Intrinsic value of Perion Network - PERI

Previous Close

$1.20

  Intrinsic Value

$4.61

stock screener

  Rating & Target

str. buy

+284%

  Value-price divergence*

-93%

Previous close

$1.20

 
Intrinsic value

$4.61

 
Up/down potential

+284%

 
Rating

str. buy

 
Value-price divergence*

-93%

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

We calculate the intrinsic value of PERI 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 0.1

 

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, %
  41.63
  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
  313
  319
  327
  335
  344
  355
  366
  379
  392
  407
  422
  439
  457
  476
  496
  518
  540
  564
  590
  616
  645
  675
  706
  739
  774
  811
  850
  891
  934
  979
  1,027
Variable operating expenses, $m
 
  141
  144
  147
  151
  155
  159
  164
  169
  175
  181
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  258
  270
  283
  297
  311
  326
  341
  358
  375
  393
Fixed operating expenses, $m
 
  170
  174
  179
  183
  188
  193
  197
  202
  207
  212
  218
  223
  229
  235
  240
  246
  253
  259
  265
  272
  279
  286
  293
  300
  308
  315
  323
  331
  340
  348
Total operating expenses, $m
  301
  311
  318
  326
  334
  343
  352
  361
  371
  382
  393
  386
  398
  411
  425
  438
  453
  469
  485
  501
  519
  537
  556
  576
  597
  619
  641
  664
  689
  715
  741
Operating income, $m
  11
  8
  8
  9
  10
  12
  14
  17
  21
  25
  29
  53
  59
  65
  72
  79
  87
  96
  105
  115
  126
  137
  150
  163
  178
  193
  209
  226
  245
  264
  285
EBITDA, $m
  37
  34
  34
  35
  37
  39
  41
  45
  48
  52
  57
  63
  69
  75
  82
  90
  98
  108
  118
  128
  140
  152
  165
  179
  194
  210
  227
  246
  265
  285
  307
Interest expense (income), $m
  0
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
Earnings before tax, $m
  3
  6
  6
  7
  8
  9
  12
  14
  18
  21
  25
  49
  55
  60
  67
  74
  82
  90
  99
  108
  119
  130
  142
  155
  169
  183
  199
  216
  234
  252
  273
Tax expense, $m
  0
  2
  2
  2
  2
  3
  3
  4
  5
  6
  7
  13
  15
  16
  18
  20
  22
  24
  27
  29
  32
  35
  38
  42
  46
  50
  54
  58
  63
  68
  74
Net income, $m
  0
  4
  4
  5
  6
  7
  9
  10
  13
  16
  19
  36
  40
  44
  49
  54
  60
  66
  72
  79
  87
  95
  104
  113
  123
  134
  145
  158
  170
  184
  199

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  32
  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
  368
  343
  350
  359
  370
  381
  393
  406
  421
  437
  453
  471
  490
  511
  532
  555
  580
  605
  633
  661
  692
  724
  758
  793
  831
  870
  912
  956
  1,002
  1,051
  1,102
Adjusted assets (=assets-cash), $m
  336
  343
  350
  359
  370
  381
  393
  406
  421
  437
  453
  471
  490
  511
  532
  555
  580
  605
  633
  661
  692
  724
  758
  793
  831
  870
  912
  956
  1,002
  1,051
  1,102
Revenue / Adjusted assets
  0.932
  0.930
  0.934
  0.933
  0.930
  0.932
  0.931
  0.933
  0.931
  0.931
  0.932
  0.932
  0.933
  0.932
  0.932
  0.933
  0.931
  0.932
  0.932
  0.932
  0.932
  0.932
  0.931
  0.932
  0.931
  0.932
  0.932
  0.932
  0.932
  0.931
  0.932
Average production assets, $m
  69
  70
  72
  73
  75
  78
  80
  83
  86
  89
  93
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  205
  214
  225
Working capital, $m
  27
  13
  14
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
Total debt, $m
  78
  63
  66
  70
  74
  79
  84
  90
  96
  103
  110
  117
  125
  134
  143
  153
  163
  174
  186
  198
  211
  224
  239
  254
  269
  286
  304
  322
  342
  362
  384
Total liabilities, $m
  160
  145
  148
  152
  156
  161
  166
  172
  178
  185
  192
  199
  207
  216
  225
  235
  245
  256
  268
  280
  293
  306
  321
  336
  351
  368
  386
  404
  424
  444
  466
Total equity, $m
  208
  198
  202
  207
  213
  220
  227
  235
  243
  252
  262
  272
  283
  295
  307
  320
  334
  349
  365
  382
  399
  418
  437
  458
  479
  502
  526
  552
  578
  606
  636
Total liabilities and equity, $m
  368
  343
  350
  359
  369
  381
  393
  407
  421
  437
  454
  471
  490
  511
  532
  555
  579
  605
  633
  662
  692
  724
  758
  794
  830
  870
  912
  956
  1,002
  1,050
  1,102
Debt-to-equity ratio
  0.375
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.550
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.600
Adjusted equity ratio
  0.524
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  4
  4
  5
  6
  7
  9
  10
  13
  16
  19
  36
  40
  44
  49
  54
  60
  66
  72
  79
  87
  95
  104
  113
  123
  134
  145
  158
  170
  184
  199
Depreciation, amort., depletion, $m
  26
  26
  26
  26
  26
  27
  27
  27
  28
  28
  28
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  28
  30
  30
  31
  32
  34
  35
  38
  40
  43
  47
  45
  50
  54
  59
  65
  71
  78
  85
  92
  101
  109
  119
  129
  140
  151
  164
  177
  191
  205
  221
Change in working capital, $m
  -2
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  30
  30
  30
  31
  32
  33
  35
  37
  40
  43
  46
  45
  49
  54
  59
  64
  70
  77
  84
  91
  99
  108
  118
  128
  138
  150
  162
  175
  189
  203
  219
Maintenance CAPEX, $m
  0
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -6
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Cash from investing activities, $m
  29
  -8
  -9
  -9
  -9
  -9
  -11
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
Free cash flow, $m
  59
  22
  22
  22
  22
  23
  25
  27
  29
  31
  34
  32
  36
  40
  44
  49
  54
  60
  66
  73
  80
  88
  96
  105
  115
  125
  136
  148
  160
  173
  188
Issuance/(repayment) of debt, $m
  -23
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -53
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Total cash flow (excl. dividends), $m
  6
  25
  25
  26
  27
  28
  30
  32
  35
  38
  41
  40
  44
  48
  53
  59
  64
  71
  78
  85
  93
  101
  110
  120
  131
  142
  154
  166
  180
  194
  209
Retained Cash Flow (-), $m
  -8
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
Prev. year cash balance distribution, $m
 
