Intrinsic value of American Public Education - APEI

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$31.15

  Intrinsic Value

$29.29

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  Rating & Target

hold

-6%

Previous close

$31.15

 
Intrinsic value

$29.29

 
Up/down potential

-6%

 
Rating

hold

We calculate the intrinsic value of APEI 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 0.5

 

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
  305
  312
  320
  329
  339
  350
  362
  375
  389
  404
  420
  437
  455
  474
  495
  516
  539
  564
  589
  616
  645
  675
  707
  740
  776
  813
  852
  893
  936
  982
Variable operating expenses, $m
  225
  231
  236
  243
  250
  258
  267
  276
  286
  297
  306
  318
  331
  345
  360
  376
  393
  410
  429
  449
  469
  491
  514
  539
  564
  591
  620
  650
  681
  714
Fixed operating expenses, $m
  45
  46
  47
  48
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  69
  71
  73
  74
  76
  77
  79
  81
  83
  85
Total operating expenses, $m
  270
  277
  283
  291
  299
  308
  318
  328
  340
  352
  362
  375
  389
  405
  421
  438
  457
  475
  496
  517
  538
  562
  587
  613
  640
  668
  699
  731
  764
  799
Operating income, $m
  35
  36
  37
  38
  40
  42
  44
  46
  49
  52
  58
  62
  66
  70
  74
  78
  83
  88
  94
  100
  106
  113
  120
  127
  135
  144
  153
  162
  172
  183
EBITDA, $m
  55
  56
  58
  60
  62
  64
  67
  70
  74
  77
  81
  86
  90
  95
  101
  106
  113
  119
  126
  133
  141
  150
  158
  168
  178
  188
  199
  211
  223
  236
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
Earnings before tax, $m
  35
  36
  37
  38
  40
  41
  44
  46
  48
  51
  58
  61
  64
  68
  72
  77
  81
  86
  92
  97
  103
  110
  117
  124
  131
  140
  148
  157
  167
  177
Tax expense, $m
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  16
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  38
  40
  42
  45
  48
Net income, $m
  25
  26
  27
  28
  29
  30
  32
  33
  35
  37
  42
  44
  47
  50
  53
  56
  59
  63
  67
  71
  75
  80
  85
  90
  96
  102
  108
  115
  122
  129

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
  207
  212
  218
  224
  230
  238
  246
  255
  264
  274
  285
  297
  309
  322
  336
  351
  366
  383
  400
  419
  438
  459
  480
  503
  527
  552
  579
  607
  636
  667
Adjusted assets (=assets-cash), $m
  207
  212
  218
  224
  230
  238
  246
  255
  264
  274
  285
  297
  309
  322
  336
  351
  366
  383
  400
  419
  438
  459
  480
  503
  527
  552
  579
  607
  636
  667
Revenue / Adjusted assets
  1.473
  1.472
  1.468
  1.469
  1.474
  1.471
  1.472
  1.471
  1.473
  1.474
  1.474
  1.471
  1.472
  1.472
  1.473
  1.470
  1.473
  1.473
  1.473
  1.470
  1.473
  1.471
  1.473
  1.471
  1.472
  1.473
  1.472
  1.471
  1.472
  1.472
Average production assets, $m
  114
  117
  120
  123
  127
  131
  136
  141
  146
  151
  157
  164
  171
  178
  186
  194
  202
  211
  221
  231
  242
  253
  265
  278
  291
  305
  319
  335
  351
  368
Working capital, $m
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
Total debt, $m
  1
  2
  3
  5
  7
  8
  10
  13
  15
  17
  20
  23
  26
  29
  32
  36
  40
  44
  48
  53
  57
  62
  68
  73
  79
  85
  92
  98
  106
  113
Total liabilities, $m
  51
  52
  53
  55
  56
  58
  60
  62
  64
  67
  70
  72
  75
  79
  82
  86
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
Total equity, $m
  157
  160
  164
  169
  174
  180
  186
  193
  200
  207
  216
  224
  234
  244
  254
  265
  277
  290
  303
  317
  331
  347
  363
  380
  398
  417
  437
  459
  481
  504
Total liabilities and equity, $m
  208
  212
  217
  224
  230
  238
  246
  255
  264
  274
  286
  296
  309
  323
  336
  351
  366
  383
  401
  419
  438
  459
  480
  503
  527
  552
  578
  607
  636
  667
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
Adjusted equity ratio
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  26
  27
  28
  29
  30
  32
  33
  35
  37
  42
  44
  47
  50
  53
  56
  59
  63
  67
  71
  75
  80
  85
  90
  96
  102
  108
  115
  122
  129
Depreciation, amort., depletion, $m
  20
  20
  21
  21
  22
  22
  23
  24
  25
  25
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  49
  51
  53
Funds from operations, $m
  45
  46
  48
  49
  51
  53
  55
  57
  60
  63
  65
  68
  72
  76
  80
  84
  89
  94
  99
  105
  110
  117
  124
  131
  138
  146
  154
  163
  173
  183
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
Cash from operations, $m
  46
  47
  48
  50
  52
  54
  56
  59
  61
  64
  66
  70
  74
  78
  82
  86
  91
  96
  102
  107
  113
  120
  127
  134
  142
  150
  159
  168
  177
  187
Maintenance CAPEX, $m
  -16
  -17
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
New CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Cash from investing activities, $m
  -18
  -20
  -20
  -20
  -22
  -22
  -23
  -25
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -41
  -42
  -45
  -46
  -49
  -51
  -53
  -56
  -59
  -61
  -65
  -68
Free cash flow, $m
  27
  28
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  46
  48
  51
  54
  58
  61
  65
  69
  74
  78
  83
  88
  94
  100
  106
  113
  119
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
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  
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
Total cash flow (excl. dividends), $m
  28
  29
  30
  31
  32
  33
  35
  36
  38
  40
  41
  44
  46
  49
  52
  55
  58
  62
  66
  70
  74
  79
  84
  89
  94
  100
  106
  113
  120
  127
Retained Cash Flow (-), $m
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Prev. year cash balance distribution, $m
  136
  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
  161
  25
  26
  26
  27
  28
  28
  30
  31
  32
  33
  35
  37
  39
  41
  44
  46
  49
  52
  56
  59
  63
  67
  72
  76
  81
  86
  92
  97
  104
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
  154
  23
  22
  22
  21
  20
  19
  18
  18
  17
  16
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  4
  3
  2
  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

