Intrinsic value of InterNAP - INAP

Previous Close

$4.60

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-154%

Previous close

$4.60

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-154%

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

We calculate the intrinsic value of INAP 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 0.3

 

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, %
  -6.29
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  298
  304
  311
  319
  328
  338
  349
  361
  373
  387
  402
  418
  435
  453
  472
  493
  514
  537
  561
  587
  614
  642
  672
  704
  737
  772
  809
  848
  889
  932
  978
Variable operating expenses, $m
 
  328
  336
  344
  354
  365
  376
  389
  402
  417
  433
  445
  463
  482
  503
  524
  547
  572
  597
  625
  653
  684
  716
  749
  785
  822
  861
  903
  946
  992
  1,040
Fixed operating expenses, $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
Total operating expenses, $m
  391
  328
  336
  344
  354
  365
  376
  389
  402
  417
  433
  445
  463
  482
  503
  524
  547
  572
  597
  625
  653
  684
  716
  749
  785
  822
  861
  903
  946
  992
  1,040
Operating income, $m
  -93
  -25
  -25
  -25
  -26
  -27
  -27
  -28
  -29
  -30
  -31
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -63
EBITDA, $m
  -16
  37
  37
  38
  39
  41
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
Interest expense (income), $m
  30
  30
  27
  28
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
  68
  72
  76
  79
  84
  88
  92
Earnings before tax, $m
  -124
  -54
  -52
  -53
  -54
  -56
  -58
  -60
  -62
  -64
  -66
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -116
  -122
  -128
  -134
  -141
  -148
  -155
Tax expense, $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
Net income, $m
  -125
  -54
  -52
  -53
  -54
  -56
  -58
  -60
  -62
  -64
  -66
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -116
  -122
  -128
  -134
  -141
  -148
  -155

