Intrinsic value of Castlight Health Cl B - CSLT

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$3.70

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$3.70

 
Intrinsic value

$1.72

 
Up/down potential

-54%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of CSLT 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 0.5

 

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, %
  36.00
  21.70
  20.03
  18.53
  17.17
  15.96
  14.86
  13.88
  12.99
  12.19
  11.47
  10.82
  10.24
  9.72
  9.24
  8.82
  8.44
  8.09
  7.79
  7.51
  7.26
  7.03
  6.83
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
Revenue, $m
  102
  124
  149
  177
  207
  240
  276
  314
  355
  398
  443
  491
  542
  594
  649
  707
  766
  828
  893
  960
  1,029
  1,102
  1,177
  1,255
  1,337
  1,421
  1,509
  1,601
  1,697
  1,796
  1,900
Variable operating expenses, $m
 
  51
  61
  73
  85
  99
  114
  129
  146
  164
  183
  202
  223
  245
  268
  291
  316
  341
  368
  395
  424
  454
  485
  517
  551
  586
  622
  660
  699
  740
  783
Fixed operating expenses, $m
 
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
  181
  185
  190
  195
  200
  205
  210
  215
  220
  226
  232
  237
  243
  249
  256
  262
  268
Total operating expenses, $m
  161
  182
  195
  211
  226
  244
  262
  281
  302
  324
  347
  370
  395
  421
  449
  476
  506
  536
  568
  600
  634
  669
  705
  743
  783
  823
  865
  909
  955
  1,002
  1,051
Operating income, $m
  -59
  -58
  -47
  -34
  -20
  -4
  14
  32
  53
  74
  97
  121
  146
  173
  201
  230
  261
  292
  325
  360
  396
  433
  472
  512
  554
  598
  644
  692
  742
  794
  849
EBITDA, $m
  -56
  -57
  -45
  -32
  -17
  -1
  17
  36
  57
  79
  103
  127
  153
  181
  209
  239
  270
  303
  337
  372
  409
  447
  487
  528
  572
  617
  664
  713
  764
  817
  873
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
Earnings before tax, $m
  -59
  -58
  -47
  -34
  -20
  -4
  12
  31
  50
  71
  94
  117
  142
  168
  195
  224
  253
  284
  317
  350
  385
  421
  459
  499
  540
  583
  628
  675
  723
  774
  828
Tax expense, $m
  0
  0
  0
  0
  0
  0
  3
  8
  14
  19
  25
  32
  38
  45
  53
  60
  68
  77
  85
  95
  104
  114
  124
  135
  146
  157
  170
  182
  195
  209
  223
Net income, $m
  -59
  -58
  -47
  -34
  -20
  -4
  9
  22
  37
  52
  68
  86
  104
  123
  142
  163
  185
  208
  231
  256
  281
  308
  335
  364
  394
  426
  458
  492
  528
  565
  604

