Intrinsic value of Scientific Games - SGMS

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$22.90

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$22.90

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence* premium content

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*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 2.1

 

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, %
  4.49
  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
  2,883
  2,941
  3,008
  3,086
  3,172
  3,269
  3,374
  3,489
  3,613
  3,747
  3,891
  4,045
  4,209
  4,384
  4,570
  4,767
  4,976
  5,197
  5,431
  5,678
  5,939
  6,214
  6,504
  6,810
  7,133
  7,472
  7,830
  8,206
  8,602
  9,019
  9,457
Variable operating expenses, $m
 
  4,026
  4,112
  4,210
  4,320
  4,443
  4,577
  4,723
  4,881
  5,051
  5,234
  5,141
  5,349
  5,571
  5,807
  6,058
  6,323
  6,604
  6,902
  7,216
  7,547
  7,897
  8,266
  8,655
  9,065
  9,496
  9,950
  10,429
  10,932
  11,461
  12,018
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
  4,026
  4,112
  4,210
  4,320
  4,443
  4,577
  4,723
  4,881
  5,051
  5,234
  5,141
  5,349
  5,571
  5,807
  6,058
  6,323
  6,604
  6,902
  7,216
  7,547
  7,897
  8,266
  8,655
  9,065
  9,496
  9,950
  10,429
  10,932
  11,461
  12,018
Operating income, $m
  156
  -1,085
  -1,104
  -1,124
  -1,148
  -1,174
  -1,203
  -1,234
  -1,267
  -1,304
  -1,343
  -1,096
  -1,140
  -1,187
  -1,238
  -1,291
  -1,348
  -1,407
  -1,471
  -1,538
  -1,608
  -1,683
  -1,762
  -1,844
  -1,932
  -2,024
  -2,121
  -2,222
  -2,330
  -2,443
  -2,561
EBITDA, $m
  895
  -414
  -424
  -435
  -447
  -461
  -476
  -492
  -509
  -528
  -548
  -570
  -593
  -618
  -644
  -672
  -701
  -733
  -765
  -800
  -837
  -876
  -917
  -960
  -1,005
  -1,053
  -1,104
  -1,157
  -1,212
  -1,271
  -1,333
Interest expense (income), $m
  622
  610
  414
  425
  438
  452
  468
  485
  504
  525
  547
  571
  596
  623
  652
  683
  715
  750
  787
  825
  866
  909
  955
  1,003
  1,053
  1,106
  1,162
  1,222
  1,284
  1,349
  1,418
Earnings before tax, $m
  -479
  -1,695
  -1,517
  -1,549
  -1,586
  -1,626
  -1,671
  -1,719
  -1,772
  -1,829
  -1,890
  -1,666
  -1,736
  -1,811
  -1,890
  -1,974
  -2,063
  -2,157
  -2,257
  -2,363
  -2,474
  -2,592
  -2,716
  -2,847
  -2,985
  -3,130
  -3,283
  -3,444
  -3,613
  -3,792
  -3,979
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
  -1,695
  -1,517
  -1,549
  -1,586
  -1,626
  -1,671
  -1,719
  -1,772
  -1,829
  -1,890
  -1,666
  -1,736
  -1,811
  -1,890
  -1,974
  -2,063
  -2,157
  -2,257
  -2,363
  -2,474
  -2,592
  -2,716
  -2,847
  -2,985
  -3,130
  -3,283
  -3,444
  -3,613
  -3,792
  -3,979