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  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
  431
  440
  450
  462
  475
  489
  505
  522
  541
  561
  582
  605
  630
  656
  684
  713
  744
  777
  812
  849
  888
  930
  973
  1,019
  1,067
  1,118
  1,171
  1,228
  1,287
  1,349
  1,415
Adjusted assets (=assets-cash), $m
  421
  440
  450
  462
  475
  489
  505
  522
  541
  561
  582
  605
  630
  656
  684
  713
  744
  777
  812
  849
  888
  930
  973
  1,019
  1,067
  1,118
  1,171
  1,228
  1,287
  1,349
  1,415
Revenue / Adjusted assets
  0.708
  0.691
  0.691
  0.690
  0.691
  0.691
  0.691
  0.692
  0.689
  0.690
  0.691
  0.691
  0.690
  0.691
  0.690
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.690
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
Average production assets, $m
  550
  561
  574
  589
  605
  624
  644
  666
  689
  715
  742
  772
  803
  837
  872
  910
  949
  992
  1,036
  1,083
  1,133
  1,186
  1,241
  1,300
  1,361
  1,426
  1,494
  1,566
  1,641
  1,721
  1,805
Working capital, $m
  -16
  -15
  -16
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -47
  -49
Total debt, $m
  374
  335
  344
  354
  366
  379
  393
  409
  425
  444
  463
  484
  506
  529
  554
  581
  609
  639
  670
  703
  739
  776
  815
  856
  899
  945
  993
  1,044
  1,097
  1,153
  1,212
Total liabilities, $m
  434
  396
  405
  415
  427
  440
  454
  470
  486
  505
  524
  545
  567
  590
  615
  642
  670
  700
  731
  764
  800
  837
  876
  917
  960
  1,006
  1,054
  1,105
  1,158
  1,214
  1,273
Total equity, $m
  -4
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
Total liabilities and equity, $m
  430
  440
  450
  461
  474
  489
  504
  522
  540
  561
  582
  606
  630
  656
  683
  713
  744
  778
  812
  849
  889
  930
  973
  1,019
  1,067
  1,118
  1,171
  1,228
  1,287
  1,349
  1,414
Debt-to-equity ratio
  -93.500
  7.610
  7.640
  7.680
  7.710
  7.750
  7.790
  7.830
  7.870
  7.910
  7.950
  7.990
  8.030
  8.070
  8.110
  8.140
  8.180
  8.220
  8.250
  8.280
  8.310
  8.340
  8.370
  8.400
  8.430
  8.450
  8.480
  8.500
  8.530
  8.550
  8.570
Adjusted equity ratio
  -0.033
  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
  -125
  -54
  -52
  -53
  -54
  -56
  -58
  -60
  -62
  -64
  -66
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -116
  -122
  -128
  -134
  -141
  -148
  -155
Depreciation, amort., depletion, $m
  77
  61
  62
  64
  66
  67
  69
  72
  74
  77
  79
  77
  80
  84
  87
  91
  95
  99
  104
  108
  113
  119
  124
  130
  136
  143
  149
  157
  164
  172
  180
Funds from operations, $m
  55
  7
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  24
  25
Change in working capital, $m
  9
  0
  0
  0
  0
  0
  -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
Cash from operations, $m
  46
  7
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  15
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
Maintenance CAPEX, $m
  0
  -55
  -56
  -57
  -59
  -61
  -62
  -64
  -67
  -69
  -72
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -104
  -108
  -113
  -119
  -124
  -130
  -136
  -143
  -149
  -157
  -164
  -172
New CAPEX, $m
  -46
  -11
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -55
  -58
  -62
  -65
  -68
  -72
  -76
  -79
  -84
Cash from investing activities, $m
  -46
  -66
  -69
  -72
  -76
  -79
  -82
  -86
  -91
  -95
  -99
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -158
  -166
  -174
  -182
  -192
  -201
  -211
  -221
  -233
  -243
  -256
Free cash flow, $m
  0
  -59
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -132
  -139
  -146
  -154
  -161
  -170
  -178
  -187
  -197
  -207
  -217
  -228
Issuance/(repayment) of debt, $m
  -8
  -39
  9
  10
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
Issuance/(repurchase) of shares, $m
  0
  102
  53
  54
  56
  57
  59
  61
  64
  66
  68
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  104
  110
  115
  121
  127
  133
  140
  147
  154
  162
Cash from financing (excl. dividends), $m  
  -8
  63
  62
  64
  68
  70
  73
  76
  81
  84
  87
  87
  91
  96
  100
  106
  111
  117
  122
  128
  135
  141
  149
  156
  164
  173
  181
  191
  200
  210
  221
Total cash flow (excl. dividends), $m
  -7
  4
  4
  4
  4
  3
  3
  3
  3
  3
  3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Retained Cash Flow (-), $m
  118
  -102
  -53
  -54
  -56
  -57
  -59
  -61
  -64
  -66
  -68
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
  -162
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
 
  -98
  -49
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
  -162
Discount rate, %
 
  14.40
  15.12
  15.88
  16.67
  17.50
  18.38
  19.30
  20.26
  21.28
  22.34
  23.46
  24.63
  25.86
  27.15
  28.51
  29.94
  31.43
  33.01
  34.66
  36.39
  38.21
  40.12
  42.12
  44.23
  46.44
  48.76
  51.20
  53.76
  56.45
  59.27
PV of cash for distribution, $m
 
  -86
  -37
  -32
  -28
  -24
  -20
  -17
  -14
  -11
  -9
  -7
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  22.7
  10.3
  4.7
  2.1
  1.0
  0.4
  0.2
  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
  0.0
  0.0
  0.0

