Intrinsic value of Salem Media Group - SALM

Previous Close

$2.98

  Intrinsic Value

$15.03

stock screener

  Rating & Target

str. buy

+405%

Previous close

$2.98

 
Intrinsic value

$15.03

 
Up/down potential

+405%

 
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
  269
  275
  282
  290
  299
  309
  319
  331
  343
  356
  370
  385
  401
  418
  436
  455
  475
  497
  519
  543
  568
  595
  623
  653
  684
  716
  751
  787
  825
  865
Variable operating expenses, $m
  159
  162
  165
  168
  172
  176
  181
  186
  191
  197
  161
  168
  175
  182
  190
  198
  207
  216
  226
  237
  248
  259
  271
  284
  298
  312
  327
  343
  359
  377
Fixed operating expenses, $m
  88
  90
  92
  94
  96
  98
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
Total operating expenses, $m
  247
  252
  257
  262
  268
  274
  281
  288
  296
  304
  270
  280
  289
  299
  309
  320
  331
  343
  356
  370
  384
  398
  413
  429
  446
  463
  482
  501
  521
  542
Operating income, $m
  22
  23
  25
  28
  31
  34
  38
  42
  47
  52
  100
  106
  112
  119
  127
  135
  144
  153
  163
  174
  185
  197
  210
  223
  238
  253
  269
  286
  304
  323
EBITDA, $m
  75
  76
  79
  82
  85
  89
  93
  97
  103
  108
  114
  121
  128
  136
  144
  153
  163
  173
  184
  195
  208
  221
  235
  249
  265
  281
  299
  317
  337
  358
Interest expense (income), $m
  14
  17
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
Earnings before tax, $m
  5
  7
  8
  10
  12
  15
  18
  21
  25
  29
  75
  80
  86
  91
  98
  104
  112
  119
  127
  136
  145
  155
  166
  177
  189
  202
  215
  229
  244
  260
Tax expense, $m
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  20
  22
  23
  25
  26
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  62
  66
  70
Net income, $m
  4
  5
  6
  7
  9
  11
  13
  15
  18
  21
  55
  59
  63
  67
  71
  76
  81
  87
  93
  99
  106
  113
  121
  129
  138
  147
  157
  167
  178
  190

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
  584
  597
  612
  630
  649
  670
  692
  717
  744
  772
  803
  835
  870
  907
  946
  987
  1,031
  1,078
  1,127
  1,178
  1,233
  1,291
  1,351
  1,415
  1,483
  1,554
  1,628
  1,707
  1,790
  1,877
Adjusted assets (=assets-cash), $m
  584
  597
  612
  630
  649
  670
  692
  717
  744
  772
  803
  835
  870
  907
  946
  987
  1,031
  1,078
  1,127
  1,178
  1,233
  1,291
  1,351
  1,415
  1,483
  1,554
  1,628
  1,707
  1,790
  1,877
Revenue / Adjusted assets
  0.461
  0.461
  0.461
  0.460
  0.461
  0.461
  0.461
  0.462
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
Average production assets, $m
  320
  328
  336
  346
  356
  368
  380
  394
  408
  424
  441
  459
  478
  498
  519
  542
  566
  592
  619
  647
  677
  709
  742
  777
  814
  853
  894
  937
  983
  1,030
Working capital, $m
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
Total debt, $m
  265
  273
  282
  292
  304
  316
  330
  345
  360
  377
  396
  415
  436
  458
  481
  506
  532
  559
  589
  620
  652
  686
  723
  761
  801
  843
  888
  935
  984
  1,036
Total liabilities, $m
  348
  356
  365
  375
  387
  399
  413
  427
  443
  460
  478
  498
  518
  540
  564
  588
  615
  642
  672
  702
  735
  769
  805
  844
  884
  926
  971
  1,017
  1,067
  1,118
Total equity, $m
  236
  241
  247
  254
  262
  270
  280
  290
  300
  312
  324
  337
  351
  366
  382
  399
  417
  435
  455
  476
  498
  521
  546
  572
  599
  628
  658
  690
  723
  758
Total liabilities and equity, $m
  584
  597
  612
  629
  649
  669
  693
  717
  743
  772
  802
  835
  869
  906
  946
  987
  1,032
  1,077
  1,127
  1,178
  1,233
  1,290
  1,351
  1,416
  1,483
  1,554
  1,629
  1,707
  1,790
  1,876
Debt-to-equity ratio
  1.120
  1.130
  1.140
  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
  1.280
  1.290
  1.300
  1.310
  1.320
  1.320
  1.330
  1.340
  1.340
  1.350
  1.360
  1.360
  1.370
Adjusted equity ratio
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  5
  6
  7
  9
  11
  13
  15
  18
  21
  55
  59
  63
  67
  71
  76
  81
  87
  93
  99
  106
  113
  121
  129
  138
  147
  157
  167
  178
  190
Depreciation, amort., depletion, $m
  53
  53
  53
  54
  54
  54
  55
  55
  56
  56
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
Funds from operations, $m
  57
  58
  59
  61
  63
  65
  68
  71
  74
  77
  70
  74
  79
  83
  89
  94
  100
  107
  114
  121
  129
  137
  146
  155
  165
  176
  187
  199
  211
  224
Change in working capital, $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  56
  57
  59
  60
  62
  65
  67
  70
  73
  77
  69
  73
  78
  83
  88
  93
  99
  106
  112
  120
  127
  136
  144
  154
  164
  174
  185
  197
  209
  222
Maintenance CAPEX, $m
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
New CAPEX, $m
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
Cash from investing activities, $m
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -81
Free cash flow, $m
  40
  39
  39
  40
  40
  41
  42
  44
  45
  47
  38
  41
  43
  46
  50
  53
  57
  61
  66
  71
  76
  81
  87
  94
  101
  108
  116
  124
  132
  142
Issuance/(repayment) of debt, $m
  6
  8
  9
  10
  11
  12
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
  49
  52
Issuance/(repurchase) of shares, $m
  1
  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
Cash from financing (excl. dividends), $m  
  7
  9
  9
  10
  11
  12
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
  49
  52
Total cash flow (excl. dividends), $m
  47
  48
  49
  50
  52
  54
  56
  58
  61
  64
  56
  60
  64
  68
  73
  78
  83
  89
  95
  102
  108
  116
  124
  132
  141
  150
  160
  171
  182
  194
Retained Cash Flow (-), $m
  -4
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
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
  43
  43
  43
  44
  45
  47
  49
  51
  53
  44
  47
  50
  53
  57
  61
  66
  70
  75
  81
  86
  93
  99
  106
  114
  121
  130
  139
  148
  158
Discount rate, %
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.24
  23.35
  24.52
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.50
  36.22
PV of cash for distribution, $m
  39
  36
  32
  29
  26
  24
  21
  19
  17
  15
  10
  9
  7
  6
  5
  4
  3
  3
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.7
  99.2
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0

