Intrinsic value of RigNet, Inc. - RNET

Previous Close

$8.54

  Intrinsic Value

$124.88

stock screener

  Rating & Target

str. buy

+999%

Previous close

$8.54

 
Intrinsic value

$124.88

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of RNET 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 0.2

 

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, %
  27.40
  25.16
  23.14
  21.33
  19.70
  18.23
  16.90
  15.71
  14.64
  13.68
  12.81
  12.03
  11.33
  10.69
  10.12
  9.61
  9.15
  8.74
  8.36
  8.03
  7.72
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
Revenue, $m
  261
  327
  403
  488
  585
  691
  808
  935
  1,072
  1,218
  1,375
  1,540
  1,714
  1,898
  2,090
  2,291
  2,500
  2,719
  2,946
  3,182
  3,428
  3,684
  3,949
  4,225
  4,512
  4,810
  5,120
  5,443
  5,778
  6,128
Variable operating expenses, $m
  136
  168
  206
  248
  296
  348
  406
  469
  537
  609
  679
  761
  847
  938
  1,033
  1,132
  1,236
  1,344
  1,456
  1,573
  1,695
  1,821
  1,952
  2,088
  2,230
  2,378
  2,531
  2,690
  2,856
  3,029
Fixed operating expenses, $m
  111
  114
  116
  119
  122
  124
  127
  130
  133
  135
  138
  142
  145
  148
  151
  154
  158
  161
  165
  168
  172
  176
  180
  184
  188
  192
  196
  200
  205
  209
Total operating expenses, $m
  247
  282
  322
  367
  418
  472
  533
  599
  670
  744
  817
  903
  992
  1,086
  1,184
  1,286
  1,394
  1,505
  1,621
  1,741
  1,867
  1,997
  2,132
  2,272
  2,418
  2,570
  2,727
  2,890
  3,061
  3,238
Operating income, $m
  14
  45
  81
  121
  167
  219
  275
  336
  403
  474
  557
  637
  722
  812
  906
  1,004
  1,107
  1,213
  1,325
  1,441
  1,561
  1,687
  1,817
  1,953
  2,094
  2,240
  2,393
  2,552
  2,717
  2,890
EBITDA, $m
  43
  79
  121
  169
  223
  284
  350
  422
  500
  583
  673
  767
  867
  972
  1,082
  1,197
  1,318
  1,443
  1,574
  1,709
  1,851
  1,998
  2,150
  2,309
  2,474
  2,646
  2,825
  3,011
  3,205
  3,407
Interest expense (income), $m
  2
  3
  5
  7
  10
  12
  15
  19
  23
  27
  31
  36
  41
  46
  52
  58
  64
  71
  77
  84
  92
  99
  107
  116
  124
  133
  143
  152
  162
  173
  184
Earnings before tax, $m
  11
  40
  73
  112
  155
  203
  256
  314
  376
  443
  521
  596
  676
  760
  848
  940
  1,036
  1,136
  1,240
  1,349
  1,462
  1,579
  1,701
  1,828
  1,960
  2,098
  2,241
  2,390
  2,545
  2,706
Tax expense, $m
  3
  11
  20
  30
  42
  55
  69
  85
  102
  120
  141
  161
  182
  205
  229
  254
  280
  307
  335
  364
  395
  426
  459
  494
  529
  566
  605
  645
  687
  731
Net income, $m
  8
  29
  54
  82
  113
  148
  187
  229
  274
  323
  380
  435
  493
  555
  619
  686
  756
  829
  906
  985
  1,067
  1,153
  1,242
  1,335
  1,431
  1,531
  1,636
  1,744
  1,858
  1,975

