Intrinsic value of Shenandoah Telecommunications - SHEN

Previous Close

$45.85

  Intrinsic Value

$8.83

stock screener

  Rating & Target

str. sell

-81%

Previous close

$45.85

 
Intrinsic value

$8.83

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of SHEN 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 2.3

 

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
  624
  639
  655
  673
  694
  716
  741
  767
  795
  826
  859
  894
  931
  970
  1,012
  1,056
  1,103
  1,153
  1,205
  1,261
  1,319
  1,381
  1,446
  1,514
  1,586
  1,662
  1,742
  1,826
  1,914
  2,008
Variable operating expenses, $m
  428
  437
  447
  458
  470
  484
  498
  514
  531
  550
  517
  538
  560
  584
  609
  636
  664
  694
  725
  759
  794
  831
  870
  911
  955
  1,000
  1,048
  1,099
  1,152
  1,208
Fixed operating expenses, $m
  151
  155
  158
  161
  165
  169
  172
  176
  180
  184
  188
  192
  196
  201
  205
  210
  214
  219
  224
  229
  234
  239
  244
  250
  255
  261
  266
  272
  278
  284
Total operating expenses, $m
  579
  592
  605
  619
  635
  653
  670
  690
  711
  734
  705
  730
  756
  785
  814
  846
  878
  913
  949
  988
  1,028
  1,070
  1,114
  1,161
  1,210
  1,261
  1,314
  1,371
  1,430
  1,492
Operating income, $m
  45
  47
  50
  54
  59
  64
  70
  77
  84
  92
  154
  164
  174
  186
  198
  211
  225
  240
  256
  273
  292
  311
  332
  353
  377
  401
  427
  455
  484
  515
EBITDA, $m
  217
  222
  228
  236
  244
  254
  265
  276
  289
  303
  319
  335
  353
  372
  392
  414
  437
  461
  487
  515
  545
  576
  609
  644
  681
  720
  761
  805
  851
  900
Interest expense (income), $m
  21
  44
  46
  47
  48
  50
  52
  54
  56
  59
  62
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  110
  116
  122
  129
  135
  142
  150
  158
  166
Earnings before tax, $m
  0
  1
  3
  6
  8
  12
  16
  20
  25
  31
  90
  96
  104
  111
  120
  129
  139
  150
  161
  174
  187
  201
  215
  231
  248
  266
  285
  305
  327
  349
Tax expense, $m
  0
  0
  1
  1
  2
  3
  4
  5
  7
  8
  24
  26
  28
  30
  32
  35
  38
  40
  44
  47
  50
  54
  58
  62
  67
  72
  77
  82
  88
  94
Net income, $m
  0
  1
  2
  4
  6
  9
  11
  15
  18
  22
  65
  70
  76
  81
  88
  94
  102
  109
  118
  127
  136
  146
  157
  169
  181
  194
  208
  223
  238
  255

