Intrinsic value of Gogo Inc. - GOGO

Previous Close

$4.68

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$4.68

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of GOGO 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 0.4

 

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, %
  15.50
  14.45
  13.51
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
Revenue, $m
  1,033
  1,182
  1,341
  1,511
  1,691
  1,880
  2,079
  2,287
  2,505
  2,732
  2,969
  3,215
  3,471
  3,738
  4,014
  4,302
  4,601
  4,911
  5,234
  5,570
  5,920
  6,284
  6,663
  7,058
  7,470
  7,900
  8,348
  8,817
  9,306
  9,817
Variable operating expenses, $m
  826
  938
  1,058
  1,186
  1,321
  1,463
  1,612
  1,768
  1,932
  2,102
  2,229
  2,414
  2,606
  2,806
  3,014
  3,229
  3,454
  3,687
  3,929
  4,182
  4,444
  4,717
  5,002
  5,299
  5,608
  5,931
  6,267
  6,619
  6,986
  7,370
Fixed operating expenses, $m
  207
  212
  217
  221
  226
  231
  236
  242
  247
  252
  258
  264
  269
  275
  281
  288
  294
  300
  307
  314
  321
  328
  335
  342
  350
  357
  365
  373
  382
  390
Total operating expenses, $m
  1,033
  1,150
  1,275
  1,407
  1,547
  1,694
  1,848
  2,010
  2,179
  2,354
  2,487
  2,678
  2,875
  3,081
  3,295
  3,517
  3,748
  3,987
  4,236
  4,496
  4,765
  5,045
  5,337
  5,641
  5,958
  6,288
  6,632
  6,992
  7,368
  7,760
Operating income, $m
  -1
  31
  66
  104
  144
  186
  231
  277
  326
  378
  482
  538
  596
  656
  719
  785
  853
  924
  998
  1,075
  1,155
  1,239
  1,326
  1,417
  1,512
  1,612
  1,716
  1,824
  1,938
  2,057
EBITDA, $m
  195
  248
  306
  367
  432
  501
  573
  649
  729
  812
  898
  989
  1,083
  1,180
  1,282
  1,388
  1,498
  1,612
  1,732
  1,856
  1,985
  2,120
  2,260
  2,407
  2,560
  2,719
  2,886
  3,061
  3,243
  3,434
Interest expense (income), $m
  28
  124
  98
  121
  145
  171
  199
  228
  259
  291
  324
  359
  396
  434
  473
  514
  557
  601
  647
  695
  745
  796
  850
  906
  965
  1,026
  1,089
  1,155
  1,224
  1,297
  1,372
Earnings before tax, $m
  -125
  -66
  -54
  -41
  -27
  -13
  3
  19
  36
  53
  123
  142
  162
  183
  205
  228
  252
  277
  303
  330
  359
  388
  420
  452
  487
  523
  560
  600
  642
  685
Tax expense, $m
  0
  0
  0
  0
  0
  0
  1
  5
  10
  14
  33
  38
  44
  49
  55
  62
  68
  75
  82
  89
  97
  105
  113
  122
  131
  141
  151
  162
  173
  185
Net income, $m
  -125
  -66
  -54
  -41
  -27
  -13
  2
  14
  26
  39
  90
  104
  118
  134
  150
  166
  184
  202
  221
  241
  262
  284
  306
  330
  355
  382
  409
  438
  468
  500

