Intrinsic value of Security National Financial Cl A - SNFCA

Previous Close

$5.28

  Intrinsic Value

$42.77

stock screener

  Rating & Target

str. buy

+710%

  Value-price divergence*

-42%

Previous close

$5.28

 
Intrinsic value

$42.77

 
Up/down potential

+710%

 
Rating

str. buy

 
Value-price divergence*

-42%

Our model is not good at valuating stocks of financial companies, such as SNFCA.

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

We calculate the intrinsic value of SNFCA 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 0.1

 

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, %
  7.72
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  0
  331
  355
  381
  407
  435
  464
  493
  524
  557
  590
  625
  662
  700
  740
  782
  825
  870
  918
  967
  1,019
  1,074
  1,130
  1,190
  1,252
  1,318
  1,386
  1,458
  1,533
  1,612
  1,694
Variable operating expenses, $m
 
  291
  312
  335
  358
  382
  407
  433
  461
  489
  519
  549
  581
  615
  650
  686
  724
  764
  806
  849
  895
  943
  993
  1,045
  1,100
  1,157
  1,217
  1,280
  1,346
  1,415
  1,488
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
  273
  291
  312
  335
  358
  382
  407
  433
  461
  489
  519
  549
  581
  615
  650
  686
  724
  764
  806
  849
  895
  943
  993
  1,045
  1,100
  1,157
  1,217
  1,280
  1,346
  1,415
  1,488
Operating income, $m
  35
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  76
  81
  85
  90
  95
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
  169
  178
  187
  197
  207
EBITDA, $m
  48
  43
  47
  50
  54
  57
  61
  65
  69
  73
  78
  82
  87
  92
  97
  103
  108
  114
  121
  127
  134
  141
  149
  156
  165
  173
  182
  192
  201
  212
  223
Interest expense (income), $m
  5
  6
  12
  18
  24
  31
  38
  45
  52
  60
  68
  76
  85
  94
  104
  113
  124
  135
  146
  158
  170
  183
  196
  210
  225
  241
  257
  274
  292
  311
  330
Earnings before tax, $m
  21
  34
  31
  28
  25
  22
  19
  15
  12
  8
  4
  0
  -4
  -9
  -13
  -18
  -23
  -28
  -34
  -40
  -46
  -52
  -58
  -65
  -73
  -80
  -88
  -96
  -105
  -114
  -123
Tax expense, $m
  7
  9
  8
  8
  7
  6
  5
  4
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  14
  25
  23
  21
  18
  16
  14
  11
  8
  6
  3
  0
  -4
  -9
  -13
  -18
  -23
  -28
  -34
  -40
  -46
  -52
  -58
  -65
  -73
  -80
  -88
  -96
  -105
  -114
  -123

