Intrinsic value of EchoStar Corporation - SATS

Previous Close

$39.58

  Intrinsic Value

$47.86

stock screener

  Rating & Target

buy

+21%

Previous close

$39.58

 
Intrinsic value

$47.86

 
Up/down potential

+21%

 
Rating

buy

We calculate the intrinsic value of SATS 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 3.8

 

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, %
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  5.00
Revenue, $m
  2,193
  2,301
  2,414
  2,533
  2,658
  2,790
  2,928
  3,073
  3,225
  3,385
  3,553
  3,730
  3,915
  4,110
  4,314
  4,529
  4,755
  4,992
  5,240
  5,502
  5,776
  6,064
  6,367
  6,685
  7,019
  7,369
  7,737
  8,123
  8,529
  8,955
Variable operating expenses, $m
  1,949
  2,028
  2,110
  2,198
  2,289
  2,385
  2,487
  2,593
  2,704
  2,822
  2,603
  2,733
  2,868
  3,011
  3,161
  3,318
  3,484
  3,657
  3,840
  4,031
  4,232
  4,443
  4,665
  4,898
  5,142
  5,399
  5,669
  5,952
  6,249
  6,561
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
  1,949
  2,028
  2,110
  2,198
  2,289
  2,385
  2,487
  2,593
  2,704
  2,822
  2,603
  2,733
  2,868
  3,011
  3,161
  3,318
  3,484
  3,657
  3,840
  4,031
  4,232
  4,443
  4,665
  4,898
  5,142
  5,399
  5,669
  5,952
  6,249
  6,561
Operating income, $m
  245
  274
  304
  336
  369
  404
  441
  480
  521
  563
  950
  997
  1,047
  1,099
  1,153
  1,211
  1,271
  1,334
  1,401
  1,471
  1,544
  1,621
  1,702
  1,787
  1,876
  1,970
  2,068
  2,172
  2,280
  2,394
EBITDA, $m
  1,143
  1,199
  1,258
  1,320
  1,385
  1,453
  1,525
  1,601
  1,680
  1,763
  1,851
  1,943
  2,039
  2,141
  2,247
  2,359
  2,477
  2,600
  2,730
  2,866
  3,009
  3,159
  3,317
  3,482
  3,656
  3,839
  4,030
  4,232
  4,443
  4,665
Interest expense (income), $m
  173
  244
  256
  269
  282
  296
  311
  326
  342
  359
  377
  396
  416
  436
  458
  481
  505
  531
  557
  585
  614
  645
  677
  711
  747
  784
  823
  864
  908
  953
  1,001
Earnings before tax, $m
  1
  18
  35
  54
  73
  94
  115
  138
  161
  186
  554
  581
  610
  640
  672
  705
  741
  777
  816
  857
  899
  944
  991
  1,040
  1,092
  1,147
  1,204
  1,264
  1,327
  1,393
Tax expense, $m
  0
  5
  10
  15
  20
  25
  31
  37
  44
  50
  150
  157
  165
  173
  181
  190
  200
  210
  220
  231
  243
  255
  268
  281
  295
  310
  325
  341
  358
  376
Net income, $m
  1
  13
  26
  39
  53
  68
  84
  100
  118
  136
  404
  424
  445
  467
  491
  515
  541
  567
  596
  625
  656
  689
  723
  759
  797
  837
  879
  923
  969
  1,017

