Intrinsic value of Scientific Games - SGMS

Previous Close

$50.45

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$50.45

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

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 4.5

 

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
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.00
Revenue, $m
  2,883
  3,030
  3,184
  3,346
  3,516
  3,694
  3,881
  4,077
  4,283
  4,499
  4,725
  4,963
  5,213
  5,475
  5,750
  6,039
  6,342
  6,661
  6,995
  7,345
  7,714
  8,100
  8,506
  8,932
  9,380
  9,850
  10,343
  10,861
  11,404
  11,975
  12,574
Variable operating expenses, $m
 
  4,139
  4,335
  4,541
  4,757
  4,983
  5,221
  5,470
  5,731
  6,006
  6,294
  6,307
  6,625
  6,958
  7,308
  7,675
  8,060
  8,464
  8,889
  9,335
  9,803
  10,294
  10,810
  11,352
  11,920
  12,517
  13,144
  13,802
  14,493
  15,218
  15,980
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
  4,139
  4,335
  4,541
  4,757
  4,983
  5,221
  5,470
  5,731
  6,006
  6,294
  6,307
  6,625
  6,958
  7,308
  7,675
  8,060
  8,464
  8,889
  9,335
  9,803
  10,294
  10,810
  11,352
  11,920
  12,517
  13,144
  13,802
  14,493
  15,218
  15,980
Operating income, $m
  156
  -1,109
  -1,151
  -1,195
  -1,241
  -1,289
  -1,340
  -1,393
  -1,449
  -1,507
  -1,569
  -1,344
  -1,412
  -1,483
  -1,557
  -1,636
  -1,718
  -1,804
  -1,894
  -1,989
  -2,089
  -2,194
  -2,304
  -2,419
  -2,540
  -2,668
  -2,801
  -2,941
  -3,089
  -3,243
  -3,405
EBITDA, $m
  895
  -427
  -449
  -472
  -496
  -521
  -547
  -575
  -604
  -634
  -666
  -700
  -735
  -772
  -811
  -851
  -894
  -939
  -986
  -1,035
  -1,087
  -1,142
  -1,199
  -1,259
  -1,322
  -1,388
  -1,458
  -1,531
  -1,607
  -1,688
  -1,772
Interest expense (income), $m
  622
  610
  428
  454
  481
  509
  538
  569
  601
  635
  671
  709
  748
  789
  832
  878
  926
  976
  1,028
  1,084
  1,141
  1,202
  1,266
  1,333
  1,404
  1,478
  1,555
  1,637
  1,722
  1,812
  1,906
Earnings before tax, $m
  -479
  -1,719
  -1,580
  -1,649
  -1,722
  -1,798
  -1,878
  -1,962
  -2,050
  -2,143
  -2,240
  -2,053
  -2,160
  -2,272
  -2,390
  -2,513
  -2,643
  -2,780
  -2,923
  -3,073
  -3,231
  -3,396
  -3,570
  -3,752
  -3,944
  -4,145
  -4,356
  -4,578
  -4,811
  -5,055
  -5,312
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
  -1,719
  -1,580
  -1,649
  -1,722
  -1,798
  -1,878
  -1,962
  -2,050
  -2,143
  -2,240
  -2,053
  -2,160
  -2,272
  -2,390
  -2,513
  -2,643
  -2,780
  -2,923
  -3,073
  -3,231
  -3,396
  -3,570
  -3,752
  -3,944
  -4,145
  -4,356
  -4,578
  -4,811
  -5,055
  -5,312

