Intrinsic value of Virtus Investment Partners, Inc. - VRTS

Previous Close

$96.45

  Intrinsic Value

$196.12

stock screener

  Rating & Target

str. buy

+103%

Previous close

$96.45

 
Intrinsic value

$196.12

 
Up/down potential

+103%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as VRTS.

We calculate the intrinsic value of VRTS 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 0.7

 

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, %
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  595
  640
  686
  735
  785
  837
  891
  948
  1,007
  1,068
  1,132
  1,198
  1,268
  1,340
  1,416
  1,495
  1,577
  1,663
  1,754
  1,848
  1,947
  2,050
  2,158
  2,271
  2,390
  2,514
  2,644
  2,781
  2,924
  3,074
Variable operating expenses, $m
  332
  353
  374
  396
  418
  442
  467
  492
  519
  547
  513
  543
  574
  607
  641
  677
  715
  754
  794
  837
  882
  929
  978
  1,029
  1,083
  1,139
  1,198
  1,260
  1,325
  1,393
Fixed operating expenses, $m
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
  169
  173
  176
  180
  184
  188
  192
  197
  201
  205
  210
  214
  219
  224
  229
  234
  239
  244
  250
Total operating expenses, $m
  465
  489
  513
  538
  563
  590
  618
  647
  677
  709
  678
  712
  747
  783
  821
  861
  903
  946
  991
  1,038
  1,087
  1,139
  1,192
  1,248
  1,307
  1,368
  1,432
  1,499
  1,569
  1,643
Operating income, $m
  130
  151
  174
  197
  221
  247
  273
  301
  330
  360
  454
  487
  521
  557
  594
  633
  674
  717
  763
  810
  859
  911
  966
  1,023
  1,083
  1,146
  1,212
  1,282
  1,355
  1,432
EBITDA, $m
  211
  234
  258
  283
  309
  336
  364
  393
  424
  456
  489
  524
  560
  598
  638
  680
  724
  769
  817
  867
  920
  975
  1,033
  1,094
  1,158
  1,225
  1,295
  1,369
  1,446
  1,528
Interest expense (income), $m
  0
  105
  115
  125
  135
  146
  157
  168
  180
  192
  205
  219
  233
  247
  263
  279
  295
  312
  331
  350
  369
  390
  412
  434
  458
  483
  509
  536
  565
  595
  626
Earnings before tax, $m
  24
  36
  49
  62
  76
  90
  105
  121
  137
  154
  235
  254
  273
  294
  316
  338
  362
  387
  413
  440
  469
  500
  531
  565
  600
  637
  676
  717
  760
  805
Tax expense, $m
  7
  10
  13
  17
  20
  24
  28
  33
  37
  42
  63
  69
  74
  79
  85
  91
  98
  104
  112
  119
  127
  135
  143
  153
  162
  172
  183
  194
  205
  217
Net income, $m
  18
  27
  36
  45
  55
  66
  77
  88
  100
  113
  172
  185
  200
  215
  230
  247
  264
  282
  301
  322
  343
  365
  388
  412
  438
  465
  494
  523
  555
  588

