BKI is a very good example of how to use the spreadsheets.
Just running it off the spreadsheet, I get negative or $0 valuations which doesn't look right. So I immediately look at the cash flow statement and the owner earnings shows -$57.2 while the FCF is $78.9.
Big difference there, so I go to the annual report at SEC and look up the cash flow statement. Looks like 138m of goodwill was impaired which isn't a cash expense. So this is added back to the cash flow which is placed under "other income" in the spreadsheets. I made it so that owner earnings ignores "other income" because I dont know whether it is from the business or some other abnormalities.
DCF Valuation
But in this case, an adjustment has to be made and so for the last year FCF, I used $60m FCF to be safe. I could have used $79m but wasn't sure and just played it safe.
15% growth rate is used since the FCF growth is 24%. Again, I'm using 15% because I don't know the company.
Discount of 15% is used. DCF value comes out to about $30.
Graham Valuation
After the $138m impairment, goodwill balance is now 2.4m which is MUCH better than before. It completely cut the excess fat. The impairment is also what caused negative EPS in 2009. If you ignore this impairment from the income statement, the EPS is actually $1.86 and not -$1.69.
If the 2009 EPS is edited to be $1.86, then the growth rate is calculated as 30% and the median EPS to be $1.04.
I'll stickwith $1.04 but lower the growth rate to 15% again.
Graham valuation is now $23
EPV
EPV uses earnings which is very inconsistent with BKI. They seem to write off lots of things every few years which is a warning sign that management makes bad decisions.
Like the graham valuation, I know that the impairment caused a bad year so if I ignore the effects of impairment, EBIT is actually $86m instead of -$51.7m.
The 2009 adjusted income then becomes $133m. The median adjusted earnings over the past 5 years then becomes something like $60m but the past year adjusted income is very good so if I use $100m to manually override the income, EPV is $14.62 while a $133m adjusted income gives an EPV of $24.08
Reproduction value is $20 so I can conclude that BKI does not have a moat but it is looks to have a MOS of 50%.
Note that I just looked at a few numbers to come up with all this, but a good exercise in how to use the spreadsheets properly.
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