Intrinsic value of Cogent Communications Holdings - CCOI

Previous Close

$49.30

  Intrinsic Value

$3.89

stock screener

  Rating & Target

str. sell

-92%

Previous close

$49.30

 
Intrinsic value

$3.89

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of CCOI 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 2.3

 

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, %
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  524
  563
  605
  648
  692
  739
  787
  838
  890
  944
  1,001
  1,060
  1,122
  1,186
  1,254
  1,324
  1,397
  1,474
  1,554
  1,638
  1,725
  1,817
  1,913
  2,014
  2,119
  2,229
  2,345
  2,466
  2,593
  2,726
Variable operating expenses, $m
  371
  399
  429
  459
  491
  524
  558
  594
  631
  670
  710
  752
  796
  841
  889
  939
  991
  1,045
  1,102
  1,161
  1,223
  1,288
  1,356
  1,428
  1,502
  1,581
  1,663
  1,748
  1,839
  1,933
Fixed operating expenses, $m
  67
  69
  70
  72
  74
  75
  77
  79
  80
  82
  84
  86
  88
  90
  91
  93
  96
  98
  100
  102
  104
  107
  109
  111
  114
  116
  119
  121
  124
  127
Total operating expenses, $m
  438
  468
  499
  531
  565
  599
  635
  673
  711
  752
  794
  838
  884
  931
  980
  1,032
  1,087
  1,143
  1,202
  1,263
  1,327
  1,395
  1,465
  1,539
  1,616
  1,697
  1,782
  1,869
  1,963
  2,060
Operating income, $m
  85
  95
  106
  116
  128
  140
  152
  165
  179
  193
  207
  223
  239
  256
  273
  292
  311
  331
  352
  375
  398
  422
  448
  475
  503
  532
  564
  596
  631
  667
EBITDA, $m
  165
  181
  198
  216
  234
  253
  273
  294
  315
  337
  361
  385
  411
  438
  465
  495
  525
  557
  590
  625
  662
  701
  741
  783
  828
  874
  923
  974
  1,028
  1,084
Interest expense (income), $m
  35
  49
  29
  32
  35
  37
  40
  44
  47
  50
  54
  57
  61
  65
  69
  74
  78
  83
  88
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  168
Earnings before tax, $m
  36
  66
  74
  82
  90
  99
  109
  118
  129
  139
  150
  162
  174
  186
  200
  214
  228
  244
  260
  276
  294
  313
  332
  352
  374
  396
  420
  445
  471
  499
Tax expense, $m
  10
  18
  20
  22
  24
  27
  29
  32
  35
  38
  41
  44
  47
  50
  54
  58
  62
  66
  70
  75
  79
  84
  90
  95
  101
  107
  113
  120
  127
  135
Net income, $m
  26
  48
  54
  60
  66
  73
  79
  86
  94
  102
  110
  118
  127
  136
  146
  156
  167
  178
  189
  202
  215
  228
  242
  257
  273
  289
  307
  325
  344
  364