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
  1,460
  1,672
  1,897
  2,137
  2,391
  2,659
  2,941
  3,235
  3,543
  3,865
  4,199
  4,548
  4,910
  5,287
  5,678
  6,085
  6,507
  6,947
  7,403
  7,878
  8,373
  8,888
  9,424
  9,983
  10,566
  11,174
  11,808
  12,471
  13,163
  13,886
Adjusted assets (=assets-cash), $m
  1,460
  1,672
  1,897
  2,137
  2,391
  2,659
  2,941
  3,235
  3,543
  3,865
  4,199
  4,548
  4,910
  5,287
  5,678
  6,085
  6,507
  6,947
  7,403
  7,878
  8,373
  8,888
  9,424
  9,983
  10,566
  11,174
  11,808
  12,471
  13,163
  13,886
Revenue / Adjusted assets
  0.708
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
Average production assets, $m
  724
  828
  940
  1,059
  1,185
  1,318
  1,457
  1,603
  1,756
  1,915
  2,081
  2,254
  2,433
  2,620
  2,814
  3,016
  3,225
  3,443
  3,669
  3,905
  4,150
  4,405
  4,671
  4,948
  5,236
  5,538
  5,852
  6,181
  6,524
  6,882
Working capital, $m
  72
  83
  94
  106
  118
  132
  146
  160
  175
  191
  208
  225
  243
  262
  281
  301
  322
  344
  366
  390
  414
  440
  466
  494
  523
  553
  584
  617
  651
  687
Total debt, $m
  806
  996
  1,199
  1,415
  1,644
  1,885
  2,138
  2,404
  2,681
  2,970
  3,271
  3,585
  3,911
  4,250
  4,602
  4,968
  5,348
  5,744
  6,155
  6,582
  7,027
  7,491
  7,973
  8,476
  9,001
  9,548
  10,119
  10,715
  11,338
  11,989
Total liabilities, $m
  1,314
  1,504
  1,708
  1,924
  2,152
  2,393
  2,647
  2,912
  3,189
  3,478
  3,780
  4,093
  4,419
  4,758
  5,110
  5,476
  5,856
  6,252
  6,663
  7,091
  7,536
  7,999
  8,482
  8,985
  9,509
  10,056
  10,627
  11,224
  11,846
  12,497
Total equity, $m
  146
  167
  190
  214
  239
  266
  294
  324
  354
  386
  420
  455
  491
  529
  568
  608
  651
  695
  740
  788
  837
  889
  942
  998
  1,057
  1,117
  1,181
  1,247
  1,316
  1,389
Total liabilities and equity, $m
  1,460
  1,671
  1,898
  2,138
  2,391
  2,659
  2,941
  3,236
  3,543
  3,864
  4,200
  4,548
  4,910
  5,287
  5,678
  6,084
  6,507
  6,947
  7,403
  7,879
  8,373
  8,888
  9,424
  9,983
  10,566
  11,173
  11,808
  12,471
  13,162
  13,886
Debt-to-equity ratio
  5.520
  5.960
  6.320
  6.620
  6.870
  7.090
  7.270
  7.430
  7.570
  7.680
  7.790
  7.880
  7.960
  8.040
  8.100
  8.160
  8.220
  8.270
  8.310
  8.350
  8.390
  8.430
  8.460
  8.490
  8.520
  8.550
  8.570
  8.590
  8.610
  8.630
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -125
  -66
  -54
  -41
  -27
  -13
  2
  14
  26
  39
  90
  104
  118
  134
  150
  166
  184
  202
  221
  241
  262
  284
  306
  330
  355
  382
  409
  438
  468
  500
Depreciation, amort., depletion, $m
  196
  217
  239
  263
  288
  315
  343
  372
  402
  434
  416
  451
  487
  524
  563
  603
  645
  689
  734
  781
  830
  881
  934
  990
  1,047
  1,108
  1,170
  1,236
  1,305
  1,376
Funds from operations, $m
  71
  151
  185
  222
  261
  302
  345
  386
  428
  473
  506
  555
  605
  658
  713
  770
  829
  891
  955
  1,022
  1,092
  1,164
  1,240
  1,320
  1,403
  1,489
  1,580
  1,674
  1,773
  1,877
Change in working capital, $m
  10
  10
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
Cash from operations, $m
  61
  140
  174
  210
  248
  289
  331
  371
  413
  457
  489
  537
  587
  639
  693
  749
  808
  869
  932
  998
  1,067
  1,139
  1,214
  1,292
  1,374
  1,459
  1,548
  1,641
  1,739
  1,841
Maintenance CAPEX, $m
  -125
  -145
  -166
  -188
  -212
  -237
  -264
  -291
  -321
  -351
  -383
  -416
  -451
  -487
  -524
  -563
  -603
  -645
  -689
  -734
  -781
  -830
  -881
  -934
  -990
  -1,047
  -1,108
  -1,170
  -1,236
  -1,305
New CAPEX, $m
  -97
  -105
  -112
  -119
  -126
  -133
  -139
  -146
  -153
  -159
  -166
  -173
  -180
  -187
  -194
  -202
  -209
  -218
  -226
  -235
  -245
  -255
  -266
  -277
  -289
  -301
  -314
  -328
  -343
  -358
Cash from investing activities, $m
  -222
  -250
  -278
  -307
  -338
  -370
  -403
  -437
  -474
  -510
  -549
  -589
  -631
  -674
  -718
  -765
  -812
  -863
  -915
  -969
  -1,026
  -1,085
  -1,147
  -1,211
  -1,279
  -1,348
  -1,422
  -1,498
  -1,579
  -1,663
Free cash flow, $m
  -162
  -109
  -104
  -97
  -89
  -81
  -72
  -67
  -60
  -53
  -60
  -52
  -43
  -34
  -25
  -15
  -5
  6
  17
  29
  41
  54
  67
  81
  95
  110
  126
  143
  160
  178
Issuance/(repayment) of debt, $m
  -219
  190
  203
  216
  229
  241
  253
  265
  277
  289
  301
  314
  326
  339
  352
  366
  380
  395
  411
  428
  445
  463
  483
  503
  524
  547
  571
  596
  623
  651
Issuance/(repurchase) of shares, $m
  540
  87
  77
  65
  53
  40
  26
  16
  5
  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  
  321
  277
  280
  281
  282
  281
  279
  281
  282
  289
  301
  314
  326
  339
  352
  366
  380
  395
  411
  428
  445
  463
  483
  503
  524
  547
  571
  596
  623
  651
Total cash flow (excl. dividends), $m
  159
  168
  176
  184
  192
  200
  207
  214
  222
  236
  242
  262
  283
  305
  327
  351
  376
  401
  428
  457
  486
  517
  550
  584
  620
  658
  697
  739
  783
  829
Retained Cash Flow (-), $m
  -540
  -87
  -77
  -65
  -53
  -40
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
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
  -381
  81
  100
  119
  139
  160
  179
  185
  191
  204
  208
  227
  247
  267
  288
  310
  333
  358
  383
  409
  437
  466
  496
  528
  562
  597
  634
  673
  713
  756
Discount rate, %
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
  32.85
  34.49
  36.21
  38.02
  39.93
  41.92
  44.02
  46.22
  48.53
  50.96
  53.50
  56.18
  58.99
  61.94
  65.03
PV of cash for distribution, $m
  -329
  59
  62
  61
  58
  53
  47
  37
  29
  23
  17
  13
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  31.3
  21.5
  16.0
  12.8
  11.0
  10.0
  9.5
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4
  9.4

