Intrinsic value of Tarena International ADR - TEDU

Previous Close

$9.00

  Intrinsic Value

$24.67

stock screener

  Rating & Target

str. buy

+174%

Previous close

$9.00

 
Intrinsic value

$24.67

 
Up/down potential

+174%

 
Rating

str. buy

We calculate the intrinsic value of TEDU 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 0.4

 

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, %
  31.20
  28.58
  26.22
  24.10
  22.19
  20.47
  18.92
  17.53
  16.28
  15.15
  14.14
  13.22
  12.40
  11.66
  10.99
  10.39
  9.85
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
Revenue, $m
  391
  503
  635
  788
  963
  1,160
  1,380
  1,622
  1,886
  2,172
  2,479
  2,807
  3,155
  3,522
  3,910
  4,316
  4,741
  5,186
  5,649
  6,131
  6,633
  7,155
  7,697
  8,261
  8,846
  9,455
  10,088
  10,746
  11,431
  12,143
Variable operating expenses, $m
  335
  431
  544
  675
  824
  993
  1,181
  1,388
  1,614
  1,859
  2,121
  2,402
  2,700
  3,015
  3,346
  3,694
  4,058
  4,438
  4,834
  5,247
  5,677
  6,123
  6,587
  7,070
  7,571
  8,092
  8,634
  9,197
  9,783
  10,393
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
  335
  431
  544
  675
  824
  993
  1,181
  1,388
  1,614
  1,859
  2,121
  2,402
  2,700
  3,015
  3,346
  3,694
  4,058
  4,438
  4,834
  5,247
  5,677
  6,123
  6,587
  7,070
  7,571
  8,092
  8,634
  9,197
  9,783
  10,393
Operating income, $m
  56
  73
  92
  114
  139
  167
  199
  234
  272
  313
  357
  405
  455
  508
  564
  622
  684
  748
  814
  884
  956
  1,032
  1,110
  1,191
  1,275
  1,363
  1,454
  1,549
  1,648
  1,751
EBITDA, $m
  75
  97
  122
  151
  185
  223
  265
  311
  362
  416
  475
  538
  605
  675
  750
  828
  909
  994
  1,083
  1,176
  1,272
  1,372
  1,476
  1,584
  1,696
  1,813
  1,935
  2,061
  2,192
  2,329
Interest expense (income), $m
  0
  0
  2
  4
  6
  8
  11
  15
  19
  23
  27
  32
  38
  43
  49
  56
  62
  69
  77
  84
  92
  101
  109
  118
  128
  137
  147
  158
  169
  180
  192
Earnings before tax, $m
  56
  71
  88
  108
  130
  156
  184
  215
  249
  286
  325
  367
  412
  459
  508
  560
  614
  671
  730
  792
  856
  922
  992
  1,063
  1,138
  1,216
  1,297
  1,381
  1,468
  1,559
Tax expense, $m
  15
  19
  24
  29
  35
  42
  50
  58
  67
  77
  88
  99
  111
  124
  137
  151
  166
  181
  197
  214
  231
  249
  268
  287
  307
  328
  350
  373
  396
  421
Net income, $m
  41
  52
  64
  79
  95
  114
  134
  157
  182
  209
  237
  268
  300
  335
  371
  409
  448
  490
  533
  578
  625
  673
  724
  776
  831
  888
  946
  1,008
  1,072
  1,138

