Intrinsic value of Shenandoah Telecommunications - SHEN

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$31.05

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$31.05

 
Intrinsic value

$207.94

 
Up/down potential

+570%

 
Rating

str. buy

 
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 SHEN 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 1.5

 

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, %
  56.43
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  535
  856
  1,323
  1,978
  2,870
  4,049
  5,566
  7,471
  9,810
  12,624
  15,945
  19,800
  24,207
  29,177
  34,715
  40,819
  47,482
  54,696
  62,448
  70,725
  79,516
  88,809
  98,594
  108,864
  119,613
  130,842
  142,550
  154,743
  167,429
  180,620
  194,330
Variable operating expenses, $m
 
  662
  1,014
  1,510
  2,184
  3,075
  4,222
  5,662
  7,430
  9,557
  12,067
  14,966
  18,298
  22,055
  26,241
  30,855
  35,892
  41,344
  47,204
  53,461
  60,106
  67,130
  74,527
  82,290
  90,416
  98,903
  107,753
  116,970
  126,559
  136,530
  146,894
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
  513
  662
  1,014
  1,510
  2,184
  3,075
  4,222
  5,662
  7,430
  9,557
  12,067
  14,966
  18,298
  22,055
  26,241
  30,855
  35,892
  41,344
  47,204
  53,461
  60,106
  67,130
  74,527
  82,290
  90,416
  98,903
  107,753
  116,970
  126,559
  136,530
  146,894
Operating income, $m
  23
  194
  308
  468
  686
  974
  1,344
  1,809
  2,380
  3,067
  3,878
  4,833
  5,909
  7,122
  8,474
  9,964
  11,591
  13,351
  15,244
  17,264
  19,410
  21,678
  24,067
  26,574
  29,198
  31,939
  34,797
  37,773
  40,870
  44,090
  47,437
EBITDA, $m
  181
  442
  683
  1,021
  1,481
  2,089
  2,872
  3,856
  5,063
  6,515
  8,228
  10,218
  12,492
  15,058
  17,915
  21,065
  24,504
  28,227
  32,227
  36,499
  41,036
  45,831
  50,881
  56,181
  61,729
  67,523
  73,565
  79,858
  86,405
  93,212
  100,288
Interest expense (income), $m
  21
  33
  61
  103
  161
  240
  344
  479
  648
  855
  1,105
  1,399
  1,741
  2,132
  2,572
  3,063
  3,605
  4,195
  4,835
  5,522
  6,256
  7,036
  7,860
  8,727
  9,638
  10,591
  11,587
  12,625
  13,706
  14,831
  16,000
Earnings before tax, $m
  2
  162
  247
  366
  525
  734
  1,000
  1,330
  1,733
  2,212
  2,773
  3,434
  4,168
  4,991
  5,902
  6,901
  7,986
  9,156
  10,409
  11,742
  13,154
  14,643
  16,207
  17,847
  19,560
  21,348
  23,210
  25,149
  27,164
  29,259
  31,436
Tax expense, $m
  3
  44
  67
  99
  142
  198
  270
  359
  468
  597
  749
  927
  1,125
  1,347
  1,593
  1,863
  2,156
  2,472
  2,810
  3,170
  3,552
  3,954
  4,376
  4,819
  5,281
  5,764
  6,267
  6,790
  7,334
  7,900
  8,488
Net income, $m
  -1
  118
  180
  267
  384
  536
  730
  971
  1,265
  1,615
  2,024
  2,507
  3,043
  3,643
  4,308
  5,038
  5,830
  6,684
  7,598
  8,572
  9,602
  10,689
  11,831
  13,028
  14,279
  15,584
  16,944
  18,358
  19,830
  21,359
  22,949

