Intrinsic value of Daily Journal - DJCO

Previous Close

$232.00

  Intrinsic Value

$51.74

stock screener

  Rating & Target

str. sell

-78%

Previous close

$232.00

 
Intrinsic value

$51.74

 
Up/down potential

-78%

 
Rating

str. sell

We calculate the intrinsic value of DJCO 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 0.3

 

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, %
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  45
  48
  52
  55
  59
  63
  67
  71
  76
  81
  85
  90
  96
  101
  107
  113
  119
  126
  133
  140
  147
  155
  163
  172
  181
  190
  200
  210
  221
  233
Variable operating expenses, $m
  52
  56
  60
  64
  68
  73
  78
  82
  88
  93
  97
  102
  108
  114
  121
  128
  135
  142
  150
  158
  166
  175
  185
  194
  204
  215
  226
  238
  250
  263
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
  52
  56
  60
  64
  68
  73
  78
  82
  88
  93
  97
  102
  108
  114
  121
  128
  135
  142
  150
  158
  166
  175
  185
  194
  204
  215
  226
  238
  250
  263
Operating income, $m
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
EBITDA, $m
  -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
  -8
  -8
  -9
Interest expense (income), $m
  1
  2
  -1
  -1
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
Earnings before tax, $m
  -9
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
Tax expense, $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
Net income, $m
  -9
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45

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
  78
  84
  91
  97
  104
  111
  118
  126
  133
  142
  150
  159
  168
  178
  188
  198
  209
  221
  233
  245
  259
  272
  287
  302
  318
  334
  352
  370
  389
  409
Adjusted assets (=assets-cash), $m
  78
  84
  91
  97
  104
  111
  118
  126
  133
  142
  150
  159
  168
  178
  188
  198
  209
  221
  233
  245
  259
  272
  287
  302
  318
  334
  352
  370
  389
  409
Revenue / Adjusted assets
  0.577
  0.571
  0.571
  0.567
  0.567
  0.568
  0.568
  0.563
  0.571
  0.570
  0.567
  0.566
  0.571
  0.567
  0.569
  0.571
  0.569
  0.570
  0.571
  0.571
  0.568
  0.570
  0.568
  0.570
  0.569
  0.569
  0.568
  0.568
  0.568
  0.570
Average production assets, $m
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
  53
  55
  59
  62
  65
  69
  72
  76
  80
  85
  89
  94
  99
  104
  109
  115
  121
Working capital, $m
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -91
  -96
Total debt, $m
  -19
  -13
  -8
  -2
  4
  10
  17
  24
  31
  38
  46
  54
  62
  71
  80
  89
  99
  110
  120
  132
  143
  156
  169
  182
  197
  211
  227
  243
  261
  279
Total liabilities, $m
  71
  76
  82
  87
  93
  100
  106
  113
  120
  127
  135
  143
  151
  160
  169
  179
  188
  199
  210
  221
  233
  245
  258
  272
  286
  301
  316
  333
  350
  368
Total equity, $m
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
Total liabilities and equity, $m
  79
  84
  91
  97
  103
  111
  118
  126
  133
  141
  150
  159
  168
  178
  188
  199
  209
  221
  233
  246
  259
  272
  287
  302
  318
  334
  351
  370
  389
  409
Debt-to-equity ratio
  -2.380
  -1.570
  -0.850
  -0.200
  0.400
  0.940
  1.430
  1.890
  2.310
  2.690
  3.050
  3.380
  3.690
  3.980
  4.250
  4.500
  4.740
  4.960
  5.170
  5.360
  5.550
  5.720
  5.890
  6.040
  6.190
  6.330
  6.460
  6.580
  6.700
  6.820
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
  -9
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
Depreciation, amort., depletion, $m
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  -3
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -23
Change in working capital, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Cash from operations, $m
  -2
  1
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
Maintenance CAPEX, $m
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -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
Cash from investing activities, $m
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -16
  -17
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -26
  -27
Free cash flow, $m
  -8
  -5
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
Issuance/(repayment) of debt, $m
  -50
  5
  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
Issuance/(repurchase) of shares, $m
  66
  8
  8
  9
  10
  11
  12
  13
  14
  15
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  47
Cash from financing (excl. dividends), $m  
  16
  13
  14
  15
  16
  17
  19
  20
  21
  22
  22
  23
  24
  27
  28
  29
  32
  33
  36
  37
  40
  41
  44
  47
  49
  52
  55
  58
  61
  65
Total cash flow (excl. dividends), $m
  7
  8
  8
  8
  8
  9
  9
  9
  9
  10
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Retained Cash Flow (-), $m
  -66
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
Prev. year cash balance distribution, $m
  209
  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
  151
  0
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
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
  144
  0
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  33.8
  22.7
  15.1
  10.0
  6.6
  4.3
  2.8
  1.8
  1.2
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  0.1
  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

