Intrinsic value of Air Transport Services Group, Inc - ATSG

Previous Close

$20.40

  Intrinsic Value

$20.05

stock screener

  Rating & Target

hold

-2%

Previous close

$20.40

 
Intrinsic value

$20.05

 
Up/down potential

-2%

 
Rating

hold

We calculate the intrinsic value of ATSG 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 1.2

 

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
  910
  931
  955
  982
  1,011
  1,044
  1,080
  1,118
  1,159
  1,204
  1,252
  1,302
  1,356
  1,414
  1,475
  1,540
  1,608
  1,680
  1,757
  1,837
  1,923
  2,012
  2,107
  2,207
  2,312
  2,423
  2,539
  2,662
  2,790
  2,926
Variable operating expenses, $m
  822
  837
  855
  875
  896
  920
  946
  975
  1,005
  1,038
  917
  954
  994
  1,036
  1,081
  1,128
  1,178
  1,231
  1,287
  1,346
  1,409
  1,474
  1,544
  1,617
  1,694
  1,775
  1,860
  1,950
  2,044
  2,144
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
  822
  837
  855
  875
  896
  920
  946
  975
  1,005
  1,038
  917
  954
  994
  1,036
  1,081
  1,128
  1,178
  1,231
  1,287
  1,346
  1,409
  1,474
  1,544
  1,617
  1,694
  1,775
  1,860
  1,950
  2,044
  2,144
Operating income, $m
  88
  93
  100
  107
  115
  124
  133
  143
  154
  166
  335
  348
  363
  378
  394
  412
  430
  449
  470
  491
  514
  538
  563
  590
  618
  648
  679
  712
  746
  782
EBITDA, $m
  432
  442
  454
  466
  481
  496
  513
  531
  551
  572
  595
  619
  645
  672
  701
  732
  764
  799
  835
  873
  914
  956
  1,001
  1,049
  1,099
  1,151
  1,207
  1,265
  1,326
  1,391
Interest expense (income), $m
  11
  76
  78
  80
  83
  87
  90
  94
  99
  103
  109
  114
  120
  126
  133
  140
  147
  155
  164
  173
  182
  192
  203
  214
  225
  238
  250
  264
  278
  293
  309
Earnings before tax, $m
  12
  15
  19
  24
  28
  33
  39
  45
  51
  58
  221
  228
  236
  245
  254
  264
  274
  285
  297
  309
  322
  335
  350
  365
  381
  397
  415
  433
  452
  473
Tax expense, $m
  3
  4
  5
  6
  8
  9
  10
  12
  14
  16
  60
  62
  64
  66
  69
  71
  74
  77
  80
  83
  87
  91
  94
  98
  103
  107
  112
  117
  122
  128
Net income, $m
  9
  11
  14
  17
  21
  24
  28
  33
  37
  42
  161
  167
  173
  179
  186
  193
  200
  208
  217
  226
  235
  245
  255
  266
  278
  290
  303
  316
  330
  345

