23,159
  24,346
  25,592
  26,898
  28,268
  29,705
  31,213
  32,795
  34,454
Revenue / Adjusted assets
  0.414
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
Average production assets, $m
  2,995
  3,184
  3,381
  3,585
  3,798
  4,021
  4,253
  4,495
  4,747
  5,011
  5,287
  5,575
  5,877
  6,192
  6,523
  6,868
  7,230
  7,609
  8,006
  8,422
  8,857
  9,314
  9,793
  10,295
  10,822
  11,374
  11,954
  12,561
  13,199
  13,868
  14,570
Working capital, $m
  425
  383
  407
  431
  457
  484
  512
  541
  571
  603
  636
  671
  707
  745
  785
  826
  870
  915
  963
  1,013
  1,066
  1,121
  1,178
  1,239
  1,302
  1,368
  1,438
  1,511
  1,588
  1,668
  1,753
Total debt, $m
  8,074
  5,828
  6,246
  6,681
  7,135
  7,608
  8,102
  8,617
  9,155
  9,717
  10,304
  10,917
  11,559
  12,230
  12,933
  13,668
  14,438
  15,245
  16,089
  16,975
  17,902
  18,875
  19,894
  20,963
  22,084
  23,259
  24,492
  25,786
  27,143
  28,566
  30,060
Total liabilities, $m
  9,023
  6,777
  7,195
  7,630
  8,084
  8,557
  9,051
  9,566
  10,104
  10,666
  11,253
  11,866
  12,508
  13,179
  13,882
  14,617
  15,387
  16,194
  17,038
  17,924
  18,851
  19,824
  20,843
  21,912
  23,033
  24,208
  25,441
  26,735
  28,092
  29,515
  31,009
Total equity, $m
  -1,936
  753
  799
  848
  898
  951
  1,006
  1,063
  1,123
  1,185
  1,250
  1,318
  1,390
  1,464
  1,542
  1,624
  1,710
  1,799
  1,893
  1,992
  2,095
  2,203
  2,316
  2,435
  2,559
  2,690
  2,827
  2,971
  3,121
  3,279
  3,445
Total liabilities and equity, $m
  7,087
  7,530
  7,994
  8,478
  8,982
  9,508
  10,057
  10,629
  11,227
  11,851
  12,503
  13,184
  13,898
  14,643
  15,424
  16,241
  17,097
  17,993
  18,931
  19,916
  20,946
  22,027
  23,159
  24,347
  25,592
  26,898
  28,268
  29,706
  31,213
  32,794
  34,454
Debt-to-equity ratio
  -4.170
  7.740
  7.810
  7.880
  7.940
  8.000
  8.060
  8.110
  8.150
  8.200
  8.240
  8.280
  8.320
  8.350
  8.380
  8.420
  8.440
  8.470
  8.500
  8.520
  8.550
  8.570
  8.590
  8.610
  8.630
  8.650
  8.660
  8.680
  8.700
  8.710
  8.720
Adjusted equity ratio
  -0.294
  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
  -354
  -1,732
  -1,613
  -1,698
  -1,787
  -1,879
  -1,976
  -2,076
  -2,181
  -2,291
  -2,405
  -2,236
  -2,362
  -2,493
  -2,630
  -2,773
  -2,923
  -3,081
  -3,245
  -3,418
  -3,599
  -3,788
  -3,987
  -4,196
  -4,414
  -4,643
  -4,884
  -5,136
  -5,400
  -5,678
  -5,969
Depreciation, amort., depletion, $m
  739
  607
  627
  647
  669
  691
  714
  738
  764
  790
  818
  558
  588
  619
  652
  687
  723
  761
  801
  842
  886
  931
  979
  1,030
  1,082
  1,137
  1,195
  1,256
  1,320
  1,387
  1,457
Funds from operations, $m
  485
  -1,125
  -986
  -1,051
  -1,118
  -1,188
  -1,261
  -1,338
  -1,418
  -1,501
  -1,588
  -1,679
  -1,774
  -1,873
  -1,977
  -2,086
  -2,200
  -2,320
  -2,445
  -2,576
  -2,713
  -2,857
  -3,008
  -3,166
