Intrinsic value of Shenandoah Telecommunications - SHEN

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$29.80

  Intrinsic Value

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  Value-price divergence*

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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 1.4

 

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
  547
  845
  1,264
  1,834
  2,588
  3,558
  4,776
  6,271
  8,070
  10,193
  12,657
  15,474
  18,652
  22,192
  26,094
  30,353
  34,964
  39,920
  45,211
  50,831
  56,771
  63,026
  69,591
  76,463
  83,641
  91,125
  98,920
  107,030
  115,462
  124,226
Variable operating expenses, $m
 
  109
  168
  252
  365
  515
  708
  950
  1,248
  1,606
  2,028
  2,519
  3,079
  3,712
  4,416
  5,193
  6,040
  6,958
  7,944
  8,997
  10,115
  11,297
  12,542
  13,849
  15,216
  16,645
  18,134
  19,685
  21,299
  22,977
  24,721
Fixed operating expenses, $m
 
  210
  215
  221
  226
  232
  238
  244
  250
  256
  262
  269
  276
  283
  290
  297
  304
  312
  320
  328
  336
  344
  353
  362
  371
  380
  390
  399
  409
  420
  430
Total operating expenses, $m
  513
  319
  383
  473
  591
  747
  946
  1,194
  1,498
  1,862
  2,290
  2,788
  3,355
  3,995
  4,706
  5,490
  6,344
  7,270
  8,264
  9,325
  10,451
  11,641
  12,895
  14,211
  15,587
  17,025
  18,524
  20,084
  21,708
  23,397
  25,151
Operating income, $m
  23
  228
  462
  792
  1,243
  1,841
  2,612
  3,582
  4,774
  6,208
  7,902
  9,869
  12,119
  14,657
  17,486
  20,604
  24,009
  27,695
  31,656
  35,886
  40,380
  45,129
  50,131
  55,381
  60,876
  66,616
  72,602
  78,836
  85,321
  92,065
  99,075
EBITDA, $m
  181
  340
  635
  1,050
  1,618
  2,370
  3,340
  4,558
  6,055
  7,857
  9,985
  12,456
  15,282
  18,470
  22,022
  25,938
  30,213
  34,842
  39,816
  45,128
  50,770
  56,734
  63,015
  69,606
  76,506
  83,714
  91,229
  99,056
  107,200
  115,667
  124,468
Interest expense (income), $m
  21
  6
  13
  22
  36
  54
  79
  110
  149
  197
  255
  324
  403
  494
  597
  711
  837
  974
  1,123
  1,282
  1,453
  1,634
  1,826
  2,027
  2,239
  2,461
  2,692
  2,933
  3,185
  3,446
  3,718
Earnings before tax, $m
  2
  222
  449
  770
  1,207
  1,787
  2,534
  3,472
  4,624
  6,010
  7,646
  9,545
  11,716
  14,163
  16,889
  19,893
  23,172
  26,721
  30,533
  34,604
  38,927
  43,495
  48,306
  53,354
  58,637
  64,156
  69,910
  75,902
  82,137
  88,619
  95,357
Tax expense, $m
  3
  60
  121
  208
  326
  482
  684
  937
  1,249
  1,623
  2,065
  2,577
  3,163
  3,824
  4,560
  5,371
  6,256
  7,215
  8,244
  9,343
  10,510
  11,744
  13,042
  14,405
  15,832
  17,322
  18,876
  20,494
  22,177
  23,927
  25,746
Net income, $m
  -1
  162
  328
  562
  881
  1,304
  1,850
  2,535
  3,376
  4,388
  5,582
  6,968
  8,553
  10,339
  12,329
  14,522
  16,916
  19,506
  22,289
  25,261
  28,416
  31,752
  35,263
  38,948
  42,805
  46,834
  51,034
  55,409
  59,960
  64,692
  69,611

