Intrinsic value of Bright Scholar Education Holdings ADR - BEDU

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$20.15

  Intrinsic Value

$22.41

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  Rating & Target

hold

+11%

Previous close

$20.15

 
Intrinsic value

$22.41

 
Up/down potential

+11%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BEDU 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Bright Scholar Education Holdings ADR (BEDU) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  27.15
  25.00
  23.00
  21.20
  19.58
  18.12
  16.81
  15.63
  14.57
  13.61
  12.75
  11.97
  11.28
  10.65
  10.08
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
Revenue, $m
  192
  240
  295
  358
  428
  505
  590
  683
  782
  888
  1,002
  1,122
  1,248
  1,381
  1,520
  1,666
  1,818
  1,976
  2,141
  2,312
  2,490
  2,675
  2,867
  3,067
  3,275
  3,491
  3,716
  3,949
  4,193
  4,446
  4,711
Variable operating expenses, $m
 
  76
  93
  112
  134
  158
  185
  213
  244
  277
  312
  348
  387
  428
  472
  517
  564
  613
  664
  717
  772
  830
  889
  951
  1,016
  1,083
  1,153
  1,225
  1,301
  1,379
  1,461
Fixed operating expenses, $m
 
  106
  108
  111
  114
  117
  119
  122
  125
  129
  132
  135
  139
  142
  146
  149
  153
  157
  161
  165
  169
  173
  177
  182
  186
  191
  196
  201
  206
  211
  216
Total operating expenses, $m
  161
  182
  201
  223
  248
  275
  304
  335
  369
  406
  444
  483
  526
  570
  618
  666
  717
  770
  825
  882
  941
  1,003
  1,066
  1,133
  1,202
  1,274
  1,349
  1,426
  1,507
  1,590
  1,677
Operating income, $m
  31
  58
  94
  134
  180
  231
  286
  347
  412
  483
  558
  639
  722
  811
  903
  1,000
  1,101
  1,206
  1,316
  1,430
  1,549
  1,672
  1,801
  1,934
  2,073
  2,217
  2,367
  2,524
  2,687
  2,856
  3,033
EBITDA, $m
  43
  72
  111
  154
  204
  258
  318
  384
  454
  530
  611
  697
  787
  882
  982
  1,086
  1,195
  1,308
  1,427
  1,550
  1,678
  1,811
  1,949
  2,093
  2,242
  2,398
  2,559
  2,728
  2,903
  3,086
  3,277
Interest expense (income), $m
  0
  0
  -2
  -1
  0
  2
  3
  5
  7
  8
  10
  13
  15
  17
  20
  22
  25
  28
  31
  34
  38
  41
  44
  48
  52
  56
  60
  64
  69
  73
  78
Earnings before tax, $m
  34
  58
  96
  135
  180
  229
  283
  342
  406
  474
  547
  626
  708
  793
  883
  977
  1,076
  1,178
  1,285
  1,396
  1,511
  1,631
  1,756
  1,886
  2,021
  2,161
  2,307
  2,459
  2,618
  2,783
  2,955
Tax expense, $m
  6
  16
  26
  37
  48
  62
  76
  92
  110
  128
  148
  169
  191
  214
  238
  264
  290
  318
  347
  377
  408
  440
  474
  509
  546
  584
  623
  664
  707
  751
  798
Net income, $m
  25
  43
  70
  99
  131
  167
  207
  250
  296
  346
  399
  457
  516
  579
  645
  714
  785
  860
  938
  1,019
  1,103
  1,191
  1,282
  1,377
  1,475
  1,578
  1,684
  1,795
  1,911
  2,032
  2,157

