Intrinsic value of Penn National Gaming, Inc. - PENN

Previous Close

$22.22

  Intrinsic Value

$60.08

stock screener

  Rating & Target

str. buy

+170%

Previous close

$22.22

 
Intrinsic value

$60.08

 
Up/down potential

+170%

 
Rating

str. buy

We calculate the intrinsic value of PENN 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 2.6

 

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, %
  50.20
  45.68
  41.61
  37.95
  34.66
  31.69
  29.02
  26.62
  24.46
  22.51
  20.76
  19.18
  17.77
  16.49
  15.34
  14.31
  13.38
  12.54
  11.78
  11.11
  10.50
  9.95
  9.45
  9.01
  8.61
  8.24
  7.92
  7.63
  7.37
  7.13
Revenue, $m
  5,389
  7,851
  11,118
  15,337
  20,652
  27,197
  35,090
  44,431
  55,297
  67,746
  81,810
  97,504
  114,827
  133,761
  154,280
  176,352
  199,940
  225,009
  251,524
  279,458
  308,788
  339,499
  371,586
  405,051
  439,908
  476,178
  513,893
  553,094
  593,833
  636,167
Variable operating expenses, $m
  4,027
  5,726
  7,980
  10,891
  14,559
  19,075
  24,521
  30,967
  38,465
  47,054
  56,450
  67,280
  79,233
  92,297
  106,456
  121,686
  137,962
  155,260
  173,557
  192,831
  213,070
  234,261
  256,401
  279,493
  303,545
  328,572
  354,596
  381,646
  409,756
  438,967
Fixed operating expenses, $m
  157
  161
  164
  168
  172
  175
  179
  183
  187
  191
  196
  200
  204
  209
  213
  218
  223
  228
  233
  238
  243
  249
  254
  260
  265
  271
  277
  283
  289
  296
Total operating expenses, $m
  4,184
  5,887
  8,144
  11,059
  14,731
  19,250
  24,700
  31,150
  38,652
  47,245
  56,646
  67,480
  79,437
  92,506
  106,669
  121,904
  138,185
  155,488
  173,790
  193,069
  213,313
  234,510
  256,655
  279,753
  303,810
  328,843
  354,873
  381,929
  410,045
  439,263
Operating income, $m
  1,205
  1,964
  2,973
  4,278
  5,922
  7,947
  10,389
  13,281
  16,645
  20,500
  25,164
  30,025
  35,390
  41,254
  47,610
  54,448
  61,755
  69,521
  77,735
  86,389
  95,475
  104,990
  114,931
  125,299
  136,098
  147,335
  159,020
  171,166
  183,787
  196,904
EBITDA, $m
  1,852
  2,767
  3,982
  5,552
  7,531
  9,968
  12,907
  16,387
  20,436
  25,074
  30,315
  36,164
  42,620
  49,677
  57,325
  65,552
  74,344
  83,688
  93,572
  103,985
  114,918
  126,367
  138,328
  150,803
  163,797
  177,318
  191,378
  205,992
  221,179
  236,961
Interest expense (income), $m
  453
  707
  2,019
  3,950
  6,512
  9,822
  13,991
  19,125
  25,316
  32,643
  41,167
  50,931
  61,963
  74,274
  87,862
  102,714
  118,809
  136,122
  154,625
  174,289
  195,088
  216,999
  240,006
  264,096
  289,265
  315,515
  342,856
  371,307
  400,891
  431,641
  463,596
Earnings before tax, $m
  498
  -54
  -976
  -2,234
  -3,900
  -6,045
  -8,735
  -12,035
  -15,998
  -20,667
  -25,767
  -31,939
  -38,884
  -46,607
  -55,103
  -64,362
  -74,368
  -85,104
  -96,554
  -108,699
  -121,524
  -135,016
  -149,165
  -163,966
  -179,417
  -195,522
  -212,287
  -229,725
  -247,853
  -266,692
Tax expense, $m
  134
  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
Net income, $m
  363
  -54
  -976
  -2,234
  -3,900
  -6,045
  -8,735
  -12,035
  -15,998
  -20,667
  -25,767
  -31,939
  -38,884
  -46,607
  -55,103
  -64,362
  -74,368
  -85,104
  -96,554
  -108,699
  -121,524
  -135,016
  -149,165
  -163,966
  -179,417
  -195,522
  -212,287
  -229,725
  -247,853
  -266,692

