Intrinsic value of Cable One, Inc. - CABO

Previous Close

$1,260.01

  Intrinsic Value

$567.07

stock screener

  Rating & Target

str. sell

-55%

Previous close

$1,260.01

 
Intrinsic value

$567.07

 
Up/down potential

-55%

 
Rating

str. sell

We calculate the intrinsic value of CABO 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 7.2

 

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, %
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
Revenue, $m
  1,122
  1,175
  1,231
  1,290
  1,352
  1,417
  1,486
  1,558
  1,634
  1,714
  1,798
  1,886
  1,979
  2,076
  2,179
  2,286
  2,399
  2,518
  2,643
  2,774
  2,911
  3,056
  3,208
  3,368
  3,535
  3,711
  3,896
  4,090
  4,294
  4,508
Variable operating expenses, $m
  804
  837
  871
  907
  946
  986
  1,028
  1,072
  1,119
  1,168
  1,107
  1,162
  1,219
  1,279
  1,342
  1,408
  1,478
  1,551
  1,628
  1,709
  1,793
  1,882
  1,976
  2,074
  2,177
  2,286
  2,400
  2,519
  2,645
  2,777
Fixed operating expenses, $m
  34
  34
  35
  36
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
Total operating expenses, $m
  838
  871
  906
  943
  983
  1,024
  1,066
  1,111
  1,159
  1,209
  1,149
  1,205
  1,263
  1,324
  1,388
  1,455
  1,526
  1,600
  1,678
  1,760
  1,845
  1,935
  2,030
  2,130
  2,234
  2,344
  2,459
  2,580
  2,707
  2,840
Operating income, $m
  285
  304
  325
  347
  370
  394
  420
  447
  475
  505
  649
  681
  716
  753
  791
  831
  874
  918
  965
  1,014
  1,066
  1,120
  1,178
  1,238
  1,301
  1,367
  1,437
  1,510
  1,587
  1,668
EBITDA, $m
  544
  571
  599
  629
  660
  693
  727
  763
  802
  842
  884
  929
  976
  1,025
  1,077
  1,131
  1,188
  1,248
  1,311
  1,378
  1,448
  1,521
  1,598
  1,679
  1,764
  1,854
  1,948
  2,046
  2,150
  2,259
Interest expense (income), $m
  29
  63
  67
  71
  75
  79
  84
  89
  94
  100
  105
  111
  118
  125
  132
  139
  147
  155
  164
  173
  182
  192
  202
  213
  225
  237
  250
  263
  277
  292
  307
Earnings before tax, $m
  222
  238
  254
  272
  291
  310
  331
  352
  375
  399
  537
  564
  592
  621
  652
  684
  719
  755
  792
  832
  874
  918
  964
  1,013
  1,064
  1,117
  1,174
  1,233
  1,295
  1,361
Tax expense, $m
  60
  64
  69
  73
  78
  84
  89
  95
  101
  108
  145
  152
  160
  168
  176
  185
  194
  204
  214
  225
  236
  248
  260
  273
  287
  302
  317
  333
  350
  367
Net income, $m
  162
  174
  186
  199
  212
  226
  241
  257
  274
  291
  392
  411
  432
  453
  476
  500
  525
  551
  579
  608
  638
  670
  704
  739
  777
  816
  857
  900
  945
  993

