Intrinsic value of National CineMedia, Inc. - NCMI

Previous Close

$7.67

  Intrinsic Value

$3.16

stock screener

  Rating & Target

str. sell

-59%

Previous close

$7.67

 
Intrinsic value

$3.16

 
Up/down potential

-59%

 
Rating

str. sell

We calculate the intrinsic value of NCMI 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 0.6

 

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
  450
  460
  472
  485
  500
  516
  534
  553
  573
  595
  619
  644
  671
  699
  729
  761
  795
  831
  869
  908
  951
  995
  1,042
  1,091
  1,143
  1,198
  1,255
  1,316
  1,380
  1,447
Variable operating expenses, $m
  286
  291
  297
  303
  310
  318
  327
  336
  346
  356
  299
  311
  324
  338
  353
  368
  385
  402
  420
  439
  460
  481
  504
  528
  553
  579
  607
  636
  667
  700
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
  286
  291
  297
  303
  310
  318
  327
  336
  346
  356
  299
  311
  324
  338
  353
  368
  385
  402
  420
  439
  460
  481
  504
  528
  553
  579
  607
  636
  667
  700
Operating income, $m
  164
  169
  175
  182
  190
  198
  207
  217
  227
  239
  319
  332
  346
  361
  376
  393
  410
  429
  448
  469
  491
  514
  538
  563
  590
  618
  648
  679
  712
  747
EBITDA, $m
  253
  259
  266
  273
  282
  291
  301
  311
  323
  335
  349
  363
  378
  394
  411
  429
  448
  468
  489
  512
  536
  561
  587
  615
  644
  675
  707
  741
  777
  815
Interest expense (income), $m
  53
  55
  28
  29
  31
  33
  35
  37
  39
  42
  45
  48
  51
  55
  59
  63
  67
  71
  76
  81
  86
  92
  98
  104
  111
  117
  125
  132
  140
  149
  158
Earnings before tax, $m
  108
  141
  146
  151
  157
  163
  170
  177
  185
  194
  271
  281
  291
  302
  314
  326
  339
  353
  367
  383
  399
  416
  434
  453
  473
  494
  516
  539
  563
  589
Tax expense, $m
  29
  38
  39
  41
  42
  44
  46
  48
  50
  52
  73
  76
  79
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  128
  133
  139
  146
  152
  159
Net income, $m
  79
  103
  107
  110
  115
  119
  124
  130
  135
  141
  198
  205
  213
  221
  229
  238
  248
  258
  268
  279
  291
  304
  317
  331
  345
  360
  376
  393
  411
  430

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
  1,165
  1,192
  1,223
  1,257
  1,295
  1,337
  1,383
  1,432
  1,485
  1,542
  1,603
  1,668
  1,737
  1,811
  1,889
  1,972
  2,059
  2,152
  2,250
  2,353
  2,463
  2,578
  2,699
  2,827
  2,961
  3,103
  3,252
  3,409
  3,574
  3,748
Adjusted assets (=assets-cash), $m
  1,165
  1,192
  1,223
  1,257
  1,295
  1,337
  1,383
  1,432
  1,485
  1,542
  1,603
  1,668
  1,737
  1,811
  1,889
  1,972
  2,059
  2,152
  2,250
  2,353
  2,463
  2,578
  2,699
  2,827
  2,961
  3,103
  3,252
  3,409
  3,574
  3,748
Revenue / Adjusted assets
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
Average production assets, $m
  390
  399
  410
  421
  434
  448
  463
  480
  498
  517
  537
  559
  582
  607
  633
  661
  690
  721
  754
  789
  825
  864
  904
  947
  992
  1,040
  1,090
  1,142
  1,197
  1,256
Working capital, $m
  53
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Total debt, $m
  463
  487
  514
  545
  580
  617
  658
  703
  750
  802
  857
  915
  977
  1,044
  1,114
  1,188
  1,267
  1,351
  1,439
  1,532
  1,630
  1,734
  1,843
  1,958
  2,079
  2,206
  2,341
  2,482
  2,630
  2,787
Total liabilities, $m
  1,049
  1,073
  1,100
  1,131
  1,166
  1,203
  1,244
  1,289
  1,337
  1,388
  1,443
  1,501
  1,564
  1,630
  1,700
  1,775
  1,854
  1,937
  2,025
  2,118
  2,216
  2,320
  2,429
  2,544
  2,665
  2,793
  2,927
  3,068
  3,217
  3,373
Total equity, $m
  117
  119
  122
  126
  130
  134
  138
  143
  149
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  310
  325
  341
  357
  375
Total liabilities and equity, $m
  1,166
  1,192
  1,222
  1,257
  1,296
  1,337
  1,382
  1,432
  1,486
  1,542
  1,603
  1,668
  1,738
  1,811
  1,889
  1,972
  2,060
  2,152
  2,250
  2,353
  2,462
  2,578
  2,699
  2,827
  2,961
  3,103
  3,252
  3,409
  3,574
  3,748
Debt-to-equity ratio
  3.970
  4.080
  4.210
  4.340
  4.470
  4.620
  4.760
  4.910
  5.050
  5.200
  5.340
  5.490
  5.630
  5.760
  5.900
  6.030
  6.150
  6.280
  6.390
  6.510
  6.620
  6.730
  6.830
  6.930
  7.020
  7.110
  7.200
  7.280
  7.360
  7.440
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
  79
  103
  107
  110
  115
  119
  124
  130
  135
  141
  198
  205
  213
  221
  229
  238
  248
  258
  268
  279
  291
  304
  317
  331
  345
  360
  376
  393
  411
  430
Depreciation, amort., depletion, $m
  90
  90
  91
  91
  92
  93
  94
  95
  96
  97
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  57
  59
  62
  65
  68
Funds from operations, $m
  169
  193
  197
  202
  207
  212
  218
  224
  231
  238
  227
  236
  244
  254
  264
  274
  285
  297
  309
  322
  336
  351
  366
  382
  399
  417
  436
  456
  476
  498
Change in working capital, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
Cash from operations, $m
  168
  192
  196
  200
  205
  210
  216
  222
  228
  235
  225
  233
  241
  250
  260
  270
  281
  293
  305
  318
  331
  345
  360
  376
  393
  410
  429
  448
  469
  490
Maintenance CAPEX, $m
  -21
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
  -62
  -65
New CAPEX, $m
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
Cash from investing activities, $m
  -29
  -30
  -32
  -34
  -36
  -38
  -39
  -42
  -44
  -46
  -48
  -51
  -53
  -57
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -107
  -112
  -117
  -123
Free cash flow, $m
  139
  162
  164
  166
  169
  172
  176
  180
  185
  189
  176
  182
  188
  194
  201
  208
  216
  224
  233
  242
  252
  262
  273
  284
  296
  309
  322
  337
  351
  367
Issuance/(repayment) of debt, $m
  -461
  24
  28
  31
  34
  38
  41
  44
  48
  51
  55
  59
  62
  66
  70
  75
  79
  83
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
  156
Issuance/(repurchase) of shares, $m
  405
  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  
  -56
  24
  28
  31
  34
  38
  41
  44
  48
  51
  55
  59
  62
  66
  70
  75
  79
  83
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
  156
Total cash flow (excl. dividends), $m
  84
  186
  192
  197
  204
  210
  217
  225
  232
  241
  231
  240
  250
  260
  271
  283
  295
  307
  321
  335
  350
  365
  382
  399
  417
  437
  457
  478
  500
  523
Retained Cash Flow (-), $m
  -485
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
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
  -401
  183
  188
  194
  200
  206
  213
  220
  227
  235
  225
  234
  243
  253
  263
  274
  286
  298
  311
  325
  339
  354
  370
  386
  404
  422
  442
  462
  484
  506
Discount rate, %
  13.30
  13.97
  14.66
  15.40
  16.17
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.75
  23.88
  25.08
  26.33
  27.65
  29.03
  30.48
  32.01
  33.61
  35.29
  37.05
  38.91
  40.85
  42.89
  45.04
  47.29
  49.65
  52.14
  54.74
PV of cash for distribution, $m
  -354
  141
  125
  109
  94
  80
  67
  56
  45
  36
  26
  20
  15
  11
  8
  6
  4
  2
  2
  1
  1
  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
  50.0
  50.0
  50.0
  50.0

