Intrinsic value of Benefitfocus - BNFT

Previous Close

$38.00

  Intrinsic Value

$2.96

stock screener

  Rating & Target

str. sell

-92%

Previous close

$38.00

 
Intrinsic value

$2.96

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of BNFT 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  25.95
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
Revenue, $m
  233
  283
  310
  338
  367
  397
  429
  462
  496
  531
  568
  606
  646
  687
  731
  775
  822
  871
  922
  975
  1,030
  1,088
  1,148
  1,211
  1,277
  1,346
  1,418
  1,494
  1,573
  1,656
  1,742
Variable operating expenses, $m
 
  64
  70
  76
  83
  90
  97
  104
  112
  120
  128
  137
  146
  155
  165
  175
  185
  196
  208
  220
  232
  245
  259
  273
  288
  303
  319
  336
  354
  373
  392
Fixed operating expenses, $m
 
  223
  228
  233
  238
  243
  248
  254
  259
  265
  271
  277
  283
  289
  296
  302
  309
  316
  323
  330
  337
  344
  352
  360
  368
  376
  384
  392
  401
  410
  419
Total operating expenses, $m
  266
  287
  298
  309
  321
  333
  345
  358
  371
  385
  399
  414
  429
  444
  461
  477
  494
  512
  531
  550
  569
  589
  611
  633
  656
  679
  703
  728
  755
  783
  811
Operating income, $m
  -32
  -4
  12
  29
  46
  64
  84
  104
  124
  146
  169
  193
  218
  243
  270
  299
  328
  359
  392
  426
  461
  499
  538
  579
  622
  667
  715
  765
  818
  873
  931
EBITDA, $m
  -19
  5
  22
  39
  58
  77
  97
  118
  140
  163
  186
  211
  237
  264
  293
  322
  353
  386
  420
  455
  493
  532
  573
  616
  661
  709
  758
  811
  866
  924
  984
Interest expense (income), $m
  7
  13
  9
  10
  12
  14
  16
  18
  21
  23
  25
  28
  30
  33
  36
  38
  41
  45
  48
  51
  55
  58
  62
  66
  70
  75
  79
  84
  89
  94
  100
Earnings before tax, $m
  -40
  -17
  3
  18
  34
  50
  67
  85
  104
  123
  144
  165
  187
  211
  235
  260
  287
  315
  344
  374
  407
  440
  476
  513
  552
  593
  636
  681
  728
  778
  831
Tax expense, $m
  0
  0
  1
  5
  9
  14
  18
  23
  28
  33
  39
  45
  51
  57
  63
  70
  77
  85
  93
  101
  110
  119
  128
  138
  149
  160
  172
  184
  197
  210
  224
Net income, $m
  -40
  -17
  2
  13
  25
  37
  49
  62
  76
  90
  105
  121
  137
  154
  171
  190
  209
  230
  251
  273
  297
  321
  347
  374
  403
  433
  464
  497
  532
  568
  607

