Intrinsic value of Navigators Group - NAVG

Previous Close

$58.90

  Intrinsic Value

$0.83

stock screener

  Rating & Target

str. sell

-99%

Previous close

$58.90

 
Intrinsic value

$0.83

 
Up/down potential

-99%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as NAVG.

We calculate the intrinsic value of NAVG 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 2017), $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 1.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  1,443
  1,577
  1,717
  1,863
  2,015
  2,173
  2,337
  2,508
  2,685
  2,869
  3,061
  3,260
  3,467
  3,683
  3,907
  4,141
  4,385
  4,639
  4,905
  5,182
  5,471
  5,773
  6,089
  6,420
  6,765
  7,127
  7,505
  7,901
  8,316
  8,751
Variable operating expenses, $m
  1,280
  1,398
  1,520
  1,647
  1,779
  1,917
  2,060
  2,208
  2,363
  2,523
  2,667
  2,840
  3,021
  3,209
  3,404
  3,608
  3,821
  4,042
  4,274
  4,515
  4,767
  5,031
  5,306
  5,594
  5,895
  6,210
  6,540
  6,885
  7,246
  7,625
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
  1,280
  1,398
  1,520
  1,647
  1,779
  1,917
  2,060
  2,208
  2,363
  2,523
  2,667
  2,840
  3,021
  3,209
  3,404
  3,608
  3,821
  4,042
  4,274
  4,515
  4,767
  5,031
  5,306
  5,594
  5,895
  6,210
  6,540
  6,885
  7,246
  7,625
Operating income, $m
  162
  180
  198
  217
  236
  256
  277
  299
  322
  346
  394
  419
  446
  474
  503
  533
  564
  597
  631
  667
  704
  743
  783
  826
  870
  917
  966
  1,017
  1,070
  1,126
EBITDA, $m
  760
  831
  905
  982
  1,062
  1,145
  1,231
  1,321
  1,414
  1,511
  1,612
  1,717
  1,826
  1,940
  2,058
  2,181
  2,310
  2,444
  2,584
  2,730
  2,882
  3,041
  3,208
  3,382
  3,564
  3,754
  3,953
  4,162
  4,381
  4,610
Interest expense (income), $m
  15
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
  185
Earnings before tax, $m
  -22
  -5
  13
  32
  51
  72
  93
  115
  137
  161
  209
  235
  261
  289
  318
  348
  379
  412
  446
  482
  519
  558
  599
  641
  686
  732
  781
  832
  885
  941
Tax expense, $m
  0
  0
  4
  9
  14
  19
  25
  31
  37
  44
  56
  63
  71
  78
  86
  94
  102
  111
  120
  130
  140
  151
  162
  173
  185
  198
  211
  225
  239
  254
Net income, $m
  -22
  -5
  9
  23
  37
  52
  68
  84
  100
  118
  153
  171
  191
  211
  232
  254
  277
  301
  326
  352
  379
  407
  437
  468
  500
  534
  570
  607
  646
  687

