Intrinsic value of ADDvantage Technologies Group - AEY

Previous Close

$1.46

  Intrinsic Value

$0.68

stock screener

  Rating & Target

str. sell

-54%

Previous close

$1.46

 
Intrinsic value

$0.68

 
Up/down potential

-54%

 
Rating

str. sell

We calculate the intrinsic value of AEY 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 2017), $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 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  26.00
  23.90
  22.01
  20.31
  18.78
  17.40
  16.16
  15.04
  14.04
  13.14
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
Revenue, $m
  62
  76
  93
  112
  133
  157
  182
  209
  239
  270
  303
  338
  375
  414
  455
  497
  541
  587
  635
  685
  737
  791
  846
  905
  965
  1,028
  1,093
  1,161
  1,232
  1,306
Variable operating expenses, $m
  60
  75
  91
  109
  129
  151
  175
  201
  229
  259
  289
  323
  358
  395
  434
  475
  517
  561
  606
  654
  703
  755
  808
  863
  921
  981
  1,043
  1,108
  1,176
  1,246
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
  60
  75
  91
  109
  129
  151
  175
  201
  229
  259
  289
  323
  358
  395
  434
  475
  517
  561
  606
  654
  703
  755
  808
  863
  921
  981
  1,043
  1,108
  1,176
  1,246
Operating income, $m
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
EBITDA, $m
  5
  6
  8
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  41
  45
  48
  52
  56
  61
  65
  70
  74
  79
  84
  90
  95
  101
  107
Interest expense (income), $m
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
Earnings before tax, $m
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
Tax expense, $m
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
Net income, $m
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26

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
  70
  86
  105
  126
  150
  176
  205
  236
  269
  304
  341
  381
  423
  466
  512
  560
  610
  662
  715
  772
  830
  890
  953
  1,019
  1,087
  1,157
  1,231
  1,308
  1,387
  1,470
Adjusted assets (=assets-cash), $m
  70
  86
  105
  126
  150
  176
  205
  236
  269
  304
  341
  381
  423
  466
  512
  560
  610
  662
  715
  772
  830
  890
  953
  1,019
  1,087
  1,157
  1,231
  1,308
  1,387
  1,470
Revenue / Adjusted assets
  0.886
  0.884
  0.886
  0.889
  0.887
  0.892
  0.888
  0.886
  0.888
  0.888
  0.889
  0.887
  0.887
  0.888
  0.889
  0.888
  0.887
  0.887
  0.888
  0.887
  0.888
  0.889
  0.888
  0.888
  0.888
  0.889
  0.888
  0.888
  0.888
  0.888
Average production assets, $m
  23
  28
  34
  41
  49
  57
  67
  77
  87
  99
  111
  124
  137
  152
  166
  182
  198
  215
  233
  251
  270
  289
  310
  331
  353
  376
  400
  425
  451
  478
Working capital, $m
  24
  30
  36
  44
  52
  61
  71
  81
  93
  105
  118
  132
  146
  161
  177
  193
  211
  229
  247
  267
  287
  308
  329
  352
  375
  400
  425
  452
  479
  508
Total debt, $m
  10
  14
  19
  24
  29
  36
  43
  50
  58
  66
  75
  85
  95
  105
  116
  128
  140
  152
  165
  179
  193
  207
  222
  238
  254
  271
  289
  307
  326
  346
Total liabilities, $m
  17
  21
  25
  30
  36
  42
  49
  57
  64
  73
  82
  91
  101
  112
  123
  134
  146
  159
  172
  185
  199
  214
  229
  244
  261
  278
  295
  314
  333
  353
Total equity, $m
  53
  65
  80
  96
  114
  134
  156
  179
  204
  231
  260
  290
  321
  354
  389
  426
  463
  503
  544
  586
  631
  677
  724
  774
  826
  880
  936
  994
  1,054
  1,117
Total liabilities and equity, $m
  70
  86
  105
  126
  150
  176
  205
  236
  268
  304
  342
  381
  422
  466
  512
  560
  609
  662
  716
  771
  830
  891
  953
  1,018
  1,087
  1,158
  1,231
  1,308
  1,387
  1,470
Debt-to-equity ratio
  0.190
  0.220
  0.230
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
Adjusted equity ratio
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
Depreciation, amort., depletion, $m
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
  42
  45
  48
Funds from operations, $m
  4
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
Change in working capital, $m
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  26
  28
  29
Cash from operations, $m
  -1
  -1
  0
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  37
  39
  42
  45
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -45
New CAPEX, $m
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
Cash from investing activities, $m
  -7
  -7
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -20
  -22
  -24
  -26
  -28
  -30
  -33
  -34
  -37
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -58
  -62
  -65
  -68
  -72
Free cash flow, $m
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -20
  -21
  -21
  -21
  -22
  -22
  -23
  -23
  -23
  -24
  -24
  -25
  -26
  -26
  -27
Issuance/(repayment) of debt, $m
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
Issuance/(repurchase) of shares, $m
  10
  12
  13
  15
  16
  17
  19
  20
  21
  22
  22
  23
  24
  24
  25
  26
  27
  27
  28
  29
  29
  30
  31
  31
  32
  33
  34
  35
  36
  37
Cash from financing (excl. dividends), $m  
  14
  16
  18
  20
  22
  23
  26
  27
  29
  30
  31
  32
  34
  34
  36
  37
  39
  39
  41
  42
  43
  45
  46
  47
  48
  50
  52
  53
  55
  57
Total cash flow (excl. dividends), $m
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  14
  14
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
Retained Cash Flow (-), $m
  -11
  -13
  -14
  -16
  -18
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
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
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Cash available for distribution, $m
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
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
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  74.2
  56.4
  43.8
  34.7
  28.1
  23.1
  19.3
  16.3
  14.0
  12.1
  10.7
  9.5
  8.5
  7.6
  6.9
  6.3
  5.8
  5.4
  5.0
  4.6
  4.3
  4.0
  3.8
  3.6
  3.4
  3.2
  3.0
  2.9
  2.7
  2.6