Daily Journal Corporation publishes newspapers and Websites covering California and Arizona, and produces various specialized information services. The Company also serves as a newspaper representative specializing in public notice advertising. It operates through two segments: Traditional Business and Journal Technologies. The Traditional Business segment provides newspaper publishing and related services. The Journal Technologies segment supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other justice partners and to extend electronic services to bar members and the public. Its subsidiary is Journal Technologies, Inc. (Journal Technologies).

FINANCIAL RATIOS  of  Daily Journal (DJCO)

Valuation Ratios
P/E Ratio -320.2
Price to Sales 7.8
Price to Book 2
Price to Tangible Book
Price to Cash Flow -106.7
Price to Free Cash Flow -106.7
Growth Rates
Sales Growth Rate -2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 20%
Total Debt to Equity 20%
Interest Coverage -7
Management Effectiveness
Return On Assets -0.3%
Ret/ On Assets - 3 Yr. Avg. -0.1%
Return On Total Capital -0.6%
Ret/ On T. Cap. - 3 Yr. Avg. -0.2%
Return On Equity -0.7%
Return On Equity - 3 Yr. Avg. -0.2%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 100%
Gross Margin - 3 Yr. Avg. 98.4%
EBITDA Margin -2.4%
EBITDA Margin - 3 Yr. Avg. 6.1%
Operating Margin -34.1%
Oper. Margin - 3 Yr. Avg. -19.2%
Pre-Tax Margin -19.5%
Pre-Tax Margin - 3 Yr. Avg. -8.9%
Net Profit Margin -2.4%
Net Profit Margin - 3 Yr. Avg. -0.8%
Effective Tax Rate 87.5%
Eff/ Tax Rate - 3 Yr. Avg. 51.4%
Payout Ratio 0%

DJCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DJCO stock intrinsic value calculation we used $41.384 million for the last fiscal year's total revenue generated by Daily Journal. The default revenue input number comes from 0001 income statement of Daily Journal. 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 DJCO stock valuation model: a) initial revenue growth rate of 7.9% 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 DJCO is calculated based on our internal credit rating of Daily Journal, 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 Daily Journal.
    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 DJCO stock the variable cost ratio is equal to 117.1%.

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 DJCO 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 Daily Journal.

Corporate tax rate of 27% is the nominal tax rate for Daily Journal. 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 DJCO 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 DJCO are equal to 51.9%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Daily Journal 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 DJCO is equal to -41.1%. 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 - $159.741 million for Daily Journal - 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 1.381 million for Daily Journal 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 Daily Journal at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Daily Journal: Fiscal 2Q Earnings Snapshot   [May-08-18 02:35PM  Associated Press]
▶ Look for these 5 'aces' when picking a money manager   [Feb-22-18 12:54PM  Yahoo Finance]
▶ Daily Journal posts 1Q profit   [Feb-08-18 02:49PM  Associated Press]
▶ Daily Journal reports 4Q loss   [Dec-13-17 04:05PM  Associated Press]
▶ Daily Journal reports 3Q loss   [Aug-08-17 11:48PM  Associated Press]
▶ LD Micro Index Reconstitution as of August 1, 2017   [Aug-01-17 09:40AM  ACCESSWIRE]
▶ ETFs with exposure to Daily Journal Corp. : June 16, 2017   [Jun-16-17 03:40PM  Capital Cube]
▶ ETFs with exposure to Daily Journal Corp. : June 6, 2017   [Jun-06-17 11:40AM  Capital Cube]
▶ 3 Charlie Munger-Approved Banks   [Feb-28-17 06:22PM  GuruFocus.com]
▶ Daily Journal reports 1Q loss   [Feb-09-17 02:52PM  Associated Press]
▶ Why Warren Buffett loaded up on more shares of Wells Fargo   [Feb-17-16 05:45PM  at bizjournals.com]

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