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
  2,254
  2,360
  2,473
  2,591
  2,715
  2,846
  2,984
  3,129
  3,281
  3,442
  3,610
  3,787
  3,973
  4,169
  4,375
  4,591
  4,818
  5,056
  5,307
  5,570
  5,846
  6,137
  6,442
  6,762
  7,099
  7,452
  7,823
  8,213
  8,622
  9,052
Adjusted assets (=assets-cash), $m
  2,254
  2,360
  2,473
  2,591
  2,715
  2,846
  2,984
  3,129
  3,281
  3,442
  3,610
  3,787
  3,973
  4,169
  4,375
  4,591
  4,818
  5,056
  5,307
  5,570
  5,846
  6,137
  6,442
  6,762
  7,099
  7,452
  7,823
  8,213
  8,622
  9,052
Revenue / Adjusted assets
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
Average production assets, $m
  1,471
  1,541
  1,614
  1,692
  1,773
  1,858
  1,948
  2,043
  2,142
  2,247
  2,357
  2,473
  2,594
  2,722
  2,856
  2,997
  3,145
  3,301
  3,465
  3,636
  3,817
  4,007
  4,206
  4,415
  4,635
  4,865
  5,108
  5,362
  5,629
  5,910
Working capital, $m
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -132
  -138
  -145
  -153
  -160
  -168
  -176
  -185
  -194
  -204
  -214
  -225
  -236
  -248
Total debt, $m
  1,233
  1,308
  1,386
  1,469
  1,556
  1,648
  1,744
  1,846
  1,952
  2,065
  2,183
  2,307
  2,437
  2,574
  2,718
  2,869
  3,028
  3,195
  3,370
  3,554
  3,748
  3,951
  4,165
  4,389
  4,624
  4,872
  5,132
  5,404
  5,691
  5,992
Total liabilities, $m
  1,578
  1,652
  1,731
  1,814
  1,901
  1,992
  2,089
  2,190
  2,297
  2,409
  2,527
  2,651
  2,781
  2,918
  3,062
  3,213
  3,372
  3,539
  3,715
  3,899
  4,092
  4,296
  4,509
  4,733
  4,969
  5,216
  5,476
  5,749
  6,036
  6,337
Total equity, $m
  676
  708
  742
  777
  815
  854
  895
  939
  984
  1,032
  1,083
  1,136
  1,192
  1,251
  1,312
  1,377
  1,445
  1,517
  1,592
  1,671
  1,754
  1,841
  1,933
  2,029
  2,130
  2,236
  2,347
  2,464
  2,587
  2,716
Total liabilities and equity, $m
  2,254
  2,360
  2,473
  2,591
  2,716
  2,846
  2,984
  3,129
  3,281
  3,441
  3,610
  3,787
  3,973
  4,169
  4,374
  4,590
  4,817
  5,056
  5,307
  5,570
  5,846
  6,137
  6,442
  6,762
  7,099
  7,452
  7,823
  8,213
  8,623
  9,053
Debt-to-equity ratio
  1.820
  1.850
  1.870
  1.890
  1.910
  1.930
  1.950
  1.970
  1.980
  2.000
  2.020
  2.030
  2.040
  2.060
  2.070
  2.080
  2.090
  2.110
  2.120
  2.130
  2.140
  2.150
  2.160
  2.160
  2.170
  2.180
  2.190
  2.190
  2.200
  2.210
Adjusted equity ratio
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  162
  174
  186
  199
  212
  226
  241
  257
  274
  291
  392
  411
  432
  453
  476
  500
  525
  551
  579
  608
  638
  670
  704
  739
  777
  816
  857
  900
  945
  993
Depreciation, amort., depletion, $m
  260
  267
  274
  282
  290
  298
  307
  317
  327
  337
  236
  247
  259
  272
  286
  300
  315
  330
  346
  364
  382
  401
  421
  441
  463
  487
  511
  536
  563
  591
Funds from operations, $m
  422
  440
  460
  480
  502
  525
  549
  574
  601
  629
  628
  659
  691
  726
  762
  799
  839
  881
  925
  971
  1,020
  1,071
  1,124
  1,181
  1,240
  1,302
  1,368
  1,436
  1,508
  1,584
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Cash from operations, $m
  425
  443
  463
  484
  505
  528
  553
  578
  605
  633
  632
  664
  696
  731
  767
  805
  845
  888
  932
  978
  1,027
  1,079
  1,133
  1,190
  1,249
  1,312
  1,378
  1,447
  1,520
  1,596
Maintenance CAPEX, $m
  -141
  -147
  -154
  -161
  -169
  -177
  -186
  -195
  -204
  -214
  -225
  -236
  -247
  -259
  -272
  -286
  -300
  -315
  -330
  -346
  -364
  -382
  -401
  -421
  -441
  -463
  -487
  -511
  -536
  -563
New CAPEX, $m
  -66
  -70
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
  -110
  -116
  -122
  -128
  -134
  -141
  -148
  -156
  -164
  -172
  -180
  -190
  -199
  -209
  -220
  -231
  -242
  -254
  -267
  -281
Cash from investing activities, $m
  -207
  -217
  -227
  -238
  -250
  -262
  -276
  -290
  -304
  -319
  -335
  -352
  -369
  -387
  -406
  -427
  -448
  -471
  -494
  -518
  -544
  -572
  -600
  -630
  -661
  -694
  -729
  -765
  -803
  -844
Free cash flow, $m
  218
  226
  235
  245
  255
  266
  277
  289
  301
  314
  298
  312
  328
  344
  361
  379
  397
  417
  438
  460
  483
  507
  533
  560
  588
  618
  649
  682
  716
  752
Issuance/(repayment) of debt, $m
  70
  75
  79
  83
  87
  92
  96
  101
  107
  112
  118
  124
  130
  137
  144
  151
  159
  167
  175
  184
  194
  203
  214
  224
  236
  247
  260
  273
  287
  301
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  
  70
  75
  79
  83
  87
  92
  96
  101
  107
  112
  118
  124
  130
  137
  144
  151
  159
  167
  175
  184
  194
  203
  214
  224
  236
  247
  260
  273
  287
  301
Total cash flow (excl. dividends), $m
  289
  301
  314
  328
  342
  357
  373
  390
  408
  426
  416
  436
  458
  481
  505
  530
  556
  584
  614
  644
  677
  711
  746
  784
  824
  865
  909
  955
  1,003
  1,053
Retained Cash Flow (-), $m
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -111
  -117
  -123
  -129
Prev. year cash balance distribution, $m
  130
  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
  388
  269
  280
  292
  305
  318
  332
  347
  362
  378
  365
  383
  402
  422
  443
  465
  488
  513
  538
  565
  594
  624
  655
  688
  723
  759
  797
  838
  880
  924
Discount rate, %
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
  367
  240
  234
  227
  219
  210
  200
  189
  177
  164
  140
  128
  116
  104
  91
  80
  69
  58
  49
  40
  32
  26
  20
  15
  11
  8
  6
  4
  3
  2
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