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
  16,481
  24,009
  34,000
  46,903
  63,157
  83,172
  107,309
  135,874
  169,105
  207,173
  250,183
  298,178
  351,152
  409,054
  471,804
  539,302
  611,437
  688,100
  769,187
  854,612
  944,306
  1,038,224
  1,136,348
  1,238,689
  1,345,283
  1,456,200
  1,571,537
  1,691,420
  1,816,002
  1,945,465
Adjusted assets (=assets-cash), $m
  16,481
  24,009
  34,000
  46,903
  63,157
  83,172
  107,309
  135,874
  169,105
  207,173
  250,183
  298,178
  351,152
  409,054
  471,804
  539,302
  611,437
  688,100
  769,187
  854,612
  944,306
  1,038,224
  1,136,348
  1,238,689
  1,345,283
  1,456,200
  1,571,537
  1,691,420
  1,816,002
  1,945,465
Revenue / Adjusted assets
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
Average production assets, $m
  8,924
  13,001
  18,411
  25,398
  34,200
  45,039
  58,109
  73,577
  91,572
  112,187
  135,477
  161,467
  190,153
  221,508
  255,488
  292,039
  331,101
  372,614
  416,524
  462,783
  511,353
  562,211
  615,346
  670,765
  728,487
  788,550
  851,006
  915,924
  983,387
  1,053,492
Working capital, $m
  -614
  -895
  -1,267
  -1,748
  -2,354
  -3,100
  -4,000
  -5,065
  -6,304
  -7,723
  -9,326
  -11,115
  -13,090
  -15,249
  -17,588
  -20,104
  -22,793
  -25,651
  -28,674
  -31,858
  -35,202
  -38,703
  -42,361
  -46,176
  -50,149
  -54,284
  -58,584
  -63,053
  -67,697
  -72,523
Total debt, $m
  7,083
  13,858
  22,850
  34,463
  49,092
  67,105
  88,829
  114,537
  144,445
  178,706
  217,415
  260,611
  308,287
  360,399
  416,874
  477,622
  542,544
  611,540
  684,519
  761,401
  842,126
  926,652
  1,014,964
  1,107,070
  1,203,005
  1,302,831
  1,406,634
  1,514,528
  1,626,652
  1,743,168
Total liabilities, $m
  14,833
  21,608
  30,600
  42,213
  56,842
  74,855
  96,578
  122,287
  152,195
  186,456
  225,164
  268,360
  316,037
  368,149
  424,624
  485,372
  550,294
  619,290
  692,269
  769,151
  849,875
  934,402
  1,022,714
  1,114,820
  1,210,755
  1,310,580
  1,414,384
  1,522,278
  1,634,402
  1,750,918
Total equity, $m
  1,648
  2,401
  3,400
  4,690
  6,316
  8,317
  10,731
  13,587
  16,911
  20,717
  25,018
  29,818
  35,115
  40,905
  47,180
  53,930
  61,144
  68,810
  76,919
  85,461
  94,431
  103,822
  113,635
  123,869
  134,528
  145,620
  157,154
  169,142
  181,600
  194,546
Total liabilities and equity, $m
  16,481
  24,009
  34,000
  46,903
  63,158
  83,172
  107,309
  135,874
  169,106
  207,173
  250,182
  298,178
  351,152
  409,054
  471,804
  539,302
  611,438
  688,100
  769,188
  854,612
  944,306
  1,038,224
  1,136,349
  1,238,689
  1,345,283
  1,456,200
  1,571,538
  1,691,420
  1,816,002
  1,945,464
Debt-to-equity ratio
  4.300
  5.770
  6.720
  7.350
  7.770
  8.070
  8.280
  8.430
  8.540
  8.630
  8.690
  8.740
  8.780
  8.810
  8.840
  8.860
  8.870
  8.890
  8.900
  8.910
  8.920
  8.930
  8.930
  8.940
  8.940
  8.950
  8.950
  8.950
  8.960
  8.960
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
  363
  -54
  -976
  -2,234
  -3,900
  -6,045
  -8,735
  -12,035
  -15,998
  -20,667
  -25,767
  -31,939
  -38,884
  -46,607
  -55,103
  -64,362
  -74,368
  -85,104
  -96,554
  -108,699
  -121,524
  -135,016
  -149,165
  -163,966
  -179,417
  -195,522
  -212,287
  -229,725
  -247,853
  -266,692
Depreciation, amort., depletion, $m
  648
  803
  1,009
  1,274
  1,609
  2,021
  2,518
  3,106
  3,790
  4,574
  5,151
  6,139
  7,230
  8,422
  9,714
  11,104
  12,589
  14,168
  15,837
  17,596
  19,443
  21,377
  23,397
  25,504
  27,699
  29,983
  32,358
  34,826
  37,391
  40,057
Funds from operations, $m
  1,011
  749
  32
  -960
  -2,291
  -4,024
  -6,217
  -8,929
  -12,207
  -16,093
  -20,616
  -25,799
  -31,654
  -38,185
  -45,389
  -53,257
  -61,778
  -70,937
  -80,717
  -91,103
  -102,081
  -113,639
  -125,768
  -138,462
  -151,718
  -165,539
  -179,929
  -194,899
  -210,462
  -226,635
Change in working capital, $m
  -205
  -281
  -372
  -481
  -606
  -746
  -900
  -1,065
  -1,239
  -1,419
  -1,603
  -1,789
  -1,975
  -2,158
  -2,339
  -2,516
  -2,689
  -2,858
  -3,023
  -3,184
  -3,344
  -3,501
  -3,658
  -3,815
  -3,974
  -4,135
  -4,300
  -4,469
  -4,644
  -4,826
Cash from operations, $m
  1,217
  1,029
  405
  -479
  -1,685
  -3,277
  -5,318
  -7,864
  -10,969
  -14,674
  -19,013
  -24,010
  -29,679
  -36,027
  -43,050
  -50,741
  -59,089
  -68,079
  -77,694
  -87,918
  -98,737
  -110,138
  -122,110
  -134,647
  -147,744
  -161,404
  -175,630
  -190,430
  -205,818
  -221,809
Maintenance CAPEX, $m
  -226
  -339
  -494
  -700
