Intrinsic value of Smith Micro Software - SMSI

Previous Close

$2.02

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$2.02

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of SMSI 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -30.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  28
  27
  32
  37
  42
  48
  55
  61
  68
  76
  83
  92
  100
  109
  118
  127
  137
  148
  158
  170
  181
  193
  206
  219
  232
  246
  261
  276
  292
  309
  326
Variable operating expenses, $m
 
  43
  50
  58
  66
  75
  85
  95
  106
  117
  129
  142
  155
  168
  182
  197
  213
  228
  245
  262
  280
  299
  318
  338
  359
  381
  404
  427
  452
  478
  505
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
  44
  43
  50
  58
  66
  75
  85
  95
  106
  117
  129
  142
  155
  168
  182
  197
  213
  228
  245
  262
  280
  299
  318
  338
  359
  381
  404
  427
  452
  478
  505
Operating income, $m
  -16
  -15
  -18
  -21
  -24
  -27
  -30
  -34
  -38
  -42
  -46
  -50
  -55
  -59
  -64
  -70
  -75
  -81
  -87
  -93
  -99
  -106
  -112
  -120
  -127
  -135
  -143
  -151
  -160
  -169
  -179
EBITDA, $m
  -15
  -14
  -17
  -19
  -22
  -25
  -28
  -32
  -36
  -39
  -43
  -48
  -52
  -57
  -61
  -66
  -72
  -77
  -83
  -88
  -94
  -101
  -107
  -114
  -121
  -128
  -136
  -144
  -152
  -161
  -170
Interest expense (income), $m
  0
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  38
  40
  42
Earnings before tax, $m
  -15
  -17
  -20
  -23
  -27
  -31
  -35
  -40
  -45
  -50
  -55
  -60
  -66
  -72
  -78
  -85
  -91
  -98
  -106
  -113
  -121
  -130
  -138
  -147
  -156
  -166
  -176
  -186
  -197
  -209
  -221
Tax expense, $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
Net income, $m
  -15
  -17
  -20
  -23
  -27
  -31
  -35
  -40
  -45
  -50
  -55
  -60
  -66
  -72
  -78
  -85
  -91
  -98
  -106
  -113
  -121
  -130
  -138
  -147
  -156
  -166
  -176
  -186
  -197
  -209
  -221

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  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
Total assets, $m
  14
  16
  19
  22
  26
  29
  33
  37
  41
  46
  50
  55
  60
  66
  71
  77
  83
  89
  96
  102
  109
  117
  124
  132
  140
  149
  158
  167
  176
  187
  197
Adjusted assets (=assets-cash), $m
  12
  16
  19
  22
  26
  29
  33
  37
  41
  46
  50
  55
  60
  66
  71
  77
  83
  89
  96
  102
  109
  117
  124
  132
  140
  149
  158
  167
  176
  187
  197
Revenue / Adjusted assets
  2.333
  1.688
  1.684
  1.682
  1.615
  1.655
  1.667
  1.649
  1.659
  1.652
  1.660
  1.673
  1.667
  1.652
  1.662
  1.649
  1.651
  1.663
  1.646
  1.667
  1.661
  1.650
  1.661
  1.659
  1.657
  1.651
  1.652
  1.653
  1.659
  1.652
  1.655
Average production assets, $m
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
Working capital, $m
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
Total debt, $m
  2
  5
  7
  9
  12
  14
  17
  19
  22
  25
  28
  32
  35
  38
  42
  46
  50
  54
  59
  63
  68
  73
  78
  83
  88
  94
  100
  106
  113
  120
  127
Total liabilities, $m
  12
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  40
  44
  48
  52
  56
  60
  64
  69
  73
  78
  83
  89
  94
  100
  106
  112
  118
  125
  132
Total equity, $m
  3
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
Total liabilities and equity, $m
  15
  16
  19
  22
  25
  30
  33
  37
  42
  46
  51
  55
  60
  66
  71
  77
  83
  89
  95
  103
  109
  116
  124
  132
  140
  149
  158
  167
  176
  186
  197
Debt-to-equity ratio
  0.667
  1.010
  1.160
  1.280
  1.380
  1.460
  1.530
  1.580
  1.630
  1.670
  1.700
  1.730
  1.760
  1.780
  1.800
  1.820
  1.840
  1.850
  1.860
  1.870
  1.890
  1.890
  1.900
  1.910
  1.920
  1.930
  1.930
  1.940
  1.940
  1.950
  1.950
Adjusted equity ratio
  0.083
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -15
  -17
  -20
  -23
  -27
  -31
  -35
  -40
  -45
  -50
  -55
  -60
  -66
  -72
  -78
  -85
  -91
  -98
  -106
  -113
  -121
  -130
  -138
  -147
  -156
  -166
  -176
  -186
  -197
  -209
  -221
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Funds from operations, $m
  -11
  -16
  -19
  -22
  -25
  -29
  -33
  -38
  -42
  -47
  -52
  -58
  -63
  -69
  -75
  -81
  -88
  -95
  -102
  -109
  -117
  -125
  -133
  -141
  -150
  -160
  -169
  -179
  -190
  -201
  -212
Change in working capital, $m
  1
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  -12
  -16
  -19
  -22
  -26
  -30
  -34
  -38
  -43
  -48
  -53
  -58
  -64
  -70
  -76
  -82
  -89
  -96
  -103
  -110
  -118
  -126
  -134
  -143
  -152
  -161
  -171
  -181
  -191
  -202
  -214
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
New CAPEX, $m
  -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
  -2
  -2
  -2
  -3
  -3
  -3
Cash from investing activities, $m
  1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -10
  -10
  -11
Free cash flow, $m
  -11
  -17
  -20
  -24
  -28
  -32
  -36
  -41
  -46
  -51
  -56
  -62
  -68
  -74
  -80
  -87
  -94
  -101
  -108
  -116
  -124
  -132
  -141
  -150
  -159
  -169
  -179
  -190
  -201
  -212
  -225
Issuance/(repayment) of debt, $m
  4
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
Issuance/(repurchase) of shares, $m
  0
  17
  21
  24
  28
  32
  36
  41
  46
  51
  56
  62
  67
  74
  80
  87
  93
  100
  108
  116
  124
  132
  141
  150
  159
  169
  179
  190
  201
  212
  224
Cash from financing (excl. dividends), $m  
  4
  19
  23
  26
  30
  34
  39
  44
  49
  54
  59
  65
  70
  78
  84
  91
  97
  104
  112
  121
  129
  137
  146
  155
  164
  175
  185
  196
  207
  219
  231
Total cash flow (excl. dividends), $m
  -7
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
Retained Cash Flow (-), $m
  11
  -17
  -21
  -24
  -28
  -32
  -36
  -41
  -46
  -51
  -56
  -62
  -67
  -74
  -80
  -87
  -93
  -100
  -108
  -116
  -124
  -132
  -141
  -150
  -159
  -169
  -179
  -190
  -201
  -212
  -224
Prev. year cash balance distribution, $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 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
 
