Intrinsic value of Laureate Education, Inc. - LAUR

Previous Close

$15.13

  Intrinsic Value

$11.90

stock screener

  Rating & Target

sell

-21%

Previous close

$15.13

 
Intrinsic value

$11.90

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of LAUR 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 3.4

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,417
  3,496
  3,585
  3,686
  3,798
  3,921
  4,054
  4,199
  4,354
  4,522
  4,700
  4,891
  5,094
  5,310
  5,539
  5,782
  6,039
  6,311
  6,598
  6,901
  7,221
  7,558
  7,914
  8,288
  8,683
  9,098
  9,536
  9,996
  10,480
  10,989
Variable operating expenses, $m
  3,169
  3,235
  3,311
  3,396
  3,490
  3,594
  3,706
  3,828
  3,960
  4,101
  3,965
  4,126
  4,298
  4,480
  4,673
  4,878
  5,095
  5,324
  5,566
  5,822
  6,092
  6,376
  6,676
  6,992
  7,325
  7,676
  8,044
  8,433
  8,841
  9,271
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
  3,169
  3,235
  3,311
  3,396
  3,490
  3,594
  3,706
  3,828
  3,960
  4,101
  3,965
  4,126
  4,298
  4,480
  4,673
  4,878
  5,095
  5,324
  5,566
  5,822
  6,092
  6,376
  6,676
  6,992
  7,325
  7,676
  8,044
  8,433
  8,841
  9,271
Operating income, $m
  248
  261
  275
  290
  308
  327
  348
  371
  395
  421
  735
  765
  797
  830
  866
  904
  944
  987
  1,032
  1,079
  1,129
  1,182
  1,237
  1,296
  1,358
  1,423
  1,491
  1,563
  1,639
  1,718
EBITDA, $m
  695
  711
  729
  750
  773
  797
  825
  854
  886
  920
  956
  995
  1,036
  1,080
  1,127
  1,176
  1,228
  1,284
  1,342
  1,404
  1,469
  1,537
  1,610
  1,686
  1,766
  1,851
  1,939
  2,033
  2,132
  2,235
Interest expense (income), $m
  367
  219
  227
  236
  246
  258
  270
  284
  300
  316
  334
  353
  373
  395
  418
  443
  469
  496
  526
  557
  589
  624
  660
  699
  739
  782
  827
  874
  924
  976
  1,031
Earnings before tax, $m
  29
  34
  39
  44
  50
  57
  64
  71
  79
  87
  382
  392
  402
  412
  424
  435
  448
  461
  475
  490
  505
  522
  539
  557
  576
  596
  617
  639
  663
  687
Tax expense, $m
  8
  9
  10
  12
  14
  15
  17
  19
  21
  24
  103
  106
  108
  111
  114
  118
  121
  125
  128
  132
  136
  141
  145
  150
  156
  161
  167
  173
  179
  185
Net income, $m
  21
  25
  28
  32
  37
  41
  46
  52
  58
  64
  279
  286
  293
  301
  309
  318
  327
  337
  347
  358
  369
  381
  393
  407
  420
  435
  450
  467
  484
  502

