Intrinsic value of Lee Enterprises, Incorporated - LEE

Previous Close

$1.95

  Intrinsic Value

$2.38

stock screener

  Rating & Target

buy

+22%

Previous close

$1.95

 
Intrinsic value

$2.38

 
Up/down potential

+22%

 
Rating

buy

We calculate the intrinsic value of LEE 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, %
  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
  555
  568
  582
  599
  617
  637
  658
  682
  707
  734
  763
  794
  827
  862
  899
  939
  981
  1,025
  1,071
  1,121
  1,173
  1,227
  1,285
  1,346
  1,410
  1,477
  1,548
  1,623
  1,702
  1,784
Variable operating expenses, $m
  419
  428
  438
  449
  461
  475
  490
  506
  524
  542
  526
  547
  570
  594
  619
  647
  675
  706
  738
  772
  808
  845
  885
  927
  971
  1,018
  1,066
  1,118
  1,172
  1,229
Fixed operating expenses, $m
  56
  57
  59
  60
  61
  63
  64
  65
  67
  68
  70
  71
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
Total operating expenses, $m
  475
  485
  497
  509
  522
  538
  554
  571
  591
  610
  596
  618
  643
  669
  695
  725
  755
  787
  821
  857
  895
  934
  976
  1,020
  1,066
  1,115
  1,165
  1,219
  1,275
  1,335
Operating income, $m
  80
  83
  86
  90
  94
  99
  104
  110
  117
  124
  168
  176
  185
  194
  204
  214
  226
  238
  250
  264
  278
  293
  309
  326
  344
  363
  383
  404
  426
  450
EBITDA, $m
  136
  139
  143
  148
  153
  158
  164
  171
  178
  186
  195
  204
  214
  225
  236
  248
  261
  274
  288
  304
  320
  337
  355
  374
  394
  416
  438
  462
  487
  513
Interest expense (income), $m
  59
  50
  41
  42
  43
  45
  47
  49
  51
  53
  56
  59
  62
  65
  68
  72
  75
  79
  84
  88
  93
  98
  103
  109
  114
  121
  127
  134
  141
  148
  156
Earnings before tax, $m
  30
  42
  44
  46
  49
  52
  55
  59
  63
  68
  109
  114
  120
  126
  132
  139
  146
  154
  162
  171
  180
  190
  201
  212
  224
  236
  249
  263
  278
  293
Tax expense, $m
  8
  11
  12
  13
  13
  14
  15
  16
  17
  18
  29
  31
  32
  34
  36
  38
  39
  42
  44
  46
  49
  51
  54
  57
  60
  64
  67
  71
  75
  79
Net income, $m
  22
  31
  32
  34
  36
  38
  40
  43
  46
  49
  80
  83
  87
  92
  96
  101
  107
  112
  118
  125
  132
  139
  147
  155
  163
  172
  182
  192
  203
  214

