Intrinsic value of Pinnacle Entertainment - PNK

Previous Close

$32.55

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$32.55

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of PNK 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 1.9

 

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
  2,613
  2,673
  2,742
  2,819
  2,904
  2,998
  3,100
  3,211
  3,330
  3,458
  3,594
  3,740
  3,896
  4,061
  4,236
  4,422
  4,618
  4,826
  5,045
  5,277
  5,522
  5,780
  6,052
  6,338
  6,640
  6,958
  7,292
  7,644
  8,014
  8,404
Variable operating expenses, $m
  2,752
  2,813
  2,883
  2,961
  3,048
  3,143
  3,247
  3,359
  3,480
  3,610
  3,649
  3,797
  3,955
  4,122
  4,300
  4,489
  4,688
  4,899
  5,122
  5,357
  5,606
  5,868
  6,144
  6,434
  6,741
  7,063
  7,403
  7,760
  8,136
  8,531
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
  2,752
  2,813
  2,883
  2,961
  3,048
  3,143
  3,247
  3,359
  3,480
  3,610
  3,649
  3,797
  3,955
  4,122
  4,300
  4,489
  4,688
  4,899
  5,122
  5,357
  5,606
  5,868
  6,144
  6,434
  6,741
  7,063
  7,403
  7,760
  8,136
  8,531
Operating income, $m
  -139
  -140
  -141
  -142
  -144
  -145
  -147
  -148
  -150
  -152
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -128
EBITDA, $m
  152
  156
  160
  164
  169
  175
  181
  187
  194
  201
  209
  218
  227
  236
  247
  257
  269
  281
  294
  307
  322
  337
  352
  369
  387
  405
  425
  445
  467
  489
Interest expense (income), $m
  339
  373
  311
  318
  328
  338
  349
  361
  375
  389
  405
  422
  440
  459
  480
  501
  524
  549
  575
  602
  631
  662
  694
  728
  764
  801
  841
  883
  927
  973
  1,022
Earnings before tax, $m
  -512
  -451
  -460
  -470
  -481
  -494
  -508
  -523
  -539
  -557
  -476
  -497
  -518
  -541
  -566
  -592
  -619
  -648
  -679
  -711
  -745
  -782
  -820
  -860
  -902
  -947
  -994
  -1,043
  -1,095
  -1,150
Tax expense, $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
Net income, $m
  -512
  -451
  -460
  -470
  -481
  -494
  -508
  -523
  -539
  -557
  -476
  -497
  -518
  -541
  -566
  -592
  -619
  -648
  -679
  -711
  -745
  -782
  -820
  -860
  -902
  -947
  -994
  -1,043
  -1,095
  -1,150

