Intrinsic value of CommScope Holding Company, Inc. - COMM

Previous Close

$15.90

  Intrinsic Value

$8.82

stock screener

  Rating & Target

sell

-45%

Previous close

$15.90

 
Intrinsic value

$8.82

 
Up/down potential

-45%

 
Rating

sell

We calculate the intrinsic value of COMM 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 3.1

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  4,660
  4,768
  4,890
  5,028
  5,180
  5,347
  5,529
  5,727
  5,939
  6,167
  6,411
  6,671
  6,948
  7,242
  7,555
  7,886
  8,236
  8,607
  8,998
  9,412
  9,848
  10,308
  10,793
  11,304
  11,842
  12,409
  13,005
  13,633
  14,293
  14,988
Variable operating expenses, $m
  4,175
  4,270
  4,378
  4,500
  4,635
  4,784
  4,945
  5,120
  5,308
  5,510
  5,681
  5,911
  6,157
  6,418
  6,694
  6,988
  7,298
  7,627
  7,974
  8,340
  8,727
  9,134
  9,564
  10,017
  10,494
  10,996
  11,524
  12,081
  12,666
  13,281
Fixed operating expenses, $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 operating expenses, $m
  4,175
  4,270
  4,378
  4,500
  4,635
  4,784
  4,945
  5,120
  5,308
  5,510
  5,681
  5,911
  6,157
  6,418
  6,694
  6,988
  7,298
  7,627
  7,974
  8,340
  8,727
  9,134
  9,564
  10,017
  10,494
  10,996
  11,524
  12,081
  12,666
  13,281
Operating income, $m
  486
  498
  512
  527
  545
  564
  585
  607
  631
  657
  730
  760
  791
  825
  860
  898
  938
  980
  1,025
  1,072
  1,121
  1,174
  1,229
  1,287
  1,348
  1,413
  1,481
  1,552
  1,628
  1,707
EBITDA, $m
  730
  747
  766
  788
  812
  838
  866
  897
  931
  966
  1,004
  1,045
  1,089
  1,135
  1,184
  1,236
  1,291
  1,349
  1,410
  1,475
  1,543
  1,615
  1,691
  1,771
  1,856
  1,944
  2,038
  2,136
  2,240
  2,348
Interest expense (income), $m
  261
  231
  237
  243
  251
  260
  269
  279
  291
  303
  316
  330
  345
  361
  378
  397
  416
  436
  458
  481
  505
  531
  558
  586
  616
  648
  681
  716
  753
  792
  833
Earnings before tax, $m
  254
  261
  268
  276
  285
  295
  305
  316
  328
  341
  400
  414
  430
  446
  464
  482
  501
  522
  544
  566
  591
  616
  643
  671
  701
  732
  765
  799
  836
  874
Tax expense, $m
  69
  70
  72
  75
  77
  80
  82
  85
  89
  92
  108
  112
  116
  121
  125
  130
  135
  141
  147
  153
  159
  166
  174
  181
  189
  198
  206
  216
  226
  236
Net income, $m
  186
  190
  196
  202
  208
  215
  223
  231
  240
  249
  292
  303
  314
  326
  338
  352
  366
  381
  397
  414
  431
  450
  469
  490
  511
  534
  558
  583
  610
  638

