Intrinsic value of Scholastic - SCHL

Previous Close

$45.76

  Intrinsic Value

$9.01

stock screener

  Rating & Target

str. sell

-80%

Previous close

$45.76

 
Intrinsic value

$9.01

 
Up/down potential

-80%

 
Rating

str. sell

We calculate the intrinsic value of SCHL 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 1.5

 

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
  1,661
  1,699
  1,743
  1,792
  1,846
  1,906
  1,971
  2,041
  2,117
  2,198
  2,285
  2,378
  2,476
  2,581
  2,693
  2,811
  2,935
  3,067
  3,207
  3,354
  3,510
  3,674
  3,847
  4,029
  4,221
  4,423
  4,635
  4,859
  5,094
  5,342
Variable operating expenses, $m
  1,164
  1,191
  1,221
  1,255
  1,293
  1,334
  1,379
  1,428
  1,480
  1,537
  1,585
  1,649
  1,718
  1,791
  1,868
  1,950
  2,036
  2,128
  2,225
  2,327
  2,435
  2,548
  2,668
  2,795
  2,928
  3,068
  3,215
  3,370
  3,534
  3,705
Fixed operating expenses, $m
  452
  462
  472
  482
  493
  504
  515
  526
  538
  549
  562
  574
  587
  599
  613
  626
  640
  654
  668
  683
  698
  713
  729
  745
  762
  778
  795
  813
  831
  849
Total operating expenses, $m
  1,616
  1,653
  1,693
  1,737
  1,786
  1,838
  1,894
  1,954
  2,018
  2,086
  2,147
  2,223
  2,305
  2,390
  2,481
  2,576
  2,676
  2,782
  2,893
  3,010
  3,133
  3,261
  3,397
  3,540
  3,690
  3,846
  4,010
  4,183
  4,365
  4,554
Operating income, $m
  45
  47
  50
  55
  61
  68
  77
  87
  99
  112
  138
  154
  172
  191
  212
  235
  259
  286
  314
  344
  377
  412
  449
  489
  531
  576
  624
  675
  730
  787
EBITDA, $m
  98
  100
  105
  111
  118
  127
  137
  149
  163
  178
  194
  213
  233
  255
  278
  304
  331
  361
  393
  427
  463
  502
  544
  588
  635
  685
  738
  795
  854
  918
Interest expense (income), $m
  1
  2
  5
  8
  12
  16
  21
  26
  32
  38
  45
  52
  60
  68
  77
  86
  96
  106
  117
  128
  141
  154
  167
  182
  197
  213
  230
  248
  266
  286
  307
Earnings before tax, $m
  43
  42
  42
  43
  44
  47
  51
  55
  61
  67
  86
  95
  104
  115
  126
  139
  153
  169
  186
  204
  223
  245
  267
  292
  318
  347
  377
  409
  444
  481
Tax expense, $m
  12
  11
  11
  12
  12
  13
  14
  15
  16
  18
  23
  26
  28
  31
  34
  38
  41
  46
  50
  55
  60
  66
  72
  79
  86
  94
  102
  110
  120
  130
Net income, $m
  31
  31
  31
  31
  32
  34
  37
  40
  44
  49
  63
  69
  76
  84
  92
  102
  112
  123
  135
  149
  163
  179
  195
  213
  232
  253
  275
  299
  324
  351

