Intrinsic value of Acorn International, Inc. - ATV

Previous Close

$28.15

  Intrinsic Value

$8.12

stock screener

  Rating & Target

str. sell

-71%

Previous close

$28.15

 
Intrinsic value

$8.12

 
Up/down potential

-71%

 
Rating

str. sell

We calculate the intrinsic value of ATV 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, %
  23.10
  21.29
  19.66
  18.19
  16.88
  15.69
  14.62
  13.66
  12.79
  12.01
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
Revenue, $m
  25
  30
  36
  42
  49
  57
  65
  74
  84
  94
  105
  116
  128
  140
  153
  166
  180
  194
  209
  225
  241
  258
  275
  293
  312
  332
  352
  374
  396
  419
Variable operating expenses, $m
  28
  34
  41
  49
  57
  66
  75
  86
  96
  108
  120
  133
  147
  161
  175
  191
  207
  223
  240
  258
  277
  296
  316
  337
  359
  382
  405
  430
  455
  482
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
  28
  34
  41
  49
  57
  66
  75
  86
  96
  108
  120
  133
  147
  161
  175
  191
  207
  223
  240
  258
  277
  296
  316
  337
  359
  382
  405
  430
  455
  482
Operating income, $m
  -4
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
EBITDA, $m
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
Earnings before tax, $m
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -13
  -15
  -16
  -18
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -68
  -73
  -77
Tax expense, $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
Net income, $m
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -13
  -15
  -16
  -18
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -68
  -73
  -77

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
  108
  131
  157
  185
  216
  250
  287
  326
  368
  412
  459
  508
  559
  613
  669
  727
  788
  851
  917
  985
  1,056
  1,130
  1,207
  1,286
  1,369
  1,455
  1,545
  1,639
  1,736
  1,838
Adjusted assets (=assets-cash), $m
  108
  131
  157
  185
  216
  250
  287
  326
  368
  412
  459
  508
  559
  613
  669
  727
  788
  851
  917
  985
  1,056
  1,130
  1,207
  1,286
  1,369
  1,455
  1,545
  1,639
  1,736
  1,838
Revenue / Adjusted assets
  0.231
  0.229
  0.229
  0.227
  0.227
  0.228
  0.226
  0.227
  0.228
  0.228
  0.229
  0.228
  0.229
  0.228
  0.229
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
Average production assets, $m
  13
  16
  19
  22
  26
  30
  35
  39
  44
  50
  55
  61
  68
  74
  81
  88
  95
  103
  111
  119
  128
  137
  146
  155
  165
  176
  187
  198
  210
  222
Working capital, $m
  -6
  -7
  -8
  -10
  -11
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -42
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -72
  -77
  -81
  -86
  -91
  -97
Total debt, $m
  3
  7
  11
  15
  20
  26
  31
  38
  44
  51
  59
  66
  74
  83
  92
  101
  111
  121
  131
  142
  153
  165
  177
  189
  202
  216
  230
  245
  260
  276
Total liabilities, $m
  17
  21
  25
  29
  34
  40
  45
  52
  58
  65
  72
  80
  88
  97
  106
  115
  125
  134
  145
  156
  167
  179
  191
  203
  216
  230
  244
  259
  274
  290
Total equity, $m
  91
  110
  132
  156
  182
  211
  242
  275
  310
  347
  386
  428
  471
  516
  563
  612
  664
  717
  772
  830
  889
  951
  1,016
  1,083
  1,153
  1,225
  1,301
  1,380
  1,462
  1,547
Total liabilities and equity, $m
  108
  131
  157
  185
  216
  251
  287
  327
  368
  412
  458
  508
  559
  613
  669
  727
  789
  851
  917
  986
  1,056
  1,130
  1,207
  1,286
  1,369
  1,455
  1,545
  1,639
  1,736
  1,837
Debt-to-equity ratio
  0.030
  0.060
  0.080
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
Adjusted equity ratio
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -13
  -15
  -16
  -18
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -68
  -73
  -77
Depreciation, amort., depletion, $m
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
Funds from operations, $m
  -2
  -3
  -4
  -5
  -5
  -6
  -8
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -39
  -42
  -45
  -47
  -50
  -53
Change in working capital, $m
  -1
  -1
  -1
  -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
  -5
Cash from operations, $m
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -26
  -28
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -48
Maintenance CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
Cash from investing activities, $m
  -3
  -4
  -5
  -5
  -6
  -7
  -7
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -15
  -16
  -16
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
Free cash flow, $m
  -5
  -6
  -7
  -8
  -10
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -54
  -58
  -62
  -65
  -69
  -74
  -78
  -83
Issuance/(repayment) of debt, $m
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
Issuance/(repurchase) of shares, $m
  21
  24
  27
  31
  35
  38
  42
  46
  50
  54
  58
  62
  66
  70
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
  127
  133
  140
  147
  155
  162
Cash from financing (excl. dividends), $m  
  24
  28
  31
  36
  40
  43
  48
  52
  57
  61
  65
  70
  74
  78
  84
  88
  94
  98
  103
  109
  115
  121
  127
  134
  140
  147
  154
  162
  170
  178
Total cash flow (excl. dividends), $m
  19
  22
  24
  27
  30
  32
  35
  37
  39
  42
  44
  46
  49
  51
  53
  55
  57
  60
  62
  64
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
Retained Cash Flow (-), $m
  -21
  -24
  -27
  -31
  -35
  -38
  -42
  -46
  -50
  -54
  -58
  -62
  -66
  -70
  -75
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -127
  -133
  -140
  -147
  -155
  -162
Prev. year cash balance distribution, $m
  13
  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
  11
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -17
  -19
  -22
  -24
  -26
  -29
  -31
  -34
  -36
  -39
  -42
  -45
  -49
  -52
  -55
  -59
  -63
  -66
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
  11
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -6
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
Current shareholders' claim on cash, %
  75.6
  57.9
  45.0
  35.5
  28.2
  22.7
  18.5
  15.2
  12.6
  10.5
  8.8
  7.4
  6.3
  5.4
  4.6
  4.0
  3.4
  3.0
  2.6
  2.3
  2.0
  1.7
  1.5
  1.3
  1.2
  1.0
  0.9
  0.8
  0.7
  0.6

