Intrinsic value of Emmis Communications Corporation - EMMS

Previous Close

$3.73

  Intrinsic Value

$0.40

stock screener

  Rating & Target

str. sell

-89%

Previous close

$3.73

 
Intrinsic value

$0.40

 
Up/down potential

-89%

 
Rating

str. sell

We calculate the intrinsic value of EMMS 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, %
  2.00
  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
  151
  154
  158
  163
  168
  173
  179
  185
  192
  200
  208
  216
  225
  235
  245
  255
  267
  279
  291
  305
  319
  334
  350
  366
  384
  402
  421
  442
  463
  485
Variable operating expenses, $m
  145
  148
  152
  156
  161
  166
  171
  177
  184
  191
  195
  203
  212
  221
  230
  240
  251
  262
  274
  287
  300
  314
  329
  344
  361
  378
  396
  415
  436
  457
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
  145
  148
  152
  156
  161
  166
  171
  177
  184
  191
  195
  203
  212
  221
  230
  240
  251
  262
  274
  287
  300
  314
  329
  344
  361
  378
  396
  415
  436
  457
Operating income, $m
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
EBITDA, $m
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
Interest expense (income), $m
  16
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
Earnings before tax, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
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
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24

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
  276
  283
  290
  298
  307
  317
  328
  340
  352
  366
  380
  396
  412
  430
  448
  468
  489
  511
  534
  558
  584
  612
  640
  671
  703
  736
  772
  809
  848
  889
Adjusted assets (=assets-cash), $m
  276
  283
  290
  298
  307
  317
  328
  340
  352
  366
  380
  396
  412
  430
  448
  468
  489
  511
  534
  558
  584
  612
  640
  671
  703
  736
  772
  809
  848
  889
Revenue / Adjusted assets
  0.547
  0.544
  0.545
  0.547
  0.547
  0.546
  0.546
  0.544
  0.545
  0.546
  0.547
  0.545
  0.546
  0.547
  0.547
  0.545
  0.546
  0.546
  0.545
  0.547
  0.546
  0.546
  0.547
  0.545
  0.546
  0.546
  0.545
  0.546
  0.546
  0.546
Average production assets, $m
  126
  129
  132
  136
  140
  145
  150
  155
  161
  167
  174
  181
  188
  196
  205
  214
  223
  233
  244
  255
  267
  279
  292
  306
  321
  336
  352
  369
  387
  406
Working capital, $m
  38
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  92
  96
  100
  105
  110
  116
  121
Total debt, $m
  143
  149
  155
  161
  169
  177
  186
  196
  206
  217
  229
  242
  255
  270
  285
  301
  318
  337
  356
  376
  397
  420
  444
  469
  495
  523
  552
  583
  615
  649
Total liabilities, $m
  228
  233
  239
  246
  254
  262
  271
  280
  291
  302
  314
  327
  340
  354
  370
  386
  403
  421
  440
  461
  482
  505
  528
  553
  580
  607
  637
  667
  700
  734
Total equity, $m
  48
  49
  51
  52
  54
  56
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  86
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  142
  148
  156
Total liabilities and equity, $m
  276
  282
  290
  298
  308
  318
  328
  339
  353
  366
  381
  396
  412
  429
  448
  468
  489
  510
  533
  559
  584
  612
  640
  670
  703
  736
  772
  809
  848
  890
Debt-to-equity ratio
  2.960
  3.000
  3.050
  3.090
  3.140
  3.190
  3.240
  3.290
  3.340
  3.390
  3.440
  3.490
  3.540
  3.590
  3.630
  3.680
  3.720
  3.770
  3.810
  3.850
  3.890
  3.920
  3.960
  3.990
  4.030
  4.060
  4.090
  4.120
  4.140
  4.170
Adjusted equity ratio
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
Depreciation, amort., depletion, $m
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Funds from operations, $m
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Cash from operations, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -5
  -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
New CAPEX, $m
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
Cash from investing activities, $m
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -10
  -11
  -11
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -19
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
Free cash flow, $m
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
Issuance/(repayment) of debt, $m
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
Issuance/(repurchase) of shares, $m
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
Cash from financing (excl. dividends), $m  
  12
  12
  13
  15
  15
  17
  18
  20
  20
  22
  21
  23
  24
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  53
  55
  59
  62
  65
Total cash flow (excl. dividends), $m
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
Retained Cash Flow (-), $m
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -31
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
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
Discount rate, %
  11.90
  12.50
  13.12
  13.78
  14.46
  15.19
  15.95
  16.74
  17.58
  18.46
  19.38
  20.35
  21.37
  22.44
  23.56
  24.74
  25.98
  27.28
  28.64
  30.07
  31.57
  33.15
  34.81
  36.55
  38.38
  40.30
  42.31
  44.43
  46.65
  48.98
PV of cash for distribution, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  88.2
  77.2
  67.4
  58.6
  50.8
  43.8
  37.7
  32.3
  27.6
  23.5
  20.7
  18.1
  15.8
  13.8
  11.9
  10.3
  8.8
  7.5
  6.4
  5.5
  4.6
  3.9
  3.3
  2.8
  2.3
  1.9
  1.6
  1.3
  1.1
  0.9

Emmis Communications Corporation is a media company, which focuses on radio broadcasting. The Company operates through three business segments: Radio, Publishing, and Corporate & Emerging Technologies. As of February 29, 2016, the Company owned 19 frequency modulation (FM) and four amplitude modulation (AM) radio stations in New York, Los Angeles, St. Louis, Austin, Indianapolis and Terre Haute, Indiana. One of the FM radio stations that the Company owns in New York is operated pursuant to a local marketing agreement (LMA) whereby a third party provides the programming for the station and sells all advertising within that programming. The Company's focus in publish operations includes Indianapolis Monthly. It also operates Digonex Technologies, Inc., a pricing business. The Company also develops and licenses TagStation, a cloud-based software platform that allows a broadcaster to manage album art, meta data and enhanced advertising on its various broadcasts.

FINANCIAL RATIOS  of  Emmis Communications Corporation (EMMS)

Valuation Ratios
P/E Ratio 3.6
Price to Sales 0.2
Price to Book -1.3
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow 2.9
Growth Rates
Sales Growth Rate -6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity -513.5%
Total Debt to Equity -578.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 9.6%
Ret/ On Assets - 3 Yr. Avg. -5.8%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. -15.4%
Return On Equity -28.9%
Return On Equity - 3 Yr. Avg. 276.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 15.8%
Gross Margin - 3 Yr. Avg. 20.2%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 2.9%
Operating Margin 14.9%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. -6%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. -11.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 12.4%
Payout Ratio 0%

EMMS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EMMS stock intrinsic value calculation we used $148 million for the last fiscal year's total revenue generated by Emmis Communications Corporation. The default revenue input number comes from 0001 income statement of Emmis Communications 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 EMMS 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 11.9%, whose default value for EMMS is calculated based on our internal credit rating of Emmis Communications 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 Emmis Communications 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 EMMS stock the variable cost ratio is equal to 95.9%.

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 EMMS 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 8.6% for Emmis Communications Corporation.

Corporate tax rate of 27% is the nominal tax rate for Emmis Communications 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 EMMS 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 EMMS are equal to 83.6%.

Life of production assets of 60.3 years is the average useful life of capital assets used in Emmis Communications 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 EMMS is equal to 25%. 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 - $47.583 million for Emmis Communications 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 13.021 million for Emmis Communications 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 Emmis Communications Corporation at the current share price and the inputted number of shares is $0.0 billion.

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