  -966
  -1,300
  -1,712
  -2,209
  -2,798
  -3,482
  -4,266
  -5,151
  -6,139
  -7,230
  -8,422
  -9,714
  -11,104
  -12,589
  -14,168
  -15,837
  -17,596
  -19,443
  -21,377
  -23,397
  -25,504
  -27,699
  -29,983
  -32,358
  -34,826
  -37,391
New CAPEX, $m
  -2,983
  -4,077
  -5,410
  -6,987
  -8,802
  -10,838
  -13,071
  -15,468
  -17,995
  -20,614
  -23,290
  -25,990
  -28,686
  -31,355
  -33,980
  -36,551
  -39,062
  -41,514
  -43,910
  -46,259
  -48,570
  -50,858
  -53,135
  -55,418
  -57,722
  -60,063
  -62,456
  -64,918
  -67,463
  -70,105
Cash from investing activities, $m
  -3,209
  -4,416
  -5,904
  -7,687
  -9,768
  -12,138
  -14,783
  -17,677
  -20,793
  -24,096
  -27,556
  -31,141
  -34,825
  -38,585
  -42,402
  -46,265
  -50,166
  -54,103
  -58,078
  -62,096
  -66,166
  -70,301
  -74,512
  -78,815
  -83,226
  -87,762
  -92,439
  -97,276
  -102,289
  -107,496
Free cash flow, $m
  -1,992
  -3,387
  -5,500
  -8,167
  -11,453
  -15,416
  -20,101
  -25,542
  -31,761
  -38,770
  -46,569
  -55,151
  -64,505
  -74,611
  -85,452
  -97,006
  -109,255
  -122,182
  -135,772
  -150,014
  -164,904
  -180,439
  -196,622
  -213,462
  -230,971
  -249,166
  -268,069
  -287,706
  -308,107
  -329,306
Issuance/(repayment) of debt, $m
  4,603
  6,776
  8,992
  11,613
  14,629
  18,013
  21,724
  25,708
  29,908
  34,261
  38,709
  43,196
  47,676
  52,112
  56,475
  60,748
  64,922
  68,996
  72,979
  76,882
  80,724
  84,526
  88,312
  92,106
  95,935
  99,826
  103,803
  107,894
  112,124
  116,516
Issuance/(repurchase) of shares, $m
  553
  807
  1,975
  3,525
  5,526
  8,046
  11,149
  14,892
  19,321
  24,474
  30,068
  36,738
  44,182
  52,398
  61,378
  71,111
  81,581
  92,771
  104,663
  117,242
  130,493
  144,408
  158,978
  174,200
  190,077
  206,613
  223,821
  241,713
  260,311
  279,638
Cash from financing (excl. dividends), $m  
  5,156
  7,583
  10,967
  15,138
  20,155
  26,059
  32,873
  40,600
  49,229
  58,735
  68,777
  79,934
  91,858
  104,510
  117,853
  131,859
  146,503
  161,767
  177,642
  194,124
  211,217
  228,934
  247,290
  266,306
  286,012
  306,439
  327,624
  349,607
  372,435
  396,154
Total cash flow (excl. dividends), $m
  3,164
  4,196
  5,467
  6,971
  8,702
  10,643
  12,772
  15,058
  17,467
  19,965
  22,208
  24,783
  27,353
  29,898
  32,401
  34,853
  37,247
  39,585
  41,870
  44,110
  46,314
  48,495
  50,667
  52,844
  55,041
  57,273
  59,555
  61,902
  64,329
  66,849
Retained Cash Flow (-), $m
  -917
  -807
  -1,975
  -3,525
  -5,526
  -8,046
  -11,149
  -14,892
  -19,321
  -24,474
  -30,068
  -36,738
  -44,182
  -52,398
  -61,378
  -71,111
  -81,581
  -92,771
  -104,663
  -117,242
  -130,493
  -144,408
  -158,978
  -174,200
  -190,077
  -206,613
  -223,821
  -241,713
  -260,311
  -279,638
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
  2,247
  3,389
  3,492
  3,446
  3,176
  2,597
  1,623
  166
  -1,853
  -4,509
  -7,860
  -11,955
  -16,828
  -22,499
  -28,977
  -36,259
  -44,334
  -53,186
  -62,793
  -73,132
  -84,180
  -95,913
  -108,311
  -121,356
  -135,036
  -149,341
  -164,266
  -179,811
  -195,983
  -212,790
Discount rate, %
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
  2,062
  2,829
  2,629
  2,318
  1,890
  1,353
  731
  64
  -603
  -1,220
  -1,745
  -2,145
  -2,400
  -2,507
  -2,476
  -2,331
  -2,101
  -1,819
  -1,514
  -1,214
  -938
  -699
  -501
  -347
  -231
  -148
  -91
  -54
  -31
  -17
Current shareholders' claim on cash, %
  82.4
  72.4
  58.8
  45.5
  34.1
  25.1
  18.2
  13.1
  9.3
  6.6
  4.7
  3.3
  2.3
  1.7
  1.2
  0.8
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Penn National Gaming, Inc. (Penn) is an owner and manager of gaming and racing facilities, and video gaming terminal operations with a focus on slot machine entertainment. The Company operates through three segments: Northeast, South/West and Midwest. The Northeast segment consists of various properties, including Hollywood Casino at Charles Town Races, Hollywood Casino Bangor, Hollywood Casino at Penn National Race Course and Hollywood Casino Toledo. The South/West segment consists of various properties, such as Zia Park Casino, Hollywood Casino Tunica, Hollywood Casino Gulf Coast, Boomtown Biloxi, M Resort and Tropicana Las Vegas. The Midwest segment consists of various properties, Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino Alton, Argosy Casino Riverside and Hollywood Casino Lawrenceburg. The Other category consists of the Company's standalone racing operations, including Rosecroft Raceway and Sanford-Orlando Kennel Club.

