Intrinsic value of Zayo Group Holdings - ZAYO

Previous Close

$36.46

  Intrinsic Value

$43.47

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  Rating & Target

hold

+19%

Previous close

$36.46

 
Intrinsic value

$43.47

 
Up/down potential

+19%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ZAYO 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 2017), $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 9.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  27.76
  25.80
  23.72
  21.85
  20.16
  18.65
  17.28
  16.05
  14.95
  13.95
  13.06
  12.25
  11.53
  10.87
  10.29
  9.76
  9.28
  8.85
  8.47
  8.12
  7.81
  7.53
  7.28
  7.05
  6.84
  6.66
  6.49
  6.34
  6.21
  6.09
  5.98
Revenue, $m
  2,200
  2,768
  3,424
  4,172
  5,013
  5,948
  6,976
  8,096
  9,306
  10,605
  11,990
  13,459
  15,010
  16,643
  18,355
  20,146
  22,016
  23,965
  25,995
  28,106
  30,301
  32,583
  34,953
  37,417
  39,978
  42,640
  45,408
  48,289
  51,288
  54,410
  57,664
Variable operating expenses, $m
 
  1,857
  2,253
  2,706
  3,214
  3,779
  4,400
  5,077
  5,808
  6,593
  7,430
  8,134
  9,072
  10,058
  11,093
  12,175
  13,306
  14,484
  15,710
  16,986
  18,313
  19,692
  21,124
  22,613
  24,161
  25,770
  27,443
  29,184
  30,996
  32,884
  34,850
Fixed operating expenses, $m
 
  346
  355
  364
  373
  382
  392
  402
  412
  422
  433
  443
  455
  466
  478
  490
  502
  514
  527
  540
  554
  568
  582
  596
  611
  627
  642
  658
  675
  692
  709
Total operating expenses, $m
  1,844
  2,203
  2,608
  3,070
  3,587
  4,161
  4,792
  5,479
  6,220
  7,015
  7,863
  8,577
  9,527
  10,524
  11,571
  12,665
  13,808
  14,998
  16,237
  17,526
  18,867
  20,260
  21,706
  23,209
  24,772
  26,397
  28,085
  29,842
  31,671
  33,576
  35,559
Operating income, $m
  356
  565
  816
  1,103
  1,426
  1,787
  2,184
  2,617
  3,086
  3,590
  4,127
  4,881
  5,484
  6,119
  6,784
  7,481
  8,209
  8,967
  9,757
  10,580
  11,434
  12,323
  13,247
  14,207
  15,205
  16,243
  17,323
  18,447
  19,616
  20,835
  22,105
EBITDA, $m
  963
  1,347
  1,740
  2,188
  2,694
  3,256
  3,876
  4,551
  5,281
  6,065
  6,902
  7,790
  8,728
  9,715
  10,751
  11,835
  12,966
  14,146
  15,375
  16,653
  17,983
  19,364
  20,800
  22,293
  23,844
  25,458
  27,136
  28,882
  30,700
  32,593
  34,566
Interest expense (income), $m
  196
  225
  301
  388
  488
  600
  725
  862
  1,011
  1,172
  1,345
  1,529
  1,725
  1,932
  2,149
  2,377
  2,615
  2,864
  3,124
  3,394
  3,676
  3,968
  4,272
  4,587
  4,916
  5,257
  5,611
  5,980
  6,363
  6,763
  7,179
Earnings before tax, $m
  104
  339
  515
  714
  938
  1,187
  1,459
  1,756
  2,075
  2,418
  2,782
  3,352
  3,759
  4,187
  4,635
  5,104
  5,593
  6,103
  6,633
  7,185
  7,759
  8,355
  8,975
  9,620
  10,290
  10,987
  11,712
  12,467
  13,253
  14,072
  14,926
Tax expense, $m
  18
  92
  139
  193
  253
  320
  394
  474
  560
  653
  751
  905
  1,015
  1,130
  1,252
  1,378
  1,510
  1,648
  1,791
  1,940
  2,095
  2,256
  2,423
  2,597
  2,778
  2,966
  3,162
  3,366
  3,578
  3,799
  4,030
Net income, $m
  86
  248
  376
  521
  685
  866
  1,065
  1,282
  1,515
  1,765
  2,031
  2,447
  2,744
  3,057
  3,384
  3,726
  4,083
  4,455
  4,842
  5,245
  5,664
  6,099
  6,552
  7,022
  7,511
  8,020
  8,550
  9,101
  9,675
  10,273
  10,896