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  1,484
  2,320
  3,584
  5,360
  7,777
  10,972
  15,084
  20,248
  26,586
  34,210
  43,210
  53,657
  65,601
  79,072
  94,080
  110,621
  128,679
  148,227
  169,235
  191,667
  215,491
  240,674
  267,192
  295,023
  324,156
  354,585
  386,315
  419,358
  453,738
  489,486
  526,641
Adjusted assets (=assets-cash), $m
  1,448
  2,320
  3,584
  5,360
  7,777
  10,972
  15,084
  20,248
  26,586
  34,210
  43,210
  53,657
  65,601
  79,072
  94,080
  110,621
  128,679
  148,227
  169,235
  191,667
  215,491
  240,674
  267,192
  295,023
  324,156
  354,585
  386,315
  419,358
  453,738
  489,486
  526,641
Revenue / Adjusted assets
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
Average production assets, $m
  815
  1,304
  2,014
  3,012
  4,371
  6,166
  8,477
  11,379
  14,941
  19,226
  24,284
  30,155
  36,867
  44,437
  52,872
  62,168
  72,316
  83,302
  95,108
  107,714
  121,103
  135,256
  150,158
  165,799
  182,171
  199,272
  217,104
  235,674
  254,995
  275,085
  295,965
Working capital, $m
  -3
  -11
  -17
  -26
  -37
  -53
  -72
  -97
  -128
  -164
  -207
  -257
  -315
  -379
  -451
  -531
  -617
  -711
  -812
  -919
  -1,034
  -1,155
  -1,282
  -1,415
  -1,555
  -1,701
  -1,853
  -2,012
  -2,177
  -2,348
  -2,526
Total debt, $m
  829
  1,492
  2,501
  3,918
  5,847
  8,397
  11,678
  15,799
  20,857
  26,941
  34,123
  42,460
  51,991
  62,740
  74,717
  87,917
  102,327
  117,926
  134,690
  152,591
  171,603
  191,699
  212,860
  235,070
  258,317
  282,600
  307,920
  334,289
  361,724
  390,251
  419,900
Total liabilities, $m
  1,189
  1,851
  2,860
  4,277
  6,206
  8,756
  12,037
  16,158
  21,216
  27,300
  34,482
  42,819
  52,350
  63,099
  75,076
  88,276
  102,686
  118,285
  135,049
  152,950
  171,962
  192,058
  213,219
  235,429
  258,676
  282,959
  308,279
  334,648
  362,083
  390,610
  420,259
Total equity, $m
  296
  469
  724
  1,083
  1,571
  2,216
  3,047
  4,090
  5,370
  6,910
  8,728
  10,839
  13,251
  15,972
  19,004
  22,345
  25,993
  29,942
  34,185
  38,717
  43,529
  48,616
  53,973
  59,595
  65,479
  71,626
  78,036
  84,710
  91,655
  98,876
  106,381
Total liabilities and equity, $m
  1,485
  2,320
  3,584
  5,360
  7,777
  10,972
  15,084
  20,248
  26,586
  34,210
  43,210
  53,658
  65,601
  79,071
  94,080
  110,621
  128,679
  148,227
  169,234
  191,667
  215,491
  240,674
  267,192
  295,024
  324,155
  354,585
  386,315
  419,358
  453,738
  489,486
  526,640
Debt-to-equity ratio
  2.801
  3.180
  3.450
  3.620
  3.720
  3.790
  3.830
  3.860
  3.880
  3.900
  3.910
  3.920
  3.920
  3.930
  3.930
  3.930
  3.940
  3.940
  3.940
  3.940
  3.940
  3.940
  3.940
  3.940
  3.950
  3.950
  3.950
  3.950
  3.950
  3.950
  3.950
Adjusted equity ratio
  0.180
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  118
  180
  267
  384
  536
  730
  971
  1,265
  1,615
  2,024
  2,507
  3,043
  3,643
  4,308
  5,038
  5,830
  6,684
  7,598
  8,572
  9,602
  10,689
  11,831
  13,028
  14,279
  15,584
  16,944
  18,358
  19,830
  21,359
  22,949
Depreciation, amort., depletion, $m
  158
  247
  374
  552
  795
  1,116
  1,528
  2,046
  2,683
  3,448
  4,351
  5,385
  6,583
  7,935
  9,441
  11,101
  12,914
  14,875
  16,984
  19,235
  21,626
