Intrinsic value of Value Line - VALU

Previous Close

$25.15

  Intrinsic Value

$4.90

stock screener

  Rating & Target

str. sell

-81%

Previous close

$25.15

 
Intrinsic value

$4.90

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of VALU 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, %
  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
  37
  37
  38
  39
  41
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
Variable operating expenses, $m
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
Fixed operating expenses, $m
  25
  25
  26
  26
  27
  27
  28
  29
  29
  30
  30
  31
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  40
  41
  42
  43
  44
  45
  46
Total operating expenses, $m
  35
  35
  37
  37
  38
  39
  40
  41
  42
  43
  44
  46
  47
  49
  49
  51
  53
  55
  56
  58
  59
  61
  64
  65
  67
  69
  71
  74
  76
  79
Operating income, $m
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  39
EBITDA, $m
  2
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  19
  20
  22
  24
  27
  29
  31
  34
  37
  40
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
Earnings before tax, $m
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  19
  20
  22
  24
  27
  29
  31
  34
Tax expense, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
Net income, $m
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  25

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
  88
  90
  93
  95
  98
  101
  105
  108
  112
  117
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  270
  284
Adjusted assets (=assets-cash), $m
  88
  90
  93
  95
  98
  101
  105
  108
  112
  117
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  270
  284
Revenue / Adjusted assets
  0.420
  0.411
  0.409
  0.411
  0.418
  0.416
  0.410
  0.417
  0.420
  0.410
  0.413
  0.413
  0.420
  0.416
  0.413
  0.416
  0.417
  0.417
  0.418
  0.416
  0.414
  0.415
  0.417
  0.416
  0.415
  0.413
  0.415
  0.415
  0.415
  0.415
Average production assets, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
Working capital, $m
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
Total debt, $m
  1
  2
  3
  4
  6
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  38
  42
  45
  50
  54
  58
  63
  68
  74
  79
  85
  91
  98
Total liabilities, $m
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  112
  117
  123
  128
  135
  141
Total equity, $m
  44
  45
  46
  48
  49
  51
  53
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  94
  98
  102
  107
  112
  118
  123
  129
  136
  142
Total liabilities and equity, $m
  88
  90
  92
  95
  98
  101
  105
  108
  112
  117
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  187
  195
  204
  213
  224
  235
  246
  257
  271
  283
Debt-to-equity ratio
  0.010
  0.040
  0.060
  0.090
  0.110
  0.140
  0.170
  0.200
  0.230
  0.250
  0.280
  0.310
  0.340
  0.360
  0.390
  0.410
  0.440
  0.460
  0.490
  0.510
  0.530
  0.550
  0.570
  0.590
  0.610
  0.630
  0.640
  0.660
  0.670
  0.690
Adjusted equity ratio
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  25
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Funds from operations, $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
Change in working capital, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $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 investing activities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Free cash flow, $m
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  26
  28
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
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  
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
Total cash flow (excl. dividends), $m
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
Retained Cash Flow (-), $m
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
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
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  26
  28
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
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  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

Value Line, Inc. (Value Line) is engaged in producing investment periodicals based on underlying research and making available copyright data, including ranking system and other information, to third parties for use in third-party managed and marketed investment products and for other purposes. The Company markets under brands, including Value Line, the Value Line logo, The Value Line Investment Survey, Smart Research, Smarter Investing and The Most Trusted Name in Investment Research. As of April 30, 2016, its services included comprehensive reference periodical publications; targeted and periodical newsletters; investment analysis software, and current and historical financial databases. The comprehensive research services (The Value Line Investment Survey, The Value Line Investment Survey-Small and Mid-Cap, The Value Line 600, The Value Line Small and Mid-Cap 300, and The Value Line Fund Advisor Plus) provide both statistical and text coverage of investment securities.

