Intrinsic value of Spark Networks - LOV

Previous Close

$1.26

  Intrinsic Value

$0.09

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

+309%

Previous close

$1.26

 
Intrinsic value

$0.09

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

+309%

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

We calculate the intrinsic value of LOV 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 0.0

 

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, %
  -27.08
  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
  35
  36
  37
  37
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  104
  109
  115
Variable operating expenses, $m
 
  16
  17
  17
  17
  18
  19
  19
  20
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
Fixed operating expenses, $m
 
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  55
  56
  57
  59
Total operating expenses, $m
  43
  45
  46
  47
  48
  50
  51
  52
  54
  55
  57
  58
  60
  62
  64
  66
  68
  70
  72
  74
  77
  79
  82
  84
  88
  91
  93
  97
  100
  104
  108
Operating income, $m
  -8
  -9
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -9
  -8
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  0
  1
  3
  4
  6
  7
EBITDA, $m
  -4
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  5
  6
  8
  10
Interest expense (income), $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
  1
  1
  1
  1
  1
  1
Earnings before tax, $m
  -8
  -9
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -9
  -8
  -8
  -8
  -8
  -7
  -7
  -6
  -5
  -5
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  5
  6
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
  1
  1
  1
  2
Net income, $m
  -7
  -9
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -9
  -8
  -8
  -8
  -8
  -7
  -7
  -6
  -5
  -5
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  4
  5

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11
  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
  32
  21
  22
  22
  23
  24
  25
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
Adjusted assets (=assets-cash), $m
  21
  21
  22
  22
  23
  24
  25
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
Revenue / Adjusted assets
  1.667
  1.714
  1.682
  1.682
  1.696
  1.667
  1.640
  1.680
  1.692
  1.667
  1.679
  1.690
  1.645
  1.656
  1.667
  1.657
  1.667
  1.658
  1.650
  1.683
  1.674
  1.667
  1.681
  1.660
  1.673
  1.685
  1.667
  1.667
  1.651
  1.652
  1.667
Average production assets, $m
  8
  8
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
Working capital, $m
  7
  -4
  -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
  -10
  -11
  -11
Total debt, $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
Total liabilities, $m
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
Total equity, $m
  22
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
Total liabilities and equity, $m
  32
  21
  21
  23
  23
  23
  25
  25
  27
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  59
  63
  65
  69
Debt-to-equity ratio
  0.000
  0.020
  0.040
  0.060
  0.080
  0.110
  0.130
  0.160
  0.180
  0.210
  0.230
  0.260
  0.290
  0.310
  0.330
  0.360
  0.380
  0.400
  0.430
  0.450
  0.470
  0.490
  0.510
  0.520
  0.540
  0.560
  0.570
  0.590
  0.600
  0.620
  0.630
Adjusted equity ratio
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  -9
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -10
  -9
  -8
  -8
  -8
  -8
  -7
  -7
  -6
  -5
  -5
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  4
  5
Depreciation, amort., depletion, $m
  4
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Funds from operations, $m
  -4
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -3
  -2
  -2
  -1
  0
  2
  3
  4
  5
  6
  7
Change in working capital, $m
  -3
  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
  -1
Cash from operations, $m
  -1
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -7
  -6
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  4
  5
  6
  8
Maintenance CAPEX, $m
  0
  -1
  -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
New CAPEX, $m
  -3
  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
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Free cash flow, $m
  -4
  -8
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -8
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  4
Issuance/(repayment) of debt, $m
  0
  0
  0
  0
  0
  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
  2
Issuance/(repurchase) of shares, $m
  9
  10
  10
  10
  10
  10
  10
  11
  11
  11
  10
  9
  9
  9
  9
  8
  8
  7
  7
  6
  6
  5
  4
  4
  3
  2
  1
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  9
  10
  10
  10
  10
  10
  10
  11
  11
  11
  10
  10
  10
  10
  10
  9
  9
  8
  8
  7
  7
  6
  5
  5
  4
  3
  2
  1
  1
  1
  2
Total cash flow (excl. dividends), $m
  5
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  5
  6
Retained Cash Flow (-), $m
  -3
  -10
  -10
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -10
  -9
  -9
  -9
  -9
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  -1
  -2
  -2
  -2
Prev. year cash balance distribution, $m
 
  11
  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
 
  3
  -8
  -8
  -9
  -9
  -9
  -9
  -9
  -9
  -8
  -8
  -8
  -8
  -7
  -7
  -7
  -6
  -6
  -5
  -4
  -3
  -3
  -2
  -1
  0
  1
  1
  2
  3
  4
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
 
