Intrinsic value of Alaska Communications Systems Group, Inc - ALSK

Previous Close

$1.72

  Intrinsic Value

$14.25

stock screener

  Rating & Target

str. buy

+729%

Previous close

$1.72

 
Intrinsic value

$14.25

 
Up/down potential

+729%

 
Rating

str. buy

We calculate the intrinsic value of ALSK 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, %
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  248
  264
  281
  299
  317
  337
  357
  378
  399
  422
  446
  471
  497
  524
  552
  582
  613
  645
  679
  715
  752
  791
  832
  875
  920
  968
  1,017
  1,069
  1,124
  1,181
Variable operating expenses, $m
  42
  43
  43
  43
  44
  44
  45
  45
  45
  46
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Fixed operating expenses, $m
  174
  178
  181
  185
  190
  194
  198
  202
  207
  211
  216
  221
  226
  231
  236
  241
  246
  252
  257
  263
  268
  274
  280
  287
  293
  299
  306
  313
  320
  327
Total operating expenses, $m
  216
  221
  224
  228
  234
  238
  243
  247
  252
  257
  225
  231
  236
  242
  247
  253
  258
  265
  271
  277
  283
  290
  297
  305
  312
  319
  327
  335
  343
  351
Operating income, $m
  32
  44
  57
  70
  84
  99
  114
  130
  147
  165
  221
  241
  261
  283
  305
  329
  354
  381
  409
  438
  469
  501
  535
  571
  609
  649
  691
  735
  781
  830
EBITDA, $m
  105
  120
  135
  151
  168
  185
  204
  223
  243
  264
  286
  309
  334
  359
  386
  414
  444
  475
  508
  542
  579
  617
  657
  699
  743
  790
  839
  891
  945
  1,003
Interest expense (income), $m
  13
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  65
  68
  72
  76
  81
  85
  90
  95
Earnings before tax, $m
  19
  30
  41
  53
  65
  78
  92
  106
  121
  137
  191
  208
  226
  246
  266
  287
  309
  333
  358
  384
  411
  440
  471
  503
  537
  572
  610
  649
  691
  735
Tax expense, $m
  5
  8
  11
  14
  18
  21
  25
  29
  33
  37
  51
  56
  61
  66
  72
  77
  84
  90
  97
  104
  111
  119
  127
  136
  145
  155
  165
  175
  187
  198
Net income, $m
  14
  22
  30
  39
  48
  57
  67
  77
  88
  100
  139
  152
  165
  179
  194
  209
  226
  243
  261
  280
  300
  321
  344
  367
  392
  418
  445
  474
  504
  537

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
  486
  518
  551
  586
  622
  660
  700
  741
  783
  828
  875
  923
  974
  1,027
  1,083
  1,141
  1,202
  1,266
  1,332
  1,402
  1,475
  1,552
  1,632
  1,716
  1,805
  1,897
  1,994
  2,096
  2,203
  2,315
Adjusted assets (=assets-cash), $m
  486
  518
  551
  586
  622
  660
  700
  741
  783
  828
  875
  923
  974
  1,027
  1,083
  1,141
  1,202
  1,266
  1,332
  1,402
  1,475
  1,552
  1,632
  1,716
  1,805
  1,897
  1,994
  2,096
  2,203
  2,315
Revenue / Adjusted assets
  0.510
  0.510
  0.510
  0.510
  0.510
  0.511
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.509
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
Average production assets, $m
  395
  421
  448
  476
  506
  536
  568
  602
  636
  673
  711
  750
  791
  835
  880
  927
  976
  1,028
  1,082
  1,139
  1,199
  1,261
  1,326
  1,395
  1,466
  1,541
  1,620
  1,703
  1,790
  1,881
Working capital, $m
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
Total debt, $m
  190
  210
  231
  253
  275
  299
  324
  350
  377
  405
  434
  465
  497
  530
  565
  602
  640
  680
  722
  766
  812
  860
  911
  964
  1,019
  1,077
  1,138
  1,202
  1,270
  1,340
Total liabilities, $m
  306
  326
  347
  369
  392
  415
  440
  466
  493
  521
  550
  581
  613
  646
  681
  718
  756
  796
  838
  882
  928
  976
  1,027
  1,080
  1,135
  1,193
  1,254
  1,319
  1,386
  1,456
Total equity, $m
  180
  192
  205
  218
  231
  245
  260
  275
  291
  307
  324
  343
  361
  381
  402
  423
  446
  470
  494
  520
  547
  576
  606
  637
  670
  704
  740
  778
  817
  859
Total liabilities and equity, $m
  486
  518
  552
  587
  623
  660
  700
  741
  784
  828
  874
  924
  974
  1,027
  1,083
  1,141
  1,202
  1,266
  1,332
  1,402
  1,475
  1,552
  1,633
  1,717
  1,805
  1,897
  1,994
  2,097
  2,203
  2,315
Debt-to-equity ratio
  1.050
  1.090
  1.130
  1.160
  1.190
  1.220
  1.250
  1.270
  1.300
  1.320
  1.340
  1.360
  1.370
  1.390
  1.410
  1.420
  1.440
  1.450
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
  1.550
  1.560
Adjusted equity ratio
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  22
  30
  39
  48
  57
  67
  77
  88
  100
  139
  152
  165
  179
  194
  209
  226
  243
  261
  280
  300
  321
  344
  367
  392
  418
  445
  474
  504
  537
Depreciation, amort., depletion, $m
  74
  76
  78
  81
  84
  87
  89
  92
  96
  99
  65
  69
  73
  77
  81
  85
  90
  94
  99
  105
  110
  116
  122
  128
  135
  141
  149
  156
  164
  173
Funds from operations, $m
  87
  98
  108
  120
  131
  144
  156
  170
  184
  199
  204
  221
  238
  256
  275
  295
  315
  337
  360
  385
  410
  437
  465
  495
  526
  559
  594
  630
  669
  709
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  87
  97
  108
  119
  131
  143
  156
  169
  184
  198
  204
  220
  237
  255
  274
  294
  315
  337
  360
  384
  409
  436
  464
  494
  525
  558
  593
  629
  667
  708
Maintenance CAPEX, $m
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -105
  -110
  -116
  -122
  -128
  -135
  -141
  -149
  -156
  -164
New CAPEX, $m
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
Cash from investing activities, $m
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -100
  -105
  -110
  -116
  -122
  -128
  -134
  -142
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -220
  -232
  -243
  -255
Free cash flow, $m
  28
  35
  42
  50
  58
  66
  75
  84
  94
  104
  104
  115
  127
  139
  152
  166
  180
  195
  211
  228
  245
  264
  283
  304
  326
  348
  372
  398
  424
  453
Issuance/(repayment) of debt, $m
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
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
Cash from financing (excl. dividends), $m  
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
Total cash flow (excl. dividends), $m
  47
  55
  63
  72
  81
  90
  100
  110
  121
  132
  134
  146
  159
  173
  187
  202
  218
  235
  253
  272
  291
  312
  334
  357
  381
  407
  433
  462
  492
  523
Retained Cash Flow (-), $m
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
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
  36
  43
  51
  59
  67
  76
  85
  95
  105
  115
  116
  128
  140
  153
  167
  181
  196
  212
  228
  246
  264
  284
  304
  326
  348
  372
  397
  424
  452
  481
Discount rate, %
  6.20
  6.51
  6.84
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.04
  20.00
  21.00
  22.05
  23.15
  24.30
  25.52
PV of cash for distribution, $m
  34
  38
  42
  45
  47
  48
  49
  48
  48
  46
  40
  38
  36
  33
  29
  26
  23
  19
  16
  13
  11
  9
  7
  5
  4
  3
  2
  1
  1
  1
Current shareholders' claim on cash, %
  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