FINANCIAL RATIOS  of  Value Line (VALU)

Valuation Ratios
P/E Ratio 24.4
Price to Sales 7
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow -61.1
Price to Free Cash Flow -40.7
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
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 11.5%
Ret/ On Assets - 3 Yr. Avg. 9.2%
Return On Total Capital 27.4%
Ret/ On T. Cap. - 3 Yr. Avg. 22.9%
Return On Equity 27.4%
Return On Equity - 3 Yr. Avg. 22.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 74.3%
Gross Margin - 3 Yr. Avg. 75.4%
EBITDA Margin 57.1%
EBITDA Margin - 3 Yr. Avg. 44.4%
Operating Margin 22.9%
Oper. Margin - 3 Yr. Avg. 12.3%
Pre-Tax Margin 42.9%
Pre-Tax Margin - 3 Yr. Avg. 33.1%
Net Profit Margin 28.6%
Net Profit Margin - 3 Yr. Avg. 22.7%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 31.1%
Payout Ratio 70%

VALU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VALU stock intrinsic value calculation we used $35.868 million for the last fiscal year's total revenue generated by Value Line. The default revenue input number comes from 0001 income statement of Value Line. 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 VALU 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 4.3%, whose default value for VALU is calculated based on our internal credit rating of Value Line, 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 Value Line.
    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 VALU stock the variable cost ratio is equal to 27.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $24 million in the base year in the intrinsic value calculation for VALU 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 Value Line.

Corporate tax rate of 27% is the nominal tax rate for Value Line. 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 VALU 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 VALU are equal to 4.4%.

Life of production assets of 1.7 years is the average useful life of capital assets used in Value Line 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 VALU is equal to -61.4%. 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 - $43.541 million for Value Line - 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 9.689 million for Value Line 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 Value Line at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
MORN Morningstar 121.76 85.22  sell
SPGI S&P Global 181.10 234.42  hold
MDP Meredith 58.59 304.03  str.buy
TRI Thomson Reuter 49.00 41.82  hold

COMPANY NEWS

▶ Is Value Line Inc (NASDAQ:VALU) A Top Dividend Stock?   [Sep-18-18 10:30AM  Simply Wall St.]
▶ Value Line: Fiscal 1Q Earnings Snapshot   [Sep-12-18 05:27PM  Associated Press]
▶ VALUE LINE, INC. ANNOUNCES FISCAL YEAR 2018 EARNINGS   [Jul-26-18 05:18PM  GlobeNewswire]
▶ Value Line, Inc. Announces Third Quarter Earnings   [Mar-14-18 03:03PM  GlobeNewswire]
▶ Value Line, Inc. Announces Second Quarter Earnings   [Dec-11-17 05:40PM  GlobeNewswire]
▶ Value Line posts 1Q profit   [Sep-13-17 09:46PM  Associated Press]
▶ Value Line posts 4Q profit   [Jul-27-17 04:19PM  Associated Press]
▶ Value Line, Inc. Announces Fiscal Year Earnings   [Jul-26-17 06:04PM  GlobeNewswire]
▶ Value Line posts 3Q profit   [Mar-13-17 06:26PM  Associated Press]
▶ Value Line, Inc. Launches ValueLineLibrary.com   [Feb-27-17 12:03PM  Business Wire]
▶ A New Buffett-Inspired Screening Model   [Feb-24-17 11:20AM  Forbes]
▶ A New Buffett-Inspired Screening Model   [11:20AM  at Forbes]
▶ Index Investing Is a Delusion   [Feb-22-17 12:01PM  GuruFocus.com]
▶ A Great Company With Cheap Valuation   [Feb-07-17 06:23PM  Gurufocus]
▶ Why Is Morningstar More Valuable Than Value Line?   [Jan-06-17 10:20AM  Gurufocus]
▶ Here Are 3 Longshots That Can Be Very Rewarding   [Dec-22-16 11:00AM  at TheStreet]
▶ 5 Tech Investments Poised for Growth   [Nov-02-16 08:01AM  at Kiplinger]
▶ 7 Blue-Chip Stocks That Are Due for a Turnaround   [Oct-21-16 11:20AM  at Kiplinger]
▶ A Value Line Fund Breaks With Tradition   [08:01AM  at Kiplinger]
▶ Value Line, Inc. Announces Sale of an Operating Facility   [Jul-29-16 05:01PM  Business Wire]
▶ Think value investing dead? Wow, you are so wrong   [Apr-13-16 09:50AM  at CNBC]

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