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
  1,862
  1,905
  1,954
  2,009
  2,070
  2,137
  2,209
  2,288
  2,373
  2,464
  2,561
  2,665
  2,776
  2,894
  3,019
  3,151
  3,291
  3,439
  3,595
  3,761
  3,935
  4,119
  4,312
  4,517
  4,732
  4,958
  5,196
  5,447
  5,711
  5,988
Adjusted assets (=assets-cash), $m
  1,862
  1,905
  1,954
  2,009
  2,070
  2,137
  2,209
  2,288
  2,373
  2,464
  2,561
  2,665
  2,776
  2,894
  3,019
  3,151
  3,291
  3,439
  3,595
  3,761
  3,935
  4,119
  4,312
  4,517
  4,732
  4,958
  5,196
  5,447
  5,711
  5,988
Revenue / Adjusted assets
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
Average production assets, $m
  586
  600
  615
  633
  652
  673
  696
  720
  747
  776
  807
  839
  874
  911
  950
  992
  1,036
  1,083
  1,132
  1,184
  1,239
  1,297
  1,358
  1,422
  1,490
  1,561
  1,636
  1,715
  1,798
  1,886
Working capital, $m
  131
  134
  138
  142
  146
  151
  156
  161
  167
  174
  180
  188
  196
  204
  213
  222
  232
  242
  253
  265
  277
  290
  304
  318
  333
  349
  366
  384
  402
  422
Total debt, $m
  17
  29
  43
  58
  75
  93
  113
  135
  158
  183
  210
  239
  269
  302
  336
  373
  412
  452
  496
  541
  589
  640
  694
  750
  809
  872
  937
  1,007
  1,080
  1,156
Total liabilities, $m
  514
  526
  539
  554
  571
  590
  610
  632
  655
  680
  707
  736
  766
  799
  833
  870
  908
  949
  992
  1,038
  1,086
  1,137
  1,190
  1,247
  1,306
  1,368
  1,434
  1,503
  1,576
  1,653
Total equity, $m
  1,348
  1,379
  1,415
  1,454
  1,498
  1,547
  1,600
  1,657
  1,718
  1,784
  1,854
  1,930
  2,010
  2,095
  2,185
  2,281
  2,383
  2,490
  2,603
  2,723
  2,849
  2,982
  3,122
  3,270
  3,426
  3,590
  3,762
  3,944
  4,135
  4,336
Total liabilities and equity, $m
  1,862
  1,905
  1,954
  2,008
  2,069
  2,137
  2,210
  2,289
  2,373
  2,464
  2,561
  2,666
  2,776
  2,894
  3,018
  3,151
  3,291
  3,439
  3,595
  3,761
  3,935
  4,119
  4,312
  4,517
  4,732
  4,958
  5,196
  5,447
  5,711
  5,989
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.210
  0.220
  0.230
  0.240
  0.240
  0.250
  0.260
  0.260
  0.270
Adjusted equity ratio
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  31
  31
  31
  32
  34
  37
  40
  44
  49
  63
  69
  76
  84
  92
  102
  112
  123
  135
  149
  163
  179
  195
  213
  232
  253
  275
  299
  324
  351
Depreciation, amort., depletion, $m
  53
  54
  55
  56
  57
  59
  60
  62
  64
  66
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  103
  108
  114
  119
  125
  131
Funds from operations, $m
  84
  84
  85
  87
  90
  93
  97
  102
  108
  115
  119
  127
  137
  147
  158
  171
  184
  198
  214
  231
  249
  269
  290
  312
  336
  361
  389
  418
  449
  482
Change in working capital, $m
  3
  3
  3
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
Cash from operations, $m
  81
  81
  82
  83
  85
  88
  92
  97
  102
  108
  112
  120
  129
  139
  149
  161
  174
  188
  203
  219
  237
  256
  276
  298
  321
  345
  372
  400
  430
  462
Maintenance CAPEX, $m
  -40
  -41
  -42
  -43
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -114
  -119
  -125
New CAPEX, $m
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
Cash from investing activities, $m
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -102
  -108
  -113
  -119
  -124
  -131
  -137
  -144
  -151
  -158
  -167
  -174
  -183
  -193
  -202
  -212
Free cash flow, $m
  30
  27
  25
  23
  22
  22
  22
  24
  25
  28
  28
  31
  36
  41
  47
  54
  61
  69
  79
  89
  100
  112
  125
  139
  154
  171
  188
  208
  228
  250
Issuance/(repayment) of debt, $m
  9
  12
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  32
  34
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  66
  69
  73
  77
Issuance/(repurchase) of shares, $m
  0
  0
  5
  9
  12
  14
  16
  17
  17
  17
  8
  6
  4
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  9
  12
  19
  24
  29
  32
  36
  39
  40
  42
  35
  35
  35
  33
  34
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  66
  69
  73
  77
Total cash flow (excl. dividends), $m
  39
  39
  43
  47
  51
  54
  58
  62
  66
  70
  62
  66
  70
  75
  81
  90
  100
  110
  122
  134
  148
  162
  178
  195
  214
  233
  254
  277
  301
  327
Retained Cash Flow (-), $m
  -27
  -31
  -35
  -40
  -44
  -48
  -53
  -57
  -61
  -66
  -71
  -75
  -80
  -85
  -90
  -96
  -101
  -107
  -113
  -120
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -191
  -201
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
  12
  8
  8
  7
  7
  6
  6
  5
  4
  4
  -9
  -9
  -10
  -10
  -9
  -6
  -2
  3
  9
  15
  22
  29
  38
  47
  58
  69
  82
  95
  110
  126
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
  12
  7
  7
  6
  5
  4
  4
  3
  3
  2
  -4
  -4
  -4
  -3
  -3
  -1
  0
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  99.7
  99.1
  98.5
  97.7
  96.8
  95.9
  95.1
  94.3
  93.9
  93.7
  93.5
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4
  93.4

