Intrinsic value of GreenTree Hospitality Group Ltd. - GHG

Previous Close

$13.43

  Intrinsic Value

$35.82

stock screener

  Rating & Target

str. buy

+167%

Previous close

$13.43

 
Intrinsic value

$35.82

 
Up/down potential

+167%

 
Rating

str. buy

We calculate the intrinsic value of GHG 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 1.4

 

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, %
  26.10
  23.99
  22.09
  20.38
  18.84
  17.46
  16.21
  15.09
  14.08
  13.17
  12.36
  11.62
  10.96
  10.36
  9.83
  9.34
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.51
  6.36
  6.23
  6.10
  5.99
Revenue, $m
  149
  184
  225
  271
  322
  379
  440
  506
  578
  654
  734
  820
  910
  1,004
  1,103
  1,206
  1,313
  1,425
  1,541
  1,662
  1,788
  1,919
  2,054
  2,196
  2,342
  2,495
  2,654
  2,819
  2,991
  3,170
Variable operating expenses, $m
  64
  80
  97
  117
  139
  163
  190
  218
  249
  282
  317
  353
  392
  433
  475
  520
  566
  614
  665
  717
  771
  827
  886
  947
  1,010
  1,076
  1,144
  1,215
  1,290
  1,367
Fixed operating expenses, $m
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  13
Total operating expenses, $m
  71
  87
  104
  125
  147
  171
  198
  226
  258
  291
  326
  362
  401
  442
  485
  530
  576
  624
  676
  728
  782
  838
  898
  959
  1,022
  1,088
  1,157
  1,228
  1,303
  1,380
Operating income, $m
  77
  98
  121
  147
  175
  207
  242
  280
  320
  363
  409
  457
  508
  562
  617
  676
  737
  800
  866
  935
  1,006
  1,080
  1,157
  1,237
  1,320
  1,407
  1,497
  1,591
  1,688
  1,790
EBITDA, $m
  81
  103
  127
  154
  184
  217
  254
  293
  336
  381
  429
  479
  533
  588
  647
  708
  772
  838
  907
  979
  1,054
  1,132
  1,212
  1,296
  1,383
  1,474
  1,568
  1,666
  1,768
  1,875
Interest expense (income), $m
  0
  0
  2
  5
  8
  11
  14
  18
  23
  28
  33
  38
  44
  50
  56
  63
  70
  77
  85
  93
  101
  109
  118
  128
  137
  147
  158
  168
  180
  191
  203
Earnings before tax, $m
  77
  95
  116
  139
  165
  193
  224
  257
  292
  330
  371
  414
  458
  506
  555
  606
  660
  716
  774
  834
  897
  962
  1,030
  1,100
  1,173
  1,249
  1,329
  1,411
  1,497
  1,586
Tax expense, $m
  21
  26
  31
  38
  44
  52
  60
  69
  79
  89
  100
  112
  124
  136
  150
  164
  178
  193
  209
  225
  242
  260
  278
  297
  317
  337
  359
  381
  404
  428
Net income, $m
  56
  70
  85
  101
  120
  141
  163
  187
  213
  241
  271
  302
  335
  369
  405
  442
  482
  522
  565
  609
  655
  702
  752
  803
  856
  912
  970
  1,030
  1,093
  1,158

