Intrinsic value of WideOpenWest - WOW

Previous Close

$10.32

  Intrinsic Value

$4.77

stock screener

  Rating & Target

str. sell

-54%

Previous close

$10.32

 
Intrinsic value

$4.77

 
Up/down potential

-54%

 
Rating

str. sell

We calculate the intrinsic value of WOW 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 0.9

 

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
  1,212
  1,240
  1,272
  1,307
  1,347
  1,390
  1,438
  1,489
  1,544
  1,604
  1,667
  1,735
  1,807
  1,883
  1,964
  2,051
  2,142
  2,238
  2,340
  2,447
  2,561
  2,681
  2,807
  2,939
  3,079
  3,227
  3,382
  3,545
  3,717
  3,897
Variable operating expenses, $m
  970
  990
  1,012
  1,036
  1,064
  1,094
  1,126
  1,162
  1,200
  1,241
  1,150
  1,197
  1,247
  1,300
  1,356
  1,415
  1,478
  1,544
  1,615
  1,689
  1,767
  1,850
  1,937
  2,028
  2,125
  2,227
  2,334
  2,446
  2,565
  2,689
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
  970
  990
  1,012
  1,036
  1,064
  1,094
  1,126
  1,162
  1,200
  1,241
  1,150
  1,197
  1,247
  1,300
  1,356
  1,415
  1,478
  1,544
  1,615
  1,689
  1,767
  1,850
  1,937
  2,028
  2,125
  2,227
  2,334
  2,446
  2,565
  2,689
Operating income, $m
  241
  250
  260
  271
  283
  297
  311
  327
  344
  363
  517
  538
  560
  584
  609
  636
  664
  694
  725
  759
  794
  831
  870
  911
  954
  1,000
  1,048
  1,099
  1,152
  1,208
EBITDA, $m
  516
  528
  541
  557
  573
  592
  612
  634
  658
  683
  710
  739
  769
  802
  836
  873
  912
  953
  996
  1,042
  1,090
  1,141
  1,195
  1,252
  1,311
  1,374
  1,440
  1,509
  1,582
  1,659
Interest expense (income), $m
  223
  133
  109
  112
  115
  119
  124
  128
  133
  139
  145
  152
  158
  166
  174
  182
  191
  200
  210
  221
  232
  244
  256
  269
  283
  297
  312
  329
  345
  363
  382
Earnings before tax, $m
  109
  141
  148
  156
  164
  173
  183
  194
  205
  218
  365
  379
  394
  410
  427
  445
  464
  483
  505
  527
  550
  575
  601
  628
  657
  688
  720
  753
  789
  826
Tax expense, $m
  29
  38
  40
  42
  44
  47
  49
  52
  55
  59
  99
  102
  106
  111
  115
  120
  125
  131
  136
  142
  149
  155
  162
  170
  177
  186
  194
  203
  213
  223
Net income, $m
  79
  103
  108
  114
  120
  126
  134
  142
  150
  159
  267
  277
  288
  299
  312
  325
  338
  353
  368
  385
  402
  420
  439
  459
  480
  502
  525
  550
  576
  603

