Intrinsic value of Four Seasons Education (Cayman) ADR - FEDU

Previous Close

$4.52

  Intrinsic Value

$288.89

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  Rating & Target

str. buy

+999%

Previous close

$4.52

 
Intrinsic value

$288.89

 
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
  76
  117
  176
  255
  359
  494
  663
  871
  1,121
  1,415
  1,758
  2,149
  2,590
  3,082
  3,624
  4,215
  4,855
  5,544
  6,278
  7,059
  7,884
  8,752
  9,664
  10,618
  11,615
  12,654
  13,737
  14,863
  16,034
  17,251
Variable operating expenses, $m
  52
  80
  120
  173
  245
  336
  452
  593
  763
  964
  1,197
  1,463
  1,763
  2,098
  2,467
  2,870
  3,306
  3,774
  4,274
  4,806
  5,367
  5,959
  6,579
  7,229
  7,908
  8,615
  9,352
  10,119
  10,916
  11,745
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
  52
  80
  120
  173
  245
  336
  452
  593
  763
  964
  1,197
  1,463
  1,763
  2,098
  2,467
  2,870
  3,306
  3,774
  4,274
  4,806
  5,367
  5,959
  6,579
  7,229
  7,908
  8,615
  9,352
  10,119
  10,916
  11,745
Operating income, $m
  24
  37
  56
  81
  115
  158
  212
  278
  358
  452
  561
  686
  827
  984
  1,157
  1,345
  1,550
  1,769
  2,004
  2,253
  2,516
  2,794
  3,085
  3,389
  3,707
  4,039
  4,385
  4,744
  5,118
  5,506
EBITDA, $m
  25
  39
  58
  84
  119
  163
  219
  287
  370
  467
  580
  709
  854
  1,016
  1,195
  1,390
  1,601
  1,828
  2,071
  2,328
  2,600
  2,886
  3,187
  3,502
  3,830
  4,173
  4,530
  4,902
  5,288
  5,689
Interest expense (income), $m
  0
  0
  1
  2
  3
  5
  8
  11
  16
  21
  27
  35
  44
  54
  65
  78
  91
  107
  123
  141
  159
  179
  200
  223
  246
  270
  296
  322
  350
  379
  409
Earnings before tax, $m
  24
  37
  54
  78
  109
  150
  200
  262
  337
  424
  526
  642
  773
  919
  1,079
  1,254
  1,443
  1,646
  1,863
  2,094
  2,337
  2,593
  2,862
  3,143
  3,437
  3,743
  4,062
  4,394
  4,739
  5,098
Tax expense, $m
  7
  10
  15
  21
  30
  40
  54
  71
  91
  115
  142
  173
  209
  248
  291
  339
  390
  445
  503
  565
  631
  700
  773
  849
  928
  1,011
  1,097
  1,186
  1,280
  1,376
Net income, $m
  18
  27
  40
  57
  80
  109
  146
  191
  246
  310
  384
  469
  564
  671
  788
  915
  1,054
  1,202
  1,360
  1,528
  1,706
  1,893
  2,089
  2,295
  2,509
  2,733
  2,965
  3,208
  3,459
  3,721

