Intrinsic value of Cogent Communications Holdings, Inc. - CCOI

Previous Close

$51.62

  Intrinsic Value

$5.87

stock screener

  Rating & Target

str. sell

-89%

Previous close

$51.62

 
Intrinsic value

$5.87

 
Up/down potential

-89%

 
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 2.4

 

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, %
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.15
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
Revenue, $m
  548
  577
  608
  640
  674
  709
  746
  785
  826
  868
  913
  960
  1,009
  1,060
  1,114
  1,171
  1,230
  1,293
  1,358
  1,427
  1,499
  1,574
  1,654
  1,737
  1,824
  1,916
  2,012
  2,113
  2,219
  2,331
Variable operating expenses, $m
  382
  400
  419
  440
  461
  483
  506
  530
  556
  583
  573
  603
  633
  666
  700
  735
  772
  812
  853
  896
  941
  988
  1,038
  1,091
  1,145
  1,203
  1,263
  1,327
  1,394
  1,463
Fixed operating expenses, $m
  73
  74
  76
  77
  79
  81
  83
  85
  86
  88
  90
  92
  94
  96
  98
  101
  103
  105
  107
  110
  112
  115
  117
  120
  122
  125
  128
  131
  133
  136
Total operating expenses, $m
  455
  474
  495
  517
  540
  564
  589
  615
  642
  671
  663
  695
  727
  762
  798
  836
  875
  917
  960
  1,006
  1,053
  1,103
  1,155
  1,211
  1,267
  1,328
  1,391
  1,458
  1,527
  1,599
Operating income, $m
  94
  103
  113
  123
  134
  146
  158
  170
  183
  197
  250
  265
  281
  298
  316
  335
  355
  376
  398
  421
  446
  471
  498
  527
  556
  588
  621
  656
  692
  731
EBITDA, $m
  211
  225
  239
  254
  270
  286
  304
  322
  341
  361
  382
  405
  428
  453
  478
  506
  534
  564
  596
  629
  664
  700
  739
  779
  822
  867
  914
  964
  1,016
  1,070
Interest expense (income), $m
  35
  53
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  53
  56
  60
  63
  66
  70
  74
  78
  82
  87
  91
  96
  101
  107
  112
  118
  125
  131
Earnings before tax, $m
  41
  75
  83
  92
  100
  110
  120
  130
  141
  152
  202
  214
  228
  242
  257
  272
  289
  306
  324
  343
  363
  384
  407
  430
  455
  481
  509
  537
  568
  600
Tax expense, $m
  11
  20
  22
  25
  27
  30
  32
  35
  38
  41
  54
  58
  61
  65
  69
  73
  78
  83
  87
  93
  98
  104
  110
  116
  123
  130
  137
  145
  153
  162
Net income, $m
  30
  55
  61
  67
  73
  80
  87
  95
  103
  111
  147
  156
  166
  176
  187
  199
  211
  223
  237
  250
  265
  281
  297
  314
  332
  351
  371
  392
  414
  438