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  854
  921
  989
  1,061
  1,134
  1,211
  1,291
  1,374
  1,461
  1,551
  1,644
  1,742
  1,844
  1,950
  2,061
  2,177
  2,298
  2,424
  2,556
  2,695
  2,839
  2,990
  3,149
  3,315
  3,488
  3,670
  3,861
  4,061
  4,270
  4,490
  4,720
Adjusted assets (=assets-cash), $m
  854
  921
  989
  1,061
  1,134
  1,211
  1,291
  1,374
  1,461
  1,551
  1,644
  1,742
  1,844
  1,950
  2,061
  2,177
  2,298
  2,424
  2,556
  2,695
  2,839
  2,990
  3,149
  3,315
  3,488
  3,670
  3,861
  4,061
  4,270
  4,490
  4,720
Revenue / Adjusted assets
  0.000
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
Average production assets, $m
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
Working capital, $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
  0
Total debt, $m
  54
  111
  169
  229
  292
  358
  425
  496
  570
  646
  726
  809
  895
  986
  1,080
  1,178
  1,281
  1,389
  1,501
  1,618
  1,741
  1,870
  2,004
  2,145
  2,293
  2,448
  2,610
  2,780
  2,958
  3,144
  3,340
Total liabilities, $m
  726
  783
  841
  901
  964
  1,030
  1,097
  1,168
  1,242
  1,318
  1,398
  1,481
  1,567
  1,658
  1,752
  1,850
  1,953
  2,061
  2,173
  2,290
  2,413
  2,542
  2,676
  2,817
  2,965
  3,120
  3,282
  3,452
  3,630
  3,816
  4,012
Total equity, $m
  128
  138
  148
  159
  170
  182
  194
  206
  219
  233
  247
  261
  277
  293
  309
  327
  345
  364
  383
  404
  426
  449
  472
  497
  523
  551
  579
  609
  641
  673
  708
Total liabilities and equity, $m
  854
  921
  989
  1,060
  1,134
  1,212
  1,291
  1,374
  1,461
  1,551
  1,645
  1,742
  1,844
  1,951
  2,061
  2,177
  2,298
  2,425
  2,556
  2,694
  2,839
  2,991
  3,148
  3,314
  3,488
  3,671
  3,861
  4,061
  4,271
  4,489
  4,720
Debt-to-equity ratio
  0.422
  0.800
  1.140
  1.440
  1.720
  1.970
  2.200
  2.410
  2.600
  2.780
  2.940
  3.100
  3.240
  3.370
  3.490
  3.610
  3.720
  3.820
  3.910
  4.000
  4.090
  4.170
  4.240
  4.320
  4.380
  4.450
  4.510
  4.560
  4.620
  4.670
  4.720
Adjusted equity ratio
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  25
  23
  21
  18
  16
  14
  11
  8
  6
  3
  0
  -4
  -9
  -13
  -18
  -23
  -28
  -34
  -40
  -46
  -52
  -58
  -65
  -73
  -80
  -88
  -96
  -105
  -114
  -123
Depreciation, amort., depletion, $m
  13
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
Funds from operations, $m
  57
  28
  27
  25
  23
  20
  18
  16
  14
  11
  9
  6
  2
  -2
  -6
  -11
  -15
  -20
  -25
  -31
  -36
  -42
  -48
  -54
  -61
  -68
  -75
  -83
  -90
  -99
  -108
Change in working capital, $m
  13
  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 operations, $m
  44
  28
  27
  25
  23
  20
  18
  16
  14
  11
  9
  6
  2
  -2
  -6
  -11
  -15
  -20
  -25
  -31
  -36
  -42
  -48
  -54
  -61
  -68
  -75
  -83
  -90
  -99
  -108
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
New CAPEX, $m
  -4
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Cash from investing activities, $m
  -56
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -18
  -18
  -19
Free cash flow, $m
  -12
  25
  22
  20
  18
  15
  13
  10
  8
  5
  2
  -1
  -6
  -10
  -15
  -20
  -25
  -30
  -36
  -41
  -48
  -54
  -61
  -68
  -75
  -83
  -91
  -99
  -108
  -117
  -127
Issuance/(repayment) of debt, $m
  13
  57
  58
  60
  63
  65
  68
  71
  73
  77
  80
  83
  87
  90
  94
  98
  103
  107
  112
  117
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  1
  5
  8
  11
  15
  19
  25
  30
  35
  41
  47
  54
  60
  67
  75
  82
  90
  99
  107
  117
  126
  136
  147
  158
Cash from financing (excl. dividends), $m  
  11
  57
  58
  60
  63
  65
  68
  72
  78
  85
  91
  98
  106
  115
  124
  133
  144
  154
  166
  177
  190
  204
  217
  231
  247
  262
  279
  296
  314
  334
  354
Total cash flow (excl. dividends), $m
  -1
  81
  80
  81
  81
  81
  81
  82
  86
  89
  93
  96
  100
  105
  109
  114
  119
  125
  130
  136
  143
  149
  156
  164
  171
  179
  188
  197
  207
  217
  227
Retained Cash Flow (-), $m
  -17
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -19
  -25
  -30
  -35
  -41
  -47
  -54
  -60
  -67
  -75
  -82
  -90
  -99
  -107
  -117
  -126
  -136
  -147
  -158
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  71
  70
  70
  69
  69
  69
  70
  73
  76
  79
  82
  81
  80
  80
  79
  78
  77
  77
  76
  75
  75
  74
  73
  73
  72
  72
  71
  70
  70
  69
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  68
  64
  60
  56
  53
  49
  46
  44
  42
  40
  37
  33
  29
  25
  21
  18
  15
  13
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.0
  96.0
  91.3
  85.4
  78.8
  71.2
  63.2
  55.2
  47.4
  40.1
  33.6
  27.7
  22.6
  18.3
  14.6
  11.6
  9.1
  7.1
  5.5
  4.2
  3.2
  2.4
  1.8
  1.4