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
  573
  617
  662
  709
  758
  809
  862
  917
  975
  1,034
  1,097
  1,161
  1,229
  1,299
  1,373
  1,450
  1,530
  1,614
  1,702
  1,794
  1,890
  1,990
  2,095
  2,205
  2,321
  2,442
  2,568
  2,701
  2,840
  2,986
Adjusted assets (=assets-cash), $m
  573
  617
  662
  709
  758
  809
  862
  917
  975
  1,034
  1,097
  1,161
  1,229
  1,299
  1,373
  1,450
  1,530
  1,614
  1,702
  1,794
  1,890
  1,990
  2,095
  2,205
  2,321
  2,442
  2,568
  2,701
  2,840
  2,986
Revenue / Adjusted assets
  0.914
  0.912
  0.914
  0.914
  0.913
  0.913
  0.913
  0.914
  0.913
  0.913
  0.912
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
Average production assets, $m
  401
  432
  463
  496
  530
  566
  603
  642
  682
  723
  767
  812
  859
  909
  960
  1,014
  1,070
  1,129
  1,190
  1,254
  1,322
  1,392
  1,465
  1,542
  1,623
  1,708
  1,796
  1,889
  1,986
  2,088
Working capital, $m
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
Total debt, $m
  428
  468
  508
  551
  595
  641
  688
  738
  789
  843
  899
  957
  1,018
  1,082
  1,148
  1,217
  1,289
  1,365
  1,444
  1,526
  1,613
  1,703
  1,798
  1,897
  2,001
  2,110
  2,224
  2,343
  2,468
  2,600
Total liabilities, $m
  516
  555
  596
  639
  683
  728
  776
  826
  877
  931
  987
  1,045
  1,106
  1,170
  1,236
  1,305
  1,377
  1,453
  1,532
  1,614
  1,701
  1,791
  1,886
  1,985
  2,089
  2,198
  2,312
  2,431
  2,556
  2,688
Total equity, $m
  57
  62
  66
  71
  76
  81
  86
  92
  97
  103
  110
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
  210
  221
  232
  244
  257
  270
  284
  299
Total liabilities and equity, $m
  573
  617
  662
  710
  759
  809
  862
  918
  974
  1,034
  1,097
  1,161
  1,229
  1,300
  1,373
  1,450
  1,530
  1,614
  1,702
  1,793
  1,890
  1,990
  2,096
  2,206
  2,321
  2,442
  2,569
  2,701
  2,840
  2,987
Debt-to-equity ratio
  7.470
  7.580
  7.670
  7.760
  7.840
  7.920
  7.980
  8.040
  8.100
  8.150
  8.200
  8.240
  8.290
  8.320
  8.360
  8.390
  8.430
  8.460
  8.480
  8.510
  8.540
  8.560
  8.580
  8.600
  8.620
  8.640
  8.660
  8.680
  8.690
  8.710
Adjusted equity ratio
  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
  26
  48
  54
  60
  66
  73
  79
  86
  94
  102
  110
  118
  127
  136
  146
  156
  167
  178
  189
  202
  215
  228
  242
  257
  273
  289
  307
  325
  344
  364
Depreciation, amort., depletion, $m
  80
  86
  93
  99
  106
  113
  121
  128
  136
  145
  153
  162
  172
  182
  192
  203
  214
  226
  238
  251
  264
  278
  293
  308
  325
  342
  359
  378
  397
  418
Funds from operations, $m
  107
  134
  146
  159
  172
  186
  200
  215
  230
  246
  263
  281
  299
  318
  338
  359
  381
  404
  428
  453
  479
  507
  535
  566
  598
  631
  666
  703
  741
  782
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  107
  135
  147
  160
  173
  187
  201
  216
  231
  247
  264
  282
  300
  319
  339
  360
  382
  405
  429
  454
  480
  508
  537
  567
  599
  633
  668
  705
  743
  784
Maintenance CAPEX, $m
  -74
  -80
  -86
  -93
  -99
  -106
  -113
  -121
  -128
  -136
  -145
  -153
  -162
  -172
  -182
  -192
  -203
  -214
  -226
  -238
  -251
  -264
  -278
  -293
  -308
  -325
  -342
  -359
  -378
  -397
New CAPEX, $m
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
Cash from investing activities, $m
  -104
  -111
  -118
  -126
  -133
  -142
  -150
  -160
  -168
  -178
  -188
  -198
  -209
  -221
  -233
  -246
  -259
  -273
  -287
  -302
  -318
  -334
  -352
  -370
  -389
  -410
  -431
  -452
  -475
  -499
Free cash flow, $m
  3
  24
  29
  34
  39
  45
  51
  56
  63
  69
  76
  83
  90
  98
  106
  114
  123
  132
  142
  152
  162
  173
  185
  197
  210
  224
  238
  253
  268
  285
Issuance/(repayment) of debt, $m
  -290
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
  104
  109
  114
  119
  125
  131
Issuance/(repurchase) of shares, $m
  306
  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  
  16
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
  104
  109
  114
  119
  125
  131
Total cash flow (excl. dividends), $m
  20
  64
  70
  77
  83
  91
  98
  106
  114
  123
  132
  141
  151
  161
  172
  183
  195
  208
  221
  234
  249
  264
  280
  296
  314
  332
  352
  372
  394
  416
Retained Cash Flow (-), $m
  -332
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
Prev. year cash balance distribution, $m
  172
  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
  -140
  59
  65
  72
  79
  86
  93
  101
  108
  117
  126
  135
  144
  154
  165
  176
  187
  199
  212
  225
  239
  254
  269
  285
  302
  320
  339
  359
  380
  401
Discount rate, %
  9.80
  10.29
  10.80
  11.34
  11.91
  12.51
  13.13
  13.79
  14.48
  15.20
  15.96
  16.76
  17.60
  18.48
  19.40
  20.37
  21.39
  22.46
  23.58
  24.76
  26.00
  27.30
  28.67
  30.10
  31.61
  33.19
  34.85
  36.59
  38.42
  40.34
PV of cash for distribution, $m
  -128
  49
  48
  47
  45
  42
  39
  36
  32
  28
  25
  21
  18
  14
  12
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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