  24,153
  26,814
  29,607
  32,531
  35,584
  38,769
  42,085
  45,535
  49,122
  52,851
Funds from operations, $m
  203
  365
  555
  819
  1,178
  1,652
  2,258
  3,018
  3,947
  5,062
  6,375
  7,892
  9,626
  11,578
  13,750
  16,139
  18,743
  21,559
  24,582
  27,806
  31,228
  34,842
  38,645
  42,635
  46,809
  51,168
  55,712
  60,443
  65,365
  70,481
  75,799
Change in working capital, $m
  41
  -4
  -6
  -9
  -12
  -15
  -20
  -25
  -30
  -37
  -43
  -50
  -57
  -65
  -72
  -79
  -87
  -94
  -101
  -108
  -114
  -121
  -127
  -134
  -140
  -146
  -152
  -159
  -165
  -171
  -178
Cash from operations, $m
  162
  708
  561
  828
  1,190
  1,667
  2,278
  3,042
  3,978
  5,099
  6,418
  7,942
  9,683
  11,643
  13,822
  16,218
  18,830
  21,653
  24,683
  27,914
  31,342
  34,963
  38,773
  42,769
  46,949
  51,314
  55,864
  60,602
  65,530
  70,653
  75,978
Maintenance CAPEX, $m
  0
  -146
  -233
  -360
  -538
  -780
  -1,101
  -1,514
  -2,032
  -2,668
  -3,433
  -4,336
  -5,385
  -6,583
  -7,935
  -9,441
  -11,101
  -12,914
  -14,875
  -16,984
  -19,235
  -21,626
  -24,153
  -26,814
  -29,607
  -32,531
  -35,584
  -38,769
  -42,085
  -45,535
  -49,122
New CAPEX, $m
  -173
  -489
  -711
  -998
  -1,358
  -1,796
  -2,311
  -2,902
  -3,562
  -4,284
  -5,058
  -5,871
  -6,712
  -7,570
  -8,434
  -9,296
  -10,148
  -10,986
  -11,806
  -12,607
  -13,389
  -14,153
  -14,903
  -15,641
  -16,372
  -17,101
  -17,832
  -18,570
  -19,321
  -20,090
  -20,880
Cash from investing activities, $m
  -820
  -635
  -944
  -1,358
  -1,896
  -2,576
  -3,412
  -4,416
  -5,594
  -6,952
  -8,491
  -10,207
  -12,097
  -14,153
  -16,369
  -18,737
  -21,249
  -23,900
  -26,681
  -29,591
  -32,624
  -35,779
  -39,056
  -42,455
  -45,979
  -49,632
  -53,416
  -57,339
  -61,406
  -65,625
  -70,002
Free cash flow, $m
  -658
  73
  -383
  -530
  -706
  -909
  -1,134
  -1,373
  -1,617
  -1,854
  -2,073
  -2,266
  -2,414
  -2,511
  -2,548
  -2,519
  -2,420
  -2,247
  -1,999
  -1,676
  -1,281
  -816
  -283
  314
  970
  1,683
  2,448
  3,263
  4,124
  5,029
  5,975
Issuance/(repayment) of debt, $m
  646
  695
  1,009
  1,417
  1,929
  2,550
  3,281
  4,120
  5,058
  6,084
  7,182
  8,337
  9,531
  10,749
  11,976
  13,200
  14,410
  15,600
  16,764
  17,901
  19,011
  20,097
  21,161
  22,209
  23,248
  24,282
  25,320
  26,369
  27,435
  28,526
  29,650
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  630
  695
  1,009
  1,417
  1,929
  2,550
  3,281
  4,120
  5,058
  6,084
  7,182
  8,337
  9,531
  10,749
  11,976
  13,200
  14,410
  15,600
  16,764
  17,901
  19,011
  20,097
  21,161
  22,209
  23,248
  24,282
  25,320
  26,369
  27,435
  28,526
  29,650
Total cash flow (excl. dividends), $m
  -29
  769
  626
  887
  1,223
  1,640
  2,147
  2,747
  3,442
  4,230
  5,109
  6,071
  7,118
  8,239
  9,429
  10,681
  11,990
  13,353
  14,765
  16,225
  17,730
  19,281
  20,878
  22,523
  24,218
  25,965
  27,769
  29,632
  31,559
  33,555
  35,624
Retained Cash Flow (-), $m
  -6
  -177
  -255
  -359
  -488
  -645
  -831
  -1,043
  -1,280
  -1,540
  -1,818
  -2,110
  -2,413
  -2,721
  -3,032
  -3,341
  -3,648
  -3,949
  -4,244
  -4,531
  -4,812
  -5,087
  -5,357
  -5,622
  -5,885
  -6,147
  -6,409
  -6,675
  -6,945
  -7,221
  -7,505
Prev. year cash balance distribution, $m
 
