Intrinsic value of Franklin Covey - FC

Previous Close

$23.70

  Intrinsic Value

$21.35

stock screener

  Rating & Target

hold

-10%

Previous close

$23.70

 
Intrinsic value

$21.35

 
Up/down potential

-10%

 
Rating

hold

We calculate the intrinsic value of FC 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, %
  15.30
  14.27
  13.34
  12.51
  11.76
  11.08
  10.47
  9.93
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
  6.91
  6.72
  6.55
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  214
  244
  277
  311
  348
  386
  427
  469
  514
  560
  608
  658
  710
  764
  820
  878
  939
  1,002
  1,068
  1,136
  1,207
  1,281
  1,358
  1,438
  1,522
  1,610
  1,701
  1,796
  1,895
  1,999
Variable operating expenses, $m
  197
  224
  253
  284
  316
  351
  386
  424
  463
  504
  538
  583
  629
  677
  727
  778
  832
  888
  946
  1,007
  1,070
  1,135
  1,203
  1,274
  1,349
  1,426
  1,507
  1,591
  1,679
  1,772
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
  197
  224
  253
  284
  316
  351
  386
  424
  463
  504
  538
  583
  629
  677
  727
  778
  832
  888
  946
  1,007
  1,070
  1,135
  1,203
  1,274
  1,349
  1,426
  1,507
  1,591
  1,679
  1,772
Operating income, $m
  16
  20
  23
  27
  32
  36
  41
  45
  50
  56
  69
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
  146
  155
  164
  174
  183
  194
  205
  216
  228
EBITDA, $m
  32
  37
  41
  47
  52
  58
  64
  70
  77
  84
  91
  99
  106
  115
  123
  132
  141
  150
  160
  170
  181
  192
  204
  216
  228
  241
  255
  269
  284
  300
Interest expense (income), $m
  2
  3
  4
  5
  6
  8
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
Earnings before tax, $m
  14
  16
  18
  21
  24
  27
  30
  33
  37
  40
  52
  56
  60
  64
  68
  73
  78
  82
  87
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
Tax expense, $m
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
Net income, $m
  10
  12
  13
  15
  18
  20
  22
  24
  27
  29
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  85
  89
  94
  99
  105
  110
  116