Security National Financial Corporation is a holding company. The Company operates through three segments: life insurance, cemetery and mortuary, and mortgage loans. The life insurance segment is engaged in the business of selling and servicing selected lines of life insurance, annuity products, and accident and health insurance. The cemetery and mortuary segment consists of approximately seven mortuaries and five cemeteries in the state of Utah and a cemetery in the state of California. The mortgage loan segment originates and underwrites or otherwise purchases residential and commercial loans for new construction, existing homes and real estate projects. The Company is also engaged in pre-need selling of funeral, cemetery, mortuary and cremation services through its Utah and California operations. It also sells pre-need funeral, cemetery and cremation services.

FINANCIAL RATIOS  of  Security National Financial Cl A (SNFCA)

Valuation Ratios
P/E Ratio 5.7
Price to Sales 0.3
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 1.8
Price to Free Cash Flow 2
Growth Rates
Sales Growth Rate 7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 42.2%
Total Debt to Equity 42.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 8.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.2%
Return On Equity 11.7%
Return On Equity - 3 Yr. Avg. 11%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 12.7%
EBITDA Margin - 3 Yr. Avg. 12%
Operating Margin 11.1%
Oper. Margin - 3 Yr. Avg. 11%
Pre-Tax Margin 6.8%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 4.6%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.6%
Payout Ratio 0%

SNFCA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SNFCA stock intrinsic value calculation we used $307 million for the last fiscal year's total revenue generated by Security National Financial Cl A. The default revenue input number comes from 2016 income statement of Security National Financial Cl A. 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 SNFCA stock valuation model: a) initial revenue growth rate of 7.7% 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 4.6%, whose default value for SNFCA is calculated based on our internal credit rating of Security National Financial Cl A, 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 Security National Financial Cl A.
    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 SNFCA stock the variable cost ratio is equal to 87.9%.

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 SNFCA 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 10.5% for Security National Financial Cl A.

Corporate tax rate of 27% is the nominal tax rate for Security National Financial Cl A. 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 SNFCA 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 SNFCA are equal to 4.7%.

Life of production assets of 1.3 years is the average useful life of capital assets used in Security National Financial Cl A 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 SNFCA is equal to 0%. 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 - $128 million for Security National Financial Cl A - 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 14.64 million for Security National Financial Cl A 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 Security National Financial Cl A at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Security National Financial posts 2Q profit   [Aug-25-17 09:57PM  Associated Press]
▶ Security National Financial posts 1Q profit   [May-15-17 05:04PM  Associated Press]
▶ 10-Q for Security National Financial Corp.   [Aug-16  08:12PM  at Company Spotlight]
▶ 10-Q for Security National Financial Corp.   [May-18  08:12PM  at Company Spotlight]
▶ 10-K for Security National Financial Corp.   [Apr-26  08:14PM  at Company Spotlight]
▶ 10-Q for Security National Financial Corp.   [Nov-17  07:09PM  Company Spotlight]
Financial statements of SNFCA
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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