Intrinsic value of Rubicon Project - RUBI

Previous Close

$1.74

  Intrinsic Value

$3.73

stock screener

  Rating & Target

str. buy

+114%

Previous close

$1.74

 
Intrinsic value

$3.73

 
Up/down potential

+114%

 
Rating

str. buy

We calculate the intrinsic value of RUBI 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, %
  12.10
  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
  278
  284
  290
  298
  306
  315
  325
  336
  348
  361
  375
  390
  406
  423
  441
  460
  480
  501
  524
  548
  573
  599
  627
  657
  688
  721
  755
  791
  829
  870
  912
Variable operating expenses, $m
 
  291
  297
  305
  313
  322
  332
  343
  355
  368
  382
  391
  406
  423
  441
  460
  480
  502
  524
  548
  573
  600
  628
  658
  689
  721
  756
  792
  831
  871
  913
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
  303
  291
  297
  305
  313
  322
  332
  343
  355
  368
  382
  391
  406
  423
  441
  460
  480
  502
  524
  548
  573
  600
  628
  658
  689
  721
  756
  792
  831
  871
  913
Operating income, $m
  -25
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
EBITDA, $m
  18
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
Earnings before tax, $m
  -23
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -18
Tax expense, $m
  -5
  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
Net income, $m
  -18
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -18

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  190
  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
  520
  337
  345
  353
  363
  374
  386
  400
  414
  429
  446
  463
  482
  502
  523
  546
  570
  595
  622
  650
  680
  712
  745
  780
  817
  856
  897
  940
  985
  1,033
  1,083
Adjusted assets (=assets-cash), $m
  330
  337
  345
  353
  363
  374
  386
  400
  414
  429
  446
  463
  482
  502
  523
  546
  570
  595
  622
  650
  680
  712
  745
  780
  817
  856
  897
  940
  985
  1,033
  1,083
Revenue / Adjusted assets
  0.842
  0.843
  0.841
  0.844
  0.843
  0.842
  0.842
  0.840
  0.841
  0.841
  0.841
  0.842
  0.842
  0.843
  0.843
  0.842
  0.842
  0.842
  0.842
  0.843
  0.843
  0.841
  0.842
  0.842
  0.842
  0.842
  0.842
  0.841
  0.842
  0.842
  0.842
Average production assets, $m
  75
  77
  78
  80
  83
  85
  88
  91
  94
  98
  101
  105
  110
  114
  119
  124
  130
  135
  141
  148
  155
  162
  169
  177
  186
  195
  204
  214
  224
  235
  246
Working capital, $m
  174
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
Total debt, $m
  0
  5
  10
  16
  22
  30
  38
  47
  56
  66
  77
  89
  102
  115
  129
  144
  160
  177
  195
  214
  234
  255
  277
  300
  325
  351
  378
  407
  437
  469
  502
Total liabilities, $m
  220
  225
  230
  236
  242
  250
  258
  267
  276
  286
  297
  309
  322
  335
  349
  364
  380
  397
  415
  434
  454
  475
  497
  520
  545
  571
  598
  627
  657
  689
  722
Total equity, $m
  300
  112
  115
  118
  121
  125
  129
  133
  138
  143
  148
  154
  161
  167
  174
  182
  190
  198
  207
  217
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
Total liabilities and equity, $m
  520
  337
  345
  354
  363
  375
  387
  400
  414
  429
  445
  463
  483
  502
  523
  546
  570
  595
  622
  651
  680
  712
  745
  780
  817
  856
  897
  940
  985
  1,033
  1,083
Debt-to-equity ratio
  0.000
  0.040
  0.090
  0.130
  0.180
  0.240
  0.290
  0.350
  0.410
  0.460
  0.520
  0.580
  0.630
  0.690
  0.740
  0.790
  0.840
  0.890
  0.940
  0.990
  1.030
  1.070
  1.120
  1.160
  1.190
  1.230
  1.270
  1.300
  1.330
  1.360
  1.390
Adjusted equity ratio
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -18
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -18
Depreciation, amort., depletion, $m
  43
  22
  22
  23
  23
  24
  24
  25
  25
  26
  27
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
Funds from operations, $m
  51
  15
  15
  15
  16
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
Change in working capital, $m
  -9
  0
  0
  0
  0
  -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
Cash from operations, $m
  60
  15
  16
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
Maintenance CAPEX, $m
  0
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -33
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -37
  -17
  -17
  -18
  -18
  -20
  -20
  -21
  -21
  -22
  -24
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -37
  -38
  -40
  -42
  -43
  -46
  -48
  -51
  -53
  -56
  -58
Free cash flow, $m
  23
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
Issuance/(repayment) of debt, $m
  0
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
Issuance/(repurchase) of shares, $m
  16
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
Cash from financing (excl. dividends), $m  
  10
  14
  15
  16
  18
  18
  20
  22
  23
  24
  26
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  49
  51
  54
  58
  60
  64
  67
Total cash flow (excl. dividends), $m
  33
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
Retained Cash Flow (-), $m
  -22
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -30
  -32
  -34
Prev. year cash balance distribution, $m
 
