Intrinsic value of Cogent Communications Holdings - CCOI

Previous Close

$54.10

  Intrinsic Value

$4.15

stock screener

  Rating & Target

str. sell

-92%

Previous close

$54.10

 
Intrinsic value

$4.15

 
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 2017), $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
   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, %
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  527
  570
  615
  662
  711
  762
  814
  869
  926
  985
  1,047
  1,111
  1,178
  1,247
  1,320
  1,396
  1,475
  1,557
  1,644
  1,734
  1,828
  1,927
  2,030
  2,138
  2,251
  2,369
  2,493
  2,623
  2,759
  2,902
Variable operating expenses, $m
  371
  402
  434
  467
  501
  537
  574
  613
  653
  694
  738
  783
  830
  879
  931
  984
  1,040
  1,098
  1,159
  1,222
  1,289
  1,358
  1,431
  1,507
  1,587
  1,670
  1,758
  1,849
  1,945
  2,046
Fixed operating expenses, $m
  69
  71
  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
Total operating expenses, $m
  440
  473
  507
  541
  577
  614
  653
  694
  736
  779
  824
  871
  920
  971
  1,025
  1,080
  1,138
  1,199
  1,262
  1,327
  1,396
  1,468
  1,543
  1,622
  1,704
  1,790
  1,880
  1,974
  2,073
  2,177
Operating income, $m
  86
  97
  109
  121
  134
  147
  161
  175
  190
  206
  222
  239
  257
  276
  295
  315
  337
  359
  382
  406
  432
  459
  487
  516
  547
  579
  613
  649
  686
  725
EBITDA, $m
  126
  141
  156
  172
  188
  206
  223
  242
  261
  282
  303
  324
  347
  371
  396
  422
  450
  478
  508
  539
  572
  606
  642
  680
  719
  761
  804
  850
  898
  948
Interest expense (income), $m
  35
  48
  29
  32
  35
  38
  42
  45
  49
  52
  56
  60
  65
  69
  73
  78
  83
  88
  94
  99
  105
  111
  118
  124
  131
  139
  146
  154
  163
  171
  181
Earnings before tax, $m
  38
  68
  77
  86
  95
  105
  116
  127
  138
  150
  162
  175
  188
  202
  217
  232
  248
  265
  283
  301
  321
  341
  362
  385
  408
  433
  459
  486
  515
  545
Tax expense, $m
  10
  18
  21
  23
  26
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  72
  76
  81
  87
  92
  98
  104
  110
  117
  124
  131
  139
  147
Net income, $m
  27
  50
  56
  63
  70
  77
  85
  92
  101
  109
  118
  128
  137
  148
  158
  170
  181
  194
  207
  220
  234
  249
  265
  281
  298
  316
  335
  355
  376
  398