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
  355
  456
  576
  715
  873
  1,052
  1,251
  1,471
  1,710
  1,969
  2,247
  2,544
  2,860
  3,193
  3,545
  3,913
  4,299
  4,701
  5,121
  5,559
  6,014
  6,487
  6,978
  7,489
  8,020
  8,572
  9,146
  9,743
  10,363
  11,009
Adjusted assets (=assets-cash), $m
  355
  456
  576
  715
  873
  1,052
  1,251
  1,471
  1,710
  1,969
  2,247
  2,544
  2,860
  3,193
  3,545
  3,913
  4,299
  4,701
  5,121
  5,559
  6,014
  6,487
  6,978
  7,489
  8,020
  8,572
  9,146
  9,743
  10,363
  11,009
Revenue / Adjusted assets
  1.101
  1.103
  1.102
  1.102
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
  1.103
Average production assets, $m
  93
  120
  151
  188
  229
  276
  328
  386
  449
  517
  590
  668
  751
  838
  930
  1,027
  1,128
  1,234
  1,344
  1,459
  1,579
  1,703
  1,832
  1,966
  2,105
  2,250
  2,401
  2,558
  2,721
  2,890
Working capital, $m
  -50
  -64
  -81
  -100
  -122
  -147
  -175
  -206
  -240
  -276
  -315
  -356
  -401
  -447
  -497
  -548
  -602
  -659
  -717
  -779
  -842
  -909
  -978
  -1,049
  -1,123
  -1,201
  -1,281
  -1,365
  -1,452
  -1,542
Total debt, $m
  30
  66
  108
  157
  212
  275
  345
  423
  507
  598
  696
  801
  912
  1,029
  1,153
  1,282
  1,418
  1,560
  1,708
  1,862
  2,022
  2,188
  2,361
  2,541
  2,728
  2,922
  3,124
  3,334
  3,553
  3,780
Total liabilities, $m
  125
  161
  203
  252
  307
  370
  440
  518
  602
  693
  791
  896
  1,007
  1,124
  1,248
  1,377
  1,513
  1,655
  1,803
  1,957
  2,117
  2,283
  2,456
  2,636
  2,823
  3,017
  3,219
  3,429
  3,648
  3,875
Total equity, $m
  230
  296
  373
  463
  566
  682
  811
  953
  1,108
  1,276
  1,456
  1,649
  1,853
  2,069
  2,297
  2,536
  2,785
  3,046
  3,319
  3,602
  3,897
  4,203
  4,522
  4,853
  5,197
  5,555
  5,927
  6,313
  6,715
  7,134
Total liabilities and equity, $m
  355
  457
  576
  715
  873
  1,052
  1,251
  1,471
  1,710
  1,969
  2,247
  2,545
  2,860
  3,193
  3,545
  3,913
  4,298
  4,701
  5,122
  5,559
  6,014
  6,486
  6,978
  7,489
  8,020
  8,572
  9,146
  9,742
  10,363
  11,009
Debt-to-equity ratio
  0.130
  0.220
  0.290
  0.340
  0.380
  0.400
  0.430
  0.440
  0.460
  0.470
  0.480
  0.490
  0.490
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.530
  0.530
  0.530
  0.530
  0.530
Adjusted equity ratio
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  41
  52
  64
  79
  95
  114
  134
  157
  182
  209
  237
  268
  300
  335
  371
  409
  448
  490
  533
  578
  625
  673
  724
  776
  831
  888
  946
  1,008
  1,072
  1,138
Depreciation, amort., depletion, $m
  19
  24
  30
  38
  46
  55
  66
  77
  90
  103
  118
  134
  150
  168
  186
  205
  226
  247
  269
  292
  316
  341
  366
  393
  421
  450
  480
  512
  544
  578
Funds from operations, $m
  60
  76
  95
  116
  141
  169
  200
  234
  272
  312
  355
  402
  451
  502
  557
  614
  674
  737
  802
  870
  940
  1,014
  1,090
  1,170
  1,252
  1,338
  1,427
  1,519
  1,616
  1,716
Change in working capital, $m
  -12
  -14
  -17
  -19
  -22
  -25
  -28
  -31
  -34
  -36
  -39
  -42
  -44
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -72
  -74
  -77
  -80
  -84
  -87
  -90
Cash from operations, $m
  72
  90
  111
  136
  163
  194
  228
  265
  305
  348
  394
  443
  495
  549
  606
  666
  728
  793
  861
  931
  1,004
  1,080
  1,159
  1,241
  1,326
  1,415
  1,507
  1,603
  1,703
  1,806
Maintenance CAPEX, $m
  -14
  -19
  -24
  -30
  -38
  -46
  -55
  -66
  -77
  -90
  -103
  -118
  -134
  -150
  -168
  -186
  -205
  -226
  -247
  -269
  -292
  -316
  -341
  -366
  -393
  -421
  -450
  -480
  -512
  -544
New CAPEX, $m
  -22
  -27
  -31
  -36
  -42
  -47
  -52
  -58
  -63
  -68
  -73
  -78
  -83
  -88
  -92
  -97
  -101
  -106
  -110
  -115
  -119
  -124
  -129
  -134
  -139
  -145
  -151
  -157
  -163
  -170
Cash from investing activities, $m
  -36
  -46
  -55
  -66
  -80
  -93
  -107
  -124
  -140
  -158
  -176
  -196
  -217
  -238
  -260
  -283
  -306
  -332
  -357
  -384
  -411
  -440
  -470
  -500
  -532
  -566
  -601
  -637
  -675
  -714
Free cash flow, $m
  35
  45
  56
  69
  84
  101
  120
  142
  165
  190
  218
  247
  278
  311
  346
  383
  421
  462
  504
  547
  593
  640
  689
  741
  794
  849
  906
  966
  1,028
  1,093
Issuance/(repayment) of debt, $m
  30
  36
  42
  49
  56
  63
  70
  77
  84
  91
  98
  105
  111
  117
  124
  130
  136
  142
  148
  154
  160
  167
  173
  180
  187
  194
  202
  210
  218
  227
Issuance/(repurchase) of shares, $m
  14
  14
  13
  11
  8
  2
  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  
  44
  50
  55
  60
  64
  65
  70
  77
  84
  91
  98
  105
  111
  117
  124
  130
  136
  142
  148
  154
  160
  167
  173
  180
  187
  194
  202
  210
  218
  227
Total cash flow (excl. dividends), $m
  79
  94
  111
  129
  148
  166
  191
  219
  249
  282
  316
  352
  389
  429
  470
  513
  557
  603
  651
  701
  753
  807
  863
  920
  981
  1,043
  1,108
  1,176
  1,247
  1,320
Retained Cash Flow (-), $m
  -55
  -66
  -78
  -90
  -103
  -116
  -129
  -142
  -155
  -168
  -180
  -193
  -204
  -216
  -228
  -239
  -250
  -261
  -272
  -283
  -295
  -307
  -319
  -331
  -344
  -358
  -372
  -387
  -402
  -419
Prev. year cash balance distribution, $m
  75
  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
  99
  29
  34
  39
  45
  50
  62
  77
  94
  114
  135
  159
  185
  213
  242
  274
  307
  342
  379
  418
  458
  500
  544
  589
  637
  686
  737
  789
  844
  902
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
  95
  26
  29
  32
  35
  37
  42
  48
  54
  60
  64
  68
  70
  71
  71
  70
  67
  63
  58
  53
  47
  42
  36
  30
  25
  20
  16
  12
  9
  7
Current shareholders' claim on cash, %
  95.8
  92.6
  90.3
  88.8
  88.0
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8
  87.8

