Intrinsic value of Dover Downs Gaming&Entertainment - DDE

Previous Close

$2.25

  Intrinsic Value

$1.55

stock screener

  Rating & Target

sell

-31%

Previous close

$2.25

 
Intrinsic value

$1.55

 
Up/down potential

-31%

 
Rating

sell

We calculate the intrinsic value of DDE 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 0.0

 

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, %
  2.30
  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
  4.87
Revenue, $m
  181
  186
  191
  197
  203
  210
  217
  225
  234
  243
  253
  264
  275
  287
  299
  313
  327
  342
  357
  374
  391
  410
  429
  450
  471
  494
  518
  543
  569
  597
Variable operating expenses, $m
  113
  116
  120
  123
  127
  132
  136
  141
  147
  153
  159
  165
  172
  180
  188
  196
  205
  214
  224
  234
  245
  257
  269
  282
  295
  310
  325
  340
  357
  374
Fixed operating expenses, $m
  68
  70
  72
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  104
  106
  108
  111
  113
  115
  118
  121
  123
  126
  129
Total operating expenses, $m
  181
  186
  192
  196
  202
  208
  214
  221
  228
  236
  244
  252
  261
  271
  281
  291
  302
  313
  325
  338
  351
  365
  380
  395
  410
  428
  446
  463
  483
  503
Operating income, $m
  -1
  -1
  0
  0
  1
  2
  3
  4
  6
  7
  9
  11
  14
  16
  19
  22
  25
  28
  32
  36
  40
  45
  50
  55
  60
  66
  72
  79
  86
  94
EBITDA, $m
  7
  8
  9
  9
  10
  12
  13
  15
  17
  19
  21
  24
  26
  29
  33
  36
  40
  44
  49
  53
  58
  64
  69
  76
  82
  89
  96
  104
  113
  121
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Earnings before tax, $m
  -2
  -2
  -2
  -1
  0
  1
  2
  3
  4
  6
  7
  9
  11
  14
  16
  19
  22
  25
  29
  32
  36
  41
  45
  50
  55
  61
  67
  73
  80
  87
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  20
  22
  24
Net income, $m
  -2
  -2
  -2
  -1
  0
  0
  1
  2
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  21
  24
  26
  30
  33
  37
  40
  44
  49
  53
  58
  64

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
  166
  170
  175
  180
  186
  192
  199
  206
  214
  223
  232
  241
  252
  262
  274
  286
  299
  313
  327
  342
  358
  375
  393
  411
  431
  452
  474
  496
  521
  546
Adjusted assets (=assets-cash), $m
  166
  170
  175
  180
  186
  192
  199
  206
  214
  223
  232
  241
  252
  262
  274
  286
  299
  313
  327
  342
  358
  375
  393
  411
  431
  452
  474
  496
  521
  546
Revenue / Adjusted assets
  1.090
  1.094
  1.091
  1.094
  1.091
  1.094
  1.090
  1.092
  1.093
  1.090
  1.091
  1.095
  1.091
  1.095
  1.091
  1.094
  1.094
  1.093
  1.092
  1.094
  1.092
  1.093
  1.092
  1.095
  1.093
  1.093
  1.093
  1.095
  1.092
  1.093
Average production assets, $m
  141
  144
  148
  153
  158
  163
  169
  175
  182
  189
  197
  205
  214
  223
  233
  243
  254
  266
  278
  291
  304
  319
  334
  350
  367
  384
  403
  422
  443
  464
Working capital, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
Total debt, $m
  21
  22
  24
  25
  27
  29
  31
  33
  35
  38
  40
  43
  46
  49
  53
  56
  60
  64
  68
  73
  78
  82
  88
  93
  99
  105
  111
  118
  125
  133
Total liabilities, $m
  49
  50
  51
  53
  55
  56
  58
  61
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  127
  133
  139
  146
  153
  161
Total equity, $m
  117
  120
  123
  127
  131
  136
  140
  146
  151
  157
  164
  170
  178
  185
  193
  202
  211
  221
  231
  241
  253
  265
  277
  290
  304
  319
  334
  350
  368
  385
Total liabilities and equity, $m
  166
  170
  174
  180
  186
  192
  198
  207
  214
  222
  232
  241
  252
  262
  274
  286
  299
  313
  327
  342
  358
  375
  392
  411
  431
  452
  473
  496
  521
  546
Debt-to-equity ratio
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
Adjusted equity ratio
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  -2
  -2
  -1
  0
  0
  1
  2
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  21
  24
  26
  30
  33
  37
  40
  44
  49
  53
  58
  64
Depreciation, amort., depletion, $m
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
Funds from operations, $m
  6
  7
  7
  8
  9
  10
  11
  12
  14
  15
  17
  19
  21
  23
  26
  28
  31
  34
  37
  41
  45
  49
  53
  57
  62
  67
  73
  79
  85
  91
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  6
  7
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  49
  53
  58
  63
  68
  74
  79
  86
  92
Maintenance CAPEX, $m
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
New CAPEX, $m
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -11
  -12
  -13
  -14
  -14
  -14
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
Free cash flow, $m
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -3
  -2
  -2
  -1
  0
  2
  3
  4
  6
  8
  10
  12
  14
  17
  19
  22
  25
  29
  32
  36
  40
  44
Issuance/(repayment) of debt, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Issuance/(repurchase) of shares, $m
  5
  5
  5
  5
  4
  4
  4
  3
  3
  2
  1
  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  
  6
  6
  6
  7
  6
  6
  6
  5
  5
  4
  4
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Total cash flow (excl. dividends), $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  5
  6
  8
  10
  12
  14
  16
  19
  22
  25
  28
  31
  35
  39
  43
  47
  52
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -5
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
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
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -4
  -3
  -2
  -1
  1
  2
  4
  6
  8
  10
  12
  15
  17
  20
  23
  26
  30
  34
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  94.5
  89.2
  84.3
  79.9
  76.1
  72.8
  70.1
  67.9
  66.1
  65.0
  64.4
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3
  64.3

