Intrinsic value of Town Sports International Holdings, Inc. - CLUB

Previous Close

$2.64

  Intrinsic Value

$1.85

stock screener

  Rating & Target

sell

-30%

Previous close

$2.64

 
Intrinsic value

$1.85

 
Up/down potential

-30%

 
Rating

sell

We calculate the intrinsic value of CLUB 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 0.1

 

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, %
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  477
  513
  549
  588
  627
  669
  712
  757
  803
  852
  902
  955
  1,010
  1,068
  1,128
  1,190
  1,256
  1,324
  1,396
  1,471
  1,549
  1,631
  1,717
  1,807
  1,901
  2,000
  2,104
  2,212
  2,326
  2,445
Variable operating expenses, $m
  411
  441
  473
  506
  540
  575
  612
  650
  690
  731
  772
  817
  864
  913
  964
  1,018
  1,074
  1,132
  1,194
  1,258
  1,325
  1,395
  1,468
  1,545
  1,626
  1,710
  1,799
  1,891
  1,989
  2,090
Fixed operating expenses, $m
  50
  51
  52
  53
  55
  56
  57
  58
  60
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
  84
  86
  88
  90
  92
  94
Total operating expenses, $m
  461
  492
  525
  559
  595
  631
  669
  708
  750
  792
  834
  881
  929
  979
  1,032
  1,087
  1,145
  1,204
  1,268
  1,334
  1,402
  1,474
  1,549
  1,628
  1,710
  1,796
  1,887
  1,981
  2,081
  2,184
Operating income, $m
  16
  20
  24
  29
  33
  38
  43
  48
  54
  60
  69
  75
  81
  88
  96
  103
  111
  120
  128
  138
  147
  157
  168
  179
  191
  204
  217
  231
  245
  260
EBITDA, $m
  55
  61
  68
  76
  83
  91
  99
  108
  117
  126
  136
  146
  157
  168
  180
  192
  205
  218
  232
  247
  263
  279
  296
  314
  333
  353
  374
  396
  419
  443
Interest expense (income), $m
  12
  14
  8
  10
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  46
  49
  52
  56
  59
  62
  66
  70
  74
Earnings before tax, $m
  2
  12
  15
  18
  21
  24
  28
  32
  36
  40
  47
  51
  56
  61
  66
  72
  77
  84
  90
  97
  104
  111
  119
  127
  136
  145
  154
  164
  175
  186
Tax expense, $m
  1
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
Net income, $m
  2
  9
  11
  13
  15
  18
  20
  23
  26
  29
  34
  38
  41
  45
  48
  52
  57
  61
  66
  70
  76
  81
  87
  93
  99
  106
  113
  120
  128
  136

