Intrinsic value of Kingstone - KINS

Previous Close

$16.68

  Intrinsic Value

$62.63

stock screener

  Rating & Target

str. buy

+275%

Previous close

$16.68

 
Intrinsic value

$62.63

 
Up/down potential

+275%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as KINS.

We calculate the intrinsic value of KINS 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 0.2

 

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, %
  26.80
  24.62
  22.66
  20.89
  19.30
  17.87
  16.59
  15.43
  14.38
  13.45
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.94
  7.65
  7.39
  7.15
  6.93
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
Revenue, $m
  118
  147
  180
  217
  259
  306
  356
  411
  471
  534
  601
  672
  747
  826
  908
  995
  1,085
  1,178
  1,276
  1,377
  1,482
  1,592
  1,706
  1,824
  1,947
  2,075
  2,208
  2,346
  2,490
  2,640
Variable operating expenses, $m
  97
  121
  149
  180
  215
  253
  295
  340
  389
  442
  497
  556
  618
  683
  751
  823
  897
  974
  1,055
  1,139
  1,226
  1,316
  1,410
  1,508
  1,610
  1,716
  1,826
  1,940
  2,059
  2,183
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
  97
  121
  149
  180
  215
  253
  295
  340
  389
  442
  497
  556
  618
  683
  751
  823
  897
  974
  1,055
  1,139
  1,226
  1,316
  1,410
  1,508
  1,610
  1,716
  1,826
  1,940
  2,059
  2,183
Operating income, $m
  20
  25
  31
  38
  45
  53
  62
  71
  81
  92
  104
  116
  129
  143
  157
  172
  188
  204
  221
  238
  257
  276
  295
  316
  337
  359
  382
  406
  431
  457
EBITDA, $m
  21
  27
  33
  40
  47
  56
  65
  75
  86
  98
  110
  123
  137
  151
  166
  182
  198
  215
  233
  252
  271
  291
  312
  333
  356
  379
  403
  429
  455
  482
Interest expense (income), $m
  0
  2
  4
  7
  10
  13
  17
  21
  26
  31
  37
  43
  49
  55
  62
  70
  77
  85
  94
  102
  111
  121
  131
  141
  151
  162
  174
  186
  198
  211
  224
Earnings before tax, $m
  19
  21
  24
  28
  32
  36
  40
  45
  50
  56
  62
  68
  74
  81
  88
  95
  102
  110
  118
  127
  136
  145
  154
  164
  175
  185
  196
  208
  220
  233
Tax expense, $m
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
Net income, $m
  14
  16
  18
  20
  23
  26
  29
  33
  37
  41
  45
  49
  54
  59
  64
  69
  75
  80
  86
  93
  99
  106
  113
  120
  127
  135
  143
  152
  161
  170

