Intrinsic value of BlackBerry Limited - BB

Previous Close

$14.02

  Intrinsic Value

$1.38

stock screener

  Rating & Target

str. sell

-90%

Previous close

$14.02

 
Intrinsic value

$1.38

 
Up/down potential

-90%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 7.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -39.38
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,769
  1,804
  1,846
  1,893
  1,947
  2,006
  2,070
  2,141
  2,217
  2,299
  2,388
  2,482
  2,583
  2,690
  2,804
  2,925
  3,053
  3,189
  3,332
  3,484
  3,644
  3,813
  3,991
  4,179
  4,377
  4,585
  4,804
  5,035
  5,278
  5,534
  5,803
Variable operating expenses, $m
 
  1,989
  2,033
  2,083
  2,139
  2,202
  2,271
  2,345
  2,426
  2,514
  2,607
  2,632
  2,739
  2,852
  2,973
  3,101
  3,237
  3,381
  3,533
  3,694
  3,864
  4,043
  4,232
  4,431
  4,641
  4,862
  5,094
  5,339
  5,597
  5,868
  6,153
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  3,364
  1,989
  2,033
  2,083
  2,139
  2,202
  2,271
  2,345
  2,426
  2,514
  2,607
  2,632
  2,739
  2,852
  2,973
  3,101
  3,237
  3,381
  3,533
  3,694
  3,864
  4,043
  4,232
  4,431
  4,641
  4,862
  5,094
  5,339
  5,597
  5,868
  6,153
Operating income, $m
  -1,596
  -184
  -187
  -190
  -193
  -196
  -200
  -205
  -209
  -214
  -220
  -150
  -156
  -162
  -169
  -176
  -184
  -192
  -201
  -210
  -220
  -230
  -241
  -252
  -264
  -277
  -290
  -304
  -318
  -334
  -350
EBITDA, $m
  -1,273
  110
  112
  115
  119
  122
  126
  130
  135
  140
  145
  151
  157
  164
  171
  178
  186
  194
  203
  212
  222
  232
  243
  255
  267
  279
  293
  307
  322
  337
  353
Interest expense (income), $m
  65
  41
  43
  45
  47
  50
  53
  56
  59
  63
  67
  71
  76
  80
  86
  91
  97
  103
  109
  116
  124
  131
  139
  148
  157
  166
  176
  187
  198
  209
  222
Earnings before tax, $m
  -1,632
  -226
  -230
  -235
  -240
  -246
  -253
  -261
  -268
  -277
  -286
  -221
  -231
  -243
  -255
  -267
  -281
  -295
  -310
  -326
  -343
  -361
  -380
  -400
  -421
  -443
  -466
  -491
  -516
  -543
  -572
Tax expense, $m
  -3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -1,629
  -226
  -230
  -235
  -240
  -246
  -253
  -261
  -268
  -277
  -286
  -221
  -231
  -243
  -255
  -267
  -281
  -295
  -310
  -326
  -343
  -361
  -380
  -400
  -421
  -443
  -466
  -491
  -516
  -543
  -572

