Intrinsic value of IOU Financial Inc. - IOU

Previous Close

$0.15

  Intrinsic Value

$0.03

stock screener

  Rating & Target

str. sell

-80%

  Value-price divergence*

0%

Previous close

$0.15

 
Intrinsic value

$0.03

 
Up/down potential

-80%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of IOU 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 2016), $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 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  41.67
  33.30
  30.47
  27.92
  25.63
  23.57
  21.71
  20.04
  18.54
  17.18
  15.96
  14.87
  13.88
  12.99
  12.19
  11.47
  10.83
  10.24
  9.72
  9.25
  8.82
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
Revenue, $m
  17
  23
  30
  38
  48
  59
  71
  86
  102
  119
  138
  159
  181
  204
  229
  255
  283
  312
  342
  374
  407
  441
  477
  514
  553
  593
  635
  678
  723
  770
  819
Variable operating expenses, $m
 
  27
  35
  44
  56
  69
  84
  101
  120
  140
  162
  187
  213
  240
  269
  300
  333
  367
  403
  440
  479
  519
  561
  605
  650
  697
  747
  797
  850
  906
  963
Fixed operating expenses, $m
 
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
Total operating expenses, $m
  22
  29
  37
  46
  58
  71
  86
  103
  122
  142
  165
  190
  216
  243
  272
  303
  336
  370
  406
  443
  482
  522
  564
  609
  654
  701
  751
  801
  854
  910
  967
Operating income, $m
  -5
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -20
  -23
  -27
  -31
  -35
  -39
  -43
  -48
  -53
  -58
  -63
  -69
  -75
  -81
  -87
  -94
  -101
  -108
  -116
  -123
  -131
  -140
  -148
EBITDA, $m
  -5
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -20
  -23
  -27
  -31
  -35
  -39
  -43
  -48
  -53
  -58
  -63
  -69
  -75
  -81
  -87
  -94
  -101
  -108
  -116
  -123
  -131
  -140
  -148
Interest expense (income), $m
  3
  3
  4
  6
  8
  10
  12
  14
  17
  21
  24
  28
  32
  37
  42
  47
  52
  58
  64
  70
  76
  83
  90
  98
  105
  113
  121
  130
  139
  148
  158
Earnings before tax, $m
  -5
  -9
  -12
  -15
  -18
  -22
  -27
  -32
  -38
  -44
  -51
  -59
  -67
  -76
  -85
  -95
  -105
  -116
  -127
  -139
  -151
  -164
  -178
  -192
  -206
  -221
  -237
  -253
  -270
  -288
  -306
Tax expense, $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
  0
Net income, $m
  -5
  -9
  -12
  -15
  -18
  -22
  -27
  -32
  -38
  -44
  -51
  -59
  -67
  -76
  -85
  -95
  -105
  -116
  -127
  -139
  -151
  -164
  -178
  -192
  -206
  -221
  -237
  -253
  -270
  -288
  -306