  3
  -8
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  68.3
  46.5
  31.6
  21.6
  14.8
  10.2
  7.1
  5.0
  3.5
  2.5
  1.9
  1.4
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.3
  0.2
  0.2
  0.2
  0.2
  0.2
  0.2
  0.2
  0.2
  0.2

Spark Networks, Inc. provides online personals services in the United States and internationally. It operates in four segments: Jewish Networks, Christian Networks, Other Networks, and Offline and Other Businesses. The company creates iconic, niche-focused brands and communities that help individuals form life-long relationships with others that share their interests and values. Its primary properties include JDate.com and ChristianMingle.com, which are communities geared towards singles of the Jewish and Christian faiths. The company, through its Websites and mobile applications, helps members search for and communicate with other like-minded individuals. Its online singles properties provide users with services, such as searching for compatible individuals with whom to potentially form long-term relationships; validating compatibility through profiles, viewing photographs, and understanding likes and characteristics; and communicating through a communications platform designed to foster relationships. The company’s online and web services offer various features that include posting of a personal profile and photos, onsite email, hotlists and favorites, message boards, mobile chat, chat rooms, instant messaging services, ice breakers, and Click!; and are available in English, Hebrew, and French languages. It also operates four different media properties primarily focused on serving the Christian community. As of December 31, 2014, it had 203,557 average paying subscribers. The company was incorporated in 2007 and is headquartered in Los Angeles, California.

FINANCIAL RATIOS  of  Spark Networks (LOV)

Valuation Ratios
P/E Ratio -5.8
Price to Sales 1.2
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow -40.3
Price to Free Cash Flow -10.1
Growth Rates
Sales Growth Rate -27.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate 0%
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 -21.5%
Ret/ On Assets - 3 Yr. Avg. -9.2%
Return On Total Capital -34.1%
Ret/ On T. Cap. - 3 Yr. Avg. -15.4%
Return On Equity -34.1%
Return On Equity - 3 Yr. Avg. -15.4%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 62.9%
Gross Margin - 3 Yr. Avg. 52.1%
EBITDA Margin -11.4%
EBITDA Margin - 3 Yr. Avg. -3.1%
Operating Margin -22.9%
Oper. Margin - 3 Yr. Avg. -8.9%
Pre-Tax Margin -22.9%
Pre-Tax Margin - 3 Yr. Avg. -9.4%
Net Profit Margin -20%
Net Profit Margin - 3 Yr. Avg. -7.9%
Effective Tax Rate 12.5%
Eff/ Tax Rate - 3 Yr. Avg. 20.8%
Payout Ratio 0%

LOV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LOV stock intrinsic value calculation we used $35 million for the last fiscal year's total revenue generated by Spark Networks. The default revenue input number comes from 2016 income statement of Spark Networks. 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 LOV 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 4.3%, whose default value for LOV is calculated based on our internal credit rating of Spark Networks, 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 Spark Networks.
    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 LOV stock the variable cost ratio is equal to 45.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $28 million in the base year in the intrinsic value calculation for LOV 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 Spark Networks.

Corporate tax rate of 27% is the nominal tax rate for Spark Networks. 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 LOV 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 LOV are equal to 21.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Spark Networks 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 LOV is equal to -10%. 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 - $22 million for Spark Networks - 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 32.543 million for Spark Networks 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 Spark Networks at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Spark Networks(R) Reports Second Quarter 2017 Results   [Aug-07-17 05:05PM  ACCESSWIRE]
▶ ETFs with exposure to Spark Networks, Inc. : July 3, 2017   [Jul-03-17 03:25PM  Capital Cube]
▶ ETFs with exposure to Spark Networks, Inc. : May 19, 2017   [May-19-17 01:59PM  Capital Cube]
▶ Spark, EliteSingles merger ignites online dating giant   [May-03-17 05:55PM  American City Business Journals]
▶ Spark Networks(R) Reports First Quarter 2017 Results   [May-02-17 05:30PM  Accesswire]
▶ Spark Networks reports 4Q loss   [Mar-21-17 05:35PM  Associated Press]
▶ What Are Match Group's Biggest Competitors?   [Nov-22-16 11:27AM  Motley Fool]
▶ What Are Match Group's Biggest Competitors?   [11:27AM  at Motley Fool]
▶ JSWIPE Dating Experience Reaches New Heights   [Jul-15-16 09:00AM  Marketwired]
▶ ChristianMingle opens doors to gay singles   [Jun-30-16 03:59PM  at MarketWatch]
Financial statements of LOV
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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