Intrinsic value of Student Transportation - STB

Previous Close

$7.50

  Intrinsic Value

$2.37

stock screener

  Rating & Target

str. sell

-68%

Previous close

$7.50

 
Intrinsic value

$2.37

 
Up/down potential

-68%

 
Rating

str. sell

We calculate the intrinsic value of STB 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
(a)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -100.00
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
  5.57
  5.52
  5.46
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
Revenue, $m
  0
  676
  718
  760
  805
  852
  900
  951
  1,004
  1,060
  1,117
  1,178
  1,241
  1,308
  1,377
  1,450
  1,526
  1,605
  1,689
  1,776
  1,868
  1,964
  2,065
  2,171
  2,281
  2,398
  2,520
  2,648
  2,782
  2,923
  3,070
Variable operating expenses, $m
 
  599
  634
  671
  709
  749
  790
  834
  879
  927
  976
  1,008
  1,063
  1,119
  1,179
  1,241
  1,306
  1,374
  1,446
  1,521
  1,599
  1,681
  1,768
  1,858
  1,953
  2,053
  2,157
  2,267
  2,381
  2,502
  2,629
Fixed operating expenses, $m
 
  47
  48
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  70
  71
  73
  74
  76
  78
  79
  81
  83
  85
  86
  88
Total operating expenses, $m
  0
  646
  682
  720
  759
  800
  842
  888
  934
  983
  1,033
  1,066
  1,123
  1,180
  1,241
  1,305
  1,371
  1,441
  1,514
  1,591
  1,670
  1,754
  1,842
  1,934
  2,031
  2,132
  2,238
  2,350
  2,466
  2,588
  2,717
Operating income, $m
  0
  31
  36
  41
  46
  52
  57
  64
  70
  77
  84
  111
  119
  127
  136
  145
  154
  164
  175
  186
  198
  210
  223
  237
  251
  266
  282
  298
  316
  334
  354
EBITDA, $m
  0
  96
  104
  112
  120
  129
  138
  148
  158
  168
  179
  191
  203
  216
  229
  243
  258
  273
  289
  306
  324
  343
  363
  383
  405
  428
  452
  478
  504
  532
  561
Interest expense (income), $m
  0
  18
  20
  22
  24
  25
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
Earnings before tax, $m
  0
  12
  16
  19
  22
  26
  30
  34
  38
  43
  48
  72
  78
  83
  89
  95
  102
  109
  116
  123
  131
  140
  149
  158
  168
  178
  189
  200
  212
  225
  239
Tax expense, $m
  0
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  57
  61
  64
Net income, $m
  0
  9
  11
  14
  16
  19
  22
  25
  28
  31
  35
  53
  57
  61
  65
  70
  74
  79
  85
  90
  96
  102
  108
  115
  122
  130
  138
  146
  155
  164
  174

