Intrinsic value of The Madison Square Garden Company - MSG

Previous Close

$282.60

  Intrinsic Value

$137.86

stock screener

  Rating & Target

str. sell

-51%

Previous close

$282.60

 
Intrinsic value

$137.86

 
Up/down potential

-51%

 
Rating

str. sell

We calculate the intrinsic value of MSG 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 6.7

 

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, %
  17.90
  16.61
  15.45
  14.40
  13.46
  12.62
  11.86
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
Revenue, $m
  1,838
  2,143
  2,474
  2,831
  3,212
  3,617
  4,046
  4,498
  4,973
  5,470
  5,990
  6,532
  7,096
  7,684
  8,294
  8,929
  9,589
  10,275
  10,988
  11,729
  12,499
  13,301
  14,135
  15,003
  15,907
  16,850
  17,833
  18,858
  19,929
  21,046
Variable operating expenses, $m
  1,219
  1,408
  1,613
  1,833
  2,069
  2,320
  2,585
  2,865
  3,159
  3,467
  3,707
  4,042
  4,392
  4,755
  5,134
  5,527
  5,935
  6,359
  6,801
  7,259
  7,736
  8,232
  8,748
  9,285
  9,845
  10,429
  11,037
  11,672
  12,334
  13,026
Fixed operating expenses, $m
  516
  527
  539
  551
  563
  575
  588
  601
  614
  628
  642
  656
  670
  685
  700
  715
  731
  747
  764
  780
  798
  815
  833
  851
  870
  889
  909
  929
  949
  970
Total operating expenses, $m
  1,735
  1,935
  2,152
  2,384
  2,632
  2,895
  3,173
  3,466
  3,773
  4,095
  4,349
  4,698
  5,062
  5,440
  5,834
  6,242
  6,666
  7,106
  7,565
  8,039
  8,534
  9,047
  9,581
  10,136
  10,715
  11,318
  11,946
  12,601
  13,283
  13,996
Operating income, $m
  103
  208
  323
  447
  580
  722
  873
  1,032
  1,200
  1,376
  1,641
  1,833
  2,034
  2,243
  2,461
  2,688
  2,923
  3,169
  3,424
  3,689
  3,966
  4,254
  4,553
  4,866
  5,192
  5,532
  5,887
  6,258
  6,645
  7,050
EBITDA, $m
  300
  424
  560
  706
  863
  1,031
  1,209
  1,396
  1,594
  1,801
  2,018
  2,245
  2,481
  2,727
  2,983
  3,250
  3,527
  3,816
  4,116
  4,428
  4,753
  5,091
  5,444
  5,811
  6,194
  6,593
  7,010
  7,446
  7,901
  8,376
Interest expense (income), $m
  0
  15
  47
  81
  118
  158
  201
  246
  294
  345
  398
  454
  512
  572
  636
  702
  770
  841
  915
  992
  1,072
  1,155
  1,241
  1,331
  1,424
  1,521
  1,623
  1,728
  1,838
  1,953
  2,073
Earnings before tax, $m
  88
  161
  242
  329
  422
  521
  627
  738
  855
  978
  1,187
  1,322
  1,462
  1,608
  1,759
  1,918
  2,082
  2,254
  2,432
  2,618
  2,811
  3,013
  3,223
  3,442
  3,671
  3,909
  4,159
  4,420
  4,692
  4,977
Tax expense, $m
  24
  44
  65
  89
  114
  141
  169
  199
  231
  264
  321
  357
  395
  434
  475
  518
  562
  608
  657
  707
  759
  813
  870
  929
  991
  1,056
  1,123
  1,193
  1,267
  1,344
Net income, $m
  64
  118
  176
  240
  308
  380
  457
  539
  624
  714
  867
  965
  1,067
  1,173
  1,284
  1,400
  1,520
  1,645
  1,775
  1,911
  2,052
  2,199
  2,353
  2,513
  2,680
  2,854
  3,036
  3,226
  3,425
  3,633

