Intrinsic value of Grand Canyon Education, Inc. - LOPE

Previous Close

$123.37

  Intrinsic Value

$43.87

stock screener

  Rating & Target

str. sell

-64%

Previous close

$123.37

 
Intrinsic value

$43.87

 
Up/down potential

-64%

 
Rating

str. sell

We calculate the intrinsic value of LOPE 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 6.0

 

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
  863
  883
  905
  931
  959
  990
  1,024
  1,060
  1,100
  1,142
  1,187
  1,235
  1,286
  1,341
  1,399
  1,460
  1,525
  1,594
  1,666
  1,743
  1,823
  1,909
  1,998
  2,093
  2,193
  2,298
  2,408
  2,524
  2,647
  2,775
Variable operating expenses, $m
  612
  625
  641
  659
  679
  700
  724
  749
  776
  806
  826
  860
  895
  933
  973
  1,016
  1,061
  1,109
  1,159
  1,213
  1,269
  1,328
  1,391
  1,457
  1,526
  1,599
  1,676
  1,757
  1,842
  1,931
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
  612
  625
  641
  659
  679
  700
  724
  749
  776
  806
  826
  860
  895
  933
  973
  1,016
  1,061
  1,109
  1,159
  1,213
  1,269
  1,328
  1,391
  1,457
  1,526
  1,599
  1,676
  1,757
  1,842
  1,931
Operating income, $m
  251
  257
  264
  272
  281
  290
  300
  311
  323
  336
  361
  376
  391
  408
  425
  444
  464
  485
  507
  530
  555
  580
  608
  637
  667
  699
  732
  768
  805
  844
EBITDA, $m
  299
  305
  313
  322
  332
  343
  354
  367
  381
  395
  411
  427
  445
  464
  484
  505
  528
  551
  577
  603
  631
  660
  692
  724
  759
  795
  833
  873
  916
  960
Interest expense (income), $m
  1
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
Earnings before tax, $m
  248
  254
  261
  269
  277
  286
  296
  307
  319
  332
  356
  371
  386
  403
  420
  438
  458
  478
  500
  523
  547
  573
  600
  628
  658
  689
  722
  757
  794
  832
Tax expense, $m
  67
  69
  70
  72
  75
  77
  80
  83
  86
  90
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  204
  214
  225
Net income, $m
  181
  185
  190
  196
  202
  209
  216
  224
  233
  242
  260
  271
  282
  294
  306
  320
  334
  349
  365
  382
  399
  418
  438
  458
  480
  503
  527
  553
  579
  608

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
  1,140
  1,166
  1,196
  1,230
  1,267
  1,308
  1,352
  1,401
  1,453
  1,508
  1,568
  1,632
  1,699
  1,771
  1,848
  1,929
  2,015
  2,105
  2,201
  2,302
  2,409
  2,521
  2,640
  2,765
  2,897
  3,035
  3,181
  3,335
  3,496
  3,666
Adjusted assets (=assets-cash), $m
  1,140
  1,166
  1,196
  1,230
  1,267
  1,308
  1,352
  1,401
  1,453
  1,508
  1,568
  1,632
  1,699
  1,771
  1,848
  1,929
  2,015
  2,105
  2,201
  2,302
  2,409
  2,521
  2,640
  2,765
  2,897
  3,035
  3,181
  3,335
  3,496
  3,666
Revenue / Adjusted assets
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
Average production assets, $m
  528
  540
  554
  570
  587
  606
  627
  649
  673
  699
  726
  756
  787
  821
  856
  894
  933
  975
  1,020
  1,067
  1,116
  1,168
  1,223
  1,281
  1,342
  1,406
  1,474
  1,545
  1,620
  1,698
Working capital, $m
  15
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
Total debt, $m
  61
  63
  65
  67
  70
  72
  75
  78
  82
  86
  89
  94
  98
  103
  108
  113
  119
  125
  131
  138
  145
  152
  160
  168
  177
  186
  196
  206
  217
  228
Total liabilities, $m
  75
  77
  79
  81
  84
  86
  89
  92
  96
  100
  103
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  231
  242
Total equity, $m
  1,065
  1,089
  1,117
  1,149
  1,183
  1,222
  1,263
  1,308
  1,357
  1,409
  1,465
  1,524
  1,587
  1,655
  1,726
  1,802
  1,882
  1,966
  2,056
  2,150
  2,250
  2,355
  2,466
  2,582
  2,705
  2,835
  2,971
  3,115
  3,265
  3,424
Total liabilities and equity, $m
  1,140
  1,166
  1,196
  1,230
  1,267
  1,308
  1,352
  1,400
  1,453
  1,509
  1,568
  1,632
  1,699
  1,772
  1,848
  1,929
  2,015
  2,105
  2,201
  2,302
  2,409
  2,521
  2,640
  2,764
  2,896
  3,035
  3,181
  3,335
  3,496
  3,666
Debt-to-equity ratio
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
Adjusted equity ratio
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934
  0.934

