Intrinsic value of BSQUARE - BSQR

Previous Close

$5.25

  Intrinsic Value

$32.22

stock screener

  Rating & Target

str. buy

+514%

  Value-price divergence*

+578%

Previous close

$5.25

 
Intrinsic value

$32.22

 
Up/down potential

+514%

 
Rating

str. buy

 
Value-price divergence*

+578%

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

We calculate the intrinsic value of BSQR 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 0.1

 

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, %
  -9.35
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
Revenue, $m
  97
  105
  113
  121
  130
  139
  148
  158
  168
  179
  190
  201
  213
  226
  239
  253
  267
  282
  297
  313
  330
  348
  366
  386
  406
  427
  450
  473
  497
  523
  550
Variable operating expenses, $m
 
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  90
  95
  100
Fixed operating expenses, $m
 
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
Total operating expenses, $m
  99
  103
  107
  110
  115
  119
  122
  126
  131
  135
  140
  145
  149
  154
  159
  165
  171
  176
  182
  188
  194
  201
  208
  215
  222
  230
  238
  246
  254
  263
  272
Operating income, $m
  -1
  1
  6
  10
  15
  21
  26
  32
  37
  44
  50
  57
  64
  72
  80
  88
  96
  106
  115
  125
  136
  147
  159
  171
  184
  198
  212
  227
  243
  260
  278
EBITDA, $m
  0
  2
  6
  11
  16
  21
  26
  32
  38
  44
  51
  57
  65
  72
  80
  88
  97
  106
  115
  125
  136
  147
  159
  171
  184
  198
  212
  228
  244
  261
  279
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
Earnings before tax, $m
  -1
  1
  6
  10
  15
  20
  26
  31
  37
  43
  49
  56
  63
  71
  79
  87
  95
  104
  114
  123
  134
  145
  156
  169
  181
  195
  209
  224
  240
  257
  274
Tax expense, $m
  0
  0
  2
  3
  4
  5
  7
  8
  10
  12
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  74
Net income, $m
  -1
  1
  4
  8
  11
  15
  19
  23
  27
  31
  36
  41
  46
  52
  57
  63
  69
  76
  83
  90
  98
  106
  114
  123
  132
  142
  153
  164
  175
  187
  200

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  33
  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
  61
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
  151
  159
Adjusted assets (=assets-cash), $m
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
  151
  159
Revenue / Adjusted assets
  3.464
  3.500
  3.424
  3.457
  3.421
  3.475
  3.442
  3.435
  3.429
  3.442
  3.455
  3.466
  3.435
  3.477
  3.464
  3.466
  3.468
  3.481
  3.453
  3.478
  3.474
  3.480
  3.453
  3.477
  3.470
  3.472
  3.462
  3.453
  3.451
  3.464
  3.459
Average production assets, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
Working capital, $m
  36
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
Total debt, $m
  0
  2
  4
  6
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  64
  68
  73
  78
  84
  89
  95
  101
  107
Total liabilities, $m
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  101
  107
  112
  118
  124
  130
Total equity, $m
  38
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
Total liabilities and equity, $m
  61
  30
  33
  35
  38
  40
  43
  45
  49
  51
  55
  58
  62
  66
  69
  73
  77
  82
  85
  90
  95
  100
  106
  111
  117
  123
  130
  136
  144
  151
  158
Debt-to-equity ratio
  0.000
  0.340
  0.640
  0.910
  1.160
  1.380
  1.590
  1.770
  1.940
  2.100
  2.240
  2.380
  2.500
  2.620
  2.720
  2.820
  2.920
  3.010
  3.090
  3.170
  3.240
  3.310
  3.370
  3.430
  3.490
  3.550
  3.600
  3.650
  3.690
  3.740
  3.780
Adjusted equity ratio
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  1
  4
  8
  11
  15
  19
  23
  27
  31
  36
  41
  46
  52
  57
  63
  69
  76
  83
  90
  98
  106
  114
  123
  132
  142
  153
  164
  175
  187
  200
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
Funds from operations, $m
  5
  1
  5
  8
  12
  15
  19
  23
  28
  32
  37
  41
  47
  52
  58
  64
  70
  76
  83
  90
  98
  106
  115
  124
  133
  143
  153
  164
  176
  188
  201
Change in working capital, $m
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  3
  1
  4
  8
  11
  15
  19
  23
  27
  32
  36
  41
  46
  52
  57
  63
  69
  76
  83
  90
  98
  106
  114
  123
  132
  142
  153
  163
  175
  187
  200
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
  -1
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
  -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
  -1
Free cash flow, $m
  -3
  1
  4
  8
  11
  15
  19
  23
  27
  31
  36
  41
  46
  51
  57
  63
  69
  75
  82
  90
  97
  105
  114
  122
  132
  142
  152
  163
  174
  187
  199
Issuance/(repayment) of debt, $m
  0
  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
  6
  6
  6
Issuance/(repurchase) of shares, $m
  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
Cash from financing (excl. dividends), $m  
  1
  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
  6
  6
  6
Total cash flow (excl. dividends), $m
  -2
  2
  6
  10
  13
  17
  21
  25
  29
  34
  39
  44
  49
  54
  60
  66
  72
  79
  86
  93
  101
  109
  118
  127
  137
  147
  157
  168
  180
  193
  206
Retained Cash Flow (-), $m
  -1
  0
  0
  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
Prev. year cash balance distribution, $m
 