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
  243
  278
  315
  355
  396
  440
  486
  534
  585
  637
  692
  749
  808
  870
  934
  1,001
  1,070
  1,142
  1,216
  1,294
  1,375
  1,459
  1,547
  1,638
  1,734
  1,833
  1,937
  2,046
  2,159
  2,277
Adjusted assets (=assets-cash), $m
  243
  278
  315
  355
  396
  440
  486
  534
  585
  637
  692
  749
  808
  870
  934
  1,001
  1,070
  1,142
  1,216
  1,294
  1,375
  1,459
  1,547
  1,638
  1,734
  1,833
  1,937
  2,046
  2,159
  2,277
Revenue / Adjusted assets
  0.881
  0.878
  0.879
  0.876
  0.879
  0.877
  0.879
  0.878
  0.879
  0.879
  0.879
  0.879
  0.879
  0.878
  0.878
  0.877
  0.878
  0.877
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
Average production assets, $m
  65
  74
  84
  94
  105
  117
  129
  142
  155
  169
  184
  199
  214
  231
  248
  265
  284
  303
  322
  343
  365
  387
  410
  434
  460
  486
  514
  542
  572
  604
Working capital, $m
  12
  14
  15
  17
  19
  22
  24
  26
  29
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  76
  81
  85
  90
  95
  101
  106
  112
Total debt, $m
  66
  86
  109
  132
  157
  183
  210
  239
  269
  301
  333
  367
  403
  439
  477
  517
  558
  601
  646
  692
  740
  790
  843
  897
  954
  1,013
  1,075
  1,140
  1,207
  1,278
Total liabilities, $m
  145
  166
  188
  211
  236
  262
  290
  319
  349
  380
  413
  447
  482
  519
  557
  596
  638
  680
  725
  771
  819
  870
  922
  976
  1,033
  1,093
  1,155
  1,219
  1,287
  1,357
Total equity, $m
  98
  112
  127
  143
  160
  178
  196
  216
  236
  258
  280
  303
  327
  351
  377
  404
  432
  461
  491
  523
  555
  589
  625
  662
  700
  741
  783
  826
  872
  920
Total liabilities and equity, $m
  243
  278
  315
  354
  396
  440
  486
  535
  585
  638
  693
  750
  809
  870
  934
  1,000
  1,070
  1,141
  1,216
  1,294
  1,374
  1,459
  1,547
  1,638
  1,733
  1,834
  1,938
  2,045
  2,159
  2,277
Debt-to-equity ratio
  0.670
  0.770
  0.850
  0.920
  0.980
  1.030
  1.070
  1.110
  1.140
  1.170
  1.190
  1.210
  1.230
  1.250
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.340
  1.350
  1.360
  1.360
  1.370
  1.370
  1.380
  1.380
  1.390
Adjusted equity ratio
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  12
  13
  15
  18
  20
  22
  24
  27
  29
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  85
  89
  94
  99
  105
  110
  116
Depreciation, amort., depletion, $m
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
  22
  24
  26
  27
  29
  32
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  68
  72
Funds from operations, $m
  26
  29
  32
  35
  38
  42
  45
  49
  53
  58
  60
  65
  69
  74
  79
  85
  90
  96
  102
  109
  115
  122
  129
  136
  144
  152
  161
  169
  178
  188
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  24
  27
  30
  33
  36
  40
  43
  47
  51
  55
  57
  62
  66
  71
  76
  82
  87
  93
  99
  105
  111
  118
  125
  132
  139
  147
  155
  164
  173
  182
Maintenance CAPEX, $m
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -27
  -29
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
New CAPEX, $m
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
Cash from investing activities, $m
  -16
  -17
  -19
  -20
  -22
  -25
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -42
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -99
Free cash flow, $m
  9
  10
  11
  12
  14
  15
  17
  19
  21
  23
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  78
  83
Issuance/(repayment) of debt, $m
  19
  21
  22
  23
  25
  26
  27
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
Issuance/(repurchase) of shares, $m
  3
  2
  2
  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  
  22
  23
  24
  23
  25
  26
  27
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
Total cash flow (excl. dividends), $m
  31
  33
  35
  36
  39
  42
  45
  48
  51
  54
  55
  59
  62
  66
  70
  74
  78
  83
  87
  92
  97
  102
  108
  113
  119
  125
  132
  139
  146
  153
Retained Cash Flow (-), $m
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
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
  18
  19
  20
  20
  22
  24
  26
  28
  30
  33
  33
  36
  38
  41
  44
  47
  50
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
  100
  105
Discount rate, %
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
  17
  17
  17
  17
  17
  17
  17
  17
  17
  16
  15
  14
  13
  13
  12
  11
  10
  9
  7
  6
  5
  5
  4
  3
  2
  2
  1
  1
  1
  1
Current shareholders' claim on cash, %
  99.0
  98.4
  98.0
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9

Franklin Covey Co. is a global company specializing in performance improvement. The Company's segments are Direct Offices, Strategic Markets, Education practice and International Licensees. The Direct Offices segment consists of its geographic sales offices that serve the United States and Canada, its international sales offices located in Japan, the United Kingdom and Australia, and its public programs group. The Strategic Markets segment includes its government services office, the Sales Performance practice, the Customer Loyalty practice, and a new Global 50 group, which is specifically focused on sales to large, multi-national organizations. The Education practice segment consists of its domestic and international Education practice operations, which are centered on sales to educational institutions, such as elementary schools, high schools, and colleges and universities. The International Licensees segment consists of its international licensees' royalty revenues.