National CineMedia, Inc. (NCM, Inc.) is a holding company that manages its consolidated subsidiary National CineMedia, LLC (NCM LLC). The Company operates digital in-theater network in North America, allowing NCM LLC to sell advertising and certain third-party theater circuits under long-term network affiliate agreements. It is engaged in the sale of advertising to national, regional and local businesses in First Look, its cinema advertising and entertainment pre-show seen on movie screens across the United States It also sells advertising on its Lobby Entertainment Network (LEN), a series of screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. The Company sells online and mobile advertising through its Cinema Accelerator digital product to reach entertainment audiences beyond the theater. In-theater advertising and entertainment content is distributed across NCM LLC's national theater network.

FINANCIAL RATIOS  of  National CineMedia, Inc. (NCMI)

Valuation Ratios
P/E Ratio 18.4
Price to Sales 1
Price to Book -1.1
Price to Tangible Book
Price to Cash Flow 3.4
Price to Free Cash Flow 3.9
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -4.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity -218.4%
Total Debt to Equity -218.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 5.9%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity -6%
Return On Equity - 3 Yr. Avg. -4.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 72.5%
Gross Margin - 3 Yr. Avg. 72%
EBITDA Margin 41.3%
EBITDA Margin - 3 Yr. Avg. 39.4%
Operating Margin 36.4%
Oper. Margin - 3 Yr. Avg. 36%
Pre-Tax Margin 21.4%
Pre-Tax Margin - 3 Yr. Avg. 19.7%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 4.1%
Effective Tax Rate 9.4%
Eff/ Tax Rate - 3 Yr. Avg. 14.8%
Payout Ratio 220%

NCMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCMI stock intrinsic value calculation we used $441 million for the last fiscal year's total revenue generated by National CineMedia, Inc.. The default revenue input number comes from 0001 income statement of National CineMedia, 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 NCMI 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 13.3%, whose default value for NCMI is calculated based on our internal credit rating of National CineMedia, 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 National CineMedia, 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 NCMI stock the variable cost ratio is equal to 63.9%.

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 NCMI 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 6% for National CineMedia, Inc..

Corporate tax rate of 27% is the nominal tax rate for National CineMedia, 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 NCMI 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 NCMI are equal to 86.8%.

Life of production assets of 18.4 years is the average useful life of capital assets used in National CineMedia, 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 NCMI is equal to 11.8%. 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 - $-368 million for National CineMedia, 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 78.602 million for National CineMedia, 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 National CineMedia, Inc. at the current share price and the inputted number of shares is $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
CNK Cinemark Holdi 42.18 42.32  hold
AMC AMC Entertainm 16.43 46.86  str.buy
ISIG Insignia Syste 1.35 2.42  str.buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.