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
  1,435
  1,468
  1,506
  1,548
  1,595
  1,647
  1,703
  1,763
  1,829
  1,899
  1,974
  2,054
  2,139
  2,230
  2,326
  2,428
  2,536
  2,650
  2,771
  2,898
  3,032
  3,174
  3,323
  3,481
  3,646
  3,821
  4,005
  4,198
  4,401
  4,615
Adjusted assets (=assets-cash), $m
  1,435
  1,468
  1,506
  1,548
  1,595
  1,647
  1,703
  1,763
  1,829
  1,899
  1,974
  2,054
  2,139
  2,230
  2,326
  2,428
  2,536
  2,650
  2,771
  2,898
  3,032
  3,174
  3,323
  3,481
  3,646
  3,821
  4,005
  4,198
  4,401
  4,615
Revenue / Adjusted assets
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
Average production assets, $m
  994
  1,017
  1,043
  1,072
  1,105
  1,140
  1,179
  1,221
  1,266
  1,315
  1,367
  1,422
  1,482
  1,544
  1,611
  1,682
  1,756
  1,835
  1,919
  2,007
  2,100
  2,198
  2,302
  2,410
  2,525
  2,646
  2,773
  2,907
  3,048
  3,196
Working capital, $m
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
Total debt, $m
  843
  868
  897
  928
  964
  1,002
  1,044
  1,090
  1,139
  1,192
  1,248
  1,308
  1,372
  1,440
  1,513
  1,589
  1,670
  1,756
  1,847
  1,942
  2,043
  2,149
  2,262
  2,380
  2,504
  2,635
  2,773
  2,918
  3,071
  3,232
Total liabilities, $m
  1,078
  1,102
  1,131
  1,163
  1,198
  1,237
  1,279
  1,324
  1,373
  1,426
  1,482
  1,543
  1,607
  1,675
  1,747
  1,824
  1,905
  1,990
  2,081
  2,176
  2,277
  2,384
  2,496
  2,614
  2,738
  2,870
  3,007
  3,153
  3,305
  3,466
Total equity, $m
  357
  366
  375
  385
  397
  410
  424
  439
  455
  473
  492
  511
  533
  555
  579
  605
  631
  660
  690
  722
  755
  790
  828
  867
  908
  951
  997
  1,045
  1,096
  1,149
Total liabilities and equity, $m
  1,435
  1,468
  1,506
  1,548
  1,595
  1,647
  1,703
  1,763
  1,828
  1,899
  1,974
  2,054
  2,140
  2,230
  2,326
  2,429
  2,536
  2,650
  2,771
  2,898
  3,032
  3,174
  3,324
  3,481
  3,646
  3,821
  4,004
  4,198
  4,401
  4,615
Debt-to-equity ratio
  2.360
  2.380
  2.390
  2.410
  2.430
  2.440
  2.460
  2.480
  2.500
  2.520
  2.540
  2.560
  2.580
  2.590
  2.610
  2.630
  2.650
  2.660
  2.680
  2.690
  2.710
  2.720
  2.730
  2.750
  2.760
  2.770
  2.780
  2.790
  2.800
  2.810
Adjusted equity ratio
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  1
  2
  4
  6
  9
  11
  15
  18
  22
  65
  70
  76
  81
  88
  94
  102
  109
  118
  127
  136
  146
  157
  169
  181
  194
  208
  223
  238
  255
Depreciation, amort., depletion, $m
  172
  175
  178
  182
  186
  190
  195
  200
  205
  211
  165
  171
  179
  186
  194
  203
  212
  221
  231
  242
  253
  265
  277
  290
  304
  319
  334
  350
  367
  385
Funds from operations, $m
  173
  176
  181
  186
  192
  199
  206
  215
  224
  234
  230
  242
  254
  267
  282
  297
  313
  331
  349
  369
  389
  411
  435
  459
  485
  513
  542
  573
  606
  640
Change in working capital, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  172
  176
  180
  185
  191
  198
  205
  214
  223
  233
  229
  240
  253
  266
  280
  295
  312
  329
  347
  367
  387
  409
  432
  457
  483
  510
  539
  570
  603
  637
Maintenance CAPEX, $m
  -117
  -120
  -122
  -126
  -129
  -133
  -137
  -142
  -147
  -153
  -158
  -165
  -171
  -179
  -186
  -194
  -203
  -212
  -221
  -231
  -242
  -253
  -265
  -277
  -290
  -304
  -319
  -334
  -350
  -367
New CAPEX, $m
  -20
  -23
  -26
  -29
  -33
  -36
  -39
  -42
  -45
  -49
  -52
  -55
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -109
  -115
  -121
  -127
  -134
  -141
  -148
Cash from investing activities, $m
  -137
  -143
  -148
  -155
  -162
  -169
  -176
  -184
  -192
  -202
  -210
  -220
  -230
  -242
  -253
  -265
  -278
  -291
  -305
  -319
  -335
  -351
  -368
  -386
  -405
  -425
  -446
  -468
  -491
  -515
Free cash flow, $m
  35
  33
  32
  30
  30
  29
  29
  30
  30
  31
  18
  20
  22
  25
  28
  31
  34
  38
  42
  47
  52
  58
  64
  71
  78
  85
  93
  102
  111
  121
Issuance/(repayment) of debt, $m
  21
  25
  28
  32
  35
  39
  42
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
Issuance/(repurchase) of shares, $m
  7
  7
  7
  7
  6
  4
  3
  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  
  28
  32
  35
  39
  41
  43
  45
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
Total cash flow (excl. dividends), $m
  64
  65
  67
  69
  70
  72
  74
  76
  79
  84
  75
  80
  86
  93
  100
  107
  115
  124
  133
  143
  153
  164
  176
  189
  202
  216
  231
  247
  264
  282
Retained Cash Flow (-), $m
  -7
  -8
  -9
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
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
  56
  57
  58
  58
  59
  59
  60
  60
  63
  67
  56
  60
  65
  70
  76
  82
  88
  95
  103
  111
  120
  129
  139
  150
  161
  173
  186
  199
  214
  229
Discount rate, %
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
  52
  48
  45
  41
  37
  33
  29
  26
  23
  21
  15
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.7
  99.4
  99.1
  98.8
  98.6
  98.4
  98.4
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3

