Intrinsic value of Franklin Covey Company - FC

Previous Close

$34.99

  Intrinsic Value

$30.24

stock screener

  Rating & Target

hold

-14%

Previous close

$34.99

 
Intrinsic value

$30.24

 
Up/down potential

-14%

 
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 0.5

 

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, %
  12.30
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.55
  7.29
  7.06
  6.86
  6.67
  6.50
  6.35
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
Revenue, $m
  236
  263
  292
  322
  353
  386
  421
  456
  494
  532
  572
  614
  657
  703
  749
  798
  849
  902
  957
  1,014
  1,074
  1,136
  1,201
  1,269
  1,339
  1,413
  1,491
  1,572
  1,656
  1,745
Variable operating expenses, $m
  180
  200
  221
  243
  266
  290
  315
  341
  368
  397
  418
  449
  480
  513
  548
  583
  620
  659
  699
  741
  785
  830
  877
  927
  979
  1,033
  1,089
  1,148
  1,210
  1,275
Fixed operating expenses, $m
  54
  55
  57
  58
  59
  60
  62
  63
  64
  66
  67
  69
  70
  72
  73
  75
  77
  78
  80
  82
  84
  86
  87
  89
  91
  93
  95
  97
  100
  102
Total operating expenses, $m
  234
  255
  278
  301
  325
  350
  377
  404
  432
  463
  485
  518
  550
  585
  621
  658
  697
  737
  779
  823
  869
  916
  964
  1,016
  1,070
  1,126
  1,184
  1,245
  1,310
  1,377
Operating income, $m
  2
  8
  14
  21
  28
  36
  44
  52
  61
  70
  87
  96
  107
  117
  128
  140
  152
  164
  177
  191
  205
  220
  236
  252
  269
  287
  306
  326
  346
  368
EBITDA, $m
  20
  27
  35
  43
  52
  61
  71
  81
  91
  102
  113
  124
  137
  149
  162
  176
  190
  205
  221
  237
  254
  272
  290
  310
  330
  351
  374
  397
  421
  447
Interest expense (income), $m
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
Earnings before tax, $m
  -1
  4
  10
  16
  22
  28
  35
  42
  49
  57
  72
  81
  89
  98
  107
  117
  127
  138
  149
  161
  173
  186
  199
  213
  228
  243
  259
  276
  293
  312
Tax expense, $m
  0
  1
  3
  4
  6
  8
  9
  11
  13
  15
  20
  22
  24
  26
  29
  32
  34
  37
  40
  43
  47
  50
  54
  58
  61
  66
  70
  74
  79
  84
Net income, $m
  -1
  3
  7
  11
  16
  21
  25
  31
  36
  41
  53
  59
  65
  72
  78
  86
  93
  101
  109
  117
  126
  136
  145
  155
  166
  177
  189
  201
  214
  228

