Intrinsic value of InnerWorkings - INWK

Previous Close

$8.87

  Intrinsic Value

$16.84

stock screener

  Rating & Target

str. buy

+90%

Previous close

$8.87

 
Intrinsic value

$16.84

 
Up/down potential

+90%

 
Rating

str. buy

We calculate the intrinsic value of INWK 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, %
  6.03
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  1,091
  1,123
  1,158
  1,196
  1,237
  1,282
  1,330
  1,382
  1,437
  1,496
  1,559
  1,625
  1,696
  1,770
  1,849
  1,933
  2,021
  2,115
  2,213
  2,317
  2,426
  2,541
  2,662
  2,790
  2,924
  3,065
  3,214
  3,370
  3,535
  3,708
  3,889
Variable operating expenses, $m
 
  524
  539
  556
  575
  595
  617
  640
  665
  691
  719
  729
  760
  794
  829
  867
  906
  948
  992
  1,039
  1,088
  1,139
  1,194
  1,251
  1,311
  1,374
  1,441
  1,511
  1,585
  1,662
  1,744
Fixed operating expenses, $m
 
  589
  604
  619
  635
  651
  667
  683
  701
  718
  736
  754
  773
  793
  812
  833
  854
  875
  897
  919
  942
  966
  990
  1,015
  1,040
  1,066
  1,093
  1,120
  1,148
  1,177
  1,206
Total operating expenses, $m
  1,071
  1,113
  1,143
  1,175
  1,210
  1,246
  1,284
  1,323
  1,366
  1,409
  1,455
  1,483
  1,533
  1,587
  1,641
  1,700
  1,760
  1,823
  1,889
  1,958
  2,030
  2,105
  2,184
  2,266
  2,351
  2,440
  2,534
  2,631
  2,733
  2,839
  2,950
Operating income, $m
  20
  10
  14
  20
  27
  36
  47
  58
  72
  87
  103
  142
  162
  184
  208
  234
  261
  291
  324
  359
  396
  436
  479
  524
  573
  625
  680
  739
  802
  868
  939
EBITDA, $m
  38
  34
  38
  44
  52
  61
  71
  83
  97
  112
  129
  147
  168
  190
  214
  240
  268
  298
  331
  366
  404
  444
  487
  533
  583
  635
  691
  750
  813
  881
  952
Interest expense (income), $m
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
Earnings before tax, $m
  15
  5
  10
  15
  22
  30
  40
  52
  64
  79
  95
  132
  152
  173
  196
  221
  247
  276
  308
  341
  377
  416
  457
  502
  549
  599
  653
  710
  771
  836
  905
Tax expense, $m
  11
  1
  3
  4
  6
  8
  11
  14
  17
  21
  26
  36
  41
  47
  53
  60
  67
  75
  83
  92
  102
  112
  124
  135
  148
  162
  176
  192
  208
  226
  244
Net income, $m
  4
  4
  7
  11
  16
  22
  29
  38
  47
  57
  69
  97
  111
  126
  143
  161
  181
  202
  225
  249
  276
  304
  334
  366
  401
  437
  477
  518
  563
  610
  660

