Intrinsic value of ALJ Regional Holdings - ALJJ

Previous Close

$1.54

  Intrinsic Value

$2.62

stock screener

  Rating & Target

str. buy

+70%

Previous close

$1.54

 
Intrinsic value

$2.62

 
Up/down potential

+70%

 
Rating

str. buy

We calculate the intrinsic value of ALJJ 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 0.1

 

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, %
  19.90
  18.41
  17.07
  15.86
  14.78
  13.80
  12.92
  12.13
  11.41
  10.77
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.76
  7.48
  7.24
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
  5.96
  5.87
  5.78
  5.70
Revenue, $m
  392
  464
  543
  629
  722
  822
  928
  1,040
  1,159
  1,284
  1,415
  1,552
  1,695
  1,844
  1,999
  2,160
  2,328
  2,502
  2,683
  2,871
  3,067
  3,270
  3,481
  3,702
  3,931
  4,169
  4,418
  4,677
  4,947
  5,229
Variable operating expenses, $m
  369
  436
  508
  587
  673
  764
  862
  965
  1,074
  1,189
  1,299
  1,425
  1,556
  1,692
  1,835
  1,983
  2,137
  2,297
  2,463
  2,636
  2,815
  3,002
  3,196
  3,398
  3,608
  3,827
  4,055
  4,293
  4,541
  4,800
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
  369
  436
  508
  587
  673
  764
  862
  965
  1,074
  1,189
  1,299
  1,425
  1,556
  1,692
  1,835
  1,983
  2,137
  2,297
  2,463
  2,636
  2,815
  3,002
  3,196
  3,398
  3,608
  3,827
  4,055
  4,293
  4,541
  4,800
Operating income, $m
  22
  28
  35
  42
  49
  58
  66
  76
  85
  96
  116
  127
  139
  151
  164
  177
  191
  205
  220
  236
  252
  268
  286
  304
  322
  342
  362
  384
  406
  429
EBITDA, $m
  46
  54
  63
  73
  84
  96
  108
  121
  135
  150
  165
  181
  198
  215
  233
  252
  271
  292
  313
  335
  357
  381
  406
  431
  458
  486
  515
  545
  577
  609
Interest expense (income), $m
  9
  10
  12
  15
  19
  22
  26
  30
  35
  39
  44
  50
  55
  61
  67
  73
  79
  86
  93
  100
  108
  116
  124
  132
  141
  150
  160
  170
  180
  191
  202
Earnings before tax, $m
  13
  16
  19
  23
  27
  32
  36
  41
  46
  51
  67
  72
  78
  85
  91
  98
  105
  112
  120
  128
  136
  144
  153
  163
  172
  182
  193
  203
  215
  227
Tax expense, $m
  3
  4
  5
  6
  7
  9
  10
  11
  12
  14
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
Net income, $m
  9
  12
  14
  17
  20
  23
  26
  30
  34
  37
  49
  53
  57
  62
  67
  71
  77
  82
  87
  93
  99
  105
  112
  119
  126
  133
  141
  149
  157
  166

