Intrinsic value of Noah Holdings Ltd. - NOAH

Previous Close

$40.44

  Intrinsic Value

$44.06

stock screener

  Rating & Target

hold

+9%

Previous close

$40.44

 
Intrinsic value

$44.06

 
Up/down potential

+9%

 
Rating

hold

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

We calculate the intrinsic value of NOAH 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 2.3

 

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, %
  18.10
  16.79
  15.61
  14.55
  13.59
  12.74
  11.96
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
Revenue, $m
  504
  589
  681
  780
  886
  999
  1,118
  1,244
  1,377
  1,515
  1,660
  1,812
  1,969
  2,133
  2,304
  2,481
  2,666
  2,857
  3,056
  3,263
  3,478
  3,702
  3,935
  4,177
  4,430
  4,693
  4,967
  5,253
  5,552
  5,864
Variable operating expenses, $m
  341
  399
  461
  528
  600
  676
  757
  842
  932
  1,026
  1,124
  1,226
  1,333
  1,444
  1,560
  1,680
  1,805
  1,934
  2,069
  2,209
  2,355
  2,506
  2,664
  2,828
  2,999
  3,177
  3,363
  3,556
  3,759
  3,970
Fixed operating expenses, $m
  21
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
Total operating expenses, $m
  362
  421
  483
  551
  623
  700
  781
  867
  958
  1,052
  1,151
  1,253
  1,361
  1,472
  1,589
  1,710
  1,835
  1,965
  2,101
  2,241
  2,388
  2,540
  2,699
  2,863
  3,035
  3,214
  3,401
  3,595
  3,798
  4,010
Operating income, $m
  141
  168
  198
  229
  263
  299
  337
  377
  419
  463
  510
  558
  608
  661
  715
  772
  831
  892
  955
  1,021
  1,090
  1,162
  1,236
  1,314
  1,395
  1,479
  1,567
  1,658
  1,754
  1,854
EBITDA, $m
  151
  179
  210
  244
  280
  318
  358
  401
  445
  492
  541
  592
  646
  701
  759
  819
  881
  946
  1,013
  1,083
  1,156
  1,232
  1,311
  1,393
  1,479
  1,568
  1,661
  1,758
  1,859
  1,965
Interest expense (income), $m
  3
  4
  6
  9
  11
  14
  17
  20
  24
  27
  31
  35
  39
  44
  48
  53
  58
  63
  68
  74
  79
  85
  91
  98
  104
  111
  119
  126
  134
  142
  151
Earnings before tax, $m
  137
  162
  189
  218
  249
  282
  316
  353
  392
  432
  474
  519
  565
  612
  662
  714
  768
  824
  882
  942
  1,005
  1,070
  1,138
  1,209
  1,283
  1,360
  1,440
  1,524
  1,612
  1,703
Tax expense, $m
  37
  44
  51
  59
  67
  76
  85
  95
  106
  117
  128
  140
  152
  165
  179
  193
  207
  222
  238
  254
  271
  289
  307
  327
  346
  367
  389
  412
  435
  460
Net income, $m
  100
  118
  138
  159
  181
  206
  231
  258
  286
  315
  346
  379
  412
  447
  483
  521
  560
  601
  644
  688
  734
  781
  831
  883
  937
  993
  1,052
  1,113
  1,176
  1,243

