Intrinsic value of Steel Connect, Inc. - STCN

Previous Close

$1.72

  Intrinsic Value

$3.61

stock screener

  Rating & Target

str. buy

+110%

Previous close

$1.72

 
Intrinsic value

$3.61

 
Up/down potential

+110%

 
Rating

str. buy

We calculate the intrinsic value of STCN 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 0.1

 

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, %
  34.10
  31.19
  28.57
  26.21
  24.09
  22.18
  20.46
  18.92
  17.53
  16.27
  15.15
  14.13
  13.22
  12.40
  11.66
  10.99
  10.39
  9.85
  9.37
  8.93
  8.54
  8.18
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
Revenue, $m
  865
  1,135
  1,459
  1,841
  2,285
  2,792
  3,363
  4,000
  4,700
  5,465
  6,293
  7,183
  8,132
  9,140
  10,206
  11,327
  12,505
  13,737
  15,024
  16,365
  17,763
  19,216
  20,728
  22,299
  23,931
  25,628
  27,391
  29,224
  31,130
  33,113
Variable operating expenses, $m
  857
  1,110
  1,414
  1,773
  2,190
  2,665
  3,202
  3,799
  4,457
  5,175
  5,907
  6,742
  7,634
  8,580
  9,580
  10,633
  11,738
  12,895
  14,103
  15,362
  16,674
  18,038
  19,457
  20,932
  22,464
  24,057
  25,712
  27,432
  29,222
  31,083
Fixed operating expenses, $m
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
  29
  30
  31
Total operating expenses, $m
  873
  1,127
  1,431
  1,790
  2,208
  2,683
  3,221
  3,818
  4,476
  5,195
  5,927
  6,763
  7,655
  8,602
  9,602
  10,656
  11,761
  12,919
  14,127
  15,387
  16,699
  18,064
  19,483
  20,959
  22,492
  24,085
  25,741
  27,461
  29,252
  31,114
Operating income, $m
  -8
  8
  28
  51
  78
  108
  143
  181
  224
  270
  365
  420
  477
  539
  603
  672
  743
  818
  897
  979
  1,064
  1,152
  1,244
  1,340
  1,439
  1,543
  1,650
  1,762
  1,878
  1,999
EBITDA, $m
  67
  93
  124
  160
  202
  251
  305
  366
  434
  507
  586
  671
  762
  859
  961
  1,069
  1,182
  1,300
  1,424
  1,552
  1,686
  1,826
  1,971
  2,122
  2,279
  2,441
  2,611
  2,787
  2,970
  3,160
Interest expense (income), $m
  0
  53
  81
  116
  158
  207
  265
  330
  404
  487
  577
  676
  783
  898
  1,021
  1,152
  1,290
  1,435
  1,587
  1,746
  1,913
  2,087
  2,267
  2,455
  2,651
  2,854
  3,065
  3,285
  3,513
  3,750
  3,997
Earnings before tax, $m
  -61
  -73
  -88
  -107
  -130
  -157
  -188
  -223
  -263
  -307
  -311
  -364
  -421
  -483
  -548
  -618
  -691
  -769
  -850
  -934
  -1,023
  -1,115
  -1,211
  -1,311
  -1,415
  -1,523
  -1,635
  -1,751
  -1,872
  -1,998
Tax expense, $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
Net income, $m
  -61
  -73
  -88
  -107
  -130
  -157
  -188
  -223
  -263
  -307
  -311
  -364
  -421
  -483
  -548
  -618
  -691
  -769
  -850
  -934
  -1,023
  -1,115
  -1,211
  -1,311
  -1,415
  -1,523
  -1,635
  -1,751
  -1,872
  -1,998

