Intrinsic value of RYB Education ADR - RYB

Previous Close

$7.83

  Intrinsic Value

$77.56

stock screener

  Rating & Target

str. buy

+891%

Previous close

$7.83

 
Intrinsic value

$77.56

 
Up/down potential

+891%

 
Rating

str. buy

We calculate the intrinsic value of RYB 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, %
  29.80
  27.32
  25.09
  23.08
  21.27
  19.64
  18.18
  16.86
  15.68
  14.61
  13.65
  12.78
  12.00
  11.30
  10.67
  10.11
  9.60
  9.14
  8.72
  8.35
  8.02
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
Revenue, $m
  183
  233
  291
  358
  434
  520
  614
  718
  830
  952
  1,082
  1,220
  1,366
  1,521
  1,683
  1,853
  2,031
  2,216
  2,410
  2,611
  2,820
  3,038
  3,264
  3,499
  3,743
  3,997
  4,261
  4,535
  4,821
  5,118
Variable operating expenses, $m
  170
  216
  270
  333
  404
  483
  571
  667
  771
  884
  1,004
  1,133
  1,269
  1,412
  1,563
  1,721
  1,886
  2,058
  2,238
  2,425
  2,619
  2,821
  3,031
  3,249
  3,476
  3,712
  3,957
  4,212
  4,477
  4,753
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
  170
  216
  270
  333
  404
  483
  571
  667
  771
  884
  1,004
  1,133
  1,269
  1,412
  1,563
  1,721
  1,886
  2,058
  2,238
  2,425
  2,619
  2,821
  3,031
  3,249
  3,476
  3,712
  3,957
  4,212
  4,477
  4,753
Operating income, $m
  13
  17
  21
  26
  31
  37
  44
  51
  59
  68
  77
  87
  97
  108
  120
  132
  145
  158
  172
  186
  201
  217
  233
  249
  267
  285
  304
  323
  344
  365
EBITDA, $m
  21
  27
  33
  41
  50
  59
  70
  82
  95
  109
  123
  139
  156
  173
  192
  211
  232
  253
  275
  298
  322
  347
  372
  399
  427
  456
  486
  517
  550
  584
Interest expense (income), $m
  0
  0
  2
  4
  7
  10
  14
  18
  23
  28
  33
  39
  45
  52
  59
  67
  74
  83
  91
  100
  109
  119
  129
  140
  151
  162
  174
  186
  199
  212
  226
Earnings before tax, $m
  13
  15
  16
  18
  20
  23
  25
  28
  31
  35
  38
  42
  45
  49
  53
  58
  62
  67
  72
  77
  82
  87
  93
  99
  105
  111
  118
  125
  132
  139
Tax expense, $m
  4
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
Net income, $m
  9
  11
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  102