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
  2,488
  2,546
  2,611
  2,685
  2,766
  2,855
  2,952
  3,058
  3,171
  3,293
  3,423
  3,562
  3,710
  3,867
  4,034
  4,211
  4,398
  4,596
  4,805
  5,026
  5,258
  5,504
  5,763
  6,036
  6,323
  6,626
  6,944
  7,279
  7,632
  8,003
Adjusted assets (=assets-cash), $m
  2,488
  2,546
  2,611
  2,685
  2,766
  2,855
  2,952
  3,058
  3,171
  3,293
  3,423
  3,562
  3,710
  3,867
  4,034
  4,211
  4,398
  4,596
  4,805
  5,026
  5,258
  5,504
  5,763
  6,036
  6,323
  6,626
  6,944
  7,279
  7,632
  8,003
Revenue / Adjusted assets
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
Average production assets, $m
  1,740
  1,780
  1,826
  1,877
  1,934
  1,997
  2,065
  2,138
  2,218
  2,303
  2,394
  2,491
  2,594
  2,704
  2,821
  2,945
  3,075
  3,214
  3,360
  3,514
  3,677
  3,849
  4,030
  4,221
  4,422
  4,634
  4,856
  5,091
  5,337
  5,597
Working capital, $m
  -73
  -74
  -76
  -78
  -81
  -83
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -113
  -118
  -123
  -129
  -134
  -140
  -147
  -154
  -161
  -168
  -176
  -185
  -194
  -203
  -213
  -223
  -234
Total debt, $m
  1,845
  1,896
  1,955
  2,021
  2,095
  2,175
  2,262
  2,357
  2,459
  2,569
  2,686
  2,811
  2,944
  3,086
  3,236
  3,395
  3,563
  3,741
  3,929
  4,128
  4,338
  4,559
  4,792
  5,037
  5,296
  5,568
  5,855
  6,157
  6,474
  6,808
Total liabilities, $m
  2,240
  2,291
  2,350
  2,416
  2,489
  2,570
  2,657
  2,752
  2,854
  2,964
  3,081
  3,206
  3,339
  3,480
  3,630
  3,790
  3,958
  4,136
  4,324
  4,523
  4,733
  4,954
  5,187
  5,432
  5,691
  5,963
  6,250
  6,551
  6,869
  7,202
Total equity, $m
  249
  255
  261
  268
  277
  286
  295
  306
  317
  329
  342
  356
  371
  387
  403
  421
  440
  460
  480
  503
  526
  550
  576
  604
  632
  663
  694
  728
  763
  800
Total liabilities and equity, $m
  2,489
  2,546
  2,611
  2,684
  2,766
  2,856
  2,952
  3,058
  3,171
  3,293
  3,423
  3,562
  3,710
  3,867
  4,033
  4,211
  4,398
  4,596
  4,804
  5,026
  5,259
  5,504
  5,763
  6,036
  6,323
  6,626
  6,944
  7,279
  7,632
  8,002
Debt-to-equity ratio
  7.410
  7.450
  7.490
  7.530
  7.570
  7.620
  7.660
  7.710
  7.760
  7.800
  7.850
  7.890
  7.940
  7.980
  8.020
  8.060
  8.100
  8.140
  8.180
  8.210
  8.250
  8.280
  8.310
  8.350
  8.380
  8.400
  8.430
  8.460
  8.480
  8.510
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
  79
  103
  108
  114
  120
  126
  134
  142
  150
  159
  267
  277
  288
  299
  312
  325
  338
  353
  368
  385
  402
  420
  439
  459
  480
  502
  525
  550
  576
  603
Depreciation, amort., depletion, $m
  275
  278
  281
  286
  290
  295
  301
  307
  313
  320
  193
  201
  209
  218
  228
  237
  248
  259
  271
  283
  297
  310
  325
  340
  357
  374
  392
  411
  430
  451
Funds from operations, $m
  354
  381
  390
  399
  410
  422
  434
  448
  463
  479
  460
  478
  497
  517
  539
  562
  586
  612
  639
  668
  698
  730
  764
  799
  836
  876
  917
  960
  1,006
  1,054
Change in working capital, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  355
  383
  391
  401
  412
  424
  437
  451
  466
  482
  463
  482
  501
  522
  544
  567
  592
  618
  645
  674
  705
  737
  771
  807
  845
  885
  926
  970
  1,017
  1,065
Maintenance CAPEX, $m
  -138
  -140
  -144
  -147
  -151
  -156
  -161
  -167
  -172
  -179
  -186
  -193
  -201
  -209
  -218
  -228
  -237
  -248
  -259
  -271
  -283
  -297
  -310
  -325
  -340
  -357
  -374
  -392
  -411
  -430
New CAPEX, $m
  -34
  -40
  -46
  -51
  -57
  -62
  -68
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -117
  -124
  -131
  -138
  -146
  -154
  -163
  -172
  -181
  -191
  -201
  -212
  -223
  -234
  -247
  -259
Cash from investing activities, $m
  -172
  -180
  -190
  -198
  -208
  -218
  -229
  -241
  -251
  -264
  -277
  -290
  -304
  -319
  -335
  -352
  -368
  -386
  -405
  -425
  -446
  -469
  -491
  -516
  -541
  -569
  -597
  -626
  -658
  -689
Free cash flow, $m
  183
  202
  202
  203
  204
  206
  208
  211
  215
  218
  187
  192
  197
  203
  209
  216
  224
  231
  240
  249
  259
  269
  280
  291
  303
  316
  330
  344
  359
  375
Issuance/(repayment) of debt, $m
  -406
  52
  59
  66
  73
  80
  88
  95
  102
  110
  117
  125
  133
  141
  150
  159
  168
  178
  188
  199
  210
  221
  233
  246
  259
  272
  287
  302
  317
  334
Issuance/(repurchase) of shares, $m
  374
  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  
  -32
  52
  59
  66
  73
  80
  88
  95
  102
  110
  117
  125
  133
  141
  150
  159
  168
  178
  188
  199
  210
  221
  233
  246
  259
  272
  287
  302
  317
  334
Total cash flow (excl. dividends), $m
  151
  254
  261
  269
  277
  286
  296
  306
  317
  328
  304
  317
  330
  344
  359
  375
  392
  410
  428
  448
  468
  490
  513
  537
  562
  589
  617
  646
  677
  709
Retained Cash Flow (-), $m
  -453
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
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
  -302
  248
  254
  262
  269
  277
  286
  295
  305
  316
  291
  303
  315
  329
  343
  358
  373
  390
  407
  426
  445
  465
  487
  510
  533
  558
  585
  612
  641
  672
Discount rate, %
  14.50
  15.23
  15.99
  16.79
  17.62
  18.51
  19.43
  20.40
  21.42
  22.49
  23.62
  24.80
  26.04
  27.34
  28.71
  30.14
  31.65
  33.23
  34.90
  36.64
  38.47
  40.40
  42.42
  44.54
  46.76
  49.10
  51.56
  54.14
  56.84
  59.68
PV of cash for distribution, $m
  -264
  187
  163
  141
  120
  100
  83
  67
  53
  42
  28
  21
  16
  11
  8
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

