Intrinsic value of Danaos Corporation - DAC

Previous Close

$0.88

  Intrinsic Value

$1.38

stock screener

  Rating & Target

str. buy

+57%

Previous close

$0.88

 
Intrinsic value

$1.38

 
Up/down potential

+57%

 
Rating

str. buy

We calculate the intrinsic value of DAC 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 0.2

 

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
  468
  479
  491
  505
  520
  537
  555
  575
  597
  620
  644
  670
  698
  728
  759
  792
  827
  865
  904
  946
  989
  1,036
  1,084
  1,136
  1,190
  1,247
  1,307
  1,370
  1,436
  1,506
Variable operating expenses, $m
  273
  280
  287
  295
  304
  314
  324
  336
  348
  362
  376
  391
  408
  425
  443
  463
  483
  505
  528
  552
  578
  605
  633
  663
  695
  728
  763
  800
  839
  879
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
  273
  280
  287
  295
  304
  314
  324
  336
  348
  362
  376
  391
  408
  425
  443
  463
  483
  505
  528
  552
  578
  605
  633
  663
  695
  728
  763
  800
  839
  879
Operating income, $m
  195
  199
  204
  210
  216
  223
  231
  239
  248
  258
  268
  279
  290
  303
  316
  330
  344
  360
  376
  393
  412
  431
  451
  472
  495
  519
  544
  570
  597
  626
EBITDA, $m
  305
  312
  320
  329
  339
  350
  361
  374
  388
  403
  419
  436
  454
  473
  494
  515
  538
  563
  588
  615
  644
  674
  705
  739
  774
  811
  850
  891
  934
  980
Interest expense (income), $m
  69
  88
  90
  92
  95
  99
  102
  106
  110
  115
  120
  125
  131
  137
  144
  151
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
  259
  272
  286
  301
  317
Earnings before tax, $m
  107
  109
  112
  115
  118
  121
  125
  129
  133
  138
  143
  148
  153
  159
  165
  172
  178
  186
  193
  201
  210
  219
  228
  238
  249
  260
  271
  283
  296
  310
Tax expense, $m
  29
  30
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
Net income, $m
  78
  80
  82
  84
  86
  89
  91
  94
  97
  101
  104
  108
  112
  116
  120
  125
  130
  136
  141
  147
  153
  160
  167
  174
  182
  190
  198
  207
  216
  226

