Great Elm Group, Inc. 7.25% Notes due 2027 (GEGGL) Discounted Future Market Cap

Great Elm Group, Inc. 7.25% Notes due 2027

GEGGL (NASDAQ)

(%)

Valuation
Great Elm Group, Inc. 7.25% Notes due 2027 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	2.72 Thou. USD
Estimated net income	-296 Mil. USD
Estimated market capitalization	103.8 Bil. USD
Market capitalization discounted to present	71.99 Bil. USD
Shares Outstanding	26.45 Mil.
Earnings Per Share (EPS)	-0.067 USD
Market Price	23.45 USD
Price to Earnings (PE) Ratio	-452.9

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": [4.5, 0.0, 4.93, 5.94, 51.18, 58.99, 60.85, 4.52, 8.66, 17.83, {"y": 33.44, "oy": 33.44, "e": true, "c": 2025, "g": 87.53, "og": 87.53}, {"y": 57.82, "oy": 57.82, "e": true, "c": 2026, "g": 72.88, "og": 72.88}, {"y": 99.96, "oy": 99.96, "e": true, "c": 2027, "g": 72.88, "og": 72.88}, {"y": 172.8, "oy": 172.8, "e": true, "c": 2028, "g": 72.88, "og": 72.88}, {"y": 298.7, "oy": 298.7, "e": true, "c": 2029, "g": 72.88, "og": 72.88}], "dataType": ".", "numberFormat": "M", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [-12.2, -15.27, -15.21, -11.07, -6.64, -12.98, -7.54, -14.89, 14.47, -1.39, {"y": -33.14, "oy": -33.14, "e": true, "c": 2025, "g": 2287, "og": 2287}, {"y": -57.29, "oy": -57.29, "e": true, "c": 2026, "g": 72.88, "og": 72.88}, {"y": -99.05, "oy": -99.05, "e": true, "c": 2027, "g": 72.88, "og": 72.88}, {"y": -171.2, "oy": -171.2, "e": true, "c": 2028, "g": 72.88, "og": 72.88}, {"y": -296.0, "oy": -296.0, "e": true, "c": 2029, "g": 72.88, "og": 72.88}], "dataType": ".", "numberFormat": "M", "hidden": false}, {"label": "Linear Regression Revenue", "mappingKey": "linearRegressionRevenue", "data": [12.16, 14.29, 16.42, 18.55, 20.68, 22.8, 24.93, 27.06, 29.19, 31.32, 33.44, 35.57, 37.7, 39.83, 41.96], "dataType": ".", "numberFormat": "M", "hidden": true}], "editableDates": {"2025": 36, "2026": 37, "2027": 38, "2028": 39, "2029": 40}, "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	17.83	19.63	33.44	57.82	99.96	172.8	298.7
Revenue Growth Rate	105.9%	10.05%	87.53%	72.88%	72.88%	72.88%	72.88%
Net Income	-1.39	-1.39	-33.14	-57.29	-99.05	-171.2	-296

Historical Values

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	23.7	19.63	17.83	8.66	4.52	60.85	58.99	51.18	5.93	4.93	0	4.5
Cost of Revenue	22.95	12.69	16.86	11.35	6.62	63.39	49.63	45.98	9.71	5.12	0.063	31.07
Gross Profit	1.06	6.94	0.977	-2.69	-2.62	-2.54	9.36	5.2	-3.77	-0.192	-0.063	0
Gross Margin	-10.42%	35.37%	5.48%	-30.99%	-58.1%	-4.17%	15.87%	10.16%	-63.52%	-3.9%		0%
Operating Income	-6.52	-5.02	-7.84	-11.21	-8.74	-7.59	3.76	-2.17	-10.47	-4.61	-9.84	-8.04
Operating Margin	-85.12%	-25.58%	-43.95%	-129.4%	-193.6%	-12.47%	6.38%	-4.24%	-176.4%	-93.46%		-178.5%
Net Income	-7.65	-1.39	-1.39	14.47	-14.89	-7.54	-12.97	-6.64	-11.07	-15.21	-15.27	-12.2
Net Margin	-99.08%	-7.1%	-7.78%	167%	-329.8%	-12.39%	-21.99%	-12.98%	-186.5%	-308.6%		-270.7%

Historical Growth Rates

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	23.7	19.63	17.83	8.66	4.52	60.85	58.99	51.18	5.93	4.93	0	4.5
Revenue Growth Rate	72.88%	10.05%	105.9%	91.83%	-92.58%	3.15%	15.27%	762.3%	20.46%		-100%	-87.62%
Net Income	-7.65	-1.39	-1.39	14.47	-14.89	-7.54	-12.97	-6.64	-11.07	-15.21	-15.27	-12.2
Net Margin	-99.08%	-7.1%	-7.78%	167%	-329.8%	-12.39%	-21.99%	-12.98%	-186.5%	-308.6%		-270.7%
Net Income Growth Rate	-7.24%	0.432%	-109.6%	-197.1%	97.57%	-41.9%	95.29%	-39.97%	-27.22%	-0.413%	25.2%	118.1%
Stockholders Equity	52.12	57.23	62.71	63.84	33.5	43.24	60.79	61.07	64.36	66.23	36.82	23.5
Equity Growth Rate	8.55%	-8.75%	-1.77%	90.6%	-22.53%	-28.88%	-0.445%	-5.12%	-2.81%	79.86%	56.66%	-62.73%
Return on Invested Capital (ROIC)	-22.64%	-7.27%	-10.76%	-16.18%	-6.96%	-9.04%	3%	-1.08%	-12.48%	-17.18%	14.55%	-185.6%
After-tax Operating Income	-6.55	-7.14	-8.78	-11.06	-8.78	-9.45	3.77	-1.65	-10.17	-4.31	-6.38	-8.15
Income Tax Rate	-1%	-42.31%	-12.01%	1.36%	-0.432%	-24.47%	-0.331%	24.11%	2.82%	6.49%	35.09%	-1.36%
Invested Capital	74.85	98.19	81.57	68.35	126.1	104.5	125.6	151.8	81.54	25.07	-43.88	4.39