WideOpenWest, Inc. is a cable operator in the United States. The Company provides high-speed data (HSD), cable television (Video), digital telephony (Telephony) and business-class services. The Company’s products are available either as a bundle or as an individual service to residential and business services customers. The Company’s services include data services, video services, telephony services, and business services. Its business-class service serves approximately 3 million homes and businesses. The Company’s services are delivered across 19 markets through hybrid fiber-coaxial (HFC) cable network.

FINANCIAL RATIOS  of  WideOpenWest (WOW)

Valuation Ratios
P/E Ratio 34.3
Price to Sales 0.7
Price to Book -1.2
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow -9.2
Growth Rates
Sales Growth Rate 1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 24.1%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity -396.7%
Total Debt to Equity -399.9%
Interest Coverage 1
Management Effectiveness
Return On Assets -211.6%
Ret/ On Assets - 3 Yr. Avg. -65%
Return On Total Capital 1.2%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity -3.3%
Return On Equity - 3 Yr. Avg. 2.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 34.7%
EBITDA Margin - 3 Yr. Avg. 33.8%
Operating Margin 16.7%
Oper. Margin - 3 Yr. Avg. 14.2%
Pre-Tax Margin -0.1%
Pre-Tax Margin - 3 Yr. Avg. -2.1%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. -1.4%
Effective Tax Rate 2700%
Eff/ Tax Rate - 3 Yr. Avg. 901.1%
Payout Ratio 0%

WOW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WOW stock intrinsic value calculation we used $1188.1 million for the last fiscal year's total revenue generated by WideOpenWest. The default revenue input number comes from 0001 income statement of WideOpenWest. 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 WOW 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 14.5%, whose default value for WOW is calculated based on our internal credit rating of WideOpenWest, 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 WideOpenWest.
    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 WOW stock the variable cost ratio is equal to 80.3%.

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 WOW 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 5.9% for WideOpenWest.

Corporate tax rate of 27% is the nominal tax rate for WideOpenWest. 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 WOW 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 WOW are equal to 143.6%.

Life of production assets of 12.4 years is the average useful life of capital assets used in WideOpenWest 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 WOW is equal to -6%. 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 - $-204.4 million for WideOpenWest - 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 82.656 million for WideOpenWest 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 WideOpenWest at the current share price and the inputted number of shares is $0.9 billion.

RELATED COMPANIES Price Int.Val. Rating
LBRDA Liberty Broadb 82.17 99.66  buy
HMTV Hemisphere Med 13.92 34.73  str.buy

COMPANY NEWS

▶ WideOpenWest: 3Q Earnings Snapshot   [06:58PM  Associated Press]
▶ WOW! Reports Third Quarter 2018 Results   [04:30PM  Business Wire]
▶ Could WideOpenWest Stock Double From Here?   [Sep-17-18 09:47PM  Motley Fool]
▶ Top Ranked Momentum Stocks to Buy for August 27th   [Aug-27-18 01:29PM  InvestorPlace]
▶ WOW! Reports Second Quarter 2018 Results   [04:15PM  Business Wire]
▶ WOW! Introduces Cheddar to Nearly 400,000 Video Subscribers   [Jul-26-18 09:26AM  Business Wire]
▶ Should You Buy WideOpenWest Inc (NYSE:WOW) When Insiders Do?   [May-18-18 07:55PM  Simply Wall St.]
▶ RM LAW Announces Investigation of WideOpenWest, Inc.   [May-11-18 10:44AM  PR Newswire]
▶ WideOpenWest: 1Q Earnings Snapshot   [07:14AM  Associated Press]
▶ WOW! Reports First Quarter 2018 Results   [07:00AM  Business Wire]
▶ WideOpenWest posts 4Q profit   [Mar-14-18 06:43PM  Associated Press]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.