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
  282
  303
  324
  347
  370
  395
  420
  447
  474
  503
  533
  564
  596
  630
  666
  703
  741
  782
  824
  868
  915
  963
  1,014
  1,067
  1,122
  1,181
  1,242
  1,306
  1,373
  1,443
Adjusted assets (=assets-cash), $m
  282
  303
  324
  347
  370
  395
  420
  447
  474
  503
  533
  564
  596
  630
  666
  703
  741
  782
  824
  868
  915
  963
  1,014
  1,067
  1,122
  1,181
  1,242
  1,306
  1,373
  1,443
Revenue / Adjusted assets
  1.691
  1.693
  1.694
  1.695
  1.695
  1.694
  1.695
  1.694
  1.694
  1.694
  1.692
  1.693
  1.695
  1.695
  1.694
  1.693
  1.695
  1.693
  1.694
  1.695
  1.693
  1.694
  1.693
  1.694
  1.694
  1.693
  1.694
  1.694
  1.694
  1.694
Average production assets, $m
  178
  191
  205
  219
  234
  249
  266
  282
  300
  318
  337
  356
  377
  398
  421
  444
  468
  494
  521
  549
  578
  608
  640
  674
  709
  746
  785
  825
  868
  912
Working capital, $m
  -64
  -69
  -74
  -79
  -85
  -90
  -96
  -102
  -108
  -115
  -122
  -129
  -136
  -144
  -152
  -161
  -170
  -179
  -188
  -199
  -209
  -220
  -232
  -244
  -257
  -270
  -284
  -299
  -314
  -330
Total debt, $m
  124
  142
  162
  182
  203
  225
  248
  272
  297
  323
  350
  378
  407
  437
  469
  503
  537
  574
  612
  651
  693
  737
  782
  830
  880
  933
  988
  1,045
  1,106
  1,169
Total liabilities, $m
  253
  272
  292
  312
  333
  355
  378
  402
  427
  453
  479
  508
  537
  567
  599
  632
  667
  704
  742
  781
  823
  867
  912
  960
  1,010
  1,063
  1,118
  1,175
  1,236
  1,299
Total equity, $m
  28
  30
  32
  35
  37
  39
  42
  45
  47
  50
  53
  56
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  101
  107
  112
  118
  124
  131
  137
  144
Total liabilities and equity, $m
  281
  302
  324
  347
  370
  394
  420
  447
  474
  503
  532
  564
  597
  630
  666
  702
  741
  782
  824
  868
  914
  963
  1,013
  1,067
  1,122
  1,181
  1,242
  1,306
  1,373
  1,443
Debt-to-equity ratio
  4.390
  4.710
  4.990
  5.250
  5.490
  5.710
  5.910
  6.090
  6.260
  6.420
  6.560
  6.700
  6.820
  6.940
  7.050
  7.150
  7.250
  7.340
  7.420
  7.500
  7.580
  7.650
  7.720
  7.780
  7.840
  7.900
  7.950
  8.000
  8.050
  8.100
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
  2
  9
  11
  13
  15
  18
  20
  23
  26
  29
  34
  38
  41
  45
  48
  52
  57
  61
  66
  70
  76
  81
  87
  93
  99
  106
  113
  120
  128
  136
Depreciation, amort., depletion, $m
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  67
  71
  75
  80
  84
  89
  94
  99
  104
  110
  116
  122
  128
  135
  142
  149
  157
  165
  174
  182
Funds from operations, $m
  40
  50
  55
  60
  65
  71
  77
  83
  89
  96
  102
  109
  116
  124
  133
  141
  150
  160
  170
  180
  191
  203
  215
  228
  241
  255
  270
  285
  301
  318
Change in working capital, $m
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Cash from operations, $m
  45
  55
  60
  65
  71
  76
  82
  89
  95
  102
  108
  116
  124
  132
  141
  150
  159
  169
  179
  190
  202
  214
  226
  240
  254
  268
  284
  300
  317
  335
Maintenance CAPEX, $m
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -64
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -149
  -157
  -165
  -174
New CAPEX, $m
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
Cash from investing activities, $m
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -73
  -78
  -83
  -87
  -92
  -96
  -102
  -107
  -113
  -120
  -126
  -132
  -139
  -147
  -154
  -162
  -170
  -179
  -188
  -197
  -207
  -218
Free cash flow, $m
  -1
  6
  8
  10
  12
  14
  16
  19
  21
  24
  26
  29
  32
  35
  39
  42
  46
  50
  54
  58
  63
  68
  73
  78
  84
  90
  96
  102
  109
  117
Issuance/(repayment) of debt, $m
  -81
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
Issuance/(repurchase) of shares, $m
  99
  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
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
Total cash flow (excl. dividends), $m
  18
  25
  27
  30
  33
  36
  39
  43
  46
  50
  53
  57
  61
  66
  70
  75
  81
  86
  92
  98
  104
  111
  118
  126
  134
  142
  151
  160
  170
  180
Retained Cash Flow (-), $m
  -101
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
Prev. year cash balance distribution, $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 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
  -83
  23
  25
  28
  31
  34
  37
  40
  43
  47
  50
  54
  58
  62
  67
  72
  77
  82
  88
  94
  100
  106
  113
  120
  128
  136
  145
  154
  163
  173
Discount rate, %
  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
  43.22
PV of cash for distribution, $m
  -75
  18
  18
  18
  17
  16
  15
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  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
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Town Sports International Holdings, Inc. is an owner and operator of fitness clubs in the Northeast and Mid-Atlantic regions of the United States fitness. As of December 31, 2016, the Company, through its subsidiaries, operated 150 fitness clubs (clubs). It owned and operated a total of 102 clubs under the New York Sports Clubs (NYSC) brand name within a 120-mile radius of New York City as of December 31, 2016, including 35 locations in Manhattan. It owned and operated 28 clubs in the Boston region under its Boston Sports Clubs (BSC) brand name, 12 clubs (one of which is partly-owned) in the Washington, D.C. region under its Washington Sports Clubs (WSC) brand name and five clubs in the Philadelphia region under its Philadelphia Sports Clubs (PSC) brand name as of December 31, 2016. In addition, as of December 31, 2016, it owned and operated three clubs in Switzerland and partly-owned one club that operated under a different brand name in Washington, D.C.

FINANCIAL RATIOS  of  Town Sports International Holdings, Inc. (CLUB)

Valuation Ratios
P/E Ratio 8.8
Price to Sales 0.2
Price to Book -0.8
Price to Tangible Book
Price to Cash Flow 3.3
Price to Free Cash Flow 70.1
Growth Rates
Sales Growth Rate -6.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -8.4%
Financial Strength
Quick Ratio 23
Current Ratio 0
LT Debt to Equity -226.7%
Total Debt to Equity -229.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 5.7%
Ret/ On T. Cap. - 3 Yr. Avg. -4.3%
Return On Equity -8.8%
Return On Equity - 3 Yr. Avg. 18.9%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 53.4%
Gross Margin - 3 Yr. Avg. 54.9%
EBITDA Margin 18.6%
EBITDA Margin - 3 Yr. Avg. 15.4%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 0.9%
Net Profit Margin 2%
Net Profit Margin - 3 Yr. Avg. -2.7%
Effective Tax Rate 55.6%
Eff/ Tax Rate - 3 Yr. Avg. -158.6%
Payout Ratio 0%

CLUB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLUB stock intrinsic value calculation we used $443 million for the last fiscal year's total revenue generated by Town Sports International Holdings, Inc.. The default revenue input number comes from 0001 income statement of Town Sports International 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 CLUB stock valuation model: a) initial revenue growth rate of 7.7% 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 10.5%, whose default value for CLUB is calculated based on our internal credit rating of Town Sports International 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 Town Sports International 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 CLUB stock the variable cost ratio is equal to 86.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $49 million in the base year in the intrinsic value calculation for CLUB 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 Town Sports International Holdings, Inc..

Corporate tax rate of 27% is the nominal tax rate for Town Sports International 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 CLUB 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 CLUB are equal to 37.3%.

Life of production assets of 4.7 years is the average useful life of capital assets used in Town Sports International 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 CLUB is equal to -13.5%. 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 - $-72.99 million for Town Sports International 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 27.924 million for Town Sports International 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 Town Sports International Holdings, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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