Intrinsic value of ADT Inc. - ADT

Previous Close

$5.34

  Intrinsic Value

$8.59

stock screener

  Rating & Target

str. buy

+61%

Previous close

$5.34

 
Intrinsic value

$8.59

 
Up/down potential

+61%

 
Rating

str. buy

We calculate the intrinsic value of ADT 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 0001), $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 4.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
Revenue, $m
  4,912
  5,255
  5,611
  5,982
  6,367
  6,768
  7,186
  7,621
  8,074
  8,546
  9,039
  9,554
  10,091
  10,652
  11,238
  11,851
  12,491
  13,162
  13,863
  14,598
  15,367
  16,172
  17,016
  17,900
  18,826
  19,797
  20,815
  21,882
  23,002
  24,176
Variable operating expenses, $m
  4,502
  4,729
  4,964
  5,209
  5,464
  5,729
  6,004
  6,292
  6,591
  6,903
  5,972
  6,312
  6,667
  7,037
  7,424
  7,829
  8,253
  8,696
  9,159
  9,644
  10,152
  10,684
  11,242
  11,826
  12,438
  13,079
  13,752
  14,457
  15,196
  15,972
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
  4,502
  4,729
  4,964
  5,209
  5,464
  5,729
  6,004
  6,292
  6,591
  6,903
  5,972
  6,312
  6,667
  7,037
  7,424
  7,829
  8,253
  8,696
  9,159
  9,644
  10,152
  10,684
  11,242
  11,826
  12,438
  13,079
  13,752
  14,457
  15,196
  15,972
Operating income, $m
  410
  526
  647
  773
  904
  1,040
  1,181
  1,329
  1,483
  1,643
  3,067
  3,242
  3,424
  3,614
  3,813
  4,021
  4,239
  4,466
  4,704
  4,953
  5,214
  5,488
  5,774
  6,074
  6,388
  6,718
  7,063
  7,425
  7,805
  8,204
EBITDA, $m
  2,907
  3,110
  3,321
  3,540
  3,768
  4,006
  4,253
  4,510
  4,779
  5,058
  5,350
  5,654
  5,972
  6,304
  6,651
  7,014
  7,393
  7,790
  8,205
  8,640
  9,095
  9,572
  10,071
  10,594
  11,142
  11,717
  12,320
  12,951
  13,614
  14,309
Interest expense (income), $m
  0
  660
  722
  786
  853
  922
  994
  1,069
  1,148
  1,229
  1,314
  1,402
  1,494
  1,591
  1,691
  1,796
  1,906
  2,020
  2,140
  2,266
  2,397
  2,534
  2,678
  2,829
  2,987
  3,152
  3,325
  3,507
  3,697
  3,897
  4,106
Earnings before tax, $m
  -250
  -196
  -139
  -80
  -19
  45
  112
  181
  254
  329
  1,665
  1,748
  1,834
  1,923
  2,017
  2,116
  2,218
  2,326
  2,439
  2,557
  2,680
  2,810
  2,945
  3,087
  3,236
  3,393
  3,556
  3,728
  3,908
  4,097
Tax expense, $m
  0
  0
  0
  0
  0
  12
  30
  49
  69
  89
  450
  472
  495
  519
  545
  571
  599
  628
  658
  690
  724
  759
  795
  834
  874
  916
  960
  1,007
  1,055
  1,106
Net income, $m
  -250
  -196
  -139
  -80
  -19
  33
  82
  132
  185
  240
  1,216
  1,276
  1,338
  1,404
  1,473
  1,544
  1,620
  1,698
  1,780
  1,866
  1,957
  2,051
  2,150
  2,254
  2,363
  2,477
  2,596
  2,721
  2,853
  2,991