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  115
  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
  157
  51
  61
  73
  85
  99
  113
  129
  146
  164
  183
  202
  223
  245
  267
  291
  315
  341
  368
  395
  424
  454
  485
  517
  550
  585
  621
  659
  699
  740
  782
Adjusted assets (=assets-cash), $m
  42
  51
  61
  73
  85
  99
  113
  129
  146
  164
  183
  202
  223
  245
  267
  291
  315
  341
  368
  395
  424
  454
  485
  517
  550
  585
  621
  659
  699
  740
  782
Revenue / Adjusted assets
  2.429
  2.431
  2.443
  2.425
  2.435
  2.424
  2.442
  2.434
  2.432
  2.427
  2.421
  2.431
  2.430
  2.424
  2.431
  2.430
  2.432
  2.428
  2.427
  2.430
  2.427
  2.427
  2.427
  2.427
  2.431
  2.429
  2.430
  2.429
  2.428
  2.427
  2.430
Average production assets, $m
  7
  8
  10
  11
  13
  15
  18
  20
  23
  25
  28
  31
  35
  38
  42
  45
  49
  53
  57
  61
  66
  71
  75
  80
  86
  91
  97
  102
  109
  115
  122
Working capital, $m
  92
  -28
  -34
  -40
  -47
  -54
  -62
  -71
  -80
  -90
  -100
  -111
  -122
  -134
  -146
  -159
  -172
  -186
  -201
  -216
  -232
  -248
  -265
  -282
  -301
  -320
  -340
  -360
  -382
  -404
  -428
Total debt, $m
  0
  -9
  0
  10
  22
  34
  47
  61
  76
  92
  109
  127
  146
  165
  186
  207
  229
  252
  276
  301
  326
  353
  381
  410
  440
  472
  504
  538
  574
  611
  649
Total liabilities, $m
  55
  46
  55
  65
  77
  89
  102
  116
  131
  147
  164
  182
  201
  220
  241
  262
  284
  307
  331
  356
  381
  408
  436
  465
  495
  527
  559
  593
  629
  666
  704
Total equity, $m
  102
  5
  6
  7
  9
  10
  11
  13
  15
  16
  18
  20
  22
  24
  27
  29
  32
  34
  37
  40
  42
  45
  48
  52
  55
  59
  62
  66
  70
  74
  78
Total liabilities and equity, $m
  157
  51
  61
  72
  86
  99
  113
  129
  146
  163
  182
  202
  223
  244
  268
  291
  316
  341
  368
  396
  423
  453
  484
  517
  550
  586
  621
  659
  699
  740
  782
Debt-to-equity ratio
  0.000
  -1.760
  0.030
  1.440
  2.540
  3.430
  4.150
  4.740
  5.230
  5.640
  5.990
  6.280
  6.530
  6.750
  6.940
  7.110
  7.260
  7.390
  7.500
  7.610
  7.700
  7.790
  7.870
  7.940
  8.000
  8.060
  8.110
  8.170
  8.210
  8.260
  8.300
Adjusted equity ratio
  -0.310
  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
  -59
  -58
  -47
  -34
  -20
  -4
  9
  22
  37
  52
  68
  86
  104
  123
  142
  163
  185
  208
  231
  256
  281
  308
  335
  364
  394
  426
  458
  492
  528
  565
  604
Depreciation, amort., depletion, $m
  3
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
Funds from operations, $m
  -46
  -57
  -45
  -32
  -17
  -1
  13
  26
  41
  57
  74
  92
  111
  130
  151
  172
  195
  218
  242
  268
  294
  322
  350
  380
  411
  444
  478
  513
  550
  588
  628
Change in working capital, $m
  -9
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
Cash from operations, $m
  -37
  -52
  -39
  -26
  -11
  6
  21
  35
  51
  67
  84
  103
  122
  142
  163
  185
  208
  232
  257
  283
  310
  338
  367
  398
  430
  463
  497
  534
  571
  611
  652
Maintenance CAPEX, $m
  0
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
New CAPEX, $m
  -2
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
Cash from investing activities, $m
  46
  -2
  -4
  -4
  -4
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -30
Free cash flow, $m
  9
  -55
  -42
  -29
  -15
  1
  15
  29
  44
  60
  76
  94
  112
  132
  152
  173
  195
  218
  242
  267
  293
  320
  348
  378
  408
  440
  474
  508
  545
  583
  622
Issuance/(repayment) of debt, $m
  0
  -9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
Issuance/(repurchase) of shares, $m
  20
  0
  34
  20
  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
  0
  0
Cash from financing (excl. dividends), $m  
  20
  -9
  43
  30
  16
  12
  13
  14
  15
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
Total cash flow (excl. dividends), $m
  30
  -64
  -33
  -19
  -3
  13
  28
  43
  59
  76
  93
  112
  131
  151
  172
  194
  217
  241
  266
  292
  319
  347
  376
  407
  439
  472
  506
  542
  580
  619
  661
Retained Cash Flow (-), $m
  16
  -18
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Prev. year cash balance distribution, $m
 
  115
  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
 
  33
  0
  0
  0
  12
  27
  42
  57
  74
  91
  110
  129
  149
  170
  192
  215
  239
  264
  289
  316
  344
  373
  404
  435
  468
  503
  539
  576
  615
  656
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
 
  32
  0
  0
  0
  9
  20
  28
  36
  42
  48
  52
  55
  57
  57
  56
  55
  52
  49
  45
  40
  36
  31
  26
  22
  18
  15
  12
  9
  7
  5
Current shareholders' claim on cash, %
  100
  100.0
  41.2
  24.2
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3
  21.3

Castlight Health, Inc. provides cloud-based software in the United States. Its software products enable employees to make health care decisions, and to communicate and measure their benefit programs. The company also offers communication and engagement, implementation, and customer support services. It serves customers in a range of industries, including education, manufacturing, retail, technology, and government. The company was formerly known as Ventana Health Services and changed its name to Castlight Health, Inc. in April 2010. Castlight Health, Inc. was founded in 2008 and is headquartered in San Francisco, California.