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
  217
  276
  346
  425
  516
  617
  730
  853
  986
  1,130
  1,285
  1,449
  1,623
  1,806
  1,999
  2,201
  2,412
  2,632
  2,862
  3,101
  3,350
  3,608
  3,876
  4,155
  4,445
  4,747
  5,060
  5,386
  5,725
  6,079
Adjusted assets (=assets-cash), $m
  217
  276
  346
  425
  516
  617
  730
  853
  986
  1,130
  1,285
  1,449
  1,623
  1,806
  1,999
  2,201
  2,412
  2,632
  2,862
  3,101
  3,350
  3,608
  3,876
  4,155
  4,445
  4,747
  5,060
  5,386
  5,725
  6,079
Revenue / Adjusted assets
  0.843
  0.844
  0.841
  0.842
  0.841
  0.843
  0.841
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
Average production assets, $m
  45
  58
  72
  89
  108
  129
  152
  178
  206
  236
  268
  303
  339
  377
  417
  460
  504
  550
  598
  648
  699
  753
  809
  868
  928
  991
  1,057
  1,125
  1,196
  1,269
Working capital, $m
  -108
  -138
  -172
  -212
  -257
  -308
  -364
  -425
  -492
  -563
  -640
  -722
  -809
  -900
  -996
  -1,097
  -1,202
  -1,312
  -1,427
  -1,546
  -1,670
  -1,798
  -1,932
  -2,071
  -2,216
  -2,366
  -2,522
  -2,685
  -2,854
  -3,030
Total debt, $m
  37
  82
  134
  194
  262
  338
  423
  515
  616
  724
  840
  963
  1,094
  1,232
  1,377
  1,529
  1,688
  1,854
  2,026
  2,206
  2,393
  2,587
  2,789
  2,999
  3,217
  3,444
  3,679
  3,924
  4,180
  4,445
Total liabilities, $m
  163
  208
  260
  320
  388
  464
  549
  641
  742
  850
  966
  1,089
  1,220
  1,358
  1,503
  1,655
  1,814
  1,980
  2,152
  2,332
  2,519
  2,713
  2,915
  3,125
  3,343
  3,570
  3,805
  4,050
  4,306
  4,571
Total equity, $m
  54
  69
  86
  106
  128
  153
  181
  211
  245
  280
  319
  359
  402
  448
  496
  546
  598
  653
  710
  769
  831
  895
  961
  1,031
  1,102
  1,177
  1,255
  1,336
  1,420
  1,507
Total liabilities and equity, $m
  217
  277
  346
  426
  516
  617
  730
  852
  987
  1,130
  1,285
  1,448
  1,622
  1,806
  1,999
  2,201
  2,412
  2,633
  2,862
  3,101
  3,350
  3,608
  3,876
  4,156
  4,445
  4,747
  5,060
  5,386
  5,726
  6,078
Debt-to-equity ratio
  0.690
  1.190
  1.560
  1.840
  2.050
  2.210
  2.340
  2.440
  2.520
  2.580
  2.640
  2.680
  2.720
  2.750
  2.780
  2.800
  2.820
  2.840
  2.850
  2.870
  2.880
  2.890
  2.900
  2.910
  2.920
  2.930
  2.930
  2.940
  2.940
  2.950
Adjusted equity ratio
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  11
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  102
Depreciation, amort., depletion, $m
  8
  10
  12
  15
  19
  22
  26
  31
  36
  41
  46
  52
  58
  65
  72
  79
  87
  95
  103
  112
  121
  130
  140
  150
  160
  171
  182
  194
  206
  219
Funds from operations, $m
  17
  21
  24
  29
  34
  39
  45
  51
  58
  66
  74
  83
  92
  101
  111
  121
  132
  144
  155
  168
  180
  194
  207
  222
  237
  252
  268
  285
  302
  321
Change in working capital, $m
  -25
  -30
  -35
  -40
  -45
  -51
  -56
  -61
  -67
  -72
  -77
  -82
  -87
  -91
  -96
  -101
  -105
  -110
  -114
  -119
  -124
  -129
  -134
  -139
  -145
  -150
  -156
  -162
  -169
  -176
Cash from operations, $m
  42
  50
  59
  68
  79
  89
  101
  113
  125
  138
  151
  164
  178
  192
  207
  222
  238
  253
  270
  287
  304
  322
  341
  361
  381
  402
  424
  447
  471
  497
Maintenance CAPEX, $m
  -6
  -8
  -10
  -12
  -15
  -19
  -22
  -26
  -31
  -36
  -41
  -46
  -52
  -58
  -65
  -72
  -79
  -87
  -95
  -103
  -112
  -121
  -130
  -140
  -150
  -160
  -171
  -182
  -194
  -206
New CAPEX, $m
  -10
  -12
  -14
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -65
  -68
  -71
  -74
Cash from investing activities, $m
  -16
  -20
  -24
  -29
  -34
  -40
  -45
  -52
  -59
  -66
  -73
  -80
  -88
  -96
  -105
  -114
  -123
  -133
  -143
  -153
  -164
  -175
  -186
  -198
  -211
  -223
  -236
  -250
  -265
  -280
Free cash flow, $m
  26
  30
  35
  39
  44
  50
  55
  61
  66
  72
  78
  84
  90
  96
  102
  108
  114
  121
  127
  134
  141
  148
  155
  163
  171
  179
  188
  197
  207
  217
Issuance/(repayment) of debt, $m
  37
  45
  52
  60
  68
  76
  84
  93
  101
  108
  116
  123
  131
  138
  145
  152
  159
  166
  173
  180
  187
  194
  202
  210
  218
  227
  236
  245
  255
  266
Issuance/(repurchase) of shares, $m
  3
  4
  5
  6
  8
  8
  9
  10
  10
  10
  10
  10
  10
  9
  9
  8
  7
  6
  5
  3
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  40
  49
  57
  66
  76
  84
  93
  103
  111
  118
  126
  133
  141
  147
  154
  160
  166
  172
  178
  183
  189
  194
  202
  210
  218
  227
  236
  245
  255
  266
Total cash flow (excl. dividends), $m
  66
  79
  92
  106
  120
  134
  149
  163
  177
  191
  204
  218
  231
  243
  256
  268
  280
  292
  304
  317
  329
  343
  357
  373
  389
  406
  424
  442
  462
  482
Retained Cash Flow (-), $m
  -12
  -15
  -17
  -20
  -22
  -25
  -28
  -31
  -33
  -36
  -38
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -88
Prev. year cash balance distribution, $m
  62
  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
  116
  64
  75
  86
  98
  109
  121
  133
  144
  155
  166
  177
  187
  198
  208
  218
  228
  237
  247
  258
  268
  278
  291
  304
  317
  331
  346
  361
  378
  395
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
  111
  59
  65
  71
  76
  79
  82
  83
  83
  81
  79
  76
  71
  66
  61
  55
  50
  44
  38
  33
  28
  23
  19
  15
  12
  10
  7
  6
  4
  3
Current shareholders' claim on cash, %
  91.5
  82.9
  74.9
  67.9
  61.9
  56.8
  52.4
  48.8
  45.7
  43.2
  41.1
  39.4
  37.9
  36.7
  35.8
  35.0
  34.4
  33.9
  33.6
  33.4
  33.3
  33.3
  33.3
  33.3
  33.3
  33.3
  33.3
  33.3
  33.3
  33.3