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
  4,026
  4,119
  4,225
  4,344
  4,475
  4,620
  4,777
  4,947
  5,131
  5,328
  5,539
  5,763
  6,003
  6,257
  6,527
  6,813
  7,116
  7,436
  7,774
  8,131
  8,508
  8,906
  9,325
  9,766
  10,231
  10,721
  11,236
  11,778
  12,349
  12,949
Adjusted assets (=assets-cash), $m
  4,026
  4,119
  4,225
  4,344
  4,475
  4,620
  4,777
  4,947
  5,131
  5,328
  5,539
  5,763
  6,003
  6,257
  6,527
  6,813
  7,116
  7,436
  7,774
  8,131
  8,508
  8,906
  9,325
  9,766
  10,231
  10,721
  11,236
  11,778
  12,349
  12,949
Revenue / Adjusted assets
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
Average production assets, $m
  3,261
  3,336
  3,422
  3,518
  3,625
  3,742
  3,869
  4,007
  4,156
  4,315
  4,486
  4,668
  4,862
  5,068
  5,286
  5,518
  5,763
  6,023
  6,297
  6,586
  6,891
  7,213
  7,553
  7,910
  8,287
  8,683
  9,101
  9,540
  10,002
  10,488
Working capital, $m
  -225
  -230
  -236
  -242
  -250
  -258
  -267
  -276
  -286
  -297
  -309
  -322
  -335
  -349
  -364
  -380
  -397
  -415
  -434
  -454
  -475
  -497
  -520
  -545
  -571
  -598
  -627
  -657
  -689
  -723
Total debt, $m
  3,269
  3,353
  3,448
  3,555
  3,673
  3,803
  3,945
  4,098
  4,263
  4,441
  4,630
  4,833
  5,048
  5,277
  5,520
  5,777
  6,050
  6,338
  6,642
  6,964
  7,303
  7,661
  8,038
  8,435
  8,854
  9,294
  9,758
  10,246
  10,759
  11,299
Total liabilities, $m
  3,624
  3,707
  3,802
  3,909
  4,028
  4,158
  4,299
  4,453
  4,618
  4,795
  4,985
  5,187
  5,402
  5,631
  5,874
  6,132
  6,404
  6,692
  6,997
  7,318
  7,657
  8,015
  8,392
  8,790
  9,208
  9,649
  10,112
  10,600
  11,114
  11,654
Total equity, $m
  403
  412
  422
  434
  448
  462
  478
  495
  513
  533
  554
  576
  600
  626
  653
  681
  712
  744
  777
  813
  851
  891
  932
  977
  1,023
  1,072
  1,124
  1,178
  1,235
  1,295
Total liabilities and equity, $m
  4,027
  4,119
  4,224
  4,343
  4,476
  4,620
  4,777
  4,948
  5,131
  5,328
  5,539
  5,763
  6,002
  6,257
  6,527
  6,813
  7,116
  7,436
  7,774
  8,131
  8,508
  8,906
  9,324
  9,767
  10,231
  10,721
  11,236
  11,778
  12,349
  12,949
Debt-to-equity ratio
  8.120
  8.140
  8.160
  8.180
  8.210
  8.230
  8.260
  8.280
  8.310
  8.330
  8.360
  8.380
  8.410
  8.430
  8.460
  8.480
  8.500
  8.520
  8.540
  8.560
  8.580
  8.600
  8.620
  8.640
  8.650
  8.670
  8.680
  8.700
  8.710
  8.730
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
  -512
  -451
  -460
  -470
  -481
  -494
  -508
  -523
  -539
  -557
  -476
  -497
  -518
  -541
  -566
  -592
  -619
  -648
  -679
  -711
  -745
  -782
  -820
  -860
  -902
  -947
  -994
  -1,043
  -1,095
  -1,150
Depreciation, amort., depletion, $m
  291
  296
  301
  306
  313
  320
  327
  335
  344
  353
  264
  275
  286
  298
  311
  325
  339
  354
  370
  387
  405
  424
  444
  465
  487
  511
  535
  561
  588
  617
Funds from operations, $m
  -221
  -155
  -159
  -163
  -169
  -174
  -181
  -188
  -195
  -204
  -213
  -222
  -232
  -243
  -255
  -267
  -280
  -294
  -308
  -324
  -340
  -357
  -375
  -395
  -415
  -436
  -458
  -482
  -507
  -533
Change in working capital, $m
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
Cash from operations, $m
  -216
  -150
  -153
  -157
  -161
  -166
  -172
  -178
  -185
  -193
  -201
  -210
  -219
  -229
  -240
  -251
  -263
  -276
  -289
  -304
  -319
  -335
  -352
  -370
  -389
  -409
  -430
  -452
  -475
  -499
Maintenance CAPEX, $m
  -188
  -192
  -196
  -201
  -207
  -213
  -220
  -228
  -236
  -244
  -254
  -264
  -275
  -286
  -298
  -311
  -325
  -339
  -354
  -370
  -387
  -405
  -424
  -444
  -465
  -487
  -511
  -535
  -561
  -588
New CAPEX, $m
  -63
  -75
  -86
  -96
  -107
  -117
  -127
  -138
  -149
  -159
  -171
  -182
  -194
  -206
  -219
  -232
  -245
  -259
  -274
  -289
  -305
  -322
  -339
  -358
  -377
  -396
  -417
  -439
  -462
  -486
Cash from investing activities, $m
  -251
  -267
  -282
  -297
  -314
  -330
  -347
  -366
  -385
  -403
  -425
  -446
  -469
  -492
  -517
  -543
  -570
  -598
  -628
  -659
  -692
  -727
  -763
  -802
  -842
  -883
  -928
  -974
  -1,023
  -1,074
Free cash flow, $m
  -467
  -417
  -435
  -454
  -475
  -497
  -520
  -544
  -570
  -597
  -625
  -655
  -687
  -721
  -756
  -794
  -833
  -874
  -918
  -964
  -1,012
  -1,062
  -1,116
  -1,172
  -1,231
  -1,293
  -1,358
  -1,426
  -1,498
  -1,574
Issuance/(repayment) of debt, $m
  -657
  83
  95
  107
  119
  130
  142
  153
  165
  177
  190
  202
  215
  229
  243
  257
  272
  288
  304
  321
  339
  358
  377
  397
  418
  441
  464
  488
  513
  540
Issuance/(repurchase) of shares, $m
  1,245
  460
  470
  482
  494
  508
  524
  540
  558
  577
  497
  519
  542
  567
  593
  620
  649
  680
  713
  747
  783
  821
  862
  904
  949
  996
  1,045
  1,097
  1,152
  1,210
Cash from financing (excl. dividends), $m  
  588
  543
  565
  589
  613
  638
  666
  693
  723
  754
  687
  721
  757
  796
  836
  877
  921
  968
  1,017
  1,068
  1,122
  1,179
  1,239
  1,301
  1,367
  1,437
  1,509
  1,585
  1,665
  1,750
Total cash flow (excl. dividends), $m
  121
  127
  131
  134
  138
  142
  146
  149
  153
  157
  62
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  123
  130
  136
  144
  151
  159
  167
  176
Retained Cash Flow (-), $m
  -1,245
  -460
  -470
  -482
  -494
  -508
  -524
  -540
  -558
  -577
  -497
  -519
  -542
  -567
  -593
  -620
  -649
  -680
  -713
  -747
  -783
  -821
  -862
  -904
  -949
  -996
  -1,045
  -1,097
  -1,152
  -1,210
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
  -1,124
  -333
  -340
  -347
  -356
  -367
  -378
  -391
  -404
  -419
  -436
  -453
  -472
  -492
  -513
  -536
  -560
  -586
  -613
  -642
  -672
  -705
  -739
  -774
  -812
  -852
  -894
  -938
  -985
  -1,034
Discount rate, %
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.68
  21.72
  22.80
  23.94
  25.14
  26.40
  27.72
  29.10
  30.56
  32.09
  33.69
  35.38
  37.15
  39.00
  40.95
  43.00
  45.15
  47.41
  49.78
  52.27
  54.88
  57.63
  60.51
PV of cash for distribution, $m
  -980
  -250
  -216
  -185
  -157
  -131
  -107
  -87
  -69
  -54
  -41
  -31
  -22
  -16
  -11
  -8
  -5
  -3
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  23.3
  10.9
  5.1
  2.4
  1.1
  0.5
  0.2
  0.1
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0