FINANCIAL RATIOS  of  Penn National Gaming, Inc. (PENN)

Valuation Ratios
P/E Ratio 18.6
Price to Sales 0.7
Price to Book -3.7
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow 6.6
Growth Rates
Sales Growth Rate 6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -49.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity -881.8%
Total Debt to Equity -907.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 10.2%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 2.4%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity -17.9%
Return On Equity - 3 Yr. Avg. -251.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 42.6%
Gross Margin - 3 Yr. Avg. 43%
EBITDA Margin 27.9%
EBITDA Margin - 3 Yr. Avg. 24.9%
Operating Margin 17.9%
Oper. Margin - 3 Yr. Avg. 14.8%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. -1.2%
Effective Tax Rate 9.9%
Eff/ Tax Rate - 3 Yr. Avg. 29.3%
Payout Ratio 0%

PENN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PENN stock intrinsic value calculation we used $3588 million for the last fiscal year's total revenue generated by Penn National Gaming, Inc.. The default revenue input number comes from 0001 income statement of Penn National Gaming, 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 PENN stock valuation model: a) initial revenue growth rate of 50.2% 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 9%, whose default value for PENN is calculated based on our internal credit rating of Penn National Gaming, 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 Penn National Gaming, 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 PENN stock the variable cost ratio is equal to 77.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $154 million in the base year in the intrinsic value calculation for PENN 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 28.5% for Penn National Gaming, Inc..

Corporate tax rate of 27% is the nominal tax rate for Penn National Gaming, 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 PENN 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 PENN are equal to 165.6%.

Life of production assets of 26.3 years is the average useful life of capital assets used in Penn National Gaming, 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 PENN is equal to -11.4%. 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 - $731.226 million for Penn National Gaming, 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 116.637 million for Penn National Gaming, 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 Penn National Gaming, Inc. at the current share price and the inputted number of shares is $2.6 billion.

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