FINANCIAL RATIOS  of  Franklin Covey (FC)

Valuation Ratios
P/E Ratio -46.2
Price to Sales 1.7
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 19
Price to Free Cash Flow 35.9
Growth Rates
Sales Growth Rate -7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 21.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 44.7%
Total Debt to Equity 54.1%
Interest Coverage -5
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.3%
Return On Equity -7.8%
Return On Equity - 3 Yr. Avg. 2.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 66.5%
Gross Margin - 3 Yr. Avg. 66.6%
EBITDA Margin -1.1%
EBITDA Margin - 3 Yr. Avg. 7.4%
Operating Margin -4.9%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin -5.9%
Pre-Tax Margin - 3 Yr. Avg. 2.7%
Net Profit Margin -3.8%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 36.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

FC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FC stock intrinsic value calculation we used $185.256 million for the last fiscal year's total revenue generated by Franklin Covey. The default revenue input number comes from 0001 income statement of Franklin Covey. 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 FC stock valuation model: a) initial revenue growth rate of 15.3% 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 4.7%, whose default value for FC is calculated based on our internal credit rating of Franklin Covey, 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 Franklin Covey.
    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 FC stock the variable cost ratio is equal to 93%.

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 FC 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 Franklin Covey.

Corporate tax rate of 27% is the nominal tax rate for Franklin Covey. 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 FC 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 FC are equal to 30.2%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Franklin Covey 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 FC is equal to 5.6%. 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 - $85.065 million for Franklin Covey - 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 13.908 million for Franklin Covey 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 Franklin Covey at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Are Franklin Covey Cos (NYSE:FC) Interest Costs Too High?   [Sep-06-18 12:44PM  Simply Wall St.]
▶ Franklin Covey: Fiscal 3Q Earnings Snapshot   [Jun-27-18 04:17PM  Associated Press]
▶ Franklin Covey Q3 Earnings Preview   [07:51AM  Benzinga]
▶ Is Franklin Covey Co (NYSE:FC) Undervalued?   [07:04AM  Simply Wall St.]
▶ Franklin Covey to Report Third-Quarter Fiscal 2018 Results   [Jun-14-18 05:15PM  Business Wire]
▶ FranklinCovey Launches The 4 Essential Roles of Leadership   [Apr-24-18 09:30AM  Business Wire]
▶ Franklin Covey reports 2Q loss   [Apr-04-18 04:20PM  Associated Press]
▶ Franklin Covey to Report Second-Quarter Fiscal 2018 Results   [Mar-22-18 05:50PM  Business Wire]
▶ 2 Stocks Jump on Friday   [Jan-05-18 04:47PM  GuruFocus.com]
▶ Franklin Covey reports 1Q loss   [Jan-04-18 04:32PM  Associated Press]
▶ Franklin Covey to Report First-Quarter Fiscal 2018 Results   [Dec-21-17 04:10PM  Business Wire]
▶ Franklin Covey misses Street 4Q forecasts   [Nov-09-17 05:53PM  Associated Press]
▶ Is It Time To Buy Franklin Covey Co (FC)?   [09:45AM  Simply Wall St.]
▶ Snap: Will It Pass The Test?   [Aug-10-17 02:51PM  Barrons.com]
▶ ETFs with exposure to Franklin Covey Co. : July 13, 2017   [Jul-13-17 04:01PM  Capital Cube]
▶ Franklin Covey Co. Acquires Jhana   [Jul-12-17 12:00PM  Business Wire]
▶ Franklin Covey reports 3Q loss   [Jun-29-17 09:37PM  Associated Press]
▶ Franklin Covey reports 3Q loss   [04:36PM  Associated Press]
▶ Franklin Covey to Report Third-Quarter 2017 Results   [Jun-15-17 06:00PM  Business Wire]
▶ Franklin Covey Co. Acquires Robert Gregory Partners   [May-18-17 04:03PM  Business Wire]
▶ ETFs with exposure to Franklin Covey Co. : April 12, 2017   [Apr-12-17 01:11PM  Capital Cube]
▶ What Happened in the Stock Market Today   [Mar-31-17 05:02PM  Motley Fool]
▶ Franklin Covey reports 2Q loss   [04:36PM  Associated Press]
▶ Should You Get Rid of Franklin Covey (FC) Now?   [Jan-31-17 08:51AM  Zacks]
▶ Franklin Covey to Report First-Quarter Fiscal 2017 Results   [Dec-22-16 05:46PM  Business Wire]

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