Intrinsic value of Entravision Communications - EVC

Previous Close

$3.31

  Intrinsic Value

$68.97

stock screener

  Rating & Target

str. buy

+999%

Previous close

$3.31

 
Intrinsic value

$68.97

 
Up/down potential

+999%

 
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 0.2

 

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, %
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.15
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
Revenue, $m
  565
  595
  627
  660
  695
  731
  769
  809
  851
  895
  941
  989
  1,040
  1,093
  1,149
  1,207
  1,268
  1,332
  1,400
  1,471
  1,545
  1,623
  1,705
  1,790
  1,880
  1,975
  2,074
  2,178
  2,288
  2,403
Variable operating expenses, $m
  95
  99
  102
  105
  109
  113
  117
  121
  126
  131
  101
  106
  111
  117
  123
  129
  136
  143
  150
  157
  165
  174
  182
  192
  201
  211
  222
  233
  245
  257
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
  269
  277
  283
  290
  299
  307
  315
  323
  333
  342
  317
  327
  337
  348
  359
  370
  382
  395
  407
  420
  433
  448
  462
  479
  494
  510
  528
  546
  565
  584
Operating income, $m
  296
  319
  344
  369
  396
  424
  454
  486
  518
  553
  624
  663
  703
  745
  790
  837
  886
  938
  993
  1,051
  1,111
  1,175
  1,242
  1,312
  1,386
  1,464
  1,546
  1,633
  1,724
  1,819
EBITDA, $m
  341
  365
  389
  416
  443
  472
  503
  535
  568
  604
  641
  680
  721
  765
  810
  858
  909
  962
  1,018
  1,077
  1,138
  1,203
  1,272
  1,344
  1,420
  1,499
  1,583
  1,671
  1,764
  1,862
Interest expense (income), $m
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  85
  89
  94
Earnings before tax, $m
  279
  301
  324
  348
  374
  401
  429
  458
  490
  522
  592
  628
  666
  706
  749
  793
  840
  889
  941
  996
  1,053
  1,113
  1,177
  1,244
  1,314
  1,388
  1,466
  1,548
  1,634
  1,725
Tax expense, $m
  75
  81
  88
  94
  101
  108
  116
  124
  132
  141
  160
  170
  180
  191
  202
  214
  227
  240
  254
  269
  284
  301
  318
  336
  355
  375
  396
  418
  441
  466
Net income, $m
  204
  220
  237
  254
  273
  292
  313
  335
  357
  381
  432
  458
  486
  516
  547
  579
  613
  649
  687
  727
  769
  813
  859
  908
  959
  1,013
  1,070
  1,130
  1,193
  1,259