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
  7,103
  7,266
  7,453
  7,663
  7,895
  8,150
  8,428
  8,728
  9,052
  9,399
  9,771
  10,167
  10,590
  11,038
  11,514
  12,019
  12,553
  13,118
  13,715
  14,345
  15,010
  15,711
  16,450
  17,229
  18,049
  18,913
  19,822
  20,778
  21,785
  22,843
Adjusted assets (=assets-cash), $m
  6,972
  7,103
  7,266
  7,453
  7,663
  7,895
  8,150
  8,428
  8,728
  9,052
  9,399
  9,771
  10,167
  10,590
  11,038
  11,514
  12,019
  12,553
  13,118
  13,715
  14,345
  15,010
  15,711
  16,450
  17,229
  18,049
  18,913
  19,822
  20,778
  21,785
  22,843
Revenue / Adjusted assets
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
Average production assets, $m
  2,995
  3,055
  3,126
  3,206
  3,296
  3,396
  3,506
  3,625
  3,754
  3,894
  4,043
  4,203
  4,373
  4,555
  4,748
  4,953
  5,170
  5,400
  5,643
  5,899
  6,170
  6,456
  6,758
  7,076
  7,411
  7,764
  8,135
  8,526
  8,938
  9,371
  9,826
Working capital, $m
  425
  368
  376
  386
  397
  409
  422
  436
  452
  468
  486
  506
  526
  548
  571
  596
  622
  650
  679
  710
  742
  777
  813
  851
  892
  934
  979
  1,026
  1,075
  1,127
  1,182
Total debt, $m
  8,074
  5,444
  5,591
  5,759
  5,948
  6,157
  6,386
  6,636
  6,906
  7,198
  7,510
  7,845
  8,202
  8,582
  8,985
  9,414
  9,868
  10,349
  10,857
  11,394
  11,961
  12,560
  13,191
  13,856
  14,557
  15,295
  16,073
  16,891
  17,752
  18,657
  19,610
Total liabilities, $m
  9,023
  6,393
  6,540
  6,708
  6,897
  7,106
  7,335
  7,585
  7,855
  8,147
  8,459
  8,794
  9,151
  9,531
  9,934
  10,363
  10,817
  11,298
  11,806
  12,343
  12,910
  13,509
  14,140
  14,805
  15,506
  16,244
  17,022
  17,840
  18,701
  19,606
  20,559
Total equity, $m
  -1,936
  710
  727
  745
  766
  790
  815
  843
  873
  905
  940
  977
  1,017
  1,059
  1,104
  1,151
  1,202
  1,255
  1,312
  1,371
  1,434
  1,501
  1,571
  1,645
  1,723
  1,805
  1,891
  1,982
  2,078
  2,178
  2,284
Total liabilities and equity, $m
  7,087
  7,103
  7,267
  7,453
  7,663
  7,896
  8,150
  8,428
  8,728
  9,052
  9,399
  9,771
  10,168
  10,590
  11,038
  11,514
  12,019
  12,553
  13,118
  13,714
  14,344
  15,010
  15,711
  16,450
  17,229
  18,049
  18,913
  19,822
  20,779
  21,784
  22,843
Debt-to-equity ratio
  -4.170
  7.660
  7.690
  7.730
  7.760
  7.800
  7.840
  7.870
  7.910
  7.950
  7.990
  8.030
  8.070
  8.100
  8.140
  8.180
  8.210
  8.240
  8.280
  8.310
  8.340
  8.370
  8.400
  8.420
  8.450
  8.470
  8.500
  8.520
  8.540
  8.560
  8.580
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
  -1,695
  -1,517
  -1,549
  -1,586
  -1,626
  -1,671
  -1,719
  -1,772
  -1,829
  -1,890
  -1,666
  -1,736
  -1,811
  -1,890
  -1,974
  -2,063
  -2,157
  -2,257
  -2,363
  -2,474
  -2,592
  -2,716
  -2,847
  -2,985
  -3,130
  -3,283
  -3,444
  -3,613
  -3,792
  -3,979
Depreciation, amort., depletion, $m
  739
  671
  680
  690
  701
  713
  727
  742
  758
  775
  794
  525
  547
  569
  594
  619
  646
  675
  705
  737
  771
  807
  845
  885
  926
  970
  1,017
  1,066
  1,117
  1,171
  1,228
Funds from operations, $m
  485
  -1,024
  -838
  -860
  -885
  -913
  -943
  -977
  -1,014
  -1,053
  -1,095
  -1,141
  -1,189
  -1,241
  -1,296
  -1,355
  -1,417
  -1,483
  -1,552
  -1,625
  -1,703
  -1,785
  -1,871
  -1,962
  -2,058
  -2,160
  -2,266
  -2,378
  -2,496
  -2,620
  -2,751
Change in working capital, $m
  66
  7
  8
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
Cash from operations, $m
  419
  -1,237
  -846
  -869
  -896
  -925
  -957
  -991
  -1,029
  -1,070
  -1,113
  -1,160
  -1,210
  -1,263
  -1,320
  -1,379
  -1,443
  -1,510
  -1,581
  -1,656
  -1,736