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
  6,127
  6,428
  6,744
  7,076
  7,425
  7,792
  8,178
  8,583
  9,008
  9,455
  9,925
  10,418
  10,936
  11,480
  12,051
  12,651
  13,281
  13,943
  14,638
  15,368
  16,135
  16,940
  17,785
  18,673
  19,605
  20,584
  21,612
  22,691
  23,824
  25,014
Adjusted assets (=assets-cash), $m
  6,127
  6,428
  6,744
  7,076
  7,425
  7,792
  8,178
  8,583
  9,008
  9,455
  9,925
  10,418
  10,936
  11,480
  12,051
  12,651
  13,281
  13,943
  14,638
  15,368
  16,135
  16,940
  17,785
  18,673
  19,605
  20,584
  21,612
  22,691
  23,824
  25,014
Revenue / Adjusted assets
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
Average production assets, $m
  4,172
  4,377
  4,592
  4,818
  5,056
  5,306
  5,568
  5,844
  6,134
  6,438
  6,758
  7,094
  7,446
  7,817
  8,206
  8,614
  9,043
  9,494
  9,967
  10,464
  10,986
  11,535
  12,110
  12,715
  13,349
  14,016
  14,716
  15,451
  16,222
  17,033
Working capital, $m
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
Total debt, $m
  3,709
  3,892
  4,085
  4,288
  4,501
  4,725
  4,960
  5,207
  5,466
  5,739
  6,025
  6,326
  6,642
  6,974
  7,322
  7,688
  8,073
  8,477
  8,901
  9,346
  9,813
  10,304
  10,820
  11,362
  11,930
  12,527
  13,154
  13,813
  14,504
  15,230
Total liabilities, $m
  3,737
  3,921
  4,114
  4,317
  4,530
  4,753
  4,988
  5,236
  5,495
  5,768
  6,054
  6,355
  6,671
  7,003
  7,351
  7,717
  8,102
  8,505
  8,929
  9,375
  9,842
  10,333
  10,849
  11,390
  11,959
  12,556
  13,183
  13,841
  14,533
  15,259
Total equity, $m
  2,390
  2,507
  2,630
  2,760
  2,896
  3,039
  3,189
  3,347
  3,513
  3,688
  3,871
  4,063
  4,265
  4,477
  4,700
  4,934
  5,180
  5,438
  5,709
  5,994
  6,293
  6,606
  6,936
  7,282
  7,646
  8,028
  8,428
  8,849
  9,291
  9,756
Total liabilities and equity, $m
  6,127
  6,428
  6,744
  7,077
  7,426
  7,792
  8,177
  8,583
  9,008
  9,456
  9,925
  10,418
  10,936
  11,480
  12,051
  12,651
  13,282
  13,943
  14,638
  15,369
  16,135
  16,939
  17,785
  18,672
  19,605
  20,584
  21,611
  22,690
  23,824
  25,015
Debt-to-equity ratio
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
Adjusted equity ratio
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  13
  26
  39
  53
  68
  84
  100
  118
  136
  404
  424
  445
  467
  491
  515
  541
  567
  596
  625
  656
  689
  723
  759
  797
  837
  879
  923
  969
  1,017
Depreciation, amort., depletion, $m
  898
  925
  954
  984
  1,016
  1,049
  1,084
  1,121
  1,159
  1,200
  901
  946
  993
  1,042
  1,094
  1,149
  1,206
  1,266
  1,329
  1,395
  1,465
  1,538
  1,615
  1,695
  1,780
  1,869
  1,962
  2,060
  2,163
  2,271
Funds from operations, $m
  899
  938
  980
  1,023
  1,069
  1,117
  1,168
  1,221
  1,277
  1,336
  1,305
  1,370
  1,438
  1,510
  1,585
  1,664
  1,746
  1,833
  1,925
  2,021
  2,121
  2,227
  2,338
  2,455
  2,577
  2,706
  2,841
  2,983
  3,132
  3,288
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
Cash from operations, $m
  899
  939
  980
  1,024
  1,070
  1,118
  1,169
  1,222
  1,278
  1,337
  1,306
  1,371
  1,439
  1,511
  1,586
  1,665
  1,748
  1,835
  1,926
  2,022
  2,123
  2,229
  2,340
  2,457
  2,580
  2,708
  2,843
  2,985
  3,134
  3,291
Maintenance CAPEX, $m
  -530
  -556
  -584
  -612
  -642
  -674
  -707
  -742
  -779
  -818
  -858
  -901
  -946
  -993
  -1,042
  -1,094
  -1,149
  -1,206
  -1,266
  -1,329
  -1,395
  -1,465
  -1,538
  -1,615
  -1,695
  -1,780
  -1,869
  -1,962
  -2,060
  -2,163
New CAPEX, $m
  -196
  -205
  -215
  -226
  -238
  -250
  -262
  -276
  -290
  -304
  -320
  -336
  -353
  -370
  -389
  -409
  -429
  -451
  -473
  -497
  -522
  -548
  -576
  -604
  -635
  -667
  -700
  -735
  -772
  -810
Cash from investing activities, $m
  -726
  -761
  -799
  -838
  -880
  -924
  -969
  -1,018
  -1,069
  -1,122
  -1,178
  -1,237
  -1,299
  -1,363
  -1,431
  -1,503
  -1,578
  -1,657
  -1,739
  -1,826
  -1,917
  -2,013
  -2,114
  -2,219
  -2,330
  -2,447
  -2,569
  -2,697
  -2,832
  -2,973
Free cash flow, $m
  173
  178
  182
  186
  190
  194
  199
  204
  209
  215
  128
  135
  141
  148
  155
  162
  170
  179
  187
  196
  206
  216
  227
  238
  250
  262
  275
  288
  303
  318
Issuance/(repayment) of debt, $m
  176
  184
  193
  203
  213
  224
  235
  247
  260
  273
  286
  301
  316
  332
  349
  366
  384
  404
  424
  445
  468
  491
  516
  541
  569
  597
  627
  658
  691
  726
Issuance/(repurchase) of shares, $m
  114
  104
  98
  90
  83
  75
  66
  57
  48
  38
  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  
  290
  288
  291
  293
  296
  299
  301
  304
  308
  311
  286
  301
  316
  332
  349
  366
  384
  404
  424
  445
  468
  491
  516
  541
  569
  597
  627
  658
  691
  726
Total cash flow (excl. dividends), $m
  463
  466
  472
  479
  485
  493
  500
  509
  517
  526
  415
  435
  457
  480
  503
  528
  555
  582
  611
  642
  674
  707
  742
  779
  818
  859
  902
  947
  994
  1,044
Retained Cash Flow (-), $m
  -115
  -117
  -123
  -130
  -136
  -143
  -150
  -158
  -166
  -174
  -183
  -192
  -202
  -212
  -223
  -234
  -246
  -258
  -271
  -285
  -299
  -314
  -330
  -346
  -364
  -382
  -401
  -421
  -442
  -464
Prev. year cash balance distribution, $m
  1,865
  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
  2,214
  348
  349
  349
  349
  350
  350
  351
  351
  352
  232
  243
  255
  267
  281
  294
  309
  324
  340
  357
  375
  393
  413
  433
  455
  477
  501
  526
  552
  579
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
  2,123
  319
  303
  287
  271
  254
  237
  219
  202
  184
  110
  104
  97
  90
  82
  75
  67
  60
  52
  45
  39
  33
  27
  22
  18
  14
  11
  8
  6
  4
Current shareholders' claim on cash, %
  94.8
  90.5
  86.8
  83.6
  81.0
  78.7
  76.9
  75.4
  74.2
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4