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  31
  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
  591
  576
  594
  614
  635
  658
  683
  709
  738
  768
  800
  834
  870
  909
  949
  992
  1,038
  1,086
  1,136
  1,189
  1,245
  1,304
  1,367
  1,432
  1,501
  1,574
  1,650
  1,730
  1,815
  1,903
  1,997
Adjusted assets (=assets-cash), $m
  560
  576
  594
  614
  635
  658
  683
  709
  738
  768
  800
  834
  870
  909
  949
  992
  1,038
  1,086
  1,136
  1,189
  1,245
  1,304
  1,367
  1,432
  1,501
  1,574
  1,650
  1,730
  1,815
  1,903
  1,997
Revenue / Adjusted assets
  1.948
  1.950
  1.949
  1.948
  1.948
  1.948
  1.947
  1.949
  1.947
  1.948
  1.949
  1.948
  1.949
  1.947
  1.948
  1.949
  1.947
  1.948
  1.948
  1.949
  1.949
  1.949
  1.947
  1.948
  1.948
  1.947
  1.948
  1.948
  1.948
  1.949
  1.947
Average production assets, $m
  52
  53
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
  183
Working capital, $m
  116
  88
  90
  93
  97
  100
  104
  108
  112
  117
  122
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
  263
  276
  289
  303
Total debt, $m
  107
  116
  127
  138
  151
  164
  178
  194
  210
  228
  247
  267
  288
  310
  334
  359
  385
  413
  442
  473
  506
  540
  576
  614
  655
  697
  741
  788
  837
  889
  943
Total liabilities, $m
  326
  335
  346
  357
  370
  383
  397
  413
  429
  447
  466
  486
  507
  529
  553
  578
  604
  632
  661
  692
  725
  759
  795
  833
  874
  916
  960
  1,007
  1,056
  1,108
  1,162
Total equity, $m
  265
  241
  248
  257
  265
  275
  285
  297
  308
  321
  334
  349
  364
  380
  397
  415
  434
  454
  475
  497
  521
  545
  571
  599
  627
  658
  690
  723
  758
  796
  835
Total liabilities and equity, $m
  591
  576
  594
  614
  635
  658
  682
  710
  737
  768
  800
  835
  871
  909
  950
  993
  1,038
  1,086
  1,136
  1,189
  1,246
  1,304
  1,366
  1,432
  1,501
  1,574
  1,650
  1,730
  1,814
  1,904
  1,997
Debt-to-equity ratio
  0.404
  0.480
  0.510
  0.540
  0.570
  0.600
  0.630
  0.650
  0.680
  0.710
  0.740
  0.760
  0.790
  0.820
  0.840
  0.860
  0.890
  0.910
  0.930
  0.950
  0.970
  0.990
  1.010
  1.030
  1.040
  1.060
  1.070
  1.090
  1.100
  1.120
  1.130
Adjusted equity ratio
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  4
  7
  11
  16
  22
  29
  38
  47
  57
  69
  97
  111
  126
  143
  161
  181
  202
  225
  249
  276
  304
  334
  366
  401
  437
  477
  518
  563
  610
  660
Depreciation, amort., depletion, $m
  18
  24
  24
  24
  24
  25
  25
  25
  25
  25
  25
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Funds from operations, $m
  -19
  28
  31
  35
  41
  47
  54
  62
  72
  83
  94
  102
  116
  132
  149
  167
  187
  209
  232
  257
  284
  312
  343
  375
  410
  448
  487
  530
  575
  622
  673
Change in working capital, $m
  -30
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  11
  25
  28
  32
  37
  43
  50
  58
  68
  78
  90
  97
  111
  126
  143
  161
  180
  202
  224
  249
  275
  303
  333
  366
  400
  437
  476
  517
  562
  609
  659
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
New CAPEX, $m
  -13
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from investing activities, $m
  -13
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -8
  -8
  -8
  -8
  -8
  -10
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -21
Free cash flow, $m
  -2
  21
  23
  27
  31
  37
  44
  52
  61
  71
  82
  89
  102
  117
  133
  151
  170
  190
  213
  237
  262
  290
  319
  351
  384
  420
  459
  499
  543
  589
  638
Issuance/(repayment) of debt, $m
  9
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
Issuance/(repurchase) of shares, $m
  3
  3
  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
Cash from financing (excl. dividends), $m  
  4
  12
  11
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
Total cash flow (excl. dividends), $m
  0
  33
  34
  38
  44
  50
  58
  67
  77
  88
  100
  108
  123
  139
  157
  176
  196
  218
  242
  268
  295
  324
  355
  389
  424
  463
  503
  546
  592
  641
  693
Retained Cash Flow (-), $m
  -11
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
Prev. year cash balance distribution, $m
 