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
  293
  367
  452
  548
  656
  776
  907
  1,049
  1,203
  1,368
  1,543
  1,728
  1,924
  2,130
  2,345
  2,571
  2,806
  3,051
  3,306
  3,572
  3,848
  4,134
  4,432
  4,742
  5,064
  5,398
  5,746
  6,108
  6,485
  6,878
Adjusted assets (=assets-cash), $m
  293
  367
  452
  548
  656
  776
  907
  1,049
  1,203
  1,368
  1,543
  1,728
  1,924
  2,130
  2,345
  2,571
  2,806
  3,051
  3,306
  3,572
  3,848
  4,134
  4,432
  4,742
  5,064
  5,398
  5,746
  6,108
  6,485
  6,878
Revenue / Adjusted assets
  0.891
  0.891
  0.892
  0.891
  0.892
  0.890
  0.891
  0.891
  0.891
  0.890
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
Average production assets, $m
  110
  138
  170
  206
  247
  292
  341
  395
  452
  514
  580
  650
  723
  801
  882
  967
  1,055
  1,147
  1,243
  1,343
  1,447
  1,554
  1,667
  1,783
  1,904
  2,030
  2,161
  2,297
  2,439
  2,586
Working capital, $m
  22
  27
  33
  41
  49
  57
  67
  78
  89
  101
  114
  128
  142
  158
  173
  190
  208
  226
  245
  264
  285
  306
  328
  351
  374
  399
  425
  452
  480
  509
Total debt, $m
  92
  131
  176
  228
  286
  349
  419
  496
  578
  665
  759
  858
  963
  1,073
  1,188
  1,308
  1,434
  1,565
  1,701
  1,843
  1,990
  2,143
  2,302
  2,467
  2,639
  2,818
  3,004
  3,197
  3,398
  3,608
Total liabilities, $m
  157
  196
  241
  293
  350
  414
  484
  560
  642
  730
  824
  923
  1,027
  1,137
  1,252
  1,373
  1,498
  1,629
  1,766
  1,907
  2,055
  2,208
  2,367
  2,532
  2,704
  2,883
  3,068
  3,262
  3,463
  3,673
Total equity, $m
  137
  171
  211
  255
  306
  361
  423
  489
  561
  637
  719
  805
  897
  992
  1,093
  1,198
  1,308
  1,422
  1,541
  1,664
  1,793
  1,927
  2,065
  2,210
  2,360
  2,516
  2,678
  2,846
  3,022
  3,205
Total liabilities and equity, $m
  294
  367
  452
  548
  656
  775
  907
  1,049
  1,203
  1,367
  1,543
  1,728
  1,924
  2,129
  2,345
  2,571
  2,806
  3,051
  3,307
  3,571
  3,848
  4,135
  4,432
  4,742
  5,064
  5,399
  5,746
  6,108
  6,485
  6,878
Debt-to-equity ratio
  0.670
  0.770
  0.840
  0.890
  0.930
  0.970
  0.990
  1.010
  1.030
  1.040
  1.060
  1.070
  1.070
  1.080
  1.090
  1.090
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.130
Adjusted equity ratio
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  29
  54
  82
  113
  148
  187
  229
  274
  323
  380
  435
  493
  555
  619
  686
  756
  829
  906
  985
  1,067
  1,153
  1,242
  1,335
  1,431
  1,531
  1,636
  1,744
  1,858
  1,975
Depreciation, amort., depletion, $m
  29
  34
  41
  48
  56
  65
  75
  86
  97
  110
  116
  130
  145
  160
  176
  193
  211
  229
  249
  269
  289
  311
  333
  357
  381
  406
  432
  459
  488
  517
Funds from operations, $m
  37
  63
  94
  130
  169
  213
  262
  315
  372
  433
  496
  565
  638
  715
  795
  879
  967
  1,059
  1,154
  1,253
  1,357
  1,464
  1,575
  1,691
  1,812
  1,937
  2,068
  2,204
  2,345
  2,493
Change in working capital, $m
  5
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Cash from operations, $m
  32
  58
  88
  122
  161
  205
  252
  304
  360
  421
  483
  551
  624
  700
  779
  863
  950
  1,041
  1,135
  1,234
  1,336
  1,443
  1,553
  1,668
  1,788
  1,913
  2,042
  2,177
  2,317
  2,464
Maintenance CAPEX, $m
  -17
  -22
  -28
  -34
  -41
  -49
  -58
  -68
  -79
  -90
  -103
  -116
  -130
  -145
  -160
  -176
  -193
  -211
  -229
  -249
  -269
  -289
  -311
  -333
  -357
  -381
  -406
  -432
  -459
  -488
New CAPEX, $m
  -24
  -28
  -32
  -36
  -41
  -45
  -49
  -54
  -58
  -62
  -66
  -70
  -74
  -77
  -81
  -85
  -88
  -92
  -96
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -131
  -136
  -142
  -148
Cash from investing activities, $m
  -41
  -50
  -60
  -70
  -82
  -94
  -107
  -122
  -137
  -152
  -169
  -186
  -204
  -222
  -241
  -261
  -281
  -303
  -325
  -349
  -373
  -397
  -423
  -449
  -478
  -507
  -537
  -568
  -601
  -636
Free cash flow, $m
  -9
  8
  28
  52
  79
  110
  144
  182
  224
  268
  314
  366
  420
  478
  538
  602
  668
  737
  810
  885
  964
  1,045
  1,130
  1,219
  1,311
  1,406
  1,505
  1,609
  1,716
  1,828
Issuance/(repayment) of debt, $m
  34
  39
  45
  51
  58
  64
  70
  76
  82
  88
  94
  99
  105
  110
  115
  120
  126
  131
  136
  142
  147
  153
  159
  165
  172
  179
  186
  193
  201
  210
Issuance/(repurchase) of shares, $m
  21
  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
Cash from financing (excl. dividends), $m  
  55
  44
  45
  51
  58
  64
  70
  76
  82
  88
  94
  99
  105
  110
  115
  120
  126
  131
  136
  142
  147
  153
  159
  165
  172
  179
  186
  193
  201
  210
Total cash flow (excl. dividends), $m
  46
  53
  74
  104
  137
  174
  215
  258
  306
  356
  408
  465
  525
  587
  653
  722
  794
  868
  946
  1,027
  1,111
  1,199
  1,289
  1,384
  1,482
  1,585
  1,691
  1,802
  1,918
  2,038
Retained Cash Flow (-), $m
  -29
  -34
  -40
  -45
  -50
  -56
  -61
  -66
  -72
  -77
  -82
  -86
  -91
  -96
  -100
  -105
  -110
  -114
  -119
  -124
  -129
  -134
  -139
  -144
  -150
  -156
  -162
  -169
  -176
  -183
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
  17
  18
  34
  59
  87
  118
  153
  192
  234
  279
  326
  378
  433
  492
  553
  617
  684
  754
  827
  903
  983
  1,065
  1,151
  1,240
  1,332
  1,429
  1,529
  1,633
  1,742
  1,855
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
  16
  17
  30
  48
  67
  86
  104
  120
  134
  146
  155
  161
  165
  165
  162
  157
  149
  139
  127
  115
  102
  88
  75
  63
  52
  42
  33
  25
  19
  14
Current shareholders' claim on cash, %
  88.5
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4