Tarena International, Inc. (Tarena International) is a holding company. The Company, through its subsidiaries, provides professional education services, including professional information technology (IT) training courses and non-IT training courses across the People's Republic of China (PRC). It operates through training segment. It offers courses in over 10 IT subjects and approximately three non-IT subjects, and over two kid education programs. It offers an education platform that combines live distance instruction, classroom-based tutoring and online learning modules. It complements the live instruction and tutoring with its learning management system, Tarena Teaching System (TTS). TTS has over five core functions, featuring course content, self-assessment exams, student and teaching staff interaction tools, student management tools and an online student community. In addition, the Company offers Tongcheng and Tongmei featuring IT training courses and non-IT training courses.

FINANCIAL RATIOS  of  Tarena International ADR (TEDU)

Valuation Ratios
P/E Ratio 14.4
Price to Sales 2.2
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 6.6
Price to Free Cash Flow 24
Growth Rates
Sales Growth Rate 34.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 292.9%
Cap. Spend. - 3 Yr. Gr. Rate 43.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.9%
Ret/ On Assets - 3 Yr. Avg. 13.4%
Return On Total Capital 16.5%
Ret/ On T. Cap. - 3 Yr. Avg. 16.8%
Return On Equity 16.5%
Return On Equity - 3 Yr. Avg. 16.8%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 71.6%
Gross Margin - 3 Yr. Avg. 71.5%
EBITDA Margin 21.4%
EBITDA Margin - 3 Yr. Avg. 22.1%
Operating Margin 14.8%
Oper. Margin - 3 Yr. Avg. 13.9%
Pre-Tax Margin 16.6%
Pre-Tax Margin - 3 Yr. Avg. 17.2%
Net Profit Margin 15.3%
Net Profit Margin - 3 Yr. Avg. 16.3%
Effective Tax Rate 7.9%
Eff/ Tax Rate - 3 Yr. Avg. 5.4%
Payout Ratio 22.9%

TEDU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TEDU stock intrinsic value calculation we used $298.338270858 million for the last fiscal year's total revenue generated by Tarena International ADR. The default revenue input number comes from 0001 income statement of Tarena International ADR. 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 TEDU stock valuation model: a) initial revenue growth rate of 31.2% 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 TEDU is calculated based on our internal credit rating of Tarena International ADR, 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 Tarena International ADR.
    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 TEDU stock the variable cost ratio is equal to 85.6%.

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 TEDU 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 Tarena International ADR.

Corporate tax rate of 27% is the nominal tax rate for Tarena International ADR. 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 TEDU 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 TEDU are equal to 23.8%.

Life of production assets of 4.7 years is the average useful life of capital assets used in Tarena International ADR 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 TEDU is equal to -12.7%. 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 - $250.027962515 million for Tarena International ADR - 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 49.224 million for Tarena International ADR 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 Tarena International ADR at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

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