Intrinsic value of Benefitfocus - BNFT

Previous Close

$31.00

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-70%

Previous close

$31.00

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-70%

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

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

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 0.9

 

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
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  233
  253
  274
  296
  318
  342
  366
  391
  417
  445
  473
  503
  534
  566
  599
  634
  671
  709
  748
  790
  833
  878
  926
  975
  1,027
  1,081
  1,138
  1,198
  1,260
  1,326
  1,394
Variable operating expenses, $m
 
  142
  154
  166
  179
  192
  205
  220
  234
  250
  266
  282
  299
  317
  336
  356
  376
  398
  420
  443
  467
  493
  519
  547
  576
  607
  639
  672
  707
  744
  782
Fixed operating expenses, $m
 
  141
  145
  149
  152
  156
  160
  164
  168
  172
  177
  181
  186
  190
  195
  200
  205
  210
  215
  221
  226
  232
  238
  244
  250
  256
  262
  269
  276
  282
  289
Total operating expenses, $m
  266
  283
  299
  315
  331
  348
  365
  384
  402
  422
  443
  463
  485
  507
  531
  556
  581
  608
  635
  664
  693
  725
  757
  791
  826
  863
  901
  941
  983
  1,026
  1,071
Operating income, $m
  -32
  -31
  -25
  -19
  -13
  -6
  0
  7
  15
  23
  31
  40
  49
  58
  68
  78
  89
  101
  113
  126
  139
  154
  169
  184
  201
  219
  237
  257
  278
  299
  322
EBITDA, $m
  -19
  -17
  -10
  -3
  4
  12
  20
  29
  38
  47
  57
  67
  77
  89
  100
  113
  126
  139
  154
  169
  184
  201
  219
  237
  257
  277
  299
  322
  346
  371
  398
Interest expense (income), $m
  7
  7
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
Earnings before tax, $m
  -40
  -37
  -26
  -20
  -15
  -10
  -4
  2
  9
  16
  23
  30
  38
  47
  55
  64
  74
  84
  95
  106
  118
  130
  144
  158
  172
  188
  204
  222
  240
  259
  280
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  6
  8
  10
  13
  15
  17
  20
  23
  26
  29
  32
  35
  39
  43
  47
  51
  55
  60
  65
  70
  76
Net income, $m
  -40
  -37
  -26
  -20
  -15
  -10
  -4
  2
  7
  11
  17
  22
  28
  34
  40
  47
  54
  61
  69
  77
  86
  95
  105
  115
  126
  137
  149
  162
  175
  189
  204