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  273
  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
  389
  145
  178
  216
  259
  305
  357
  412
  473
  537
  605
  678
  754
  834
  919
  1,007
  1,098
  1,194
  1,293
  1,397
  1,505
  1,616
  1,733
  1,853
  1,979
  2,109
  2,245
  2,386
  2,533
  2,687
  2,846
Adjusted assets (=assets-cash), $m
  116
  145
  178
  216
  259
  305
  357
  412
  473
  537
  605
  678
  754
  834
  919
  1,007
  1,098
  1,194
  1,293
  1,397
  1,505
  1,616
  1,733
  1,853
  1,979
  2,109
  2,245
  2,386
  2,533
  2,687
  2,846
Revenue / Adjusted assets
  1.655
  1.655
  1.657
  1.657
  1.653
  1.656
  1.653
  1.658
  1.653
  1.654
  1.656
  1.655
  1.655
  1.656
  1.654
  1.654
  1.656
  1.655
  1.656
  1.655
  1.654
  1.655
  1.654
  1.655
  1.655
  1.655
  1.655
  1.655
  1.655
  1.655
  1.655
Average production assets, $m
  71
  88
  108
  131
  157
  185
  217
  251
  287
  326
  368
  412
  458
  507
  558
  611
  667
  725
  786
  848
  914
  982
  1,052
  1,126
  1,202
  1,281
  1,364
  1,449
  1,539
  1,632
  1,729
Working capital, $m
  108
  -206
  -254
  -307
  -368
  -434
  -507
  -586
  -672
  -763
  -860
  -963
  -1,072
  -1,186
  -1,306
  -1,431
  -1,561
  -1,697
  -1,839
  -1,986
  -2,139
  -2,298
  -2,463
  -2,635
  -2,813
  -2,999
  -3,192
  -3,393
  -3,602
  -3,819
  -4,046
Total debt, $m
  0
  -53
  -23
  11
  49
  91
  137
  187
  241
  299
  361
  426
  495
  567
  643
  722
  804
  891
  980
  1,073
  1,170
  1,271
  1,375
  1,484
  1,597
  1,714
  1,837
  1,964
  2,096
  2,234
  2,378
Total liabilities, $m
  184
  131
  161
  195
  233
  275
  321
  371
  425
  483
  545
  610
  679
  751
  827
  906
  988
  1,075
  1,164
  1,257
  1,354
  1,455
  1,559
  1,668
  1,781
  1,898
  2,021
  2,148
  2,280
  2,418
  2,562
Total equity, $m
  205
  15
  18
  22
  26
  31
  36
  41
  47
  54
  61
  68
  75
  83
  92
  101
  110
  119
  129
  140
  150
  162
  173
  185
  198
  211
  225
  239
  253
  269
  285
Total liabilities and equity, $m
  389
  146
  179
  217
  259
  306
  357
  412
  472
  537
  606
  678
  754
  834
  919
  1,007
  1,098
  1,194
  1,293
  1,397
  1,504
  1,617
  1,732
  1,853
  1,979
  2,109
  2,246
  2,387
  2,533
  2,687
  2,847
Debt-to-equity ratio
  0.000
  -3.690
  -1.320
  0.490
  1.880
  2.970
  3.840
  4.540
  5.110
  5.570
  5.960
  6.290
  6.560
  6.790
  7.000
  7.170
  7.320
  7.460
  7.580
  7.680
  7.780
  7.860
  7.940
  8.010
  8.070
  8.130
  8.180
  8.230
  8.270
  8.320
  8.350
Adjusted equity ratio
  -0.586
  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
  25
  43
  70
  99
  131
  167
  207
  250
  296
  346
  399
  457
  516
  579
  645
  714
  785
  860
  938
  1,019
  1,103
  1,191
  1,282
  1,377
  1,475
  1,578
  1,684
  1,795
  1,911
  2,032
  2,157
Depreciation, amort., depletion, $m
  12
  14
  17
  20
  24
  28
  32
  37
  42
  47
  53
  58
  65
  71
  79
  86
  94
  102
  111
  120
  129
  138
  148
  159
  169
  180
  192
  204
  217
  230
  243
Funds from operations, $m
  95
  57
  87
  119
  155
  195
  239
  287
  338
  394
  453
  515
  581
  651
  723
  800
  879
  962
  1,049
  1,138
  1,232
  1,329
  1,430
  1,535
  1,645
  1,758
  1,876
  2,000
  2,128
  2,261
  2,401
Change in working capital, $m
  28
  -41
  -47
  -54
  -60
  -67
  -73
  -79
  -85
  -91
  -97
  -103
  -109
  -114
  -120
  -125
  -130
  -136
  -141
  -147
  -153
  -159
  -165
  -172
  -178
  -186
  -193
  -201
  -209
  -218
  -227
Cash from operations, $m
  67
  98
  134
  172
  215
  261
  312
  366
  424
  485
  550
  618
  690
  765
  843
  925
  1,010
  1,098
  1,190
  1,286
  1,385
  1,488
  1,595
  1,707
  1,823
  1,944
  2,069
  2,200
  2,337
  2,479
  2,628
Maintenance CAPEX, $m
  0
  -10
  -12
  -15
  -18
  -22
  -26
  -31
  -35
  -40
  -46
  -52
  -58
  -65
  -71
  -79
  -86
  -94
  -102
  -111
  -120
  -129
  -138
  -148
  -159
  -169
  -180
  -192
  -204
  -217
  -230
New CAPEX, $m
  -14
  -18
  -20
  -23
  -26
  -28
  -31
  -34
  -36
  -39
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
Cash from investing activities, $m
  -8
  -28
  -32
  -38
  -44
  -50
  -57
  -65
  -71
  -79
  -88
  -96
  -104
  -114
  -122
  -132
  -142
  -152
  -162
  -174
  -185
  -197
  -209
  -221
  -235
  -248
  -262
  -278
  -293
  -310
  -327
Free cash flow, $m
  59
  70
  101
  134
  171
  211
  254
  301
  352
  406
  463
  522
  585
  651
  721
  793
  868
  946
  1,027
  1,112
  1,200
  1,292
  1,387
  1,485
  1,588
  1,695
  1,807
  1,923
  2,043
  2,169
  2,301
Issuance/(repayment) of debt, $m
  2
  -53
  30
  34
  38
  42
  46
  50
  54
  58
  62
  65
  69
  72
  76
  79
  83
  86
  90
  93
  97
  101
  105
  109
  113
  117
  122
  127
  132
  138
  144
Issuance/(repurchase) of shares, $m
  0
  40
  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  
  168
  -13
  30
  34
  38
  42
  46
  50
  54
  58
  62
  65
  69
  72
  76
  79
  83
  86
  90
  93
  97
  101
  105
  109
  113
  117
  122
  127
  132
  138
  144
Total cash flow (excl. dividends), $m
  222
  57
  131
  168
  209
  253
  301
  352
  406
  463
  524
  587
  654
  724
  796
  872
  950
  1,032
  1,117
  1,205
  1,297
  1,392
  1,491
  1,594
  1,701
  1,813
  1,929
  2,050
  2,176
  2,307
  2,445
Retained Cash Flow (-), $m
  -188
  -83
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
Prev. year cash balance distribution, $m
 