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,862
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  4,409
  2,596
  2,656
  2,724
  2,801
  2,886
  2,979
  3,080
  3,190
  3,308
  3,435
  3,571
  3,716
  3,871
  4,035
  4,209
  4,393
  4,588
  4,795
  5,013
  5,243
  5,486
  5,743
  6,013
  6,297
  6,597
  6,913
  7,245
  7,595
  7,963
  8,349
Adjusted assets (=assets-cash), $m
  2,547
  2,596
  2,656
  2,724
  2,801
  2,886
  2,979
  3,080
  3,190
  3,308
  3,435
  3,571
  3,716
  3,871
  4,035
  4,209
  4,393
  4,588
  4,795
  5,013
  5,243
  5,486
  5,743
  6,013
  6,297
  6,597
  6,913
  7,245
  7,595
  7,963
  8,349
Revenue / Adjusted assets
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
Average production assets, $m
  1,566
  1,597
  1,634
  1,676
  1,723
  1,775
  1,832
  1,895
  1,962
  2,035
  2,113
  2,197
  2,286
  2,381
  2,482
  2,589
  2,702
  2,822
  2,949
  3,083
  3,225
  3,374
  3,532
  3,698
  3,873
  4,058
  4,252
  4,456
  4,671
  4,898
  5,135
Working capital, $m
  1,466
  -404
  -413
  -424
  -436
  -449
  -464
  -480
  -497
  -515
  -535
  -556
  -579
  -603
  -628
  -655
  -684
  -714
  -746
  -780
  -816
  -854
  -894
  -936
  -980
  -1,027
  -1,076
  -1,128
  -1,182
  -1,240
  -1,300
Total debt, $m
  798
  830
  868
  911
  961
  1,015
  1,075
  1,139
  1,210
  1,285
  1,367
  1,454
  1,546
  1,645
  1,750
  1,862
  1,980
  2,105
  2,237
  2,376
  2,524
  2,679
  2,843
  3,016
  3,198
  3,390
  3,592
  3,805
  4,029
  4,264
  4,512
Total liabilities, $m
  1,629
  1,662
  1,700
  1,743
  1,793
  1,847
  1,907
  1,971
  2,042
  2,117
  2,199
  2,286
  2,378
  2,477
  2,582
  2,694
  2,812
  2,937
  3,069
  3,208
  3,356
  3,511
  3,675
  3,848
  4,030
  4,222
  4,424
  4,637
  4,861
  5,096
  5,344
Total equity, $m
  2,779
  935
  956
  981
  1,008
  1,039
  1,072
  1,109
  1,148
  1,191
  1,237
  1,286
  1,338
  1,393
  1,452
  1,515
  1,582
  1,652
  1,726
  1,805
  1,888
  1,975
  2,067
  2,165
  2,267
  2,375
  2,489
  2,608
  2,734
  2,867
  3,006
Total liabilities and equity, $m
  4,408
  2,597
  2,656
  2,724
  2,801
  2,886
  2,979
  3,080
  3,190
  3,308
  3,436
  3,572
  3,716
  3,870
  4,034
  4,209
  4,394
  4,589
  4,795
  5,013
  5,244
  5,486
  5,742
  6,013
  6,297
  6,597
  6,913
  7,245
  7,595
  7,963
  8,350
Debt-to-equity ratio
  0.287
  0.890
  0.910
  0.930
  0.950
  0.980
  1.000
  1.030
  1.050
  1.080
  1.110
  1.130
  1.160
  1.180
  1.200
  1.230
  1.250
  1.270
  1.300
  1.320
  1.340
  1.360
  1.380
  1.390
  1.410
  1.430
  1.440
  1.460
  1.470
  1.490
  1.500
Adjusted equity ratio
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,629
  -226
  -230
  -235
  -240
  -246
  -253
  -261
  -268
  -277
  -286
  -221
  -231
  -243
  -255
  -267
  -281
  -295
  -310
  -326
  -343
  -361
  -380
  -400
  -421
  -443
  -466
  -491
  -516
  -543
  -572
Depreciation, amort., depletion, $m
  323
  294
  299
  305
  311
  319
  326
  335
  344
  354
  365
  301
  313
  326
  340
  355
  370
  387
  404
  422
  442
  462
  484
  507
  531
  556
  582
  610
  640
  671
  703
Funds from operations, $m
  -442
  68
  69
  70
  71
  72
  73
  75
  76
  77
  79
  80
  82
  83
  85
  87
  89
  91
  94
  96
  98
  101
  104
  107
  110
  113
  116
  120
  124
  128
  132
Change in working capital, $m
  -139
  -8
  -9
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
  -57
  -60
Cash from operations, $m
  -303
  76
  79
  81
  83
  85
  88
  90
  93
  96
  98
  101
  104
  107
  111
  114
  118
  122
  126
  130
  134
  139
  144
  149
  154
  160
  165
  172
  178
  185
  192
Maintenance CAPEX, $m
  0
  -214
  -219
  -224
  -230
  -236
  -243
  -251
  -260
  -269
  -279
  -289
  -301
  -313
  -326
  -340
  -355
  -370
  -387
  -404
  -422
  -442
  -462
  -484
  -507
  -531
  -556
  -582
  -610
  -640
  -671
New CAPEX, $m
  -93
  -31
  -37
  -42
  -47
  -52
  -57
  -62
  -68
  -73
  -78
  -84
  -89
  -95
  -101
  -107
  -113
  -120
  -127
  -134
  -142
  -149
  -158
  -166
  -175
  -184
  -194
  -204
  -215
  -226
  -238
Cash from investing activities, $m
  978
  -245
  -256
  -266
  -277
  -288
  -300
  -313
  -328
  -342
  -357
  -373
  -390
  -408
  -427
  -447
  -468
  -490
  -514
  -538
  -564
  -591
  -620
  -650
  -682
  -715
  -750
  -786
  -825
  -866
  -909
Free cash flow, $m
  675
  -169
  -177
  -185
  -194
  -203
  -213
  -223
  -234
  -246
  -258
  -272
  -286
  -301
  -316
  -333
  -350
  -369
  -388
  -408
  -430
  -452
  -476
  -501
  -528
  -555
  -585
  -615
  -647
  -681
  -717
Issuance/(repayment) of debt, $m
  -959
  32
  38
  44
  49
  54
  60
  65
  70
  76
  81
  87
  93
  99
  105
  111
  118
  125
  132
  140
  147
  156
  164
  173
  182
  192
  202
  213
  224
  235
  248
Issuance/(repurchase) of shares, $m
  7
  243
  251
  259
  268
  277
  287
  297
  308
  320
  332
  270
  284
  298
  314
  330
  347
  366
  385
  405
  426
  449
  472
  497
  523
  551
  580
  610
  642
  676
  711
Cash from financing (excl. dividends), $m  
  -975
  275
  289
  303
  317
  331
  347
  362
  378
  396
  413
  357
  377
  397
  419
  441
  465
  491
  517
  545
  573
  605
  636
  670
  705
  743
  782
  823
  866
  911
  959
Total cash flow (excl. dividends), $m
  -301
  106
  113
  118
  123
  129
  134
  139
  144
  149
  155
  85
  91
  96
  102
  109
  115
  122
  129
  136
  144
  152
  160
  169
  178
  187
  197
  208
  218
  230
  242
Retained Cash Flow (-), $m
  1,555
  -243
  -251
  -259
  -268
  -277
  -287
  -297
  -308
  -320
  -332
  -270
  -284
  -298
  -314
  -330
  -347
  -366
  -385
  -405
  -426
  -449
  -472
  -497
  -523
  -551
  -580
  -610
  -642
  -676
  -711
Prev. year cash balance distribution, $m
 
