Intrinsic value of Otelco Cl A - OTEL

Previous Close

$16.09

  Intrinsic Value

$11.44

stock screener

  Rating & Target

sell

-29%

Previous close

$16.09

 
Intrinsic value

$11.44

 
Up/down potential

-29%

 
Rating

sell

We calculate the intrinsic value of OTEL 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
  70
  72
  73
  75
  78
  80
  83
  86
  89
  92
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  204
  214
  225
Variable operating expenses, $m
  51
  52
  53
  54
  56
  57
  59
  61
  63
  65
  63
  66
  69
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
  148
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
  51
  52
  53
  54
  56
  57
  59
  61
  63
  65
  63
  66
  69
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
  148
Operating income, $m
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
EBITDA, $m
  30
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
Interest expense (income), $m
  0
  13
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
  39
  42
  44
Earnings before tax, $m
  7
  9
  9
  9
  9
  10
  10
  11
  11
  11
  17
  17
  18
  18
  19
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
Tax expense, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
Net income, $m
  5
  6
  6
  7
  7
  7
  7
  8
  8
  8
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24

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
  116
  119
  122
  126
  129
  134
  138
  143
  148
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  310
  325
  341
  357
  375
Adjusted assets (=assets-cash), $m
  116
  119
  122
  126
  129
  134
  138
  143
  148
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  310
  325
  341
  357
  375
Revenue / Adjusted assets
  0.603
  0.605
  0.598
  0.595
  0.605
  0.597
  0.601
  0.601
  0.601
  0.597
  0.600
  0.599
  0.598
  0.602
  0.598
  0.599
  0.602
  0.600
  0.600
  0.600
  0.602
  0.601
  0.600
  0.601
  0.601
  0.600
  0.600
  0.598
  0.599
  0.600
Average production assets, $m
  74
  76
  78
  80
  83
  85
  88
  91
  95
  98
  102
  106
  111
  115
  120
  126
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
  207
  217
  228
  239
Working capital, $m
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Total debt, $m
  75
  78
  81
  84
  87
  91
  95
  99
  104
  109
  115
  121
  127
  133
  140
  148
  156
  164
  173
  182
  192
  202
  213
  225
  237
  250
  263
  277
  292
  308
Total liabilities, $m
  105
  107
  110
  113
  117
  120
  124
  129
  134
  139
  144
  150
  156
  163
  170
  177
  185
  194
  202
  212
  222
  232
  243
  254
  266
  279
  293
  307
  322
  337
Total equity, $m
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  22
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
Total liabilities and equity, $m
  117
  119
  122
  126
  130
  133
  138
  143
  149
  154
  160
  167
  173
  181
  189
  197
  206
  216
  224
  236
  247
  258
  270
  282
  296
  310
  326
  341
  358
  374
Debt-to-equity ratio
  6.470
  6.530
  6.590
  6.650
  6.720
  6.790
  6.870
  6.940
  7.010
  7.090
  7.160
  7.230
  7.300
  7.370
  7.440
  7.500
  7.570
  7.630
  7.690
  7.750
  7.800
  7.860
  7.910
  7.960
  8.000
  8.050
  8.090
  8.130
  8.170
  8.210
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
  5
  6
  6
  7
  7
  7
  7
  8
  8
  8
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
Depreciation, amort., depletion, $m
  10
  10
  11
  11
  11
  11
  11
  12
  12
  12
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
Funds from operations, $m
  15
  17
  17
  17
  18
  18
  19
  19
  20
  20
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
Change in working capital, $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
  1
  1
  1
  1
  1
Cash from operations, $m
  15
  17
  17
  17
  18
  18
  19
  19
  20
  20
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
Maintenance CAPEX, $m
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
New CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -7
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -16
  -16
  -16
  -18
  -18
  -19
  -21
  -21
  -23
  -23
  -25
  -26
  -28
  -28
Free cash flow, $m
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  9
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  13
Issuance/(repayment) of debt, $m
  -9
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
Issuance/(repurchase) of shares, $m
  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
  0
Cash from financing (excl. dividends), $m  
  -4
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
Total cash flow (excl. dividends), $m
  5
  12
  12
  12
  13
  13
  13
  14
  14
  15
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  23
  24
  26
  27
  28
  29
Retained Cash Flow (-), $m
  -10
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
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
  -5
  11
  12
  12
  12
  13
  13
  13
  14
  14
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
Discount rate, %
  12.00
  12.60
  13.23
  13.89
  14.59
  15.32
  16.08
  16.89
  17.73
  18.62
  19.55
  20.52
  21.55
  22.63
  23.76
  24.95
  26.19
  27.50
  28.88
  30.32
  31.84
  33.43
  35.10
  36.86
  38.70
  40.64
  42.67
  44.80
  47.04
  49.39
PV of cash for distribution, $m
  -4
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2

