Cable One, Inc. (CABO) stock intrinsic value fair value estimate & owner earnings analysis

Cable One sells broadband internet, video and phone service under the Sparklight brand to about 1.03 million customers in smaller cities and towns across 24 states. Residential internet is 60.1% of revenue, business data 15.3% and residential video 12.5%. The business is shrinking. Revenue fell from $1,706M in 2022 to $1,501M in 2025, then fell another 7.9% in the first half of 2026 ($701.9M vs $761.7M). In 2025 internet customers fell 5.3% and video customers about 22%, as fiber overbuilders, fixed wireless and phone companies competed for them. Earnings before interest, taxes, depreciation, amortization and impairments fell from about $870M in 2023 to $784M in 2024 and $717M in 2025, and were down 11% in the first half of 2026; margins slipped from about 52% to 46%. Capital spending has held near $285M a year. The debt decides the value. At June 30, 2026 the company owed $3.06B and held $166M of cash. On about October 1, 2026 it is due to buy the 55% of Mega Broadband Investments (MBI) it does not already own for about $480M, taking on MBI's roughly $845M to $895M of net debt, which matures in November 2027. That brings net debt to about $4.2B, or about $740 per share. Most of it comes due between November 2027 and mid-2028: MBI's loans in November 2027, $345M of 1.125% convertible notes in March 2028, the revolving credit line in 2028, and about $1.65B of term loans. The term loans move to May 2028 unless most of the Term Loan B-4 is repaid first. Only the $582M of 4% notes run to 2030. The loan agreement caps net debt at 5.0 times earnings (5.5 times for the four quarters after the MBI closing). We estimate about 4.8 times just after the closing, rising toward the limit as earnings fall. Much of today's debt carries low rates (1.125% and 4% on the notes, about 6% on the term loans), so refinancing will cost more. In 2025 the company bought back $68M of its 4% notes for $54.1M, about 80 cents on the dollar, which implies lenders were already asking roughly 9% on its unsecured debt. How we valued it, and what changed. Our previous analysis valued the cash left for shareholders after interest. It assumed that cash would shrink at the same pace as the business and that the debt could be rolled over indefinitely. That was a mistake for a company in this position: interest does not shrink when revenue does, and lenders will not keep refinancing $4.2B for a business losing 5% to 9% of its revenue a year. This time we valued the whole business and subtracted what it owes. The business value is the cash it produces before interest, after tax, after stock compensation and after the capital spending needed to keep the network running. We treat all capital spending as upkeep because revenue is falling. This lowers our base estimate from $310 per share to below zero. For reference, cash after interest was $275M in 2025 ($48.77 per share), down 15% from 2024, and the 2022-2025 median was about $50 per share. Our path starts from the 2025 results and the declines already reported in both quarters of 2026. The impairments ($586M in 2025 and a further $598M in the second quarter of 2026) are non-cash and do not reduce these figures directly. They do show the company itself marking these assets down, so that decline is carried in the path below. We include all of MBI (2025 revenue $309M, down 3.3%; operating costs $137M; capital spending $75M, from MBI's own figures), along with all of its debt and the purchase price. MBI's loan rate is not disclosed, so we assumed it matches Cable One's term loans. All cash flows are discounted at 6%. Base case, about -$213 per share. Revenue declines 8% in the first year, 7% in the second, 6% in years three to five and 5% a year after that. That is roughly the rate internet customers are leaving, once the low-margin video business has mostly run off. Margins keep slipping about 1.5 points a year, as they have since 2023, down to 40%. Capital spending stays at about 19.5% of revenue, the 2025-2026 level. MBI revenue declines 4% a year. On these numbers the combined business is worth about $3.0B against roughly $4.2B of net debt: the company appears to owe about $1.2B more than it is worth. Cash after interest falls from about $196M in the first year to around zero by year six, as refinanced debt costs about 7.5%. We credit nothing for fiber upgrades, DOCSIS 4.0, business fiber expansion or new markets, because none of it is contracted or proven. Bear case, about -$383 per share. Revenue declines 9% a year for five years and 7% after that; the 9% matches the first half of 2026 (the second quarter was down 8.4%). Margins fall 2 points a year to 36%, capital spending runs at 21% of revenue, MBI declines 6% a year and debt is refinanced near 9.5%. The business is worth about $2.0B, about $2.2B less than it owes. In practice this is the case where the 2027-2028 maturities or the leverage limit force a restructuring and shareholders are left with nothing. Bull case, about $10 per share. Revenue declines 6% in the first year and 4% a year after that as video runs off and business data holds steady. Margins stay near 45% to 47%, helped by cost cuts already under way: Cable One's 2025 operating costs fell 5.9%, and MBI cut operating costs 11% and capital spending 24%. Capital spending falls to 18% of revenue, MBI declines 2.5% a year and the debt is refinanced near 7%. Even then the business is worth about $4.3B, roughly the same as its debt. Cross-check and stress test. We also modeled year by year, with all spare cash repaying debt and interest at the refinancing rates above. That gave about -$318 base and $28 bull. The bear case came out far more negative, because the model keeps borrowing to cover shortfalls, which lenders would not allow. The tax saving on interest roughly offsets the cost of borrowing above 6%, so we use the simpler figures. We also tested whether the base case is too harsh. Holding margins at a 43% floor and cutting capital spending to 18% of revenue still leaves about -$152 per share. Holding revenue declines at 5% from the start gives about -$183. Only the bull case's combination of slower customer losses, steady margins, lower capital spending and affordable refinancing brings the business back to about the value of its debt. What could make this wrong: customer losses could slow sharply if competing fiber and fixed-wireless build-outs stall; a buyer could pay more for the network than its cash flows justify; or the company could sell assets or refinance on better terms than we assume. MBI's purchase price and debt are preliminary estimates and may differ at closing.