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
  322
  402
  493
  596
  710
  837
  976
  1,127
  1,289
  1,462
  1,647
  1,842
  2,047
  2,263
  2,489
  2,725
  2,972
  3,228
  3,495
  3,773
  4,062
  4,361
  4,673
  4,997
  5,334
  5,684
  6,048
  6,427
  6,822
  7,233
Adjusted assets (=assets-cash), $m
  322
  402
  493
  596
  710
  837
  976
  1,127
  1,289
  1,462
  1,647
  1,842
  2,047
  2,263
  2,489
  2,725
  2,972
  3,228
  3,495
  3,773
  4,062
  4,361
  4,673
  4,997
  5,334
  5,684
  6,048
  6,427
  6,822
  7,233
Revenue / Adjusted assets
  0.366
  0.366
  0.365
  0.364
  0.365
  0.366
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
Average production assets, $m
  6
  7
  9
  10
  12
  15
  17
  20
  23
  26
  29
  32
  36
  40
  44
  48
  52
  57
  61
  66
  71
  76
  82
  88
  93
  100
  106
  113
  120
  127
Working capital, $m
  2
  2
  3
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
Total debt, $m
  72
  121
  179
  243
  315
  395
  482
  577
  679
  788
  903
  1,026
  1,155
  1,290
  1,432
  1,581
  1,735
  1,896
  2,064
  2,239
  2,420
  2,608
  2,804
  3,007
  3,219
  3,439
  3,667
  3,906
  4,153
  4,412
Total liabilities, $m
  202
  252
  309
  374
  446
  526
  613
  708
  810
  918
  1,034
  1,157
  1,286
  1,421
  1,563
  1,711
  1,866
  2,027
  2,195
  2,369
  2,551
  2,739
  2,935
  3,138
  3,350
  3,570
  3,798
  4,036
  4,284
  4,542
Total equity, $m
  120
  149
  183
  222
  264
  312
  363
  419
  480
  544
  613
  685
  762
  842
  926
  1,014
  1,105
  1,201
  1,300
  1,404
  1,511
  1,622
  1,738
  1,859
  1,984
  2,114
  2,250
  2,391
  2,538
  2,691
Total liabilities and equity, $m
  322
  401
  492
  596
  710
  838
  976
  1,127
  1,290
  1,462
  1,647
  1,842
  2,048
  2,263
  2,489
  2,725
  2,971
  3,228
  3,495
  3,773
  4,062
  4,361
  4,673
  4,997
  5,334
  5,684
  6,048
  6,427
  6,822
  7,233
Debt-to-equity ratio
  0.600
  0.810
  0.970
  1.100
  1.190
  1.270
  1.330
  1.380
  1.420
  1.450
  1.470
  1.500
  1.520
  1.530
  1.550
  1.560
  1.570
  1.580
  1.590
  1.590
  1.600
  1.610
  1.610
  1.620
  1.620
  1.630
  1.630
  1.630
  1.640
  1.640
Adjusted equity ratio
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  16
  18
  20
  23
  26
  29
  33
  37
  41
  45
  49
  54
  59
  64
  69
  75
  80
  86
  93
  99
  106
  113
  120
  127
  135
  143
  152
  161
  170
Depreciation, amort., depletion, $m
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  25
Funds from operations, $m
  15
  17
  20
  23
  26
  29
  33
  37
  41
  46
  51
  56
  61
  67
  73
  79
  85
  92
  99
  106
  113
  121
  129
  137
  146
  155
  165
  174
  185
  195
Change in working capital, $m
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  15
  17
  19
  22
  25
  29
  32
  36
  40
  45
  50
  55
  60
  66
  71
  78
  84
  90
  97
  104
  112
  120
  127
  136
  144
  153
  163
  172
  183
  193
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
Cash from investing activities, $m
  -2
  -2
  -3
  -4
  -4
  -4
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -16
  -17
  -18
  -19
  -20
  -22
  -24
  -25
  -26
  -28
  -30
  -31
Free cash flow, $m
  12
  14
  16
  18
  21
  24
  27
  30
  34
  37
  41
  46
  50
  55
  60
  65
  70
  76
  81
  87
  94
  100
  107
  114
  121
  129
  136
  145
  153
  162
Issuance/(repayment) of debt, $m
  42
  50
  57
  65
  72
  80
  87
  95
  102
  109
  116
  122
  129
  136
  142
  148
  155
  161
  168
  174
  181
  188
  196
  203
  211
  220
  229
  238
  248
  258
Issuance/(repurchase) of shares, $m
  12
  14
  16
  18
  20
  21
  22
  23
  24
  24
  24
  23
  22
  21
  20
  19
  17
  15
  13
  11
  8
  6
  3
  1
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  54
  64
  73
  83
  92
  101
  109
  118
  126
  133
  140
  145
  151
  157
  162
  167
  172
  176
  181
  185
  189
  194
  199
  204
  211
  220
  229
  238
  248
  258
Total cash flow (excl. dividends), $m
  67
  78
  89
  101
  113
  125
  136
  148
  159
  170
  181
  191
  202
  212
  222
  232
  242
  252
  262
  272
  283
  294
  306
  318
  332
  348
  365
  383
  401
  420
Retained Cash Flow (-), $m
  -25
  -30
  -34
  -38
  -43
  -47
  -52
  -56
  -60
  -64
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -95
  -99
  -103
  -107
  -112
  -116
  -121
  -125
  -130
  -136
  -141
  -147
  -153
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
  41
  48
  56
  63
  70
  77
  85
  92
  99
  106
  112
  119
  125
  131
  138
  144
  150
  156
  163
  169
  176
  183
  190
  197
  207
  218
  230
  242
  254
  267
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
  40
  44
  48
  52
  54
  56
  57
  57
  57
  55
  53
  51
  48
  44
  40
  37
  33
  29
  25
  21
  18
  15
  12
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  93.8
  88.4
  83.6
  79.5
  75.9
  72.8
  70.2
  67.9
  65.9
  64.2
  62.7
  61.5
  60.4
  59.6
  58.8
  58.2
  57.7
  57.3
  56.9
  56.7
  56.5
  56.4
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3