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
Total assets, $m
  18,466
  19,755
  21,094
  22,488
  23,936
  25,444
  27,014
  28,649
  30,353
  32,129
  33,982
  35,916
  37,935
  40,043
  42,247
  44,551
  46,960
  49,480
  52,118
  54,878
  57,769
  60,797
  63,968
  67,291
  70,774
  74,425
  78,252
  82,264
  86,472
  90,885
Adjusted assets (=assets-cash), $m
  18,466
  19,755
  21,094
  22,488
  23,936
  25,444
  27,014
  28,649
  30,353
  32,129
  33,982
  35,916
  37,935
  40,043
  42,247
  44,551
  46,960
  49,480
  52,118
  54,878
  57,769
  60,797
  63,968
  67,291
  70,774
  74,425
  78,252
  82,264
  86,472
  90,885
Revenue / Adjusted assets
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
Average production assets, $m
  10,295
  11,014
  11,761
  12,538
  13,345
  14,186
  15,061
  15,973
  16,923
  17,913
  18,946
  20,024
  21,150
  22,326
  23,554
  24,839
  26,182
  27,587
  29,058
  30,597
  32,208
  33,896
  35,665
  37,517
  39,459
  41,494
  43,628
  45,865
  48,211
  50,672
Working capital, $m
  -496
  -531
  -567
  -604
  -643
  -684
  -726
  -770
  -815
  -863
  -913
  -965
  -1,019
  -1,076
  -1,135
  -1,197
  -1,262
  -1,329
  -1,400
  -1,474
  -1,552
  -1,633
  -1,719
  -1,808
  -1,901
  -1,999
  -2,102
  -2,210
  -2,323
  -2,442
Total debt, $m
  10,942
  11,914
  12,924
  13,974
  15,067
  16,203
  17,387
  18,620
  19,904
  21,244
  22,641
  24,099
  25,621
  27,211
  28,873
  30,610
  32,426
  34,327
  36,315
  38,397
  40,576
  42,859
  45,251
  47,756
  50,382
  53,135
  56,020
  59,046
  62,219
  65,546
Total liabilities, $m
  13,923
  14,895
  15,905
  16,956
  18,048
  19,185
  20,369
  21,601
  22,886
  24,225
  25,622
  27,080
  28,603
  30,193
  31,854
  33,591
  35,408
  37,308
  39,297
  41,378
  43,558
  45,841
  48,232
  50,738
  53,364
  56,116
  59,002
  62,027
  65,200
  68,528
Total equity, $m
  4,543
  4,860
  5,189
  5,532
  5,888
  6,259
  6,645
  7,048
  7,467
  7,904
  8,360
  8,835
  9,332
  9,851
  10,393
  10,960
  11,552
  12,172
  12,821
  13,500
  14,211
  14,956
  15,736
  16,554
  17,410
  18,308
  19,250
  20,237
  21,272
  22,358
Total liabilities and equity, $m
  18,466
  19,755
  21,094
  22,488
  23,936
  25,444
  27,014
  28,649
  30,353
  32,129
  33,982
  35,915
  37,935
  40,044
  42,247
  44,551
  46,960
  49,480
  52,118
  54,878
  57,769
  60,797
  63,968
  67,292
  70,774
  74,424
  78,252
  82,264
  86,472
  90,886
Debt-to-equity ratio
  2.410
  2.450
  2.490
  2.530
  2.560
  2.590
  2.620
  2.640
  2.670
  2.690
  2.710
  2.730
  2.750
  2.760
  2.780
  2.790
  2.810
  2.820
  2.830
  2.840
  2.860
  2.870
  2.880
  2.880
  2.890
  2.900
  2.910
  2.920
  2.920
  2.930
Adjusted equity ratio
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -250
  -196
  -139
  -80
  -19
  33
  82
  132
  185
  240
  1,216
  1,276
  1,338
  1,404
  1,473
  1,544
  1,620
  1,698
  1,780
  1,866
  1,957
  2,051
  2,150
  2,254
  2,363
  2,477
  2,596
  2,721
  2,853
  2,991
Depreciation, amort., depletion, $m
  2,497
  2,584
  2,674
  2,768
  2,865
  2,966
  3,072
  3,181
  3,296
  3,415
  2,283
  2,413
  2,548
  2,690
  2,838
  2,993
  3,154
  3,324
  3,501
  3,686
  3,881
  4,084
  4,297
  4,520
  4,754
  4,999
  5,256
  5,526
  5,809
  6,105
Funds from operations, $m
  2,247
  2,388
  2,535
  2,687
  2,846
  2,999
  3,153
  3,314
  3,481
  3,656
  3,498
  3,688
  3,887
  4,094
  4,311
  4,537
  4,774
  5,022
  5,281
  5,553
  5,837
  6,135
  6,447
  6,774
  7,117
  7,476
  7,853
  8,247
  8,662
  9,096
Change in working capital, $m
  -33
  -35
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -113
  -119
Cash from operations, $m
  2,280
  2,423
  2,571
  2,725
  2,885
  3,040
  3,195
  3,358
  3,527
  3,703
  3,548
  3,740
  3,941
  4,151
  4,370
  4,599
  4,839
  5,090
  5,352
  5,627
  5,915
  6,216
  6,532
  6,863
  7,210
  7,574
  7,955
  8,355
  8,775
  9,215
Maintenance CAPEX, $m
  -1,157
  -1,240
  -1,327
  -1,417
  -1,511
  -1,608
  -1,709
  -1,815
  -1,924
  -2,039
  -2,158
  -2,283
  -2,413
  -2,548
  -2,690
  -2,838
  -2,993
  -3,154
  -3,324
  -3,501
  -3,686
  -3,881
  -4,084
  -4,297
  -4,520
  -4,754
  -4,999
  -5,256
  -5,526
  -5,809
New CAPEX, $m
  -691
  -719
  -747
  -777
  -808
  -841
  -875
  -912
  -950
  -990
  -1,033
  -1,078
  -1,126
  -1,176
  -1,229
  -1,284
  -1,343
  -1,405
  -1,470