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
  846
  988
  1,142
  1,309
  1,487
  1,676
  1,876
  2,088
  2,310
  2,543
  2,786
  3,040
  3,304
  3,579
  3,866
  4,163
  4,472
  4,794
  5,128
  5,475
  5,836
  6,211
  6,602
  7,009
  7,432
  7,874
  8,334
  8,814
  9,315
  9,839
Adjusted assets (=assets-cash), $m
  846
  988
  1,142
  1,309
  1,487
  1,676
  1,876
  2,088
  2,310
  2,543
  2,786
  3,040
  3,304
  3,579
  3,866
  4,163
  4,472
  4,794
  5,128
  5,475
  5,836
  6,211
  6,602
  7,009
  7,432
  7,874
  8,334
  8,814
  9,315
  9,839
Revenue / Adjusted assets
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
Average production assets, $m
  48
  56
  65
  74
  84
  95
  106
  118
  131
  144
  158
  172
  187
  203
  219
  236
  253
  271
  290
  310
  330
  352
  374
  397
  421
  446
  472
  499
  527
  557
Working capital, $m
  -69
  -80
  -93
  -106
  -120
  -136
  -152
  -169
  -187
  -206
  -226
  -246
  -268
  -290
  -313
  -337
  -363
  -389
  -416
  -444
  -473
  -503
  -535
  -568
  -602
  -638
  -676
  -714
  -755
  -797
Total debt, $m
  116
  161
  209
  262
  318
  378
  441
  508
  578
  652
  729
  809
  892
  979
  1,070
  1,164
  1,262
  1,363
  1,469
  1,578
  1,692
  1,811
  1,935
  2,063
  2,197
  2,336
  2,482
  2,634
  2,792
  2,957
Total liabilities, $m
  267
  312
  361
  414
  470
  530
  593
  660
  730
  803
  880
  961
  1,044
  1,131
  1,222
  1,316
  1,413
  1,515
  1,620
  1,730
  1,844
  1,963
  2,086
  2,215
  2,349
  2,488
  2,634
  2,785
  2,944
  3,109
Total equity, $m
  579
  676
  781
  895
  1,017
  1,146
  1,283
  1,428
  1,580
  1,739
  1,906
  2,079
  2,260
  2,448
  2,644
  2,848
  3,059
  3,279
  3,507
  3,745
  3,992
  4,248
  4,516
  4,794
  5,084
  5,386
  5,700
  6,029
  6,372
  6,730
Total liabilities and equity, $m
  846
  988
  1,142
  1,309
  1,487
  1,676
  1,876
  2,088
  2,310
  2,542
  2,786
  3,040
  3,304
  3,579
  3,866
  4,164
  4,472
  4,794
  5,127
  5,475
  5,836
  6,211
  6,602
  7,009
  7,433
  7,874
  8,334
  8,814
  9,316
  9,839
Debt-to-equity ratio
  0.200
  0.240
  0.270
  0.290
  0.310
  0.330
  0.340
  0.360
  0.370
  0.370
  0.380
  0.390
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
  0.430
  0.430
  0.430
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
Adjusted equity ratio
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  100
  118
  138
  159
  181
  206
  231
  258
  286
  315
  346
  379
  412
  447
  483
  521
  560
  601
  644
  688
  734
  781
  831
  883
  937
  993
  1,052
  1,113
  1,176
  1,243
Depreciation, amort., depletion, $m
  10
  11
  13
  15
  17
  19
  21
  24
  26
  29
  32
  34
  37
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  94
  100
  105
  111
Funds from operations, $m
  110
  129
  151
  174
  198
  224
  252
  281
  312
  344
  378
  413
  450
  488
  527
  568
  611
  656
  702
  750
  800
  852
  906
  962
  1,021
  1,082
  1,146
  1,212
  1,282
  1,355
Change in working capital, $m
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
Cash from operations, $m
  120
  141
  163
  187
  213
  240
  268
  299
  330
  363
  398
  434
  471
  510
  550
  592
  636
  682
  729
  778
  829
  882
  938
  995
  1,055
  1,118
  1,183
  1,251
  1,323
  1,397
Maintenance CAPEX, $m
  -8
  -10
  -11
  -13
  -15
  -17
  -19
  -21
  -24
  -26
  -29
  -32
  -34
  -37
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66
  -70
  -75
  -79
  -84
  -89
  -94
  -100
  -105
New CAPEX, $m
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
Cash from investing activities, $m
  -15
  -18
  -20
  -22
  -25
  -28
  -30
  -33
  -37
  -39
  -43
  -46
  -49
  -53
  -57
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -92
  -98
  -103
  -109
  -115
  -121
  -128
  -135
Free cash flow, $m
  105
  123
  143
  165
  188
  212
  238
  265
  294
  324
  355
  388
  422
  457
  494
  532
  571
  613
  656
  700
  747
  795
  845
  897
  952
  1,009
  1,068
  1,130
  1,194
  1,262
Issuance/(repayment) of debt, $m
  41
  45
  49
  53
  56
  60
  63
  67
  70
  74
  77
  80
  84
  87
  90
  94
  98
  102
  106
  110
  114
  119
  123
  129
  134
  140
  145
  152
  158
  165
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  
  41
  45
  49
  53
  56
  60
  63
  67
  70
  74
  77
  80
  84
  87
  90
  94
  98
  102
  106
  110
  114
  119
  123
  129
  134
  140
  145
  152
  158
  165
Total cash flow (excl. dividends), $m
  147
  168
  192
  217
  244
  272
  301
  332
  364
  397
  432
  468
  505
  544
  584
  626
  669
  714
  761
  810
  861
  913
  969
  1,026
  1,086
  1,148
  1,213
  1,282
  1,353
  1,427
Retained Cash Flow (-), $m
  -89
  -97
  -106
  -114
  -122
  -129
  -137
  -145
  -152
  -159
  -166
  -174
  -181
  -188
  -196
  -204
  -212
  -220
  -228
  -237
  -247
  -257
  -267
  -278
  -290
  -302
  -315
  -328
  -343
  -358
Prev. year cash balance distribution, $m
  191
  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
  249
  71
  87
  104
  122
  143
  164
  188
  212
  238
  266
  294
  324
  356
  388
  422
  458
  494
  533
  572
  614
  657
  701
  748
  796
  846
  899
  953
  1,010
  1,069
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
  239
  65
  75
  85
  95
  103
  111
  117
  122
  125
  126
  126
  123
  119
  114
  107
  100
  91
  82
  73
  63
  54
  46
  38
  31
  25
  19
  15
  11
  8
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