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  221
  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
  8,739
  10,727
  13,272
  16,171
  19,432
  23,055
  27,040
  31,381
  36,072
  41,105
  46,473
  52,167
  58,180
  64,507
  71,143
  78,085
  85,333
  92,889
  100,756
  108,939
  117,447
  126,289
  135,478
  145,027
  154,952
  165,270
  176,001
  187,167
  198,789
  210,892
  223,503
Adjusted assets (=assets-cash), $m
  8,518
  10,727
  13,272
  16,171
  19,432
  23,055
  27,040
  31,381
  36,072
  41,105
  46,473
  52,167
  58,180
  64,507
  71,143
  78,085
  85,333
  92,889
  100,756
  108,939
  117,447
  126,289
  135,478
  145,027
  154,952
  165,270
  176,001
  187,167
  198,789
  210,892
  223,503
Revenue / Adjusted assets
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
Average production assets, $m
  5,610
  7,057
  8,731
  10,639
  12,784
  15,168
  17,789
  20,645
  23,732
  27,043
  30,574
  34,320
  38,277
  42,439
  46,805
  51,372
  56,141
  61,112
  66,287
  71,671
  77,268
  83,086
  89,131
  95,413
  101,943
  108,731
  115,791
  123,137
  130,783
  138,746
  147,043
Working capital, $m
  -105
  -393
  -486
  -592
  -712
  -845
  -991
  -1,150
  -1,322
  -1,506
  -1,703
  -1,911
  -2,131
  -2,363
  -2,606
  -2,861
  -3,126
  -3,403
  -3,691
  -3,991
  -4,303
  -4,627
  -4,963
  -5,313
  -5,677
  -6,055
  -6,448
  -6,857
  -7,283
  -7,726
  -8,188
Total debt, $m
  5,639
  7,526
  9,711
  12,202
  15,003
  18,115
  21,538
  25,267
  29,297
  33,620
  38,231
  43,122
  48,288
  53,722
  59,423
  65,386
  71,612
  78,103
  84,860
  91,890
  99,198
  106,793
  114,686
  122,889
  131,414
  140,278
  149,496
  159,087
  169,071
  179,468
  190,300
Total liabilities, $m
  7,329
  9,215
  11,400
  13,891
  16,692
  19,804
  23,227
  26,956
  30,986
  35,309
  39,920
  44,811
  49,977
  55,411
  61,112
  67,075
  73,301
  79,792
  86,549
  93,579
  100,887
  108,482
  116,375
  124,578
  133,103
  141,967
  151,185
  160,776
  170,760
  181,157
  191,989
Total equity, $m
  1,411
  1,513
  1,871
  2,280
  2,740
  3,251
  3,813
  4,425
  5,086
  5,796
  6,553
  7,355
  8,203
  9,095
  10,031
  11,010
  12,032
  13,097
  14,207
  15,360
  16,560
  17,807
  19,102
  20,449
  21,848
  23,303
  24,816
  26,391
  28,029
  29,736
  31,514
Total liabilities and equity, $m
  8,740
  10,728
  13,271
  16,171
  19,432
  23,055
  27,040
  31,381
  36,072
  41,105
  46,473
  52,166
  58,180
  64,506
  71,143
  78,085
  85,333
  92,889
  100,756
  108,939
  117,447
  126,289
  135,477
  145,027
  154,951
  165,270
  176,001
  187,167
  198,789
  210,893
  223,503
Debt-to-equity ratio
  3.996
  4.980
  5.190
  5.350
  5.480
  5.570
  5.650
  5.710
  5.760
  5.800
  5.830
  5.860
  5.890
  5.910
  5.920
  5.940
  5.950
  5.960
  5.970
  5.980
  5.990
  6.000
  6.000
  6.010
  6.010
  6.020
  6.020
  6.030
  6.030
  6.040
  6.040
Adjusted equity ratio
  0.140
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  86
  248
  376
  521
  685
  866
  1,065
  1,282
  1,515
  1,765
  2,031
  2,447
  2,744
  3,057
  3,384
  3,726
  4,083
  4,455
  4,842
  5,245
  5,664
  6,099
  6,552
  7,022
  7,511
  8,020
  8,550
  9,101
  9,675
  10,273
  10,896
Depreciation, amort., depletion, $m
  607
  782
  924
  1,086
  1,267
  1,469
  1,692
  1,934
  2,195
  2,476
  2,775
  2,909
  3,244