  -1,539
  -1,612
  -1,688
  -1,768
  -1,853
  -1,942
  -2,035
  -2,134
  -2,237
  -2,346
  -2,461
Cash from investing activities, $m
  -1,848
  -1,959
  -2,074
  -2,194
  -2,319
  -2,449
  -2,584
  -2,727
  -2,874
  -3,029
  -3,191
  -3,361
  -3,539
  -3,724
  -3,919
  -4,122
  -4,336
  -4,559
  -4,794
  -5,040
  -5,298
  -5,569
  -5,852
  -6,150
  -6,462
  -6,789
  -7,133
  -7,493
  -7,872
  -8,270
Free cash flow, $m
  432
  464
  497
  531
  567
  591
  611
  632
  653
  674
  357
  379
  403
  427
  451
  477
  503
  530
  558
  587
  617
  648
  680
  714
  748
  785
  822
  862
  903
  945
Issuance/(repayment) of debt, $m
  939
  972
  1,010
  1,050
  1,093
  1,137
  1,184
  1,233
  1,285
  1,339
  1,397
  1,458
  1,522
  1,590
  1,662
  1,737
  1,817
  1,900
  1,989
  2,082
  2,180
  2,283
  2,391
  2,506
  2,626
  2,752
  2,886
  3,026
  3,173
  3,328
Issuance/(repurchase) of shares, $m
  568
  513
  469
  423
  375
  338
  304
  270
  234
  197
  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  
  1,507
  1,485
  1,479
  1,473
  1,468
  1,475
  1,488
  1,503
  1,519
  1,536
  1,397
  1,458
  1,522
  1,590
  1,662
  1,737
  1,817
  1,900
  1,989
  2,082
  2,180
  2,283
  2,391
  2,506
  2,626
  2,752
  2,886
  3,026
  3,173
  3,328
Total cash flow (excl. dividends), $m
  1,940
  1,949
  1,976
  2,004
  2,034
  2,066
  2,099
  2,134
  2,171
  2,210
  1,754
  1,837
  1,925
  2,017
  2,113
  2,214
  2,319
  2,430
  2,546
  2,668
  2,796
  2,931
  3,071
  3,219
  3,374
  3,537
  3,708
  3,887
  4,075
  4,273
Retained Cash Flow (-), $m
  -568
  -513
  -469
  -423
  -375
  -371
  -386
  -402
  -419
  -437
  -456
  -476
  -497
  -519
  -542
  -567
  -593
  -620
  -649
  -679
  -711
  -745
  -780
  -817
  -857
  -898
  -941
  -987
  -1,035
  -1,086
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
  1,371
  1,435
  1,507
  1,582
  1,659
  1,695
  1,713
  1,732
  1,752
  1,773
  1,298
  1,362
  1,428
  1,498
  1,571
  1,647
  1,727
  1,810
  1,898
  1,989
  2,085
  2,186
  2,291
  2,402
  2,518
  2,639
  2,766
  2,900
  3,040
  3,187
Discount rate, %
  9.40
  9.87
  10.36
  10.88
  11.43
  12.00
  12.60
  13.23
  13.89
  14.58
  15.31
  16.08
  16.88
  17.73
  18.61
  19.54
  20.52
  21.54
  22.62
  23.75
  24.94
  26.19
  27.50
  28.87
  30.32
  31.83
  33.42
  35.09
  36.85
  38.69
PV of cash for distribution, $m
  1,254
  1,189
  1,121
  1,046
  966
  859
  747
  641
  544
  455
  271
  228
  188
  153
  121
  95
  72
  54
  39
  28
  19
  13
  9
  5
  3
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  87.7
  78.4
  71.2
  65.7
  61.3
  57.8
  55.0
  52.8
  51.0
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7

FINANCIAL RATIOS  of  ADT Inc. (ADT)

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%

ADT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADT stock intrinsic value calculation we used $4582 million for the last fiscal year's total revenue generated by ADT Inc.. The default revenue input number comes from 0001 income statement of ADT Inc.. 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 ADT stock valuation model: a) initial revenue growth rate of 7.2% 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 9.4%, whose default value for ADT is calculated based on our internal credit rating of ADT Inc., 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 ADT Inc..
    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 ADT stock the variable cost ratio is equal to 93.5%.

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 ADT 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 6.6% for ADT Inc..

Corporate tax rate of 27% is the nominal tax rate for ADT Inc.. 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 ADT 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 ADT are equal to 209.6%.

Life of production assets of 8.3 years is the average useful life of capital assets used in ADT Inc. 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 ADT is equal to -10.1%. 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 - $4224.805 million for ADT Inc. - 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 757.342 million for ADT Inc. 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 ADT Inc. at the current share price and the inputted number of shares is $4.0 billion.

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