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
  287
  339
  397
  460
  528
  601
  679
  761
  848
  939
  1,035
  1,135
  1,240
  1,349
  1,462
  1,580
  1,703
  1,830
  1,963
  2,100
  2,243
  2,392
  2,547
  2,708
  2,875
  3,050
  3,232
  3,421
  3,619
  3,825
Adjusted assets (=assets-cash), $m
  287
  339
  397
  460
  528
  601
  679
  761
  848
  939
  1,035
  1,135
  1,240
  1,349
  1,462
  1,580
  1,703
  1,830
  1,963
  2,100
  2,243
  2,392
  2,547
  2,708
  2,875
  3,050
  3,232
  3,421
  3,619
  3,825
Revenue / Adjusted assets
  1.366
  1.369
  1.368
  1.367
  1.367
  1.368
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
Average production assets, $m
  120
  142
  167
  193
  222
  252
  285
  319
  356
  394
  434
  476
  520
  566
  614
  663
  715
  768
  824
  881
  941
  1,004
  1,069
  1,136
  1,207
  1,280
  1,356
  1,436
  1,519
  1,605
Working capital, $m
  35
  42
  49
  57
  65
  74
  84
  94
  104
  116
  127
  140
  153
  166
  180
  194
  209
  225
  241
  258
  276
  294
  313
  333
  354
  375
  398
  421
  445
  471
Total debt, $m
  130
  161
  196
  234
  275
  318
  365
  414
  467
  521
  579
  639
  702
  767
  835
  906
  979
  1,056
  1,135
  1,218
  1,304
  1,393
  1,486
  1,582
  1,683
  1,788
  1,897
  2,011
  2,129
  2,253
Total liabilities, $m
  172
  204
  238
  276
  317
  361
  407
  457
  509
  564
  621
  681
  744
  809
  877
  948
  1,022
  1,098
  1,178
  1,260
  1,346
  1,435
  1,528
  1,625
  1,725
  1,830
  1,939
  2,053
  2,171
  2,295
Total equity, $m
  115
  136
  159
  184
  211
  240
  272
  304
  339
  376
  414
  454
  496
  540
  585
  632
  681
  732
  785
  840
  897
  957
  1,019
  1,083
  1,150
  1,220
  1,293
  1,369
  1,448
  1,530
Total liabilities and equity, $m
  287
  340
  397
  460
  528
  601
  679
  761
  848
  940
  1,035
  1,135
  1,240
  1,349
  1,462
  1,580
  1,703
  1,830
  1,963
  2,100
  2,243
  2,392
  2,547
  2,708
  2,875
  3,050
  3,232
  3,422
  3,619
  3,825
Debt-to-equity ratio
  1.130
  1.190
  1.230
  1.270
  1.300
  1.320
  1.340
  1.360
  1.380
  1.390
  1.400
  1.410
  1.410
  1.420
  1.430
  1.430
  1.440
  1.440
  1.450
  1.450
  1.450
  1.460
  1.460
  1.460
  1.460
  1.470
  1.470
  1.470
  1.470
  1.470
Adjusted equity ratio
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  12
  14
  17
  20
  23
  26
  30
  34
  37
  49
  53
  57
  62
  67
  71
  77
  82
  87
  93
  99
  105
  112
  119
  126
  133
  141
  149
  157
  166
Depreciation, amort., depletion, $m
  23
  26
  29
  32
  35
  38
  42
  46
  50
  54
  49
  54
  58
  64
  69
  75
  80
  86
  93
  99
  106
  113
  120
  128
  136
  144
  152
  161
  171
  180
Funds from operations, $m
  33
  37
  43
  48
  55
  61
  68
  76
  83
  91
  97
  106
  116
  125
  135
  146
  157
  168
  180
  192
  205
  218
  232
  246
  261
  277
  293
  310
  328
  346
Change in working capital, $m
  6
  6
  7
  8
  8
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
Cash from operations, $m
  27
  31
  36
  41
  46
  52
  59
  65
  73
  80
  86
  94
  103
  112
  122
  131
  142
  153
  164
  175
  187
  200
  213
  227
  241
  255
  271
  287
  303
  321
Maintenance CAPEX, $m
  -11
  -14
  -16
  -19
  -22
  -25
  -28
  -32
  -36
  -40
  -44
  -49
  -54
  -58
  -64
  -69
  -75
  -80
  -86
  -93
  -99
  -106
  -113
  -120
  -128
  -136
  -144
  -152
  -161
  -171
New CAPEX, $m
  -20
  -22
  -24
  -26
  -29
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -51
  -53
  -56
  -58
  -60
  -62
  -65
  -68
  -70
  -73
  -76
  -80
  -83
  -87
Cash from investing activities, $m
  -31
  -36
  -40
  -45
  -51
  -56
  -61
  -67
  -72
  -78
  -84
  -91
  -98
  -104
  -112
  -119
  -126
  -133
  -142
  -151
  -159
  -168
  -178
  -188
  -198
  -209
  -220
  -232
  -244
  -258
Free cash flow, $m
  -4
  -5
  -5
  -4
  -4
  -3
  -2
  -1
  0
  2
  1
  3
  5
  8
  10
  13
  16
  19
  22
  25
  28
  32
  35
  39
  43
  46
  50
  55
  59
  63
Issuance/(repayment) of debt, $m
  29
  32
  35
  38
  41
  44
  47
  49
  52
  55
  57
  60
  63
  65
  68
  71
  74
  76
  79
  83
  86
  89
  93
  97
  101
  105
  109
  114
  119
  124
Issuance/(repurchase) of shares, $m
  10
  9
  9
  8
  7
  6
  5
  3
  1
  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  
  39
  41
  44
  46
  48
  50
  52
  52
  53
  55
  57
  60
  63
  65
  68
  71
  74
  76
  79
  83
  86
  89
  93
  97
  101
  105
  109
  114
  119
  124
Total cash flow (excl. dividends), $m
  34
  36
  39
  42
  44
  47
  49
  51
  54
  57
  59
  63
  68
  73
  78
  84
  89
  95
  101
  108
  114
  121
  128
  135
  143
  151
  160
  168
  178
  187
Retained Cash Flow (-), $m
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -83
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
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  23
  26
  30
  33
  37
  40
  44
  48
  53
  57
  61
  66
  71
  76
  81
  87
  93
  98
  105
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  14
  13
  13
  12
  11
  10
  9
  9
  8
  7
  6
  6
  6
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  87.5
  78.2
  71.5
  66.5
  62.9
  60.4
  58.7
  57.8
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5
  57.5