  3,597
  3,967
  4,354
  4,758
  5,179
  5,618
  6,074
  6,548
  7,041
  7,553
  8,086
  8,639
  9,215
  9,813
  10,435
  11,083
  11,758
  12,461
Funds from operations, $m
  875
  1,030
  1,300
  1,607
  1,952
  2,336
  2,757
  3,215
  3,710
  4,241
  4,806
  5,356
  5,988
  6,653
  7,350
  8,080
  8,841
  9,634
  10,460
  11,319
  12,212
  13,140
  14,105
  15,108
  16,151
  17,235
  18,362
  19,536
  20,758
  22,031
  23,357
Change in working capital, $m
  -35
  -81
  -93
  -106
  -119
  -133
  -146
  -159
  -172
  -184
  -197
  -209
  -220
  -232
  -243
  -254
  -266
  -277
  -288
  -300
  -312
  -324
  -337
  -350
  -364
  -378
  -393
  -409
  -426
  -443
  -462
Cash from operations, $m
  910
  1,110
  1,393
  1,713
  2,072
  2,469
  2,903
  3,374
  3,882
  4,425
  5,003
  5,564
  6,208
  6,885
  7,593
  8,334
  9,106
  9,911
  10,748
  11,619
  12,524
  13,464
  14,442
  15,458
  16,514
  17,613
  18,756
  19,945
  21,184
  22,474
  23,819
Maintenance CAPEX, $m
  0
  -475
  -598
  -740
  -902
  -1,083
  -1,285
  -1,508
  -1,750
  -2,011
  -2,292
  -2,591
  -2,909
  -3,244
  -3,597
  -3,967
  -4,354
  -4,758
  -5,179
  -5,618
  -6,074
  -6,548
  -7,041
  -7,553
  -8,086
  -8,639
  -9,215
  -9,813
  -10,435
  -11,083
  -11,758
New CAPEX, $m
  -836
  -1,447
  -1,674
  -1,908
  -2,145
  -2,384
  -2,621
  -2,856
  -3,086
  -3,311
  -3,531
  -3,746
  -3,956
  -4,162
  -4,366
  -4,567
  -4,769
  -4,971
  -5,175
  -5,384
  -5,597
  -5,817
  -6,045
  -6,282
  -6,530
  -6,789
  -7,060
  -7,346
  -7,646
  -7,963
  -8,297
Cash from investing activities, $m
  -2,270
  -1,922
  -2,272
  -2,648
  -3,047
  -3,467
  -3,906
  -4,364
  -4,836
  -5,322
  -5,823
  -6,337
  -6,865
  -7,406
  -7,963
  -8,534
  -9,123
  -9,729
  -10,354
  -11,002
  -11,671
  -12,365
  -13,086
  -13,835
  -14,616
  -15,428
  -16,275
  -17,159
  -18,081
  -19,046
  -20,055
Free cash flow, $m
  -1,360
  -812
  -879
  -934
  -975
  -999
  -1,004
  -989
  -954
  -897
  -820
  -773
  -656
  -521
  -369
  -200
  -16
  182
  394
  617
  853
  1,099
  1,356
  1,622
  1,899
  2,185
  2,481
  2,787
  3,102
  3,428
  3,765
Issuance/(repayment) of debt, $m
  1,450
  1,900
  2,186
  2,491
  2,801
  3,113
  3,423
  3,729
  4,030
  4,324
  4,611
  4,891
  5,165
  5,435
  5,700
  5,963
  6,226
  6,490
  6,757
  7,029
  7,308
  7,596
  7,893
  8,203
  8,525
  8,864
  9,218
  9,591
  9,983
  10,397
  10,833
Issuance/(repurchase) of shares, $m
  0
  62
  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  
  1,411
  1,962
  2,186
  2,491
  2,801
  3,113
  3,423
  3,729
  4,030
  4,324
  4,611
  4,891
  5,165
  5,435
  5,700
  5,963
  6,226
  6,490
  6,757
  7,029
  7,308
  7,596
  7,893
  8,203
  8,525
  8,864
  9,218
  9,591
  9,983
  10,397
  10,833
Total cash flow (excl. dividends), $m
  50
  1,149
  1,306
  1,556
  1,826
  2,114
  2,419
  2,740
  3,076
  3,426
  3,790
  4,118
  4,509
  4,913
  5,331
  5,763
  6,210
  6,673
  7,151
  7,647
  8,161
  8,694
  9,249
  9,825
  10,424
  11,049
  11,699
  12,378
  13,086
  13,825
  14,597
Retained Cash Flow (-), $m
  -192
  -310
  -359
  -409
  -460
  -511
  -562
  -612
  -661
  -710
  -757
  -803
  -848
  -892
  -936
  -979
  -1,022
  -1,065
  -1,109
  -1,154
  -1,200
  -1,247
  -1,296
  -1,346
  -1,399
  -1,455
  -1,513
  -1,574
  -1,639
  -1,707
  -1,778
Prev. year cash balance distribution, $m
 