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  181
  185
  190
  196
  202
  209
  216
  224
  233
  242
  260
  271
  282
  294
  306
  320
  334
  349
  365
  382
  399
  418
  438
  458
  480
  503
  527
  553
  579
  608
Depreciation, amort., depletion, $m
  47
  48
  49
  50
  51
  53
  54
  56
  57
  59
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
Funds from operations, $m
  228
  234
  239
  246
  253
  262
  270
  280
  290
  301
  310
  322
  336
  350
  365
  381
  398
  416
  435
  455
  476
  498
  521
  546
  572
  599
  628
  658
  690
  724
Change in working capital, $m
  0
  0
  0
  0
  0
  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
Cash from operations, $m
  228
  233
  239
  246
  253
  261
  270
  279
  289
  300
  309
  322
  335
  349
  364
  380
  397
  415
  434
  453
  474
  497
  520
  544
  570
  598
  626
  657
  688
  722
Maintenance CAPEX, $m
  -35
  -36
  -37
  -38
  -39
  -40
  -42
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
New CAPEX, $m
  -10
  -12
  -14
  -16
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
Cash from investing activities, $m
  -45
  -48
  -51
  -54
  -56
  -59
  -63
  -65
  -68
  -72
  -76
  -79
  -83
  -87
  -91
  -97
  -101
  -106
  -111
  -117
  -122
  -128
  -135
  -142
  -149
  -156
  -164
  -172
  -181
  -190
Free cash flow, $m
  183
  185
  188
  192
  197
  202
  208
  214
  221
  228
  234
  242
  252
  262
  273
  284
  296
  309
  322
  337
  352
  368
  385
  403
  422
  442
  462
  484
  508
  532
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
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  
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Total cash flow (excl. dividends), $m
  184
  187
  190
  194
  199
  205
  211
  217
  224
  232
  238
  247
  256
  267
  278
  289
  302
  315
  329
  343
  359
  375
  393
  411
  430
  451
  472
  495
  518
  543
Retained Cash Flow (-), $m
  -22
  -24
  -28
  -31
  -35
  -38
  -42
  -45
  -49
  -52
  -56
  -59
  -63
  -67
  -71
  -76
  -80
  -85
  -89
  -94
  -100
  -105
  -111
  -117
  -123
  -129
  -136
  -143
  -151
  -159
Prev. year cash balance distribution, $m
  170
  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
  333
  162
  162
  163
  164
  166
  169
  172
  176
  180
  182
  187
  193
  199
  206
  214
  222
  230
  239
  249
  259
  270
  282
  294
  307
  321
  336
  351
  367
  385
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
  319
  148
  141
  134
  127
  121
  114
  108
  101
  94
  86
  80
  73
  67
  61
  54
  48
  42
  37
  32
  27
  22
  18
  15
  12
  9
  7
  5
  4
  3
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

Grand Canyon Education, Inc. is engaged in the provision of postsecondary education. The Company is a regionally accredited university. The Company offers the degrees, including Doctor of Education, Doctor of Business Administration, Doctor of Nursing Practice, Doctor of Philosophy, Education Specialist, Master of Divinity, Master of Arts, Master of Education, Master of Business Administration and Master of Public Administration, Master of Public Health, Master of Science, Bachelor of Arts, Bachelor of Science, and a range of programs for its degrees. It also offers certificate programs, which consist of a series of courses focused on a particular area of study for both the post-baccalaureate and post-graduate students. The Company offers its ground-based programs to students through three 15-week semesters in a calendar year and to online students in courses that generally range from 5 to 16 weeks throughout the calendar year.

FINANCIAL RATIOS  of  Grand Canyon Education, Inc. (LOPE)

Valuation Ratios
P/E Ratio 39.4
Price to Sales 6.7
Price to Book 7.6
Price to Tangible Book
Price to Cash Flow 26.9
Price to Free Cash Flow -279.4
Growth Rates
Sales Growth Rate 12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.6%
Cap. Spend. - 3 Yr. Gr. Rate 20.8%
Financial Strength
Quick Ratio 3
Current Ratio 0.5
LT Debt to Equity 8.5%
Total Debt to Equity 12.7%
Interest Coverage 237
Management Effectiveness
Return On Assets 15.1%
Ret/ On Assets - 3 Yr. Avg. 15.8%
Return On Total Capital 19.1%
Ret/ On T. Cap. - 3 Yr. Avg. 20.7%
Return On Equity 21.5%
Return On Equity - 3 Yr. Avg. 24.2%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 57.3%
Gross Margin - 3 Yr. Avg. 57.7%
EBITDA Margin 32.4%
EBITDA Margin - 3 Yr. Avg. 31.5%
Operating Margin 27.1%
Oper. Margin - 3 Yr. Avg. 26.8%
Pre-Tax Margin 27%
Pre-Tax Margin - 3 Yr. Avg. 26.6%
Net Profit Margin 17.1%
Net Profit Margin - 3 Yr. Avg. 16.7%
Effective Tax Rate 36.9%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
Payout Ratio 0%

LOPE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LOPE stock intrinsic value calculation we used $846 million for the last fiscal year's total revenue generated by Grand Canyon Education, Inc.. The default revenue input number comes from 0001 income statement of Grand Canyon 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 LOPE 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 4.3%, whose default value for LOPE is calculated based on our internal credit rating of Grand Canyon 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 Grand Canyon 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 LOPE stock the variable cost ratio is equal to 70.9%.

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 LOPE 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 Grand Canyon Education, Inc..

Corporate tax rate of 27% is the nominal tax rate for Grand Canyon 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 LOPE 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 LOPE are equal to 61.2%.

Life of production assets of 14.6 years is the average useful life of capital assets used in Grand Canyon 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 LOPE is equal to 1.7%. 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 - $1213.597 million for Grand Canyon 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 48.280 million for Grand Canyon 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 Grand Canyon Education, Inc. at the current share price and the inputted number of shares is $6.0 billion.

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