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
  88
  136
  203
  294
  415
  571
  766
  1,006
  1,294
  1,634
  2,030
  2,481
  2,991
  3,559
  4,184
  4,867
  5,607
  6,401
  7,250
  8,151
  9,104
  10,107
  11,159
  12,261
  13,412
  14,612
  15,862
  17,163
  18,515
  19,920
Adjusted assets (=assets-cash), $m
  88
  136
  203
  294
  415
  571
  766
  1,006
  1,294
  1,634
  2,030
  2,481
  2,991
  3,559
  4,184
  4,867
  5,607
  6,401
  7,250
  8,151
  9,104
  10,107
  11,159
  12,261
  13,412
  14,612
  15,862
  17,163
  18,515
  19,920
Revenue / Adjusted assets
  0.864
  0.860
  0.867
  0.867
  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
  0.866
Average production assets, $m
  4
  6
  9
  14
  19
  26
  35
  46
  59
  75
  93
  114
  137
  163
  192
  223
  257
  294
  333
  374
  418
  464
  512
  563
  616
  671
  728
  788
  850
  914
Working capital, $m
  -31
  -48
  -72
  -105
  -148
  -204
  -273
  -359
  -462
  -583
  -724
  -885
  -1,067
  -1,270
  -1,493
  -1,737
  -2,000
  -2,284
  -2,587
  -2,908
  -3,248
  -3,606
  -3,982
  -4,375
  -4,785
  -5,214
  -5,660
  -6,124
  -6,606
  -7,107
Total debt, $m
  14
  33
  61
  98
  148
  212
  292
  390
  508
  648
  810
  995
  1,204
  1,437
  1,693
  1,973
  2,277
  2,602
  2,950
  3,320
  3,710
  4,121
  4,553
  5,005
  5,477
  5,969
  6,481
  7,014
  7,569
  8,145
Total liabilities, $m
  36
  56
  83
  121
  170
  234
  314
  412
  531
  670
  832
  1,017
  1,226
  1,459
  1,716
  1,996
  2,299
  2,625
  2,972
  3,342
  3,732
  4,144
  4,575
  5,027
  5,499
  5,991
  6,504
  7,037
  7,591
  8,167
Total equity, $m
  52
  80
  120
  174
  245
  337
  452
  593
  763
  964
  1,197
  1,464
  1,765
  2,100
  2,469
  2,872
  3,308
  3,777
  4,277
  4,809
  5,371
  5,963
  6,584
  7,234
  7,913
  8,621
  9,359
  10,126
  10,924
  11,753
Total liabilities and equity, $m
  88
  136
  203
  295
  415
  571
  766
  1,005
  1,294
  1,634
  2,029
  2,481
  2,991
  3,559
  4,185
  4,868
  5,607
  6,402
  7,249
  8,151
  9,103
  10,107
  11,159
  12,261
  13,412
  14,612
  15,863
  17,163
  18,515
  19,920
Debt-to-equity ratio
  0.270
  0.420
  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
  40
  57
  80
  109
  146
  191
  246
  310
  384
  469
  564
  671
  788
  915
  1,054
  1,202
  1,360
  1,528
  1,706
  1,893
  2,089
  2,295
  2,509
  2,733
  2,965
  3,208
  3,459
  3,721
Depreciation, amort., depletion, $m
  1
  1
  2
  3
  4
  5
  7
  9
  12
  15
  19
  23
  27
  33
  38
  45
  51
  59
  67
  75
  84
  93
  102
  113
  123
  134
  146
  158
  170
  183
Funds from operations, $m
  19
  28
  41
  60
  84
  115
  153
  201
  258
  325
  403
  492
  592
  703
  826
  960
  1,105
  1,261
  1,427
  1,603
  1,790
  1,986
  2,192
  2,407
  2,632
  2,867
  3,111
  3,365
  3,629
  3,904
Change in working capital, $m
  -12
  -17
  -24
  -33
  -43
  -55
  -70
  -86
  -103
  -121
  -141
  -161
  -182
  -203
  -223
  -244
  -264
  -284
  -303
  -322
  -340
  -358
  -376
  -393
  -411
  -428
  -446
  -464
  -482
  -501
Cash from operations, $m
  30
  45
  65
  92
  127
  170
  223
  286
  361
  446
  544
  653
  774
  906
  1,049
  1,204
  1,369
  1,544
  1,730
  1,925
  2,130
  2,344
  2,567
  2,800
  3,043
  3,295
  3,557
  3,829
  4,112
  4,405
Maintenance CAPEX, $m
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -7
  -9
  -12
  -15
  -19
  -23
  -27
  -33
  -38
  -45
  -51
  -59
  -67
  -75
  -84
  -93
  -102
  -113
  -123
  -134
  -146
  -158
  -170
New CAPEX, $m
  -2
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -13
  -16
  -18
  -21
  -23
  -26
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -46
  -48
  -51
  -53
  -55
  -57
  -60
  -62
  -65
Cash from investing activities, $m
  -2
  -3
  -4
  -6
  -9
  -11
  -14
  -18
  -22
  -28
  -33
  -40
  -46
  -53
  -62
  -69
  -79
  -87
  -98
  -108
  -119
  -130
  -141
  -153
  -166
  -178
  -191
  -206
  -220
  -235
Free cash flow, $m
  28
  42
  61
  86
  119
  159
  209
  268
  338
  419
  510
  613
  727
  852
  988
  1,134
  1,290
  1,456
  1,632
  1,817
  2,011
  2,214
  2,426
  2,647
  2,877
  3,117
  3,365
  3,624
  3,892
  4,171
Issuance/(repayment) of debt, $m
  14
  20
  28
  37
  50
  64
  80
  98
  118
  140
  162
  185
  209
  233
  257
  280
  303
  326
  348
  369
  391
  411
  432
  452
  472
  492
  512
  533
  554
  576
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  
  16
  21
  28
  37
  50
  64
  80
  98
  118
  140
  162
  185
  209
  233
  257
  280
  303
  326
  348
  369
  391
  411
  432
  452
  472
  492
  512
  533
  554
  576
Total cash flow (excl. dividends), $m
  44
  63
  89
  124
  168
  223
  289
  366
  456
  558
  672
  799
  936
  1,085
  1,244
  1,414
  1,593
  1,782
  1,980
  2,186
  2,402
  2,625
  2,858
  3,099
  3,349
  3,609
  3,878
  4,157
  4,447
  4,747
Retained Cash Flow (-), $m
  -20
  -28
  -40
  -54
  -71
  -92
  -115
  -141
  -170
  -201
  -233
  -267
  -301
  -335
  -369
  -403
  -436
  -469
  -501
  -532
  -562
  -592
  -621
  -650
  -679
  -708
  -737
  -767
  -798
  -829
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
  70
  97
  131
  174
  225
  286
  357
  439
  532
  636
  750
  875
  1,011
  1,157
  1,313
  1,479
  1,655
  1,840
  2,034
  2,237
  2,449
  2,670
  2,901
  3,141
  3,390
  3,649
  3,918
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
  43
  57
  75
  95
  117
  141
  164
  187
  209
  227
  242
  252
  257
  257
  252
  242
  228
  210
  190
  169
  147
  125
  104
  85
  67
  52
  40
  30
Current shareholders' claim on cash, %
  91.6
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1

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) ADR (FEDU)

Valuation Ratios
P/E Ratio 35.9
Price to Sales 3.7
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow 6.7
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 $47.4925726928 million for the last fiscal year's total revenue generated by Four Seasons Education (Cayman) ADR. The default revenue input number comes from 0001 income statement of Four Seasons Education (Cayman) ADR. 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) ADR, 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) ADR.
    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) ADR.

Corporate tax rate of 27% is the nominal tax rate for Four Seasons Education (Cayman) ADR. 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) ADR 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) ADR - 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 13.578 million for Four Seasons Education (Cayman) ADR 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) ADR at the current share price and the inputted number of shares is $0.1 billion.

COMPANY NEWS

▶ Four Seasons Education Announces Dividend   [07:25AM  PR Newswire]
▶ Opening Bell, November 8, 2017   [09:29AM  CNBC Videos]
▶ Today's Bell Ringer, November 8, 2017   [09:15AM  CNBC Videos]

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