Gogo Inc. is a holding company. The Company is a provider of in-flight broadband connectivity and connectivity-enabled services to commercial and business aviation. The Company operates through three segments: Commercial Aviation North America (CA-NA), Commercial Aviation Rest of World (CA-ROW) and Business Aviation (BA). The CA-NA segment offers air-to-ground (ATG) and satellite connectivity and entertainment services to commercial aircraft flying routes generally within North America. The CA-ROW segment offers satellite connectivity and entertainment services, using 2Ku and Ku solutions, to commercial aircraft flying routes outside of North America. The Company's BA segment offers a suite of integrated equipment, network and Internet connectivity products and services to the business aviation market. As of December 31, 2016, it provided services on 2,943 commercial aircraft. The Company offers a package of airborne equipment for its ATG-4/ATG and satellite services.

FINANCIAL RATIOS  of  Gogo Inc. (GOGO)

Valuation Ratios
P/E Ratio -3.2
Price to Sales 0.7
Price to Book -10.1
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow -3.6
Growth Rates
Sales Growth Rate 19.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.7%
Cap. Spend. - 3 Yr. Gr. Rate 7.9%
Financial Strength
Quick Ratio 152
Current Ratio 0
LT Debt to Equity -2002.5%
Total Debt to Equity -2010%
Interest Coverage -3
Management Effectiveness
Return On Assets -8.6%
Ret/ On Assets - 3 Yr. Avg. -8%
Return On Total Capital -17.9%
Ret/ On T. Cap. - 3 Yr. Avg. -17.9%
Return On Equity -961.5%
Return On Equity - 3 Yr. Avg. -359.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 53.9%
Gross Margin - 3 Yr. Avg. 52.4%
EBITDA Margin 1.8%
EBITDA Margin - 3 Yr. Avg. 2.8%
Operating Margin -7%
Oper. Margin - 3 Yr. Avg. -9.6%
Pre-Tax Margin -20.6%
Pre-Tax Margin - 3 Yr. Avg. -20.7%
Net Profit Margin -20.9%
Net Profit Margin - 3 Yr. Avg. -21.1%
Effective Tax Rate -1.6%
Eff/ Tax Rate - 3 Yr. Avg. -2%
Payout Ratio 0%

GOGO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GOGO stock intrinsic value calculation we used $894 million for the last fiscal year's total revenue generated by Gogo Inc.. The default revenue input number comes from 0001 income statement of Gogo 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 GOGO stock valuation model: a) initial revenue growth rate of 15.5% 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 15.8%, whose default value for GOGO is calculated based on our internal credit rating of Gogo 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 Gogo 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 GOGO stock the variable cost ratio is equal to 80.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $203 million in the base year in the intrinsic value calculation for GOGO 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 12.1% for Gogo Inc..

Corporate tax rate of 27% is the nominal tax rate for Gogo 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 GOGO 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 GOGO are equal to 70.1%.

Life of production assets of 5 years is the average useful life of capital assets used in Gogo 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 GOGO is equal to 7%. 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 - $-268.761 million for Gogo 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 87.560 million for Gogo 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 Gogo Inc. at the current share price and the inputted number of shares is $0.4 billion.

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