Intrinsic value of MDC Partners Inc. - MDCA

Previous Close

$1.85

  Intrinsic Value

$6.72

stock screener

  Rating & Target

str. buy

+263%

Previous close

$1.85

 
Intrinsic value

$6.72

 
Up/down potential

+263%

 
Rating

str. buy

We calculate the intrinsic value of MDCA 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
  1,544
  1,580
  1,620
  1,666
  1,716
  1,772
  1,832
  1,898
  1,968
  2,043
  2,124
  2,210
  2,302
  2,400
  2,503
  2,613
  2,729
  2,852
  2,982
  3,119
  3,263
  3,416
  3,576
  3,746
  3,924
  4,112
  4,309
  4,517
  4,736
  4,966
Variable operating expenses, $m
  534
  544
  556
  569
  583
  599
  617
  635
  656
  677
  610
  635
  661
  689
  719
  750
  784
  819
  856
  895
  937
  981
  1,027
  1,075
  1,127
  1,180
  1,237
  1,297
  1,360
  1,426
Fixed operating expenses, $m
  894
  914
  934
  955
  976
  997
  1,019
  1,041
  1,064
  1,088
  1,112
  1,136
  1,161
  1,187
  1,213
  1,239
  1,267
  1,295
  1,323
  1,352
  1,382
  1,412
  1,443
  1,475
  1,508
  1,541
  1,575
  1,609
  1,645
  1,681
Total operating expenses, $m
  1,428
  1,458
  1,490
  1,524
  1,559
  1,596
  1,636
  1,676
  1,720
  1,765
  1,722
  1,771
  1,822
  1,876
  1,932
  1,989
  2,051
  2,114
  2,179
  2,247
  2,319
  2,393
  2,470
  2,550
  2,635
  2,721
  2,812
  2,906
  3,005
  3,107
Operating income, $m
  116
  122
  130
  142
  157
  175
  197
  221
  248
  278
  403
  440
  480
  524
  572
  623
  679
  739
  803
  871
  945
  1,023
  1,106
  1,195
  1,290
  1,391
  1,498
  1,611
  1,732
  1,860
EBITDA, $m
  231
  237
  246
  259
  275
  294
  316
  341
  369
  401
  436
  474
  516
  562
  611
  664
  721
  783
  849
  920
  995
  1,076
  1,162
  1,253
  1,351
  1,455
  1,565
  1,681
  1,805
  1,937
Interest expense (income), $m
  65
  64
  38
  41
  44
  47
  51
  55
  59
  64
  69
  75
  80
  87
  93
  100
  108
  116
  124
  133
  143
  153
  163
  174
  186
  198
  211
  225
  239
  254
  270
Earnings before tax, $m
  52
  83
  90
  99
  110
  125
  142
  162
  184
  209
  328
  359
  394
  431
  471
  515
  563
  614
  669
  728
  792
  860
  932
  1,009
  1,092
  1,179
  1,273
  1,372
  1,477
  1,589
Tax expense, $m
  14
  23
  24
  27
  30
  34
  38
  44
  50
  57
  89
  97
  106
  116
  127
  139
  152
  166
  181
  197
  214
  232
  252
  273
  295
  318
  344
  370
  399
  429
Net income, $m
  38
  61
  65
  72
  81
  91
  104
  118
  134
  153
  240
  262
  287
  315
  344
  376
  411
  448
  489
  532
  578
  628
  680
  737
  797
  861
  929
  1,002
  1,078
  1,160

