Intrinsic value of A. H. Belo Series A - AHC

Previous Close

$4.80

  Intrinsic Value

$0.85

stock screener

  Rating & Target

str. sell

-82%

Previous close

$4.80

 
Intrinsic value

$0.85

 
Up/down potential

-82%

 
Rating

str. sell

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

We calculate the intrinsic value of AHC 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, %
  -4.41
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  260
  265
  271
  278
  286
  295
  304
  315
  326
  338
  351
  365
  380
  395
  412
  430
  449
  469
  490
  512
  536
  560
  587
  614
  643
  674
  706
  740
  776
  813
  853
Variable operating expenses, $m
 
  133
  136
  139
  143
  147
  152
  157
  163
  169
  175
  180
  188
  196
  204
  213
  222
  232
  242
  253
  265
  277
  290
  304
  318
  333
  349
  366
  384
  402
  422
Fixed operating expenses, $m
 
  162
  166
  170
  174
  179
  183
  188
  193
  197
  202
  207
  212
  218
  223
  229
  235
  240
  246
  253
  259
  265
  272
  279
  286
  293
  300
  308
  315
  323
  331
Total operating expenses, $m
  284
  295
  302
  309
  317
  326
  335
  345
  356
  366
  377
  387
  400
  414
  427
  442
  457
  472
  488
  506
  524
  542
  562
  583
  604
  626
  649
  674
  699
  725
  753
Operating income, $m
  -24
  -29
  -30
  -31
  -31
  -31
  -31
  -30
  -29
  -28
  -26
  -23
  -21
  -18
  -15
  -12
  -8
  -4
  1
  6
  12
  18
  24
  32
  39
  48
  57
  66
  77
  88
  100
EBITDA, $m
  -12
  -20
  -20
  -21
  -21
  -21
  -20
  -19
  -18
  -16
  -14
  -11
  -9
  -6
  -2
  2
  6
  11
  16
  22
  29
  35
  43
  51
  60
  69
  79
  89
  101
  113
  126
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
Earnings before tax, $m
  -21
  -29
  -30
  -31
  -31
  -31
  -31
  -31
  -30
  -29
  -27
  -24
  -22
  -20
  -17
  -14
  -10
  -6
  -2
  3
  8
  14
  20
  27
  35
  43
  51
  60
  70
  81
  92
Tax expense, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  6
  7
  9
  11
  14
  16
  19
  22
  25
Net income, $m
  -19
  -29
  -30
  -31
  -31
  -31
  -31
  -31
  -30
  -29
  -27
  -24
  -22
  -20
  -17
  -14
  -10
  -6
  -2
  2
  6
  10
  15
  20
  25
  31
  37
  44
  51
  59
  67