  1,862
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,724
  -139
  -141
  -145
  -148
  -153
  -158
  -164
  -170
  -177
  -185
  -193
  -202
  -211
  -221
  -232
  -244
  -256
  -269
  -282
  -297
  -312
  -328
  -345
  -363
  -382
  -403
  -424
  -446
  -469
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,653
  -127
  -123
  -119
  -115
  -111
  -107
  -102
  -98
  -93
  -88
  -82
  -77
  -71
  -65
  -59
  -53
  -47
  -41
  -36
  -31
  -26
  -22
  -18
  -14
  -11
  -9
  -7
  -5
  -4
Current shareholders' claim on cash, %
  100
  91.0
  82.7
  75.1
  68.1
  61.8
  56.0
  50.8
  46.0
  41.7
  37.8
  34.9
  32.3
  29.8
  27.5
  25.3
  23.3
  21.5
  19.8
  18.2
  16.7
  15.3
  14.1
  12.9
  11.9
  10.9
  10.0
  9.1
  8.4
  7.7
  7.0

BlackBerry Limited (BlackBerry) provides mobile communications solutions. The Company is engaged in the sale of smartphones and enterprise software and services. The Company's products and services include Enterprise Solutions and Services, Devices, BlackBerry Technology Solutions and Messaging. It is engaged in providing enterprise mobility management (EMM) and mobile security, and offers a portfolio of enterprise software solutions and services that can be deployed across a range of ecosystems and devices, including BlackBerry Enterprise Service (BES) 12 and Good Platforms, BES12 Cloud, enterprise file-sync-and-share (EFSS), SecuSUITE for Enterprise, Enhanced subscriber identity module (SIM)-Based Licensing (ESBL), WorkLife by BlackBerry solution and Professional Cybersecurity Services. The BlackBerry Technology Solutions business unit consists of five units: QNX, Certicom, Paratek, the BlackBerry IoT Platform and Intellectual Property and Patent Licensing (IPPL).

FINANCIAL RATIOS  of  BlackBerry Limited (BB)

Valuation Ratios
P/E Ratio -4.6
Price to Sales 4.2
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow -24.5
Price to Free Cash Flow -18.8
Growth Rates
Sales Growth Rate -39.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -32.6%
Cap. Spend. - 3 Yr. Gr. Rate -45%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 28.7%
Total Debt to Equity 28.7%
Interest Coverage -24
Management Effectiveness
Return On Assets -26.3%
Ret/ On Assets - 3 Yr. Avg. -10.8%
Return On Total Capital -33.8%
Ret/ On T. Cap. - 3 Yr. Avg. -14.7%
Return On Equity -45.8%
Return On Equity - 3 Yr. Avg. -20.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 49%
Gross Margin - 3 Yr. Avg. 47.8%
EBITDA Margin -70.3%
EBITDA Margin - 3 Yr. Avg. -13.3%
Operating Margin -90.2%
Oper. Margin - 3 Yr. Avg. -37.7%
Pre-Tax Margin -92.3%
Pre-Tax Margin - 3 Yr. Avg. -39%
Net Profit Margin -92.1%
Net Profit Margin - 3 Yr. Avg. -36.9%
Effective Tax Rate 0.2%
Eff/ Tax Rate - 3 Yr. Avg. 15.8%
Payout Ratio 0%

BB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BB stock intrinsic value calculation we used $1769 million for the last fiscal year's total revenue generated by BlackBerry Limited. The default revenue input number comes from 2017 income statement of BlackBerry Limited. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BB stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BB is calculated based on our internal credit rating of BlackBerry Limited, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of BlackBerry Limited.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BB stock the variable cost ratio is equal to 110.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.2% for BlackBerry Limited.

Corporate tax rate of 27% is the nominal tax rate for BlackBerry Limited. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BB stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BB are equal to 88.5%.

Life of production assets of 7.3 years is the average useful life of capital assets used in BlackBerry Limited operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BB is equal to -22.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2779 million for BlackBerry Limited - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 531.25 million for BlackBerry Limited is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of BlackBerry Limited at the current share price and the inputted number of shares is $7.4 billion.

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Financial statements of BB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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