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
  1,733
  1,773
  1,819
  1,870
  1,926
  1,989
  2,056
  2,130
  2,209
  2,293
  2,384
  2,481
  2,584
  2,693
  2,810
  2,933
  3,063
  3,201
  3,347
  3,500
  3,663
  3,834
  4,014
  4,204
  4,404
  4,615
  4,837
  5,070
  5,316
  5,574
Adjusted assets (=assets-cash), $m
  1,733
  1,773
  1,819
  1,870
  1,926
  1,989
  2,056
  2,130
  2,209
  2,293
  2,384
  2,481
  2,584
  2,693
  2,810
  2,933
  3,063
  3,201
  3,347
  3,500
  3,663
  3,834
  4,014
  4,204
  4,404
  4,615
  4,837
  5,070
  5,316
  5,574
Revenue / Adjusted assets
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
Average production assets, $m
  554
  567
  582
  598
  616
  636
  658
  681
  706
  734
  763
  794
  827
  862
  899
  938
  980
  1,024
  1,070
  1,120
  1,172
  1,226
  1,284
  1,345
  1,409
  1,476
  1,547
  1,622
  1,700
  1,783
Working capital, $m
  -289
  -295
  -303
  -312
  -321
  -331
  -343
  -355
  -368
  -382
  -397
  -413
  -431
  -449
  -468
  -489
  -510
  -533
  -558
  -583
  -610
  -639
  -669
  -700
  -734
  -769
  -806
  -845
  -886
  -929
Total debt, $m
  531
  566
  607
  653
  705
  760
  821
  887
  959
  1,035
  1,116
  1,203
  1,296
  1,395
  1,499
  1,610
  1,727
  1,851
  1,983
  2,121
  2,267
  2,421
  2,583
  2,754
  2,934
  3,124
  3,324
  3,534
  3,755
  3,987
Total liabilities, $m
  1,560
  1,596
  1,637
  1,683
  1,734
  1,790
  1,851
  1,917
  1,988
  2,064
  2,146
  2,233
  2,326
  2,424
  2,529
  2,639
  2,757
  2,881
  3,012
  3,150
  3,296
  3,450
  3,613
  3,784
  3,964
  4,153
  4,353
  4,563
  4,784
  5,017
Total equity, $m
  173
  177
  182
  187
  193
  199
  206
  213
  221
  229
  238
  248
  258
  269
  281
  293
  306
  320
  335
  350
  366
  383
  401
  420
  440
  461
  484
  507
  532
  557
Total liabilities and equity, $m
  1,733
  1,773
  1,819
  1,870
  1,927
  1,989
  2,057
  2,130
  2,209
  2,293
  2,384
  2,481
  2,584
  2,693
  2,810
  2,932
  3,063
  3,201
  3,347
  3,500
  3,662
  3,833
  4,014
  4,204
  4,404
  4,614
  4,837
  5,070
  5,316
  5,574
Debt-to-equity ratio
  3.060
  3.190
  3.340
  3.500
  3.660
  3.820
  3.990
  4.170
  4.340
  4.510
  4.680
  4.850
  5.020
  5.180
  5.340
  5.490
  5.640
  5.780
  5.920
  6.060
  6.190
  6.320
  6.440
  6.550
  6.660
  6.770
  6.870
  6.970
  7.060
  7.150
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
  38
  61
  65
  72
  81
  91
  104
  118
  134
  153
  240
  262
  287
  315
  344
  376
  411
  448
  489
  532
  578
  628
  680
  737
  797
  861
  929
  1,002
  1,078
  1,160
Depreciation, amort., depletion, $m
  115
  115
  116
  117
  117
  118
  119
  120
  121
  122
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
Funds from operations, $m
  153
  176
  181
  189
  198
  209
  223
  238
  256
  275
  273
  297
  323
  352
  383
  417
  453
  493
  535
  580
  629
  681
  736
  795
  858
  925
  996
  1,072
  1,152
  1,237
Change in working capital, $m
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
Cash from operations, $m
  159
  183
  189
  197
  207
  220
  234
  250
  269
  289
  288
  313
  340
  370
  402
  437
  475
  516
  559
  606
  656
  709
  766
  827
  891
  960
  1,033
  1,111
  1,193
  1,280
Maintenance CAPEX, $m
  -24
  -24
  -25
  -25
  -26
  -27
  -28
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
New CAPEX, $m
  -11
  -13
  -15
  -16
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
  -79
  -83
Cash from investing activities, $m
  -35
  -37
  -40
  -41
  -44
  -47
  -50
  -51
  -54
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -83
  -86
  -91
  -95
  -100
  -106
  -111
  -117
  -122
  -128
  -135
  -142
  -149
  -157
Free cash flow, $m
  124
  146
  150
  156
  163
  173
  185
  198
  214
  232
  227
  249
  273
  299
  328
  359
  393
  429
  468
  510
  555
  604
  655
  710
  769
  832
  898
  969
  1,044
  1,124
Issuance/(repayment) of debt, $m
  -353
  36
  41
  46
  51
  56
  61
  66
  71
  76
  82
  87
  93
  99
  105
  111
  117
  124
  131
  138
  146
  154
  162
  171
  180
  190
  200
  210
  221
  232
Issuance/(repurchase) of shares, $m
  349
  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  
  -4
  36
  41
  46
  51
  56
  61
  66
  71
  76
  82
  87
  93
  99
  105
  111
  117
  124
  131
  138
  146
  154
  162
  171
  180
  190
  200
  210
  221
  232
Total cash flow (excl. dividends), $m
  120
  182
  191
  202
  214
  229
  246
  264
  285
  308
  309
  336
  366
  398
  433
  470
  510
  553
  599
  649
  701
  758
  818
  881
  949
  1,021
  1,098
  1,179
  1,265
  1,357
Retained Cash Flow (-), $m
  -387
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
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
  -267
  178
  186
  197
  209
  223
  239
  257
  277
  300
  300
  326
  355
  387
  421
  458
  497
  539
  585
  633
  685
  741
  800
  862
  929
  1,000
  1,076
  1,156
  1,241
  1,331
Discount rate, %
  13.80
  14.49
  15.21
  15.98
  16.77
  17.61
  18.49
  19.42
  20.39
  21.41
  22.48
  23.60
  24.78
  26.02
  27.32
  28.69
  30.12
  31.63
  33.21
  34.87
  36.62
  38.45
  40.37
  42.39
  44.51
  46.73
  49.07
  51.52
  54.10
  56.80
PV of cash for distribution, $m
  -234
  136
  122
  109
  96
  84
  73
  62
  52
  43
  32
  26
  20
  15
  11
  8
  6
  4
  3
  2
  1
  1
  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
  50.0
  50.0
  50.0
  50.0