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
  6,764
  6,920
  7,097
  7,297
  7,518
  7,761
  8,025
  8,311
  8,620
  8,950
  9,304
  9,682
  10,084
  10,511
  10,965
  11,445
  11,954
  12,492
  13,060
  13,660
  14,293
  14,961
  15,665
  16,407
  17,188
  18,010
  18,876
  19,787
  20,745
  21,753
Adjusted assets (=assets-cash), $m
  6,764
  6,920
  7,097
  7,297
  7,518
  7,761
  8,025
  8,311
  8,620
  8,950
  9,304
  9,682
  10,084
  10,511
  10,965
  11,445
  11,954
  12,492
  13,060
  13,660
  14,293
  14,961
  15,665
  16,407
  17,188
  18,010
  18,876
  19,787
  20,745
  21,753
Revenue / Adjusted assets
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
Average production assets, $m
  2,694
  2,756
  2,826
  2,906
  2,994
  3,091
  3,196
  3,310
  3,433
  3,564
  3,705
  3,856
  4,016
  4,186
  4,367
  4,558
  4,761
  4,975
  5,201
  5,440
  5,692
  5,958
  6,238
  6,534
  6,845
  7,172
  7,517
  7,880
  8,261
  8,663
Working capital, $m
  746
  763
  782
  804
  829
  856
  885
  916
  950
  987
  1,026
  1,067
  1,112
  1,159
  1,209
  1,262
  1,318
  1,377
  1,440
  1,506
  1,576
  1,649
  1,727
  1,809
  1,895
  1,985
  2,081
  2,181
  2,287
  2,398
Total debt, $m
  4,084
  4,198
  4,329
  4,475
  4,638
  4,816
  5,011
  5,221
  5,448
  5,691
  5,951
  6,228
  6,524
  6,838
  7,171
  7,524
  7,898
  8,294
  8,711
  9,152
  9,618
  10,109
  10,626
  11,171
  11,745
  12,350
  12,986
  13,655
  14,360
  15,100
Total liabilities, $m
  4,972
  5,086
  5,217
  5,363
  5,526
  5,704
  5,899
  6,109
  6,335
  6,579
  6,839
  7,116
  7,412
  7,726
  8,059
  8,412
  8,786
  9,181
  9,599
  10,040
  10,506
  10,996
  11,514
  12,059
  12,633
  13,237
  13,874
  14,543
  15,247
  15,988
Total equity, $m
  1,792
  1,834
  1,881
  1,934
  1,992
  2,057
  2,127
  2,203
  2,284
  2,372
  2,466
  2,566
  2,672
  2,786
  2,906
  3,033
  3,168
  3,310
  3,461
  3,620
  3,788
  3,965
  4,151
  4,348
  4,555
  4,773
  5,002
  5,243
  5,497
  5,764
Total liabilities and equity, $m
  6,764
  6,920
  7,098
  7,297
  7,518
  7,761
  8,026
  8,312
  8,619
  8,951
  9,305
  9,682
  10,084
  10,512
  10,965
  11,445
  11,954
  12,491
  13,060
  13,660
  14,294
  14,961
  15,665
  16,407
  17,188
  18,010
  18,876
  19,786
  20,744
  21,752
Debt-to-equity ratio
  2.280
  2.290
  2.300
  2.310
  2.330
  2.340
  2.360
  2.370
  2.380
  2.400
  2.410
  2.430
  2.440
  2.450
  2.470
  2.480
  2.490
  2.510
  2.520
  2.530
  2.540
  2.550
  2.560
  2.570
  2.580
  2.590
  2.600
  2.600
  2.610
  2.620
Adjusted equity ratio
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  186
  190
  196
  202
  208
  215
  223
  231
  240
  249
  292
  303
  314
  326
  338
  352
  366
  381
  397
  414
  431
  450
  469
  490
  511
  534
  558
  583
  610
  638
Depreciation, amort., depletion, $m
  245
  249
  254
  260
  267
  274
  282
  290
  299
  309
  274
  286
  297
  310
  323
  338
  353
  369
  385
  403
  422
  441
  462
  484
  507
  531
  557
  584
  612
  642
Funds from operations, $m
  430
  440
  450
  462
  475
  489
  505
  521
  539
  558
  566
  588
  611
  636
  662
  690
  719
  750
  782
  817
  853
  891
  931
  974
  1,018
  1,066
  1,115
  1,167
  1,222
  1,280
Change in working capital, $m
  15
  17
  20
  22
  24
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  86
  91
  95
  100
  106
  111
Cash from operations, $m
  416
  423
  431
  440
  451
  462
  475
  490
  505
  522
  527
  547
  567
  589
  612
  637
  663
  690
  719
  750
  783
  817
  854
  892
  932
  975
  1,020
  1,067
  1,116
  1,168
Maintenance CAPEX, $m
  -196
  -200
  -204
  -209
  -215
  -222
  -229
  -237
  -245
  -254
  -264
  -274
  -286
  -297
  -310
  -323
  -338
  -353
  -369
  -385
  -403
  -422
  -441
  -462
  -484
  -507
  -531
  -557
  -584
  -612
New CAPEX, $m
  -53
  -62
  -71
  -80
  -88
  -97
  -105
  -114
  -123
  -132
  -141
  -150
  -160
  -170
  -181
  -191
  -203
  -214
  -226
  -239
  -252
  -266
  -280
  -295
  -311
  -328
  -345
  -363
  -382
  -401
Cash from investing activities, $m
  -249
  -262
  -275
  -289
  -303
  -319
  -334
  -351
  -368
  -386
  -405
  -424
  -446
  -467
  -491
  -514
  -541
  -567
  -595
  -624
  -655
  -688
  -721
  -757
  -795
  -835
  -876
  -920
  -966
  -1,013
Free cash flow, $m
  167
  161
  156
  151
  147
  144
  141
  139
  137
  136
  122
  122
  121
  121
  121
  122
  122
  123
  125
  126
  128
  130
  132
  135
  137
  140
  144
  147
  151
  155
Issuance/(repayment) of debt, $m
  98
  114
  131
  147
  163
  178
  194
  210
  227
  243
  260
  278
  296
  314
  333
  353
  374
  395
  418
  441
  465
  491
  517
  545
  574
  604
  636
  669
  704
  741
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  
  98
  114
  131
  147
  163
  178
  194
  210
  227
  243
  260
  278
  296
  314
  333
  353
  374
  395
  418
  441
  465
  491
  517
  545
  574
  604
  636
  669
  704
  741
Total cash flow (excl. dividends), $m
  265
  275
  286
  298
  310
  322
  336
  349
  364
  379
  383
  399
  417
  435
  455
  475
  496
  519
  542
  567
  593
  621
  649
  680
  711
  745
  780
  817
  855
  896
Retained Cash Flow (-), $m
  -36
  -41
  -47
  -53
  -59
  -64
  -70
  -76
  -82
  -88
  -94
  -100
  -107
  -113
  -120
  -127
  -135
  -143
  -151
  -159
  -168
  -177
  -187
  -197
  -207
  -218
  -229
  -241
  -254
  -267
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
  229
  234
  239
  245
  251
  258
  266
  273
  282
  291
  289
  299
  310
  322
  334
  348
  361
  376
  392
  408
  425
  444
  463
  483
  504
  527
  550
  575
  601
  629
Discount rate, %
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
  210
  194
  179
  163
  147
  132
  117
  102
  89
  76
  61
  51
  42
  34
  27
  21
  16
  12
  8
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
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