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  80
  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
  193
  115
  118
  121
  124
  128
  132
  137
  142
  147
  153
  159
  165
  172
  179
  187
  195
  204
  213
  223
  233
  244
  255
  267
  280
  293
  307
  322
  337
  353
  371
Adjusted assets (=assets-cash), $m
  113
  115
  118
  121
  124
  128
  132
  137
  142
  147
  153
  159
  165
  172
  179
  187
  195
  204
  213
  223
  233
  244
  255
  267
  280
  293
  307
  322
  337
  353
  371
Revenue / Adjusted assets
  2.301
  2.304
  2.297
  2.298
  2.306
  2.305
  2.303
  2.299
  2.296
  2.299
  2.294
  2.296
  2.303
  2.297
  2.302
  2.299
  2.303
  2.299
  2.300
  2.296
  2.300
  2.295
  2.302
  2.300
  2.296
  2.300
  2.300
  2.298
  2.303
  2.303
  2.299
Average production assets, $m
  53
  54
  55
  57
  58
  60
  62
  64
  66
  69
  72
  74
  77
  81
  84
  88
  92
  96
  100
  104
  109
  114
  120
  125
  131
  137
  144
  151
  158
  166
  174
Working capital, $m
  85
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Total debt, $m
  0
  -1
  1
  4
  7
  10
  14
  18
  22
  27
  32
  38
  43
  50
  56
  63
  71
  78
  87
  95
  104
  114
  124
  135
  147
  159
  171
  184
  198
  213
  229
Total liabilities, $m
  105
  104
  106
  109
  112
  115
  119
  123
  127
  132
  137
  143
  148
  155
  161
  168
  176
  183
  192
  200
  209
  219
  229
  240
  252
  264
  276
  289
  303
  318
  334
Total equity, $m
  88
  12
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
  37
Total liabilities and equity, $m
  193
  116
  118
  121
  124
  128
  132
  137
  141
  147
  152
  159
  164
  172
  179
  187
  196
  203
  213
  222
  232
  243
  254
  267
  280
  293
  307
  321
  337
  353
  371
Debt-to-equity ratio
  0.000
  -0.110
  0.090
  0.320
  0.560
  0.800
  1.060
  1.320
  1.590
  1.850
  2.120
  2.380
  2.640
  2.890
  3.140
  3.380
  3.620
  3.850
  4.070
  4.280
  4.490
  4.690
  4.880
  5.070
  5.240
  5.410
  5.580
  5.740
  5.890
  6.030
  6.170
Adjusted equity ratio
  0.071
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -19
  -29
  -30
  -31
  -31
  -31
  -31
  -31
  -30
  -29
  -27
  -24
  -22
  -20
  -17
  -14
  -10
  -6
  -2
  2
  6
  10
  15
  20
  25
  31
  37
  44
  51
  59
  67
Depreciation, amort., depletion, $m
  12
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
Funds from operations, $m
  6
  -20
  -20
  -21
  -21
  -21
  -20
  -19
  -18
  -17
  -15
  -13
  -10
  -7
  -4
  0
  4
  9
  14
  18
  23
  28
  33
  39
  45
  52
  59
  67
  76
  84
  94
Change in working capital, $m
  -2
  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
Cash from operations, $m
  8
  -20
  -20
  -21
  -21
  -21
  -20
  -20
  -18
  -17
  -15
  -13
  -10
  -7
  -4
  0
  4
  8
  13
  18
  23
  27
  33
  39
  45
  52
  59
  67
  75
  84
  93
Maintenance CAPEX, $m
  0
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
New CAPEX, $m
  -7
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Cash from investing activities, $m
  -1
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -14
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
Free cash flow, $m
  7
  -29
  -30
  -31
  -31
  -32
  -32
  -31
  -31
  -30
  -28
  -27
  -25
  -23
  -20
  -17
  -14
  -10
  -6
  -2
  2
  6
  10
  15
  20
  25
  31
  37
  44
  52
  60
Issuance/(repayment) of debt, $m
  0
  -1
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  0
  33
  31
  31
  32
  32
  32
  31
  30
  29
  28
  25
  23
  20
  17
  14
  11
  7
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2
  32
  33
  34
  35
  35
  36
  35
  34
  34
  33
  30
  29
  26
  24
  21
  18
  15
  11
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Total cash flow (excl. dividends), $m
  9
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  3
  4
  4
  4
  4
  5
  5
  5
  7
  11
  15
  20
  25
  31
  37
  44
  51
  58
  66
  75
Retained Cash Flow (-), $m
  30
  -33
  -31
  -31
  -32
  -32
  -32
  -31
  -30
  -29
  -28
  -25
  -23
  -20
  -17
  -14
  -11
  -7
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
Prev. year cash balance distribution, $m
 
  80
  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
 
  50
  -28
  -28
  -28
  -28
  -28
  -27
  -26
  -25
  -23
  -21
  -19
  -16
  -13
  -10
  -6
  -2
  3
  6
  10
  14
  19
  24
  30
  36
  42
  49
  57
  65
  73
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
 
  48
  -25
  -25
  -23
  -22
  -20
  -18
  -16
  -14
  -12
  -10
  -8
  -6
  -4
  -3
  -2
  0
  0
  1
  1
  1
  2
  2
  2
  1
  1
  1
  1
  1
  1
Current shareholders' claim on cash, %
  100
  22.4
  6.9
  2.1
  0.7
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