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
  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
Adjusted assets (=assets-cash), $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
Revenue / Adjusted assets
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Average production assets, $m
  5,744
  6,279
  6,837
  7,418
  8,023
  8,651
  9,304
  9,983
  10,689
  11,422
  12,184
  12,977
  13,802
  14,660
  15,554
  16,486
  17,457
  18,469
  19,526
  20,628
  21,780
  22,984
  24,242
  25,557
  26,932
  28,372
  29,878
  31,456
  33,108
  34,838
Working capital, $m
  -4,382
  -4,790
  -5,216
  -5,659
  -6,120
  -6,600
  -7,098
  -7,616
  -8,154
  -8,713
  -9,295
  -9,900
  -10,529
  -11,184
  -11,866
  -12,576
  -13,317
  -14,090
  -14,896
  -15,737
  -16,616
  -17,534
  -18,493
  -19,497
  -20,546
  -21,644
  -22,793
  -23,997
  -25,257
  -26,577
Total debt, $m
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
  3,422
Total liabilities, $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 equity, $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 liabilities and equity, $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
Debt-to-equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -22
  -5
  9
  23
  37
  52
  68
  84
  100
  118
  153
  171
  191
  211
  232
  254
  277
  301
  326
  352
  379
  407
  437
  468
  500
  534
  570
  607
  646
  687
Depreciation, amort., depletion, $m
  598
  651
  707
  765
  825
  888
  954
  1,022
  1,092
  1,165
  1,218
  1,298
  1,380
  1,466
  1,555
  1,649
  1,746
  1,847
  1,953
  2,063
  2,178
  2,298
  2,424
  2,556
  2,693
  2,837
  2,988
  3,146
  3,311
  3,484
Funds from operations, $m
  575
  646
  716
  788
  863
  941
  1,021
  1,105
  1,192
  1,283
  1,371
  1,469
  1,571
  1,677
  1,787
  1,903
  2,023
  2,148
  2,278
  2,415
  2,557
  2,706
  2,861
  3,024
  3,194
  3,372
  3,558
  3,753
  3,957
  4,171
Change in working capital, $m
  -391
  -408
  -426
  -443
  -461
  -479
  -498
  -518
  -538
  -559
  -582
  -605
  -629
  -655
  -682
  -711
  -741
  -772
  -806
  -841
  -879
  -918
  -960
  -1,003
  -1,049
  -1,098
  -1,149
  -1,203
  -1,260
  -1,320
Cash from operations, $m
  966
  1,054
  1,142
  1,231
  1,324
  1,420
  1,520
  1,623
  1,731
  1,842
  1,952
  2,074
  2,200
  2,332
  2,469
  2,613
  2,763
  2,920
  3,084
  3,256
  3,436
  3,624
  3,821
  4,027
  4,243
  4,470
  4,707
  4,956
  5,217
  5,491
Maintenance CAPEX, $m
  -523
  -574
  -628
  -684
  -742
  -802
  -865
  -930
  -998
  -1,069
  -1,142
  -1,218
  -1,298
  -1,380
  -1,466
  -1,555
  -1,649
  -1,746
  -1,847
  -1,953
  -2,063
  -2,178
  -2,298
  -2,424
  -2,556
  -2,693
  -2,837
  -2,988
  -3,146
  -3,311
New CAPEX, $m
  -511
  -535
  -558
  -581
  -605
  -629
  -653
  -679
  -705
  -733
  -762
  -793
  -825
  -858
  -894
  -931
  -971
  -1,013
  -1,057
  -1,103
  -1,152
  -1,203
  -1,258
  -1,315
  -1,376
  -1,439
  -1,507
  -1,577
  -1,652
  -1,730
Cash from investing activities, $m
  -1,034
  -1,109
  -1,186
  -1,265
  -1,347
  -1,431
  -1,518
  -1,609
  -1,703
  -1,802
  -1,904
  -2,011
  -2,123
  -2,238
  -2,360
  -2,486
  -2,620
  -2,759
  -2,904
  -3,056
  -3,215
  -3,381
  -3,556
  -3,739
  -3,932
  -4,132
  -4,344
  -4,565
  -4,798
  -5,041
Free cash flow, $m
  -68
  -55
  -44
  -33
  -22
  -11
  1
  14
  27
  40
  48
  63
  78
  93
  109
  126
  144
  162
  181
  201
  221
  242
  265
  288
  312
  337
  363
  391
  420
  450
Issuance/(repayment) of debt, $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
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  
  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 cash flow (excl. dividends), $m
  -68
  -55
  -44
  -33
  -22
  -11
  1
  14
  27
  40
  48
  63
  78
  93
  109
  126
  144
  162
  181
  201
  221
  242
  265
  288
  312
  337
  363
  391
  420
  450
Retained Cash Flow (-), $m
  -22
  -5
  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
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
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  64
  67
  71
  74
  78
  83
  87
  91
Cash available for distribution, $m
  -22
  -5
  0
  0
  0
  0
  1
  14
  27
  40
  48
  63
  78
  93
  109
  126
  144
  162
  181
  201
  221
  242
  265
  288
  312
  337
  363
  391
  420
  450
Discount rate, %
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.71
  24.89
  26.14
  27.44
  28.81
  30.25
  31.77
  33.36
  35.02
  36.77
  38.61
  40.54
  42.57
  44.70
  46.93
  49.28
  51.75
  54.33
PV of cash for distribution, $m
  -20
  -4
  0
  0
  0
  0
  0
  4
  5
  6
  6
  5
  5
  4
  3
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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