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
  240
  268
  297
  328
  360
  393
  428
  465
  503
  542
  583
  625
  670
  715
  763
  813
  864
  918
  974
  1,032
  1,093
  1,157
  1,223
  1,292
  1,364
  1,439
  1,518
  1,600
  1,686
  1,777
Adjusted assets (=assets-cash), $m
  240
  268
  297
  328
  360
  393
  428
  465
  503
  542
  583
  625
  670
  715
  763
  813
  864
  918
  974
  1,032
  1,093
  1,157
  1,223
  1,292
  1,364
  1,439
  1,518
  1,600
  1,686
  1,777
Revenue / Adjusted assets
  0.983
  0.981
  0.983
  0.982
  0.981
  0.982
  0.984
  0.981
  0.982
  0.982
  0.981
  0.982
  0.981
  0.983
  0.982
  0.982
  0.983
  0.983
  0.983
  0.983
  0.983
  0.982
  0.982
  0.982
  0.982
  0.982
  0.982
  0.983
  0.982
  0.982
Average production assets, $m
  67
  75
  83
  92
  101
  111
  120
  131
  141
  152
  164
  176
  188
  201
  214
  228
  243
  258
  274
  290
  307
  325
  343
  363
  383
  404
  426
  449
  474
  499
Working capital, $m
  8
  9
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
Total debt, $m
  62
  79
  97
  116
  136
  157
  179
  202
  225
  250
  276
  302
  330
  358
  388
  419
  451
  485
  520
  556
  594
  634
  675
  718
  763
  810
  859
  910
  964
  1,020
Total liabilities, $m
  150
  167
  185
  205
  225
  246
  267
  290
  314
  338
  364
  390
  418
  446
  476
  507
  539
  573
  608
  644
  682
  722
  763
  806
  851
  898
  947
  999
  1,052
  1,109
Total equity, $m
  90
  101
  112
  123
  135
  148
  161
  175
  189
  204
  219
  235
  252
  269
  287
  306
  325
  345
  366
  388
  411
  435
  460
  486
  513
  541
  571
  602
  634
  668
Total liabilities and equity, $m
  240
  268
  297
  328
  360
  394
  428
  465
  503
  542
  583
  625
  670
  715
  763
  813
  864
  918
  974
  1,032
  1,093
  1,157
  1,223
  1,292
  1,364
  1,439
  1,518
  1,601
  1,686
  1,777
Debt-to-equity ratio
  0.680
  0.780
  0.870
  0.940
  1.010
  1.060
  1.110
  1.160
  1.190
  1.230
  1.260
  1.280
  1.310
  1.330
  1.350
  1.370
  1.390
  1.400
  1.420
  1.430
  1.450
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.510
  1.520
  1.530
Adjusted equity ratio
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  3
  7
  11
  16
  21
  25
  31
  36
  41
  53
  59
  65
  72
  78
  86
  93
  101
  109
  117
  126
  136
  145
  155
  166
  177
  189
  201
  214
  228
Depreciation, amort., depletion, $m
  18
  20
  21
  22
  24
  25
  27
  28
  30
  32
  26
  28
  30
  32
  34
  36
  39
  41
  43
  46
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
Funds from operations, $m
  17
  23
  28
  34
  39
  46
  52
  59
  66
  73
  79
  87
  95
  104
  112
  122
  132
  142
  152
  163
  175
  187
  200
  213
  227
  241
  257
  273
  289
  307
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  16
  22
  27
  33
  38
  44
  51
  58
  65
  72
  77
  85
  93
  102
  111
  120
  130
  140
  150
  161
  173
  185
  197
  211
  224
  239
  254
  270
  286
  304
Maintenance CAPEX, $m
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
New CAPEX, $m
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -17
  -19
  -20
  -22
  -24
  -25
  -28
  -29
  -32
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -59
  -63
  -67
  -71
  -74
  -78
  -82
  -86
  -91
  -95
  -100
Free cash flow, $m
  -1
  3
  7
  11
  15
  19
  24
  28
  33
  38
  42
  47
  53
  59
  66
  72
  79
  86
  94
  102
  110
  118
  127
  137
  147
  157
  168
  179
  191
  203
Issuance/(repayment) of debt, $m
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
Issuance/(repurchase) of shares, $m
  11
  7
  4
  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  
  27
  24
  22
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
Total cash flow (excl. dividends), $m
  27
  28
  29
  30
  35
  40
  45
  51
  57
  63
  67
  74
  81
  88
  95
  103
  111
  120
  129
  138
  148
  158
  169
  180
  192
  204
  217
  230
  245
  259
Retained Cash Flow (-), $m
  -11
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
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
  16
  17
  18
  18
  23
  27
  32
  37
  43
  48
  52
  58
  64
  71
  77
  84
  92
  100
  108
  116
  125
  134
  144
  154
  164
  176
  187
  199
  212
  226
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  15
  16
  15
  15
  17
  19
  21
  23
  24
  24
  23
  23
  23
  22
  21
  20
  18
  16
  15
  13
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  97.9
  96.6
  96.0
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9

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 Company (FC)

Valuation Ratios
P/E Ratio -68.2
Price to Sales 2.6
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 28.1
Price to Free Cash Flow 53
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 $210 million for the last fiscal year's total revenue generated by Franklin Covey Company. The default revenue input number comes from 0001 income statement of Franklin Covey Company. 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 12.3% 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 4.6%, whose default value for FC is calculated based on our internal credit rating of Franklin Covey Company, 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 Company.
    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 76.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $53 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 5.8% for Franklin Covey Company.

Corporate tax rate of 27% is the nominal tax rate for Franklin Covey Company. 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 28.6%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Franklin Covey Company 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 3.6%. 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 - $80.5 million for Franklin Covey Company - 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 13.929 million for Franklin Covey Company 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 Company at the current share price and the inputted number of shares is $0.5 billion.

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