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
  2,738
  2,801
  2,873
  2,954
  3,043
  3,141
  3,248
  3,364
  3,489
  3,623
  3,766
  3,919
  4,082
  4,255
  4,438
  4,633
  4,839
  5,056
  5,286
  5,529
  5,786
  6,056
  6,341
  6,641
  6,957
  7,290
  7,640
  8,009
  8,397
  8,805
Adjusted assets (=assets-cash), $m
  2,738
  2,801
  2,873
  2,954
  3,043
  3,141
  3,248
  3,364
  3,489
  3,623
  3,766
  3,919
  4,082
  4,255
  4,438
  4,633
  4,839
  5,056
  5,286
  5,529
  5,786
  6,056
  6,341
  6,641
  6,957
  7,290
  7,640
  8,009
  8,397
  8,805
Revenue / Adjusted assets
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
Average production assets, $m
  2,691
  2,753
  2,824
  2,903
  2,991
  3,088
  3,193
  3,307
  3,429
  3,561
  3,702
  3,852
  4,012
  4,182
  4,362
  4,554
  4,756
  4,970
  5,196
  5,435
  5,687
  5,952
  6,232
  6,527
  6,838
  7,165
  7,510
  7,872
  8,253
  8,654
Working capital, $m
  -68
  -69
  -71
  -73
  -75
  -78
  -81
  -83
  -87
  -90
  -93
  -97
  -101
  -105
  -110
  -115
  -120
  -125
  -131
  -137
  -143
  -150
  -157
  -165
  -173
  -181
  -189
  -199
  -208
  -218
Total debt, $m
  1,664
  1,711
  1,765
  1,825
  1,891
  1,964
  2,043
  2,129
  2,222
  2,321
  2,427
  2,541
  2,662
  2,790
  2,926
  3,070
  3,223
  3,385
  3,555
  3,736
  3,926
  4,126
  4,338
  4,561
  4,795
  5,042
  5,302
  5,576
  5,863
  6,166
Total liabilities, $m
  2,032
  2,078
  2,132
  2,192
  2,258
  2,331
  2,410
  2,496
  2,589
  2,688
  2,795
  2,908
  3,029
  3,157
  3,293
  3,438
  3,590
  3,752
  3,923
  4,103
  4,293
  4,493
  4,705
  4,928
  5,162
  5,409
  5,669
  5,943
  6,231
  6,533
Total equity, $m
  706
  723
  741
  762
  785
  810
  838
  868
  900
  935
  972
  1,011
  1,053
  1,098
  1,145
  1,195
  1,248
  1,305
  1,364
  1,427
  1,493
  1,562
  1,636
  1,713
  1,795
  1,881
  1,971
  2,066
  2,166
  2,272
Total liabilities and equity, $m
  2,738
  2,801
  2,873
  2,954
  3,043
  3,141
  3,248
  3,364
  3,489
  3,623
  3,767
  3,919
  4,082
  4,255
  4,438
  4,633
  4,838
  5,057
  5,287
  5,530
  5,786
  6,055
  6,341
  6,641
  6,957
  7,290
  7,640
  8,009
  8,397
  8,805
Debt-to-equity ratio
  2.360
  2.370
  2.380
  2.390
  2.410
  2.420
  2.440
  2.450
  2.470
  2.480
  2.500
  2.510
  2.530
  2.540
  2.560
  2.570
  2.580
  2.590
  2.610
  2.620
  2.630
  2.640
  2.650
  2.660
  2.670
  2.680
  2.690
  2.700
  2.710
  2.710
Adjusted equity ratio
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  78
  80
  82
  84
  86
  89
  91
  94
  97
  101
  104
  108
  112
  116
  120
  125
  130
  136
  141
  147
  153
  160
  167
  174
  182
  190
  198
  207
  216
  226
Depreciation, amort., depletion, $m
  110
  112
  115
  118
  122
  126
  130
  135
  140
  145
  151
  157
  164
  171
  178
  186
  194
  203
  212
  222
  232
  243
  254
  266
  279
  292
  307
  321
  337
  353
Funds from operations, $m
  188
  192
  197
  202
  208
  215
  222
  229
  237
  246
  255
  265
  276
  287
  299
  311
  324
  338
  353
  369
  385
  403
  421
  440
  461
  482
  505
  528
  553
  579
Change in working capital, $m
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
Cash from operations, $m
  189
  194
  199
  204
  210
  217
  224
  232
  240
  249
  259
  269
  280
  291
  303
  316
  329
  344
  359
  375
  392
  409
  428
  448
  468
  490
  513
  537
  563
  589
Maintenance CAPEX, $m
  -108
  -110
  -112
  -115
  -118
  -122
  -126
  -130
  -135
  -140
  -145
  -151
  -157
  -164
  -171
  -178
  -186
  -194
  -203
  -212
  -222
  -232
  -243
  -254
  -266
  -279
  -292
  -307
  -321
  -337
New CAPEX, $m
  -53
  -62
  -71
  -79
  -88
  -97
  -105
  -114
  -123
  -132
  -141
  -150
  -160
  -170
  -180
  -191
  -202
  -214
  -226
  -239
  -252
  -266
  -280
  -295
  -311
  -327
  -344
  -362
  -381
  -401
Cash from investing activities, $m
  -161
  -172
  -183
  -194
  -206
  -219
  -231
  -244
  -258
  -272
  -286
  -301
  -317
  -334
  -351
  -369
  -388
  -408
  -429
  -451
  -474
  -498
  -523
  -549
  -577
  -606
  -636
  -669
  -702
  -738
Free cash flow, $m
  29
  22
  16
  10
  4
  -2
  -7
  -12
  -17
  -22
  -27
  -32
  -38
  -43
  -48
  -53
  -59
  -64
  -70
  -76
  -82
  -88
  -95
  -102
  -109
  -116
  -124
  -132
  -140
  -148
Issuance/(repayment) of debt, $m
  43
  47
  53
  60
  66
  73
  79
  86
  93
  99
  106
  113
  121
  128
  136
  144
  153
  162
  171
  180
  190
  201
  211
  223
  235
  247
  260
  274
  288
  303
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  
  43
  47
  53
  60
  66
  73
  79
  86
  93
  99
  106
  113
  121
  128
  136
  144
  153
  162
  171
  180
  190
  201
  211
  223
  235
  247
  260
  274
  288
  303
Total cash flow (excl. dividends), $m
  71
  69
  69
  70
  70
  71
  72
  74
  75
  77
  79
  81
  83
  86
  88
  91
  94
  97
  101
  104
  108
  112
  116
  121
  126
  131
  136
  142
  148
  154
Retained Cash Flow (-), $m
  -16
  -16
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -35
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -77
  -82
  -86
  -90
  -95
  -100
  -105
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
  56
  53
  50
  49
  47
  46
  45
  44
  43
  42
  42
  41
  41
  41
  41
  41
  41
  41
  41
  42
  42
  42
  43
  44
  44
  45
  46
  47
  48
  49
Discount rate, %
  10.20
  10.71
  11.25
  11.81
  12.40
  13.02
  13.67
  14.35
  15.07
  15.82
  16.61
  17.45
  18.32
  19.23
  20.20
  21.21
  22.27
  23.38
  24.55
  25.77
  27.06
  28.42
  29.84
  31.33
  32.90
  34.54
  36.27
  38.08
  39.99
  41.98
PV of cash for distribution, $m
  51
  43
  37
  31
  26
  22
  18
  15
  12
  10
  8
  6
  5
  3
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  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