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
  594
  626
  659
  694
  731
  769
  809
  851
  895
  941
  990
  1,040
  1,093
  1,149
  1,208
  1,269
  1,334
  1,401
  1,472
  1,546
  1,624
  1,706
  1,792
  1,883
  1,977
  2,077
  2,181
  2,291
  2,406
  2,526
Adjusted assets (=assets-cash), $m
  594
  626
  659
  694
  731
  769
  809
  851
  895
  941
  990
  1,040
  1,093
  1,149
  1,208
  1,269
  1,334
  1,401
  1,472
  1,546
  1,624
  1,706
  1,792
  1,883
  1,977
  2,077
  2,181
  2,291
  2,406
  2,526
Revenue / Adjusted assets
  0.951
  0.950
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.952
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
  0.951
Average production assets, $m
  228
  240
  253
  266
  280
  295
  310
  326
  343
  361
  379
  399
  419
  440
  463
  486
  511
  537
  564
  593
  623
  654
  687
  722
  758
  796
  836
  878
  922
  968
Working capital, $m
  33
  35
  36
  38
  40
  42
  45
  47
  49
  52
  55
  57
  60
  63
  67
  70
  74
  77
  81
  85
  90
  94
  99
  104
  109
  115
  120
  126
  133
  139
Total debt, $m
  318
  341
  366
  392
  418
  447
  476
  507
  539
  573
  609
  646
  685
  726
  769
  814
  862
  911
  963
  1,018
  1,075
  1,136
  1,199
  1,265
  1,335
  1,408
  1,485
  1,565
  1,650
  1,738
Total liabilities, $m
  437
  460
  485
  510
  537
  565
  595
  625
  658
  692
  727
  765
  804
  845
  888
  933
  980
  1,030
  1,082
  1,137
  1,194
  1,254
  1,317
  1,384
  1,453
  1,526
  1,603
  1,684
  1,768
  1,857
Total equity, $m
  157
  166
  175
  184
  194
  204
  214
  226
  237
  249
  262
  276
  290
  305
  320
  336
  353
  371
  390
  410
  430
  452
  475
  499
  524
  550
  578
  607
  638
  670
Total liabilities and equity, $m
  594
  626
  660
  694
  731
  769
  809
  851
  895
  941
  989
  1,041
  1,094
  1,150
  1,208
  1,269
  1,333
  1,401
  1,472
  1,547
  1,624
  1,706
  1,792
  1,883
  1,977
  2,076
  2,181
  2,291
  2,406
  2,527
Debt-to-equity ratio
  2.020
  2.060
  2.090
  2.130
  2.160
  2.190
  2.220
  2.250
  2.270
  2.300
  2.320
  2.340
  2.360
  2.380
  2.400
  2.420
  2.440
  2.450
  2.470
  2.480
  2.500
  2.510
  2.520
  2.540
  2.550
  2.560
  2.570
  2.580
  2.590
  2.600
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
  204
  220
  237
  254
  273
  292
  313
  335
  357
  381
  432
  458
  486
  516
  547
  579
  613
  649
  687
  727
  769
  813
  859
  908
  959
  1,013
  1,070
  1,130
  1,193
  1,259
Depreciation, amort., depletion, $m
  45
  45
  46
  47
  47
  48
  48
  49
  50
  51
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  40
  42
Funds from operations, $m
  249
  265
  283
  301
  320
  340
  361
  384
  407
  432
  449
  476
  505
  535
  567
  600
  636
  673
  712
  753
  796
  842
  889
  940
  993
  1,048
  1,107
  1,169
  1,234
  1,302
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
Cash from operations, $m
  247
  263
  281
  299
  318
  338
  359
  381
  405
  429
  446
  473
  502
  532
  564
  597
  632
  669
  708
  749
  792
  837
  885
  935
  987
  1,043
  1,101
  1,163
  1,227
  1,295
Maintenance CAPEX, $m
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
New CAPEX, $m
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
Cash from investing activities, $m
  -21
  -22
  -24
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -58
  -62
  -65
  -68
  -71
  -75
  -79
  -83
  -86
Free cash flow, $m
  226
  241
  257
  274
  292
  311
  331
  352
  374
  397
  412
  437
  464
  492
  522
  553
  586
  621
  657
  695
  736
  778
  823
  870
  919
  972
  1,026
  1,084
  1,145
  1,208
Issuance/(repayment) of debt, $m
  23
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
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  
  23
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
Total cash flow (excl. dividends), $m
  249
  265
  282
  300
  319
  339
  360
  383
  406
  431
  447
  474
  503
  533
  565
  598
  633
  670
  709
  750
  793
  839
  886
  936
  989
  1,045
  1,103
  1,164
  1,229
  1,297
Retained Cash Flow (-), $m
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
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
  440
  256
  273
  291
  310
  329
  350
  372
  394
  418
  434
  461
  489
  518
  549
  582
  616
  652
  690
  730
  773
  817
  863
  912
  964
  1,018
  1,075
  1,135
  1,199
  1,265
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
  422
  234
  238
  239
  240
  239
  236
  232
  227
  219
  206
  197
  186
  174
  161
  148
  134
  120
  106
  93
  80
  68
  57
  46
  38
  30
  23
  18
  13
  10
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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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 (EVC)

Valuation Ratios
P/E Ratio 14.9
Price to Sales 1.2
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 5.2
Price to Free Cash Flow 6.2
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 $536.034 million for the last fiscal year's total revenue generated by Entravision Communications. The default revenue input number comes from 0001 income statement of Entravision Communications. 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 5.4% 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, 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.
    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.

Corporate tax rate of 27% is the nominal tax rate for Entravision Communications. 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 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 - 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 64.567 million for Entravision Communications 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 at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Entravision Communications: 3Q Earnings Snapshot   [06:52PM  Associated Press]
▶ Entravision Expands PoliticaYa   [09:00AM  PR Newswire]
▶ Entravision Communications: 2Q Earnings Snapshot   [05:12AM  Associated Press]
▶ Ed Goldman: Lincoln native is One of the Most Influential Women in Radio   [Jul-10-18 11:30AM  American City Business Journals]
▶ June Undervalued Tech Opportunities   [Jun-06-18 05:02PM  Simply Wall St.]
▶ Entravision Communications: 1Q Earnings Snapshot   [May-08-18 07:31PM  Associated Press]
▶ Headway, an Entravision Company, Partners with Pixalate   [Apr-04-18 02:25PM  PR Newswire]
▶ Entravision Communications posts 4Q profit   [Mar-14-18 05:55PM  Associated Press]
▶ Headway Joins Elite Mobile Ad Fraud Coalition CAAF   [Feb-14-18 08:13AM  PR Newswire]
▶ Entravision Communications posts 3Q profit   [05:38AM  Associated Press]

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