  -1,819
  -1,908
  -2,001
  -2,099
  -2,202
  -2,311
  -2,425
  -2,546
  -2,672
  -2,806
Maintenance CAPEX, $m
  0
  -374
  -382
  -391
  -401
  -412
  -425
  -438
  -453
  -469
  -487
  -505
  -525
  -547
  -569
  -594
  -619
  -646
  -675
  -705
  -737
  -771
  -807
  -845
  -885
  -926
  -970
  -1,017
  -1,066
  -1,117
  -1,171
New CAPEX, $m
  -273
  -61
  -70
  -80
  -90
  -100
  -110
  -119
  -129
  -139
  -149
  -160
  -171
  -182
  -193
  -205
  -217
  -230
  -243
  -257
  -271
  -286
  -302
  -318
  -335
  -353
  -371
  -391
  -411
  -433
  -455
Cash from investing activities, $m
  -232
  -435
  -452
  -471
  -491
  -512
  -535
  -557
  -582
  -608
  -636
  -665
  -696
  -729
  -762
  -799
  -836
  -876
  -918
  -962
  -1,008
  -1,057
  -1,109
  -1,163
  -1,220
  -1,279
  -1,341
  -1,408
  -1,477
  -1,550
  -1,626
Free cash flow, $m
  187
  -1,672
  -1,298
  -1,341
  -1,387
  -1,437
  -1,491
  -1,549
  -1,612
  -1,678
  -1,750
  -1,825
  -1,906
  -1,991
  -2,082
  -2,178
  -2,279
  -2,386
  -2,499
  -2,618
  -2,744
  -2,877
  -3,016
  -3,163
  -3,318
  -3,481
  -3,653
  -3,833
  -4,023
  -4,222
  -4,432
Issuance/(repayment) of debt, $m
  -140
  -2,581
  147
  168
  189
  209
  229
  250
  270
  291
  313
  334
  357
  380
  404
  429
  454
  481
  508
  537
  567
  598
  631
  665
  701
  738
  777
  818
  861
  906
  953
Issuance/(repurchase) of shares, $m
  -6
  6,900
  1,168
  1,191
  1,219
  1,251
  1,287
  1,327
  1,371
  1,419
  1,472
  1,528
  1,589
  1,654
  1,723
  1,797
  1,875
  1,959
  2,047
  2,141
  2,240
  2,345
  2,455
  2,572
  2,695
  2,825
  2,962
  3,106
  3,258
  3,417
  3,586
Cash from financing (excl. dividends), $m  
  -196
  4,319
  1,315
  1,359
  1,408
  1,460
  1,516
  1,577
  1,641
  1,710
  1,785
  1,862
  1,946
  2,034
  2,127
  2,226
  2,329
  2,440
  2,555
  2,678
  2,807
  2,943
  3,086
  3,237
  3,396
  3,563
  3,739
  3,924
  4,119
  4,323
  4,539
Total cash flow (excl. dividends), $m
  -14
  -4,254
  -1,151
  -1,172
  -1,198
  -1,228
  -1,261
  -1,299
  -1,341
  -1,387
  -1,437
  -1,491
  -1,549
  -1,611
  -1,678
  -1,749
  -1,825
  -1,905
  -1,991
  -2,081
  -2,177
  -2,278
  -2,385
  -2,498
  -2,617
  -2,743
  -2,875
  -3,015
  -3,162
  -3,317
  -3,480
Retained Cash Flow (-), $m
  440
  -2,712
  -16
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -35
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
Prev. year cash balance distribution, $m
 
  66
  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
 
  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
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
 
  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
Current shareholders' claim on cash, %
  100
  50.0
  18.9
  7.2
  2.7
  1.0
  0.4
  0.1
  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

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 -5.7
Price to Sales 0.7
Price to Book -1
Price to Tangible Book
Price to Cash Flow 4.8
Price to Free Cash Flow 13.8
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 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 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 8 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 90.486 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 $2.1 billion.


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COMPANY NEWS

▶ 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]
▶ Hedge Funds Are Finally Buying Scientific Games Corp (SGMS) Again   [Dec-01-16 01:37PM  at Insider Monkey]
▶ $1,122,459 Jackpot Hit at Four Winds New Buffalo   [Sep-14-16 01:42PM  Marketwired]
Stock chart of SGMS Financial statements of SGMS
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