  31
  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
 
  57
  26
  30
  35
  41
  48
  56
  65
  75
  87
  94
  108
  123
  140
  158
  177
  198
  221
  245
  271
  299
  329
  361
  396
  432
  471
  513
  557
  604
  654
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  55
  24
  26
  29
  31
  34
  37
  40
  43
  45
  44
  45
  46
  46
  45
  44
  42
  39
  36
  33
  29
  26
  22
  19
  16
  13
  10
  8
  6
  4
Current shareholders' claim on cash, %
  100
  99.3
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2

InnerWorkings, Inc. is a marketing execution company. The Company's software applications and databases create an integrated solution that stores, analyzes and tracks the production capabilities of its supplier network, as well as detailed pricing data. The Company's segments include North America and International. The North America segment includes operations in the United States and Canada. The International segment includes operations in Mexico, South America, Central America, Europe, the Middle East, Africa and Asia. The Company procures products for clients across a range of industries, such as retail, financial services, hospitality, consumer packaged goods, non-profits, healthcare, pharmaceuticals, food and beverage, broadcasting and cable and transportation. The Company's clients are classified into over two categories, enterprise and transactional. The Company provides marketing materials to its transactional clients on an order-by-order basis.

FINANCIAL RATIOS  of  InnerWorkings (INWK)

Valuation Ratios
P/E Ratio 119.9
Price to Sales 0.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 43.6
Price to Free Cash Flow -239.9
Growth Rates
Sales Growth Rate 6%
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 1.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 40.4%
Total Debt to Equity 40.4%
Interest Coverage 5
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. 1.4%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.6%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. 1.9%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 24.2%
Gross Margin - 3 Yr. Avg. 23.5%
EBITDA Margin 3.4%
EBITDA Margin - 3 Yr. Avg. 3.4%
Operating Margin 1.8%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 1.4%
Pre-Tax Margin - 3 Yr. Avg. 1.3%
Net Profit Margin 0.4%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 73.3%
Eff/ Tax Rate - 3 Yr. Avg. 6.8%
Payout Ratio 0%

INWK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INWK stock intrinsic value calculation we used $1091 million for the last fiscal year's total revenue generated by InnerWorkings. The default revenue input number comes from 2016 income statement of InnerWorkings. 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 INWK stock valuation model: a) initial revenue growth rate of 2.9% 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 4.4%, whose default value for INWK is calculated based on our internal credit rating of InnerWorkings, 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 InnerWorkings.
    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 INWK stock the variable cost ratio is equal to 46.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $575 million in the base year in the intrinsic value calculation for INWK 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 3.9% for InnerWorkings.

Corporate tax rate of 27% is the nominal tax rate for InnerWorkings. 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 INWK 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 INWK are equal to 4.7%.

Life of production assets of 14.2 years is the average useful life of capital assets used in InnerWorkings 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 INWK is equal to 7.8%. 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 - $265 million for InnerWorkings - 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 55.825 million for InnerWorkings 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 InnerWorkings at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ InnerWorkings Announces CEO Succession Plan   [Feb-01-18 04:14PM  Business Wire]
▶ InnerWorkings beats 3Q profit forecasts   [Nov-07-17 07:29PM  Associated Press]
▶ InnerWorkings beats 2Q profit forecasts   [Aug-07-17 11:14PM  Associated Press]
▶ InnerWorkings beats 2Q profit forecasts   [06:10PM  Associated Press]
▶ InnerWorkings to Present at Upcoming Investor Conferences   [May-31-17 04:30PM  Business Wire]
▶ ETFs with exposure to InnerWorkings, Inc. : May 12, 2017   [May-12-17 04:03PM  Capital Cube]
▶ InnerWorkings meets 1Q profit forecasts   [May-08-17 05:50PM  Associated Press]
▶ InnerWorkings tops Street 4Q forecasts   [07:37PM  Associated Press]
▶ InnerWorkings Expands Partnership with McKesson   [Dec-21-16 09:13AM  Business Wire]
▶ Is Strayer Education Inc (STRA) Going to Burn These Hedge Funds?   [Dec-12-16 09:26AM  at Insider Monkey]
Financial statements of INWK
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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