Intrinsic value of Scholastic Corporation - SCHL

Previous Close

$32.74

  Intrinsic Value

$8.51

stock screener

  Rating & Target

str. sell

-74%

Previous close

$32.74

 
Intrinsic value

$8.51

 
Up/down potential

-74%

 
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 1.2

 

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
  1,742
  1,791
  1,846
  1,905
  1,970
  2,040
  2,116
  2,197
  2,284
  2,377
  2,476
  2,581
  2,692
  2,810
  2,935
  3,067
  3,206
  3,354
  3,509
  3,673
  3,846
  4,028
  4,220
  4,421
  4,634
  4,858
  5,093
  5,340
Variable operating expenses, $m
  1,164
  1,190
  1,221
  1,255
  1,292
  1,334
  1,379
  1,427
  1,480
  1,536
  1,585
  1,649
  1,717
  1,790
  1,867
  1,949
  2,036
  2,127
  2,224
  2,326
  2,434
  2,548
  2,668
  2,794
  2,927
  3,067
  3,215
  3,370
  3,533
  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
  1,652
  1,693
  1,737
  1,785
  1,838
  1,894
  1,953
  2,018
  2,085
  2,147
  2,223
  2,304
  2,389
  2,480
  2,575
  2,676
  2,781
  2,892
  3,009
  3,132
  3,261
  3,397
  3,539
  3,689
  3,845
  4,010
  4,183
  4,364
  4,554
Operating income, $m
  45
  47
  50
  55
  61
  68
  77
  87
  99
  112
  138
  154
  172
  191
  212
  235
  259
  285
  314
  344
  377
  412
  449
  489
  531
  576
  624
  675
  729
  787
EBITDA, $m
  98
  100
  105
  110
  118
  127
  137
  149
  162
  177
  194
  212
  232
  254
  278
  303
  331
  361
  392
  426
  463
  502
  543
  587
  634
  684
  738
  794
  854
  918
Interest expense (income), $m
  1
  2
  5
  8
  12
  16
  21
  26
  32
  38
  45
  52
  60
  68
  76
  86
  95
  106
  117
  128
  141
  154
  167
  182
  197
  213
  230
  247
  266
  286
  306
Earnings before tax, $m
  43
  42
  42
  43
  44
  47
  51
  55
  60
  67
  86
  95
  104
  115
  126
  139
  153
  169
  185
  204
  223
  244
  267
  292
  318
  346
  377
  409
  443
  480
Tax expense, $m
  12
  11
  11
  11
  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
  178
  195
  213
  232
  253
  275
  298
  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
  1,904
  1,953
  2,008
  2,069
  2,136
  2,209
  2,288
  2,372
  2,463
  2,561
  2,665
  2,775
  2,893
  3,018
  3,150
  3,290
  3,438
  3,594
  3,760
  3,934
  4,118
  4,311
  4,516
  4,730
  4,957
  5,195
  5,446
  5,709
  5,987
Adjusted assets (=assets-cash), $m
  1,862
  1,904
  1,953
  2,008
  2,069
  2,136
  2,209
  2,288
  2,372
  2,463
  2,561
  2,665
  2,775
  2,893
  3,018
  3,150
  3,290
  3,438
  3,594
  3,760
  3,934
  4,118
  4,311
  4,516
  4,730
  4,957
  5,195
  5,446
  5,709
  5,987
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
  632
  652
  673
  695
  720
  747
  776
  806
  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
  1,885
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
  42
  58
  74
  93
  113
  135
  158
  183
  210
  239
  269
  302
  336
  373
  411
  452
  495
  541
  589
  640
  693
  750
  809
  871
  937
  1,006
  1,079
  1,156
Total liabilities, $m
  514
  526
  539
  554
  571
  590
  610
  631
  655
  680
  707
  735
  766
  798
  833
  869
  908
  949
  992
  1,038
  1,086
  1,136
  1,190
  1,246
  1,306
  1,368
  1,434
  1,503
  1,576
  1,652
Total equity, $m
  1,348
  1,379
  1,414
  1,454
  1,498
  1,546
  1,599
  1,656
  1,718
  1,783
  1,854
  1,929
  2,009
  2,095
  2,185
  2,281
  2,382
  2,489
  2,602
  2,722
  2,848
  2,981
  3,121
  3,269
  3,425
  3,589
  3,761
  3,943
  4,134
  4,335
Total liabilities and equity, $m
  1,862
  1,905
  1,953
  2,008
  2,069
  2,136
  2,209
  2,287
  2,373
  2,463
  2,561
  2,664
  2,775
  2,893
  3,018
  3,150
  3,290
  3,438
  3,594
  3,760
  3,934
  4,117
  4,311
  4,515
  4,731
  4,957
  5,195
  5,446
  5,710
  5,987
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
  178
  195
  213
  232
  253
  275
  298
  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
  89
  93
  97
  102
  108
  115
  119
  127
  137
  147
  158
  170
  184
  198
  214
  231
  249
  268
  289
  312
  336
  361
  388
  418
  449
  481
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
  255
  276
  297
  320
  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
  23
  25
  28
  27
  31
  36
  41
  47
  53
  61
  69
  78
  89
  100
  112
  125
  139
  154
  171
  188
  207
  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
  2
  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
  34
  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
  213
  233
  254
  277
  301
  326
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
  -172
  -181
  -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
  8
  15
  21
  29
  38
  47
  58
  69
  82
  95
  110
  125
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
  99.6
  98.9
  98.0
  96.9
  95.8
  94.7
  93.5
  92.5
  92.0
  91.7
  91.5
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4
  91.4

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 Corporation (SCHL)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 0.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow 23.9
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 million for the last fiscal year's total revenue generated by Scholastic Corporation. The default revenue input number comes from 0001 income statement of Scholastic 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 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 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 Scholastic 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 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 Corporation.

Corporate tax rate of 27% is the nominal tax rate for Scholastic 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 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 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 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 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 35.306 million for Scholastic 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 Scholastic Corporation at the current share price and the inputted number of shares is $1.2 billion.

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