The Navigators Group, Inc. is an insurance holding company. The Company is an international insurance company focused on marine insurance. The Company's segments include U.S. Insurance, International Insurance (Int'l Insurance), Global Reinsurance (GlobalRe) and Corporate. The Company's Property and Casualty (P&C) insurance business primarily offers general liability coverage, and umbrella and excess liability coverage to commercial enterprises through its U.S. Insurance and Int'l Insurance segments. It also offers reinsurance products through its GlobalRe segment. It distributes its products through international, national and regional, retail and wholesale insurance brokers. The Company's U.S. Insurance and Int'l Insurance segments consists of three segments, such as Marine, Property and Casualty (P&C) and Professional Liability. Its GlobalRe products include accident & health (A&H), marine, P&C and professional liability.

FINANCIAL RATIOS  of  Navigators Group (NAVG)

Valuation Ratios
P/E Ratio 20.7
Price to Sales 1.4
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 7.8
Growth Rates
Sales Growth Rate 12.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -16.7%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 22.4%
Total Debt to Equity 22.4%
Interest Coverage 9
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 5.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 7.3%
Return On Equity - 3 Yr. Avg. 8.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 13.4%
Operating Margin 11.1%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 11.5%
Net Profit Margin 6.9%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 29.7%
Eff/ Tax Rate - 3 Yr. Avg. 31%
Payout Ratio 4.8%

NAVG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NAVG stock intrinsic value calculation we used $1314 million for the last fiscal year's total revenue generated by Navigators Group. The default revenue input number comes from 2017 income statement of Navigators Group. 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 NAVG stock valuation model: a) initial revenue growth rate of 9.8% 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 13.2%, whose default value for NAVG is calculated based on our internal credit rating of Navigators Group, 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 Navigators Group.
    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 NAVG stock the variable cost ratio is equal to 88.9%.

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 NAVG 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 Navigators Group.

Corporate tax rate of 27% is the nominal tax rate for Navigators Group. 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 NAVG stock is equal to 1.1%.

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 NAVG are equal to 398.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Navigators Group 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 NAVG is equal to -303.7%. 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 - $0 million for Navigators Group - 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 29 million for Navigators Group 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 Navigators Group at the current share price and the inputted number of shares is $1.7 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ Navigators Announces Second Quarter 2018 Dividend   [May-10-18 04:21PM  GlobeNewswire]
▶ Navigators: 1Q Earnings Snapshot   [May-07-18 07:17PM  Associated Press]
▶ Navigators posts 4Q profit   [Feb-15-18 04:21PM  Associated Press]
▶ Navigators to Acquire Belgian Specialty Insurer   [Dec-18-17 01:31AM  GlobeNewswire]
▶ New Strong Sell Stocks for November 3rd   [Nov-03-17 07:20AM  Zacks]
▶ Navigators reports 3Q loss   [Nov-02-17 05:44PM  Associated Press]
▶ Navigators Hires Jim Rhyner to Run Navigators Pro   [Aug-15-17 09:20AM  GlobeNewswire]
▶ Navigators Promotes Pat Milner to President of NavTech   [Aug-10-17 04:02PM  GlobeNewswire]
▶ Navigators Reports Second Quarter 2017 Earnings   [Aug-03-17 04:01PM  GlobeNewswire]
▶ Navigators Announces Second Quarter 2017 Dividend   [May-25-17 04:01PM  GlobeNewswire]
▶ Navigators posts 1Q profit   [May-04-17 07:01PM  Associated Press]
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