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
  7,319
  7,691
  8,082
  8,492
  8,922
  9,374
  9,848
  10,345
  10,866
  11,414
  11,988
  12,592
  13,225
  13,889
  14,587
  15,319
  16,088
  16,895
  17,743
  18,632
  19,566
  20,546
  21,576
  22,656
  23,791
  24,982
  26,233
  27,546
  28,925
  30,373
Adjusted assets (=assets-cash), $m
  6,972
  7,319
  7,691
  8,082
  8,492
  8,922
  9,374
  9,848
  10,345
  10,866
  11,414
  11,988
  12,592
  13,225
  13,889
  14,587
  15,319
  16,088
  16,895
  17,743
  18,632
  19,566
  20,546
  21,576
  22,656
  23,791
  24,982
  26,233
  27,546
  28,925
  30,373
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
  3,148
  3,308
  3,477
  3,653
  3,838
  4,032
  4,236
  4,450
  4,674
  4,910
  5,157
  5,416
  5,689
  5,974
  6,275
  6,590
  6,920
  7,267
  7,632
  8,015
  8,416
  8,838
  9,281
  9,746
  10,234
  10,746
  11,284
  11,849
  12,442
  13,065
Working capital, $m
  425
  379
  398
  418
  439
  462
  485
  510
  535
  562
  591
  620
  652
  684
  719
  755
  793
  833
  874
  918
  964
  1,013
  1,063
  1,117
  1,172
  1,231
  1,293
  1,358
  1,426
  1,497
  1,572
Total debt, $m
  8,074
  5,638
  5,973
  6,325
  6,694
  7,081
  7,487
  7,914
  8,361
  8,831
  9,323
  9,841
  10,383
  10,953
  11,551
  12,179
  12,838
  13,530
  14,257
  15,019
  15,820
  16,660
  17,543
  18,469
  19,442
  20,463
  21,535
  22,661
  23,843
  25,084
  26,386
Total liabilities, $m
  9,023
  6,587
  6,922
  7,274
  7,643
  8,030
  8,436
  8,863
  9,310
  9,780
  10,272
  10,790
  11,332
  11,902
  12,500
  13,128
  13,787
  14,479
  15,206
  15,968
  16,769
  17,609
  18,492
  19,418
  20,391
  21,412
  22,484
  23,610
  24,792
  26,033
  27,335
Total equity, $m
  -1,936
  732
  769
  808
  849
  892
  937
  985
  1,034
  1,087
  1,141
  1,199
  1,259
  1,322
  1,389
  1,459
  1,532
  1,609
  1,690
  1,774
  1,863
  1,957
  2,055
  2,158
  2,266
  2,379
  2,498
  2,623
  2,755
  2,893
  3,037
Total liabilities and equity, $m
  7,087
  7,319
  7,691
  8,082
  8,492
  8,922
  9,373
  9,848
  10,344
  10,867
  11,413
  11,989
  12,591
  13,224
  13,889
  14,587
  15,319
  16,088
  16,896
  17,742
  18,632
  19,566
  20,547
  21,576
  22,657
  23,791
  24,982
  26,233
  27,547
  28,926
  30,372
Debt-to-equity ratio
  -4.170
  7.700
  7.770
  7.830
  7.880
  7.940
  7.990
  8.040
  8.080
  8.130
  8.170
  8.210
  8.250
  8.280
  8.320
  8.350
  8.380
  8.410
  8.440
  8.470
  8.490
  8.510
  8.540
  8.560
  8.580
  8.600
  8.620
  8.640
  8.660
  8.670
  8.690
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
  -1,719
  -1,580
  -1,649
  -1,722
  -1,798
  -1,878
  -1,962
  -2,050
  -2,143
  -2,240
  -2,053
  -2,160
  -2,272
  -2,390
  -2,513
  -2,643
  -2,780
  -2,923
  -3,073
  -3,231
  -3,396
  -3,570
  -3,752
  -3,944
  -4,145
  -4,356
  -4,578
  -4,811
  -5,055
  -5,312
Depreciation, amort., depletion, $m
  739
  682
  702
  723
  745
  769
  793
  818
  845
  873
  903
  645
  677
  711
  747
  784
  824
  865
  908
  954
  1,002
  1,052
  1,105
  1,160
  1,218
  1,279
  1,343
  1,411
  1,481
  1,555
  1,633
Funds from operations, $m
  485
  -1,037
  -877
  -926
  -976
  -1,029
  -1,085
  -1,144
  -1,205
  -1,270
  -1,337
  -1,408
  -1,483
  -1,561
  -1,643
  -1,729
  -1,820
  -1,915
  -2,014
  -2,119
  -2,229
  -2,344
  -2,465
  -2,592
  -2,726
  -2,866
  -3,013
  -3,167
  -3,330
  -3,500
  -3,679
Change in working capital, $m
  66
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
  75
Cash from operations, $m
  419
  -1,055
  -897
  -946
  -997
  -1,052
  -1,109
  -1,168
  -1,231
  -1,297
  -1,366
  -1,438
  -1,514
  -1,594
  -1,677
  -1,765
  -1,857
  -1,954
  -2,056
  -2,163
  -2,275
  -2,392
  -2,516
  -2,646
  -2,782
  -2,925
  -3,075
  -3,232
  -3,398
  -3,571
  -3,754
Maintenance CAPEX, $m
  0
  -374
  -394
  -414
  -435
  -457
  -480
  -504
  -529
  -556
  -584
  -614
  -645
  -677
  -711
  -747
  -784
  -824
  -865
  -908
  -954
  -1,002
  -1,052
  -1,105
  -1,160
  -1,218
  -1,279
  -1,343
  -1,411
  -1,481
  -1,555
New CAPEX, $m
  -273
  -154
  -160
  -168
  -176
  -185
  -194
  -204
  -214
  -224
  -236
  -247
  -259
  -272
  -286
  -300
  -315
  -331
  -347
  -364
  -383
  -402
  -422
  -443
  -465
  -488
  -512
  -538
  -565
  -593
  -623
Cash from investing activities, $m
  -232
  -528
  -554
  -582
  -611
  -642
  -674
  -708
  -743
  -780
  -820
  -861
  -904
  -949
  -997
  -1,047
  -1,099
  -1,155
  -1,212
  -1,272
  -1,337
  -1,404
  -1,474
  -1,548
  -1,625
  -1,706
  -1,791
  -1,881
  -1,976
  -2,074
  -2,178
Free cash flow, $m
  187
  -1,583
  -1,450
  -1,527
  -1,608
  -1,693
  -1,782
  -1,876
  -1,974
  -2,077
  -2,185
  -2,299
  -2,418
  -2,543
  -2,674
  -2,812
  -2,957
  -3,109
  -3,268
  -3,436
  -3,611
  -3,796
  -3,990
  -4,193
  -4,407
  -4,631
  -4,866
  -5,113
  -5,373
  -5,645
  -5,932
Issuance/(repayment) of debt, $m
  -140
  -2,387
  335
  352
  369
  387
  406
  426
  447
  470
  493
  517
  543
  570
  598
  628
  659
  692
  726
  763
  801
  840
  882
  926
  973
  1,021
  1,072
  1,126
  1,182
  1,241
  1,303
Issuance/(repurchase) of shares, $m
  -6
  4,453
  1,617
  1,688
  1,763
  1,841
  1,923
  2,009
  2,100
  2,195
  2,294
  2,110
  2,220
  2,335
  2,456
  2,583
  2,717
  2,856
  3,003
  3,158
  3,319
  3,489
  3,668
  3,855
  4,052
  4,259
  4,475
  4,703
  4,942
  5,193
  5,457
Cash from financing (excl. dividends), $m  
  -196
  2,066
  1,952
  2,040
  2,132
  2,228
  2,329
  2,435
  2,547
  2,665
  2,787
  2,627
  2,763
  2,905
  3,054
  3,211
  3,376
  3,548
  3,729
  3,921
  4,120
  4,329
  4,550
  4,781
  5,025
  5,280
  5,547
  5,829
  6,124
  6,434
  6,760
Total cash flow (excl. dividends), $m
  -14
  483
  502
  512
  523
  535
  547
  560
  573
  587
  602
  329
  345
  362
  380
  399
  419
  440
  462
  485
  509
  534
  561
  589
  618
  649
  681
  715
  751
  788
  828
Retained Cash Flow (-), $m
  440
  -4,453
  -1,617
  -1,688
  -1,763
  -1,841
  -1,923
  -2,009
  -2,100
  -2,195
  -2,294
  -2,110
  -2,220
  -2,335
  -2,456
  -2,583
  -2,717
  -2,856
  -3,003
  -3,158
  -3,319
  -3,489
  -3,668
  -3,855
  -4,052
  -4,259
  -4,475
  -4,703
  -4,942
  -5,193
  -5,457
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
 