  -3,332
  -3,506
  -3,688
  -3,880
  -4,080
  -4,291
  -4,512
Change in working capital, $m
  66
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  70
  73
  77
  80
  84
Cash from operations, $m
  419
  -1,148
  -1,010
  -1,075
  -1,144
  -1,215
  -1,289
  -1,367
  -1,448
  -1,533
  -1,621
  -1,714
  -1,810
  -1,911
  -2,017
  -2,128
  -2,244
  -2,365
  -2,493
  -2,626
  -2,766
  -2,912
  -3,065
  -3,226
  -3,395
  -3,572
  -3,758
  -3,953
  -4,157
  -4,371
  -4,596
Maintenance CAPEX, $m
  0
  -299
  -318
  -338
  -359
  -380
  -402
  -425
  -449
  -475
  -501
  -529
  -558
  -588
  -619
  -652
  -687
  -723
  -761
  -801
  -842
  -886
  -931
  -979
  -1,030
  -1,082
  -1,137
  -1,195
  -1,256
  -1,320
  -1,387
New CAPEX, $m
  -273
  -190
  -196
  -205
  -213
  -222
  -232
  -242
  -253
  -264
  -276
  -288
  -302
  -315
  -330
  -346
  -362
  -379
  -397
  -416
  -436
  -457
  -479
  -502
  -527
  -552
  -579
  -608
  -638
  -669
  -702
Cash from investing activities, $m
  -232
  -489
  -514
  -543
  -572
  -602
  -634
  -667
  -702
  -739
  -777
  -817
  -860
  -903
  -949
  -998
  -1,049
  -1,102
  -1,158
  -1,217
  -1,278
  -1,343
  -1,410
  -1,481
  -1,557
  -1,634
  -1,716
  -1,803
  -1,894
  -1,989
  -2,089
Free cash flow, $m
  187
  -1,637
  -1,525
  -1,618
  -1,715
  -1,817
  -1,923
  -2,034
  -2,150
  -2,271
  -2,398
  -2,531
  -2,669
  -2,814
  -2,966
  -3,126
  -3,292
  -3,467
  -3,650
  -3,842
  -4,044
  -4,255
  -4,476
  -4,708
  -4,951
  -5,207
  -5,475
  -5,756
  -6,051
  -6,360
  -6,685
Issuance/(repayment) of debt, $m
  -140
  -2,246
  418
  436
  454
  473
  494
  515
  538
  562
  587
  614
  642
  671
  703
  735
  770
  806
  845
  885
  928
  972
  1,019
  1,069
  1,121
  1,176
  1,233
  1,293
  1,357
  1,424
  1,494
Issuance/(repurchase) of shares, $m
  -6
  4,421
  1,659
  1,746
  1,837
  1,932
  2,030
  2,133
  2,241
  2,353
  2,471
  2,305
  2,433
  2,567
  2,708
  2,855
  3,009
  3,170
  3,339
  3,516
  3,702
  3,896
  4,100
  4,314
  4,539
  4,774
  5,021
  5,279
  5,551
  5,836
  6,135
Cash from financing (excl. dividends), $m  
  -196
  2,175
  2,077
  2,182
  2,291
  2,405
  2,524
  2,648
  2,779
  2,915
  3,058
  2,919
  3,075
  3,238
  3,411
  3,590
  3,779
  3,976
  4,184
  4,401
  4,630
  4,868
  5,119
  5,383
  5,660
  5,950
  6,254
  6,572
  6,908
  7,260
  7,629
Total cash flow (excl. dividends), $m
  -14
  538
  553
  564
  575
  588
  601
  614
  629
  644
  660
  388
  405
  424
  444
  465
  486
  509
  534
  559
  586
  614
  644
  675
  708
  743
  779
  817
  857
  899
  944
Retained Cash Flow (-), $m
  440
  -4,421
  -1,659
  -1,746
  -1,837
  -1,932
  -2,030
  -2,133
  -2,241
  -2,353
  -2,471
  -2,305
  -2,433
  -2,567
  -2,708
  -2,855
  -3,009
  -3,170
  -3,339
  -3,516
  -3,702
  -3,896
  -4,100
  -4,314
  -4,539
  -4,774
  -5,021
  -5,279
  -5,551
  -5,836
  -6,135
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
 