  33
  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
 
  35
  6
  9
  13
  17
  20
  25
  29
  33
  38
  43
  48
  54
  59
  65
  72
  78
  85
  93
  100
  108
  117
  126
  136
  146
  156
  167
  179
  191
  204
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
 
  34
  5
  8
  11
  13
  15
  17
  18
  19
  20
  20
  21
  20
  20
  19
  18
  17
  16
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  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
  100.0

BSQUARE Corporation provides software solutions and related engineering services to businesses that develop, market, and sell standalone intelligent systems in North America, Asia, and Europe. Its software products include HTML5 rendering engine that is based on the open-source WebKit platform and facilitates device makers to create applications and user interfaces for their devices; and TestQuest 10, a software testing automation tool. The company also offers DataV software Services, such as integration with enterprise databases; integration with internal enterprise systems; integration with external public or third-party data sources; custom application development; management of customer cloud instances hosting DataV software; training; and software integration on remote devices. In addition, it provides engineering services, such as architectural and system design; software design and development; platform development systems integration; application, middleware, and multimedia software development; quality assurance and testing; device solution strategy consulting; technical support; implementation; and test automation engineering and consulting services. The company markets and sells its products to original equipment manufacturers, original design manufacturers, and corporate enterprises, as well as silicon vendors and peripheral vendors. BSQUARE Corporation was founded in 1994 and is headquartered in Bellevue, Washington.

FINANCIAL RATIOS  of  BSQUARE (BSQR)

Valuation Ratios
P/E Ratio -65.8
Price to Sales 0.7
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 21.9
Price to Free Cash Flow 21.9
Growth Rates
Sales Growth Rate -9.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.7%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital -2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.6%
Return On Equity -2.7%
Return On Equity - 3 Yr. Avg. 7.6%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 16.5%
Gross Margin - 3 Yr. Avg. 17.6%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin -2.1%
Oper. Margin - 3 Yr. Avg. 2.5%
Pre-Tax Margin -1%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin -1%
Net Profit Margin - 3 Yr. Avg. 2.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 4.8%
Payout Ratio 0%

BSQR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BSQR stock intrinsic value calculation we used $97 million for the last fiscal year's total revenue generated by BSQUARE. The default revenue input number comes from 2016 income statement of BSQUARE. 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 BSQR stock valuation model: a) initial revenue growth rate of 8% 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 BSQR is calculated based on our internal credit rating of BSQUARE, 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 BSQUARE.
    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 BSQR stock the variable cost ratio is equal to 18.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $82 million in the base year in the intrinsic value calculation for BSQR 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 3.5% for BSQUARE.

Corporate tax rate of 27% is the nominal tax rate for BSQUARE. 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 BSQR 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 BSQR are equal to 0.5%.

Life of production assets of 4.5 years is the average useful life of capital assets used in BSQUARE 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 BSQR is equal to 3.1%. 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 - $38 million for BSQUARE - 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 12.313 million for BSQUARE 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 BSQUARE at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Bsquare Unveils Cross-platform IoT Apps   [Mar-21-17 08:00AM  PR Newswire]
▶ Bsquare reports 4Q loss   [Feb-21-17 05:56PM  Associated Press]
▶ Bsquare DataV Enters 2017 with Strong Momentum   [Jan-03-17 08:00AM  PR Newswire]
▶ Hedge Funds Are Crazy About Avinger Inc (AVGR)   [Dec-15-16 06:23AM  at Insider Monkey]
▶ Bsquare Achieves AWS IoT Competency Status   [Nov-29-16 02:37PM  PR Newswire]
▶ Bsquare Receives TMCnet Tech Culture Award   [Sep-21-16 08:00AM  PR Newswire]
▶ Bsquare to Exhibit Alongside Microsoft at Embedded World   [Feb-23-16 08:00AM  PR Newswire]
▶ Bsquare Showcases IoT Solutions at Retail's Big Show   [Jan-12-16 12:34PM  PR Newswire]
▶ Here is What Hedge Funds Think About BSQUARE Corporation (BSQR)   [Dec-10  10:58AM  at Insider Monkey]
▶ Bsquare Takes the Main Stage at IoT World Forum   [Nov-16  10:25AM  PR Newswire]
Stock chart of BSQR Financial statements of BSQR
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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