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
  880
  1,359
  2,033
  2,949
  4,161
  5,721
  7,679
  10,082
  12,974
  16,387
  20,349
  24,878
  29,987
  35,678
  41,951
  48,800
  56,213
  64,180
  72,687
  81,722
  91,272
  101,329
  111,883
  122,931
  134,471
  146,504
  159,035
  172,073
  185,630
  199,720
Adjusted assets (=assets-cash), $m
  1,448
  880
  1,359
  2,033
  2,949
  4,161
  5,721
  7,679
  10,082
  12,974
  16,387
  20,349
  24,878
  29,987
  35,678
  41,951
  48,800
  56,213
  64,180
  72,687
  81,722
  91,272
  101,329
  111,883
  122,931
  134,471
  146,504
  159,035
  172,073
  185,630
  199,720
Revenue / Adjusted assets
  0.369
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
Average production assets, $m
  815
  761
  1,175
  1,757
  2,550
  3,598
  4,946
  6,639
  8,717
  11,217
  14,168
  17,593
  21,509
  25,926
  30,847
  36,270
  42,191
  48,601
  55,488
  62,844
  70,655
  78,912
  87,607
  96,732
  106,284
  116,261
  126,664
  137,499
  148,771
  160,492
  172,674
Working capital, $m
  -3
  19
  30
  44
  64
  91
  125
  167
  219
  282
  357
  443
  542
  653
  777
  913
  1,062
  1,224
  1,397
  1,582
  1,779
  1,987
  2,206
  2,436
  2,676
  2,927
  3,189
  3,462
  3,746
  4,041
  4,348
Total debt, $m
  829
  367
  642
  1,028
  1,553
  2,247
  3,141
  4,263
  5,640
  7,297
  9,253
  11,523
  14,118
  17,045
  20,307
  23,901
  27,825
  32,073
  36,638
  41,513
  46,689
  52,162
  57,924
  63,972
  70,303
  76,915
  83,810
  90,990
  98,461
  106,229
  114,303
Total liabilities, $m
  1,189
  504
  779
  1,165
  1,690
  2,384
  3,278
  4,400
  5,777
  7,434
  9,390
  11,660
  14,255
  17,182
  20,444
  24,038
  27,962
  32,210
  36,775
  41,650
  46,826
  52,299
  58,061
  64,109
  70,440
  77,052
  83,947
  91,127
  98,598
  106,366
  114,440
Total equity, $m
  296
  376
  580
  868
  1,259
  1,777
  2,443
  3,279
  4,305
  5,540
  6,997
  8,689
  10,623
  12,804
  15,235
  17,913
  20,837
  24,003
  27,405
  31,037
  34,895
  38,973
  43,267
  47,774
  52,492
  57,419
  62,557
  67,908
  73,475
  79,264
  85,281
Total liabilities and equity, $m
  1,485
  880
  1,359
  2,033
  2,949
  4,161
  5,721
  7,679
  10,082
  12,974
  16,387
  20,349
  24,878
  29,986
  35,679
  41,951
  48,799
  56,213
  64,180
  72,687
  81,721
  91,272
  101,328
  111,883
  122,932
  134,471
  146,504
  159,035
  172,073
  185,630
  199,721
Debt-to-equity ratio
  2.801
  0.980
  1.110
  1.180
  1.230
  1.260
  1.290
  1.300
  1.310
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
  1.330
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
Adjusted equity ratio
  0.180
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  162
  328
  562
  881
  1,304
  1,850
  2,535
  3,376
  4,388
  5,582
  6,968
  8,553
  10,339
  12,329
  14,522
  16,916
  19,506
  22,289
  25,261
  28,416
  31,752
  35,263
  38,948
  42,805
  46,834
  51,034
  55,409
  59,960
  64,692
  69,611
Depreciation, amort., depletion, $m
  158
  112
  173
  258
  375
  529
  727
  976
  1,282
  1,650
  2,083
  2,587
  3,163
  3,813
  4,536
  5,334
  6,205
  7,147
  8,160
  9,242
  10,390
  11,605
  12,883
  14,225
  15,630
  17,097
  18,627
  20,220
  21,878
  23,602
  25,393
Funds from operations, $m
  203
  274
  501
  820
  1,256
  1,833
  2,577
  3,511
  4,658
  6,037
  7,665
  9,555
  11,716
  14,152
  16,866
  19,856
  23,120
  26,653
  30,449
  34,503
  38,807
  43,356
  48,146
  53,173
  58,435
  63,931
  69,661
  75,629
  81,838
  88,294
  95,004
Change in working capital, $m
  41
  7
  10
  15
  20
  26
  34
  43
  52
  63
  74
  86
  99
  111
  124
  137
  149
  161
  173
  185
  197
  208
  219
  230
  241
  251
  262
  273
  284
  295
  307
Cash from operations, $m
  162
  268
  490
  806
  1,236
  1,807
  2,543
  3,468
  4,605
  5,974
  7,591
  9,469
  11,617
  14,041
  16,742
  19,720
  22,971
  26,492
  30,276