  -3,883
  -1,106
  -1,182
  -1,262
  -1,344
  -1,430
  -1,519
  -1,612
  -1,710
  -1,811
  -1,917
  -2,028
  -2,143
  -2,264
  -2,390
  -2,522
  -2,661
  -2,806
  -2,957
  -3,116
  -3,282
  -3,456
  -3,639
  -3,831
  -4,031
  -4,242
  -4,462
  -4,694
  -4,936
  -5,191
Discount rate, %
 
  15.50
  16.28
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.05
  25.25
  26.51
  27.84
  29.23
  30.69
  32.22
  33.83
  35.53
  37.30
  39.17
  41.13
  43.18
  45.34
  47.61
  49.99
  52.49
  55.11
  57.87
  60.76
  63.80
PV of cash for distribution, $m
 
  -3,362
  -818
  -737
  -652
  -567
  -484
  -405
  -333
  -267
  -210
  -161
  -121
  -88
  -63
  -43
  -29
  -19
  -12
  -7
  -4
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  15.6
  4.9
  1.5
  0.5
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Scientific Games Corporation develops technology-based products and services, and associated content for the gaming, lottery, and interactive gaming industries worldwide. Its Gaming segment supplies and leases gaming machines, video lottery terminals, automatic card shufflers, roulette chip sorters, fixed odds betting terminals, and server-based gaming systems and content, as well as arcade and bingo machines, conversion kits, and spare parts; and licenses proprietary table game content. It also provides video lottery central monitoring and control systems and networks for gaming regulators; and sells casino-management technology solutions and systems. The company’s Lottery segment designs, prints, and sells instant lottery games; and provides value-added services, such as game design, sales and marketing and support, specialty games and promotions, inventory management, warehousing, and fulfillment services, as well as instant game category management services. This segment also provides lottery systems, including equipment, software, and data communication services and support; instant game validation systems; and software, hardware, and related services for sports wagering and keno systems. In addition, it provides licensed games, promotional entertainment, and Internet-based marketing services; and branded merchandise, advertising, promotional support, and drawing management services, as well as prize fulfillment programs. Further, this segment prints and sells phone cards; and supplies proprietary transaction-processing software, draw lottery games, keno, point-of-sale terminals, central site computers, and communication platforms, as well as ongoing operational support and maintenance services. Its Interactive segment provides interactive gaming products and services for social gaming and real-money gaming through desktop and mobile devices to online casino operators. The company was founded in 1984 and is headquartered in Las Vegas, Nevada.

FINANCIAL RATIOS  of  Scientific Games (SGMS)

Valuation Ratios
P/E Ratio -6.7
Price to Sales 0.8
Price to Book -1.2
Price to Tangible Book
Price to Cash Flow 5.6
Price to Free Cash Flow 16.2
Growth Rates
Sales Growth Rate 4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.7%
Cap. Spend. - 3 Yr. Gr. Rate 10.5%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity -414.5%
Total Debt to Equity -417%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. -3.7%
Return On Total Capital -5.5%
Ret/ On T. Cap. - 3 Yr. Avg. -9.3%
Return On Equity 20.6%
Return On Equity - 3 Yr. Avg. 28%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 61.6%
Gross Margin - 3 Yr. Avg. 58%
EBITDA Margin 30.6%
EBITDA Margin - 3 Yr. Avg. 10.5%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. -14.3%
Pre-Tax Margin -16.6%
Pre-Tax Margin - 3 Yr. Avg. -35.2%
Net Profit Margin -12.3%
Net Profit Margin - 3 Yr. Avg. -25.3%
Effective Tax Rate 26.1%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 0%

SGMS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SGMS stock intrinsic value calculation we used $2883 million for the last fiscal year's total revenue generated by Scientific Games. The default revenue input number comes from 2016 income statement of Scientific Games. 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 SGMS stock valuation model: a) initial revenue growth rate of 6.3% 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 15.5%, whose default value for SGMS is calculated based on our internal credit rating of Scientific Games, 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 Scientific Games.
    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 SGMS stock the variable cost ratio is equal to 137.1%.

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 SGMS 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 7.6% for Scientific Games.

Corporate tax rate of 27% is the nominal tax rate for Scientific Games. 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 SGMS 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 SGMS are equal to 103.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Scientific Games 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 SGMS is equal to 12.5%. 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 - $-1936 million for Scientific Games - 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 86.874 million for Scientific Games 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 Scientific Games at the current share price and the inputted number of shares is $2.3 billion.

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COMPANY NEWS

▶ Watching for Buying Signals Near Trendline Support   [Jul-12-17 01:00PM  Investopedia]
▶ Scientific Games Debuts THE SIMPSONS Slot Game   [Jun-27-17 08:45AM  PR Newswire]
▶ Playing your options in the casino space   [Jun-21-17 02:01PM  CNBC Videos]
▶ Scientific Games reports 1Q loss   [Apr-27-17 06:36PM  Associated Press]
▶ Scientific Games: Stock Is Expensive, But Bonds Yield 11%   [Dec-30-16 04:41PM  at Barrons.com]
▶ This $800 Million Hedge Fund Will Sell 100% Of These Positions   [Dec-15-16 04:29PM  at Insider Monkey]
Stock chart of SGMS Financial statements of SGMS Annual reports of SGMS
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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