Intrinsic value of LivePerson - LPSN

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$7.15

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$7.15

 
Intrinsic value

$0.94

 
Up/down potential

-87%

 
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 LPSN 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 0.4

 

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, %
  -6.69
  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
  223
  227
  233
  239
  245
  253
  261
  270
  279
  290
  301
  313
  326
  339
  353
  369
  385
  402
  420
  439
  459
  481
  503
  527
  552
  578
  606
  635
  665
  698
  732
Variable operating expenses, $m
 
  100
  102
  104
  107
  110
  113
  117
  121
  125
  129
  126
  131
  137
  142
  149
  155
  162
  169
  177
  185
  194
  203
  212
  222
  233
  244
  256
  268
  281
  295
Fixed operating expenses, $m
 
  152
  155
  159
  163
  167
  172
  176
  180
  185
  189
  194
  199
  204
  209
  214
  220
  225
  231
  237
  243
  249
  255
  261
  268
  274
  281
  288
  295
  303
  310
Total operating expenses, $m
  242
  252
  257
  263
  270
  277
  285
  293
  301
  310
  318
  320
  330
  341
  351
  363
  375
  387
  400
  414
  428
  443
  458
  473
  490
  507
  525
  544
  563
  584
  605
Operating income, $m
  -19
  -24
  -25
  -25
  -25
  -25
  -24
  -23
  -21
  -20
  -18
  -7
  -5
  -2
  2
  6
  10
  15
  20
  26
  32
  38
  46
  53
  62
  71
  80
  91
  102
  114
  126
EBITDA, $m
  0
  -9
  -9
  -9
  -9
  -9
  -8
  -6
  -5
  -3
  0
  3
  6
  9
  13
  17
  22
  28
  33
  40
  46
  54
  61
  70
  79
  89
  100
  111
  123
  136
  149
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
Earnings before tax, $m
  -20
  -24
  -25
  -25
  -25
  -25
  -24
  -23
  -22
  -21
  -19
  -8
  -6
  -3
  0
  4
  8
  13
  18
  23
  29
  35
  42
  50
  58
  66
  76
  86
  96
  108
  120
Tax expense, $m
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  5
  6
  8
  10
  11
  13
  16
  18
  20
  23
  26
  29
  32
Net income, $m
  -26
  -24
  -25
  -25
  -25
  -25
  -24
  -23
  -22
  -21
  -19
  -8
  -6
  -3
  0
  3
  6
  9
  13
  17
  21
  26
  31
  36
  42
  48
  55
  63
  70
  79
  88