  190
  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
 
  193
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
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
 
  185
  3
  3
  4
  4
  4
  4
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  89.4
  79.6
  70.6
  62.4
  54.9
  48.3
  42.3
  37.0
  32.2
  28.1
  25.8
  23.6
  21.6
  19.6
  17.8
  16.1
  14.5
  13.0
  11.6
  10.4
  9.3
  8.2
  7.3
  6.5
  5.7
  5.0
  4.4
  3.9
  3.4
  3.0

The Rubicon Project, Inc. offers a technology solution to automate the purchase and sale of advertising for buyers and sellers. The Company's solution enables buyers and sellers to purchase and sell a range of advertising units, including display and video; utilizing various inventory types, including direct sale of inventory and real-time bidding (RTB), and across digital channels, including mobile Web, mobile application and desktop, as well as across various out of home channels, such as digital billboards. The Company's platform features applications for digital advertising sellers, including Websites, mobile applications and other digital media properties, to sell their advertising inventory; applications and services for buyers, including advertisers, agencies, agency trading desks (ATDs), demand side platforms (DSPs) and advertisement networks, to buy advertising inventory, and a marketplace over which such transactions are executed.

FINANCIAL RATIOS  of  Rubicon Project (RUBI)

Valuation Ratios
P/E Ratio -4.8
Price to Sales 0.3
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 1.4
Price to Free Cash Flow 3.2
Growth Rates
Sales Growth Rate 12.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.9%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
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 -3.4%
Ret/ On Assets - 3 Yr. Avg. -4%
Return On Total Capital -6.2%
Ret/ On T. Cap. - 3 Yr. Avg. -10.2%
Return On Equity -6.2%
Return On Equity - 3 Yr. Avg. -10.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 73.7%
Gross Margin - 3 Yr. Avg. 78.1%
EBITDA Margin 7.2%
EBITDA Margin - 3 Yr. Avg. 4.4%
Operating Margin -9%
Oper. Margin - 3 Yr. Avg. -8.9%
Pre-Tax Margin -8.3%
Pre-Tax Margin - 3 Yr. Avg. -8.4%
Net Profit Margin -6.5%
Net Profit Margin - 3 Yr. Avg. -7.2%
Effective Tax Rate 21.7%
Eff/ Tax Rate - 3 Yr. Avg. 40.6%
Payout Ratio 0%

RUBI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RUBI stock intrinsic value calculation we used $278 million for the last fiscal year's total revenue generated by Rubicon Project. The default revenue input number comes from 2016 income statement of Rubicon Project. 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 RUBI 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 RUBI is calculated based on our internal credit rating of Rubicon Project, 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 Rubicon Project.
    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 RUBI stock the variable cost ratio is equal to 102.5%.

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 RUBI 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 Rubicon Project.

Corporate tax rate of 27% is the nominal tax rate for Rubicon Project. 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 RUBI 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 RUBI are equal to 27%.

Life of production assets of 3.3 years is the average useful life of capital assets used in Rubicon Project 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 RUBI is equal to -5.8%. 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 - $300 million for Rubicon Project - 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 49.821 million for Rubicon Project 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 Rubicon Project at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ The Rubicon Project reports 3Q loss   [Nov-06-17 05:39AM  Associated Press]
▶ Rubicon Project Reports Third Quarter 2017 Results   [Nov-02-17 04:05PM  GlobeNewswire]
▶ The Rubicon Project reports 2Q loss   [Aug-01-17 06:56PM  Associated Press]
▶ [$$] Rubicon Project Acquires nToggle for $38.5 Million   [Jul-17-17 06:19PM  The Wall Street Journal]
▶ Rubicon Project Acquires nToggle   [06:00AM  GlobeNewswire]
▶ Rubicon Project: Creating a Bargain Price   [Jun-21-17 01:55PM  GuruFocus.com]
▶ The Guardian crosses Rubicon Project with breach-of-contract lawsuit   [May-19-17 01:40PM  American City Business Journals]
▶ Rubicon Project Selected by BT to Expand Digital Presence   [May-09-17 07:01AM  GlobeNewswire]
▶ The Rubicon Project reports 1Q loss   [May-03-17 07:27PM  Associated Press]
▶ The Guardian is suing ad tech company Rubicon Project   [Mar-28-17 04:15AM  Business Insider]
▶ Five Cheap Tech Stocks to Buy Now   [Mar-21-17 01:19PM  at Insider Monkey]
▶ Rubicon taps new CEO after rough few months   [01:35PM  at bizjournals.com]
▶ CMO Today: New CEO for Beleaguered Ad Tech Firm Rubicon Project   [07:30AM  at The Wall Street Journal]
▶ Rubicon Project Appoints Michael Barrett as CEO   [Mar-14-17 06:58PM  at The Wall Street Journal]
▶ Rubicon Project Names David Day Chief Financial Officer   [Feb-23-17 09:00AM  Business Wire]
▶ Rubicon Project President Greg Raifman to Depart Company   [07:02PM  at The Wall Street Journal]
Financial statements of RUBI
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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