RYB Education, Inc. is engaged in providing early childhood education services in China. The Company develops various educational products and services, such as teaching aids, educational toys and at-home education products and services. The Company promotes and sells its self-developed and third party products and services through its franchisees and Hong Shan Enable Alliance participants for their further distribution and directly to number of families.The Company kindergarten offers preschool education to 2-6-year-old children. As of June 30, 2017, the Company directly operated 80 kindergartens and franchised additional 175 kindergartens, covering 130 cities and towns in China.The Company’s play-and-learn centers offer flexible and engaging classes designed for the joint participation of 0-6-year-old children and their families to promote children's development and prepare them for kindergartens and primary schools.

FINANCIAL RATIOS  of  RYB Education ADR (RYB)

Valuation Ratios
P/E Ratio 32.1
Price to Sales 2.1
Price to Book 56.1
Price to Tangible Book
Price to Cash Flow 6.4
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate 31.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.3%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.9%
Ret/ On Assets - 3 Yr. Avg. -0.3%
Return On Total Capital 1400%
Ret/ On T. Cap. - 3 Yr. Avg. 509.5%
Return On Equity 1400%
Return On Equity - 3 Yr. Avg. 509.5%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 15.6%
Gross Margin - 3 Yr. Avg. 11.9%
EBITDA Margin 11.9%
EBITDA Margin - 3 Yr. Avg. 7.1%
Operating Margin 7.3%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 7.3%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin 6.4%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 8.3%
Payout Ratio 0%

RYB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RYB stock intrinsic value calculation we used $140.803 million for the last fiscal year's total revenue generated by RYB Education ADR. The default revenue input number comes from 0001 income statement of RYB Education ADR. 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 RYB stock valuation model: a) initial revenue growth rate of 29.8% 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 RYB is calculated based on our internal credit rating of RYB Education ADR, 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 RYB Education ADR.
    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 RYB stock the variable cost ratio is equal to 92.9%.

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 RYB 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 RYB Education ADR.

Corporate tax rate of 27% is the nominal tax rate for RYB Education ADR. 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 RYB 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 RYB are equal to 24.8%.

Life of production assets of 5.8 years is the average useful life of capital assets used in RYB Education ADR 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 RYB is equal to -59.2%. 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 - $103.745 million for RYB Education ADR - 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 9.668 million for RYB Education ADR 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 RYB Education ADR at the current share price and the inputted number of shares is $0.1 billion.

COMPANY NEWS

▶ RYB Education, Inc. Files Its Annual Report on Form 20-F   [Apr-25-18 07:10AM  PR Newswire]

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