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
  1,109
  1,455
  1,870
  2,361
  2,929
  3,579
  4,312
  5,128
  6,026
  7,007
  8,068
  9,208
  10,426
  11,718
  13,084
  14,522
  16,032
  17,611
  19,261
  20,981
  22,772
  24,636
  26,574
  28,588
  30,681
  32,856
  35,117
  37,467
  39,911
  42,453
Adjusted assets (=assets-cash), $m
  1,109
  1,455
  1,870
  2,361
  2,929
  3,579
  4,312
  5,128
  6,026
  7,007
  8,068
  9,208
  10,426
  11,718
  13,084
  14,522
  16,032
  17,611
  19,261
  20,981
  22,772
  24,636
  26,574
  28,588
  30,681
  32,856
  35,117
  37,467
  39,911
  42,453
Revenue / Adjusted assets
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
Average production assets, $m
  234
  306
  394
  497
  617
  754
  908
  1,080
  1,269
  1,476
  1,699
  1,939
  2,196
  2,468
  2,756
  3,058
  3,376
  3,709
  4,056
  4,419
  4,796
  5,188
  5,596
  6,021
  6,461
  6,919
  7,396
  7,890
  8,405
  8,941
Working capital, $m
  -80
  -106
  -136
  -171
  -213
  -260
  -313
  -372
  -437
  -508
  -585
  -668
  -756
  -850
  -949
  -1,053
  -1,163
  -1,278
  -1,397
  -1,522
  -1,652
  -1,787
  -1,928
  -2,074
  -2,226
  -2,383
  -2,547
  -2,718
  -2,895
  -3,080
Total debt, $m
  699
  1,000
  1,361
  1,788
  2,283
  2,848
  3,485
  4,195
  4,977
  5,830
  6,753
  7,745
  8,804
  9,929
  11,117
  12,368
  13,681
  15,056
  16,491
  17,988
  19,546
  21,167
  22,853
  24,606
  26,426
  28,319
  30,285
  32,330
  34,456
  36,668
Total liabilities, $m
  965
  1,266
  1,627
  2,054
  2,549
  3,114
  3,751
  4,461
  5,243
  6,096
  7,019
  8,011
  9,070
  10,195
  11,383
  12,634
  13,947
  15,322
  16,757
  18,254
  19,812
  21,433
  23,119
  24,872
  26,692
  28,585
  30,551
  32,596
  34,722
  36,934
Total equity, $m
  144
  189
  243
  307
  381
  465
  561
  667
  783
  911
  1,049
  1,197
  1,355
  1,523
  1,701
  1,888
  2,084
  2,289
  2,504
  2,728
  2,960
  3,203
  3,455
  3,716
  3,989
  4,271
  4,565
  4,871
  5,188
  5,519
Total liabilities and equity, $m
  1,109
  1,455
  1,870
  2,361
  2,930
  3,579
  4,312
  5,128
  6,026
  7,007
  8,068
  9,208
  10,425
  11,718
  13,084
  14,522
  16,031
  17,611
  19,261
  20,982
  22,772
  24,636
  26,574
  28,588
  30,681
  32,856
  35,116
  37,467
  39,910
  42,453
Debt-to-equity ratio
  4.850
  5.290
  5.600
  5.830
  5.990
  6.120
  6.220
  6.290
  6.350
  6.400
  6.440
  6.470
  6.500
  6.520
  6.540
  6.550
  6.560
  6.580
  6.590
  6.590
  6.600
  6.610
  6.620
  6.620
  6.630
  6.630
  6.630
  6.640
  6.640
  6.640
Adjusted equity ratio
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -61
  -73
  -88
  -107
  -130
  -157
  -188
  -223
  -263
  -307
  -311
  -364
  -421
  -483
  -548
  -618
  -691
  -769
  -850
  -934
  -1,023
  -1,115
  -1,211
  -1,311
  -1,415
  -1,523
  -1,635
  -1,751
  -1,872
  -1,998
Depreciation, amort., depletion, $m
  75
  84
  96
  109
  125
  143
  163
  185
  210
  236
  221
  252
  285
  321
  358
  397
  438
  482
  527
  574
  623
  674
  727
  782
  839
  899
  960
  1,025
  1,092
  1,161
Funds from operations, $m
  14
  12
  8
  2
  -5
  -14
  -25
  -38
  -53
  -71
  -90
  -112
  -136
  -162
  -190
  -221
  -253
  -287
  -323
  -361
  -400
  -441
  -484
  -529
  -576
  -624
  -674
  -726
  -780
  -837
Change in working capital, $m
  -20
  -25
  -30
  -36
  -41
  -47
  -53
  -59
  -65
  -71
  -77
  -83
  -88
  -94
  -99
  -104
  -109
  -115
  -120
  -125
  -130
  -135
  -141
  -146
  -152
  -158
  -164
  -170
  -177
  -184
Cash from operations, $m
  35
  37
  38
  38
  36
  33
  28
  21
  12
  1
  -13
  -29
  -48
  -68
  -91
  -116
  -143
  -172
  -203
  -236
  -270
  -306
  -344
  -383
  -424
  -466
  -510
  -556
  -603
  -652
Maintenance CAPEX, $m
  -23
  -30
  -40
  -51
  -65
  -80
  -98
  -118
  -140
  -165
  -192
  -221
  -252
  -285
  -321
  -358
  -397
  -438
  -482
  -527
  -574
  -623
  -674
  -727
  -782
  -839
  -899
  -960
  -1,025
  -1,092
New CAPEX, $m
  -59
  -73
  -88
  -103
  -120
  -137
  -154
  -172
  -189
  -207
  -224
  -240
  -256
  -272
  -288
  -303
  -318
  -333
  -347
  -362
  -377
  -392
  -408
  -424
  -441
  -458
  -476
  -495
  -515
  -535
Cash from investing activities, $m
