Intrinsic value of tronc - TRNC

Previous Close

$16.12

  Intrinsic Value

$20.54

stock screener

  Rating & Target

buy

+27%

Previous close

$16.12

 
Intrinsic value

$20.54

 
Up/down potential

+27%

 
Rating

buy

We calculate the intrinsic value of TRNC 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 0.6

 

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
  1,554
  1,590
  1,631
  1,677
  1,728
  1,784
  1,844
  1,910
  1,981
  2,057
  2,138
  2,225
  2,318
  2,416
  2,520
  2,630
  2,747
  2,871
  3,001
  3,139
  3,285
  3,438
  3,600
  3,771
  3,950
  4,139
  4,338
  4,547
  4,768
  4,999
Variable operating expenses, $m
  1,503
  1,537
  1,575
  1,619
  1,667
  1,720
  1,777
  1,840
  1,907
  1,979
  2,027
  2,109
  2,197
  2,290
  2,389
  2,494
  2,604
  2,722
  2,845
  2,976
  3,114
  3,260
  3,413
  3,574
  3,745
  3,924
  4,112
  4,311
  4,520
  4,739
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
  1,503
  1,537
  1,575
  1,619
  1,667
  1,720
  1,777
  1,840
  1,907
  1,979
  2,027
  2,109
  2,197
  2,290
  2,389
  2,494
  2,604
  2,722
  2,845
  2,976
  3,114
  3,260
  3,413
  3,574
  3,745
  3,924
  4,112
  4,311
  4,520
  4,739
Operating income, $m
  52
  54
  56
  58
  61
  64
  67
  70
  74
  78
  111
  116
  121
  126
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  205
  215
  226
  237
  248
  260
EBITDA, $m
  117
  119
  122
  126
  130
  134
  138
  143
  148
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  310
  325
  341
  357
  375
Interest expense (income), $m
  24
  26
  26
  27
  29
  30
  32
  34
  36
  39
  42
  44
  47
  51
  54
  58
  62
  66
  70
  75
  80
  85
  90
  96
  102
  108
  115
  122
  129
  137
  145
Earnings before tax, $m
  26
  28
  29
  30
  31
  32
  33
  34
  35
  36
  67
  68
  70
  72
  73
  75
  77
  79
  81
  84
  86
  89
  91
  94
  97
  100
  104
  107
  111
  115
Tax expense, $m
  7
  8
  8
  8
  8
  9
  9
  9
  9
  10
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
Net income, $m
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  63
  65
  67
  69
  71
  73
  76
  78
  81
  84