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
  584
  632
  682
  734
  788
  844
  903
  963
  1,026
  1,092
  1,160
  1,232
  1,306
  1,383
  1,463
  1,547
  1,635
  1,727
  1,822
  1,922
  2,027
  2,136
  2,251
  2,370
  2,496
  2,627
  2,764
  2,908
  3,059
  3,217
Adjusted assets (=assets-cash), $m
  584
  632
  682
  734
  788
  844
  903
  963
  1,026
  1,092
  1,160
  1,232
  1,306
  1,383
  1,463
  1,547
  1,635
  1,727
  1,822
  1,922
  2,027
  2,136
  2,251
  2,370
  2,496
  2,627
  2,764
  2,908
  3,059
  3,217
Revenue / Adjusted assets
  0.902
  0.902
  0.902
  0.902
  0.902
  0.903
  0.901
  0.902
  0.903
  0.902
  0.903
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
Average production assets, $m
  403
  437
  471
  507
  545
  583
  624
  666
  709
  755
  802
  851
  902
  955
  1,011
  1,069
  1,130
  1,193
  1,259
  1,328
  1,400
  1,476
  1,555
  1,638
  1,724
  1,815
  1,910
  2,009
  2,114
  2,223
Working capital, $m
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
Total debt, $m
  430
  473
  518
  565
  614
  664
  717
  772
  828
  887
  949
  1,013
  1,080
  1,149
  1,222
  1,297
  1,376
  1,459
  1,545
  1,635
  1,729
  1,827
  1,930
  2,038
  2,151
  2,269
  2,392
  2,522
  2,658
  2,800
Total liabilities, $m
  526
  569
  614
  661
  709
  760
  812
  867
  924
  983
  1,044
  1,108
  1,175
  1,245
  1,317
  1,393
  1,472
  1,554
  1,640
  1,730
  1,824
  1,923
  2,025
  2,133
  2,246
  2,364
  2,488
  2,617
  2,753
  2,896
Total equity, $m
  58
  63
  68
  73
  79
  84
  90
  96
  103
  109
  116
  123
  131
  138
  146
  155
  164
  173
  182
  192
  203
  214
  225
  237
  250
  263
  276
  291
  306
  322
Total liabilities and equity, $m
  584
  632
  682
  734
  788
  844
  902
  963
  1,027
  1,092
  1,160
  1,231
  1,306
  1,383
  1,463
  1,548
  1,636
  1,727
  1,822
  1,922
  2,027
  2,137
  2,250
  2,370
  2,496
  2,627
  2,764
  2,908
  3,059
  3,218
Debt-to-equity ratio
  7.370
  7.490
  7.600
  7.700
  7.790
  7.870
  7.940
  8.010
  8.070
  8.130
  8.180
  8.230
  8.270
  8.310
  8.350
  8.380
  8.420
  8.450
  8.480
  8.500
  8.530
  8.550
  8.580
  8.600
  8.620
  8.640
  8.650
  8.670
  8.690
  8.700
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
  27
  50
  56
  63
  70
  77
  85
  92
  101
  109
  118
  128
  137
  148
  158
  170
  181
  194
  207
  220
  234
  249
  265
  281
  298
  316
  335
  355
  376
  398
Depreciation, amort., depletion, $m
  40
  44
  47
  51
  54
  58
  62
  67
  71
  75
  80
  85
  90
  96
  101
  107
  113
  119
  126
  133
  140
  148
  155
  164
  172
  181
  191
  201
  211
  222
Funds from operations, $m
  68
  93
  103
  113
  124
  135
  147
  159
  172
  185
  198
  213
  228
  243
  260
  277
  294
  313
  332
  353
  374
  397
  420
  445
  470
  498
  526
  556
  587
  620
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  69
  94
  104
  115
  125
  137
  148
  160
  173
  186
  200
  214
  229
  245
  261
  278
  296
  315
  334
  355
  376
  399
  423
  447
  473
  500
  529
  559
  590
  623
Maintenance CAPEX, $m
  -37
  -40
  -44
  -47
  -51
  -54
  -58
  -62
  -67
  -71
  -75
  -80
  -85
  -90
  -96
  -101
  -107
  -113
  -119
  -126
  -133
  -140
  -148
  -155
  -164
  -172
  -181
  -191
  -201
  -211
New CAPEX, $m
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -95
  -99
  -104
  -109
Cash from investing activities, $m
  -69
  -73
  -79
  -83
  -88
  -93
  -98
  -104
  -111
  -116
  -122
  -129
  -136
  -143
  -152
  -159
  -168
  -176
  -185
  -195
  -205
  -216
  -227
  -238
  -251
  -263
  -276
  -290
  -305
  -320
Free cash flow, $m
  0
  21
  26
  31
  37
  43
  50
  56
  63
  70
  77
  85
  93
  101
  110
  119
  129
  139
  149
  160
  171
  183
  196
  209
  223
  237
  252
  268
  285
  303
Issuance/(repayment) of debt, $m
  -281
  43
  45
  47
  49
  51
  53
  55
  57
  59
  61
  64
  67
  70
  72
  76
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  142
Issuance/(repurchase) of shares, $m
  299
  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  
  18
  43
  45
  47
  49
  51
  53
  55
  57
  59
  61
  64
  67
  70
  72
  76
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  142
Total cash flow (excl. dividends), $m
  18
  64
  71
  78
  86
  94
  102
  111
  120
  129
  139
  149
  160
  171
  183
  195
  208
  221
  235
  250
  265
  282
  299
  317
  336
  355
  376
  398
  421
  445
Retained Cash Flow (-), $m
  -327
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
Prev. year cash balance distribution, $m
  165
  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
  13
  14
  15
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
  75
Cash available for distribution, $m
  -143
  59
  66
  73
  80
  88
  96
  105
  113
  122
  132
  142
  152
  163
  174
  186
  199
  212
  226
  240
  255
  271
  287
  305
  323
  342
  362
  384
  406
  429
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
  -131
  49
  49
  48
  46
  43
  41
  37
  34
  30
  26
  22
  19
  15
  12
  10
  7
  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
  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 44.9
Price to Sales 7.4
Price to Book 13.3
Price to Tangible Book
Price to Cash Flow 31.2
Price to Free Cash Flow 77.6
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 million for the last fiscal year's total revenue generated by Cogent Communications Holdings. The default revenue input number comes from 2017 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 8.6% 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 70.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $68 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 2.7%.

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 10 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 -2.4%. 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 - $-103 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 45 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 $2.4 billion.

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COMPANY NEWS

▶ 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]
▶ Cogent meets 1Q profit forecasts   [May-04-17 07:55AM  Associated Press]
▶ Cogent misses Street 4Q forecasts   [07:56AM  Associated Press]
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