Noah Holdings Limited is a wealth management service provider with a focus on global wealth investment and asset allocation services for high net worth individuals and enterprises in China. The Company operates through three segments: wealth management, asset management and Internet finance. It also provides Internet finance services to clients in China. It provides direct access to China's high net worth population. With approximately 1,100 relationship managers in over 130 branch offices, its coverage network includes China's regions where high net worth population is concentrated, including the Yangtze River Delta, the Pearl River Delta, the Bohai Rim and other regions. Its product offerings consist primarily of over-the-counter (OTC) wealth management and OTC asset management products, mutual fund products and asset management plans originated in China and designed to cater to the needs of China's high net worth population.

FINANCIAL RATIOS  of  Noah Holdings Ltd. (NOAH)

Valuation Ratios
P/E Ratio 12.3
Price to Sales 3.2
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 11.5
Price to Free Cash Flow 13.6
Growth Rates
Sales Growth Rate 10.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.6%
Cap. Spend. - 3 Yr. Gr. Rate 16.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 16.7%
Total Debt to Equity 16.7%
Interest Coverage 36
Management Effectiveness
Return On Assets 12.8%
Ret/ On Assets - 3 Yr. Avg. 16%
Return On Total Capital 18.3%
Ret/ On T. Cap. - 3 Yr. Avg. 22%
Return On Equity 21.7%
Return On Equity - 3 Yr. Avg. 24.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 32.6%
EBITDA Margin - 3 Yr. Avg. 35.1%
Operating Margin 26.5%
Oper. Margin - 3 Yr. Avg. 29.7%
Pre-Tax Margin 29.3%
Pre-Tax Margin - 3 Yr. Avg. 32.9%
Net Profit Margin 25.7%
Net Profit Margin - 3 Yr. Avg. 26.7%
Effective Tax Rate 21.7%
Eff/ Tax Rate - 3 Yr. Avg. 22.5%
Payout Ratio 0%

NOAH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NOAH stock intrinsic value calculation we used $427 million for the last fiscal year's total revenue generated by Noah Holdings Ltd.. The default revenue input number comes from 0001 income statement of Noah Holdings Ltd.. 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 NOAH stock valuation model: a) initial revenue growth rate of 18.1% 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 NOAH is calculated based on our internal credit rating of Noah Holdings Ltd., 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 Noah Holdings Ltd..
    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 NOAH stock the variable cost ratio is equal to 67.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $21 million in the base year in the intrinsic value calculation for NOAH 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 Noah Holdings Ltd..

Corporate tax rate of 27% is the nominal tax rate for Noah Holdings Ltd.. 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 NOAH 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 NOAH are equal to 9.5%.

Life of production assets of 3.3 years is the average useful life of capital assets used in Noah Holdings Ltd. 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 NOAH is equal to -13.6%. 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 - $681.340084643 million for Noah Holdings Ltd. - 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 57.340 million for Noah Holdings Ltd. 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 Noah Holdings Ltd. at the current share price and the inputted number of shares is $2.3 billion.

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