Intrinsic value of Saga Communications Cl A - SGA

Previous Close

$36.58

  Intrinsic Value

$56.52

stock screener

  Rating & Target

str. buy

+55%

Previous close

$36.58

 
Intrinsic value

$56.52

 
Up/down potential

+55%

 
Rating

str. 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, %
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  126
  134
  142
  151
  160
  169
  179
  189
  200
  211
  223
  235
  248
  261
  275
  290
  305
  321
  338
  355
  374
  393
  413
  434
  457
  480
  504
  530
  557
  585
Variable operating expenses, $m
  102
  107
  113
  120
  126
  133
  140
  148
  155
  163
  161
  170
  179
  188
  199
  209
  220
  232
  244
  256
  270
  284
  298
  314
  330
  346
  364
  383
  402
  422
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
  102
  107
  113
  120
  126
  133
  140
  148
  155
  163
  161
  170
  179
  188
  199
  209
  220
  232
  244
  256
  270
  284
  298
  314
  330
  346
  364
  383
  402
  422
Operating income, $m
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  62
  65
  69
  73
  76
  81
  85
  89
  94
  99
  104
  109
  115
  121
  127
  133
  140
  147
  155
  163
EBITDA, $m
  39
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  86
  91
  96
  101
  106
  111
  117
  123
  130
  136
  143
  150
  158
  166
  175
  183
Interest expense (income), $m
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
Earnings before tax, $m
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  110
  116
  121
  127
  134
  140
  147
Tax expense, $m
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
Net income, $m
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  103
  108

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
  231
  246
  261
  277
  293
  311
  329
  347
  367
  387
  409
  431
  455
  479
  505
  531
  559
  589
  620
  652
  686
  721
  758
  797
  838
  881
  925
  973
  1,022
  1,074
Adjusted assets (=assets-cash), $m
  231
  246
  261
  277
  293
  311
  329
  347
  367
  387
  409
  431
  455
  479
  505
  531
  559
  589
  620
  652
  686
  721
  758
  797
  838
  881
  925
  973
  1,022
  1,074
Revenue / Adjusted assets
  0.545
  0.545
  0.544
  0.545
  0.546
  0.543
  0.544
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.546
  0.546
  0.545
  0.545
  0.544
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
Average production assets, $m
  112
  119
  126
  134
  142
  150
  159
  168
  178
  188
  198
  209
  220
  232
  244
  257
  271
  285
  300
  316
  332
  349
  367
  386
  406
  427
  448
  471
  495
  520
Working capital, $m
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Total debt, $m
  30
  34
  39
  44
  50
  55
  61
  67
  73
  80
  87
  94
  101
  109
  117
  126
  135
  144
  154
  164
  175
  186
  198
  211
  224
  237
  252
  267
  283
  299
Total liabilities, $m
  74
  79
  83
  89
  94
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  209
  219
  231
  243
  255
  268
  282
  296
  311
  327
  344
Total equity, $m
  157
  167
  177
  188
  199
  211
  223
  236
  249
  263
  278
  293
  309
  326
  343
  361
  380
  400
  421
  443
  466
  490
  515
  542
  570
  599
  629
  661
  695
  730
Total liabilities and equity, $m
  231
  246
  260
  277
  293
  310
  328
  347
  366
  387
  409
  431
  454
  479
  504
  531
  559
  588
  619
  652
  685
  721
  758
  797
  838
  881
  925
  972
  1,022
  1,074
Debt-to-equity ratio
  0.190
  0.210
  0.220
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
  0.390
  0.400
  0.400
  0.400
  0.410
  0.410
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
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  103
  108
Depreciation, amort., depletion, $m
  15
  16
  16
  16
  17
  17
  17
  18
  18
  18
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
Funds from operations, $m
  32
  34
  35
  37
  39
  41
  43
  46
  48
  50
  50
  53
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  91
  96
  101
  106
  111
  116
  122
  128
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
  1
  1
Cash from operations, $m
  32
  34
  35
  37
  39
  41
  43
  45
  48
  50
  50
  52
  55
  58
  61
  64
  67
  71
  75
  78
  82
  86
  91
  95
  100
  105
  110
  116
  122
  128
Maintenance CAPEX, $m
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
New CAPEX, $m
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -19
  -21
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
Free cash flow, $m
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
Issuance/(repayment) of debt, $m
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
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  
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
Total cash flow (excl. dividends), $m
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
Retained Cash Flow (-), $m
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
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
  48
  17
  18
  19
  20
  21
  22
  23
  25
  26
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  58
  61
  64
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
  46
  15
  15
  15
  15
  15
  15
  15
  14
  14
  11
  11
  10
  10
  9
  8
  7
  6
  6
  5
  4
  4
  3
  2
  2
  2
  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 Cl A (SGA)

Valuation Ratios
P/E Ratio 12
Price to Sales 1.5
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 9
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 $118.149 million for the last fiscal year's total revenue generated by Saga Communications Cl A. The default revenue input number comes from 0001 income statement of Saga Communications Cl A. 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 6.5% 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 Cl A, 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 Cl A.
    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 Cl A.

Corporate tax rate of 27% is the nominal tax rate for Saga Communications Cl A. 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 Cl A 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 Cl A - 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 5.028 million for Saga Communications Cl A 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 Cl A at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Saga: 2Q Earnings Snapshot   [Aug-07-18 09:15AM  Associated Press]
▶ Saga: 1Q Earnings Snapshot   [May-08-18 09:44AM  Associated Press]
▶ Saga posts 3Q profit   [Nov-07-17 09:25AM  Associated Press]
▶ Should You Buy Saga Communications Inc (SGA) At This PE Ratio?   [Sep-29-17 09:12PM  Simply Wall St.]
▶ /C O R R E C T I O N -- Saga Communications, Inc./   [Sep-06-17 03:58PM  PR Newswire]
▶ Saga posts 2Q profit   [Aug-03-17 09:48AM  Associated Press]
▶ Saga posts 1Q profit   [May-04-17 09:30AM  Associated Press]
▶ Saga posts 4Q profit   [09:16AM  Associated Press]
▶ Here are 15 ways to invest in Detroit   [Sep-30-16 07:00AM  at CNBC]

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