Intrinsic value of Saga Communications, Inc. - SGA

Previous Close

$32.84

  Intrinsic Value

$48.50

stock screener

  Rating & Target

buy

+48%

Previous close

$32.84

 
Intrinsic value

$48.50

 
Up/down potential

+48%

 
Rating

buy

We calculate the intrinsic value of SGA 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 0.2

 

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, %
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.85
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
Revenue, $m
  123
  129
  135
  142
  148
  155
  163
  171
  179
  187
  197
  206
  216
  227
  238
  250
  262
  275
  289
  303
  318
  334
  350
  367
  386
  405
  425
  446
  468
  492
Variable operating expenses, $m
  100
  104
  108
  113
  118
  123
  128
  134
  140
  146
  142
  149
  156
  164
  172
  180
  189
  198
  208
  218
  229
  241
  253
  265
  278
  292
  307
  322
  338
  355
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
  100
  104
  108
  113
  118
  123
  128
  134
  140
  146
  142
  149
  156
  164
  172
  180
  189
  198
  208
  218
  229
  241
  253
  265
  278
  292
  307
  322
  338
  355
Operating income, $m
  23
  25
  27
  29
  30
  32
  34
  37
  39
  41
  55
  57
  60
  63
  66
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  113
  118
  124
  130
  137
EBITDA, $m
  39
  41
  42
  44
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
  91
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
Interest expense (income), $m
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
Earnings before tax, $m
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  51
  54
  56
  59
  61
  64
  67
  71
  74
  78
  81
  85
  89
  94
  98
  103
  108
  113
  119
  124
Tax expense, $m
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
Net income, $m
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91

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
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
  378
  397
  416
  437
  458
  481
  504
  529
  556
  583
  612
  642
  674
  708
  743
  780
  819
  859
  902
Adjusted assets (=assets-cash), $m
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
  378
  397
  416
  437
  458
  481
  504
  529
  556
  583
  612
  642
  674
  708
  743
  780
  819
  859
  902
Revenue / Adjusted assets
  0.544
  0.544
  0.544
  0.546
  0.544
  0.544
  0.545
  0.546
  0.546
  0.544
  0.546
  0.545
  0.544
  0.546
  0.545
  0.546
  0.545
  0.546
  0.546
  0.545
  0.545
  0.546
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
Average production assets, $m
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
  202
  212
  222
  233
  244
  256
  269
  282
  296
  311
  327
  343
  360
  378
  397
  416
  437
Working capital, $m
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Total debt, $m
  28
  32
  35
  39
  43
  47
  51
  56
  61
  66
  71
  77
  83
  89
  95
  102
  110
  117
  125
  133
  142
  152
  161
  171
  182
  193
  205
  218
  231
  244
Total liabilities, $m
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  161
  169
  178
  187
  196
  206
  216
  226
  238
  250
  262
  275
  289
Total equity, $m
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  270
  283
  297
  312
  327
  343
  360
  378
  396
  416
  437
  458
  481
  505
  530
  557
  584
  613
Total liabilities and equity, $m
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  360
  378
  397
  416
  437
  459
  481
  504
  529
  556
  583
  612
  643
  674
  707
  743
  780
  819
  859
  902
Debt-to-equity ratio
  0.180
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
Adjusted equity ratio
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91
Depreciation, amort., depletion, $m
  15
  15
  16
  16
  16
  16
  17
  17
  17
  18
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
Funds from operations, $m
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  71
  74
  78
  81
  85
  89
  94
  98
  103
  108
Change in working capital, $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 operations, $m
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  103
  108
Maintenance CAPEX, $m
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
New CAPEX, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -9
  -9
  -10
  -11
  -11
  -11
  -13
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -23
  -24
  -25
  -27
  -27
  -29
  -31
  -32
  -34
  -36
  -38
Free cash flow, $m
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
Issuance/(repayment) of debt, $m
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
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  
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Total cash flow (excl. dividends), $m
  26
  26
  27
  29
  30
  31
  32
  33
  35
  36
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  70
  73
  77
  80
  84
Retained Cash Flow (-), $m
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
Prev. year cash balance distribution, $m
  32
  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
  51
  19
  20
  21
  21
  22
  23
  24
  24
  25
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
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
  49
  18
  17
  17
  16
  16
  15
  15
  14
  13
  11
  10
  10
  9
  8
  7
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Saga Communications, Inc. is a broadcast company engaged in acquiring, developing and operating broadcast properties. The Company's segments are Radio, Television, and Corporate and Other. As of February 28, 2017, it owned and/or operated four television stations and five low-power television (LPTV) stations serving two markets, and 68 frequency modulation (FM) and 32 amplitude modulation (AM) radio stations serving 24 markets, including Bellingham, Washington; Columbus, Ohio; Norfolk, Virginia; Milwaukee, Wisconsin; Manchester, New Hampshire; Des Moines, Iowa, and Joplin, Missouri. As of December 31, 2016, the Radio segment included 24 markets, which includes all 99 of its radio stations. The Television segment included two markets and consists of four television stations and five (LPTV) stations, as of December 31, 2016. The radio stations that the Company owns employ a range of programming formats, including Classic Hits, Adult Contemporary, Classic Rock, News/Talk and Country.

FINANCIAL RATIOS  of  Saga Communications, Inc. (SGA)

Valuation Ratios
P/E Ratio 10.7
Price to Sales 1.4
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 8.1
Growth Rates
Sales Growth Rate 7.5%
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 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0.4
LT Debt to Equity 25.9%
Total Debt to Equity 25.9%
Interest Coverage 32
Management Effectiveness
Return On Assets 8.7%
Ret/ On Assets - 3 Yr. Avg. 7.9%
Return On Total Capital 10.9%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 12.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 28.7%
Gross Margin - 3 Yr. Avg. 27.5%
EBITDA Margin 27.3%
EBITDA Margin - 3 Yr. Avg. 25.1%
Operating Margin 22.4%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 21.7%
Pre-Tax Margin - 3 Yr. Avg. 19.2%
Net Profit Margin 12.6%
Net Profit Margin - 3 Yr. Avg. 11.2%
Effective Tax Rate 41.9%
Eff/ Tax Rate - 3 Yr. Avg. 41.8%
Payout Ratio 44.4%

SGA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SGA stock intrinsic value calculation we used $118 million for the last fiscal year's total revenue generated by Saga Communications, Inc.. The default revenue input number comes from 0001 income statement of Saga Communications, 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 SGA stock valuation model: a) initial revenue growth rate of 4.6% 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 SGA is calculated based on our internal credit rating of Saga Communications, 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 Saga Communications, 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 SGA stock the variable cost ratio is equal to 81.4%.

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 SGA 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 5.4% for Saga Communications, Inc..

Corporate tax rate of 27% is the nominal tax rate for Saga Communications, 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 SGA 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 SGA are equal to 88.9%.

Life of production assets of 25.1 years is the average useful life of capital assets used in Saga Communications, 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 SGA is equal to 1.9%. 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 - $179.465 million for Saga Communications, 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 5.910 million for Saga Communications, 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 Saga Communications, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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