Cogent Communications Holdings, Inc. is a facility-based provider of Internet access and Internet Protocol (IP) communications services. The Company's network is designed and optimized to transmit data using IP. The Company delivers its services to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in North America, Europe and Asia. The Company offers on-net Internet access services through its own facilities, which run from its network to its customers' premises. It offers its on-net services to customers located in buildings that are physically connected to its network. Its on-net service consists of Internet access and IP connectivity ranging from 100 Megabits per second to 100 Gigabits per second of bandwidth. It provides its on-net Internet access services to its net-centric and corporate customers. Its network consists of in-building riser facilities, metropolitan optical networks and inter-city transport facilities. _tck('aft');

FINANCIAL RATIOS  of  Cogent Communications Holdings (CCOI)

Valuation Ratios
P/E Ratio 40.9
Price to Sales 6.7
Price to Book 12.1
Price to Tangible Book
Price to Cash Flow 28.5
Price to Free Cash Flow 70.7
Growth Rates
Sales Growth Rate 9.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.4%
Cap. Spend. - 3 Yr. Gr. Rate -1.6%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 206.2%
Total Debt to Equity 257%
Interest Coverage 1
Management Effectiveness
Return On Assets 50.2%
Ret/ On Assets - 3 Yr. Avg. 20.8%
Return On Total Capital 9.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.4%
Return On Equity 32.3%
Return On Equity - 3 Yr. Avg. 11.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 56.9%
Gross Margin - 3 Yr. Avg. 56%
EBITDA Margin 30.5%
EBITDA Margin - 3 Yr. Avg. 28.9%
Operating Margin 13.2%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin 2%
Pre-Tax Margin - 3 Yr. Avg. 0.9%
Net Profit Margin 16.4%
Net Profit Margin - 3 Yr. Avg. 5.9%
Effective Tax Rate -714.3%
Eff/ Tax Rate - 3 Yr. Avg. -249.2%
Payout Ratio 61.4%

CCOI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CCOI stock intrinsic value calculation we used $485.175 million for the last fiscal year's total revenue generated by Cogent Communications Holdings. The default revenue input number comes from 0001 income statement of Cogent Communications Holdings. 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 CCOI stock valuation model: a) initial revenue growth rate of 7.9% 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 9.8%, whose default value for CCOI is calculated based on our internal credit rating of Cogent Communications Holdings, 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 Cogent Communications Holdings.
    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 CCOI stock the variable cost ratio is equal to 70.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $66 million in the base year in the intrinsic value calculation for CCOI 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 6.8% for Cogent Communications Holdings.

Corporate tax rate of 27% is the nominal tax rate for Cogent Communications Holdings. 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 CCOI 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 CCOI are equal to 76.6%.

Life of production assets of 4.9 years is the average useful life of capital assets used in Cogent Communications Holdings 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 CCOI is equal to -1.7%. 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 - $-102.544 million for Cogent Communications Holdings - 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 46.292 million for Cogent Communications Holdings 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 Cogent Communications Holdings at the current share price and the inputted number of shares is $2.3 billion.

RELATED COMPANIES Price Int.Val. Rating
ZAYO Zayo Group Hol 23.21 31.67  hold
T AT&T 30.51 51.95  str.buy
VZ Verizon Commun 58.94 66.50  buy
CTL CenturyLink 19.07 62.90  str.buy

COMPANY NEWS

▶ Cogent: 3Q Earnings Snapshot   [Nov-01-18 07:52AM  Associated Press]
▶ Cogent Communications to Host Investor Day   [Sep-07-18 05:24PM  PR Newswire]
▶ Cogent Launches Notes Offering   [08:08AM  PR Newswire]
▶ Cogent: 2Q Earnings Snapshot   [08:02AM  Associated Press]
▶ Free Research Report as Iridium's Revenues Jumped 14%   [May-22-18 07:05AM  ACCESSWIRE]
▶ Edited Transcript of CCOI presentation 6-Mar-17 9:00pm GMT   [Apr-10-18 11:24AM  Thomson Reuters StreetEvents]
▶ Cogent reports 4Q loss   [07:23AM  Associated Press]
▶ 3 Top Dividend Stocks With Yields Over 4%   [Dec-03-17 07:32AM  Motley Fool]
▶ Cogent misses Street 3Q forecasts   [07:41AM  Associated Press]
▶ Cogent misses Street 2Q forecasts   [Aug-04-17 02:36AM  Associated Press]
▶ 7 Tech Stocks That Dial Dividends Up To 14%   [May-21-17 08:12AM  Forbes]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.