  -82
  -103
  -128
  -154
  -185
  -217
  -252
  -290
  -329
  -372
  -416
  -461
  -508
  -557
  -609
  -661
  -715
  -771
  -829
  -889
  -951
  -1,015
  -1,082
  -1,151
  -1,223
  -1,297
  -1,375
  -1,455
  -1,540
  -1,627
Free cash flow, $m
  -47
  -66
  -90
  -117
  -148
  -184
  -224
  -268
  -317
  -371
  -428
  -490
  -556
  -626
  -700
  -777
  -858
  -943
  -1,032
  -1,125
  -1,221
  -1,321
  -1,426
  -1,534
  -1,646
  -1,763
  -1,885
  -2,011
  -2,143
  -2,279
Issuance/(repayment) of debt, $m
  245
  301
  362
  427
  495
  565
  637
  710
  782
  853
  923
  992
  1,059
  1,124
  1,188
  1,251
  1,313
  1,374
  1,435
  1,497
  1,558
  1,621
  1,686
  1,752
  1,821
  1,892
  1,967
  2,045
  2,126
  2,212
Issuance/(repurchase) of shares, $m
  97
  118
  142
  171
  204
  241
  283
  329
  379
  434
  449
  512
  579
  651
  726
  805
  888
  974
  1,064
  1,158
  1,256
  1,357
  1,463
  1,573
  1,687
  1,805
  1,929
  2,057
  2,190
  2,328
Cash from financing (excl. dividends), $m  
  342
  419
  504
  598
  699
  806
  920
  1,039
  1,161
  1,287
  1,372
  1,504
  1,638
  1,775
  1,914
  2,056
  2,201
  2,348
  2,499
  2,655
  2,814
  2,978
  3,149
  3,325
  3,508
  3,697
  3,896
  4,102
  4,316
  4,540
Total cash flow (excl. dividends), $m
  296
  352
  414
  481
  550
  623
  696
  770
  844
  917
  944
  1,014
  1,082
  1,149
  1,215
  1,279
  1,342
  1,405
  1,467
  1,530
  1,593
  1,657
  1,723
  1,791
  1,861
  1,934
  2,010
  2,090
  2,173
  2,261
Retained Cash Flow (-), $m
  -97
  -118
  -142
  -171
  -204
  -241
  -283
  -329
  -379
  -434
  -449
  -512
  -579
  -651
  -726
  -805
  -888
  -974
  -1,064
  -1,158
  -1,256
  -1,357
  -1,463
  -1,573
  -1,687
  -1,805
  -1,929
  -2,057
  -2,190
  -2,328
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
  198
  234
  272
  310
  347
  382
  413
  441
  464
  482
  495
  502
  503
  499
  489
  474
  455
  431
  403
  372
  337
  300
  260
  218
  174
  129
  82
  33
  -16
  -67
Discount rate, %
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
  43.22
PV of cash for distribution, $m
  180
  190
  196
  196
  190
  179
  164
  147
  127
  107
  87
  69
  53
  40
  29
  20
  14
  9
  6
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  52.2
  28.6
  16.2
  9.5
  5.7
  3.5
  2.1
  1.3
  0.9
  0.5
  0.4
  0.2
  0.2
  0.1
  0.1
  0.1
  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

FINANCIAL RATIOS  of  Steel Connect, Inc. (STCN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

STCN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STCN stock intrinsic value calculation we used $645 million for the last fiscal year's total revenue generated by Steel Connect, Inc.. The default revenue input number comes from 0001 income statement of Steel Connect, 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 STCN stock valuation model: a) initial revenue growth rate of 34.1% 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 10.5%, whose default value for STCN is calculated based on our internal credit rating of Steel Connect, 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 Steel Connect, 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 STCN stock the variable cost ratio is equal to 100.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $16 million in the base year in the intrinsic value calculation for STCN 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 11.6% for Steel Connect, Inc..

Corporate tax rate of 27% is the nominal tax rate for Steel Connect, 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 STCN 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 STCN are equal to 27%.

Life of production assets of 7.7 years is the average useful life of capital assets used in Steel Connect, 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 STCN is equal to -9.3%. 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 - $107.628 million for Steel Connect, 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 61.800 million for Steel Connect, 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 Steel Connect, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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