  208
  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
 
  1,047
  948
  1,148
  1,366
  1,603
  1,857
  2,128
  2,414
  2,717
  3,033
  3,315
  3,661
  4,021
  4,396
  4,785
  5,188
  5,607
  6,042
  6,493
  6,961
  7,448
  7,953
  8,478
  9,025
  9,594
  10,186
  10,803
  11,447
  12,118
  12,819
Discount rate, %
 
  10.80
  11.34
  11.91
  12.50
  13.13
  13.78
  14.47
  15.20
  15.96
  16.75
  17.59
  18.47
  19.40
  20.37
  21.38
  22.45
  23.58
  24.75
  25.99
  27.29
  28.66
  30.09
  31.59
  33.17
  34.83
  36.57
  38.40
  40.32
  42.34
  44.45
PV of cash for distribution, $m
 
  945
  764
  819
  853
  865
  856
  826
  779
  717
  644
  558
  479
  401
  328
  261
  203
  153
  113
  81
  56
  37
  24
  15
  9
  5
  3
  2
  1
  0
  0
Current shareholders' claim on cash, %
  100
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2

Zayo Group Holdings, Inc. provides communications infrastructure services, including fiber and bandwidth connectivity, colocation and cloud infrastructure to a range of businesses. The Company operates in five segments: Dark Fiber Solutions, Network Connectivity, Colocation and Cloud Infrastructure, Zayo Canada and Other. Its products include leased dark fiber, fiber to cellular towers and small cell sites, wavelength connections, Ethernet, Internet Protocol (IP) connectivity and cloud services. Its products and services enable high-bandwidth applications, such as cloud-based computing, video, mobile, social media and machine-to-machine connectivity. As of March 1, 2017, the Company operated 8,100 route miles of long haul fiber and 4,000 miles of dense metro fiber across Denver, Minneapolis, Phoenix, Portland, Seattle, Sacramento, San Francisco, San Jose, Salt Lake City, Spokane and Boise, with on-net connectivity to over 3,100 enterprise buildings and 100 data centers.

FINANCIAL RATIOS  of  Zayo Group Holdings (ZAYO)

Valuation Ratios
P/E Ratio 104.5
Price to Sales 4.1
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 121.4
Growth Rates
Sales Growth Rate 27.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18.8%
Cap. Spend. - 3 Yr. Gr. Rate 18.3%
Financial Strength
Quick Ratio 17
Current Ratio 0.1
LT Debt to Equity 398.7%
Total Debt to Equity 399.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 1.4%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity 6.5%
Return On Equity - 3 Yr. Avg. -6.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 64.4%
Gross Margin - 3 Yr. Avg. 66.7%
EBITDA Margin 41.2%
EBITDA Margin - 3 Yr. Avg. 37.6%
Operating Margin 16.2%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. -3.8%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. -4%
Effective Tax Rate 17.3%
Eff/ Tax Rate - 3 Yr. Avg. 3.7%
Payout Ratio 0%

ZAYO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ZAYO stock intrinsic value calculation we used $2200 million for the last fiscal year's total revenue generated by Zayo Group Holdings. The default revenue input number comes from 2017 income statement of Zayo Group Holdings. 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 ZAYO stock valuation model: a) initial revenue growth rate of 25.8% 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 10.8%, whose default value for ZAYO is calculated based on our internal credit rating of Zayo Group Holdings, 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 Zayo Group Holdings.
    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 ZAYO stock the variable cost ratio is equal to 68.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $338 million in the base year in the intrinsic value calculation for ZAYO 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 4% for Zayo Group Holdings.