ADDvantage Technologies Group, Inc., through its subsidiaries, distributes and services a range of electronics and hardware for the cable television (Cable TV) and telecommunications (Telco) industries. The Company provides equipment repair services to cable operators. The Company has two segments: Cable Television (Cable TV) and Telecommunications (Telco). The Company's Cable TV segment sells new, surplus and refurbished cable television equipment to cable television operators or multiple system operators (MSOs) or other resellers that sell to these customers throughout North America, Central America, South America and to other international regions. The Company's Telco segment offers its customers a range of used telecommunication equipment across various manufacturers consisting of component parts to expand capacity, provides spares or replaces non-working components. The Telco segment's switching equipment products originate, terminate and route voice traffic.

FINANCIAL RATIOS  of  ADDvantage Technologies Group (AEY)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.3
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow 5
Growth Rates
Sales Growth Rate 25.6%
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 1
Current Ratio 0
LT Debt to Equity 4.8%
Total Debt to Equity 14.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 1.5%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 1.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 30.6%
Gross Margin - 3 Yr. Avg. 31.8%
EBITDA Margin 2%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 1.5%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 1.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

AEY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AEY stock intrinsic value calculation we used $49 million for the last fiscal year's total revenue generated by ADDvantage Technologies Group. The default revenue input number comes from 2017 income statement of ADDvantage Technologies Group. 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 AEY stock valuation model: a) initial revenue growth rate of 26% 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 AEY is calculated based on our internal credit rating of ADDvantage Technologies Group, 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 ADDvantage Technologies Group.
    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 AEY stock the variable cost ratio is equal to 98.5%.

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 AEY 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 7.3% for ADDvantage Technologies Group.

Corporate tax rate of 27% is the nominal tax rate for ADDvantage Technologies Group. 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 AEY stock is equal to 0.4%.

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 AEY are equal to 36.6%.

Life of production assets of 10 years is the average useful life of capital assets used in ADDvantage Technologies Group 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 AEY is equal to 38.9%. 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 - $42 million for ADDvantage Technologies Group - 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 10 million for ADDvantage Technologies Group 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 ADDvantage Technologies Group at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ ADDvantage Technologies Group, Inc. Earnings Q3, 2015   [Aug-27  09:56AM  Capital Cube]
▶ 10-Q for ADDvantage Technologies Group, Inc.   [Aug-13  08:10PM  at Company Spotlight]
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