Intrinsic value of Salem Media Group, Inc. - SALM

Previous Close

$2.36

  Intrinsic Value

$10.85

stock screener

  Rating & Target

str. buy

+360%

Previous close

$2.36

 
Intrinsic value

$10.85

 
Up/down potential

+360%

 
Rating

str. buy

We calculate the intrinsic value of SALM 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
  268
  274
  281
  289
  298
  308
  318
  330
  342
  355
  369
  384
  400
  417
  435
  454
  474
  495
  518
  542
  567
  593
  621
  651
  682
  714
  749
  785
  823
  863
Variable operating expenses, $m
  244
  249
  254
  260
  267
  274
  282
  290
  300
  310
  279
  290
  302
  315
  328
  343
  358
  374
  391
  409
  428
  448
  469
  491
  515
  539
  565
  593
  621
  652
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
  244
  249
  254
  260
  267
  274
  282
  290
  300
  310
  279
  290
  302
  315
  328
  343
  358
  374
  391
  409
  428
  448
  469
  491
  515
  539
  565
  593
  621
  652
Operating income, $m
  24
  26
  27
  29
  31
  34
  36
  39
  42
  45
  90
  94
  98
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
  159
  167
  175
  183
  192
  201
  211
EBITDA, $m
  77
  79
  81
  83
  85
  88
  91
  94
  98
  102
  106
  110
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  225
  235
  247
Interest expense (income), $m
  14
  18
  19
  19
  20
  21
  22
  22
  23
  24
  26
  27
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
Earnings before tax, $m
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  64
  66
  68
  71
  74
  77
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  141
Tax expense, $m
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  17
  18
  18
  19
  20
  21
  22
  23
  23
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
Net income, $m
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103

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
  571
  584
  599
  616
  634
  655
  677
  701
  727
  755
  785
  817
  851
  887
  925
  966
  1,009
  1,054
  1,102
  1,153
  1,206
  1,262
  1,322
  1,384
  1,450
  1,520
  1,593
  1,670
  1,751
  1,836
Adjusted assets (=assets-cash), $m
  571
  584
  599
  616
  634
  655
  677
  701
  727
  755
  785
  817
  851
  887
  925
  966
  1,009
  1,054
  1,102
  1,153
  1,206
  1,262
  1,322
  1,384
  1,450
  1,520
  1,593
  1,670
  1,751
  1,836
Revenue / Adjusted assets
  0.469
  0.469
  0.469
  0.469
  0.470
  0.470
  0.470
  0.471
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
Average production assets, $m
  314
  321
  329
  338
  349
  360
  372
  385
  400
  415
  431
  449
  468
  487
  508
  531
  554
  579
  606
  633
  663
  694
  726
  761
  797
  835
  875
  917
  962
  1,009
Working capital, $m
  10
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
Total debt, $m
  261
  269
  278
  288
  299
  312
  325
  340
  355
  372
  390
  409
  430
  452
  475
  499
  525
  552
  581
  612
  644
  678
  714
  752
  791
  833
  877
  923
  972
  1,024
Total liabilities, $m
  344
  352
  361
  371
  383
  395
  408
  423
  439
  455
  473
  493
  513
  535
  558
  582
  608
  636
  665
  695
  727
  761
  797
  835
  875
  916
  960
  1,007
  1,056
  1,107
Total equity, $m
  227
  232
  238
  244
  252
  260
  269
  278
  289
  300
  312
  324
  338
  352
  367
  383
  400
  418
  438
  458
  479
  501
  525
  550
  576
  603
  632
  663
  695
  729
Total liabilities and equity, $m
  571
  584
  599
  615
  635
  655
  677
  701
  728
  755
  785
  817
  851
  887
  925
  965
  1,008
  1,054
  1,103
  1,153
  1,206
  1,262
  1,322
  1,385
  1,451
  1,519
  1,592
  1,670
  1,751
  1,836
Debt-to-equity ratio
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.340
  1.340
  1.350
  1.360
  1.370
  1.370
  1.380
  1.390
  1.390
  1.400
  1.400
Adjusted equity ratio
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
Depreciation, amort., depletion, $m
  53
  53
  53
  53
  54
  54
  55
  55
  56
  56
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  25
  26
  27
  28
  30
  31
  32
  34
  36
Funds from operations, $m
  57
  58
  59
  60
  62
  63
  65
  67
  69
  71
  62
  64
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  110
  116
  121
  127
  132
  139
Change in working capital, $m
  0
  0
  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
  1
  2
Cash from operations, $m
  57
  58
  59
  60
  61
  63
  64
  66
  68
  70
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  104
  109
  114
  120
  125
  131
  137
Maintenance CAPEX, $m
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
New CAPEX, $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
Cash from investing activities, $m
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -38
  -40
  -43
  -45
  -46
  -49
  -51
  -54
  -58
  -60
  -63
  -66
  -70
  -73
  -76
  -81
Free cash flow, $m
  40
  39
  39
  39
  39
  39
  39
  40
  40
  41
  30
  31
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
Issuance/(repayment) of debt, $m
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Total cash flow (excl. dividends), $m
  47
  47
  48
  49
  50
  52
  53
  54
  56
  57
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
Retained Cash Flow (-), $m
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
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
  42
  42
  42
  43
  43
  43
  44
  45
  46
  46
  36
  37
  38
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
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
  39
  35
  32
  29
  26
  23
  20
  17
  15
  13
  8
  7
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.7
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6