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
  882
  903
  926
  952
  981
  1,012
  1,047
  1,084
  1,124
  1,167
  1,214
  1,263
  1,315
  1,371
  1,430
  1,493
  1,559
  1,629
  1,703
  1,782
  1,864
  1,951
  2,043
  2,140
  2,242
  2,349
  2,462
  2,581
  2,706
  2,837
Adjusted assets (=assets-cash), $m
  882
  903
  926
  952
  981
  1,012
  1,047
  1,084
  1,124
  1,167
  1,214
  1,263
  1,315
  1,371
  1,430
  1,493
  1,559
  1,629
  1,703
  1,782
  1,864
  1,951
  2,043
  2,140
  2,242
  2,349
  2,462
  2,581
  2,706
  2,837
Revenue / Adjusted assets
  1.762
  1.761
  1.761
  1.762
  1.761
  1.763
  1.761
  1.762
  1.762
  1.763
  1.761
  1.762
  1.763
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
  1.762
Average production assets, $m
  243
  248
  254
  262
  270
  278
  288
  298
  309
  321
  334
  347
  362
  377
  393
  410
  429
  448
  468
  490
  512
  536
  562
  588
  616
  646
  677
  709
  744
  780
Working capital, $m
  -22
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
Total debt, $m
  352
  370
  391
  414
  440
  469
  500
  533
  570
  608
  650
  694
  742
  792
  845
  901
  961
  1,024
  1,091
  1,161
  1,236
  1,314
  1,397
  1,484
  1,575
  1,672
  1,774
  1,880
  1,993
  2,111
Total liabilities, $m
  794
  812
  833
  857
  883
  911
  942
  976
  1,012
  1,051
  1,092
  1,137
  1,184
  1,234
  1,287
  1,344
  1,403
  1,466
  1,533
  1,604
  1,678
  1,756
  1,839
  1,926
  2,018
  2,114
  2,216
  2,323
  2,435
  2,554
Total equity, $m
  88
  90
  93
  95
  98
  101
  105
  108
  112
  117
  121
  126
  132
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  271
  284
Total liabilities and equity, $m
  882
  902
  926
  952
  981
  1,012
  1,047
  1,084
  1,124
  1,168
  1,213
  1,263
  1,316
  1,371
  1,430
  1,493
  1,559
  1,629
  1,703
  1,782
  1,864
  1,951
  2,043
  2,140
  2,242
  2,349
  2,462
  2,581
  2,706
  2,838
Debt-to-equity ratio
  3.990
  4.100
  4.220
  4.350
  4.490
  4.630
  4.780
  4.920
  5.070
  5.210
  5.360
  5.500
  5.640
  5.770
  5.910
  6.040
  6.160
  6.290
  6.400
  6.520
  6.630
  6.730
  6.840
  6.930
  7.030
  7.120
  7.200
  7.290
  7.370
  7.440
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  63
  65
  67
  69
  71
  73
  76
  78
  81
  84
Depreciation, amort., depletion, $m
  65
  65
  66
  67
  69
  70
  71
  73
  74
  76
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  104
  109
  115
Funds from operations, $m
  84
  86
  87
  89
  91
  93
  95
  98
  100
  103
  98
  101
  104
  108
  111
  115
  119
  124
  128
  133
  138
  144
  149
  155
  162
  168
  175
  182
  190
  198
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
  84
  86
  88
  90
  92
  94
  96
  98
  101
  104
  99
  102
  105
  109
  113
  117
  121
  125
  130
  135
  140
  146
  152
  158
  164
  171
  178
  185
  193
  202
Maintenance CAPEX, $m
  -35
  -36
  -36
  -37
  -38
  -40
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -109
New CAPEX, $m
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
Cash from investing activities, $m
  -40
  -42
  -42
  -44
  -46
  -49
  -50
  -52
  -55
  -57
  -60
  -63
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -91
  -95
  -99
  -104
  -110
  -115
  -120
  -126
  -133
  -138
  -145
Free cash flow, $m
  44
  45
  45
  45
  45
  45
  46
  46
  46
  47
  39
  40
  40
  41
  41
  42
  42
  43
  44
  45
  46
  46
  47
  48
  50
  51
  52
  53
  55
  56
Issuance/(repayment) of debt, $m
  -2
  18
  21
  23
  26
  28
  31
  34
  36
  39
  42
  44
  47
  50
  53
  56
  60
  63
  67
  70
  74
  78
  83
  87
  92
  97
  102
  107
  112
  118
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  
  -2
  18
  21
  23
  26
  28
  31
  34
  36
  39
  42
  44
  47
  50
  53
  56
  60
  63
  67
  70
  74
  78
  83
  87
  92
  97
  102
  107
  112
  118
Total cash flow (excl. dividends), $m
  42
  63
  66
  69
  71
  74
  77
  79
  82
  85
  81
  84
  87
  91
  94
  98
  102
  106
  111
  115
  120
  125
  130
  136
  141
  147
  154
  160
  167
  174
Retained Cash Flow (-), $m
  -19
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
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
  23
  61
  64
  66
  68
  71
  73
  76
  78
  81
  76
  79
  82
  85
  88
  92
  95
  99
  103
  107
  112
  116
  121
  126
  131
  137
  142
  148
  155
  161
Discount rate, %
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
  22
  56
  55
  53
  52
  50
  48
  45
  43
  40
  34
  31
  29
  26
  23
  21
  18
  16
  13
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
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

tronc, Inc., formerly Tribune Publishing Company, is a media company. As of December 25, 2016, the Company operated over 150 titles in nine markets. Its portfolio of news and information brands are in markets, including Los Angeles and San Diego, California; Chicago, Illinois; Fort Lauderdale and Orlando, Florida; Baltimore, Maryland; Hartford, Connecticut; Allentown, Pennsylvania, and Newport News, Virginia. The Company also offers an array of customized marketing solutions, and publishes a number of niche products, including Hoy and El Sentinel. troncM's media groups include the Chicago Tribune Media Group, the Los Angeles Times Media Group, the San Diego Media Group, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Morning Call Media Group and the Daily Press Media Group. troncX consists of the Company's digital revenues and related digital expenses from more than 130 digital platforms online and mobile applications.

FINANCIAL RATIOS  of  tronc (TRNC)

Valuation Ratios
P/E Ratio 83.9
Price to Sales 0.4
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 6.8
Price to Free Cash Flow 9
Growth Rates
Sales Growth Rate -4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.4%
Cap. Spend. - 3 Yr. Gr. Rate 1%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 323.1%
Total Debt to Equity 343.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.2%
Return On Equity 14.9%
Return On Equity - 3 Yr. Avg. 42.1%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 93.5%
Gross Margin - 3 Yr. Avg. 81.1%
EBITDA Margin 6.7%
EBITDA Margin - 3 Yr. Avg. 6%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 3.2%
Pre-Tax Margin 1.6%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 0.4%
Net Profit Margin - 3 Yr. Avg. 0.9%
Effective Tax Rate 72%
Eff/ Tax Rate - 3 Yr. Avg. 39.2%
Payout Ratio 71.4%

TRNC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRNC stock intrinsic value calculation we used $1524.018 million for the last fiscal year's total revenue generated by tronc. The default revenue input number comes from 0001 income statement of tronc. 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 TRNC 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 4.7%, whose default value for TRNC is calculated based on our internal credit rating of tronc, 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 tronc.
    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 TRNC stock the variable cost ratio is equal to 96.7%.

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 TRNC 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 7.3% for tronc.

Corporate tax rate of 27% is the nominal tax rate for tronc. 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 TRNC 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 TRNC are equal to 15.6%.

Life of production assets of 6.8 years is the average useful life of capital assets used in tronc 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 TRNC is equal to -1.4%. 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 - $69.162 million for tronc - 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 35.461 million for tronc 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 tronc at the current share price and the inputted number of shares is $0.6 billion.

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