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  55
  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
  220
  168
  172
  177
  181
  187
  193
  200
  207
  214
  223
  231
  241
  251
  261
  273
  285
  297
  311
  325
  340
  356
  372
  390
  408
  428
  448
  469
  492
  516
  541
Adjusted assets (=assets-cash), $m
  165
  168
  172
  177
  181
  187
  193
  200
  207
  214
  223
  231
  241
  251
  261
  273
  285
  297
  311
  325
  340
  356
  372
  390
  408
  428
  448
  469
  492
  516
  541
Revenue / Adjusted assets
  1.352
  1.351
  1.355
  1.350
  1.354
  1.353
  1.352
  1.350
  1.348
  1.355
  1.350
  1.355
  1.353
  1.351
  1.352
  1.352
  1.351
  1.354
  1.350
  1.351
  1.350
  1.351
  1.352
  1.351
  1.353
  1.350
  1.353
  1.354
  1.352
  1.353
  1.353
Average production assets, $m
  48
  48
  50
  51
  52
  54
  56
  57
  60
  62
  64
  67
  69
  72
  75
  79
  82
  86
  89
  94
  98
  102
  107
  112
  118
  123
  129
  135
  142
  149
  156
Working capital, $m
  17
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -48
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -119
  -124
Total debt, $m
  0
  2
  4
  6
  8
  11
  14
  17
  21
  25
  29
  33
  38
  43
  48
  54
  59
  66
  72
  79
  87
  95
  103
  112
  121
  130
  141
  151
  163
  174
  187
Total liabilities, $m
  81
  84
  86
  88
  90
  93
  96
  99
  103
  107
  111
  115
  120
  125
  130
  136
  141
  148
  154
  161
  169
  177
  185
  194
  203
  212
  223
  233
  245
  256
  269
Total equity, $m
  138
  85
  87
  89
  91
  94
  97
  100
  104
  108
  112
  116
  121
  126
  132
  137
  143
  150
  156
  163
  171
  179
  187
  196
  205
  215
  225
  236
  248
  260
  272
Total liabilities and equity, $m
  219
  169
  173
  177
  181
  187
  193
  199
  207
  215
  223
  231
  241
  251
  262
  273
  284
  298
  310
  324
  340
  356
  372
  390
  408
  427
  448
  469
  493
  516
  541
Debt-to-equity ratio
  0.000
  0.020
  0.040
  0.060
  0.090
  0.120
  0.140
  0.170
  0.200
  0.230
  0.260
  0.280
  0.310
  0.340
  0.360
  0.390
  0.420
  0.440
  0.460
  0.490
  0.510
  0.530
  0.550
  0.570
  0.590
  0.610
  0.620
  0.640
  0.660
  0.670
  0.690
Adjusted equity ratio
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -26
  -24
  -25
  -25
  -25
  -25
  -24
  -23
  -22
  -21
  -19
  -8
  -6
  -3
  0
  3
  6
  9
  13
  17
  21
  26
  31
  36
  42
  48
  55
  63
  70
  79
  88
Depreciation, amort., depletion, $m
  19
  15
  15
  16
  16
  16
  16
  17
  17
  17
  18
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
Funds from operations, $m
  41
  -9
  -9
  -9
  -9
  -9
  -8
  -7
  -5
  -3
  -1
  2
  4
  8
  12
  15
  18
  22
  26
  31
  36
  41
  47
  53
  60
  67
  75
  83
  92
  101
  111
Change in working capital, $m
  16
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Cash from operations, $m
  25
  -9
  -8
  -8
  -8
  -8
  -7
  -5
  -4
  -2
  1
  4
  7
  10
  14
  17
  21
  25
  29
  34
  39
  45
  51
  57
  64
  71
  79
  88
  97
  106
  117
Maintenance CAPEX, $m
  0
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -12
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Cash from investing activities, $m
  -11
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -13
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -20
  -20
  -21
  -22
  -24
  -24
  -25
  -27
  -28
  -29
Free cash flow, $m
  14
  -17
  -17
  -17
  -17
  -17
  -16
  -15
  -14
  -13
  -11
  -9
  -6
  -3
  0
  3
  6
  9
  13
  17
  21
  26
  31
  36
  42
  48
  55
  62
  70
  78
  87
Issuance/(repayment) of debt, $m
  0
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $m
  -7
  0
  17
  17
  17
  17
  16
  15
  14
  13
  11
  9
  6
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -7
  2
  19
  19
  19
  20
  19
  18
  18
  17
  15
  13
  11
  8
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Total cash flow (excl. dividends), $m
  2
  -16
  -15
  -15
  -15
  -14
  -13
  -12
  -11
  -9
  -7
  -4
  -1
  2
  5
  8
  12
  15
  19
  24
  28
  33
  39
  45
  51
  58
  65
  73
  81
  90
  100
Retained Cash Flow (-), $m
  27
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
Prev. year cash balance distribution, $m
 
  55
  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
 
  38
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  3
  6
  9
  13
  16
  21
  25
  30
  36
  42
  48
  55
  62
  70
  78
  87
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
 
  36
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
Current shareholders' claim on cash, %
  100
  100.0
  93.8
  87.9
  82.5
  77.7
  73.4
  69.7
  66.5
  63.9
  61.8
  60.2
  59.2
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7
  58.7