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 (SALM)

Valuation Ratios
P/E Ratio 8.6
Price to Sales 0.3
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2
Price to Free Cash Flow 2.7
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 $263.736 million for the last fiscal year's total revenue generated by Salem Media Group. The default revenue input number comes from 0001 income statement of Salem Media Group. 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 8.8%, whose default value for SALM is calculated based on our internal credit rating of Salem Media Group, 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.
    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 59.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $86 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 6.4% for Salem Media Group.

Corporate tax rate of 27% is the nominal tax rate for Salem Media Group. 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 119.1%.

Life of production assets of 31.1 years is the average useful life of capital assets used in Salem Media Group 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 5.2%. 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 - $231.281 million for Salem Media Group - 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 20.628 million for Salem Media Group 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 at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Salem Communications: 3Q Earnings Snapshot   [06:31PM  Associated Press]
▶ Salem Media Group Announces Quarterly Cash Distribution   [Sep-05-18 04:55PM  Business Wire]
▶ Should You Buy Salem Media Group Inc (NASDAQ:SALM)?   [Aug-17-18 03:41PM  Simply Wall St.]
▶ Salem Communications: 2Q Earnings Snapshot   [05:57PM  Associated Press]
▶ Singing News Radio Network Gets New Host   [Jul-30-18 08:00AM  Business Wire]
▶ Salem Church Products Acquires ChildrensMinistryDeals.com   [Jul-26-18 01:14PM  Business Wire]
▶ 5 Top Stocks to Pull Through the June Swoon   [Jun-13-18 09:50AM  InvestorPlace]
▶ Jobs Report Paints a Pretty Picture for These Top 5 Stocks   [Jun-04-18 01:47PM  InvestorPlace]
▶ Salem Media Group Announces Quarterly Cash Distribution   [May-31-18 12:00PM  Business Wire]
▶ Salem Media Announces Sale of KGBI-FM in Omaha   [May-22-18 01:00PM  Business Wire]
▶ Salem Communications: 1Q Earnings Snapshot   [May-08-18 06:28PM  Associated Press]
▶ Salem Communications posts 4Q profit   [Mar-15-18 06:59PM  Associated Press]
▶ KPAM Is Alive and Well   [Mar-05-18 11:30AM  Business Wire]
▶ Salem Media Group Announces Quarterly Cash Distribution   [Feb-28-18 09:00AM  Business Wire]
▶ Salem Media Group to Present at NobleCon14   [Jan-23-18 09:00AM  Business Wire]
▶ Salem Media Group Creates Brand for Events Division   [Jan-08-18 06:39PM  Business Wire]
▶ Salem Media Group Announces Quarterly Cash Distribution   [Dec-07-17 07:00PM  Business Wire]
▶ Salem Communications posts 3Q loss   [Nov-07-17 05:13PM  Associated Press]
▶ Hernandes Union The Preachers Kid Joins Praise 95.1   [Oct-30-17 08:00AM  Business Wire]
▶ Salem Media Group Announces Quarterly Cash Distribution   [Sep-12-17 12:30PM  Business Wire]
▶ Salem Communications posts 2Q profit   [Aug-08-17 12:00AM  Associated Press]
▶ REPEAT/Gabelli & Companys Broadcasting Symposium   [Aug-02-17 07:00AM  Business Wire]

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