Acorn International, Inc. is a marketing and branding company in China that develops, promotes and sells a portfolio of branded products. The Company’s business is comprised of two main divisions, direct-sales platforms and its nationwide distribution network. The direct-sales business involves marketing and selling products directly to consumers in China through its outbound marketing platform and Internet sales platform. In addition, the Company maintains a nationwide distribution network through which it distributes a select number of its products promoted by the direct-sales platform. The Company’s distribution network covers all provinces in China through more than 29 distributors, and allows us to reach over 2,200 retail outlets across China.

FINANCIAL RATIOS  of  Acorn International, Inc. (ATV)

Valuation Ratios
P/E Ratio 707.6
Price to Sales 84.9
Price to Book 21.4
Price to Tangible Book
Price to Cash Flow -151.6
Price to Free Cash Flow -141.5
Growth Rates
Sales Growth Rate -47.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. -16.5%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. -20.8%
Return On Equity 2.2%
Return On Equity - 3 Yr. Avg. -22.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 52%
Gross Margin - 3 Yr. Avg. 39.7%
EBITDA Margin 48%
EBITDA Margin - 3 Yr. Avg. -22.7%
Operating Margin -36%
Oper. Margin - 3 Yr. Avg. -55.6%
Pre-Tax Margin 36%
Pre-Tax Margin - 3 Yr. Avg. -30.9%
Net Profit Margin 12%
Net Profit Margin - 3 Yr. Avg. -39.2%
Effective Tax Rate 55.6%
Eff/ Tax Rate - 3 Yr. Avg. 17.7%
Payout Ratio 0%

ATV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATV stock intrinsic value calculation we used $20 million for the last fiscal year's total revenue generated by Acorn International, Inc.. The default revenue input number comes from 0001 income statement of Acorn International, 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 ATV stock valuation model: a) initial revenue growth rate of 23.1% 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 ATV is calculated based on our internal credit rating of Acorn International, 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 Acorn International, 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 ATV stock the variable cost ratio is equal to 115%.

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 ATV 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 Acorn International, Inc..

Corporate tax rate of 27% is the nominal tax rate for Acorn International, 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 ATV 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 ATV are equal to 53%.

Life of production assets of 9.4 years is the average useful life of capital assets used in Acorn International, 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 ATV is equal to -23.1%. 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 - $86.988608 million for Acorn International, 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 2.680 million for Acorn International, 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 Acorn International, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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