Intrinsic value of PROS Holdings - PRO

Previous Close

$25.20

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-132%

Previous close

$25.20

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-132%

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

We calculate the intrinsic value of PRO 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 0.8

 

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, %
  -8.93
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
Revenue, $m
  153
  165
  178
  192
  206
  220
  235
  251
  267
  284
  301
  320
  339
  359
  380
  401
  424
  447
  472
  498
  525
  553
  583
  614
  646
  680
  715
  753
  792
  832
  875
Variable operating expenses, $m
 
  55
  59
  63
  68
  72
  77
  82
  87
  93
  98
  102
  108
  115
  121
  128
  136
  143
  151
  159
  168
  177
  186
  196
  207
  218
  229
  241
  253
  266
  280
Fixed operating expenses, $m
 
  176
  181
  185
  190
  195
  199
  204
  210
  215
  220
  226
  231
  237
  243
  249
  255
  262
  268
  275
  282
  289
  296
  304
  311
  319
  327
  335
  343
  352
  361
Total operating expenses, $m
  219
  231
  240
  248
  258
  267
  276
  286
  297
  308
  318
  328
  339
  352
  364
  377
  391
  405
  419
  434
  450
  466
  482
  500
  518
  537
  556
  576
  596
  618
  641
Operating income, $m
  -65
  -66
  -61
  -57
  -52
  -47
  -42
  -36
  -30
  -24
  -17
  -8
  -1
  7
  15
  24
  33
  43
  53
  64
  75
  87
  100
  114
  128
  144
  160
  177
  195
  214
  235
EBITDA, $m
  -55
  -58
  -53
  -48
  -42
  -37
  -31
  -24
  -18
  -11
  -4
  4
  12
  21
  30
  39
  49
  60
  71
  83
  95
  108
  122
  137
  153
  169
  187
  205
  225
  246
  268
Interest expense (income), $m
  3
  4
  -1
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
Earnings before tax, $m
  -75
  -70
  -61
  -57
  -52
  -47
  -42
  -37
  -31
  -25
  -19
  -10
  -3
  4
  12
  20
  29
  38
  48
  58
  69
  81
  93
  106
  120
  135
  150
  167
  184
  203
  222
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  5
  8
  10
  13
  16
  19
  22
  25
  29
  32
  36
  41
  45
  50
  55
  60
Net income, $m
  -75
  -70
  -61
  -57
  -52
  -47
  -42
  -37
  -31
  -25
  -19
  -10
  -3
  3
  9
  15
  21
  28
  35
  43
  51
  59
  68
  78
  88
  98
  110
  122
  134
  148
  162

