Intrinsic value of AMERISAFE - AMSF

Previous Close

$61.25

  Intrinsic Value

$10.28

stock screener

  Rating & Target

str. sell

-83%

Previous close

$61.25

 
Intrinsic value

$10.28

 
Up/down potential

-83%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as AMSF.

We calculate the intrinsic value of AMSF 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 1.2

 

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, %
  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
  383
  391
  401
  413
  425
  439
  454
  470
  487
  506
  526
  548
  570
  594
  620
  647
  676
  706
  739
  772
  808
  846
  886
  928
  972
  1,018
  1,067
  1,119
  1,173
  1,230
Variable operating expenses, $m
  273
  279
  286
  294
  303
  313
  323
  334
  347
  360
  369
  384
  400
  416
  434
  453
  474
  495
  517
  541
  566
  593
  621
  650
  681
  714
  748
  784
  822
  862
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
  273
  279
  286
  294
  303
  313
  323
  334
  347
  360
  369
  384
  400
  416
  434
  453
  474
  495
  517
  541
  566
  593
  621
  650
  681
  714
  748
  784
  822
  862
Operating income, $m
  109
  112
  115
  119
  122
  126
  131
  136
  141
  147
  157
  164
  171
  178
  186
  194
  202
  211
  221
  231
  242
  253
  265
  278
  291
  305
  320
  335
  351
  368
EBITDA, $m
  274
  280
  287
  296
  305
  314
  325
  337
  349
  363
  377
  392
  408
  426
  444
  464
  484
  506
  529
  553
  579
  606
  634
  665
  696
  729
  765
  801
  840
  881
Interest expense (income), $m
  0
  61
  61
  61
  61
  61
  61
  61
  61
  61
  61
  62
  62
  62
  62
  62
  62
  62
  63
  63
  63
  63
  63
  64
  64
  64
  65
  65
  65
  65
  66
Earnings before tax, $m
  48
  51
  54
  58
  61
  65
  70
  74
  80
  85
  96
  102
  109
  116
  123
  131
  140
  149
  158
  168
  179
  190
  201
  214
  227
  240
  255
  270
  286
  302
Tax expense, $m
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  26
  28
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  82
Net income, $m
  35
  37
  40
  42
  45
  48
  51
  54
  58
  62
  70
  75
  79
  85
  90
  96
  102
  109
  116
  123
  130
  139
  147
  156
  165
  175
  186
  197
  209
  221