  34,318
  38,610
  43,148
  47,927
  52,944
  58,195
  63,680
  69,399
  75,356
  81,554
  87,999
  94,697
Maintenance CAPEX, $m
  0
  -70
  -112
  -173
  -258
  -375
  -529
  -727
  -976
  -1,282
  -1,650
  -2,083
  -2,587
  -3,163
  -3,813
  -4,536
  -5,334
  -6,205
  -7,147
  -8,160
  -9,242
  -10,390
  -11,605
  -12,883
  -14,225
  -15,630
  -17,097
  -18,627
  -20,220
  -21,878
  -23,602
New CAPEX, $m
  -173
  -285
  -415
  -582
  -793
  -1,048
  -1,348
  -1,693
  -2,078
  -2,500
  -2,951
  -3,425
  -3,916
  -4,417
  -4,921
  -5,424
  -5,921
  -6,410
  -6,888
  -7,355
  -7,811
  -8,257
  -8,695
  -9,125
  -9,552
  -9,977
  -10,404
  -10,834
  -11,272
  -11,721
  -12,182
Cash from investing activities, $m
  -820
  -355
  -527
  -755
  -1,051
  -1,423
  -1,877
  -2,420
  -3,054
  -3,782
  -4,601
  -5,508
  -6,503
  -7,580
  -8,734
  -9,960
  -11,255
  -12,615
  -14,035
  -15,515
  -17,053
  -18,647
  -20,300
  -22,008
  -23,777
  -25,607
  -27,501
  -29,461
  -31,492
  -33,599
  -35,784
Free cash flow, $m
  -658
  -87
  -36
  50
  185
  384
  666
  1,048
  1,551
  2,193
  2,991
  3,960
  5,114
  6,461
  8,008
  9,760
  11,716
  13,878
  16,241
  18,802
  21,557
  24,501
  27,628
  30,935
  34,417
  38,073
  41,899
  45,895
  50,061
  54,400
  58,913
Issuance/(repayment) of debt, $m
  646
  189
  275
  386
  525
  694
  894
  1,122
  1,377
  1,657
  1,956
  2,270
  2,595
  2,927
  3,261
  3,594
  3,924
  4,248
  4,565
  4,875
  5,177
  5,472
  5,762
  6,048
  6,331
  6,612
  6,895
  7,180
  7,471
  7,768
  8,074
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
  189
  275
  386
  525
  694
  894
  1,122
  1,377
  1,657
  1,956
  2,270
  2,595
  2,927
  3,261
  3,594
  3,924
  4,248
  4,565
  4,875
  5,177
  5,472
  5,762
  6,048
  6,331
  6,612
  6,895
  7,180
  7,471
  7,768
  8,074
Total cash flow (excl. dividends), $m
  -29
  102
  238
  436
  711
  1,079
  1,559
  2,170
  2,928
  3,849
  4,946
  6,230
  7,709
  9,388
  11,270
  13,354
  15,640
  18,126
  20,806
  23,677
  26,734
  29,973
  33,390
  36,983
  40,748
  44,685
  48,794
  53,075
  57,532
  62,168
  66,987
Retained Cash Flow (-), $m
  -6
  -141
  -205
  -288
  -391
  -517
  -666
  -836
  -1,026
  -1,235
  -1,457
  -1,692
  -1,934
  -2,181
  -2,430
  -2,679
  -2,924
  -3,166
  -3,402
  -3,633
  -3,858
  -4,078
  -4,294
  -4,507
  -4,718
  -4,927
  -5,138
  -5,351
  -5,567
  -5,789
  -6,017
Prev. year cash balance distribution, $m
 
  55
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  17
  34
  149
  319
  561
  893
  1,334
  1,902
  2,615
  3,489
  4,539
  5,775
  7,207
  8,839
  10,676
  12,716
  14,960
  17,404
  20,044
  22,876
  25,895
  29,096
  32,476
  36,030
  39,757
  43,656
  47,724
  51,965
  56,379
  60,970
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  16
  31
  129
  263
  435
  648
  901
  1,189
  1,502
  1,829
  2,155
  2,464
  2,740
  2,967
  3,134
  3,231
  3,255
  3,205
  3,086
  2,907
  2,678
  2,414
  2,129
  1,835
  1,547
  1,274
  1,024
  804
  615
  459
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 -1458.4
Price to Sales 2.7
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow -132.6
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 $342 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 4.3%, 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 19.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $205 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 3.5% 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 139%.

Life of production assets of 6.8 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 3.5%. 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 - $290 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 47.434 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 $1.4 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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