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
  3,036
  3,264
  3,502
  3,748
  4,004
  4,271
  4,548
  4,836
  5,136
  5,449
  5,774
  6,114
  6,468
  6,837
  7,223
  7,626
  8,047
  8,487
  8,947
  9,428
  9,931
  10,458
  11,010
  11,588
  12,193
  12,827
  13,492
  14,188
  14,919
  15,684
Adjusted assets (=assets-cash), $m
  3,036
  3,264
  3,502
  3,748
  4,004
  4,271
  4,548
  4,836
  5,136
  5,449
  5,774
  6,114
  6,468
  6,837
  7,223
  7,626
  8,047
  8,487
  8,947
  9,428
  9,931
  10,458
  11,010
  11,588
  12,193
  12,827
  13,492
  14,188
  14,919
  15,684
Revenue / Adjusted assets
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
Average production assets, $m
  314
  337
  362
  387
  414
  441
  470
  500
  531
  563
  596
  632
  668
  706
  746
  788
  831
  877
  924
  974
  1,026
  1,080
  1,137
  1,197
  1,259
  1,325
  1,394
  1,466
  1,541
  1,620
Working capital, $m
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -79
  -84
  -88
  -93
  -97
  -102
  -108
Total debt, $m
  2,129
  2,310
  2,500
  2,696
  2,900
  3,113
  3,333
  3,563
  3,802
  4,052
  4,311
  4,582
  4,864
  5,158
  5,466
  5,787
  6,122
  6,473
  6,839
  7,223
  7,624
  8,044
  8,484
  8,944
  9,427
  9,932
  10,462
  11,017
  11,599
  12,209
Total liabilities, $m
  2,420
  2,602
  2,791
  2,987
  3,191
  3,404
  3,625
  3,854
  4,094
  4,343
  4,602
  4,873
  5,155
  5,449
  5,757
  6,078
  6,413
  6,764
  7,130
  7,514
  7,915
  8,335
  8,775
  9,236
  9,718
  10,223
  10,753
  11,308
  11,890
  12,500
Total equity, $m
  616
  663
  711
  761
  813
  867
  923
  982
  1,043
  1,106
  1,172
  1,241
  1,313
  1,388
  1,466
  1,548
  1,633
  1,723
  1,816
  1,914
  2,016
  2,123
  2,235
  2,352
  2,475
  2,604
  2,739
  2,880
  3,028
  3,184
Total liabilities and equity, $m
  3,036
  3,265
  3,502
  3,748
  4,004
  4,271
  4,548
  4,836
  5,137
  5,449
  5,774
  6,114
  6,468
  6,837
  7,223
  7,626
  8,046
  8,487
  8,946
  9,428
  9,931
  10,458
  11,010
  11,588
  12,193
  12,827
  13,492
  14,188
  14,918
  15,684
Debt-to-equity ratio
  3.450
  3.490
  3.520
  3.540
  3.570
  3.590
  3.610
  3.630
  3.650
  3.660
  3.680
  3.690
  3.700
  3.720
  3.730
  3.740
  3.750
  3.760
  3.770
  3.770
  3.780
  3.790
  3.800
  3.800
  3.810
  3.810
  3.820
  3.830
  3.830
  3.830
Adjusted equity ratio
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  27
  36
  45
  55
  66
  77
  88
  100
  113
  172
  185
  200
  215
  230
  247
  264
  282
  301
  322
  343
  365
  388
  412
  438
  465
  494
  523
  555
  588
Depreciation, amort., depletion, $m
  81
  83
  84
  86
  87
  89
  91
  92
  94
  96
  35
  37
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
  75
  78
  82
  87
  91
  96
Funds from operations, $m
  99
  109
  120
  131
  143
  155
  167
  181
  194
  209
  207
  223
  239
  256
  275
  294
  313
  334
  356
  379
  403
  429
  455
  483
  513
  544
  576
  610
  646
  684
Change in working capital, $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
  -5
  -5
  -5
  -5
Cash from operations, $m
  101
  111
  122
  133
  145
  157
  169
  183
  196
  211
  209
  225
  242
  259
  277
  296
  316
  337
  359
  382
  407
  432
  459
  487
  517
  548
  581
  615
  651
  689
Maintenance CAPEX, $m
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
  -78
  -82
  -87
  -91
New CAPEX, $m
  -23
  -24
  -25
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -48
  -50
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
Cash from investing activities, $m
  -40
  -43
  -45
  -46
  -49
  -52
  -55
  -58
  -61
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -94
  -100
  -105
  -110
  -115
  -121
  -127
  -134
  -141
  -147
  -154
  -162
  -170
Free cash flow, $m
  61
  69
  77
  86
  95
  105
  115
  125
  136
  147
  142
  155
  168
  181
  196
  211
  226
  243
  260
  278
  297
  317
  338
  360
  383
  408
  434
  460
  489
  519
Issuance/(repayment) of debt, $m
  179
  182
  189
  197
  204
  212
  221
  230
  239
  249
  260
  271
  282
  294
  307
  321
  335
  351
  367
  383
  401
  420
  440
  461
  482
  505
  530
  555
  582
  610
Issuance/(repurchase) of shares, $m
  28
  20
  12
  5
  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  
  207
  202
  201
  202
  204
  212
  221
  230
  239
  249
  260
  271
  282
  294
  307
  321
  335
  351
  367
  383
  401
  420
  440
  461
  482
  505
  530
  555
  582
  610
Total cash flow (excl. dividends), $m
  268
  271
  279
  287
  299
  317
  335
  355
  375
  396
  402
  425
  450
  476
  503
  532
  562
  593
  627
  662
  698
  737
  778
  821
  866
  913
  963
  1,016
  1,071
  1,129
Retained Cash Flow (-), $m
  -46
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -98
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
  -155
Prev. year cash balance distribution, $m
  59
  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
  281
  224
  231
  237
  247
  263
  279
  296
  314
  333
  336
  356
  378
  401
  425
  450
  476
  504
  533
  564
  596
  630
  666
  703
  743
  785
  828
  874
  923
  973
Discount rate, %
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.31
  19.22
  20.18
  21.19
  22.25
  23.36
  24.53
  25.76
  27.05
  28.40
  29.82
  31.31
  32.87
  34.52
  36.24
  38.06
  39.96
  41.96
  44.05
  46.26
  48.57
PV of cash for distribution, $m
  252
  178
  160
  142
  127
  113
  100
  87
  74
  62
  49
  39
  31
  24
  18
  13
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  95.7
  92.9
  91.3
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7