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  48
  56
  73
  93
  117
  145
  176
  212
  251
  294
  341
  392
  446
  504
  566
  631
  699
  771
  845
  924
  1,005
  1,090
  1,178
  1,270
  1,365
  1,464
  1,567
  1,674
  1,786
  1,901
  2,022
Adjusted assets (=assets-cash), $m
  42
  56
  73
  93
  117
  145
  176
  212
  251
  294
  341
  392
  446
  504
  566
  631
  699
  771
  845
  924
  1,005
  1,090
  1,178
  1,270
  1,365
  1,464
  1,567
  1,674
  1,786
  1,901
  2,022
Revenue / Adjusted assets
  0.405
  0.411
  0.411
  0.409
  0.410
  0.407
  0.403
  0.406
  0.406
  0.405
  0.405
  0.406
  0.406
  0.405
  0.405
  0.404
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
Average production assets, $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
  0
Working capital, $m
  20
  11
  15
  19
  24
  29
  36
  43
  51
  60
  69
  79
  90
  102
  115
  128
  142
  156
  171
  187
  204
  221
  239
  257
  276
  297
  317
  339
  362
  385
  409
Total debt, $m
  36
  41
  54
  69
  87
  108
  132
  159
  189
  222
  258
  297
  338
  382
  429
  479
  531
  585
  642
  702
  764
  829
  896
  966
  1,038
  1,114
  1,192
  1,274
  1,359
  1,447
  1,539
Total liabilities, $m
  37
  43
  56
  71
  89
  110
  134
  161
  191
  224
  260
  299
  340
  384
  431
  481
  533
  587
  644
  704
  766
  831
  898
  968
  1,040
  1,116
  1,194
  1,276
  1,361
  1,449
  1,541
Total equity, $m
  10
  13
  17
  22
  28
  35
  42
  50
  60
  70
  81
  93
  106
  120
  135
  150
  166
  183
  201
  220
  239
  259
  280
  302
  325
  349
  373
  399
  425
  453
  481
Total liabilities and equity, $m
  47
  56
  73
  93
  117
  145
  176
  211
  251
  294
  341
  392
  446
  504
  566
  631
  699
  770
  845
  924
  1,005
  1,090
  1,178
  1,270
  1,365
  1,465
  1,567
  1,675
  1,786
  1,902
  2,022
Debt-to-equity ratio
  3.600
  3.050
  3.090
  3.110
  3.130
  3.140
  3.150
  3.160
  3.170
  3.170
  3.180
  3.180
  3.180
  3.190
  3.190
  3.190
  3.190
  3.190
  3.190
  3.190
  3.190
  3.190
  3.190
  3.200
  3.200
  3.200
  3.200
  3.200
  3.200
  3.200
  3.200
Adjusted equity ratio
  0.095
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  -9
  -12
  -15
  -18
  -22
  -27
  -32
  -38
  -44
  -51
  -59
  -67
  -76
  -85
  -95
  -105
  -116
  -127
  -139
  -151
  -164
  -178
  -192
  -206
  -221
  -237
  -253
  -270
  -288
  -306
Depreciation, amort., depletion, $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
  0
Funds from operations, $m
  -88
  -9
  -12
  -15
  -18
  -22
  -27
  -32
  -38
  -44
  -51
  -59
  -67
  -76
  -85
  -95
  -105
  -116
  -127
  -139
  -151
  -164
  -178
  -192
  -206
  -221
  -237
  -253
  -270
  -288
  -306
Change in working capital, $m
  -74
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
Cash from operations, $m
  -14
  -12
  -15
  -19
  -23
  -28
  -33
  -39
  -46
  -53
  -61
  -69
  -78
  -87
  -97
  -108
  -119
  -130
  -142
  -155
  -168
  -182
  -196
  -210
  -226
  -241
  -258
  -275
  -293
  -311
  -330
Maintenance CAPEX, $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
  0
New CAPEX, $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
  0
Cash from investing activities, $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
  0
Free cash flow, $m
  -14
  -12
  -15
  -19
  -23
  -28
  -33
  -39
  -46
  -53
  -61
  -69
  -78
  -87
  -97
  -108
  -119
  -130
  -142
  -155
  -168
  -182
  -196
  -210
  -226
  -241
  -258
  -275
  -293
  -311
  -330
Issuance/(repayment) of debt, $m
  17
  11
  13
  16
  18
  21
  24
  27
  30
  33
  36
  39
  41
  44
  47
  49
  52
  55
  57
  60
  62
  65
  67
  70
  73
  76
  78
  82
  85
  88
  92
Issuance/(repurchase) of shares, $m
  2
  13
  16
  20
  24
  29
  34
  40
  47
  54
  62
  71
  80
  89
  99
  110
  121
  133
  145
  158
  171
  185
  199
  214
  229
  245
  261
  279
  297
  315
  335
Cash from financing (excl. dividends), $m  
  16
  24
  29
  36
  42
  50
  58
  67
  77
  87
  98
  110
  121
  133
  146
  159
  173
  188
  202
  218
  233
  250
  266
  284
  302
  321
  339
  361
  382
  403
  427
Total cash flow (excl. dividends), $m
  2
  11
  14
  16
  19
  22
  25
  28
  31
  34
  37
  40
  43
  46
  49
  52
  54
  57
  60
  62
  65
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
Retained Cash Flow (-), $m
  3
  -13
  -16
  -20
  -24
  -29
  -34
  -40
  -47
  -54
  -62
  -71
  -80
  -89
  -99
  -110
  -121
  -133
  -145
  -158
  -171
  -185
  -199
  -214
  -229
  -245
  -261
  -279
  -297
  -315
  -335
Prev. year cash balance distribution, $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 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
 