Pinnacle Entertainment, Inc. is an owner, operator and developer of casinos and related hospitality and entertainment businesses. The Company operates through three segments: Midwest, South and West. The Company's Midwest segment includes Ameristar Council Bluffs, Ameristar East Chicago, Ameristar Kansas City, Ameristar St. Charles, Belterra, Belterra Park, Meadows and River City. The Company's South segment includes Ameristar Vicksburg, Boomtown Bossier City, Boomtown New Orleans, L'Auberge Baton Rouge and L'Auberge Lake Charles. The Company's West segment includes Ameristar Black Hawk and Cactus Petes and Horseshu. As of September 30, 2016, the Company owned and operated 16 gaming entertainment businesses, located in Colorado, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, Ohio and Pennsylvania. The Company's gaming entertainment businesses include gaming, food and beverage, and retail facilities, which include hotel and resort amenities.

FINANCIAL RATIOS  of  Pinnacle Entertainment (PNK)

Valuation Ratios
P/E Ratio -4
Price to Sales 0.8
Price to Book -4.7
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 11.5
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.1%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity -1054.3%
Total Debt to Equity -1070.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -3.2%
Ret/ On Assets - 3 Yr. Avg. 2.1%
Return On Total Capital -11.9%
Ret/ On T. Cap. - 3 Yr. Avg. -3.2%
Return On Equity 3046.7%
Return On Equity - 3 Yr. Avg. 1026.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 46.3%
Gross Margin - 3 Yr. Avg. 46.3%
EBITDA Margin 3%
EBITDA Margin - 3 Yr. Avg. 16.8%
Operating Margin -6.3%
Oper. Margin - 3 Yr. Avg. 6.8%
Pre-Tax Margin -20.4%
Pre-Tax Margin - 3 Yr. Avg. -5.2%
Net Profit Margin -19.2%
Net Profit Margin - 3 Yr. Avg. -5%
Effective Tax Rate 5.8%
Eff/ Tax Rate - 3 Yr. Avg. 18.2%
Payout Ratio 0%

PNK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PNK stock intrinsic value calculation we used $2561.848 million for the last fiscal year's total revenue generated by Pinnacle Entertainment. The default revenue input number comes from 0001 income statement of Pinnacle Entertainment. 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 PNK 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 14.7%, whose default value for PNK is calculated based on our internal credit rating of Pinnacle Entertainment, 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 Pinnacle Entertainment.
    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 PNK stock the variable cost ratio is equal to 105.4%.

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 PNK 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 9.5% for Pinnacle Entertainment.

Corporate tax rate of 27% is the nominal tax rate for Pinnacle Entertainment. 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 PNK 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 PNK are equal to 124.8%.

Life of production assets of 17 years is the average useful life of capital assets used in Pinnacle Entertainment 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 PNK is equal to -8.6%. 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 - $-330.066 million for Pinnacle Entertainment - 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 58.879 million for Pinnacle Entertainment 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 Pinnacle Entertainment at the current share price and the inputted number of shares is $1.9 billion.

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