EchoStar Corporation is a holding company. The Company is a provider of satellite operations, video delivery solutions, digital set-top boxes, and broadband satellite technologies and services for home and office, delivering network technologies, managed services, and solutions for enterprises and governments. The Company operates through three segments: Hughes, EchoStar Technologies (ETC) and EchoStar Satellite Services (ESS). The Company's Hughes segment provides broadband satellite technologies and broadband services for the home and office, delivering network technologies, managed services and communication solutions to domestic and international consumers and enterprise and government customers. The ETC segment provides end-to-end video and broadcast technology products and services to businesses and directly to consumers. The ESS segment operates its business using its owned and leased in-orbit satellites. Its operations also include real estate and other activities.

FINANCIAL RATIOS  of  EchoStar Corporation (SATS)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 1.2
Price to Book 1
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow 65.6
Growth Rates
Sales Growth Rate -2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.3%
Cap. Spend. - 3 Yr. Gr. Rate 13.7%
Financial Strength
Quick Ratio 94
Current Ratio 0.6
LT Debt to Equity 92.4%
Total Debt to Equity 93.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 3.9%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. 4.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 43.2%
Gross Margin - 3 Yr. Avg. 41.3%
EBITDA Margin 31.2%
EBITDA Margin - 3 Yr. Avg. 29.2%
Operating Margin 11.9%
Oper. Margin - 3 Yr. Avg. 10.8%
Pre-Tax Margin 9.4%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 5.1%
Effective Tax Rate 36.9%
Eff/ Tax Rate - 3 Yr. Avg. 28.9%
Payout Ratio 0%

SATS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SATS stock intrinsic value calculation we used $2091 million for the last fiscal year's total revenue generated by EchoStar Corporation. The default revenue input number comes from 0001 income statement of EchoStar Corporation. 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 SATS stock valuation model: a) initial revenue growth rate of 4.9% 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 SATS is calculated based on our internal credit rating of EchoStar Corporation, 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 EchoStar Corporation.
    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 SATS stock the variable cost ratio is equal to 89.6%.

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 SATS 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 6.9% for EchoStar Corporation.

Corporate tax rate of 27% is the nominal tax rate for EchoStar Corporation. 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 SATS 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 SATS are equal to 190.2%.

Life of production assets of 7.5 years is the average useful life of capital assets used in EchoStar Corporation 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 SATS is equal to -0.7%. 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 - $4140.199 million for EchoStar Corporation - 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 95.456 million for EchoStar Corporation 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 EchoStar Corporation at the current share price and the inputted number of shares is $3.8 billion.

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