  14
  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
 
  35
  21
  21
  21
  22
  23
  25
  26
  29
  31
  29
  33
  36
  41
  45
  50
  56
  62
  68
  75
  83
  91
  100
  109
  119
  130
  141
  153
  166
  180
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
 
  33
  19
  18
  17
  17
  17
  17
  17
  17
  16
  14
  14
  14
  14
  13
  13
  12
  11
  11
  10
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  100
  100.0
  99.8
  99.5
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3

Perion Network Ltd. is a global technology company. It is engaged in delivering advertising solutions to brands and publishers. It operates through High Impact Advertising solutions segment. It provides execution, ranging from high-impact advertisement formats to branded search, and a unified social and mobile programmatic platform. Its business solutions include Undertone, Codefuel, Growmobile, IncrediMail and Smilebox. Undertone offers engaging digital advertising, which is designed to capture consumer attention and drive engagement, delivering these advertisements across a portfolio of Websites and mobile applications. CodeFuel is an engagement and monetization suite delivering solutions for both content publishers and advertisers. Growmobile offers automated marketing solutions ranging from social advertising to user engagement. IncrediMail is a unified messaging application. Smilebox is a photo sharing and social expression product and offers various formats, themes and styles.

FINANCIAL RATIOS  of  Perion Network (PERI)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.3
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 3.1
Price to Free Cash Flow 3.9
Growth Rates
Sales Growth Rate 41.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 28.8%
Total Debt to Equity 37.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 1.6%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 1.8%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0.9%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 94.6%
Gross Margin - 3 Yr. Avg. 96%
EBITDA Margin 9.3%
EBITDA Margin - 3 Yr. Avg. 5.5%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 0.8%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. -0.7%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -6.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 5.3%
Payout Ratio 0%

PERI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PERI stock intrinsic value calculation we used $313 million for the last fiscal year's total revenue generated by Perion Network. The default revenue input number comes from 2016 income statement of Perion Network. 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 PERI 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 PERI is calculated based on our internal credit rating of Perion Network, 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 Perion Network.
    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 PERI stock the variable cost ratio is equal to 44.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $166 million in the base year in the intrinsic value calculation for PERI 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 Perion Network.

Corporate tax rate of 27% is the nominal tax rate for Perion Network. 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 PERI 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 PERI are equal to 21.9%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Perion Network 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 PERI is equal to 4.2%. 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 - $208 million for Perion Network - 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 77.894 million for Perion Network 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 Perion Network at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Perion Network reports 2Q loss   [Aug-03-17 07:41PM  Associated Press]
▶ Perion Reports Second Quarter 2017 Results   [07:00AM  Business Wire]
▶ Perion Network reports 1Q loss   [May-04-17 09:24AM  Associated Press]
▶ Perion Reports First Quarter 2017 Results   [07:40AM  GlobeNewswire]
▶ Perion to Present at The MicroCap Conference on April 4   [Mar-28-17 10:00AM  GlobeNewswire]
▶ Perion Network posts 4Q profit   [Mar-07-17 07:26AM  Associated Press]
▶ Perion Reports Q3 2016 Results   [07:00AM  GlobeNewswire]
▶ Undertone Names Robert Schwartz as President   [Oct-13-16 10:00AM  Marketwired]
▶ Josef Mandelbaum to Step Down as CEO of Perion   [Sep-27-16 02:44AM  GlobeNewswire]
▶ Perion Network posts 2Q profit   [Aug-03-16 08:41AM  AP]
▶ Perion Network Rises on Improved Guidance   [Dec-31  08:50AM  24/7 Wall St.]
▶ Perion Network Ltd (PERI) May Be Best Avoided   [Dec-07  03:32PM  at Insider Monkey]
▶ Perion Acquires Undertone   [09:00AM  Business Wire]
▶ Harmony Merger Corp (HRMNU): Hedge Fund Sentiment Unchanged   [Nov-24  03:51PM  at Insider Monkey]
▶ Growmobile Launches Expanded Offering in Europe   [Nov-18  04:22AM  Business Wire]
▶ Perion Network reports 3Q loss   [Nov-03  07:57AM  AP]
▶ Perion Reports Third Quarter 2015 Results   [07:00AM  Business Wire]
▶ Perion Reports Second Quarter 2015 Results   [07:00AM  Business Wire]
Financial statements of PERI
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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