Intrinsic value of Four Seasons Education (Cayman) Inc. - FEDU

Previous Close

$1.85

  Intrinsic Value

$80.74

stock screener

  Rating & Target

str. buy

+999%

Previous close

$1.85

 
Intrinsic value

$80.74

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of FEDU 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 0.1

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  75
  116
  174
  252
  356
  489
  656
  862
  1,109
  1,401
  1,739
  2,127
  2,563
  3,050
  3,586
  4,171
  4,805
  5,486
  6,213
  6,986
  7,802
  8,662
  9,564
  10,508
  11,495
  12,523
  13,594
  14,709
  15,868
  17,072
Variable operating expenses, $m
  51
  79
  118
  172
  242
  333
  447
  587
  755
  954
  1,185
  1,448
  1,746
  2,077
  2,442
  2,841
  3,272
  3,736
  4,231
  4,757
  5,313
  5,898
  6,513
  7,156
  7,828
  8,528
  9,258
  10,017
  10,806
  11,626
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
  51
  79
  118
  172
  242
  333
  447
  587
  755
  954
  1,185
  1,448
  1,746
  2,077
  2,442
  2,841
  3,272
  3,736
  4,231
  4,757
  5,313
  5,898
  6,513
  7,156
  7,828
  8,528
  9,258
  10,017
  10,806
  11,626
Operating income, $m
  24
  37
  55
  80
  113
  156
  209
  275
  354
  447
  555
  678
  818
  973
  1,144
  1,331
  1,533
  1,750
  1,982
  2,228
  2,489
  2,763
  3,051
  3,352
  3,667
  3,995
  4,337
  4,692
  5,062
  5,446
EBITDA, $m
  25
  38
  57
  83
  117
  161
  216
  284
  366
  462
  573
  701
  845
  1,005
  1,182
  1,375
  1,584
  1,808
  2,048
  2,302
  2,572
  2,855
  3,152
  3,463
  3,789
  4,128
  4,481
  4,848
  5,230
  5,627
Interest expense (income), $m
  0
  0
  1
  2
  3
  5
  8
  11
  16
  21
  27
  35
  43
  53
  64
  77
  90
  105
  122
  139
  158
  177
  198
  220
  243
  267
  293
  319
  346
  375
  404
Earnings before tax, $m
  24
  36
  54
  77
  108
  148
  198
  259
  333
  420
  520
  635
  765
  909
  1,067
  1,240
  1,427
  1,628
  1,843
  2,071
  2,311
  2,565
  2,831
  3,109
  3,399
  3,702
  4,018
  4,346
  4,687
  5,042
Tax expense, $m
  6
  10
  14
  21
  29
  40
  53
  70
  90
  113
  140
  171
  206
  245
  288
  335
  385
  440
  498
  559
  624
  692
  764
  839
  918
  1,000
  1,085
  1,173
  1,265
  1,361
Net income, $m
  18
  27
  39
  56
  79
  108
  145
  189
  243
  306
  380
  464
  558
  663
  779
  905
  1,042
  1,189
  1,345
  1,512
  1,687
  1,872
  2,066
  2,269
  2,481
  2,703
  2,933
  3,172
  3,421
  3,680