Corporate tax rate of 27% is the nominal tax rate for Zayo Group Holdings. 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 ZAYO 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 ZAYO are equal to 255%.

Life of production assets of 11.8 years is the average useful life of capital assets used in Zayo Group Holdings 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 ZAYO is equal to -14.2%. 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 - $1411 million for Zayo Group Holdings - 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 246.44 million for Zayo Group Holdings 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 Zayo Group Holdings at the current share price and the inputted number of shares is $9.0 billion.

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COMPANY NEWS

▶ Zayo Executives to Present at December Investor Conferences   [Nov-28-17 04:05PM  Business Wire]
▶ Zayo to Acquire Spread Networks   [Nov-27-17 08:00AM  Business Wire]
▶ Zayo Recognized for Board Diversity   [Nov-20-17 08:00AM  Business Wire]
▶ Zayo Appoints CRO and European Managing Director   [Nov-13-17 08:00AM  Business Wire]
▶ Growth Slows at Zayo Group Holdings   [09:31AM  Motley Fool]
▶ Zayo Group misses 1Q profit forecasts   [Nov-06-17 04:26PM  Associated Press]
▶ Zayo Expands Fiber Network in Indiana   [Nov-02-17 08:00AM  Business Wire]
▶ Zayo to Offer Three Diverse Routes to Marseille   [Oct-23-17 07:00AM  Business Wire]
▶ Major Carrier Selects Zayo for Small Cell Densification   [Oct-12-17 08:00AM  Business Wire]
▶ Global Webscale Company Selects Zayo for Dark Fiber   [Oct-04-17 08:00AM  Business Wire]
▶ Zayo Attracts Activists Jana, Corvex and FrontFour   [Sep-29-17 11:22AM  TheStreet.com]
▶ Data center operator plans 72,000 square foot server farm in Atlanta   [Sep-26-17 07:20AM  American City Business Journals]
▶ Zayo to Expand Atlanta Data Center Presence   [08:00AM  Business Wire]
▶ Is There Now An Opportunity In Zayo Group Holdings Inc (ZAYO)?   [Sep-12-17 09:25PM  Simply Wall St.]
▶ Zayo Announces CFO Transition   [Sep-11-17 04:05PM  Business Wire]
▶ Zayo Acquires Data Center in Colorado   [Sep-06-17 08:00AM  Business Wire]
▶ Zayo Group Reports Bookings Success   [12:14PM  Motley Fool]
▶ Zayo Group meets 4Q profit forecasts   [Aug-21-17 10:01PM  Associated Press]
▶ Consolidated Smart Systems Selects Zayo for Dark Fiber   [Aug-10-17 08:00AM  Business Wire]
▶ Zayo to Enable CloudLink Service in Peak 10 Data Centers   [Jul-31-17 08:00AM  Business Wire]
▶ Cloud Service Provider Selects Zayo for Diverse Wavelengths   [Jul-27-17 08:00AM  Business Wire]
▶ Zayo Group Announces Completion of Term Loan Repricing   [Jul-20-17 04:05PM  Business Wire]
▶ Zayo Group, LLC Closes $300M Senior Notes Offering   [Jul-05-17 04:05PM  Business Wire]
▶ Zayo Group, LLC Prices $300 Million Senior Notes Offering   [Jun-29-17 04:07PM  Business Wire]
▶ Zayo Group Announces Change in Sales Leadership   [Jun-22-17 08:42AM  Business Wire]
▶ Large Data Center Provider Selects Zayo for Dark Fiber   [Jun-16-17 09:21AM  Business Wire]
▶ Multinational Bank Selects Zayo for Dark Fiber   [Jun-08-17 08:00AM  Business Wire]
▶ Zayo Executives to Present at June Investor Conferences   [Jun-05-17 05:00PM  Business Wire]
▶ Eagle Brook Church Selects Zayo for Dark Fiber   [May-24-17 08:00AM  Business Wire]
▶ Zayo Executives to Present at May Investor Conferences   [May-15-17 04:05PM  Business Wire]
▶ IPO Stock News And Analysis: Find Today's Top New Issues   [10:30AM  Investor's Business Daily]
Financial statements of ZAYO
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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