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  134
  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
  228
  102
  110
  118
  126
  135
  144
  154
  164
  174
  185
  196
  208
  220
  233
  246
  260
  275
  290
  306
  322
  340
  358
  377
  397
  418
  439
  462
  486
  511
  538
Adjusted assets (=assets-cash), $m
  94
  102
  110
  118
  126
  135
  144
  154
  164
  174
  185
  196
  208
  220
  233
  246
  260
  275
  290
  306
  322
  340
  358
  377
  397
  418
  439
  462
  486
  511
  538
Revenue / Adjusted assets
  1.628
  1.618
  1.618
  1.627
  1.635
  1.630
  1.632
  1.630
  1.628
  1.632
  1.627
  1.633
  1.630
  1.632
  1.631
  1.630
  1.631
  1.625
  1.628
  1.627
  1.630
  1.626
  1.628
  1.629
  1.627
  1.627
  1.629
  1.630
  1.630
  1.628
  1.626
Average production assets, $m
  29
  31
  34
  36
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  150
  158
  166
Working capital, $m
  77
  -62
  -66
  -71
  -77
  -82
  -88
  -94
  -100
  -106
  -112
  -119
  -126
  -134
  -142
  -150
  -158
  -167
  -176
  -186
  -196
  -206
  -217
  -229
  -241
  -254
  -267
  -281
  -295
  -311
  -327
Total debt, $m
  122
  -18
  -10
  -3
  5
  13
  21
  30
  39
  48
  58
  68
  78
  89
  101
  113
  125
  138
  152
  166
  181
  197
  213
  230
  248
  267
  287
  307
  329
  351
  375
Total liabilities, $m
  231
  91
  99
  106
  114
  122
  130
  139
  148
  157
  167
  177
  187
  198
  210
  222
  234
  247
  261
  275
  290
  306
  322
  339
  357
  376
  396
  416
  438
  460
  484
Total equity, $m
  -3
  10
  11
  12
  13
  14
  14
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
Total liabilities and equity, $m
  228
  101
  110
  118
  127
  136
  144
  154
  164
  174
  186
  197
  208
  220
  233
  247
  260
  274
  290
  306
  322
  340
  358
  377
  397
  418
  440
  462
  487
  511
  538
Debt-to-equity ratio
  -40.667
  -1.730
  -0.950
  -0.260
  0.370
  0.940
  1.450
  1.920
  2.350
  2.750
  3.110
  3.450
  3.760
  4.050
  4.320
  4.580
  4.810
  5.030
  5.240
  5.440
  5.620
  5.790
  5.950
  6.110
  6.250
  6.390
  6.520
  6.640
  6.760
  6.870
  6.970
Adjusted equity ratio
  -1.457
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -75
  -70
  -61
  -57
  -52
  -47
  -42
  -37
  -31
  -25
  -19
  -10
  -3
  3
  9
  15
  21
  28
  35
  43
  51
  59
  68
  78
  88
  98
  110
  122
  134
  148
  162
Depreciation, amort., depletion, $m
  10
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
Funds from operations, $m
  10
  -62
  -52
  -47
  -42
  -37
  -31
  -25
  -19
  -12
  -5
  2
  10
  17
  23
  30
  37
  45
  53
  62
  71
  80
  90
  101
  112
  124
  137
  150
  165
  180
  195
Change in working capital, $m
  24
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Cash from operations, $m
  -14
  -57
  -47
  -42
  -37
  -31
  -26
  -19
  -13
  -6
  1
  9
  17
  24
  31
  38
  46
  54
  62
  71
  81
  91
  101
  112
  124
  137
  150
  164
  179
  195
  211
Maintenance CAPEX, $m
  0
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
New CAPEX, $m
  -10
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Cash from investing activities, $m
  -25
  -8
  -8
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
Free cash flow, $m
  -39
  -65
  -56
  -52
  -47
  -42
  -37
  -31
  -25
  -19
  -13
  -6
  1
  7
  13
  20
  26
  33
  41
  48
  57
  65
  75
  84
  95
  106
  118
  130
  143
  157
  172
Issuance/(repayment) of debt, $m
  0
  -140
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $m
  2
  217
  62
  57
  53
  48
  43
  38
  32
  26
  20
  11
  4
  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
  77
  69
  64
  61
  56
  51
  47
  41
  35
  30
  21
  15
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  -44
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  15
  16
  18
  25
  32
  39
  46
  54
  63
  72
  81
  91
  102
  113
  125
  137
  151
  165
  180
  195
Retained Cash Flow (-), $m
  58
  -217
  -62
  -57
  -53
  -48
  -43
  -38
  -32
  -26
  -20
  -11
  -4
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Prev. year cash balance distribution, $m
 
  134
  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
 
  -71
  -49
  -44
  -39
  -34
  -28
  -23
  -16
  -10
  -3
  4
  12
  17
  24
  30
  37
  45
  53
  61
  70
  79
  89
  100
  111
  123
  135
  148
  162
  177
  193
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
 
  -68
  -45
  -38
  -32
  -26
  -21
  -15
  -10
  -6
  -2
  2
  5
  7
  8
  9
  9
  10
  10
  9
  9
  8
  7
  7
  6
  5
  4
  3
  3
  2
  1
Current shareholders' claim on cash, %
  100
  50.0
  7.1
  1.1
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

PROS Holdings, Inc. (PROS) is a provider of revenue and profit realization solutions. The Company provides its solutions to enterprises across the manufacturing, distribution, services, and travel industries, including automotive and industrial, business-to-business (B2B) services, cargo, chemicals and energy, consumer goods, insurance, food and beverage, healthcare, high tech and travel. The Company offers its solutions through a software-as-a-service (SaaS) delivery model, as well as on a perpetual or term license basis. The Company also provides professional services to implement its software applications, as well as business consulting. In addition, the Company provides product maintenance and support to its customers through which they receive unspecified upgrades, maintenance releases and bug fixes during the term of the support period on a when-and-if-available basis. Its cloud solutions for revenue and profit realization include SellingPRO, PricingPRO and RevenuePRO.