Alaska Communications Systems Group, Inc. is a fiber broadband and managed information technology (IT) services provider. The Company is focused primarily on business and wholesale customers in and out of Alaska. The Company also provides telecommunication services to consumers across Alaska. The Company's facilities-based communications network extends across Alaska and connects to the contiguous states through its undersea fiber optic cable systems and its usage rights on an undersea system. It serves customers in various areas, such as Business and Wholesale (broadband, voice and managed IT services); Consumer (broadband and voice services), and Other Services (including carrier termination, equipment sales, access services and support services receiving federal support funding). It provides voice and broadband services to residential customers. It provides voice and broadband origination and termination services to inter and intrastate carriers serving its retail customers.

FINANCIAL RATIOS  of  Alaska Communications Systems Group, Inc (ALSK)

Valuation Ratios
P/E Ratio 44.3
Price to Sales 0.4
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow -44.3
Growth Rates
Sales Growth Rate -2.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.5%
Cap. Spend. - 3 Yr. Gr. Rate -4.1%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 112.7%
Total Debt to Equity 113.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. 2.6%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1%
Return On Equity 1.3%
Return On Equity - 3 Yr. Avg. 2.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 55.1%
Gross Margin - 3 Yr. Avg. 49.8%
EBITDA Margin 22.9%
EBITDA Margin - 3 Yr. Avg. 24.4%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. 12.1%
Pre-Tax Margin 1.8%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 0.9%
Net Profit Margin - 3 Yr. Avg. 1.8%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 44.5%
Payout Ratio 0%

ALSK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALSK stock intrinsic value calculation we used $232 million for the last fiscal year's total revenue generated by Alaska Communications Systems Group, Inc. The default revenue input number comes from 0001 income statement of Alaska Communications Systems Group, 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 ALSK stock valuation model: a) initial revenue growth rate of 6.8% 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 6.2%, whose default value for ALSK is calculated based on our internal credit rating of Alaska Communications Systems Group, 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 Alaska Communications Systems Group, 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 ALSK stock the variable cost ratio is equal to 18.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $170 million in the base year in the intrinsic value calculation for ALSK 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 7.5% for Alaska Communications Systems Group, Inc.

Corporate tax rate of 27% is the nominal tax rate for Alaska Communications Systems Group, 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 ALSK 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 ALSK are equal to 159.3%.

Life of production assets of 10.9 years is the average useful life of capital assets used in Alaska Communications Systems Group, 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 ALSK is equal to 2.3%. 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 - $168.811 million for Alaska Communications Systems Group, 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 53.269 million for Alaska Communications Systems Group, 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 Alaska Communications Systems Group, Inc at the current share price and the inputted number of shares is $0.1 billion.

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