Shenandoah Telecommunications Company is a telecommunications holding company. The Company's segments are Wireless, Cable, Wireline and Other. The Company, through its operating subsidiaries, provides both regulated and unregulated telecommunications services to end user customers and other telecommunications providers in Virginia, West Virginia, central Pennsylvania, western Maryland, and portions of Kentucky and Ohio. The business of the Wireless segment is conducted principally by the Company's subsidiary, Shenandoah Personal Communications, LLC (PCS). The business of the Company's Cable segment is conducted through Shenandoah Cable Television, LLC (Shenandoah Cable). The Wireline segment provides regulated and unregulated voice services, digital subscriber line (DSL) Internet access, cable modem and long distance access services throughout Shenandoah County and portions of Rockingham, Frederick, Warren and Augusta counties, Virginia.

FINANCIAL RATIOS  of  Shenandoah Telecommunications (SHEN)

Valuation Ratios
P/E Ratio -2243.9
Price to Sales 4.2
Price to Book 7.6
Price to Tangible Book
Price to Cash Flow 13.9
Price to Free Cash Flow -204
Growth Rates
Sales Growth Rate 56.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 147.1%
Cap. Spend. - 3 Yr. Gr. Rate 8.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 269.3%
Total Debt to Equity 280.1%
Interest Coverage 1
Management Effectiveness
Return On Assets -1.1%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5.2%
Return On Equity -0.3%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 63.9%
Gross Margin - 3 Yr. Avg. 62.9%
EBITDA Margin 33.8%
EBITDA Margin - 3 Yr. Avg. 38.8%
Operating Margin 4.1%
Oper. Margin - 3 Yr. Avg. 14.9%
Pre-Tax Margin 0.4%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin -0.2%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 150%
Eff/ Tax Rate - 3 Yr. Avg. 76.6%
Payout Ratio -1200%

SHEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SHEN stock intrinsic value calculation we used $611.991 million for the last fiscal year's total revenue generated by Shenandoah Telecommunications. The default revenue input number comes from 0001 income statement of Shenandoah Telecommunications. 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 SHEN 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 8%, whose default value for SHEN is calculated based on our internal credit rating of Shenandoah Telecommunications, 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 Shenandoah Telecommunications.
    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 SHEN stock the variable cost ratio is equal to 68.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $148 million in the base year in the intrinsic value calculation for SHEN 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 Shenandoah Telecommunications.

Corporate tax rate of 27% is the nominal tax rate for Shenandoah Telecommunications. 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 SHEN 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 SHEN are equal to 159.2%.

Life of production assets of 8.3 years is the average useful life of capital assets used in Shenandoah Telecommunications 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 SHEN is equal to 3.5%. 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 - $350.222 million for Shenandoah Telecommunications - 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 49.539 million for Shenandoah Telecommunications 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 Shenandoah Telecommunications at the current share price and the inputted number of shares is $2.3 billion.

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COMPANY NEWS

▶ Shenandoah Telecom: 3Q Earnings Snapshot   [Nov-06-18 07:22AM  Associated Press]
▶ Snap Up These 5 Stocks on New Analyst Coverage   [Oct-12-18 09:43AM  Zacks]
▶ Shenandoah Telecom: 2Q Earnings Snapshot   [09:37AM  Associated Press]
▶ Shenandoah Telecom: 1Q Earnings Snapshot   [May-03-18 10:01AM  Associated Press]
▶ Shenandoah Telecom posts 4Q profit   [Mar-15-18 08:09AM  Associated Press]
▶ Shenandoah Telecom posts 3Q profit   [Nov-02-17 09:38AM  Associated Press]
▶ Shenandoah Telecom posts 2Q loss   [12:16AM  Associated Press]

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