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
  561
  591
  623
  655
  690
  726
  764
  804
  845
  889
  934
  982
  1,033
  1,085
  1,140
  1,198
  1,259
  1,323
  1,390
  1,460
  1,534
  1,611
  1,692
  1,778
  1,867
  1,961
  2,060
  2,163
  2,272
  2,386
Adjusted assets (=assets-cash), $m
  561
  591
  623
  655
  690
  726
  764
  804
  845
  889
  934
  982
  1,033
  1,085
  1,140
  1,198
  1,259
  1,323
  1,390
  1,460
  1,534
  1,611
  1,692
  1,778
  1,867
  1,961
  2,060
  2,163
  2,272
  2,386
Revenue / Adjusted assets
  0.977
  0.976
  0.976
  0.977
  0.977
  0.977
  0.976
  0.976
  0.978
  0.976
  0.978
  0.978
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.978
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
Average production assets, $m
  399
  420
  443
  466
  491
  516
  543
  572
  601
  632
  665
  699
  734
  772
  811
  852
  896
  941
  989
  1,039
  1,091
  1,146
  1,204
  1,264
  1,328
  1,395
  1,465
  1,538
  1,616
  1,697
Working capital, $m
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
Total debt, $m
  418
  445
  474
  503
  534
  567
  601
  637
  674
  713
  754
  798
  843
  890
  940
  992
  1,047
  1,104
  1,164
  1,228
  1,294
  1,364
  1,437
  1,513
  1,594
  1,678
  1,767
  1,860
  1,958
  2,061
Total liabilities, $m
  505
  532
  560
  590
  621
  653
  688
  723
  761
  800
  841
  884
  929
  977
  1,026
  1,079
  1,133
  1,191
  1,251
  1,314
  1,381
  1,450
  1,523
  1,600
  1,680
  1,765
  1,854
  1,947
  2,045
  2,147
Total equity, $m
  56
  59
  62
  66
  69
  73
  76
  80
  85
  89
  93
  98
  103
  109
  114
  120
  126
  132
  139
  146
  153
  161
  169
  178
  187
  196
  206
  216
  227
  239
Total liabilities and equity, $m
  561
  591
  622
  656
  690
  726
  764
  803
  846
  889
  934
  982
  1,032
  1,086
  1,140
  1,199
  1,259
  1,323
  1,390
  1,460
  1,534
  1,611
  1,692
  1,778
  1,867
  1,961
  2,060
  2,163
  2,272
  2,386
Debt-to-equity ratio
  7.460
  7.540
  7.610
  7.680
  7.750
  7.810
  7.870
  7.920
  7.980
  8.030
  8.070
  8.120
  8.160
  8.200
  8.240
  8.280
  8.310
  8.350
  8.380
  8.410
  8.440
  8.460
  8.490
  8.510
  8.540
  8.560
  8.580
  8.600
  8.620
  8.640
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
  30
  55
  61
  67
  73
  80
  87
  95
  103
  111
  147
  156
  166
  176
  187
  199
  211
  223
  237
  250
  265
  281
  297
  314
  332
  351
  371
  392
  414
  438
Depreciation, amort., depletion, $m
  117
  122
  126
  131
  136
  141
  146
  152
  158
  164
  133
  140
  147
  154
  162
  170
  179
  188
  198
  208
  218
  229
  241
  253
  266
  279
  293
  308
  323
  339
Funds from operations, $m
  147
  176
  187
  198
  209
  221
  233
  247
  260
  275
  280
  296
  313
  331
  350
  369
  390
  411
  434
  458
  483
  510
  538
  567
  598
  630
  664
  700
  738
  777
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  147
  176
  186
  197
  209
  220
  233
  246
  260
  274
  280
  296
  313
  330
  349
  368
  389
  411
  433
  457
  483
  509
  537
  566
  597
  629
  663
  699
  736
  776
Maintenance CAPEX, $m
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -109
  -114
  -120
  -126
  -133
  -140
  -147
  -154
  -162
  -170
  -179
  -188
  -198
  -208
  -218
  -229
  -241
  -253
  -266
  -279
  -293
  -308
  -323
New CAPEX, $m
  -21
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
Cash from investing activities, $m
  -97
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -158
  -167
  -176
  -184
  -193
  -203
  -213
  -224
  -236
  -248
  -260
  -273
  -287
  -302
  -317
  -333
  -349
  -367
  -385
  -404
Free cash flow, $m
  50
  75
  80
  85
  91
  97
  103
  109
  116
  123
  121
  129
  137
  146
  155
  165
  175
  186
  198
  210
  222
  236
  250
  265
  280
  297
  314
  332
  351
  372
Issuance/(repayment) of debt, $m
  -377
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  93
  98
  103
Issuance/(repurchase) of shares, $m
  376
  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  
  -1
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  93
  98
  103
Total cash flow (excl. dividends), $m
  49
  102
  108
  115
  122
  129
  137
  145
  154
  162
  162
  172
  182
  193
  205
  217
  230
  244
  258
  273
  289
  305
  323
  341
  361
  381
  403
  425
  449
  474
Retained Cash Flow (-), $m
  -406
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
Prev. year cash balance distribution, $m
  201
  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
  -156
  99
  105
  112
  118
  126
  133
  141
  149
  158
  157
  167
  177
  188
  199
  211
  224
  237
  251
  266
  281
  298
  315
  333
  352
  372
  393
  415
  438
  463
Discount rate, %
  10.00
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
PV of cash for distribution, $m
  -141
  81
  77
  72
  67
  61
  55
  49
  43
  37
  30
  25
  21
  17
  13
  10
  8
  6
  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
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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, Inc. (CCOI)

Valuation Ratios
P/E Ratio 42.9
Price to Sales 7
Price to Book 12.7
Price to Tangible Book
Price to Cash Flow 29.8
Price to Free Cash Flow 74
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 $520 million for the last fiscal year's total revenue generated by Cogent Communications Holdings, Inc.. The default revenue input number comes from 0001 income statement of Cogent Communications Holdings, 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 CCOI stock valuation model: a) initial revenue growth rate of 5.4% 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 10%, whose default value for CCOI is calculated based on our internal credit rating of Cogent Communications Holdings, 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 Cogent Communications Holdings, 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 CCOI stock the variable cost ratio is equal to 70%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $71 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 6.7% for Cogent Communications Holdings, Inc..

Corporate tax rate of 27% is the nominal tax rate for Cogent Communications Holdings, 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 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 72.8%.

Life of production assets of 4.7 years is the average useful life of capital assets used in Cogent Communications Holdings, 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 CCOI is equal to 1.2%. 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 - $-149.002 million for Cogent Communications Holdings, 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 46.262 million for Cogent Communications Holdings, 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 Cogent Communications Holdings, Inc. at the current share price and the inputted number of shares is $2.4 billion.

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