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
  6,903
  7,062
  7,243
  7,447
  7,673
  7,921
  8,190
  8,482
  8,797
  9,134
  9,496
  9,881
  10,291
  10,727
  11,190
  11,681
  12,200
  12,749
  13,329
  13,941
  14,587
  15,269
  15,987
  16,744
  17,541
  18,380
  19,264
  20,193
  21,171
  22,200
Adjusted assets (=assets-cash), $m
  6,903
  7,062
  7,243
  7,447
  7,673
  7,921
  8,190
  8,482
  8,797
  9,134
  9,496
  9,881
  10,291
  10,727
  11,190
  11,681
  12,200
  12,749
  13,329
  13,941
  14,587
  15,269
  15,987
  16,744
  17,541
  18,380
  19,264
  20,193
  21,171
  22,200
Revenue / Adjusted assets
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
Average production assets, $m
  2,860
  2,926
  3,001
  3,085
  3,179
  3,282
  3,393
  3,514
  3,645
  3,785
  3,934
  4,094
  4,264
  4,445
  4,636
  4,839
  5,055
  5,282
  5,522
  5,776
  6,044
  6,326
  6,624
  6,937
  7,268
  7,615
  7,981
  8,366
  8,772
  9,198
Working capital, $m
  -465
  -475
  -488
  -501
  -517
  -533
  -551
  -571
  -592
  -615
  -639
  -665
  -693
  -722
  -753
  -786
  -821
  -858
  -897
  -939
  -982
  -1,028
  -1,076
  -1,127
  -1,181
  -1,237
  -1,297
  -1,359
  -1,425
  -1,494
Total debt, $m
  2,802
  2,913
  3,039
  3,181
  3,338
  3,510
  3,698
  3,901
  4,120
  4,355
  4,607
  4,875
  5,160
  5,464
  5,786
  6,127
  6,489
  6,871
  7,274
  7,701
  8,150
  8,625
  9,125
  9,651
  10,206
  10,790
  11,405
  12,052
  12,733
  13,449
Total liabilities, $m
  4,805
  4,915
  5,041
  5,183
  5,340
  5,513
  5,700
  5,904
  6,123
  6,358
  6,609
  6,877
  7,163
  7,466
  7,788
  8,130
  8,491
  8,873
  9,277
  9,703
  10,153
  10,627
  11,127
  11,654
  12,209
  12,793
  13,408
  14,055
  14,735
  15,451
Total equity, $m
  2,099
  2,147
  2,202
  2,264
  2,333
  2,408
  2,490
  2,579
  2,674
  2,777
  2,887
  3,004
  3,129
  3,261
  3,402
  3,551
  3,709
  3,876
  4,052
  4,238
  4,435
  4,642
  4,860
  5,090
  5,332
  5,588
  5,856
  6,139
  6,436
  6,749
Total liabilities and equity, $m
  6,904
  7,062
  7,243
  7,447
  7,673
  7,921
  8,190
  8,483
  8,797
  9,135
  9,496
  9,881
  10,292
  10,727
  11,190
  11,681
  12,200
  12,749
  13,329
  13,941
  14,588
  15,269
  15,987
  16,744
  17,541
  18,381
  19,264
  20,194
  21,171
  22,200
Debt-to-equity ratio
  1.340
  1.360
  1.380
  1.400
  1.430
  1.460
  1.490
  1.510
  1.540
  1.570
  1.600
  1.620
  1.650
  1.680
  1.700
  1.730
  1.750
  1.770
  1.800
  1.820
  1.840
  1.860
  1.880
  1.900
  1.910
  1.930
  1.950
  1.960
  1.980
  1.990
Adjusted equity ratio
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304
  0.304

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  25
  28
  32
  37
  41
  46
  52
  58
  64
  279
  286
  293
  301
  309
  318
  327
  337
  347
  358
  369
  381
  393
  407
  420
  435
  450
  467
  484
  502
Depreciation, amort., depletion, $m
  447
  450
  455
  459
  465
  470
  477
  483
  491
  499
  221
  230
  240
  250
  260
  272
  284
  297
  310
  324
  340
  355
  372
  390
  408
  428
  448
  470
  493
  517
Funds from operations, $m
  468
  475
  483
  492
  501
  512
  523
  535
  548
  562
  500
  516
  533
  551
  570
  590
  611
  633
  657
  682
  708
  736
  765
  796
  829
  863
  899
  937
  976
  1,018
Change in working capital, $m
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -63
  -66
  -69
Cash from operations, $m
  477
  486
  495
  505
  516
  528
  541
  555
  570
  585
  524
  542
  560
  580
  601
  623
  646
  670
  696
  723
  752
  782
  814
  847
  882
  919
  958
  999
  1,042
  1,088
Maintenance CAPEX, $m
  -157
  -161
  -164
  -169
  -173
  -179
  -184
  -191
  -197
  -205
  -213
  -221
  -230
  -240
  -250
  -260
  -272
  -284
  -297
  -310
  -324
  -340
  -355
  -372
  -390
  -408
  -428
  -448
  -470
  -493
New CAPEX, $m
  -57
  -66
  -75
  -84
  -94
  -103
  -112
  -121
  -130
  -140
  -150
  -160
  -170
  -181
  -192
  -203
  -215
  -227
  -240
  -254
  -268
  -282
  -298
  -314
  -330
  -348
  -366
  -385
  -405
  -426
Cash from investing activities, $m
  -214
  -227
  -239
  -253
  -267
  -282
  -296
  -312
  -327
  -345
  -363
  -381
  -400
  -421
  -442
  -463
  -487
  -511
  -537
  -564
  -592
  -622
  -653
  -686
  -720
  -756
  -794
  -833
  -875
  -919
Free cash flow, $m
  263
  259
  256
  252
  250
  247
  245
  243
  242
  240
  162
  161
  160
  160
  159
  159
  159
  159
  159
  159
  160
  160
  161
  162
  162
  163
  165
  166
  167
  169
Issuance/(repayment) of debt, $m
  96
  111
  126
  142
  157
  172
  188
  203
  219
  235
  251
  268
  286
  304
  322
  341
  361
  382
  404
  426
  450
  474
  500
  527
  555
  584
  615
  647
  681
  716
Issuance/(repurchase) of shares, $m
  16
  24
  27
  30
  32
  34
  36
  37
  38
  39
  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  
  112
  135
  153
  172
  189
  206
  224
  240
  257
  274
  251
  268
  286
  304
  322
  341
  361
  382
  404
  426
  450
  474
  500
  527
  555
  584
  615
  647
  681
  716
Total cash flow (excl. dividends), $m
  375
  393
  409
  424
  439
  454
  468
  483
  499
  514
  413
  429
  446
  463
  482
  500
  520
  541
  563
  586
  609
  635
  661
  688
  717
  748
  779
  813
  848
  884
Retained Cash Flow (-), $m
  -37
  -48
  -55
  -62
  -69
  -75
  -82
  -89
  -96
  -103
  -110
  -117
  -125
  -133
  -141
  -149
  -158
  -167
  -176
  -186
  -196
  -207
  -218
  -230
  -242
  -255
  -269
  -283
  -297
  -313
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
  337
  345
  354
  362
  370
  378
  386
  395
  403
  412
  304
  312
  321
  331
  341
  351
  362
  374
  386
  399
  413
  427
  442
  458
  475
  492
  511
  530
  550
  572
Discount rate, %
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
  314
  298
  280
  262
  242
  222
  201
  181
  160
  141
  88
  76
  65
  54
  45
  37
  29
  23
  18
  14
  10
  7
  5
  4
  2
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  99.5
  98.8
  98.1
  97.3
  96.5
  95.6
  94.8
  93.9
  93.1
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3
  92.3