FINANCIAL RATIOS  of  Otelco Cl A (OTEL)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

OTEL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OTEL stock intrinsic value calculation we used $68.526 million for the last fiscal year's total revenue generated by Otelco Cl A. The default revenue input number comes from 0001 income statement of Otelco Cl A. 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 OTEL 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 12%, whose default value for OTEL is calculated based on our internal credit rating of Otelco Cl A, 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 Otelco Cl A.
    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 OTEL stock the variable cost ratio is equal to 72.5%.

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 OTEL 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 15% for Otelco Cl A.

Corporate tax rate of 27% is the nominal tax rate for Otelco Cl A. 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 OTEL 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 OTEL are equal to 106.3%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Otelco Cl A 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 OTEL is equal to 6.1%. 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 - $1.507 million for Otelco Cl A - 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 3.389 million for Otelco Cl A 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 Otelco Cl A at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Richard Clark Joins Otelco as Chief Operating Officer   [Oct-12-18 05:00PM  GlobeNewswire]
▶ Otelco to Release 2018 Third Quarter Results   [Oct-10-18 11:30AM  GlobeNewswire]
▶ Otelco Inc. Class A to Host Earnings Call   [Aug-14-18 09:30AM  ACCESSWIRE]
▶ Otelco to Release 2018 Second Quarter Results   [Jul-16-18 11:00AM  GlobeNewswire]
▶ Otelco Reports First Quarter 2018 Results   [May-08-18 05:00PM  GlobeNewswire]
▶ Otelco to Release 2018 First Quarter Results   [Apr-11-18 12:00PM  GlobeNewswire]
▶ Otelco Inc. Class A to Host Earnings Call   [Mar-06-18 09:30AM  ACCESSWIRE]
▶ Otelco Reports Fourth Quarter and 2017 Results   [Mar-05-18 05:00PM  GlobeNewswire]
▶ Otelco to Release 2017 Fourth Quarter and Year-End Results   [Feb-05-18 12:15PM  GlobeNewswire]
▶ Yacktman Asset Management Buys 2 Stocks in 4th Quarter   [Feb-02-18 04:59PM  GuruFocus.com]
▶ Otelco to Release 2017 Third Quarter Results   [Oct-17-17 03:00PM  GlobeNewswire]
▶ Investor Network: Otelco Inc. to Host Earnings Call   [Aug-02-17 09:10AM  ACCESSWIRE]
▶ Otelco Reports Second Quarter 2017 Results   [Aug-01-17 05:00PM  GlobeNewswire]
▶ Otelco to Release 2017 Second Quarter Results   [Jul-06-17 11:30AM  GlobeNewswire]
▶ Investor Network: Otelco Inc. to Host Earnings Call   [May-03-17 08:05AM  Accesswire]
▶ Otelco Reports First Quarter 2017 Results   [May-02-17 05:00PM  GlobeNewswire]
▶ Otelco to Release 2017 First Quarter Results   [Apr-05-17 10:30AM  GlobeNewswire]
▶ Otelco to Release 2016 Fourth Quarter and Year-End Results   [Feb-07-17 10:30AM  GlobeNewswire]
▶ Otelco Reports Third Quarter 2016 Results   [05:00PM  GlobeNewswire]
▶ Otelco to Release 2016 Third Quarter Results   [Oct-06-16 01:00PM  GlobeNewswire]
▶ Otelco Reports Second Quarter 2016 Results   [05:00PM  GlobeNewswire]
▶ Otelco to Release 2016 Second Quarter Results   [Jul-06-16 12:00PM  GlobeNewswire]
▶ Otelco Reports First Quarter 2016 Results   [05:00PM  GlobeNewswire]
▶ Otelco to Release 2016 First Quarter Results   [Apr-06-16 12:00PM  GlobeNewswire]
▶ Otelco to Release 2015 Fourth Quarter and Year-End Results   [Feb-09-16 10:30AM  GlobeNewswire]
▶ Otelco Reports Third Quarter Results   [05:06PM  GlobeNewswire]

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