FINANCIAL RATIOS  of  Castlight Health Cl B (CSLT)

Valuation Ratios
P/E Ratio -6.5
Price to Sales 3.8
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow -10.4
Price to Free Cash Flow -9.9
Growth Rates
Sales Growth Rate 36%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
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 -35.8%
Ret/ On Assets - 3 Yr. Avg. -44.1%
Return On Total Capital -53.6%
Ret/ On T. Cap. - 3 Yr. Avg. -60.7%
Return On Equity -53.6%
Return On Equity - 3 Yr. Avg. -60.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 65.7%
Gross Margin - 3 Yr. Avg. 53.6%
EBITDA Margin -54.9%
EBITDA Margin - 3 Yr. Avg. -114.6%
Operating Margin -57.8%
Oper. Margin - 3 Yr. Avg. -117.6%
Pre-Tax Margin -57.8%
Pre-Tax Margin - 3 Yr. Avg. -117.2%
Net Profit Margin -57.8%
Net Profit Margin - 3 Yr. Avg. -117.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CSLT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSLT stock intrinsic value calculation we used $102 million for the last fiscal year's total revenue generated by Castlight Health Cl B. The default revenue input number comes from 2016 income statement of Castlight Health Cl B. 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 CSLT stock valuation model: a) initial revenue growth rate of 21.7% 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 CSLT is calculated based on our internal credit rating of Castlight Health Cl B, 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 Castlight Health Cl B.
    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 CSLT stock the variable cost ratio is equal to 41.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $128 million in the base year in the intrinsic value calculation for CSLT 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 Castlight Health Cl B.

Corporate tax rate of 27% is the nominal tax rate for Castlight Health Cl B. 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 CSLT 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 CSLT are equal to 6.4%.

Life of production assets of 2.2 years is the average useful life of capital assets used in Castlight Health Cl B 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 CSLT is equal to -22.5%. 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 - $102 million for Castlight Health Cl B - 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 128.773 million for Castlight Health Cl B 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 Castlight Health Cl B at the current share price and the inputted number of shares is $0.5 billion.


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COMPANY NEWS

▶ 3 Digital Health Companies Poised for Sizzling Growth   [May-16-17 03:02PM  Motley Fool]
▶ What's Behind Castlight Health Rallying 13.2% Today   [May-10-17 04:57PM  Motley Fool]
▶ Castlight reports 1Q loss   [Apr-26-17 07:02PM  Associated Press]
▶ Castlight Health completes acquisition of startup Jiff   [Apr-05-17 10:53AM  American City Business Journals]
▶ Here's Why Castlight Health Inc. Is Soaring Today   [Feb-16-17 02:15PM  at Motley Fool]
▶ Castlight reports 4Q loss   [06:38PM  AP]
▶ 13 Questions For Bryan Roberts Of Venrock   [Jan-31-17 08:33AM  at Forbes]
▶ [$$] Castlight Health Acquires Jiff in $117.5 Million Stock Deal   [Jan-06-17 02:41PM  at The Wall Street Journal]
▶ Is Castlight Health Inc (CSLT) A Good Stock To Buy?   [Dec-08-16 12:55PM  at Insider Monkey]
▶ Is Cryolife Inc (CRY) A Good Stock To Buy?   [Dec-04-16 10:41PM  at Insider Monkey]
▶ Castlight Health Selected by CSM Bakery Solutions   [Nov-18-16 08:30AM  Marketwired]
▶ Castlight Health Jumped 12.1% in August -- Here's Why   [Sep-09-16 10:42AM  at Motley Fool]
▶ Castlight reports 2Q loss   [Aug-08-16 04:59PM  AP]
▶ Right To Shop: The Next Big Thing In Health Care   [Aug-05-16 12:12PM  at Forbes]
Stock chart of CSLT Financial statements of CSLT Annual reports of CSLT
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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