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
  221
  274
  334
  402
  478
  562
  653
  751
  857
  970
  1,090
  1,216
  1,350
  1,489
  1,636
  1,789
  1,948
  2,114
  2,287
  2,466
  2,653
  2,847
  3,048
  3,258
  3,475
  3,702
  3,937
  4,182
  4,438
  4,704
Adjusted assets (=assets-cash), $m
  221
  274
  334
  402
  478
  562
  653
  751
  857
  970
  1,090
  1,216
  1,350
  1,489
  1,636
  1,789
  1,948
  2,114
  2,287
  2,466
  2,653
  2,847
  3,048
  3,258
  3,475
  3,702
  3,937
  4,182
  4,438
  4,704
Revenue / Adjusted assets
  0.674
  0.672
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.673
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
Average production assets, $m
  20
  25
  30
  36
  43
  51
  59
  68
  77
  88
  98
  110
  122
  135
  148
  162
  176
  191
  207
  223
  240
  257
  275
  294
  314
  334
  356
  378
  401
  425
Working capital, $m
  -84
  -104
  -127
  -152
  -181
  -213
  -247
  -285
  -325
  -367
  -413
  -461
  -511
  -564
  -620
  -678
  -738
  -801
  -866
  -934
  -1,005
  -1,078
  -1,155
  -1,234
  -1,316
  -1,402
  -1,491
  -1,584
  -1,681
  -1,782
Total debt, $m
  40
  87
  141
  201
  268
  342
  422
  509
  603
  703
  809
  920
  1,038
  1,162
  1,291
  1,427
  1,567
  1,714
  1,867
  2,025
  2,190
  2,362
  2,540
  2,725
  2,917
  3,118
  3,326
  3,543
  3,768
  4,003
Total liabilities, $m
  195
  242
  295
  356
  423
  496
  577
  664
  758
  857
  963
  1,075
  1,193
  1,317
  1,446
  1,581
  1,722
  1,869
  2,021
  2,180
  2,345
  2,516
  2,695
  2,880
  3,072
  3,272
  3,481
  3,697
  3,923
  4,158
Total equity, $m
  26
  32
  39
  47
  55
  65
  76
  87
  99
  113
  126
  141
  157
  173
  190
  207
  226
  245
  265
  286
  308
  330
  354
  378
  403
  429
  457
  485
  515
  546
Total liabilities and equity, $m
  221
  274
  334
  403
  478
  561
  653
  751
  857
  970
  1,089
  1,216
  1,350
  1,490
  1,636
  1,788
  1,948
  2,114
  2,286
  2,466
  2,653
  2,846
  3,049
  3,258
  3,475
  3,701
  3,938
  4,182
  4,438
  4,704
Debt-to-equity ratio
  1.580
  2.750
  3.630
  4.310
  4.830
  5.250
  5.580
  5.840
  6.060
  6.250
  6.400
  6.520
  6.630
  6.730
  6.810
  6.870
  6.940
  6.990
  7.040
  7.080
  7.120
  7.150
  7.180
  7.210
  7.240
  7.260
  7.280
  7.300
  7.320
  7.340
Adjusted equity ratio
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  70
  85
  101
  120
  141
  163
  187
  213
  241
  271
  302
  335
  369
  405
  442
  482
  522
  565
  609
  655
  702
  752
  803
  856
  912
  970
  1,030
  1,093
  1,158
Depreciation, amort., depletion, $m
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  27
  30
  32
  35
  38
  41
  45
  48
  51
  55
  59
  63
  67
  71
  76
  80
  85
Funds from operations, $m
  61
  75
  91
  109
  129
  151
  175
  201
  229
  259
  290
  324
  359
  396
  435
  475
  517
  561
  606
  653
  702
  754
  807
  862
  919
  979
  1,041
  1,106
  1,173
  1,243
Change in working capital, $m
  -17
  -20
  -23
  -26
  -29
  -32
  -34
  -37
  -40
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -71
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -101
Cash from operations, $m
  78
  95
  114
  135
  158
  183
  210
  238
  269
  302
  336
  372
  410
  449
  490
  533
  577
  623
  671
  721
  773
  827
  883
  941
  1,002
  1,065
  1,130
  1,199
  1,270
  1,344
Maintenance CAPEX, $m
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -14
  -15
  -18
  -20
  -22
  -24
  -27
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -51
  -55
  -59
  -63
  -67
  -71
  -76
  -80
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -7
  -9
  -10
  -12
  -14
  -17
  -18
  -21
  -24
  -25
  -29
  -31
  -34
  -37
  -40
  -44
  -46
  -50
  -54
  -57
  -62
  -66
  -69
  -74
  -79
  -83
  -88
  -93
  -99
  -104
Free cash flow, $m
  71
  86
  103
  122
  143
  166
  191
  218
  246
  276
  308
  341
  376
  412
  450
  489
  530
  573
  618
  664
  712
  762
  813
  867
  923
  981
  1,042
  1,105
  1,171
  1,240
Issuance/(repayment) of debt, $m
  40
  47
  53
  60
  67
  74
  80
  87
  94
  100
  106
  112
  118
  124
  129
  135
  141
  147
  153
  159
  165
  171
  178
  185
  192
  200
  208
  217
  226
  235
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  
  40
  47
  53
  60
  67
  74
  80
  87
  94
  100
  106
  112
  118
  124
  129
  135
  141
  147
  153
  159
  165
  171
  178
  185
  192
  200
  208
  217
  226
  235
Total cash flow (excl. dividends), $m
  111
  133
  157
  183
  210
  240
  272
  305
  340
  376
  413
  453
  493
  536
  579
  624
  671
  720
  770
  822
  877
  933
  991
  1,052
  1,116
  1,182
  1,250
  1,322
  1,397
  1,475
Retained Cash Flow (-), $m
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
Prev. year cash balance distribution, $m
  90
  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
  196
  127
  150
  175
  202
  231
  261
  293
  327
  363
  400
  438
  478
  519
  562
  607
  653
  701
  750
  802
  855
  910
  968
  1,028
  1,090
  1,155
  1,223
  1,294
  1,367
  1,444
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
  188
  116
  130
  144
  156
  167
  176
  183
  188
  190
  190
  187
  182
  174
  165
  154
  142
  129
  116
  102
  88
  76
  63
  52
  42
  34
  26
  20
  15
  11
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

FINANCIAL RATIOS  of  GreenTree Hospitality Group Ltd. (GHG)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
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 NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

GHG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GHG stock intrinsic value calculation we used $118 million for the last fiscal year's total revenue generated by GreenTree Hospitality Group Ltd.. The default revenue input number comes from 0001 income statement of GreenTree Hospitality Group Ltd.. 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 GHG stock valuation model: a) initial revenue growth rate of 26.1% 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 GHG is calculated based on our internal credit rating of GreenTree Hospitality Group Ltd., 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 GreenTree Hospitality Group Ltd..
    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 GHG stock the variable cost ratio is equal to 43.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7 million in the base year in the intrinsic value calculation for GHG 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 GreenTree Hospitality Group Ltd..

Corporate tax rate of 27% is the nominal tax rate for GreenTree Hospitality Group Ltd.. 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 GHG 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 GHG are equal to 13.4%.

Life of production assets of 4.3 years is the average useful life of capital assets used in GreenTree Hospitality Group Ltd. 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 GHG is equal to -56.2%. 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 - $110.677938482 million for GreenTree Hospitality Group Ltd. - 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 101.362 million for GreenTree Hospitality Group Ltd. 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 GreenTree Hospitality Group Ltd. at the current share price and the inputted number of shares is $1.4 billion.

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