Internap Corporation provides information technology (IT) infrastructure services. It operates through two business segments, Data Center Services and Internet Protocol (IP) Services. The Data Center Services segment provides colocation services comprising physical space within data centers and associated services, such as power, interconnection, environmental controls, monitoring, and security. It also offers hosting and cloud services, which include the provision and maintenance of hardware, operating system software, management and monitoring software, and data center infrastructure and interconnection that enables its customers to own and manage their software applications and content. This segment provides its services through approximately 51 data centers in North America, Europe, and the Asia-Pacific region. The IP Services segment offers patented Performance IP service, IP routing hardware and software platform, and managed Internet route optimizer controllers. It also offers content delivery network services that enable its customers to stream and distribute media and content, such as video, audio software, and applications to audiences through points of presence, as well as offers capacity-on-demand services to handle events and unanticipated traffic spikes. This segment provides its services through approximately 86I P service points worldwide. The company serves various industries, such as software and Internet, including advertising technology; media and entertainment, comprising gaming; business services; hosting and IT infrastructure; health care technology infrastructure; and telecommunications. The company was formerly known as Internap Network Services Corporation and changed its name to Internap Corporation in November 2014. Internap Corporation was founded in 1996 and is headquartered in Atlanta, Georgia.

FINANCIAL RATIOS  of  InterNAP (INAP)

Valuation Ratios
P/E Ratio -2.1
Price to Sales 0.9
Price to Book -66.5
Price to Tangible Book
Price to Cash Flow 5.8
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.3%
Cap. Spend. - 3 Yr. Gr. Rate -6.4%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity -9075%
Total Debt to Equity -9350%
Interest Coverage -3
Management Effectiveness
Return On Assets -19.2%
Ret/ On Assets - 3 Yr. Avg. -8.6%
Return On Total Capital -29.1%
Ret/ On T. Cap. - 3 Yr. Avg. -15.4%
Return On Equity -227.3%
Return On Equity - 3 Yr. Avg. -95.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 47.7%
Gross Margin - 3 Yr. Avg. 45.9%
EBITDA Margin -5.7%
EBITDA Margin - 3 Yr. Avg. 11.6%
Operating Margin -31.2%
Oper. Margin - 3 Yr. Avg. -14.5%
Pre-Tax Margin -41.6%
Pre-Tax Margin - 3 Yr. Avg. -23.4%
Net Profit Margin -41.9%
Net Profit Margin - 3 Yr. Avg. -22.9%
Effective Tax Rate -0.8%
Eff/ Tax Rate - 3 Yr. Avg. 2.5%
Payout Ratio 0%

INAP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INAP stock intrinsic value calculation we used $298 million for the last fiscal year's total revenue generated by InterNAP. The default revenue input number comes from 2016 income statement of InterNAP. 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 INAP stock valuation model: a) initial revenue growth rate of 2% 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 14.4%, whose default value for INAP is calculated based on our internal credit rating of InterNAP, 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 InterNAP.
    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 INAP stock the variable cost ratio is equal to 108.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for INAP 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% for InterNAP.

Corporate tax rate of 27% is the nominal tax rate for InterNAP. 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 INAP 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 INAP are equal to 184.6%.

Life of production assets of 10 years is the average useful life of capital assets used in InterNAP 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 INAP is equal to -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 - $-4 million for InterNAP - 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 57.227 million for InterNAP 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 InterNAP at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Internap Network reports 2Q loss   [Aug-03-17 11:52PM  Associated Press]
▶ Penny Stocks to Watch for June 2017 (CYTR, DELT)   [Jun-30-17 04:01PM  Investopedia]
▶ Penny Stocks to Watch for June 2017   [May-31-17 09:46AM  Investopedia]
▶ ETFs with exposure to Internap Corp. : May 25, 2017   [May-25-17 12:41PM  Capital Cube]
▶ Bull Of The Day: Internap (INAP)   [05:52AM  Zacks]
▶ Is Internap Corp (INAP) Going to Burn These Hedge Funds?   [Dec-10-16 10:31AM  at Insider Monkey]
▶ Rackspace: Math Supports a $32 Take-Out Price, Says Wells   [Aug-05-16 12:13PM  at Barrons.com]
Stock chart of INAP Financial statements of INAP
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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