Intrinsic value of Alaska Communications Systems Group - ALSK

Previous Close

$1.50

  Intrinsic Value

$0.72

stock screener

  Rating & Target

str. sell

-52%

Previous close

$1.50

 
Intrinsic value

$0.72

 
Up/down potential

-52%

 
Rating

str. sell

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, %
  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
  231
  237
  243
  250
  257
  266
  275
  284
  295
  306
  318
  331
  345
  360
  375
  392
  409
  427
  447
  467
  489
  512
  536
  561
  588
  616
  646
  677
  710
  744
Variable operating expenses, $m
  211
  216
  221
  228
  235
  242
  250
  259
  269
  279
  290
  302
  315
  328
  342
  357
  373
  390
  408
  426
  446
  467
  489
  512
  536
  562
  589
  617
  647
  679
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
  211
  216
  221
  228
  235
  242
  250
  259
  269
  279
  290
  302
  315
  328
  342
  357
  373
  390
  408
  426
  446
  467
  489
  512
  536
  562
  589
  617
  647
  679
Operating income, $m
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  65
EBITDA, $m
  57
  59
  60
  62
  64
  66
  68
  70
  73
  76
  79
  82
  86
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  184
Interest expense (income), $m
  13
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  50
  52
  55
  58
  61
  65
Earnings before tax, $m
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
Tax expense, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
Net income, $m
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  0

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
  451
  462
  473
  487
  501
  518
  535
  554
  575
  597
  621
  646
  673
  701
  731
  763
  797
  833
  871
  911
  953
  998
  1,045
  1,094
  1,146
  1,201
  1,259
  1,320
  1,384
  1,451
Adjusted assets (=assets-cash), $m
  451
  462
  473
  487
  501
  518
  535
  554
  575
  597
  621
  646
  673
  701
  731
  763
  797
  833
  871
  911
  953
  998
  1,045
  1,094
  1,146
  1,201
  1,259
  1,320
  1,384
  1,451
Revenue / Adjusted assets
  0.512
  0.513
  0.514
  0.513
  0.513
  0.514
  0.514
  0.513
  0.513
  0.513
  0.512
  0.512
  0.513
  0.514
  0.513
  0.514
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
Average production assets, $m
  374
  382
  392
  403
  415
  429
  443
  459
  476
  494
  514
  535
  557
  581
  606
  632
  660
  690
  721
  754
  789
  826
  865
  906
  949
  995
  1,042
  1,093
  1,146
  1,201
Working capital, $m
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
Total debt, $m
  191
  198
  206
  215
  224
  235
  246
  259
  272
  287
  302
  318
  336
  355
  374
  395
  417
  441
  466
  492
  519
  548
  579
  611
  645
  681
  719
  759
  800
  844
Total liabilities, $m
  295
  301
  309
  318
  327
  338
  350
  362
  375
  390
  405
  422
  439
  458
  478
  498
  521
  544
  569
  595
  623
  652
  682
  715
  749
  784
  822
  862
  904
  947
Total equity, $m
  157
  160
  164
  169
  174
  180
  186
  192
  200
  207
  215
  224
  233
  243
  254
  265
  277
  289
  302
  316
  331
  346
  363
  380
  398
  417
  437
  458
  480
  503
Total liabilities and equity, $m
  452
  461
  473
  487
  501
  518
  536
  554
  575
  597
  620
  646
  672
  701
  732
  763
  798
  833
  871
  911
  954
  998
  1,045
  1,095
  1,147
  1,201
  1,259
  1,320
  1,384
  1,450
Debt-to-equity ratio
  1.220
  1.240
  1.250
  1.270
  1.290
  1.310
  1.330
  1.340
  1.360
  1.380
  1.400
  1.420
  1.440
  1.460
  1.470
  1.490
  1.510
  1.520
  1.540
  1.560
  1.570
  1.580
  1.600
  1.610
  1.620
  1.630
  1.650
  1.660
  1.670
  1.680
Adjusted equity ratio
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  0
Depreciation, amort., depletion, $m
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  63
  65
  68
  71
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  119
Funds from operations, $m
  41
  42
  43
  44
  45
  46
  48
  49
  51
  53
  54
  56
  58
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  104
  109
  114
  119
Change in working capital, $m
  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
  1
  1
Cash from operations, $m
  41
  42
  43
  44
  45
  46
  47
  49
  51
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  83
  87
  91
  95
  99
  104
  108
  113
  119
Maintenance CAPEX, $m
  -36
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -63
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
New CAPEX, $m
  -7
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
Cash from investing activities, $m
  -43
  -46
  -48
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -69
  -72
  -75
  -79
  -82
  -87
  -91
  -95
  -99
  -104
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -153
  -161
  -169
Free cash flow, $m
  -3
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
Issuance/(repayment) of debt, $m
  5
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
Issuance/(repurchase) of shares, $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
Cash from financing (excl. dividends), $m  
  5
  7
  8
  10
  11
  13
  14
  15
  16
  18
  20
  21
  24
  26
  27
  29
  31
  33
  36
  37
  40
  42
  45
  47
  50
  54
  57
  60
  63
  67
Total cash flow (excl. dividends), $m
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
Retained Cash Flow (-), $m
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
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
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Discount rate, %
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  99.8
  99.1
  98.1
  96.6
  94.9
  92.8
  90.4
  87.9
  85.1
  82.2
  79.2
  76.1
  73.0
  69.8
  66.6
  63.4
  60.3
  57.2
  54.2
  51.3
  48.4
  45.7
  43.0
  40.4
  38.0
  35.6
  33.4
  31.3

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 (ALSK)

Valuation Ratios
P/E Ratio 38.6
Price to Sales 0.3
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 2.1
Price to Free Cash Flow -38.6
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 $226.905 million for the last fiscal year's total revenue generated by Alaska Communications Systems Group. The default revenue input number comes from 0001 income statement of Alaska Communications Systems 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 ALSK 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 7.9%, whose default value for ALSK is calculated based on our internal credit rating of Alaska Communications Systems 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 Alaska Communications Systems 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 ALSK stock the variable cost ratio is equal to 91.2%.

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 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 8.1% for Alaska Communications Systems Group.

Corporate tax rate of 27% is the nominal tax rate for Alaska Communications Systems 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 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 161.4%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Alaska Communications Systems 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 ALSK is equal to 2.4%. 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 - $153.519 million for Alaska Communications Systems 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 53.184 million for Alaska Communications Systems 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 Alaska Communications Systems Group at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Alaska Communications: 3Q Earnings Snapshot   [Nov-05-18 07:16PM  Associated Press]
▶ Alaska Communications Comments on Letter from 22NW Fund, LP   [Oct-05-18 08:56PM  Business Wire]
▶ Alaska Communications: 2Q Earnings Snapshot   [Aug-06-18 05:16PM  Associated Press]
▶ Alaska Communications: 1Q Earnings Snapshot   [May-10-18 05:03AM  Associated Press]
▶ Alaska Communications Reaches Agreement with TAR Holdings   [May-09-18 05:15PM  Business Wire]
▶ Alaska Communications reports 4Q loss   [Mar-16-18 05:17PM  Associated Press]
▶ Alaska Communications posts 3Q profit   [08:13AM  Associated Press]
▶ Alaska Communications reports 2Q loss   [Aug-04-17 12:55AM  Associated Press]
▶ 9 Stocks Charles Brandes Continues to Buy   [03:13PM  GuruFocus.com]
▶ Alaska Communications reports 1Q loss   [08:27AM  Associated Press]
▶ Alaska Communications posts 4Q profit   [09:14AM  Associated Press]

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