Estimating The Truthful Worth Of Ten Leisure Group plc (LON:TEG)

Today we are going to provide a method of estimating the intrinsic value of Ten Entertainment Group plc (LON: TEG) by discounting the expected future cash flows to their present value. One way to achieve this is to use the discounted cash flow (DCF) model. Believe it or not, it’s not too difficult to follow as you will see from our example!

We point out that there are many ways to evaluate a company and that each method such as DCF has advantages and disadvantages in certain scenarios. If you want to learn more about the intrinsic value, you should get the Simply Wall St analytical model.

Check out our latest analysis for Ten Entertainment Group

Is the Ten Entertainment Group rated fairly?

We use the 2-step growth model, which simply means that we consider two phases of growth for the company. In the initial phase the company can show a higher growth rate and in the second phase a stable growth rate is normally assumed. In the first phase, we need to estimate the cash flows for the business over the next ten years. We use analyst estimates whenever possible, but when these are not available we extrapolate the previous free cash flow (FCF) from the most recent estimate or reported value. We assume that companies with falling free cash flow will slow their rate of contraction and that companies with increasing free cash flow will slow their growth rate over this period. We do this to take into account that growth tends to slow down more in the first few years than in later years.

In general, we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today’s dollars:

Free cash flow (FCF) estimate for 10 years

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Levered FCF (£ million)

– UK £ 7.70m

UK £ 15.6m

£ 16.2 million

£ 16.6 million

Great Britain 16.9 million £

Great Britain £ 17.2m

Great Britain £ 17.5m

Great Britain £ 17.7m

£ 17.9m

Great Britain £ 18.1m

Source of growth rate estimate

Analyst x3

Analyst x5

Analyst x2

Estimated at 2.57%

Estimated @ 2.08%

Estimated @ 1.73%

Estimate @ 1.49%

Estimated @ 1.32%

East @ 1.2%

Estimated @ 1.11%

Present value (£, million) discounted by 12%

– UK £ 6.9

UK £ 12.5

UK £ 11.6

UK £ 10.7

UK £ 9.8

UK £ 8.9

UK £ 8.1

UK £ 7.4

UK £ 6.7

UK £ 6.1

(“Est” = FCF growth rate, estimated by Simply Wall St)
Present value of 10-year cash flow (PVCF) = £ 75 million

The story goes on

After calculating the present value of future cash flows in the first 10 year period, we need to calculate the terminal value that takes into account all future cash flows beyond the first tier. The Gordon growth formula is used to calculate the terminal value using a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 0.9%. We discount the terminal cash flows to today’s value using a cost of equity rate of 12%.

Final value (TV)= FCF2030 × (1 + g) ÷ (r – g) = UK £ 18m × (1 + 0.9%) ÷ (12% -0.9%) = UK £ 172m

Present value of the final value (PVTV)= TV / (1 + r) 10 = UK £ 172m ÷ (1 + 12%) 10 = UK £ 58m

The total value or equity value is then the sum of the present value of future cash flows which in this case is £ 133 million. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Based on the current share price of 2.3 pounds sterling, the company appears at fair value at the time of writing. Ratings, however, are inaccurate instruments, much like a telescope – move a few degrees and land in a different galaxy. Keep this in mind.

dcf

The assumptions

The above calculation depends heavily on two assumptions. The first is the discount rate and the other is the cash flows. You don’t have to agree to these inputs, I recommend repeating the calculations yourself and playing with them. The DCF also does not take into account the possible cyclical nature of an industry or the future capital requirements of a company, so that it does not provide a complete picture of a company’s potential performance. Since we consider Ten Entertainment Group to be a potential shareholder, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we used 12% which is based on a leveraged beta of 2,000. Beta is a measure of the volatility of a stock compared to the overall market. We get our beta from the industry average beta of globally comparable companies with an imposed limit between 0.8 and 2.0, which is a reasonable range for stable business.