LivePerson, Inc. provides mobile and online messaging technologies that power digital communication between brands and consumers in the United States, in the United Kingdom, the Asia-Pacific, Latin America, and Western Europe. It operates in two segments, Business and Consumer. The Business segment facilitates real-time online interactions, such as chat, voice, messaging, and content delivery, across multiple channels and screens for corporations of all sizes. The Consumer segment facilitates online transactions between independent service providers and individual consumers seeking information and knowledge via mobile and online messaging. Its cloud-based platform is LiveEngage, which enables businesses to create a connection with consumers by offering messaging as a preferred channel of communication. In addition, the company provides professional services and value-added business consulting services. It sells its products through direct and indirect sales channels to small and medium-sized businesses, Fortune 500 companies, Internet businesses, online merchants, universities, libraries, government agencies, and not-for-profit organizations. LivePerson, Inc. was founded in 1995 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  LivePerson (LPSN)

Valuation Ratios
P/E Ratio -16
Price to Sales 1.9
Price to Book 3
Price to Tangible Book
Price to Cash Flow 16.7
Price to Free Cash Flow 32.1
Growth Rates
Sales Growth Rate -6.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.7%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
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 -11.7%
Ret/ On Assets - 3 Yr. Avg. -8.7%
Return On Total Capital -17.2%
Ret/ On T. Cap. - 3 Yr. Avg. -12.1%
Return On Equity -17.2%
Return On Equity - 3 Yr. Avg. -12.1%
Asset Turnover 1
Profitability Ratios
Gross Margin 71.7%
Gross Margin - 3 Yr. Avg. 72.4%
EBITDA Margin -0.4%
EBITDA Margin - 3 Yr. Avg. 2.5%
Operating Margin -8.5%
Oper. Margin - 3 Yr. Avg. -5%
Pre-Tax Margin -9%
Pre-Tax Margin - 3 Yr. Avg. -5.3%
Net Profit Margin -11.7%
Net Profit Margin - 3 Yr. Avg. -8.6%
Effective Tax Rate -30%
Eff/ Tax Rate - 3 Yr. Avg. -68.8%
Payout Ratio 0%

LPSN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LPSN stock intrinsic value calculation we used $223 million for the last fiscal year's total revenue generated by LivePerson. The default revenue input number comes from 2016 income statement of LivePerson. 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 LPSN 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 LPSN is calculated based on our internal credit rating of LivePerson, 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 LivePerson.
    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 LPSN stock the variable cost ratio is equal to 43.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $148 million in the base year in the intrinsic value calculation for LPSN 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 LivePerson.

Corporate tax rate of 27% is the nominal tax rate for LivePerson. 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 LPSN 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 LPSN are equal to 21.3%.

Life of production assets of 6.7 years is the average useful life of capital assets used in LivePerson 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 LPSN is equal to -17%. 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 - $138 million for LivePerson - 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 57.461 million for LivePerson 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 LivePerson at the current share price and the inputted number of shares is $0.4 billion.


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COMPANY NEWS

▶ ETFs with exposure to LivePerson, Inc. : April 5, 2017   [Apr-05-17 05:03PM  Capital Cube]
▶ LivePerson to Participate in 29th Annual ROTH Conference   [Mar-02-17 05:00PM  PR Newswire]
▶ Why Shares of LivePerson Tumbled and Recovered Today   [Feb-09-17 01:01PM  Motley Fool]
▶ Hedge Funds Arent Crazy About LivePerson, Inc. (LPSN) Anymore   [Dec-06-16 05:42AM  at Insider Monkey]
▶ LivePerson Inc. Earnings: Looking for Signs of Life   [Nov-10-16 12:14PM  at Motley Fool]
▶ LivePerson Going Live With AdWords Click-to-Text   [Oct-18-16 03:34PM  at Investopedia]
▶ Why LivePerson Inc. Stock Tumbled Today   [Jul-28-16 12:34PM  at Motley Fool]
▶ LivePerson Inc. Earnings: Bring Out Your Dead   [07:23AM  at Motley Fool]
▶ Why LivePerson Inc. Stock Jumped Today   [Jul-07-16 12:56PM  at Motley Fool]
▶ Idea Design Studio Offers Prototype Tips   [Jun-27-16 08:32AM  PR Newswire]
Stock chart of LPSN Financial statements of LPSN
Valuation of Stocks

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