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
  2,520
  2,578
  2,645
  2,719
  2,801
  2,892
  2,990
  3,097
  3,212
  3,335
  3,467
  3,608
  3,757
  3,917
  4,086
  4,265
  4,454
  4,655
  4,866
  5,090
  5,326
  5,575
  5,837
  6,113
  6,404
  6,711
  7,033
  7,373
  7,730
  8,105
Adjusted assets (=assets-cash), $m
  2,520
  2,578
  2,645
  2,719
  2,801
  2,892
  2,990
  3,097
  3,212
  3,335
  3,467
  3,608
  3,757
  3,917
  4,086
  4,265
  4,454
  4,655
  4,866
  5,090
  5,326
  5,575
  5,837
  6,113
  6,404
  6,711
  7,033
  7,373
  7,730
  8,105
Revenue / Adjusted assets
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
Average production assets, $m
  1,532
  1,567
  1,608
  1,653
  1,703
  1,758
  1,818
  1,883
  1,953
  2,027
  2,108
  2,193
  2,284
  2,381
  2,484
  2,593
  2,708
  2,830
  2,958
  3,094
  3,238
  3,389
  3,548
  3,716
  3,893
  4,080
  4,276
  4,482
  4,699
  4,927
Working capital, $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 debt, $m
  1,441
  1,489
  1,544
  1,605
  1,673
  1,747
  1,828
  1,916
  2,010
  2,112
  2,220
  2,336
  2,459
  2,590
  2,730
  2,877
  3,033
  3,198
  3,372
  3,556
  3,750
  3,955
  4,171
  4,398
  4,638
  4,890
  5,155
  5,435
  5,729
  6,038
Total liabilities, $m
  2,074
  2,122
  2,176
  2,238
  2,306
  2,380
  2,461
  2,549
  2,643
  2,745
  2,853
  2,969
  3,092
  3,223
  3,362
  3,510
  3,666
  3,831
  4,005
  4,189
  4,383
  4,588
  4,804
  5,031
  5,271
  5,523
  5,788
  6,068
  6,362
  6,671
Total equity, $m
  446
  456
  468
  481
  496
  512
  529
  548
  568
  590
  614
  639
  665
  693
  723
  755
  788
  824
  861
  901
  943
  987
  1,033
  1,082
  1,134
  1,188
  1,245
  1,305
  1,368
  1,435
Total liabilities and equity, $m
  2,520
  2,578
  2,644
  2,719
  2,802
  2,892
  2,990
  3,097
  3,211
  3,335
  3,467
  3,608
  3,757
  3,916
  4,085
  4,265
  4,454
  4,655
  4,866
  5,090
  5,326
  5,575
  5,837
  6,113
  6,405
  6,711
  7,033
  7,373
  7,730
  8,106
Debt-to-equity ratio
  3.230
  3.260
  3.300
  3.330
  3.370
  3.410
  3.450
  3.500
  3.540
  3.580
  3.620
  3.660
  3.700
  3.740
  3.770
  3.810
  3.850
  3.880
  3.910
  3.950
  3.980
  4.010
  4.040
  4.060
  4.090
  4.120
  4.140
  4.160
  4.190
  4.210
Adjusted equity ratio
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  11
  14
  17
  21
  24
  28
  33
  37
  42
  161
  167
  173
  179
  186
  193
  200
  208
  217
  226
  235
  245
  255
  266
  278
  290
  303
  316
  330
  345
Depreciation, amort., depletion, $m
  345
  349
  354
  360
  366
  373
  380
  388
  397
  406
  260
  271
  282
  294
  307
  320
  334
  349
  365
  382
  400
  418
  438
  459
  481
  504
  528
  553
  580
  608
Funds from operations, $m
  353
  360
  368
  377
  386
  397
  408
  421
  434
  448
  421
  437
  455
  473
  492
  513
  535
  558
  582
  608
  635
  663
  693
  725
  758
  794
  831
  870
  910
  954
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
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  353
  360
  368
  377
  386
  397
  408
  421
  434
  448
  421
  437
  455
  473
  492
  513
  535
  558
  582
  608
  635
  663
  693
  725
  758
  794
  831
  870
  910
  954
Maintenance CAPEX, $m
  -185
  -189
  -194
  -198
  -204
  -210
  -217
  -224
  -232
  -241
  -250
  -260
  -271
  -282
  -294
  -307
  -320
  -334
  -349
  -365
  -382
  -400
  -418
  -438
  -459
  -481
  -504
  -528
  -553
  -580
New CAPEX, $m
  -30
  -35
  -40
  -45
  -50
  -55
  -60
  -65
  -70
  -75
  -80
  -86
  -91
  -97
  -103
  -109
  -115
  -122
  -129
  -136
  -143
  -151
  -159
  -168
  -177
  -186
  -196
  -206
  -217
  -228
Cash from investing activities, $m
  -215
  -224
  -234
  -243
  -254
  -265
  -277
  -289
  -302
  -316
  -330
  -346
  -362
  -379
  -397
  -416
  -435
  -456
  -478
  -501
  -525
  -551
  -577
  -606
  -636
  -667
  -700
  -734
  -770
  -808
Free cash flow, $m
  138
  136
  134
  133
  132
  132
  131
  131
  132
  132
  91
  92
  93
  94
  96
  97
  99
  102
  104
  107
  109
  112
  116
  119
  123
  127
  131
  135
  140
  145
Issuance/(repayment) of debt, $m
  40
  48
  55
  61
  68
  74
  81
  88
  95
  101
  109
  116
  123
  131
  139
  147
  156
  165
  174
  184
  194
  205
  216
  227
  240
  252
  265
  279
  294
  309
Issuance/(repurchase) of shares, $m
  1
  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  
  41
  48
  55
  61
  68
  74
  81
  88
  95
  101
  109
  116
  123
  131
  139
  147
  156
  165
  174
  184
  194
  205
  216
  227
  240
  252
  265
  279
  294
  309
Total cash flow (excl. dividends), $m
  179
  184
  189
  194
  200
  206
  212
  219
  226
  233
  199
  207
  216
  225
  235
  245
  255
  267
  278
  291
  303
  317
  331
  346
  362
  379
  396
  415
  434
  454
Retained Cash Flow (-), $m
  -10
  -10
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -35
  -37
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -63
  -66
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
  170
  173
  177
  181
  185
  190
  195
  200
  206
  212
  176
  183
  190
  197
  205
  213
  222
  231
  241
  251
  262
  273
  285
  298
  311
  325
  339
  355
  371
  388
Discount rate, %
  9.60
  10.08
  10.58
  11.11
  11.67
  12.25
  12.86
  13.51
  14.18
  14.89
  15.64
  16.42
  17.24
  18.10
  19.01
  19.96
  20.96
  22.00
  23.10
  24.26
  25.47
  26.75
  28.08
  29.49
  30.96
  32.51
  34.13
  35.84
  37.63
  39.51
PV of cash for distribution, $m
  155
  143
  131
  119
  107
  95
  84
  73
  62
  53
  36
  29
  24
  19
  15
  12
  9
  6
  5
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9