Danaos Corporation is a holding company and an international owner of containerships, chartering its vessels to a range of liner companies. The Company's principal business is the acquisition and operation of vessels. The Company conducts its operations through the vessel owning companies, whose principal activity is the ownership and operation of containerships that are under the management of a related party of the company. The Company's manager is Danaos Shipping Company Limited (Danaos Shipping). The Company has a fleet of over 50 containerships aggregating approximately 329,590 twenty-foot equivalent units (TEUs). Its containership fleet includes approximately 53 containerships deployed on time charters and approximately two containerships deployed on bareboat charter. Gemini Shipholdings Corporation (Gemini), a company beneficially owned by the Company, owns approximately four additional containerships of over 24,000 TEU aggregate capacity.

FINANCIAL RATIOS  of  Danaos Corporation (DAC)

Valuation Ratios
P/E Ratio -0.3
Price to Sales 0.2
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 0.4
Price to Free Cash Flow 0.4
Growth Rates
Sales Growth Rate -12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 513.3%
Interest Coverage -4
Management Effectiveness
Return On Assets -8.7%
Ret/ On Assets - 3 Yr. Avg. -0.6%
Return On Total Capital -11.1%
Ret/ On T. Cap. - 3 Yr. Avg. -2.7%
Return On Equity -55%
Return On Equity - 3 Yr. Avg. -13.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 75.3%
Gross Margin - 3 Yr. Avg. 76.8%
EBITDA Margin -33.7%
EBITDA Margin - 3 Yr. Avg. 20.6%
Operating Margin -42.8%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin -73.5%
Pre-Tax Margin - 3 Yr. Avg. -17.9%
Net Profit Margin -73.5%
Net Profit Margin - 3 Yr. Avg. -17.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

DAC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DAC stock intrinsic value calculation we used $459 million for the last fiscal year's total revenue generated by Danaos Corporation. The default revenue input number comes from 0001 income statement of Danaos Corporation. 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 DAC 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 10.2%, whose default value for DAC is calculated based on our internal credit rating of Danaos Corporation, 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 Danaos Corporation.
    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 DAC stock the variable cost ratio is equal to 58.4%.

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 DAC 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 5.4% for Danaos Corporation.

Corporate tax rate of 27% is the nominal tax rate for Danaos Corporation. 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 DAC 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 DAC are equal to 574.8%.

Life of production assets of 24.5 years is the average useful life of capital assets used in Danaos Corporation 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 DAC is equal to -14.5%. 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 - $690.853 million for Danaos Corporation - 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 213.330 million for Danaos Corporation 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 Danaos Corporation at the current share price and the inputted number of shares is $0.2 billion.

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