Discounted Cash Flow Calculation for OTCPK:KROT.Y using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
OTCPK:KROT.Y DCF 1st Stage: Next 10 year cash flow forecast
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Kroton Educacional's share price is below the future cash flow value, and at a moderate discount (> 20%).
Kroton Educacional's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Kroton Educacional's earnings available for a low price, and how does
this compare to other companies in the same industry?
Kroton Educacional's earnings are expected to grow by 15.4% yearly, however this is not considered high growth (20% yearly).
Kroton Educacional's revenue is expected to grow by 7.8% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Kroton Educacional's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
1/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Kroton Educacional's finances.
The net worth of a company is the difference between its assets and liabilities.
Kroton Educacional is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Kroton Educacional's long term commitments exceed its cash and other short term assets.
This treemap shows a more detailed breakdown of
Kroton Educacional's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Low level of unsold assets.
Debt is not covered by short term assets, assets are 0.7x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. Rodrigo Calvo Galindo has been Chief Executive Officer and Member of Board of Executive Officer of Kroton Educacional S.A. since January 1, 2011. In addition, he served as CEO of Grupo Educacional IUNI (2007 to 2010), chief operations and higher education officer of Kroton (2010 to 2011). Mr. Galindo served as Graduate Studies Executive Officer and Post-Secondary Education Officer at Kroton Educacional S.A. From 2007 to 2010, he was Chief Executive Officer at IUNI Educational Group, with more than 50,000 students enrolled in its higher education institutions and is present in six Brazilian states. In 2010, he held the position of Chief Operating Officer and in 2011, Director of Higher Education at Kroton Educacional S/A (publicly held company). Publications: “Políticas Públicas de Avaliação: análise crítica do modelo e perspectiva das associações representativas”. He is co-author of the book “Políticas Públicas de Avaliação”. He served as an Independent Director of Arezzo Industria e Comercio S.A. from July 2013 to April 2017. From 2004 to 2007, he was Administrative Dean at the University of Cuiabá, being responsible for the accreditation and implementation of higher education institutions in Bahia, Mato Grosso, Amapá, Acre and Rondônia. He has worked in educational institute management for over 17 years. He was Administrative Dean of the Universidade de Cuiabá and responsible for accreditation and implementation of post-secondary educational institutes in Bahia, Mato Grosso, Amapá and Rondônia. He holds a B.A in Law and a Master's degree in Education from the Pontifícia Universidade Católica de São Paulo - PUC (Pontifical Catholic University of São Paulo). He has been Director of BK Brasil Operação e Assessoria a Restaurantes S.A. since October 2017. He is independent director of Clínica SiM (since July 2015) and director of Endeavor (since February 2017).
Insufficient data for Rodrigo to compare compensation growth.
Insufficient data for Rodrigo to establish whether their remuneration is reasonable compared to companies of similar size in United States of America.
Management Team Tenure
Average tenure of the
management team in years:
The tenure for the Kroton Educacional management team is about average.
CEO & Member of Board of Executive Officers
CFO & Member of Board of Executive Officers
Investor Relations Officer & Member of Board of Executive Officers
Legal Officer & Member of Board of Executive Officers
Roberto Valério Neto
Undergrad DL & Centers Officer & Member of Board of Executive Officers
Administrative Officer & Member of Board of Executive Officers
Marketing & Sales Officer and Member of Board of Executive Officers
On-Campus Undergraduate & Campus Executive Officer and Member of Board of Executive Officers
Paulo de Tarso
Business & Innovation Officer and Member of Board of Executive Officers
Undergraduate Academic Officer & Member of Board of Executive Officers
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The tenure for the Kroton Educacional board of directors is about average.
Kroton Educacional S.A. operates as a private educational organization in Brazil. The company operates through three segments: In-Class Higher Education, Distance Learning Higher Education, and Basic Education. It offers in-class and distance-learning higher education, and post-graduate courses; manages child, K-12, and high-school teaching activities; sells textbooks and learning aids; and licenses teaching and pedagogic products. The company provides technical and preparatory courses for civil service examinations and Brazilian Bar Association; advises on and/or offers the direct and indirect financing for students; and develops software for adaptive teaching and academic management optimization. Its services include primary, secondary, and postsecondary education services with on-campus undergraduate and graduate programs, and distance learning, as well as graduate, master’s and doctoral programs; preparatory courses under the brand LFG; unregulated programs; and language courses. Kroton Educacional S.A. operates 119 higher education units in 15 Brazilian states and 74 cities; 1,111 distance-learning graduation centers in various Brazilian states and in the Federal District; and 870 associated basic education schools in Brazil. The company was formerly known as OPPORTUNITY OFFICEPAR PARTICIPAÇÕES S.A. and changed its name to Kroton Educacional S.A. in May 2007. Kroton Educacional S.A. was founded in 1998 and is headquartered in Belo Horizonte, Brazil.
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