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
  3,821
  4,456
  5,144
  5,885
  6,678
  7,520
  8,412
  9,352
  10,339
  11,372
  12,452
  13,579
  14,753
  15,974
  17,244
  18,564
  19,936
  21,362
  22,844
  24,384
  25,986
  27,652
  29,386
  31,191
  33,071
  35,031
  37,075
  39,207
  41,432
  43,755
Adjusted assets (=assets-cash), $m
  3,821
  4,456
  5,144
  5,885
  6,678
  7,520
  8,412
  9,352
  10,339
  11,372
  12,452
  13,579
  14,753
  15,974
  17,244
  18,564
  19,936
  21,362
  22,844
  24,384
  25,986
  27,652
  29,386
  31,191
  33,071
  35,031
  37,075
  39,207
  41,432
  43,755
Revenue / Adjusted assets
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
Average production assets, $m
  1,899
  2,214
  2,556
  2,924
  3,318
  3,737
  4,180
  4,647
  5,137
  5,651
  6,187
  6,747
  7,330
  7,937
  8,568
  9,224
  9,906
  10,614
  11,350
  12,116
  12,912
  13,739
  14,601
  15,498
  16,432
  17,406
  18,421
  19,481
  20,586
  21,741
Working capital, $m
  -709
  -827
  -955
  -1,093
  -1,240
  -1,396
  -1,562
  -1,736
  -1,920
  -2,111
  -2,312
  -2,521
  -2,739
  -2,966
  -3,202
  -3,447
  -3,702
  -3,966
  -4,241
  -4,527
  -4,825
  -5,134
  -5,456
  -5,791
  -6,140
  -6,504
  -6,884
  -7,279
  -7,692
  -8,124
Total debt, $m
  320
  555
  809
  1,082
  1,375
  1,685
  2,014
  2,361
  2,725
  3,107
  3,505
  3,921
  4,354
  4,805
  5,273
  5,761
  6,267
  6,793
  7,340
  7,908
  8,499
  9,114
  9,754
  10,420
  11,114
  11,837
  12,591
  13,378
  14,199
  15,056
Total liabilities, $m
  1,410
  1,644
  1,898
  2,172
  2,464
  2,775
  3,104
  3,451
  3,815
  4,196
  4,595
  5,011
  5,444
  5,894
  6,363
  6,850
  7,357
  7,883
  8,429
  8,998
  9,589
  10,204
  10,843
  11,509
  12,203
  12,927
  13,681
  14,467
  15,288
  16,146
Total equity, $m
  2,411
  2,812
  3,246
  3,714
  4,214
  4,745
  5,308
  5,901
  6,524
  7,176
  7,857
  8,568
  9,309
  10,080
  10,881
  11,714
  12,580
  13,479
  14,414
  15,386
  16,397
  17,448
  18,542
  19,681
  20,868
  22,105
  23,394
  24,739
  26,143
  27,609
Total liabilities and equity, $m
  3,821
  4,456
  5,144
  5,886
  6,678
  7,520
  8,412
  9,352
  10,339
  11,372
  12,452
  13,579
  14,753
  15,974
  17,244
  18,564
  19,937
  21,362
  22,843
  24,384
  25,986
  27,652
  29,385
  31,190
  33,071
  35,032
  37,075
  39,206
  41,431
  43,755
Debt-to-equity ratio
  0.130
  0.200
  0.250
  0.290
  0.330
  0.360
  0.380
  0.400
  0.420
  0.430
  0.450
  0.460
  0.470
  0.480
  0.480
  0.490
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
  0.530
  0.530
  0.530
  0.540
  0.540
  0.540
  0.540
  0.550
Adjusted equity ratio
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  64
  118
  176
  240
  308
  380
  457
  539
  624
  714
  867
  965
  1,067
  1,173
  1,284
  1,400
  1,520
  1,645
  1,775
  1,911
  2,052
  2,199
  2,353
  2,513
  2,680
  2,854
  3,036
  3,226
  3,425
  3,633
Depreciation, amort., depletion, $m
  197
  216
  237
  260
  284
  309
  336
  365
  394
  426
  377
  411
  447
  484
  522
  562
  604
  647
  692
  739
  787
  838
  890
  945
  1,002
  1,061
  1,123
  1,188
  1,255
  1,326
Funds from operations, $m
  261
  334
  414
  499
  591
  690
  793
  903
  1,019
  1,139
  1,244
  1,376
  1,514
  1,657
  1,807
  1,962
  2,124
  2,292