American Public Education, Inc. provides online and on-campus postsecondary education. The Company provides postsecondary education through its subsidiary institutions, American Public University System, Inc. (APUS) and Hondros College of Nursing (HCON). It operates through two segments: American Public Education Segment, which consists of the operational activities of APUS, other corporate activities, and minority investments, and Hondros College of Nursing Segment, which consists of the operational activities of HCON. APUS provides online postsecondary education to approximately 88,700 adult learners serving the needs of the military and public safety communities as of December 31, 2016. As of December 31, 2016, HCON provided nursing education to approximately 1,300 students across five campuses in the State of Ohio, as well as online. It offers a Diploma in Practical Nursing and an Associate Degree in Nursing. As of December 31, 2016, the Company had approximately 90,000 students.

FINANCIAL RATIOS  of  American Public Education (APEI)

Valuation Ratios
P/E Ratio 20.9
Price to Sales 1.6
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 12.5
Growth Rates
Sales Growth Rate -4.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40.7%
Cap. Spend. - 3 Yr. Gr. Rate -5.3%
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 7.8%
Ret/ On Assets - 3 Yr. Avg. 11%
Return On Total Capital 9.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.9%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 1
Profitability Ratios
Gross Margin 62.6%
Gross Margin - 3 Yr. Avg. 63.6%
EBITDA Margin 18.2%
EBITDA Margin - 3 Yr. Avg. 21.3%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 15.6%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 39.5%
Eff/ Tax Rate - 3 Yr. Avg. 38.6%
Payout Ratio 0%

APEI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APEI stock intrinsic value calculation we used $299.248 million for the last fiscal year's total revenue generated by American Public Education. The default revenue input number comes from 0001 income statement of American Public Education. 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 APEI 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 APEI is calculated based on our internal credit rating of American Public Education, 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 American Public Education.
    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 APEI stock the variable cost ratio is equal to 73.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $44 million in the base year in the intrinsic value calculation for APEI 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 American Public Education.

Corporate tax rate of 27% is the nominal tax rate for American Public Education. 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 APEI 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 APEI are equal to 37.5%.

Life of production assets of 6.9 years is the average useful life of capital assets used in American Public Education 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 APEI is equal to -10.5%. 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 - $289.406 million for American Public Education - 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 16.424 million for American Public Education 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 American Public Education at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ American Public Education: 2Q Earnings Snapshot   [04:53PM  Associated Press]
▶ American Public Education: 1Q Earnings Snapshot   [May-08-18 07:19PM  Associated Press]
▶ New Strong Buy Stocks for March 5th   [Mar-05-18 09:49AM  Zacks]
▶ American Public Education posts 4Q profit   [05:03AM  Associated Press]
▶ Top Ranked Value Stocks to Buy for January 22nd   [Jan-22-18 10:05AM  Zacks]
▶ New Strong Buy Stocks for November 13th   [Nov-13-17 10:04AM  Zacks]
▶ Closing Bell Ringer: November 8, 2017   [Nov-08-17 04:00PM  CNBC Videos]
▶ American Public Education posts 3Q profit   [Nov-07-17 05:09PM  Associated Press]
▶ New Strong Sell Stocks for October 5th   [Oct-05-17 08:18AM  Zacks]
▶ New Strong Sell Stocks for September 18th   [Sep-18-17 07:51AM  Zacks]
▶ New Strong Sell Stocks for September 12th   [Sep-12-17 08:22AM  Zacks]

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