Laureate Education, Inc. provides higher education programs and services to students through an international network of licensed universities and higher education institutions (institutions). The Company’s programs are provided through institutions that are campus-based and Internet-based, or through electronically distributed educational programs (online). It offers its educational services through six segments: Brazil; Mexico; Andean and Iberian; Central America and United States (U.S.) Campuses; Online and Partnerships; and Europe, Middle East, Africa and Asia Pacific (EMEAA). Its institutions also offer an education that emphasizes professional-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines. As of June 30, 2017, the Company’s global network of 69 institutions comprised 57 institutions it owned or controlled, and an additional 12 institutions that it managed or with which it had other relationships.

FINANCIAL RATIOS  of  Laureate Education, Inc. (LAUR)

Valuation Ratios
P/E Ratio 5.4
Price to Sales 0.5
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 10.9
Price to Free Cash Flow -36.7
Growth Rates
Sales Growth Rate -1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.2%
Cap. Spend. - 3 Yr. Gr. Rate -13.7%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 376.1%
Total Debt to Equity 394.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 9.4%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. -1.4%
Return On Equity 57.7%
Return On Equity - 3 Yr. Avg. -6.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 21.3%
Gross Margin - 3 Yr. Avg. 19.9%
EBITDA Margin 25%
EBITDA Margin - 3 Yr. Avg. 14.8%
Operating Margin 18.2%
Oper. Margin - 3 Yr. Avg. 10.8%
Pre-Tax Margin 10.2%
Pre-Tax Margin - 3 Yr. Avg. 0.3%
Net Profit Margin 8.8%
Net Profit Margin - 3 Yr. Avg. -0.7%
Effective Tax Rate 15.1%
Eff/ Tax Rate - 3 Yr. Avg. -7.9%
Payout Ratio 0%

LAUR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LAUR stock intrinsic value calculation we used $3350 million for the last fiscal year's total revenue generated by Laureate Education, Inc.. The default revenue input number comes from 0001 income statement of Laureate Education, 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 LAUR stock valuation model: a) initial revenue growth rate of 2% 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 7.3%, whose default value for LAUR is calculated based on our internal credit rating of Laureate Education, 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 Laureate Education, 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 LAUR stock the variable cost ratio is equal to 92.9%.

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 LAUR 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 8.1% for Laureate Education, Inc..

Corporate tax rate of 27% is the nominal tax rate for Laureate Education, 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 LAUR 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 LAUR are equal to 83.7%.

Life of production assets of 17.8 years is the average useful life of capital assets used in Laureate Education, 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 LAUR is equal to -13.6%. 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 - $2061.079 million for Laureate Education, 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 223.989 million for Laureate Education, 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 Laureate Education, Inc. at the current share price and the inputted number of shares is $3.4 billion.

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