Air Transport Services Group, Inc. (ATSG) is a holding company. The Company provides airline operations, aircraft leases, aircraft maintenance and other support services primarily to the cargo transportation and package delivery industries. It offers aircraft, crew, maintenance and insurance (ACMI) for specified cargo operations. Its segments include ACMI Services and CAM. Through its subsidiaries, it offers a range of complementary services to delivery companies, freight forwarders, airlines and government customers. Its leasing subsidiary, Cargo Aircraft Management, Inc. (CAM) leases cargo aircraft to its airlines, as well as to non-affiliated airlines and other lessees. Airborne Global Solutions, Inc. (AGS) is its subsidiary that assists the Company's businesses in marketing plans and provides sales leads to its subsidiaries by identifying customers' business and operational requirements. It owns two airlines, ABX Air, Inc. (ABX) and Air Transport International, Inc. (ATI).

FINANCIAL RATIOS  of  Air Transport Services Group, Inc (ATSG)

Valuation Ratios
P/E Ratio 52.7
Price to Sales 1.6
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow -17.1
Growth Rates
Sales Growth Rate 24.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 66%
Cap. Spend. - 3 Yr. Gr. Rate 18.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 156.3%
Total Debt to Equity 165.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 2.9%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 6.6%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 56.8%
Gross Margin - 3 Yr. Avg. 59.4%
EBITDA Margin 24.1%
EBITDA Margin - 3 Yr. Avg. 28.6%
Operating Margin 8.3%
Oper. Margin - 3 Yr. Avg. 10.4%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 38.2%
Eff/ Tax Rate - 3 Yr. Avg. 38.3%
Payout Ratio 0%

ATSG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATSG stock intrinsic value calculation we used $892 million for the last fiscal year's total revenue generated by Air Transport Services Group, Inc. The default revenue input number comes from 0001 income statement of Air Transport Services 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 ATSG 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 9.6%, whose default value for ATSG is calculated based on our internal credit rating of Air Transport Services 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 Air Transport Services 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 ATSG stock the variable cost ratio is equal to 90.7%.

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 ATSG 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 Air Transport Services Group, Inc.

Corporate tax rate of 27% is the nominal tax rate for Air Transport Services 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 ATSG 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 ATSG are equal to 168.4%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Air Transport Services 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 ATSG is equal to 0%. 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 - $436.438 million for Air Transport Services 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 59.057 million for Air Transport Services 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 Air Transport Services Group, Inc at the current share price and the inputted number of shares is $1.2 billion.

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