Salem Media Group, Inc., formerly Salem Communications Corporation, is a multi-media company specializing in Christian and Conservative content, with media properties consisting of radio broadcasting, digital media, and book, magazine and newsletter publishing. The Company operates through three segments: Broadcast, Digital Media and Publishing. The Company's broadcasting segment is engaged in the ownership and operation of radio stations in metropolitan markets. The Company's radio stations carry national and local programming content, as well as national and local advertisers. The Company's Digital Media segment focuses on Web-based platform designed for audiences interested in Christian and family-themed content and conservative news. The Company's publishing segment consists of Regnery Publishing, Xulon Press and Salem Publishing. The Company owns and operates approximately 116 radio stations in over 40 markets.

FINANCIAL RATIOS  of  Salem Media Group, Inc. (SALM)

Valuation Ratios
P/E Ratio 6.8
Price to Sales 0.2
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 1.6
Price to Free Cash Flow 2.1
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.7%
Cap. Spend. - 3 Yr. Gr. Rate -1.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.3
LT Debt to Equity 122%
Total Debt to Equity 122.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 1.9%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity 4.2%
Return On Equity - 3 Yr. Avg. 4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 24.1%
Gross Margin - 3 Yr. Avg. 24.4%
EBITDA Margin 16.1%
EBITDA Margin - 3 Yr. Avg. 17.1%
Operating Margin 10.2%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 5.1%
Net Profit Margin 3.3%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 39.9%
Payout Ratio 77.8%

SALM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SALM stock intrinsic value calculation we used $263 million for the last fiscal year's total revenue generated by Salem Media Group, Inc.. The default revenue input number comes from 0001 income statement of Salem Media Group, 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 SALM 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 9%, whose default value for SALM is calculated based on our internal credit rating of Salem Media Group, 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 Salem Media Group, 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 SALM stock the variable cost ratio is equal to 91.3%.

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 SALM 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 7.2% for Salem Media Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Salem Media Group, 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 SALM 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 SALM are equal to 116.9%.

Life of production assets of 28.3 years is the average useful life of capital assets used in Salem Media Group, 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 SALM is equal to 3.9%. 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 - $221.869 million for Salem Media Group, 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 26.186 million for Salem Media Group, 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 Salem Media Group, Inc. at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
EMMS Emmis Communic 4.18 9.81  str.buy
SGA Saga Communica 30.25 50.25  str.buy
BBGI Beasley Broadc 3.08 25.27  str.buy
ETM Entercom Commu 5.95 12.21  str.buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.