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
  587
  601
  616
  633
  653
  674
  697
  722
  748
  777
  808
  840
  875
  912
  952
  994
  1,038
  1,084
  1,134
  1,186
  1,241
  1,299
  1,360
  1,424
  1,492
  1,563
  1,639
  1,718
  1,801
  1,888
Adjusted assets (=assets-cash), $m
  587
  601
  616
  633
  653
  674
  697
  722
  748
  777
  808
  840
  875
  912
  952
  994
  1,038
  1,084
  1,134
  1,186
  1,241
  1,299
  1,360
  1,424
  1,492
  1,563
  1,639
  1,718
  1,801
  1,888
Revenue / Adjusted assets
  0.945
  0.945
  0.945
  0.946
  0.945
  0.945
  0.944
  0.945
  0.945
  0.945
  0.944
  0.945
  0.945
  0.945
  0.944
  0.945
  0.945
  0.946
  0.944
  0.945
  0.945
  0.945
  0.945
  0.945
  0.945
  0.945
  0.944
  0.945
  0.945
  0.945
Average production assets, $m
  296
  303
  311
  320
  329
  340
  352
  364
  378
  392
  408
  424
  442
  460
  480
  501
  524
  547
  572
  598
  626
  655
  686
  719
  753
  789
  827
  867
  909
  953
Working capital, $m
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Total debt, $m
  383
  396
  410
  425
  442
  461
  482
  504
  528
  554
  582
  611
  643
  676
  712
  749
  789
  831
  875
  922
  972
  1,024
  1,079
  1,137
  1,198
  1,262
  1,330
  1,401
  1,476
  1,555
Total liabilities, $m
  528
  541
  555
  570
  587
  606
  627
  649
  673
  699
  727
  756
  788
  821
  857
  894
  934
  976
  1,020
  1,067
  1,117
  1,169
  1,224
  1,282
  1,343
  1,407
  1,475
  1,546
  1,621
  1,699
Total equity, $m
  59
  60
  62
  63
  65
  67
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  104
  108
  113
  119
  124
  130
  136
  142
  149
  156
  164
  172
  180
  189
Total liabilities and equity, $m
  587
  601
  617
  633
  652
  673
  697
  721
  748
  777
  808
  840
  876
  912
  952
  993
  1,038
  1,084
  1,133
  1,186
  1,241
  1,299
  1,360
  1,424
  1,492
  1,563
  1,639
  1,718
  1,801
  1,888
Debt-to-equity ratio
  6.530
  6.590
  6.650
  6.710
  6.780
  6.850
  6.920
  6.990
  7.060
  7.130
  7.210
  7.280
  7.340
  7.410
  7.480
  7.540
  7.600
  7.660
  7.720
  7.780
  7.830
  7.880
  7.930
  7.980
  8.030
  8.070
  8.120
  8.160
  8.200
  8.230
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
  22
  31
  32
  34
  36
  38
  40
  43
  46
  49
  80
  83
  87
  92
  96
  101
  107
  112
  118
  125
  132
  139
  147
  155
  163
  172
  182
  192
  203
  214
Depreciation, amort., depletion, $m
  56
  57
  57
  58
  59
  59
  60
  61
  62
  63
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
Funds from operations, $m
  78
  87
  89
  92
  94
  97
  100
  104
  108
  112
  107
  112
  117
  122
  128
  135
  142
  149
  157
  165
  173
  183
  192
  203
  213
  225
  237
  250
  263
  278
Change in working capital, $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
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  79
  88
  90
  92
  94
  97
  101
  104
  108
  112
  107
  112
  117
  123
  129
  135
  142
  149
  157
  165
  174
  183
  193
  203
  214
  225
  238
  250
  264
  278
Maintenance CAPEX, $m
  -19
  -20
  -20
  -21
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
New CAPEX, $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
Cash from investing activities, $m
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -39
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -59
  -61
  -64
  -68
  -71
  -75
  -78
  -82
  -86
  -91
  -95
  -100
  -105
Free cash flow, $m
  53
  61
  62
  62
  63
  65
  66
  68
  70
  73
  65
  68
  71
  75
  78
  82
  86
  91
  96
  101
  106
  112
  118
  125
  132
  139
  147
  155
  164
  174
Issuance/(repayment) of debt, $m
  -84
  12
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  31
  33
  35
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
Issuance/(repurchase) of shares, $m
  74
  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  
  -10
  12
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  31
  33
  35
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
Total cash flow (excl. dividends), $m
  43
  73
  75
  78
  81
  84
  87
  91
  94
  98
  93
  98
  103
  108
  114
  120
  126
  133
  140
  148
  156
  164
  173
  183
  193
  204
  215
  227
  239
  252
Retained Cash Flow (-), $m
  -96
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
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
  -53
  72
  74
  76
  79
  82
  85
  88
  92
  96
  90
  94
  99
  104
  110
  115
  122
  128
  135
  142
  150
  158
  167
  176
  186
  196
  207
  219
  231
  244
Discount rate, %
  14.00
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.68
  21.72
  22.80
  23.94
  25.14
  26.40
  27.72
  29.10
  30.56
  32.09
  33.69
  35.38
  37.15
  39.00
  40.95
  43.00
  45.15
  47.41
  49.78
  52.27
  54.88
  57.63
PV of cash for distribution, $m
  -47
  55
  48
  42
  36
  30
  25
  21
  17
  13
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
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  50.0

Lee Enterprises, Incorporated is a provider of local news and information, and a platform for print and digital advertising. The Company's products included 46 daily and 34 Sunday newspapers, 300 weekly newspapers, and classified and niche publications, as of September 25, 2016. The Company also provides a range of digital products, including video, digital couponing, behavioral targeting, audience retargeting, banner advertisements and social networking. It provides digital marketing services to small and midsized businesses (SMBs), including search engine marketing (SEM), social media, audience extension, business profiles, and Website hosting and design. It offers small business solutions, including search engine optimization (SEO), local online marketing, social media marketing, video advertising and Website design. The markets it caters to are located primarily in the Midwest, Mountain West and West regions of the United States.

FINANCIAL RATIOS  of  Lee Enterprises, Incorporated (LEE)

Valuation Ratios
P/E Ratio 4.1
Price to Sales 0.2
Price to Book -1.2
Price to Tangible Book
Price to Cash Flow 1.5
Price to Free Cash Flow 1.6
Growth Rates
Sales Growth Rate -7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -42.9%
Cap. Spend. - 3 Yr. Gr. Rate -22.2%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity -540.2%
Total Debt to Equity -572.8%
Interest Coverage 2
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 10.1%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.6%
Return On Equity -24.5%
Return On Equity - 3 Yr. Avg. -20.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 95.6%
Gross Margin - 3 Yr. Avg. 95.5%
EBITDA Margin 24.7%
EBITDA Margin - 3 Yr. Avg. 25.3%
Operating Margin 16.4%
Oper. Margin - 3 Yr. Avg. 18.4%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 7.5%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 27.5%
Eff/ Tax Rate - 3 Yr. Avg. 34.1%
Payout Ratio 0%

LEE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LEE stock intrinsic value calculation we used $544 million for the last fiscal year's total revenue generated by Lee Enterprises, Incorporated. The default revenue input number comes from 0001 income statement of Lee Enterprises, Incorporated. 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 LEE 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 14%, whose default value for LEE is calculated based on our internal credit rating of Lee Enterprises, Incorporated, 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 Lee Enterprises, Incorporated.
    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 LEE stock the variable cost ratio is equal to 75.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $55 million in the base year in the intrinsic value calculation for LEE 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 10.6% for Lee Enterprises, Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Lee Enterprises, Incorporated. 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 LEE 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 LEE are equal to 53.4%.

Life of production assets of 15 years is the average useful life of capital assets used in Lee Enterprises, Incorporated 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 LEE is equal to -0.8%. 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 - $-37.354 million for Lee Enterprises, Incorporated - 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 57.690 million for Lee Enterprises, Incorporated 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 Lee Enterprises, Incorporated at the current share price and the inputted number of shares is $0.1 billion.

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