Virtus Investment Partners, Inc. (Virtus) is a provider of investment management and related services to individuals and institutions. The Company provides its products in various forms and through multiple distribution channels. Its retail products include open-end mutual funds, closed-end funds, exchange traded funds, variable insurance funds, undertakings for collective investments in transferable securities (UCITS) and separately managed accounts. Its open-end mutual funds are distributed through intermediaries. Its closed-end funds trade on the New York Stock Exchange. Its variable insurance funds are available as investment options in variable annuities and life insurance products distributed by life insurance companies. Separately managed accounts consists of intermediary programs, sponsored and distributed by unaffiliated brokerage firms, and private client accounts, which are offered to the high net-worth clients of its affiliated managers.

FINANCIAL RATIOS  of  Virtus Investment Partners, Inc. (VRTS)

Valuation Ratios
P/E Ratio 11.6
Price to Sales 1.8
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 19.6
Growth Rates
Sales Growth Rate -15.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 116.5%
Total Debt to Equity 116.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 10.4%
Return On Equity 11.8%
Return On Equity - 3 Yr. Avg. 12.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 23.5%
EBITDA Margin - 3 Yr. Avg. 25%
Operating Margin 15.8%
Oper. Margin - 3 Yr. Avg. 21.9%
Pre-Tax Margin 21.7%
Pre-Tax Margin - 3 Yr. Avg. 23.2%
Net Profit Margin 15.2%
Net Profit Margin - 3 Yr. Avg. 15.4%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 37.7%
Payout Ratio 28.6%

VRTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRTS stock intrinsic value calculation we used $552 million for the last fiscal year's total revenue generated by Virtus Investment Partners, Inc.. The default revenue input number comes from 0001 income statement of Virtus Investment Partners, 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 VRTS stock valuation model: a) initial revenue growth rate of 7.8% 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 11.8%, whose default value for VRTS is calculated based on our internal credit rating of Virtus Investment Partners, 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 Virtus Investment Partners, 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 VRTS stock the variable cost ratio is equal to 56.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $130 million in the base year in the intrinsic value calculation for VRTS 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 Virtus Investment Partners, Inc..

Corporate tax rate of 27% is the nominal tax rate for Virtus Investment Partners, 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 VRTS 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 VRTS are equal to 52.7%.

Life of production assets of 16.9 years is the average useful life of capital assets used in Virtus Investment Partners, 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 VRTS 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 - $629.909 million for Virtus Investment Partners, 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 7.011 million for Virtus Investment Partners, 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 Virtus Investment Partners, Inc. at the current share price and the inputted number of shares is $0.7 billion.

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