CommScope Holding Company, Inc. (CommScope) is a provider of infrastructure solutions for the core, access and edge layers of communications networks. The Company operates through two segments: CommScope Connectivity Solutions (CCS) and CommScope Mobility Solutions (CMS). Its portfolio includes wireless and fiber optic solutions. The Company's solutions are found in the venues and outdoor spaces, including in data centers and buildings of all shapes, sizes and complexities; at wireless cell sites; in telecom central offices and cable head ends; in fiber-to-the-X (FTTX) deployments, and in airports, trains and tunnels. As of December 31, 2016, it served customers in over 100 countries through a network of more than 30 manufacturing and distribution facilities located around the globe. Its customers include global telecommunication operators and enterprise customers, including Fortune 500 enterprises and multi-system operators (MSOs).

FINANCIAL RATIOS  of  CommScope Holding Company, Inc. (COMM)

Valuation Ratios
P/E Ratio 13.8
Price to Sales 0.6
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 5.1
Price to Free Cash Flow 5.7
Growth Rates
Sales Growth Rate 29.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.3%
Cap. Spend. - 3 Yr. Gr. Rate 12.9%
Financial Strength
Quick Ratio 33
Current Ratio 0
LT Debt to Equity 326.3%
Total Debt to Equity 327.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity 17%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 41.3%
Gross Margin - 3 Yr. Avg. 37.7%
EBITDA Margin 18.9%
EBITDA Margin - 3 Yr. Avg. 16.9%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 10.5%
Pre-Tax Margin 5.5%
Pre-Tax Margin - 3 Yr. Avg. 4.1%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate 18.3%
Eff/ Tax Rate - 3 Yr. Avg. 9.7%
Payout Ratio 0%

COMM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the COMM stock intrinsic value calculation we used $4569 million for the last fiscal year's total revenue generated by CommScope Holding Company, Inc.. The default revenue input number comes from 0001 income statement of CommScope Holding Company, 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 COMM stock valuation model: a) initial revenue growth rate of 2% 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 9.3%, whose default value for COMM is calculated based on our internal credit rating of CommScope Holding Company, 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 CommScope Holding Company, 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 COMM stock the variable cost ratio is equal to 89.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for COMM 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 5.8% for CommScope Holding Company, Inc..

Corporate tax rate of 27% is the nominal tax rate for CommScope Holding Company, 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 COMM 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 COMM are equal to 57.8%.

Life of production assets of 13.5 years is the average useful life of capital assets used in CommScope Holding Company, 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 COMM is equal to 16%. 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 - $1756.768 million for CommScope Holding Company, 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 192.202 million for CommScope Holding Company, 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 CommScope Holding Company, Inc. at the current share price and the inputted number of shares is $3.1 billion.

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