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  59
  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
  180
  182
  199
  217
  236
  255
  276
  297
  319
  342
  365
  390
  415
  442
  470
  499
  529
  560
  593
  627
  662
  700
  738
  779
  821
  866
  912
  961
  1,011
  1,065
  1,120
Adjusted assets (=assets-cash), $m
  121
  182
  199
  217
  236
  255
  276
  297
  319
  342
  365
  390
  415
  442
  470
  499
  529
  560
  593
  627
  662
  700
  738
  779
  821
  866
  912
  961
  1,011
  1,065
  1,120
Revenue / Adjusted assets
  1.926
  1.555
  1.558
  1.558
  1.555
  1.557
  1.554
  1.556
  1.555
  1.553
  1.556
  1.554
  1.557
  1.554
  1.555
  1.553
  1.554
  1.555
  1.555
  1.555
  1.556
  1.554
  1.556
  1.555
  1.555
  1.554
  1.555
  1.555
  1.556
  1.555
  1.555
Average production assets, $m
  68
  87
  95
  103
  112
  122
  131
  141
  152
  163
  174
  186
  198
  210
  224
  237
  252
  267
  282
  298
  315
  333
  351
  371
  391
  412
  434
  457
  481
  507
  533
Working capital, $m
  4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
Total debt, $m
  101
  75
  90
  107
  123
  141
  159
  178
  198
  219
  240
  262
  285
  309
  334
  360
  387
  415
  445
  475
  507
  541
  576
  612
  650
  690
  732
  776
  821
  869
  920
Total liabilities, $m
  214
  164
  179
  195
  212
  230
  248
  267
  287
  307
  329
  351
  374
  398
  423
  449
  476
  504
  534
  564
  596
  630
  665
  701
  739
  779
  821
  865
  910
  958
  1,008
Total equity, $m
  -33
  18
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
Total liabilities and equity, $m
  181
  182
  199
  217
  236
  256
  276
  297
  319
  341
  366
  390
  416
  442
  470
  499
  529
  560
  593
  627
  662
  700
  739
  779
  821
  866
  912
  961
  1,011
  1,064
  1,120
Debt-to-equity ratio
  -3.061
  4.110
  4.540
  4.910
  5.230
  5.520
  5.780
  6.010
  6.210
  6.400
  6.570
  6.720
  6.860
  6.990
  7.110
  7.220
  7.320
  7.410
  7.500
  7.580
  7.660
  7.730
  7.800
  7.860
  7.920
  7.970
  8.030
  8.080
  8.120
  8.170
  8.210
Adjusted equity ratio
  -0.595
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -40
  -17
  2
  13
  25
  37
  49
  62
  76
  90
  105
  121
  137
  154
  171
  190
  209
  230
  251
  273
  297
  321
  347
  374
  403
  433
  464
  497
  532
  568
  607
Depreciation, amort., depletion, $m
  13
  9
  10
  11
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
Funds from operations, $m
  -45
  -8
  12
  24
  36
  49
  62
  77
  91
  106
  122
  139
  157
  175
  194
  214
  235
  256
  279
  303
  328
  355
  382
  411
  442
  474
  507
  543
  580
  619
  660
Change in working capital, $m
  -22
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  -23
  -8
  13
  24
  37
  50
  63
  77
  92
  107
  123
  140
  157
  175
  195
  214
  235
  257
  280
  304
  329
  356
  383
  412
  443
  475
  509
  544
  581
  620
  662
Maintenance CAPEX, $m
  0
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
New CAPEX, $m
  -13
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Cash from investing activities, $m
  26
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -43
  -44
  -47
  -50
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -78
Free cash flow, $m
  3
  -24
  -4
  6
  17
  29
  41
  54
  67
  81
  96
  111
  126
  143
  160
  178
  197
  217
  238
  260
  282
  306
  332
  358
  386
  415
  445
  478
  511
  547
  584
Issuance/(repayment) of debt, $m
  0
  -40
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
Issuance/(repurchase) of shares, $m
  7
  74
  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 financing (excl. dividends), $m  
  6
  34
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
Total cash flow (excl. dividends), $m
  9
  10
  11
  22
  34
  47
  59
  73
  87
  102
  117
  133
  150
  167
  185
  204
  224
  245
  267
  290
  315
  340
  366
  394
  424
  455
  487
  521
  557
  595
  634
Retained Cash Flow (-), $m
  15
  -74
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
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
 
  16
  18
  20
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  69
  72
  76
  80
  85
  89
  94
  99
  104
Cash available for distribution, $m
 
  -64
  10
  21
  32
  45
  57
  71
  85
  99
  115
  130
  147
  164
  182
  201
  221
  242
  264
  287
  311
  336
  363
  390
  420
  450
  482
  516
  552
  589
  629
Discount rate, %
 
  12.90
  13.55
  14.22
  14.93
  15.68
  16.46
  17.29
  18.15
  19.06
  20.01
  21.01
  22.06
  23.17
  24.32
  25.54
  26.82
  28.16
  29.57
  31.05
  32.60
  34.23
  35.94
  37.74
  39.62
  41.60
  43.68
  45.87
  48.16
  50.57
  53.10
PV of cash for distribution, $m
 
  -57
  7
  14
  19
  22
  23
  23
  22
  21
  18
  16
  13
  11
  9
  7
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
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Benefitfocus, Inc. (Benefitfocus) is a provider of cloud-based benefits management platform for consumers, employers, insurance carriers and brokers. The Benefitfocus Platform allows how organizations and individuals shop for, enroll in, manage and exchange benefits. The Company operates through two business segments: Employer, which derives its revenue from customers that use the Company's services for the provision of benefits to their employees, and administrators acting on behalf of employers, Carrier, which derives its revenue from insurance companies that provide coverage at their own risk. Its solutions support benefits plans, including healthcare, dental, life and disability insurance, and voluntary benefits plans, such as critical illness, supplemental income and wellness programs. It provides a multi-tenant cloud-based benefits management platform to the employer and carrier markets.