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
  49
  50
  52
  53
  55
  57
  58
  61
  63
  65
  68
  71
  74
  77
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  125
  131
  138
  144
  151
  159
Adjusted assets (=assets-cash), $m
  49
  50
  52
  53
  55
  57
  58
  61
  63
  65
  68
  71
  74
  77
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  125
  131
  138
  144
  151
  159
Revenue / Adjusted assets
  7.816
  7.820
  7.712
  7.792
  7.727
  7.702
  7.828
  7.705
  7.730
  7.785
  7.735
  7.718
  7.703
  7.714
  7.750
  7.795
  7.770
  7.758
  7.779
  7.720
  7.769
  7.761
  7.772
  7.733
  7.776
  7.771
  7.732
  7.771
  7.768
  7.736
Average production assets, $m
  1,595
  1,631
  1,673
  1,720
  1,772
  1,830
  1,892
  1,959
  2,032
  2,110
  2,194
  2,283
  2,377
  2,478
  2,585
  2,698
  2,818
  2,945
  3,079
  3,220
  3,370
  3,527
  3,693
  3,868
  4,052
  4,246
  4,450
  4,665
  4,891
  5,128
Working capital, $m
  -1,114
  -1,140
  -1,169
  -1,202
  -1,238
  -1,278
  -1,322
  -1,369
  -1,420
  -1,474
  -1,533
  -1,595
  -1,661
  -1,732
  -1,806
  -1,885
  -1,969
  -2,058
  -2,151
  -2,250
  -2,355
  -2,465
  -2,580
  -2,703
  -2,831
  -2,967
  -3,109
  -3,259
  -3,417
  -3,583
Total debt, $m
  1,126
  1,127
  1,129
  1,130
  1,131
  1,133
  1,135
  1,136
  1,138
  1,141
  1,143
  1,145
  1,148
  1,151
  1,154
  1,157
  1,160
  1,164
  1,168
  1,172
  1,176
  1,180
  1,185
  1,190
  1,195
  1,200
  1,206
  1,212
  1,218
  1,225
Total liabilities, $m
  44
  45
  47
  48
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
Total equity, $m
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
Total liabilities and equity, $m
  49
  50
  52
  53
  54
  57
  59
  61
  63
  66
  68
  71
  73
  77
  80
  83
  87
  91
  96
  100
  104
  109
  114
  120
  126
  131
  138
  144
  151
  159
Debt-to-equity ratio
  228.440
  223.510
  218.140
  212.410
  206.430
  200.250
  193.960
  187.590
  181.200
  174.840
  168.530
  162.310
  156.200
  150.210
  144.370
  138.690
  133.170
  127.820
  122.650
  117.660
  112.850
  108.210
  103.750
  99.470
  95.360
  91.420
  87.640
  84.020
  80.550
  77.240
Adjusted equity ratio
  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
  35
  37
  40
  42
  45
  48
  51
  54
  58
  62
  70
  75
  79
  85
  90
  96
  102
  109
  116
  123
  130
  139
  147
  156
  165
  175
  186
  197
  209
  221
Depreciation, amort., depletion, $m
  164
  168
  172
  177
  182
  188
  194
  201
  208
  216
  219
  228
  238
  248
  258
  270
  282
  295
  308
  322
  337
  353
  369
  387
  405
  425
  445
  466
  489
  513
Funds from operations, $m
  200
  206
  212
  219
  227
  236
  245
  255
  266
  278
  289
  303
  317
  332
  349
  366
  384
  403
  423
  445
  467
  491
  516
  543
  571
  600
  631
  663
  698
  734
Change in working capital, $m
  -22
  -26
  -29
  -33
  -36
  -40
  -44
  -47
  -51
  -54
  -58
  -62
  -66
  -70
  -75
  -79
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -129
  -135
  -143
  -150
  -158
  -166
Cash from operations, $m
  222
  231
  241
  252
  263
  276
  289
  302
  317
  333
  348
  365
  383
  403
  423
  445
  468
  492
  517
  544
  572
  601
  632
  665
  699
  736
  774
  813
  855
  900
Maintenance CAPEX, $m
  -156
  -159
  -163
  -167
  -172
  -177
  -183
  -189
  -196
  -203
  -211
  -219
  -228
  -238
  -248
  -258
  -270
  -282
  -295
  -308
  -322
  -337
  -353
  -369
  -387
  -405
  -425
  -445
  -466
  -489
New CAPEX, $m
  -30
  -37
  -42
  -47
  -52
  -57
  -62
  -67
  -73
  -78
  -83
  -89
  -95
  -101
  -107
  -113
  -120
  -127
  -134
  -141
  -149
  -157
  -166
  -175
  -184
  -194
  -204
  -215
  -226
  -238
Cash from investing activities, $m
  -186
  -196
  -205
  -214
  -224
  -234
  -245
  -256
  -269
  -281
  -294
  -308
  -323
  -339
  -355
  -371
  -390
  -409
  -429
  -449
  -471
  -494
  -519
  -544
  -571
  -599
  -629
  -660
  -692
  -727
Free cash flow, $m
  35
  35
  36
  38
  39
  41
  43
  46
  48
  51
  53
  57
  60
  64
  69
  73
  78
  83
  89
  94
  100
  107
  114
  121
  128
  136
  145
  154
  163
  173
Issuance/(repayment) of debt, $m
  -4
  1
  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
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  
  -4
  1
  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
Total cash flow (excl. dividends), $m
  31
  36
  37
  39
  41
  43
  45
  48
  50
  54
  56
  59
  63
  67
  72
  76
  81
  87
  92
  98
  105
  111
  118
  126
  134
  142
  151
  160
  169
  180
Retained Cash Flow (-), $m
  -5
  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
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
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash available for distribution, $m
  26
  36
  37
  39
  41
  43
  45
  47
  50
  53
  55
  59
  63
  67
  71
  76
  81
  86
  92
  98
  104
  111
  118
  125
  133
  141
  150
  159
  169
  179
Discount rate, %
  13.80
  14.49
  15.21
  15.98
  16.77
  17.61
  18.49
  19.42
  20.39
  21.41
  22.48
  23.60
  24.78
  26.02
  27.32
  28.69
  30.12
  31.63
  33.21
  34.87
  36.62
  38.45
  40.37
  42.39
  44.51
  46.73
  49.07
  51.52
  54.10
  56.80
PV of cash for distribution, $m
  23
  27
  24
  21
  19
  16
  14
  11
  9
  8
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
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Amerisafe, Inc. is an insurance holding company. The Company is engaged in providing workers' compensation insurance focused on small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, manufacturing, and agriculture. It is engaged in underwriting the workers' compensation exposures inherent in these industries. It provides coverage to employers under state and federal workers' compensation laws. The Company's workers' compensation insurance policies provide benefits to injured employees for, temporary or permanent disability, death and medical and hospital expenses. The Company provides safety services at employers' workplaces as a component of its underwriting process. It utilizes claims management practices. In addition to its voluntary workers' compensation business, it underwrites workers' compensation policies for employers assigned to the Company and assumes reinsurance premiums from mandatory pooling arrangements.