  -3,904
  -1,115
  -1,176
  -1,239
  -1,306
  -1,376
  -1,450
  -1,527
  -1,608
  -1,693
  -1,782
  -1,875
  -1,973
  -2,076
  -2,184
  -2,298
  -2,417
  -2,542
  -2,673
  -2,811
  -2,955
  -3,107
  -3,267
  -3,434
  -3,610
  -3,794
  -3,988
  -4,191
  -4,405
  -4,629
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
 
  -3,380
  -825
  -732
  -641
  -551
  -466
  -387
  -315
  -251
  -196
  -150
  -112
  -81
  -57
  -39
  -26
  -17
  -11
  -6
  -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
  0.0
  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
  0.0

Scientific Games Corporation is a developer of technology-based products and services and associated content for the gaming, lottery and interactive gaming industries. Its segments include Gaming, Lottery and Interactive. Its portfolio includes gaming machines and game content, casino management systems, table game products and services, instant and draw-based lottery games, server-based gaming and lottery systems, sports betting technology, lottery content and services, loyalty and rewards programs, interactive gaming and social casino solutions. Gaming segment designs, develops, manufactures, markets and distributes a portfolio of gaming products and services. Lottery segment consists of its systems-based services and product sales business and its instant games business. Its Interactive business segment includes social (non-wagering) gaming and interactive real-money gaming (RMG). Its games are available on Facebook, Amazon.com, the Apple app store and Android app on Google play.

FINANCIAL RATIOS  of  Scientific Games (SGMS)

Valuation Ratios
P/E Ratio -12.5
Price to Sales 1.5
Price to Book -2.3
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 30.4
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 5.1% 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 89.425 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 $4.5 billion.

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COMPANY NEWS

▶ Sports betting isn't legal, but firms are jockeying already   [Nov-13-17 10:48AM  Associated Press]
▶ Scientific Games reports 3Q loss   [Nov-01-17 05:56PM  Associated Press]
▶ Scientific Games Signs Agreement with Apigee   [Oct-16-17 04:15PM  PR Newswire]
▶ [$$] Scientific Games Buys In   [Sep-21-17 03:30PM  Barrons.com]
▶ Is It Time To Buy Scientific Games Corporation (SGMS)?   [Sep-13-17 09:01PM  Simply Wall St.]
▶ Oregon Lottery Extends Contract With Scientific Games   [Sep-07-17 08:45AM  PR Newswire]
▶ Why Shares of Scientific Games Corp. Popped 15% Today   [Jul-25-17 04:36PM  Motley Fool]
▶ Bearish buying in semis & a trade update   [01:21PM  CNBC Videos]
▶ Company News for July 25, 2017   [10:18AM  Zacks]
▶ Scientific Games reports 2Q loss   [Jul-24-17 09:46PM  Associated Press]
▶ 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]
Financial statements 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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