ALJ Regional Holdings, Inc. is a holding company. The Company's segments include Faneuil, Inc. (Faneuil), Floors-N-More, LLC (Carpets) and Phoenix Color Corp. (Phoenix). The Faneuil segment provides business processing solutions for a client portfolio that includes both commercial and government entities across several verticals, including transportation, government services, utilities and healthcare. Faneuil delivers outsourcing support, ranging from customer contact centers, fulfillment operations and information technology services, to manual and electronic toll collection, violation processing and medical device tracking. The Carpets segment provides multiple products for the commercial, retail and home builder markets, including flooring, countertops, cabinets, window coverings and garage/closet organizers. The Phoenix segment manufactures book components, educational materials and related products.

FINANCIAL RATIOS  of  ALJ Regional Holdings (ALJJ)

Valuation Ratios
P/E Ratio 3.6
Price to Sales 0.2
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 2.3
Price to Free Cash Flow 3.6
Growth Rates
Sales Growth Rate 22%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 125%
Cap. Spend. - 3 Yr. Gr. Rate -2.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 90.6%
Total Debt to Equity 105.2%
Interest Coverage 1
Management Effectiveness
Return On Assets 28.2%
Ret/ On Assets - 3 Yr. Avg. 17%
Return On Total Capital 8.6%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 18.8%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 23.2%
Gross Margin - 3 Yr. Avg. 22.9%
EBITDA Margin 8.9%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 4.4%
Pre-Tax Margin 0.9%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate -433.3%
Eff/ Tax Rate - 3 Yr. Avg. -208.3%
Payout Ratio 0%

ALJJ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALJJ stock intrinsic value calculation we used $326.718 million for the last fiscal year's total revenue generated by ALJ Regional Holdings. The default revenue input number comes from 0001 income statement of ALJ Regional Holdings. 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 ALJJ stock valuation model: a) initial revenue growth rate of 19.9% 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 7.1%, whose default value for ALJJ is calculated based on our internal credit rating of ALJ Regional Holdings, 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 ALJ Regional Holdings.
    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 ALJJ stock the variable cost ratio is equal to 94.8%.

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 ALJJ 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 9.5% for ALJ Regional Holdings.

Corporate tax rate of 27% is the nominal tax rate for ALJ Regional Holdings. 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 ALJJ 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 ALJJ are equal to 30.7%.

Life of production assets of 8.9 years is the average useful life of capital assets used in ALJ Regional Holdings 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 ALJJ is equal to 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 - $95.753 million for ALJ Regional Holdings - 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 37.921 million for ALJ Regional Holdings 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 ALJ Regional Holdings at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Is ALJ Regional Holdings Inc (NASDAQ:ALJJ) A Tech Leader?   [Dec-15-17 05:05PM  Simply Wall St.]
▶ What You Must Know About ALJ Regional Holdings Incs (ALJJ) ROE   [Dec-08-17 12:03PM  Simply Wall St.]

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