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
  87
  134
  201
  291
  411
  565
  758
  995
  1,281
  1,617
  2,009
  2,456
  2,960
  3,522
  4,141
  4,817
  5,549
  6,335
  7,175
  8,066
  9,009
  10,002
  11,044
  12,134
  13,273
  14,461
  15,698
  16,985
  18,323
  19,714
Adjusted assets (=assets-cash), $m
  87
  134
  201
  291
  411
  565
  758
  995
  1,281
  1,617
  2,009
  2,456
  2,960
  3,522
  4,141
  4,817
  5,549
  6,335
  7,175
  8,066
  9,009
  10,002
  11,044
  12,134
  13,273
  14,461
  15,698
  16,985
  18,323
  19,714
Revenue / Adjusted assets
  0.862
  0.866
  0.866
  0.866
  0.866
  0.865
  0.865
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
Average production assets, $m
  4
  6
  9
  13
  19
  26
  35
  46
  59
  74
  92
  113
  136
  162
  190
  221
  255
  291
  329
  370
  414
  459
  507
  557
  609
  664
  720
  780
  841
  905
Working capital, $m
  -31
  -48
  -72
  -104
  -147
  -201
  -270
  -355
  -457
  -577
  -717
  -876
  -1,056
  -1,257
  -1,477
  -1,719
  -1,980
  -2,260
  -2,560
  -2,878
  -3,214
  -3,569
  -3,940
  -4,329
  -4,736
  -5,160
  -5,601
  -6,060
  -6,537
  -7,034
Total debt, $m
  13
  33
  60
  97
  146
  209
  289
  386
  503
  641
  801
  985
  1,191
  1,422
  1,676
  1,953
  2,253
  2,575
  2,919
  3,285
  3,671
  4,078
  4,506
  4,953
  5,420
  5,907
  6,414
  6,941
  7,490
  8,060
Total liabilities, $m
  36
  55
  82
  119
  168
  232
  311
  408
  525
  663
  824
  1,007
  1,214
  1,444
  1,698
  1,975
  2,275
  2,597
  2,942
  3,307
  3,694
  4,101
  4,528
  4,975
  5,442
  5,929
  6,436
  6,964
  7,512
  8,083
Total equity, $m
  51
  79
  118
  172
  242
  333
  447
  587
  756
  954
  1,185
  1,449
  1,746
  2,078
  2,443
  2,842
  3,274
  3,738
  4,233
  4,759
  5,315
  5,901
  6,516
  7,159
  7,831
  8,532
  9,262
  10,021
  10,810
  11,631
Total liabilities and equity, $m
  87
  134
  200
  291
  410
  565
  758
  995
  1,281
  1,617
  2,009
  2,456
  2,960
  3,522
  4,141
  4,817
  5,549
  6,335
  7,175
  8,066
  9,009
  10,002
  11,044
  12,134
  13,273
  14,461
  15,698
  16,985
  18,322
  19,714
Debt-to-equity ratio
  0.260
  0.410
  0.510
  0.570
  0.600
  0.630
  0.650
  0.660
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  27
  39
  56
  79
  108
  145
  189
  243
  306
  380
  464
  558
  663
  779
  905
  1,042
  1,189
  1,345
  1,512
  1,687
  1,872
  2,066
  2,269
  2,481
  2,703
  2,933
  3,172
  3,421
  3,680
Depreciation, amort., depletion, $m
  1
  1
  2
  3
  4
  5
  7
  9
  12
  15
  18
  23
  27
  32
  38
  44
  51
  58
  66
  74
  83
  92
  101
  111
  122
  133
  144
  156
  168
  181
Funds from operations, $m
  18
  28
  41
  59
  83
  113
  152
  198
  255
  321
  398
  486
  585
  696
  817
  950
  1,093
  1,247
  1,411
  1,586
  1,770
  1,964
  2,168
  2,381
  2,603
  2,835
  3,077
  3,328
  3,590
  3,861
Change in working capital, $m
  -12
  -17
  -24
  -32
  -43
  -55
  -69
  -85
  -102
  -120
  -140
  -160
  -180
  -200
  -221
  -241
  -261
  -281
  -300
  -318
  -336
  -354
  -372
  -389
  -406
  -424
  -441
  -459
  -477
  -496
Cash from operations, $m
  30
  45
  65
  91
  125
  168
  221
  283
  357
  441
  538
  646
  765
  896
  1,038
  1,191
  1,354
  1,527
  1,711
  1,904
  2,106
  2,318
  2,539
  2,770
  3,010
  3,259
  3,518
  3,787
  4,067
  4,357
Maintenance CAPEX, $m
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -7
  -9
  -12
  -15
  -18
  -23
  -27
  -32
  -38
  -44
  -51
  -58
  -66
  -74
  -83
  -92
  -101
  -111
  -122
  -133
  -144
  -156
  -168
New CAPEX, $m
  -2
  -2
  -3
  -4
  -5
  -7
  -9
  -11
  -13
  -15
  -18
  -21
  -23
  -26
  -28
  -31
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -50
  -52
  -55
  -57
  -59
  -61
  -64
Cash from investing activities, $m
  -2
  -3
  -4
  -6
  -8
  -11
  -14
  -18
  -22
  -27
  -33
  -39
  -46
  -53
  -60
  -69
  -78
  -87
  -97
  -107
  -117
  -129
  -140
  -151
  -163
  -177
  -190
  -203
  -217
  -232
Free cash flow, $m
  28
  42
  60
  85
  117
  157
  206
  265
  334
  414
  505
  607
  719
  843
  977
  1,122
  1,276
  1,440
  1,614
  1,797
  1,989
  2,190
  2,400
  2,618
  2,846
  3,083
  3,329
  3,584
  3,850
  4,125
Issuance/(repayment) of debt, $m
  13
  19
  27
  37
  49
  63
  79
  97
  117
  138
  160
  183
  207
  230
  254
  277
  300
  322
  344
  366
  387
  407
  427
  447
  467
  487
  507
  528
  549
  570
Issuance/(repurchase) of shares, $m
  2
  1
  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  
  15
  20
  27
  37
  49
  63
  79
  97
  117
  138
  160
  183
  207
  230
  254
  277
  300
  322
  344
  366
  387
  407
  427
  447
  467
  487
  507
  528
  549
  570
Total cash flow (excl. dividends), $m
  43
  62
  88
  122
  166
  220
  286
  363
  451
  552
  665
  790
  926
  1,073
  1,231
  1,399
  1,576
  1,763
  1,958
  2,163
  2,376
  2,597
  2,827
  3,066
  3,313
  3,570
  3,836
  4,112
  4,398
  4,696
Retained Cash Flow (-), $m
  -19
  -28
  -39
  -53
  -71
  -91
  -114
  -140
  -168
  -199
  -231
  -264
  -297
  -331
  -365
  -399
  -432
  -464
  -495
  -526
  -556
  -586
  -615
  -643
  -672
  -701
  -730
  -759
  -789
  -821
Prev. year cash balance distribution, $m
  71
  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
  95
  35
  49
  69
  96
  130
  172
  223
  283
  354
  435
  526
  629
  742
  866
  1,000
  1,144
  1,299
  1,463
  1,637
  1,819
  2,011
  2,212
  2,422
  2,641
  2,869
  3,106
  3,353
  3,609
  3,875
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
  91
  32
  42
  57
  74
  94
  116
  139
  163
  185
  206
  225
  239
  249
  254
  254
  249
  239
  225
  208
  188
  167
  145
  123
  103
  84
  67
  52
  39
  29
Current shareholders' claim on cash, %
  94.4
  91.6
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5

