Intrinsic value of Entravision Communications Corporation - EVC

Previous Close

$3.71

  Intrinsic Value

$39.00

stock screener

  Rating & Target

str. buy

+951%

Previous close

$3.71

 
Intrinsic value

$39.00

 
Up/down potential

+951%

 
Rating

str. buy

We calculate the intrinsic value of EVC 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, %
  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
  547
  559
  574
  590
  608
  627
  649
  672
  697
  723
  752
  783
  815
  850
  886
  925
  966
  1,010
  1,056
  1,104
  1,155
  1,209
  1,266
  1,326
  1,389
  1,456
  1,526
  1,599
  1,677
  1,758
Variable operating expenses, $m
  93
  95
  96
  98
  100
  102
  104
  107
  109
  112
  81
  84
  87
  91
  95
  99
  103
  108
  113
  118
  124
  129
  136
  142
  149
  156
  163
  171
  180
  188
Fixed operating expenses, $m
  174
  178
  181
  185
  190
  194
  198
  202
  207
  211
  216
  221
  226
  231
  236
  241
  246
  252
  257
  263
  268
  274
  280
  287
  293
  299
  306
  313
  320
  327
Total operating expenses, $m
  267
  273
  277
  283
  290
  296
  302
  309
  316
  323
  297
  305
  313
  322
  331
  340
  349
  360
  370
  381
  392
  403
  416
  429
  442
  455
  469
  484
  500
  515
Operating income, $m
  280
  287
  296
  306
  318
  332
  346
  363
  381
  400
  456
  478
  502
  528
  556
  585
  617
  650
  686
  723
  763
  805
  850
  898
  948
  1,001
  1,056
  1,115
  1,178
  1,243
EBITDA, $m
  324
  332
  341
  352
  364
  378
  393
  409
  428
  447
  469
  492
  517
  543
  571
  602
  634
  668
  704
  743
  784
  827
  873
  921
  972
  1,026
  1,083
  1,144
  1,207
  1,274
Interest expense (income), $m
  15
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
Earnings before tax, $m
  263
  270
  278
  288
  299
  312
  326
  341
  358
  376
  430
  452
  475
  499
  525
  553
  583
  614
  648
  683
  721
  761
  804
  849
  896
  946
  999
  1,055
  1,114
  1,176
Tax expense, $m
  71
  73
  75
  78
  81
  84
  88
  92
  97
  101
  116
  122
  128
  135
  142
  149
  157
  166
  175
  185
  195
  206
  217
  229
  242
  255
  270
  285
  301
  318
Net income, $m
  192
  197
  203
  210
  218
  227
  238
  249
  261
  274
  314
  330
  346
  364
  383
  404
  425
  448
  473
  499
  527
  556
  587
  619
  654
  691
  729
  770
  813
  859