A. H. Belo Corporation is a local news and information publishing company. The Company is engaged in providing commercial printing, distribution and direct mail services, as well as media and digital marketing services. The Company operates through two segments: Publishing and Marketing, Event Marketing and Other Services (MEMO). The Company's Publishing segment includes its print operations associated with its newspapers, publications and related Websites. The Company's publishing segment includes the operations of The Dallas Morning News (www.dallasnews.com), a Texas newspaper, and the Denton Record-Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas. The Company's MEMO segment consists of marketing, event marketing and other businesses. It offers digital marketing solutions through Your Speakeasy, LLC (Speakeasy) and DMV Digital Holdings Company, Inc., and provides event promotion and marketing services through DMN CrowdSource LLC (CrowdSource).

FINANCIAL RATIOS  of  A. H. Belo Series A (AHC)

Valuation Ratios
P/E Ratio -5.5
Price to Sales 0.4
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 104.1
Growth Rates
Sales Growth Rate -4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.5%
Cap. Spend. - 3 Yr. Gr. Rate 11.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -9.2%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital -18.4%
Ret/ On T. Cap. - 3 Yr. Avg. 10%
Return On Equity -18.4%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 90%
Gross Margin - 3 Yr. Avg. 88.8%
EBITDA Margin -3.5%
EBITDA Margin - 3 Yr. Avg. 10.9%
Operating Margin -9.2%
Oper. Margin - 3 Yr. Avg. -6.1%
Pre-Tax Margin -8.1%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin -7.3%
Net Profit Margin - 3 Yr. Avg. 6.7%
Effective Tax Rate 9.5%
Eff/ Tax Rate - 3 Yr. Avg. 8.7%
Payout Ratio -36.8%

AHC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AHC stock intrinsic value calculation we used $260 million for the last fiscal year's total revenue generated by A. H. Belo Series A. The default revenue input number comes from 2016 income statement of A. H. Belo Series 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 AHC stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for AHC is calculated based on our internal credit rating of A. H. Belo Series 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 A. H. Belo Series 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 AHC stock the variable cost ratio is equal to 50%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $158 million in the base year in the intrinsic value calculation for AHC 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 A. H. Belo Series A.

Corporate tax rate of 27% is the nominal tax rate for A. H. Belo Series 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 AHC 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 AHC are equal to 20.4%.

Life of production assets of 6.5 years is the average useful life of capital assets used in A. H. Belo Series 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 AHC is equal to 1.9%. 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 - $88 million for A. H. Belo Series 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 21.753 million for A. H. Belo Series 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 A. H. Belo Series A at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ ETFs with exposure to A.H. Belo Corp. : December 12, 2017   [Dec-12-17 12:40PM  Capital Cube]
▶ 10 High-Yield Stocks That Wont Cut Their Dividends in 2018   [Dec-07-17 03:00PM  InvestorPlace]
▶ A.H. Belo edits future, finds new lede   [01:50PM  American City Business Journals]
▶ ETFs with exposure to A.H. Belo Corp. : November 15, 2017   [Nov-15-17 11:28AM  Capital Cube]
▶ Denton Record-Chronicle to be purchased by its longtime publisher   [Oct-31-17 06:00PM  American City Business Journals]
▶ A.H. Belo posts 3Q profit   [Oct-30-17 06:27PM  Associated Press]
▶ ETFs with exposure to A.H. Belo Corp. : August 17, 2017   [Aug-17-17 03:08PM  Capital Cube]
▶ A.H. Belo reports 2Q loss   [Aug-01-17 10:56PM  Associated Press]
▶ A.H. Belo reports 1Q loss   [May-03-17 07:38AM  Associated Press]
▶ ETFs with exposure to A.H. Belo Corp. : April 5, 2017   [Apr-05-17 04:15PM  Capital Cube]
▶ A.H. Belo reports 4Q loss   [07:14AM  Associated Press]
▶ Dallas Newspaper Publisher Battered by Earnings   [Nov-02-16 11:05AM  at 24/7 Wall St.]
▶ Report: Gannett weighs acquisition of Dallas Morning News   [Sep-23-16 01:21PM  at bizjournals.com]
Financial statements of AHC
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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