Four Seasons Education (Cayman) Inc. is engaged in providing after-school math education service for elementary school students in Shanghai. The Company’s courses are divided into elementary school programs and middle school and kindergarten programs. Elementary school programs account for a majority of its students. The Company offers three elementary school programs: standard programs, Ivy programs and special programs. Standard programs, which offer courses through five standard programs for students of different aptitude levels for each elementary school grade level. Ivy programs offer personalized classes addressing students’ specific needs such as individualized competition preparation and topic review. Students and parents can tailor standard program course parameters such as difficulty of content, pace and class size. Special programs include short-term, intensive competition workshops, courses delivered to K-12 schools and classes on specific math topics.

FINANCIAL RATIOS  of  Four Seasons Education (Cayman) Inc. (FEDU)

Valuation Ratios
P/E Ratio 14.7
Price to Sales 1.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 2.6
Price to Free Cash Flow 2.8
Growth Rates
Sales Growth Rate 107.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 10.7%
Ret/ On Assets - 3 Yr. Avg. -16.9%
Return On Total Capital 25%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 25%
Return On Equity - 3 Yr. Avg. 8.3%
Asset Turnover 1
Profitability Ratios
Gross Margin 58.6%
Gross Margin - 3 Yr. Avg. 33.8%
EBITDA Margin 17.2%
EBITDA Margin - 3 Yr. Avg. -3.8%
Operating Margin 31%
Oper. Margin - 3 Yr. Avg. 12.7%
Pre-Tax Margin 17.2%
Pre-Tax Margin - 3 Yr. Avg. -3.8%
Net Profit Margin 10.3%
Net Profit Margin - 3 Yr. Avg. -6.1%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 13.3%
Payout Ratio 0%

FEDU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FEDU stock intrinsic value calculation we used $47 million for the last fiscal year's total revenue generated by Four Seasons Education (Cayman) Inc.. The default revenue input number comes from 0001 income statement of Four Seasons Education (Cayman) Inc.. 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 FEDU stock valuation model: a) initial revenue growth rate of 60% 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 FEDU is calculated based on our internal credit rating of Four Seasons Education (Cayman) Inc., 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 Four Seasons Education (Cayman) Inc..
    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 FEDU stock the variable cost ratio is equal to 68.1%.

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 FEDU 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 5.4% for Four Seasons Education (Cayman) Inc..

Corporate tax rate of 27% is the nominal tax rate for Four Seasons Education (Cayman) Inc.. 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 FEDU 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 FEDU are equal to 5.3%.

Life of production assets of 2.4 years is the average useful life of capital assets used in Four Seasons Education (Cayman) Inc. 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 FEDU is equal to -41.2%. 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 - $102.960651075 million for Four Seasons Education (Cayman) Inc. - 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 49.936 million for Four Seasons Education (Cayman) Inc. 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 Four Seasons Education (Cayman) Inc. at the current share price and the inputted number of shares is $0.1 billion.

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