Cable One, Inc. is a provider of data, video and voice services. The Company offers products, including Residential Video Services, Residential Data Services, Residential Voice Services, Business Services and Advertising. As of May 1, 2017, the Company provided data, video and voice services in 21 Western, Midwestern and Southern states. As of December 31, 2016, the Company provided these broadband services to residential and business customers in more than 35 cable systems covering over 400 cities and towns. The Company provides these broadband services to residential and business customers in approximately 40 cable systems covering over 400 cities and towns. The markets it serves are non-metropolitan, secondary markets, with its customers located in five states: Arizona, Idaho, Mississippi, Oklahoma and Texas. The Company offers a range of residential video services, generally ranging from a basic video service to digital service with access to hundreds of channels.

FINANCIAL RATIOS  of  Cable One, Inc. (CABO)

Valuation Ratios
P/E Ratio 72.7
Price to Sales 8.8
Price to Book 15.8
Price to Tangible Book
Price to Cash Flow 28.6
Price to Free Cash Flow 66.6
Growth Rates
Sales Growth Rate 1.6%
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 0.3%
Financial Strength
Quick Ratio 23
Current Ratio 0
LT Debt to Equity 116.7%
Total Debt to Equity 118%
Interest Coverage 7
Management Effectiveness
Return On Assets 8.3%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. 12.3%
Return On Equity 22.2%
Return On Equity - 3 Yr. Avg. 17.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 62.8%
Gross Margin - 3 Yr. Avg. 61.3%
EBITDA Margin 40.7%
EBITDA Margin - 3 Yr. Avg. 41.2%
Operating Margin 23%
Oper. Margin - 3 Yr. Avg. 21%
Pre-Tax Margin 19.9%
Pre-Tax Margin - 3 Yr. Avg. 22.3%
Net Profit Margin 12.1%
Net Profit Margin - 3 Yr. Avg. 13.7%
Effective Tax Rate 39.3%
Eff/ Tax Rate - 3 Yr. Avg. 38.7%
Payout Ratio 34.3%

CABO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CABO stock intrinsic value calculation we used $1072 million for the last fiscal year's total revenue generated by Cable One, Inc.. The default revenue input number comes from 0001 income statement of Cable One, 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 CABO stock valuation model: a) initial revenue growth rate of 4.7% 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 5.6%, whose default value for CABO is calculated based on our internal credit rating of Cable One, 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 Cable One, 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 CABO stock the variable cost ratio is equal to 72.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $33 million in the base year in the intrinsic value calculation for CABO 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 Cable One, Inc..

Corporate tax rate of 27% is the nominal tax rate for Cable One, 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 CABO 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 CABO are equal to 131.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Cable One, 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 CABO is equal to -5.5%. 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 - $775.358 million for Cable One, 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 5.702 million for Cable One, 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 Cable One, Inc. at the current share price and the inputted number of shares is $7.2 billion.

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