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
  131
  142
  153
  165
  177
  190
  203
  217
  231
  246
  261
  277
  294
  311
  329
  348
  368
  388
  410
  432
  456
  481
  506
  533
  561
  591
  622
  654
  688
  724
Adjusted assets (=assets-cash), $m
  121
  131
  142
  153
  165
  177
  190
  203
  217
  231
  246
  261
  277
  294
  311
  329
  348
  368
  388
  410
  432
  456
  481
  506
  533
  561
  591
  622
  654
  688
  724
Revenue / Adjusted assets
  1.926
  1.931
  1.930
  1.935
  1.927
  1.932
  1.926
  1.926
  1.922
  1.926
  1.923
  1.927
  1.928
  1.925
  1.926
  1.927
  1.928
  1.927
  1.928
  1.927
  1.928
  1.925
  1.925
  1.927
  1.927
  1.927
  1.926
  1.926
  1.927
  1.927
  1.925
Average production assets, $m
  68
  74
  80
  86
  93
  100
  107
  114
  122
  130
  138
  147
  156
  165
  175
  185
  196
  207
  218
  231
  243
  256
  270
  285
  300
  316
  332
  350
  368
  387
  407
Working capital, $m
  4
  -35
  -38
  -40
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -127
  -134
  -141
  -148
  -156
  -164
  -173
  -182
  -191
Total debt, $m
  101
  6
  16
  26
  37
  48
  59
  71
  83
  96
  109
  123
  137
  152
  168
  184
  201
  219
  238
  257
  277
  298
  321
  344
  368
  393
  420
  448
  477
  507
  539
Total liabilities, $m
  214
  118
  128
  138
  149
  160
  171
  183
  195
  208
  221
  235
  249
  264
  280
  296
  313
  331
  350
  369
  389
  410
  433
  456
  480
  505
  532
  560
  589
  619
  651
Total equity, $m
  -33
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  65
  69
  72
Total liabilities and equity, $m
  181
  131
  142
  153
  166
  178
  190
  203
  217
  231
  246
  261
  277
  293
  311
  329
  348
  368
  389
  410
  432
  456
  481
  507
  533
  561
  591
  622
  654
  688
  723
Debt-to-equity ratio
  -3.061
  0.480
  1.120
  1.700
  2.220
  2.680
  3.100
  3.490
  3.830
  4.150
  4.440
  4.710
  4.960
  5.190
  5.400
  5.600
  5.780
  5.960
  6.120
  6.270
  6.410
  6.540
  6.670
  6.790
  6.900
  7.010
  7.100
  7.200
  7.290
  7.370
  7.450
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
  -37
  -26
  -20
  -15
  -10
  -4
  2
  7
  11
  17
  22
  28
  34
  40
  47
  54
  61
  69
  77
  86
  95
  105
  115
  126
  137
  149
  162
  175
  189
  204
Depreciation, amort., depletion, $m
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56
  58
  62
  65
  68
  72
  75
Funds from operations, $m
  -45
  -23
  -11
  -4
  2
  9
  16
  23
  29
  36
  42
  49
  57
  65
  73
  81
  90
  100
  110
  120
  131
  143
  155
  168
  181
  196
  211
  227
  243
  261
  280
Change in working capital, $m
  -22
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
Cash from operations, $m
  -23
  -21
  -8
  -1
  5
  12
  20
  27
  33
  39
  46
  53
  61
  69
  77
  86
  95
  105
  115
  126
  137
  149
  161
  175
  188
  203
  218
  235
  252
  270
  289
Maintenance CAPEX, $m
  0
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -58
  -62
  -65
  -68
  -72
New CAPEX, $m
  -13
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  26
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -29
  -31
  -32
  -35
  -36
  -38
  -41
  -42
  -45
  -47
  -50
  -52
  -56
  -58
  -61
  -64
  -68
  -72
  -75
  -79
  -83
  -87
  -92
Free cash flow, $m
  3
  -39
  -27
  -22
  -17
  -12
  -6
  -1
  4
  9
  14
  19
  25
  31
  37
  43
  50
  58
  65
  73
  82
  91
  100
  110
  121
  132
  143
  156
  169
  183
  197
Issuance/(repayment) of debt, $m
  0
  -72
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
Issuance/(repurchase) of shares, $m
  7
  119
  27
  22
  16
  11
  5
  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
  47
  37
  32
  27
  22
  16
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
Total cash flow (excl. dividends), $m
  9
  9
  9
  9
  10
  10
  10
  11
  16
  22
  27
  33
  39
  46
  53
  60
  67
  75
  84
  93
  102
  112
  122
  133
  145
  157
  170
  184
  198
  213
  229
Retained Cash Flow (-), $m
  15
  -119
  -27
  -22
  -16
  -11
  -5
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Prev. year cash balance distribution, $m
 
  36
  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
 
  -75
  -18
  -12
  -7
  -1
  5
  10
  15
  20
  26
  32
  38
  44
  51
  58
  65
  73
  82
  90
  100
  109
  120
  131
  142
  154
  167
  181
  195
  210
  226
Discount rate, %
 
  11.10
  11.66
  12.24
  12.85
  13.49
  14.17
  14.88
  15.62
  16.40
  17.22
  18.08
  18.98
  19.93
  20.93
  21.98
  23.08
  24.23
  25.44
  26.71
  28.05
  29.45
  30.92
  32.47
  34.09
  35.80
  37.59
  39.47
  41.44
  43.51
  45.69
PV of cash for distribution, $m
 
  -67
  -14
  -9
  -4
  0
  2
  4
  5
  5
  5
  5
  5
  4
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  16.5
  6.6
  3.2
  1.9
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5
  1.5

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 -23.6
Price to Sales 4
Price to Book -28.6
Price to Tangible Book
Price to Cash Flow -41
Price to Free Cash Flow -26.2
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 $233 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 8.6% 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 11.1%, 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 56.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $138 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 8.4% 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 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 BNFT are equal to 29.2%.

Life of production assets of 5.4 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 -13.7%. 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 - $-33 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 30.321 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 $0.9 billion.

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COMPANY NEWS

▶ 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]
▶ Benefitfocus reports 4Q loss   [Feb-23-17 06:15PM  Associated Press]
▶ Baron Opportunity Fund Comments on Benefitfocus   [Feb-21-17 11:57AM  Gurufocus]
▶ Benefitfocus reports 3Q loss   [Nov-03-16 05:43PM  AP]
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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