FINANCIAL RATIOS  of  PROS Holdings (PRO)

Valuation Ratios
P/E Ratio -10.3
Price to Sales 5
Price to Book -256.9
Price to Tangible Book
Price to Cash Flow -55
Price to Free Cash Flow -32.1
Growth Rates
Sales Growth Rate -8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 42.9%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity -4066.7%
Total Debt to Equity -4066.7%
Interest Coverage -24
Management Effectiveness
Return On Assets -29.3%
Ret/ On Assets - 3 Yr. Avg. -22.4%
Return On Total Capital -51.7%
Ret/ On T. Cap. - 3 Yr. Avg. -36.5%
Return On Equity -288.5%
Return On Equity - 3 Yr. Avg. -136.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 58.8%
Gross Margin - 3 Yr. Avg. 63.8%
EBITDA Margin -40.5%
EBITDA Margin - 3 Yr. Avg. -26.5%
Operating Margin -43.1%
Oper. Margin - 3 Yr. Avg. -29.4%
Pre-Tax Margin -49%
Pre-Tax Margin - 3 Yr. Avg. -33.7%
Net Profit Margin -49%
Net Profit Margin - 3 Yr. Avg. -36.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -17.8%
Payout Ratio 0%

PRO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PRO stock intrinsic value calculation we used $153 million for the last fiscal year's total revenue generated by PROS Holdings. The default revenue input number comes from 2016 income statement of PROS Holdings. 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 PRO stock valuation model: a) initial revenue growth rate of 8.1% 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 PRO is calculated based on our internal credit rating of PROS Holdings, 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 PROS Holdings.
    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 PRO stock the variable cost ratio is equal to 33.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $172 million in the base year in the intrinsic value calculation for PRO 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 PROS Holdings.

Corporate tax rate of 27% is the nominal tax rate for PROS Holdings. 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 PRO 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 PRO are equal to 19%.

Life of production assets of 4.9 years is the average useful life of capital assets used in PROS Holdings 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 PRO is equal to -37.3%. 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 - $-3 million for PROS Holdings - 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 31.926 million for PROS Holdings 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 PROS Holdings at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ PROS Holdings Inc (PRO): What Does It Mean For Your Portfolio?   [Sep-14-17 11:19AM  Simply Wall St.]
▶ Pros Holdings reports 2Q loss   [Aug-03-17 06:37PM  Associated Press]
▶ Microsoft Names PROS 2017 U.S. Partner of the Year   [Jul-12-17 08:00AM  Business Wire]
▶ ETFs with exposure to PROS Holdings, Inc. : May 5, 2017   [May-05-17 04:28PM  Capital Cube]
▶ Pros Holdings reports 1Q loss   [May-02-17 05:00PM  Associated Press]
▶ PROS to Present at IATA Cargo Network Services Conference   [Apr-27-17 08:00AM  Business Wire]
▶ PROS, Icertis to Join Forces at eXtreme 365 2017   [Mar-13-17 07:00AM  Business Wire]
▶ flydubai Selects PROS to Optimize Network Revenue   [Feb-06-17 08:00AM  Business Wire]
▶ PROS Executive to Address Aviation Festival Asia   [Jan-25-17 08:00AM  Business Wire]
▶ [$$] Policing the digital cartels   [Jan-08-17 01:01PM  at Financial Times]
▶ Do Hedge Funds Love The Marcus Corporation (MCS)?   [Dec-12-16 05:30PM  at Insider Monkey]
▶ Here is What Hedge Funds Think About Gener8 Maritime Inc (GNRT)   [Dec-05-16 05:54AM  at Insider Monkey]
Financial statements of PRO
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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