Kingstone Companies, Inc. offers property and casualty insurance products to small businesses and individuals in New York State. The Company offers these products through its subsidiary, Kingstone Insurance Company (KICO). KICO is a licensed property and casualty insurance company. The Company operates through property and casualty insurances segment, which offers a range of property and casualty policies to its producers. The Company underwrites its business utilizing the CLUE industry claims database, insurance scoring reports, physical inspection of risks and other individual risk underwriting tools. It writes homeowners and dwelling fire business in New York City and Long Island. The Company's product lines include personal lines, commercial liability, commercial automobile, livery physical damage and other. Its personal lines consist of homeowners, dwelling fire, renters, equipment breakdown and service line endorsements and personal umbrella policies.

FINANCIAL RATIOS  of  Kingstone (KINS)

Valuation Ratios
P/E Ratio 14.7
Price to Sales 1.7
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate 20.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
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 5.7%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 17.6%
Ret/ On T. Cap. - 3 Yr. Avg. 15.6%
Return On Equity 17.6%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 18.2%
EBITDA Margin - 3 Yr. Avg. 17.8%
Operating Margin 16.9%
Oper. Margin - 3 Yr. Avg. 16.2%
Pre-Tax Margin 16.9%
Pre-Tax Margin - 3 Yr. Avg. 16.2%
Net Profit Margin 11.7%
Net Profit Margin - 3 Yr. Avg. 10.9%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 22.2%

KINS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KINS stock intrinsic value calculation we used $92.76931 million for the last fiscal year's total revenue generated by Kingstone. The default revenue input number comes from 0001 income statement of Kingstone. 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 KINS stock valuation model: a) initial revenue growth rate of 26.8% 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 KINS is calculated based on our internal credit rating of Kingstone, 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 Kingstone.
    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 KINS stock the variable cost ratio is equal to 82.8%.

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 KINS 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 Kingstone.

Corporate tax rate of 27% is the nominal tax rate for Kingstone. 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 KINS 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 KINS are equal to 4.8%.

Life of production assets of 3.6 years is the average useful life of capital assets used in Kingstone 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 KINS is equal to 1.4%. 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 - $94.577746 million for Kingstone - 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 10.664 million for Kingstone 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 Kingstone at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
ERIE Erie Indemnity 133.99 459.50  str.buy

COMPANY NEWS

▶ Kingstone Announces 2018 Third Quarter Financial Results   [Nov-07-18 04:10PM  Business Wire]
▶ Kingstone Companies Announces Changes to Reinsurance Treaty   [Aug-22-18 09:00AM  Business Wire]
▶ Kingstone Companies, Inc. to Host Earnings Call   [Aug-09-18 06:30AM  ACCESSWIRE]
▶ Kingstone Launches in Massachusetts   [09:00AM  Business Wire]
▶ Kingstone Announces Annual Meeting of Stockholders   [Jun-22-18 09:00AM  Business Wire]
▶ Kingstone Declares $0.10 Per Share Quarterly Dividend   [Feb-05-18 09:00AM  Business Wire]
▶ Buy 3 Stocks With Rising Cash Flows This Earnings Season   [Jan-16-18 02:00PM  InvestorPlace]
▶ Kingstone Companies Prices $30 Million of Senior Notes   [Dec-14-17 04:30PM  Business Wire]
▶ Kingstone Launches in Rhode Island   [Dec-07-17 03:00PM  Business Wire]
▶ KINGSTONE COMPANIES, INC. to Host Earnings Call   [Nov-10-17 07:00AM  ACCESSWIRE]
▶ Kingstone Announces 2017 Third Quarter Financial Results   [Nov-09-17 04:05PM  Business Wire]
▶ Which Companies Are Now Outperforming 95% Of All Stocks?   [Jun-19-17 05:05PM  Investor's Business Daily]
▶ Thinly Traded Insurance Stock With 114% Growth Nears Buy Point   [04:15PM  Investor's Business Daily]
▶ Kingstone Announces 2017 First Quarter Financial Results   [May-11-17 04:15PM  Business Wire]
▶ 8 Rising Stocks That Are Still Undervalued   [Feb-20-17 03:05PM  GuruFocus.com]

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