Scholastic Corporation is a publisher and distributor of children's books, a provider of print and digital instructional materials for pre-kindergarten (pre-K) to grade 12, and a producer of educational and entertaining children's media. The Company operates through three segments: Children's Book Publishing and Distribution, Education and International. The Children's Book Publishing and Distribution segment includes the publication and distribution of children's books, e-books, media and interactive products in the United States through its book clubs and book fairs in its school channels and through the trade channel. The Education segment includes publication and distribution to schools and libraries of children's books, classroom magazines, supplemental classroom materials, and print and online reference and non-fiction products for grades pre-K to 12 in the United States. The International segment includes its international operations, and export and foreign rights businesses.

FINANCIAL RATIOS  of  Scholastic (SCHL)

Valuation Ratios
P/E Ratio 30.9
Price to Sales 0.9
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 11.4
Price to Free Cash Flow 33.5
Growth Rates
Sales Growth Rate 4.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 52.5%
Cap. Spend. - 3 Yr. Gr. Rate -21.7%
Financial Strength
Quick Ratio 74
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0.5%
Interest Coverage 89
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 7.7%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 11.1%
Return On Equity 4.1%
Return On Equity - 3 Yr. Avg. 11.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 53.2%
Gross Margin - 3 Yr. Avg. 53.8%
EBITDA Margin 8.7%
EBITDA Margin - 3 Yr. Avg. 7.9%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 5.1%
Pre-Tax Margin - 3 Yr. Avg. 3.7%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 7.8%
Effective Tax Rate 39.8%
Eff/ Tax Rate - 3 Yr. Avg. 40.9%
Payout Ratio 40.4%

SCHL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCHL stock intrinsic value calculation we used $1628.4 million for the last fiscal year's total revenue generated by Scholastic. The default revenue input number comes from 0001 income statement of Scholastic. 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 SCHL 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 4.3%, whose default value for SCHL is calculated based on our internal credit rating of Scholastic, 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 Scholastic.
    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 SCHL stock the variable cost ratio is equal to 70.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $442 million in the base year in the intrinsic value calculation for SCHL 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 28.4% for Scholastic.

Corporate tax rate of 27% is the nominal tax rate for Scholastic. 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 SCHL 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 SCHL are equal to 35.3%.

Life of production assets of 14.4 years is the average useful life of capital assets used in Scholastic 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 SCHL is equal to 7.9%. 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 - $1320.8 million for Scholastic - 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 33.333 million for Scholastic 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 Scholastic at the current share price and the inputted number of shares is $1.5 billion.

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COMPANY NEWS

▶ [$$] Scholastic's Loss, Revenue Beat Estimates   [Sep-27-18 03:01PM  The Wall Street Journal]
▶ Scholastic: Fiscal 1Q Earnings Snapshot   [07:14AM  Associated Press]
▶ Scholastic Corporation Announces Second Quarter Dividend   [Sep-26-18 12:50PM  PR Newswire]
▶ 2018 Scholastic Summer Reading Challenge Update   [Aug-07-18 09:03AM  PR Newswire]
▶ [$$] Land O'Lakes Names Next CEO   [Jul-26-18 09:24AM  The Wall Street Journal]
▶ Scholastic Corporation Announces First Quarter Dividend   [Jul-18-18 01:30PM  PR Newswire]
▶ 10 Small-Caps Leading the Market Rebound   [Jul-10-18 09:19AM  InvestorPlace]
▶ [$$] Summer books of 2018: Childrens and Picture books   [Jun-29-18 07:14AM  Financial Times]
▶ [$$] Short review: Candy by Lavie Tidhar   [Jun-15-18 08:21AM  Financial Times]
▶ Scholastic reports 3Q loss   [Mar-21-18 04:20PM  Associated Press]
▶ Klutz® Launches KLUTZ Maker Lab Line at Toy Fair   [Feb-06-18 10:06AM  PR Newswire]
▶ 5 Stocks That Look Good Short   [Jan-28-18 02:00PM  TheStreet.com]
▶ Scholastic posts 2Q profit   [07:16AM  Associated Press]
▶ ETFs with exposure to Scholastic Corp. : October 17, 2017   [Oct-17-17 09:59AM  Capital Cube]
▶ Some Companies Have Growth Stories -- and Some Don't   [Sep-22-17 10:57PM  Motley Fool]
▶ Company News For Sep 22, 2017   [10:18AM  Zacks]
▶ Scholastic reports 1Q loss   [Sep-21-17 10:03PM  Associated Press]
▶ What Happened in the Stock Market Today   [05:03PM  Motley Fool]

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