  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
  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
 
  596
  371
  529
  734
  995
  1,317
  1,704
  2,161
  2,690
  3,291
  3,961
  4,705
  5,518
  6,397
  7,339
  8,343
  9,404
  10,522
  11,693
  12,918
  14,194
  15,522
  16,901
  18,333
  19,819
  21,359
  22,957
  24,614
  26,334
  28,119
Discount rate, %
 
  10.40
  10.92
  11.47
  12.04
  12.64
  13.27
  13.94
  14.63
  15.37
  16.13
  16.94
  17.79
  18.68
  19.61
  20.59
  21.62
  22.70
  23.84
  25.03
  26.28
  27.59
  28.97
  30.42
  31.94
  33.54
  35.22
  36.98
  38.83
  40.77
  42.81
PV of cash for distribution, $m
 
  540
  301
  382
  466
  549
  623
  684
  725
  743
  738
  708
  660
  596
  521
  443
  364
  290
  224
  168
  121
  85
  58
  38
  24
  14
  8
  5
  3
  1
  1
Current shareholders' claim on cash, %
  100
  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
  100.0

Shenandoah Telecommunications Company, through its subsidiaries, provides regulated and unregulated telecommunications services to end-user customers and other telecommunications providers in Virginia, West Virginia, central Pennsylvania, and western Maryland. It offers a suite of voice, video, and data communications services. The company operates in three segments: Wireless, Cable, and Wireline. The Wireless segment provides digital wireless services; and wireless mobility communications network products and services. As of December 31, 2015, it owned 158 cell site towers built on leased land; leased space on 153 towers; and had 202 leases with other wireless communications providers. The Cable segment offers video, Internet, and voice services in Virginia, West Virginia, and western Maryland; and leases fiber optic facilities. The Wireline segment provides regulated and unregulated voice services, DSL Internet access, and long distance access services in Shenandoah County, as well as portions of Rockingham, Frederick, Warren, and Augusta counties in Virginia; video services in portions of Shenandoah County; and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia, and adjacent areas along the Interstate 81 corridor. The company offers its products and services under the Sprint and Shentel brands. Shenandoah Telecommunications Company was founded in 1902 and is headquartered in Edinburg, Virginia.

FINANCIAL RATIOS  of  Shenandoah Telecommunications (SHEN)

Valuation Ratios
P/E Ratio -1519.6
Price to Sales 2.8
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 9.4
Price to Free Cash Flow -138.1
Growth Rates
Sales Growth Rate 56.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 147.1%
Cap. Spend. - 3 Yr. Gr. Rate 8.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 269.3%
Total Debt to Equity 280.1%
Interest Coverage 1
Management Effectiveness
Return On Assets -1.1%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5.2%
Return On Equity -0.3%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 63.9%
Gross Margin - 3 Yr. Avg. 62.9%
EBITDA Margin 33.8%
EBITDA Margin - 3 Yr. Avg. 38.8%
Operating Margin 4.1%
Oper. Margin - 3 Yr. Avg. 14.9%
Pre-Tax Margin 0.4%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin -0.2%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 150%
Eff/ Tax Rate - 3 Yr. Avg. 76.6%
Payout Ratio -1200%

SHEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SHEN stock intrinsic value calculation we used $535 million for the last fiscal year's total revenue generated by Shenandoah Telecommunications. The default revenue input number comes from 2016 income statement of Shenandoah Telecommunications. 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 SHEN stock valuation model: a) initial revenue growth rate of 60% 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 10.4%, whose default value for SHEN is calculated based on our internal credit rating of Shenandoah Telecommunications, 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 Shenandoah Telecommunications.
    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 SHEN stock the variable cost ratio is equal to 78.3%.

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 SHEN 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 4.1% for Shenandoah Telecommunications.

Corporate tax rate of 27% is the nominal tax rate for Shenandoah Telecommunications. 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 SHEN 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 SHEN are equal to 152.3%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Shenandoah Telecommunications 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 SHEN is equal to -1.3%. 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 - $296 million for Shenandoah Telecommunications - 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 48.485 million for Shenandoah Telecommunications 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 Shenandoah Telecommunications at the current share price and the inputted number of shares is $1.5 billion.


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COMPANY NEWS

▶ Shenandoah Telecom posts 1Q profit   [May-04-17 08:31AM  Associated Press]
▶ Shenandoah Telecom posts 4Q loss   [09:38AM  Associated Press]
▶ Time to sell out of these 3 small-cap telecom stocks   [Jul-25-16 02:42PM  at MarketWatch]
Stock chart of SHEN Financial statements of SHEN Annual reports of SHEN
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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