FINANCIAL RATIOS  of  Benefitfocus (BNFT)

Valuation Ratios
P/E Ratio -28.9
Price to Sales 5
Price to Book -35
Price to Tangible Book
Price to Cash Flow -50.3
Price to Free Cash Flow -32.1
Growth Rates
Sales Growth Rate 25.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.3%
Cap. Spend. - 3 Yr. Gr. Rate 7.6%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity -236.4%
Total Debt to Equity -306.1%
Interest Coverage -5
Management Effectiveness
Return On Assets -18.2%
Ret/ On Assets - 3 Yr. Avg. -32%
Return On Total Capital -69.6%
Ret/ On T. Cap. - 3 Yr. Avg. -185.8%
Return On Equity 156.9%
Return On Equity - 3 Yr. Avg. 251.3%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 48.5%
Gross Margin - 3 Yr. Avg. 43.1%
EBITDA Margin -8.6%
EBITDA Margin - 3 Yr. Avg. -23.3%
Operating Margin -14.2%
Oper. Margin - 3 Yr. Avg. -28.8%
Pre-Tax Margin -17.2%
Pre-Tax Margin - 3 Yr. Avg. -32.2%
Net Profit Margin -17.2%
Net Profit Margin - 3 Yr. Avg. -32.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

BNFT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BNFT stock intrinsic value calculation we used $257 million for the last fiscal year's total revenue generated by Benefitfocus. The default revenue input number comes from 2016 income statement of Benefitfocus. 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 BNFT stock valuation model: a) initial revenue growth rate of 10% 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 12.9%, whose default value for BNFT is calculated based on our internal credit rating of Benefitfocus, 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 Benefitfocus.
    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 BNFT stock the variable cost ratio is equal to 22.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $218 million in the base year in the intrinsic value calculation for BNFT 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 11.5% for Benefitfocus.

Corporate tax rate of 27% is the nominal tax rate for Benefitfocus. 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 BNFT stock is equal to 6.3%.

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 BNFT are equal to 30.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Benefitfocus 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 BNFT is equal to -1.7%. 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 - $-39 million for Benefitfocus - 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 31 million for Benefitfocus 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 Benefitfocus at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Benefitfocus Announces Secondary Offering   [May-21-18 04:43PM  GlobeNewswire]
▶ Why Benefitfocus Inc. Stock Jumped Today   [12:55PM  Motley Fool]
▶ Benefitfocus: 1Q Earnings Snapshot   [May-03-18 07:15PM  Associated Press]
▶ Benefitfocus Extends Stock Ownership to All Employees   [Apr-24-18 03:00PM  PR Newswire]
▶ Edited Transcript of BNFT presentation 7-Mar-17 2:50pm GMT   [10:59AM  Thomson Reuters StreetEvents]
▶ Benefitfocus reports 4Q loss   [Mar-14-18 05:08PM  Associated Press]
▶ 8 Stocks That Will Hit All-Time Lows in 2018   [Jan-19-18 01:08PM  InvestorPlace]
▶ Benefitfocus Promotes Ray August to Chief Executive Officer   [Nov-20-17 04:30PM  GlobeNewswire]
▶ Benefitfocus reports 3Q loss   [Nov-02-17 07:09PM  Associated Press]
▶ Why MannKind, Intelsat, and Benefitfocus Jumped Today   [Oct-04-17 04:30PM  Motley Fool]
▶ Benefitfocus Expands to Salt Lake City   [Sep-27-17 09:00AM  PR Newswire]
▶ Benefitfocus reports 2Q loss   [Aug-04-17 02:34AM  Associated Press]
▶ ETFs with exposure to Benefitfocus, Inc. : June 2, 2017   [Jun-02-17 01:54PM  Capital Cube]
▶ ETFs with exposure to Benefitfocus, Inc. : May 18, 2017   [May-18-17 01:33PM  Capital Cube]
▶ ETFs with exposure to Benefitfocus, Inc. : May 2, 2017   [May-02-17 03:45PM  Capital Cube]
▶ Benefitfocus reports 1Q loss   [Apr-27-17 06:16PM  Associated Press]
Financial statements of BNFT
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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