  -2
  -2
  -3
  -5
  -7
  -9
  -12
  -16
  -20
  -25
  -30
  -36
  -43
  -50
  -58
  -67
  -76
  -85
  -95
  -106
  -117
  -128
  -140
  -153
  -166
  -179
  -193
  -208
  -223
  -239
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  -1
  -2
  -3
  -4
  -5
  -7
  -8
  -10
  -11
  -13
  -14
  -15
  -16
  -17
  -17
  -16
  -16
  -15
  -14
  -13
  -11
  -10
  -9
  -7
  -6
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  100
  49.2
  25.0
  13.0
  6.9
  3.8
  2.1
  1.2
  0.7
  0.4
  0.2
  0.1
  0.1
  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
  0.0
  0.0
  0.0

IOU Financial Inc. (IOU Financial) operates an Internet-based lending platform in the United States for owner-operated businesses with daily sales, such as medical and dental practices, grocery and retail stores, restaurants and hotels, franchisees and e-commerce companies, through its subsidiary, IOU Central Inc. (IOC USA). The Company allows these businesses to apply for approximately six, nine, 12, 15 and 18 month loans. The Company operates through activities, such as lending and servicing. Its lending activity originates and retains loans as part of its loans receivable portfolio. The Company finances its lending activities in part by selling some of its commercial loans receivable to third party purchasers and one related party on a non-recourse basis and retaining the servicing rights for these loans in exchange for a service fee. Its servicing activity services loans that have been sold to third party purchasers on a non-recourse basis in exchange for a servicing fee.

FINANCIAL RATIOS  of  IOU Financial Inc. (IOU)

Valuation Ratios
P/E Ratio -2.1
Price to Sales 0.6
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow -0.8
Price to Free Cash Flow -0.8
Growth Rates
Sales Growth Rate 41.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 100%
Total Debt to Equity 360%
Interest Coverage -1
Management Effectiveness
Return On Assets -4.9%
Ret/ On Assets - 3 Yr. Avg. -4.1%
Return On Total Capital -12.8%
Ret/ On T. Cap. - 3 Yr. Avg. -11.8%
Return On Equity -43.5%
Return On Equity - 3 Yr. Avg. -29.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -11.8%
EBITDA Margin - 3 Yr. Avg. -9.5%
Operating Margin -29.4%
Oper. Margin - 3 Yr. Avg. -26.5%
Pre-Tax Margin -29.4%
Pre-Tax Margin - 3 Yr. Avg. -26.5%
Net Profit Margin -29.4%
Net Profit Margin - 3 Yr. Avg. -26.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

IOU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IOU stock intrinsic value calculation we used $17 million for the last fiscal year's total revenue generated by IOU Financial Inc.. The default revenue input number comes from 2016 income statement of IOU Financial Inc.. 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 IOU stock valuation model: a) initial revenue growth rate of 33.3% 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 4.4%, whose default value for IOU is calculated based on our internal credit rating of IOU Financial Inc., 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 IOU Financial Inc..
    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 IOU stock the variable cost ratio is equal to 117.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2 million in the base year in the intrinsic value calculation for IOU 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 10.9% for IOU Financial Inc..

Corporate tax rate of 27% is the nominal tax rate for IOU Financial Inc.. 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 IOU 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 IOU are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in IOU Financial Inc. 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 IOU is equal to 50%. 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 - $10 million for IOU Financial Inc. - 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 81.5 million for IOU Financial Inc. 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 IOU Financial Inc. at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of IOU
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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