Intrinsic value of Kornit Digital - KRNT

Previous Close

$15.35

  Intrinsic Value

$0.76

stock screener

  Rating & Target

str. sell

-95%

Previous close

$15.35

 
Intrinsic value

$0.76

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of KRNT 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, %
  26.74
  20.80
  19.22
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
Revenue, $m
  109
  132
  157
  185
  215
  249
  284
  322
  363
  406
  451
  498
  548
  599
  653
  710
  768
  829
  893
  958
  1,027
  1,098
  1,172
  1,248
  1,328
  1,411
  1,498
  1,588
  1,682
  1,780
  1,883
Variable operating expenses, $m
 
  124
  148
  174
  203
  234
  268
  304
  342
  382
  424
  468
  515
  564
  615
  667
  723
  780
  839
  901
  966
  1,032
  1,102
  1,174
  1,249
  1,327
  1,409
  1,494
  1,582
  1,674
  1,770
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
  107
  124
  148
  174
  203
  234
  268
  304
  342
  382
  424
  468
  515
  564
  615
  667
  723
  780
  839
  901
  966
  1,032
  1,102
  1,174
  1,249
  1,327
  1,409
  1,494
  1,582
  1,674
  1,770
Operating income, $m
  1
  7
  9
  11
  12
  14
  16
  19
  21
  24
  26
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
  70
  74
  79
  84
  89
  95
  100
  106
  112
EBITDA, $m
  4
  10
  12
  14
  16
  19
  22
  25
  28
  31
  34
  38
  42
  46
  50
  54
  59
  63
  68
  73
  78
  84
  89
  95
  101
  108
  114
  121
  128
  136
  143
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  1
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  26
  29
  31
  34
  37
  39
  42
  46
  49
  52
  56
  59
  63
  67
  71
  75
  80
  85
  89
  94
Tax expense, $m
  0
  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
  26
Net income, $m
  1
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  65
  69

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  39
  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
  140
  122
  145
  171
  200
  230
  263
  299
  336
  376
  418
  462
  507
  556
  606
  658
  712
  769
  827
  888
  952
  1,017
  1,086
  1,157
  1,231
  1,308
  1,388
  1,472
  1,559
  1,650
  1,745
Adjusted assets (=assets-cash), $m
  101
  122
  145
  171
  200
  230
  263
  299
  336
  376
  418
  462
  507
  556
  606
  658
  712
  769
  827
  888
  952
  1,017
  1,086
  1,157
  1,231
  1,308
  1,388
  1,472
  1,559
  1,650
  1,745
Revenue / Adjusted assets
  1.079
  1.082
  1.083
  1.082
  1.075
  1.083
  1.080
  1.077
  1.080
  1.080
  1.079
  1.078
  1.081
  1.077
  1.078
  1.079
  1.079
  1.078
  1.080
  1.079
  1.079
  1.080
  1.079
  1.079
  1.079
  1.079
  1.079
  1.079
  1.079
  1.079
  1.079
Average production assets, $m
  9
  11
  13
  15
  18
  21
  24
  27
  30
  34
  37
  41
  45
  50
  54
  59
  64
  69
  74
  80
  85
  91
  97
  104
  110
  117
  124
  132
  140
  148
  156
Working capital, $m
  69
  36
  43
  51
  59
  68
  78
  89
  100
  112
  124
  137
  151
  165
  180
  195
  211
  228
  245
  264
  282
  302
  322
  343
  365
  388
  412
  437
  463
  490
  518
Total debt, $m
  0
  7
  15
  23
  32
  42
  53
  65
  77
  90
  104
  118
  133
  149
  165
  182
  200
  218
  237
  257
  278
  300
  322
  345
  370
  395
  421
  448
  477
  507
  538
Total liabilities, $m
  33
  40
  48
  56
  65
  75
  86
  98
  110
  123
  137
  151
  166
  182
  198
  215
  233
  251
  270
  290
  311
  333
  355
  378
  403
  428
  454
  481
  510
  540
  571
Total equity, $m
  107
  82
  98
  115
  134
  155
  177
  201
  226
  253
  281
  311
  342
  374
  408
  443
  479
  517
  557
  598
  640
  685
  731
  779
  829
  880
  934
  991
  1,049
  1,110
  1,174
Total liabilities and equity, $m
  140
  122
  146
  171
  199
  230
  263
  299
  336
  376
  418
  462
  508
  556
  606
  658
  712
  768
  827
  888
  951
  1,018
  1,086
  1,157
  1,232
  1,308
  1,388
  1,472
  1,559
  1,650
  1,745
Debt-to-equity ratio
  0.000
  0.080
  0.150
  0.200
  0.240
  0.270
  0.300
  0.320
  0.340
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.430
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  0.460
  0.460
Adjusted equity ratio
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  65
  69
Depreciation, amort., depletion, $m
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
Funds from operations, $m
  -8
  8
  9
  11
  12
  14
  16
  18
  20
  23
  25
  27
  30
  33
  35
  38
  42
  45
  48
  52
  55
  59
  63
  67
  71
  75
  80
  85
  90
  95
  100
Change in working capital, $m
  -9
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
Cash from operations, $m
  1
  2
  2
  3
  4
  5
  6
  8
  9
  11
  13
  14
  16
  18
  21
  23
  25
  28
  31
  33
  36
  39
  42
  46
  49
  53
  56
  60
  64
  68
  72
Maintenance CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
New CAPEX, $m
  -5
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
Cash from investing activities, $m
  2
  -4
  -4
  -5
  -6
  -7
  -7
  -8
  -8
  -10
  -11
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -28
  -29
  -30
  -32
  -34
  -36
  -38
Free cash flow, $m
  3
  -2
  -2
  -2
  -2
  -1
  -1
  0
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
Issuance/(repayment) of debt, $m
  0
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
Issuance/(repurchase) of shares, $m
  1
  9
  9
  10
  11
  11
  11
  11
  11
  11
  11
  11
  10
  10
  9
  8
  8
  7
  6
  5
  5
  4
  3
  2
  1
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1
  16
  17
  18
  20
  21
  22
  23
  23
  24
  25
  25
  25
  26
  25
  25
  26
  25
  25
  25
  26
  26
  25
  25
  25
  25
  26
  27
  28
  30
  31
Total cash flow (excl. dividends), $m
  4
  14
  15
  17
  18
  20
  21
  23
  24
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  52
  55
  58
  61
  65
Retained Cash Flow (-), $m
  -7
  -14
  -16
  -17
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
Prev. year cash balance distribution, $m
 