Looking ahead:

Assessment is only one side of the coin in terms of creating your investment thesis and ideally not the only analysis you research for a company. A foolproof valuation is not possible with a DCF model. Instead, the best use for a DCF model is to test certain assumptions and theories to see if they would lead to an under- or over-valuation of the company. If a company is growing differently, or if the cost of equity or the risk-free interest rate changes dramatically, the outcome may be very different. For Ten Entertainment Group, there are three key aspects that you should investigate further:

  1. Risks: You should be aware of this 1 warning sign for Ten Entertainment Group We uncovered before we even consider investing in the company.

  2. Future income: What is TEG’s growth rate compared to competitors and the broader market? Delve deeper into analyst consensus numbers for the years to come by using our free analyst growth expectations chart.

  3. Other high quality alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of ​​what else you might be missing out on!

PS. The Simply Wall St app performs a discounted cash flow assessment for every share on the LSE on a daily basis. If you want to easily find the calculation for other stocks Search here.

This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamentals. Note that our analysis may not take into account the latest company announcements or quality material, which is sensitive to the price. Simply Wall St has no position in the stocks mentioned.

Do you have any feedback on this article? Concerned about the content? Get in touch directly with us. Alternatively, send an email to the editorial team (at) simplywallst.com.

Have Insiders Been Shopping for Ten Leisure Group plc (LON:TEG) Shares?

We haven’t counted the number of times insiders have accumulated stakes in a company that is doing significantly better. The downside of this is that there aren’t just a few examples of insiders dumping stocks before a period of poor performance. So before you buy or sell Ten Entertainment Group plc ((LON: TEG) You may want to know if any insiders bought or sold.

What is insider selling?

It is quite normal for company insiders, such as board members, to trade in company stocks from time to time. However, such insiders are required to disclose their trading activities and are not allowed to trade inside information.

Insider trading isn’t the most important thing when it comes to long-term investments. But we would also consider it foolish to ignore insider trading altogether. For example, Columbia University study found that “insiders are more likely to buy their own company’s shares in the open market when the company announces new agreements with customers and suppliers”.

Check out our latest analysis for Ten Entertainment Group

Ten insider deals by the Entertainment Group last year

Interim Executive Chairman Nicholas Basing made the largest insider buy in the past 12 months. This single transaction involved shares valued at £ 81,000 in the UK at a price of £ 1.55 each in the UK. We’d love to see a purchase but that purchase was made well below the current UK price of £ 2.35. Since the shares were bought at a lower price, that purchase doesn’t tell us much about how insiders view the current share price.

Last year we saw insiders buy 149.90,000 shares worth £ 232,000. But they sold 42.21,000 shares for £ 69,000 in the UK. A total of ten Insiders from the Entertainment Group were net buyers last year. Below is a visual representation of insider trades (by companies and individuals) over the past 12 months. If you want to know exactly who sold how much and when, just click on the graphic below!

The story goes on

Insider trading volume

There are always plenty of stocks that insiders buy. If that suits your style, you can check or take a look at each inventory individually free List of companies. (Note: Insiders bought them).

Does Ten Entertainment Group have a high level of inside ownership?

Another way to test alignment between a company’s executives and other shareholders is to see how many stocks they own. The higher the proportion of insiders, the more likely it is that insiders will receive incentives to build the company over the long term. Our data suggests that Ten Entertainment Group insiders own 2.0% of the company, valued at approximately £ 3.2 million. We consider this to be relatively low inside ownership.

What could the insider deals at Ten Entertainment Group tell us?

It doesn’t really mean much that no insider traded Ten Entertainment Group shares in the last quarter. But insiders have shown more appetite for the stock over the past year. The deals are okay, but it would be more encouraging if Ten Entertainment Group insiders bought more shares in the company. In addition to knowing about ongoing insider transactions, it is beneficial to identify the risks that Ten Entertainment Group is exposed to. When we did our research, we found out 2 warning signs for Ten Entertainment Group (1 concerns!) That we believe we deserve your full attention.

If you’d rather try another company – one with potentially superior financials – this is not to be missed free List of interesting companies with high return on equity and low debt.

For the purposes of this article, insiders are persons who report their transactions to the competent supervisory authority. We currently consider open market transactions and private sales, but not derivative transactions.