  2,467
  2,650
  2,839
  3,037
  3,243
  3,458
  3,682
  3,915
  4,159
  4,414
  4,681
  4,959
Change in working capital, $m
  -108
  -118
  -128
  -138
  -147
  -156
  -166
  -174
  -183
  -192
  -201
  -209
  -218
  -227
  -236
  -245
  -255
  -265
  -275
  -286
  -297
  -309
  -322
  -335
  -349
  -364
  -379
  -396
  -413
  -431
Cash from operations, $m
  369
  452
  541
  637
  739
  846
  959
  1,078
  1,202
  1,331
  1,445
  1,585
  1,732
  1,884
  2,043
  2,207
  2,379
  2,557
  2,743
  2,936
  3,137
  3,346
  3,565
  3,793
  4,031
  4,279
  4,539
  4,810
  5,094
  5,390
Maintenance CAPEX, $m
  -98
  -116
  -135
  -156
  -178
  -202
  -228
  -255
  -283
  -313
  -345
  -377
  -411
  -447
  -484
  -522
  -562
  -604
  -647
  -692
  -739
  -787
  -838
  -890
  -945
  -1,002
  -1,061
  -1,123
  -1,188
  -1,255
New CAPEX, $m
  -288
  -315
  -342
  -368
  -394
  -419
  -443
  -467
  -490
  -514
  -537
  -560
  -583
  -607
  -631
  -656
  -682
  -708
  -736
  -765
  -796
  -828
  -862
  -897
  -934
  -974
  -1,015
  -1,059
  -1,106
  -1,154
Cash from investing activities, $m
  -386
  -431
  -477
  -524
  -572
  -621
  -671
  -722
  -773
  -827
  -882
  -937
  -994
  -1,054
  -1,115
  -1,178
  -1,244
  -1,312
  -1,383
  -1,457
  -1,535
  -1,615
  -1,700
  -1,787
  -1,879
  -1,976
  -2,076
  -2,182
  -2,294
  -2,409
Free cash flow, $m
  -18
  21
  64
  113
  167
  225
  288
  356
  428
  505
  563
  648
  737
  830
  928
  1,029
  1,135
  1,245
  1,359
  1,478
  1,602
  1,731
  1,866
  2,006
  2,151
  2,303
  2,462
  2,627
  2,800
  2,981
Issuance/(repayment) of debt, $m
  215
  234
  254
  273
  292
  311
  329
  347
  364
  381
  399
  416
  433
  451
  469
  487
  506
  526
  547
  568
  591
  615
  640
  666
  694
  723
  754
  787
  821
  857
Issuance/(repurchase) of shares, $m
  302
  283
  258
  228
  192
  151
  105
  54
  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  
  517
  517
  512
  501
  484
  462
  434
  401
  364
  381
  399
  416
  433
  451
  469
  487
  506
  526
  547
  568
  591
  615
  640
  666
  694
  723
  754
  787
  821
  857
Total cash flow (excl. dividends), $m
  499
  538
  576
  614
  651
  687
  722
  757
  792
  886
  962
  1,064
  1,170
  1,281
  1,396
  1,516
  1,641
  1,771
  1,906
  2,047
  2,193
  2,346
  2,505
  2,672
  2,845
  3,027
  3,216
  3,414
  3,621
  3,838
Retained Cash Flow (-), $m
  -366
  -401
  -434
  -468
  -500
  -532
  -563
  -593
  -623
  -652
  -682
  -711
  -741
  -771
  -801
  -833
  -866
  -900
  -935
  -972
  -1,011
  -1,051
  -1,094
  -1,139
  -1,187
  -1,237
  -1,289
  -1,345
  -1,404
  -1,466
Prev. year cash balance distribution, $m
  491
  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
  624
  137
  142
  146
  151
  155
  160
  164
  169
  234
  280
  353
  430
  510
  595
  683
  775
  871
  971
  1,075
  1,183
  1,295
  1,411
  1,533
  1,659
  1,790
  1,927
  2,069
  2,217
  2,372
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
  598
  126
  123
  121
  117
  113
  108
  102
  97
  123
  133
  151
  163
  171
  175
  174
  169
  160
  149
  137
  122
  107
  92
  78
  65
  52
  41
  32
  24
  18
Current shareholders' claim on cash, %
  94.7
  90.7
  87.7
  85.4
  83.8
  82.6
  81.9
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6
  81.6

