MFS High Income Municipal Trust (CXE) Discounted Future Market Cap

MFS High Income Municipal Trust

CXE (NYSE)

(%)

Valuation
MFS High Income Municipal Trust Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("quote:close") / data.get("income:eps"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

assumptions.set("%net_income_margin",
                data.average(f"%netMargin:{-assumptions.get('historical_years')}->0"))  # Historical average
assumptions.set("%revenue_growth_rate",
                data.average(f"%revenueGrowthRate:{-assumptions.get('historical_years')}->0"))  # Historical average

# Calculate a linear regression for forecasting revenues
data.compute({
    "linearRegressionRevenue": f"function:linear_regression:income:revenue start:{-assumptions.get('historical_years')}",
}, forecast=assumptions.get("projection_years"))

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"function:compound:{data.get('linearRegressionRevenue:1')} rate:{assumptions.get('%revenue_growth_rate')} offset:-1",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("quote:close"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income",
        "linearRegressionRevenue": "Linear Regression Revenue"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "number_format": "M",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ],
        "hidden_keys": ["linearRegressionRevenue"]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

USD

Market Price USD

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	-6.59 USD
Estimated net income	-43.36 Mil. USD
Estimated market capitalization	-300.2 Mil. USD
Market capitalization discounted to present	-207.8 Mil. USD
Shares Outstanding	31.53 Mil.
Earnings Per Share (EPS)	0.52 USD
Market Price	3.6 USD
Price to Earnings (PE) Ratio	6.93

Historical and forecasted data

In Millions of USD

{"sectionId": "section-chart-1", "sectionType": "chart", "title": "Historical and forecasted data", "dates": [2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029], "series": [{"label": "Revenue", "mappingKey": "income:revenue", "data": [14.5, 15.14, 13.62, 4.57, 16.25, 0.862, 12.66, -34.22, 10.24, 10.15, {"y": -3.75, "oy": -3.75, "e": true, "c": 2025, "g": -136.9, "og": -136.9}, {"y": -6.99, "oy": -6.99, "e": true, "c": 2026, "g": 86.54, "og": 86.54}, {"y": -13.05, "oy": -13.05, "e": true, "c": 2027, "g": 86.54, "og": 86.54}, {"y": -24.34, "oy": -24.34, "e": true, "c": 2028, "g": 86.54, "og": 86.54}, {"y": -45.4, "oy": -45.4, "e": true, "c": 2029, "g": 86.54, "og": 86.54}], "dataType": ".", "numberFormat": "M", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [9.58, 5.1, 13.35, 4.47, 16.16, 0.799, 12.6, -34.27, 2.45, 16.37, {"y": -3.58, "oy": -3.58, "e": true, "c": 2025, "g": -121.9, "og": -121.9}, {"y": -6.68, "oy": -6.68, "e": true, "c": 2026, "g": 86.54, "og": 86.54}, {"y": -12.46, "oy": -12.46, "e": true, "c": 2027, "g": 86.54, "og": 86.54}, {"y": -23.24, "oy": -23.24, "e": true, "c": 2028, "g": 86.54, "og": 86.54}, {"y": -43.36, "oy": -43.36, "e": true, "c": 2029, "g": 86.54, "og": 86.54}], "dataType": ".", "numberFormat": "M", "hidden": false}, {"label": "Linear Regression Revenue", "mappingKey": "linearRegressionRevenue", "data": [14.66, 12.82, 10.98, 9.14, 7.3, 5.46, 3.62, 1.77, -0.067, -1.91, -3.75, -5.59, -7.43, -9.27, -11.11], "dataType": ".", "numberFormat": "M", "hidden": true}], "editableDates": {"2025": 37, "2026": 38, "2027": 39, "2028": 40, "2029": 41}, "properties": {"number_format": "M", "display_table": true}, "width": "full"}

Edit Chart Values	2025	2026	2027	2028	2029

↳ Growth Rate

Estimated Future Values

amounts of USD except for #	2024	LTM	2025	2026	2027	2028	2029
Revenue	10.15	9.2	-3.75	-6.99	-13.05	-24.34	-45.4
Revenue Growth Rate	-0.89%	-9.32%	-136.9%	86.54%	86.54%	86.54%	86.54%
Net Income	16.37	16.37	-3.58	-6.68	-12.46	-23.24	-43.36

Historical Values

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	6.63	9.2	10.15	10.24	-34.22	12.66	0.862	16.25	4.57	13.62	15.14	14.5
Cost of Revenue	1.84	1.85	0	1.37	1.6	1.83	1.78	1.87	1.82	2.02	2.15	2.11
Gross Profit	4.96	7.36	10.15	8.87	-35.82	10.83	-0.919	14.38	2.76	11.6	12.99	12.39
Gross Margin	68.68%	79.93%	100%	86.61%	104.7%	85.53%	-106.6%	88.52%	60.32%	85.19%	85.77%	85.46%
Operating Income	6.94	17.16	8.66	8.64	-32.34	12.61	0.799	16.16	7	15.3	11.51	10.82
Operating Margin	105.3%	186.5%	85.28%	84.37%	94.5%	99.58%	92.72%	99.45%	153.1%	112.4%	76.02%	74.6%
Net Income	5.73	16.37	16.37	2.45	-34.27	12.6	0.799	16.16	4.47	13.35	5.1	9.58
Net Margin	95.51%	177.9%	161.3%	23.94%	100.2%	99.56%	92.72%	99.45%	97.74%	98.03%	33.67%	66.06%

Historical Growth Rates

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	6.63	9.2	10.15	10.24	-34.22	12.66	0.862	16.25	4.57	13.62	15.14	14.5
Revenue Growth Rate	86.51%	-9.32%	-0.89%	-129.9%	-370.3%	1,368%	-94.69%	255.2%	-66.42%	-10.02%	4.38%	5.62%
Net Income	5.73	16.37	16.37	2.45	-34.27	12.6	0.799	16.16	4.47	13.35	5.1	9.58
Net Margin	95.51%	177.9%	161.3%	23.94%	100.2%	99.56%	92.72%	99.45%	97.74%	98.03%	33.67%	66.06%
Net Income Growth Rate	172.1%	0%	567.9%	-107.2%	-371.9%	1,477%	-95.05%	261.5%	-66.52%	162%	-46.81%	-59.99%
Stockholders Equity	155	137	137	126.3	128.8	169.5	164.5	171.5	163.3	168	163.9	175.4
Equity Growth Rate	-2.05%	0%	8.49%	-1.98%	-23.99%	3%	-4.06%	4.98%	-2.74%	2.44%	-6.52%	-0.092%
Return on Invested Capital (ROIC)	0.44%	7.95%	4.01%	4.15%	-18.45%	4.72%	0%	2.96%	2.79%	-0.844%	-1.95%	-0.949%
After-tax Operating Income	1.27	17.16	8.66	8.64	-39.72	12.6	0	7.93	7.25	-2.24	-5.08	-2.53
Income Tax Rate	63.34%	0%	0%	0%	-22.83%	0.014%	100%	50.95%	-3.6%	114.6%	144.2%	123.4%
Invested Capital	245.9	215.8	215.8	208	215.3	266.9	262.1	267.7	260.3	264.8	260.9	266.9