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
  575
  588
  603
  620
  639
  660
  682
  706
  733
  761
  791
  823
  857
  893
  932
  973
  1,016
  1,062
  1,110
  1,161
  1,215
  1,272
  1,331
  1,394
  1,461
  1,531
  1,604
  1,682
  1,763
  1,849
Adjusted assets (=assets-cash), $m
  575
  588
  603
  620
  639
  660
  682
  706
  733
  761
  791
  823
  857
  893
  932
  973
  1,016
  1,062
  1,110
  1,161
  1,215
  1,272
  1,331
  1,394
  1,461
  1,531
  1,604
  1,682
  1,763
  1,849
Revenue / Adjusted assets
  0.951
  0.951
  0.952
  0.952
  0.951
  0.950
  0.952
  0.952
  0.951
  0.950
  0.951
  0.951
  0.951
  0.952
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.950
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
Average production assets, $m
  220
  225
  231
  238
  245
  253
  261
  271
  281
  292
  303
  315
  328
  342
  357
  373
  389
  407
  425
  445
  466
  487
  510
  534
  560
  587
  615
  645
  676
  709
Working capital, $m
  32
  32
  33
  34
  35
  36
  38
  39
  40
  42
  44
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  73
  77
  81
  84
  88
  93
  97
  102
Total debt, $m
  304
  314
  325
  337
  351
  366
  383
  401
  420
  441
  463
  486
  511
  538
  566
  596
  628
  662
  697
  735
  774
  816
  860
  906
  955
  1,006
  1,061
  1,117
  1,177
  1,240
Total liabilities, $m
  423
  432
  443
  456
  470
  485
  501
  519
  538
  559
  581
  605
  630
  657
  685
  715
  747
  780
  816
  853
  893
  935
  979
  1,025
  1,074
  1,125
  1,179
  1,236
  1,296
  1,359
Total equity, $m
  152
  156
  160
  164
  169
  175
  181
  187
  194
  202
  210
  218
  227
  237
  247
  258
  269
  281
  294
  308
  322
  337
  353
  370
  387
  406
  425
  446
  467
  490
Total liabilities and equity, $m
  575
  588
  603
  620
  639
  660
  682
  706
  732
  761
  791
  823
  857
  894
  932
  973
  1,016
  1,061
  1,110
  1,161
  1,215
  1,272
  1,332
  1,395
  1,461
  1,531
  1,604
  1,682
  1,763
  1,849
Debt-to-equity ratio
  2.000
  2.010
  2.030
  2.050
  2.070
  2.100
  2.120
  2.140
  2.160
  2.190
  2.210
  2.230
  2.250
  2.270
  2.290
  2.310
  2.330
  2.350
  2.370
  2.390
  2.410
  2.420
  2.440
  2.450
  2.470
  2.480
  2.490
  2.510
  2.520
  2.530
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
  192
  197
  203
  210
  218
  227
  238
  249
  261
  274
  314
  330
  346
  364
  383
  404
  425
  448
  473
  499
  527
  556
  587
  619
  654
  691
  729
  770
  813
  859
Depreciation, amort., depletion, $m
  44
  45
  45
  45
  46
  46
  46
  47
  47
  48
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  25
  26
  27
  28
  30
  31
Funds from operations, $m
  236
  242
  248
  255
  264
  273
  284
  296
  308
  322
  328
  344
  361
  379
  399
  420
  442
  466
  492
  518
  547
  577
  609
  643
  679
  716
  756
  798
  843
  890
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
Cash from operations, $m
  236
  241
  247
  254
  263
  272
  283
  294
  307
  320
  326
  342
  359
  377
  397
  418
  440
  464
  489
  516
  544
  574
  606
  639
  675
  713
  752
  794
  838
  885
Maintenance CAPEX, $m
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
New CAPEX, $m
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
Cash from investing activities, $m
  -13
  -15
  -16
  -17
  -17
  -19
  -20
  -20
  -22
  -23
  -25
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -52
  -54
  -57
  -59
  -63
Free cash flow, $m
  222
  226
  231
  238
  245
  254
  263
  273
  285
  297
  302
  316
  332
  349
  367
  386
  407
  429
  453
  477
  504
  532
  561
  593
  626
  661
  698
  737
  779
  823
Issuance/(repayment) of debt, $m
  8
  10
  11
  12
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  37
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
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  
  8
  10
  11
  12
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  37
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
Total cash flow (excl. dividends), $m
  231
  236
  243
  250
  259
  269
  280
  291
  304
  318
  324
  340
  357
  376
  395
  416
  439
  463
  488
  515
  543
  574
  605
  639
  675
  713
  752
  794
  839
  886
Retained Cash Flow (-), $m
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
Prev. year cash balance distribution, $m
  199
  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
  427
  232
  239
  246
  254
  263
  274
  285
  297
  311
  316
  331
  348
  366
  385
  406
  427
  451
  475
  501
  529
  558
  590
  622
  657
  694
  733
  774
  817
  863
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
  409
  213
  208
  202
  197
  191
  185
  178
  171
  163
  150
  141
  132
  123
  113
  103
  93
  83
  73
  64
  55
  46
  39
  32
  26
  20
  16
  12
  9
  6
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

Entravision Communications Corporation is a media company. The Company reaches and engages Hispanics in the United States and certain border markets of Mexico across media channels and advertising platforms. The Company operates through three segments: television broadcasting, radio broadcasting and digital media. As of December 31, 2016, the Company owned and operated 54 television stations located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New Mexico, Texas and Washington, District of Columbia. It owns and operates Spanish-language radio stations in the United States. As of December 31, 2016, its radio stations consisted of 38 frequency modulation (FM) and 11 amplitude modulation (AM) stations located in Arizona, California, Colorado, Florida, Nevada, New Mexico and Texas. The digital media segment provides digital advertising solutions that allow advertisers to reach online Hispanic audiences throughout the United States and Mexico.

FINANCIAL RATIOS  of  Entravision Communications Corporation (EVC)

Valuation Ratios
P/E Ratio 16.7
Price to Sales 1.3
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 5.9
Price to Free Cash Flow 7
Growth Rates
Sales Growth Rate 2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.7%
Cap. Spend. - 3 Yr. Gr. Rate -2.1%
Financial Strength
Quick Ratio 16
Current Ratio 0
LT Debt to Equity 156.3%
Total Debt to Equity 158.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 11.4%
Return On Equity - 3 Yr. Avg. 15.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 52.5%
Gross Margin - 3 Yr. Avg. 53.9%
EBITDA Margin 24.7%
EBITDA Margin - 3 Yr. Avg. 27.9%
Operating Margin 18.9%
Oper. Margin - 3 Yr. Avg. 21.7%
Pre-Tax Margin 13.1%
Pre-Tax Margin - 3 Yr. Avg. 16.2%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 41.2%
Eff/ Tax Rate - 3 Yr. Avg. 40.2%
Payout Ratio 55%

EVC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EVC stock intrinsic value calculation we used $536 million for the last fiscal year's total revenue generated by Entravision Communications Corporation. The default revenue input number comes from 0001 income statement of Entravision 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 EVC 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 4.3%, whose default value for EVC is calculated based on our internal credit rating of Entravision 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 Entravision 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 EVC stock the variable cost ratio is equal to 17.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $170 million in the base year in the intrinsic value calculation for EVC 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 5.7% for Entravision Communications Corporation.

Corporate tax rate of 27% is the nominal tax rate for Entravision 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 EVC 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 EVC are equal to 40.3%.

Life of production assets of 22.8 years is the average useful life of capital assets used in Entravision 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 EVC is equal to 5.8%. 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 - $348.87 million for Entravision 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 88.856 million for Entravision 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 Entravision Communications Corporation at the current share price and the inputted number of shares is $0.3 billion.

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