The Madison Square Garden Company is a holding company, which is engaged in live experiences consisting of celebrated venues, sports teams, and entertainment productions. The Company operates in two segments, which include MSG Entertainment and MSG Sports. The MSG Sports segment includes the Company's professional sports franchises, which include the New York Knicks (the Knicks) of the National Basketball Association (the NBA), the New York Rangers (the Rangers) of the National Hockey League (the NHL), the New York Liberty (the Liberty) of the Women's National Basketball Association (the WNBA), the Hartford Wolf Pack of the American Hockey League (the AHL), which is the primary player development team for the Rangers, and the Westchester Knicks, an NBA Development League team. The MSG Entertainment segment includes the Company's live entertainment events. The Company presents or hosts live entertainment events, including concerts, family shows, performing arts and special events.

FINANCIAL RATIOS  of  The Madison Square Garden Company (MSG)

Valuation Ratios
P/E Ratio -91.1
Price to Sales 5
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 30.7
Price to Free Cash Flow 38.5
Growth Rates
Sales Growth Rate 18.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -38.9%
Cap. Spend. - 3 Yr. Gr. Rate -32.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 4.4%
Total Debt to Equity 4.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -2%
Ret/ On Assets - 3 Yr. Avg. -2.2%
Return On Total Capital -2.9%
Ret/ On T. Cap. - 3 Yr. Avg. -3.4%
Return On Equity -2.9%
Return On Equity - 3 Yr. Avg. -3.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 34.7%
Gross Margin - 3 Yr. Avg. 33.6%
EBITDA Margin 2%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin -4.6%
Oper. Margin - 3 Yr. Avg. -3.3%
Pre-Tax Margin -6.1%
Pre-Tax Margin - 3 Yr. Avg. -5.6%
Net Profit Margin -5.5%
Net Profit Margin - 3 Yr. Avg. -5.4%
Effective Tax Rate 4.9%
Eff/ Tax Rate - 3 Yr. Avg. 0.8%
Payout Ratio 0%

MSG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MSG stock intrinsic value calculation we used $1559 million for the last fiscal year's total revenue generated by The Madison Square Garden Company. The default revenue input number comes from 0001 income statement of The Madison Square Garden Company. 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 MSG stock valuation model: a) initial revenue growth rate of 17.9% 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 MSG is calculated based on our internal credit rating of The Madison Square Garden Company, 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 The Madison Square Garden Company.
    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 MSG stock the variable cost ratio is equal to 67.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $505 million in the base year in the intrinsic value calculation for MSG 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 14.6% for The Madison Square Garden Company.

Corporate tax rate of 27% is the nominal tax rate for The Madison Square Garden Company. 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 MSG 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 MSG are equal to 103.3%.

Life of production assets of 16.4 years is the average useful life of capital assets used in The Madison Square Garden Company 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 MSG is equal to -38.6%. 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 - $2536.483 million for The Madison Square Garden Company - 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 23.747 million for The Madison Square Garden Company 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 The Madison Square Garden Company at the current share price and the inputted number of shares is $6.7 billion.

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