FINANCIAL RATIOS  of  AMERISAFE (AMSF)

Valuation Ratios
P/E Ratio 15.1
Price to Sales 3
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 10.3
Price to Free Cash Flow 10.5
Growth Rates
Sales Growth Rate -1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 17.1%
Ret/ On T. Cap. - 3 Yr. Avg. 15.1%
Return On Equity 17.1%
Return On Equity - 3 Yr. Avg. 15.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 28.7%
EBITDA Margin - 3 Yr. Avg. 24.2%
Operating Margin 28.5%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin 28.5%
Pre-Tax Margin - 3 Yr. Avg. 24%
Net Profit Margin 19.6%
Net Profit Margin - 3 Yr. Avg. 16.8%
Effective Tax Rate 31%
Eff/ Tax Rate - 3 Yr. Avg. 29.6%
Payout Ratio 97.4%

AMSF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMSF stock intrinsic value calculation we used $375 million for the last fiscal year's total revenue generated by AMERISAFE. The default revenue input number comes from 2017 income statement of AMERISAFE. 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 AMSF 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 13.8%, whose default value for AMSF is calculated based on our internal credit rating of AMERISAFE, 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 AMERISAFE.
    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 AMSF stock the variable cost ratio is equal to 71.4%.

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 AMSF 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 5.4% for AMERISAFE.

Corporate tax rate of 27% is the nominal tax rate for AMERISAFE. 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 AMSF stock is equal to 0.5%.

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 AMSF are equal to 416.9%.

Life of production assets of 10 years is the average useful life of capital assets used in AMERISAFE 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 AMSF is equal to -291.3%. 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 - $0 million for AMERISAFE - 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 19 million for AMERISAFE 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 AMERISAFE at the current share price and the inputted number of shares is $1.2 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ AMERISAFE, Inc. to Host Earnings Call   [09:20AM  ACCESSWIRE]
▶ Amerisafe: 1Q Earnings Snapshot   [Apr-25-18 06:19PM  Associated Press]
▶ Should You Get Rid of Amerisafe (AMSF) Now?   [Mar-27-18 08:49AM  Zacks]
▶ New Strong Sell Stocks for March 6th   [Mar-06-18 08:26AM  Zacks]
▶ AMERISAFE, Inc. to Host Earnings Call   [09:00AM  ACCESSWIRE]
▶ Amerisafe misses 4Q profit forecasts   [05:00AM  Associated Press]
▶ ETFs with exposure to AMERISAFE, Inc. : November 29, 2017   [Nov-29-17 10:57AM  Capital Cube]
▶ ETFs with exposure to AMERISAFE, Inc. : November 16, 2017   [Nov-16-17 11:09AM  Capital Cube]
▶ ETFs with exposure to AMERISAFE, Inc. : November 2, 2017   [Nov-02-17 11:43AM  Capital Cube]
▶ Amerisafe beats 3Q profit forecasts   [Oct-25-17 07:55PM  Associated Press]
▶ AMERISAFE to Present at KBW 2017 Insurance Conference   [Aug-30-17 08:00AM  GlobeNewswire]
▶ Amerisafe posts 2Q profit   [Jul-28-17 08:04PM  Associated Press]
▶ AMERISAFE Announces 2017 Second Quarter Results   [Jul-27-17 04:30PM  GlobeNewswire]
▶ New Strong Sell Stocks for June 1st   [Jun-01-17 10:47AM  Zacks]
▶ What Makes Amerisafe (AMSF) a Strong Sell?   [May-09-17 08:43AM  Zacks]
▶ Amerisafe posts 1Q profit   [Apr-26-17 06:02PM  Associated Press]
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