MDC Partners Inc. is a provider of global marketing, advertising, activation, communications and strategic consulting solutions. The Company and its subsidiary agencies (Partner Firms) deliver a range of customized services. The Company's segments include Reportable Segment, All Other and Corporate. The Reportable segment consists of the Company's integrated advertising, media and public relations service companies. The All Other segment consists of the companies that provide the Company's specialist marketing offerings, such as direct marketing, sales promotion, market research, strategic communications, database and customer relationship management, data analytics and insights, corporate identity, and design and branding. The Reportable segment includes the operations of various companies, such as Allison & Partners, Anomaly, Crispin Porter + Bogusky, Doner, Forsman & Bodenfors, Hunter PR, kbs, MDC Media Partners and 72andSunny.

FINANCIAL RATIOS  of  MDC Partners Inc. (MDCA)

Valuation Ratios
P/E Ratio -2
Price to Sales 0.1
Price to Book -0.2
Price to Tangible Book
Price to Cash Flow 19.5
Price to Free Cash Flow -4.1
Growth Rates
Sales Growth Rate 4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20.8%
Cap. Spend. - 3 Yr. Gr. Rate 11.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity -164.8%
Total Debt to Equity -164.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. 0.5%
Return On Total Capital -18.1%
Ret/ On T. Cap. - 3 Yr. Avg. -13.8%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 7.3%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 32.5%
Gross Margin - 3 Yr. Avg. 33.6%
EBITDA Margin 4.4%
EBITDA Margin - 3 Yr. Avg. 6.7%
Operating Margin 3.5%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin -3.6%
Pre-Tax Margin - 3 Yr. Avg. -1.2%
Net Profit Margin -3.5%
Net Profit Margin - 3 Yr. Avg. -2.7%
Effective Tax Rate 16%
Eff/ Tax Rate - 3 Yr. Avg. 20.2%
Payout Ratio -68.8%

MDCA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MDCA stock intrinsic value calculation we used $1514 million for the last fiscal year's total revenue generated by MDC Partners Inc.. The default revenue input number comes from 0001 income statement of MDC Partners 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 MDCA 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 13.8%, whose default value for MDCA is calculated based on our internal credit rating of MDC Partners 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 MDC Partners 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 MDCA stock the variable cost ratio is equal to 34.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $875 million in the base year in the intrinsic value calculation for MDCA 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 7.2% for MDC Partners Inc..

Corporate tax rate of 27% is the nominal tax rate for MDC Partners 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 MDCA 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 MDCA are equal to 35.9%.

Life of production assets of 23.1 years is the average useful life of capital assets used in MDC Partners 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 MDCA is equal to -18.7%. 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 - $-213.543 million for MDC Partners 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 49.934 million for MDC Partners 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 MDC Partners Inc. at the current share price and the inputted number of shares is $0.1 billion.

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