This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.

Do you have any feedback on this article? Concerned about the content? Get in touch directly with us. Alternatively, you can also send an email to the editorial team (at) simplywallst.com.

Analysts Simply Made A Main Revision To Their Ten Leisure Group plc (LON:TEG) Income Forecasts

TipRanks

2 penny stocks with strong buy that could generate oversized profits

Well it’s official. Joe Biden is now president and is supported – at least in the short term – by Democratic majorities in both houses of Congress. Wall Street is taking the action of the new administration and is seeing its first steps spike in fiscal stimulus, which is expected to boost consumer spending, weigh on corporate earnings and provide general economic support in the first half of 2021 The situation for Goldman Sachs is investment strategist David Kostin who is optimistic about the near-term outlook for fiscal stimulus. Against this background, Kostin sets the Goldman outlook for this year at a GDP growth of 6.4%. He sees continued high growth in the next year and sets the forecast for 2022 at 4%. These outlook figures are above the previously published 5.9% and 3.7%. To that end, Kostin sees the S&P 500 hit 4,300 by the end of the year, which is a 12% gain over current levels. “Elections have consequences. 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The platform led us to two tickers with stock prices below $ 5 and analyst consensus ratings with “strong buy”. Not to mention significant upside potential. AzurRx BioPharma (AZRX) We’re starting a company specializing in gastrointestinal diseases, AzurRx. This company focuses on the development of non-systemic, targeted recombinant therapies for GI diseases. AzurRx has a pipeline of three drug candidates at multiple levels of the development process. The key candidate for the pipeline, MS1819, is currently being investigated for the treatment of exocrine pancreatic insufficiency in patients with cystic fibrosis. MS1819 is a recombinant lipase derived from a strain of yeast. The drug targets fat molecules in the digestive tract and allows patients to absorb the broken down fats for nutritional value. The drug is currently in phase 2 trials, which are expected to be completed in the first half of this year. As of January 21, the first two patients in the Phase 2b OPTION 2 extension study were given treatment and the Data Monitoring Committee (DMC) “continues to support the program.” In another major development, AzurRx announced earlier this month that it is partnering with First Wave Bio to develop the oral and rectal formulations of niclosamide for the treatment of Immune Checkpoint Inhibitor Associated Colitis (ICI-AC) and COVID-19 -to study gastrointestinal infections caused by the disease. The estimated market for niclosamide for treating COVID-related GI problems exceeds $ 450 million. Based on several potentially significant clinical catalysts plus the $ 0.98 share price, several members of the street believe now is the right time to pull the trigger. 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In particular, the company is working on drugs to reverse a group of genetic visual disorders called hereditary retinal diseases. These diseases currently have no effective treatments. The company has a research pipeline of five drug candidates. The two most distant are QR-110 (Sepofarse) and QR-421. Of these two, QR-110 is currently in phase 2/3 studies. This candidate is RNA therapy to correct the m The most common CEP290 gene mutation that causes congenital liver amaurosis 10 (LCA10). This is a serious genetic retinal disease that affects up to 3 in 100,000 children. QR-421 is another RNA therapy that focuses on exon 13 mutations in the USH2A gene. These mutations cause blindness due to retinitis pigmentosa and / or Usher syndrome. QR-421 is in Phase 1/2 studies with the aim of restoring lost vision or preventing it from happening at all. 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In line with his optimistic outlook, Wolleben sets a price target of 20 USD for the share, what a Year of 384% implies up, along with an Outperform (i.e. Buy) rating. (To see Wolleben’s track record, click here.) Overall, PRQR receives a unanimous Strong Buy rating from analyst consensus based on 3 positive stock valuations currently trading $ 4.13, and the average target price of $ 20.67 is slightly more bullish than Wolleben’s, indicating an upward move of 400% for the next 12 months. (See PRQR stock analysis at TipRanks) To get good ideas for To find penny stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of the insights into TipRanks stocks Conclusion: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. He is very impo You must do your own analysis before making any investment.