  273
  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
 
  247
  128
  164
  205
  248
  295
  346
  400
  457
  517
  580
  646
  716
  788
  863
  941
  1,023
  1,107
  1,195
  1,286
  1,381
  1,480
  1,582
  1,689
  1,800
  1,915
  2,036
  2,161
  2,292
  2,429
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
 
  237
  117
  143
  168
  192
  214
  234
  250
  263
  271
  275
  276
  272
  264
  253
  239
  223
  204
  184
  163
  143
  123
  104
  86
  70
  56
  44
  33
  25
  18
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Bright Scholar Education Holdings Limited is an operator of international and bilingual K-12 schools in China. The Company is engaged in providing international education to Chinese students. Its schools comprise international schools, bilingual schools and kindergartens. It offers a broad range of internationally-accredited curricula at its international schools. It also offers a range of complementary education services, including overseas camps and after-school programs. As of February 28, 2017, the Company had six international schools, which focus on internationally-accredited curricula and offer extracurricular activities and programs; 11 bilingual schools, which provide government-mandated curricula and developing students’ English proficiency; and 34 bilingual kindergartens, including 11 that deliver international curricula. As of February 28, 2017, the Company operated 51 schools.

FINANCIAL RATIOS  of  Bright Scholar Education Holdings ADR (BEDU)

Valuation Ratios
P/E Ratio 94.5
Price to Sales 12.3
Price to Book 11.5
Price to Tangible Book
Price to Cash Flow 35.3
Price to Free Cash Flow 44.6
Growth Rates
Sales Growth Rate 27.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.7%
Cap. Spend. - 3 Yr. Gr. Rate -8.6%
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 8.8%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital 22.5%
Ret/ On T. Cap. - 3 Yr. Avg. 27.2%
Return On Equity 22.5%
Return On Equity - 3 Yr. Avg. 27.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 35.4%
Gross Margin - 3 Yr. Avg. 25.5%
EBITDA Margin 24%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 16.1%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 17.7%
Pre-Tax Margin - 3 Yr. Avg. 3.5%
Net Profit Margin 13%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 17.6%
Eff/ Tax Rate - 3 Yr. Avg. 52.5%
Payout Ratio 0%

BEDU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BEDU stock intrinsic value calculation we used $192 million for the last fiscal year's total revenue generated by Bright Scholar Education Holdings ADR. The default revenue input number comes from 2017 income statement of Bright Scholar Education Holdings ADR. 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 BEDU stock valuation model: a) initial revenue growth rate of 25% 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 BEDU is calculated based on our internal credit rating of Bright Scholar Education Holdings ADR, 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 Bright Scholar Education Holdings ADR.
    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 BEDU stock the variable cost ratio is equal to 31.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $103 million in the base year in the intrinsic value calculation for BEDU 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 3.5% for Bright Scholar Education Holdings ADR.

Corporate tax rate of 27% is the nominal tax rate for Bright Scholar Education Holdings ADR. 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 BEDU 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 BEDU are equal to 36.7%.

Life of production assets of 7.1 years is the average useful life of capital assets used in Bright Scholar Education Holdings ADR 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 BEDU is equal to -85.9%. 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 - $205 million for Bright Scholar Education Holdings ADR - 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 115.694 million for Bright Scholar Education Holdings ADR 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 Bright Scholar Education Holdings ADR at the current share price and the inputted number of shares is $2.3 billion.

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Financial statements of BEDU
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