Dover Downs Gaming & Entertainment, Inc. is a holding company. The Company, through its subsidiaries, operates gaming and entertainment resort destination. The Company operates through its gaming and entertainment segment. Its operations consist of Dover Downs Casino, Dover Downs Hotel and Conference Center and Dover Downs Raceway. Dover Downs Casino features table games, including craps, roulette and card games, such as blackjack, Spanish 21, baccarat, slot machine offerings, multi-player electronic table games, a poker room, a Race and Sports Book operation, the Festival Buffet, Doc Magrogan's Oyster House, Frankie's Italian restaurant, as well as various bars, restaurants and over four retail outlets. Dover Downs Hotel and Conference Center is approximately 500-room AAA Four Diamond hotel with a dining restaurant, conference, banquet, ballroom and concert hall facilities. Dover Downs Raceway is a harness racing track with pari-mutuel wagering on live and simulcast horse races.

FINANCIAL RATIOS  of  Dover Downs Gaming&Entertainment (DDE)

Valuation Ratios
P/E Ratio 74.3
Price to Sales 0.4
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 10.6
Growth Rates
Sales Growth Rate -0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 21.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.2%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 0.7%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 0.9%
Return On Equity - 3 Yr. Avg. 0.6%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 18.1%
Gross Margin - 3 Yr. Avg. 18.4%
EBITDA Margin 5.5%
EBITDA Margin - 3 Yr. Avg. 5.8%
Operating Margin 1.1%
Oper. Margin - 3 Yr. Avg. 1.3%
Pre-Tax Margin 0.5%
Pre-Tax Margin - 3 Yr. Avg. 0.5%
Net Profit Margin 0.5%
Net Profit Margin - 3 Yr. Avg. 0.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 11.1%
Payout Ratio 0%

DDE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DDE stock intrinsic value calculation we used $176.924 million for the last fiscal year's total revenue generated by Dover Downs Gaming&Entertainment. The default revenue input number comes from 0001 income statement of Dover Downs Gaming&Entertainment. 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 DDE stock valuation model: a) initial revenue growth rate of 2.3% 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 4.3%, whose default value for DDE is calculated based on our internal credit rating of Dover Downs Gaming&Entertainment, 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 Dover Downs Gaming&Entertainment.
    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 DDE stock the variable cost ratio is equal to 62.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $67 million in the base year in the intrinsic value calculation for DDE 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 Dover Downs Gaming&Entertainment.

Corporate tax rate of 27% is the nominal tax rate for Dover Downs Gaming&Entertainment. 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 DDE 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 DDE are equal to 77.8%.

Life of production assets of 16.8 years is the average useful life of capital assets used in Dover Downs Gaming&Entertainment 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 DDE is equal to -3.3%. 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 - $114.309 million for Dover Downs Gaming&Entertainment - 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 18.414 million for Dover Downs Gaming&Entertainment 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 Dover Downs Gaming&Entertainment at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Legal betting to generate $4.2B for major U.S. sports   [Oct-18-18 04:07PM  Yahoo Finance Video]
▶ [$$] Dover Downs Shares Soar After Merger Announcement   [02:49PM  The Wall Street Journal]
▶ Benzinga Pro's 5 Stocks To Watch Today   [May-15-18 09:04AM  Benzinga]
▶ 8 Stocks Mario Gabelli Continues to Buy   [Feb-20-18 12:24PM  GuruFocus.com]
▶ 2015 Fourth Quarter Earnings Release   [Jan-28-16 09:24AM  at noodls]
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