  39
  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
 
  39
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -2
  -1
  -1
  0
  1
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
 
  37
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.4
  95.1
  93.1
  91.4
  89.9
  88.5
  87.4
  86.4
  85.5
  84.7
  84.0
  83.5
  83.0
  82.6
  82.2
  81.9
  81.7
  81.5
  81.3
  81.2
  81.1
  81.0
  81.0
  81.0
  81.0
  81.0
  81.0
  81.0
  81.0
  81.0

Kornit Digital Ltd. develops, designs and markets digital printing solutions for the global printed textile industry. The Company's solutions include its digital printing systems, ink and other consumables, associated software and value added services. Its customers include custom decorators, online businesses, brand owners and contract printers. The Company categorizes its Direct to Garment (DTG) systems into two groups: entry level and high throughput. The Company's entry-level systems consist of its Breeze and Thunder systems. Its high throughput systems consist of its Avalanche family of systems, Storm II and Paradigm II. Allegro is its Roll to Roll (R2R) printing system. Its ink and other consumables consist of NeoPigment PURE ink, binding agent, priming fluid, wiping fluid and flushing fluid. Its pigment-based inks are available in over seven colors and are formulated for use in its systems.

FINANCIAL RATIOS  of  Kornit Digital (KRNT)

Valuation Ratios
P/E Ratio 465.1
Price to Sales 4.3
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 465.1
Price to Free Cash Flow -116.3
Growth Rates
Sales Growth Rate 26.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 150%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
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 0.8%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital 1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 1%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 45%
Gross Margin - 3 Yr. Avg. 45.5%
EBITDA Margin 3.7%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 1.8%
Oper. Margin - 3 Yr. Avg. 4.1%
Pre-Tax Margin 0.9%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 0.9%
Net Profit Margin - 3 Yr. Avg. 3.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 8.3%
Payout Ratio 0%

KRNT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KRNT stock intrinsic value calculation we used $109 million for the last fiscal year's total revenue generated by Kornit Digital. The default revenue input number comes from 2016 income statement of Kornit Digital. 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 KRNT stock valuation model: a) initial revenue growth rate of 20.8% 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 KRNT is calculated based on our internal credit rating of Kornit Digital, 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 Kornit Digital.
    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 KRNT stock the variable cost ratio is equal to 94.5%.

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 KRNT 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 Kornit Digital.

Corporate tax rate of 27% is the nominal tax rate for Kornit Digital. 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 KRNT 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 KRNT are equal to 8.3%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Kornit Digital 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 KRNT is equal to 27.5%. 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 - $107 million for Kornit Digital - 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 33.734 million for Kornit Digital 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 Kornit Digital at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Why Kornit Digital Ltd. Stock Just Crashed 20%   [Sep-27-17 01:17PM  Motley Fool]
▶ Kornit Digital beats 2Q profit forecasts   [Aug-08-17 10:07PM  Associated Press]
▶ Kornit Digital Reports 2017 Second Quarter Results   [Aug-07-17 04:05PM  GlobeNewswire]
▶ ETFs with exposure to Kornit Digital Ltd. : July 12, 2017   [Jul-12-17 02:45PM  Capital Cube]
▶ ETFs with exposure to Kornit Digital Ltd. : June 26, 2017   [Jun-26-17 04:20PM  Capital Cube]
▶ ETFs with exposure to Kornit Digital Ltd. : June 15, 2017   [Jun-15-17 02:22PM  Capital Cube]
▶ Kornit Digital to Present at Upcoming Investor Conferences   [Jun-01-17 08:30AM  GlobeNewswire]
▶ Kornit Digital Reports 2017 First Quarter Results   [May-09-17 04:05PM  GlobeNewswire]
▶ ETFs with exposure to Kornit Digital Ltd. : April 5, 2017   [Apr-05-17 05:00PM  Capital Cube]
▶ Kornit Digital posts 4Q profit   [04:59PM  Associated Press]
▶ Kornit Digital Signs Agreement with Amazon   [07:45AM  GlobeNewswire]
▶ Kornit Digital to Present at Upcoming Investor Conferences   [Dec-28-16 04:05PM  GlobeNewswire]
▶ Kornit Digital to Present at Upcoming Investor Conferences   [Jun-01-16 04:05PM  GlobeNewswire]
▶ Kornit Digital Announces Organizational Changes   [Apr-29-16 08:00AM  GlobeNewswire]
Financial statements of KRNT
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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