RigNet, Inc. (RigNet) provides customized systems and solutions serving customers with data networking and operational requirements. The Company provides voice and data network, video conferencing and monitoring, crew welfare, asset and weather monitoring, and real-time data services. It operates through two segments: Managed Services, and Systems Integration and Automation (SI&A). The Managed Services segment provides remote communications services for offshore and onshore drilling rigs and production facilities, as well as, support vessels and other remote sites. The SI&A segment provides customized solutions for customer telecommunications systems. As of December 31, 2016, the Company provided remote communications and collaborative services to approximately 500 customers reaching approximately 900 remote sites located in approximately 50 countries on six continents. It provides managed remote communications, engineered telecommunications solutions and applications.

FINANCIAL RATIOS  of  RigNet, Inc. (RNET)

Valuation Ratios
P/E Ratio -12.8
Price to Sales 0.7
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow 6.1
Growth Rates
Sales Growth Rate -18.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -58.8%
Cap. Spend. - 3 Yr. Gr. Rate -14.1%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 55.4%
Total Debt to Equity 62.5%
Interest Coverage -2
Management Effectiveness
Return On Assets -3.1%
Ret/ On Assets - 3 Yr. Avg. -0.7%
Return On Total Capital -6.1%
Ret/ On T. Cap. - 3 Yr. Avg. -2.1%
Return On Equity -10.2%
Return On Equity - 3 Yr. Avg. -3.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 41.2%
Gross Margin - 3 Yr. Avg. 41.7%
EBITDA Margin 14%
EBITDA Margin - 3 Yr. Avg. 13.4%
Operating Margin -0.9%
Oper. Margin - 3 Yr. Avg. 1.7%
Pre-Tax Margin -2.3%
Pre-Tax Margin - 3 Yr. Avg. 0.7%
Net Profit Margin -5.4%
Net Profit Margin - 3 Yr. Avg. -2.3%
Effective Tax Rate -120%
Eff/ Tax Rate - 3 Yr. Avg. -31%
Payout Ratio 0%

RNET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RNET stock intrinsic value calculation we used $205 million for the last fiscal year's total revenue generated by RigNet, Inc.. The default revenue input number comes from 0001 income statement of RigNet, 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 RNET stock valuation model: a) initial revenue growth rate of 27.4% 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 RNET is calculated based on our internal credit rating of RigNet, 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 RigNet, 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 RNET stock the variable cost ratio is equal to 52.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $109 million in the base year in the intrinsic value calculation for RNET 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 RigNet, Inc..

Corporate tax rate of 27% is the nominal tax rate for RigNet, 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 RNET 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 RNET are equal to 42.2%.

Life of production assets of 3.7 years is the average useful life of capital assets used in RigNet, 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 RNET is equal to 8.3%. 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 - $107.199 million for RigNet, 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 19.411 million for RigNet, 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 RigNet, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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