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
  0
  588
  623
  661
  700
  740
  782
  826
  872
  921
  971
  1,023
  1,078
  1,136
  1,196
  1,259
  1,326
  1,395
  1,467
  1,543
  1,623
  1,706
  1,794
  1,886
  1,982
  2,083
  2,189
  2,300
  2,417
  2,539
  2,668
Adjusted assets (=assets-cash), $m
  0
  588
  623
  661
  700
  740
  782
  826
  872
  921
  971
  1,023
  1,078
  1,136
  1,196
  1,259
  1,326
  1,395
  1,467
  1,543
  1,623
  1,706
  1,794
  1,886
  1,982
  2,083
  2,189
  2,300
  2,417
  2,539
  2,668
Revenue / Adjusted assets
  0.000
  1.150
  1.152
  1.150
  1.150
  1.151
  1.151
  1.151
  1.151
  1.151
  1.150
  1.152
  1.151
  1.151
  1.151
  1.152
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
Average production assets, $m
  0
  458
  486
  515
  545
  577
  610
  644
  680
  717
  757
  798
  840
  885
  932
  981
  1,033
  1,087
  1,143
  1,203
  1,265
  1,330
  1,398
  1,469
  1,545
  1,623
  1,706
  1,792
  1,883
  1,979
  2,079
Working capital, $m
  0
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Total debt, $m
  0
  317
  345
  374
  404
  435
  467
  501
  537
  574
  613
  654
  696
  741
  787
  836
  887
  940
  996
  1,055
  1,116
  1,181
  1,249
  1,319
  1,394
  1,472
  1,554
  1,639
  1,729
  1,824
  1,923
Total liabilities, $m
  0
  454
  481
  510
  540
  571
  604
  638
  674
  711
  749
  790
  833
  877
  924
  972
  1,023
  1,077
  1,133
  1,191
  1,253
  1,317
  1,385
  1,456
  1,530
  1,608
  1,690
  1,776
  1,866
  1,960
  2,059
Total equity, $m
  0
  134
  142
  151
  159
  169
  178
  188
  199
  210
  221
  233
  246
  259
  273
  287
  302
  318
  335
  352
  370
  389
  409
  430
  452
  475
  499
  524
  551
  579
  608
Total liabilities and equity, $m
  0
  588
  623
  661
  699
  740
  782
  826
  873
  921
  970
  1,023
  1,079
  1,136
  1,197
  1,259
  1,325
  1,395
  1,468
  1,543
  1,623
  1,706
  1,794
  1,886
  1,982
  2,083
  2,189
  2,300
  2,417
  2,539
  2,667
Debt-to-equity ratio
  0.000
  2.370
  2.430
  2.480
  2.530
  2.580
  2.620
  2.660
  2.700
  2.740
  2.770
  2.800
  2.830
  2.860
  2.890
  2.910
  2.930
  2.960
  2.980
  3.000
  3.020
  3.040
  3.050
  3.070
  3.080
  3.100
  3.110
  3.130
  3.140
  3.150
  3.160
Adjusted equity ratio
  0.000
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  9
  11
  14
  16
  19
  22
  25
  28
  31
  35
  53
  57
  61
  65
  70
  74
  79
  85
  90
  96
  102
  108
  115
  122
  130
  138
  146
  155
  164
  174
Depreciation, amort., depletion, $m
  0
  65
  68
  71
  74
  77
  81
  84
  88
  91
  95
  80
  84
  89
  93
  98
  103
  109
  114
  120
  126
  133
  140
  147
  154
  162
  171
  179
  188
  198
  208
Funds from operations, $m
  0
  74
  80
  85
  91
  96
  103
  109
  116
  123
  130
  133
  141
  149
  158
  168
  178
  188
  199
  210
  222
  235
  248
  262
  277
  292
  308
  326
  343
  362
  382
Change in 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
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  0
  74
  79
  85
  90
  96
  102
  109
  116
  123
  130
  132
  140
  149
  158
  167
  177
  188
  198
  210
  222
  234
  248
  262
  276
  292
  308
  325
  343
  362
  381
Maintenance CAPEX, $m
  0
  -43
  -46
  -49
  -51
  -55
  -58
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -109
  -114
  -120
  -126
  -133
  -140
  -147
  -154
  -162
  -171
  -179
  -188
  -198
New CAPEX, $m
  0
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
Cash from investing activities, $m
  0
  -70
  -74
  -78
  -81
  -87
  -91
  -95
  -100
  -106
  -111
  -117
  -123
  -129
  -136
  -142
  -149
  -157
  -166
  -173
  -182
  -191
  -201
  -212
  -222
  -233
  -245
  -258
  -270
  -283
  -298
Free cash flow, $m
  0
  4
  6
  7
  9
  10
  12
  13
  15
  17
  19
  16
  18
  20
  22
  25
  28
  30
  33
  36
  40
  43
  47
  50
  54
  59
  63
  68
  73
  78
  83
Issuance/(repayment) of debt, $m
  0
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  47
  49
  51
  53
  56
  59
  62
  64
  68
  71
  74
  78
  82
  86
  90
  94
  99
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  0
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  47
  49
  51
  53
  56
  59
  62
  64
  68
  71
  74
  78
  82
  86
  90
  94
  99
Total cash flow (excl. dividends), $m
  0
  30
  33
  36
  39
  41
  44
  48
  51
  54
  58
  56
  60
  65
  69
  74
  79
  84
  89
  95
  101
  107
  114
  121
  129
  137
  145
  154
  163
  172
  183
Retained Cash Flow (-), $m
  0
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
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
 
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Cash available for distribution, $m
 
  22
  25
  27
  30
  32
  35
  37
  40
  43
  46
  44
  48
  51
  55
  59
  64
  68
  73
  78
  83
  88
  94
  100
  107
  113
  121
  128
  136
  144
  153
Discount rate, %
 
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
 
  20
  21
  20
  20
  19
  17
  16
  15
  13
  12
  9
  8
  7
  6
  4
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
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

Student Transportation Inc is a Canada-based company engaged in providing school bus transportation services in North America. The Company provides school bus and management services to public and private schools in North America and offers services, such as contracted services, special needs transportation, charter services, direct to parent and used bus sales. The Company operates a fleet of approximately 13,500 vehicles. It provides a managed transportation service that covers operations, such as dispatch, routing and scheduling, driver training and staffing, and maintenance, among others. The Company’s Managed Services Group is an all-inclusive solution which creates student transportation program for public and private schools. The Company offers management experience, advisory services, fleet life cycle management, driver training and development programs, among others.

FINANCIAL RATIOS  of  Student Transportation (STB)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

STB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STB stock intrinsic value calculation we used $637 million for the last fiscal year's total revenue generated by Student Transportation. The default revenue input number comes from income statement of Student Transportation. 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 STB stock valuation model: a) initial revenue growth rate of 6.2% 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 9.5%, whose default value for STB is calculated based on our internal credit rating of Student Transportation, 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 Student Transportation.
    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 STB stock the variable cost ratio is equal to 88.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $46 million in the base year in the intrinsic value calculation for STB 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 6.3% for Student Transportation.

Corporate tax rate of 27% is the nominal tax rate for Student Transportation. 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 STB stock is equal to 0.9%.

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 STB are equal to 67.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Student Transportation 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 STB is equal to 0.5%. 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 - $126 million for Student Transportation - 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 93 million for Student Transportation 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 Student Transportation at the current share price and the inputted number of shares is $0.7 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of STB
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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