  -15
  -18
  -22
  -26
  -29
  -34
  -38
  -43
  -48
  -53
  -58
  -64
  -70
  -76
  -83
  -90
  -97
  -104
  -111
  -119
  -127
  -136
  -145
  -154
  -163
  -173
  -184
  -194
  -206
  -217
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  -14
  -16
  -18
  -19
  -20
  -20
  -21
  -21
  -20
  -19
  -18
  -17
  -16
  -14
  -12
  -11
  -9
  -8
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  72.3
  52.3
  37.8
  27.4
  19.8
  14.4
  10.4
  7.6
  5.5
  4.0
  2.9
  2.1
  1.5
  1.1
  0.8
  0.6
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Smith Micro Software, Inc. is a provider of software solutions. The Company operates through two segments: Wireless and Graphics. The Company offers multi-platform, modular solutions organized into three product families, including NetWise, CommSuite and QuickLink. For mobile network operators, NetWise helps reduce cellular congestion and optimize data traffic across third-generation (3G), fourth-generation (4G) and wireless fidelity (Wi-Fi) networks. Graphics segment includes its consumer-based products, such as Poser, Anime Studio, Manga Studio, MotionArtist and StuffIt. The Graphics segment develops a range of software, including graphic design and animation, compression and personal computer (PC)/Mac utilities, for consumers, professional artists and educators. The Company also offers Family Safety platform for family locator and parental controls.

FINANCIAL RATIOS  of  Smith Micro Software (SMSI)

Valuation Ratios
P/E Ratio -1.7
Price to Sales 0.9
Price to Book 8.3
Price to Tangible Book
Price to Cash Flow -2.1
Price to Free Cash Flow -1.9
Growth Rates
Sales Growth Rate -30%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 66.7%
Total Debt to Equity 66.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -78.9%
Ret/ On Assets - 3 Yr. Avg. -43.8%
Return On Total Capital -157.9%
Ret/ On T. Cap. - 3 Yr. Avg. -83.8%
Return On Equity -176.5%
Return On Equity - 3 Yr. Avg. -90%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 75%
Gross Margin - 3 Yr. Avg. 76.1%
EBITDA Margin -50%
EBITDA Margin - 3 Yr. Avg. -25.6%
Operating Margin -57.1%
Oper. Margin - 3 Yr. Avg. -31.5%
Pre-Tax Margin -53.6%
Pre-Tax Margin - 3 Yr. Avg. -31.2%
Net Profit Margin -53.6%
Net Profit Margin - 3 Yr. Avg. -31.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

SMSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMSI stock intrinsic value calculation we used $22.974 million for the last fiscal year's total revenue generated by Smith Micro Software. The default revenue input number comes from 2016 income statement of Smith Micro Software. 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 SMSI stock valuation model: a) initial revenue growth rate of 18.5% 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 6.8%, whose default value for SMSI is calculated based on our internal credit rating of Smith Micro Software, 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 Smith Micro Software.
    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 SMSI stock the variable cost ratio is equal to 156.5%.

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 SMSI 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 35.3% for Smith Micro Software.

Corporate tax rate of 27% is the nominal tax rate for Smith Micro Software. 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 SMSI 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 SMSI are equal to 16%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Smith Micro Software 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 SMSI is equal to 8.3%. 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 - $4.567 million for Smith Micro Software - 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 25.003 million for Smith Micro Software 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 Smith Micro Software at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Smith Micro Reports Third Quarter 2018 Financial Results   [Oct-24-18 04:05PM  Business Wire]
▶ Smith Micro Announces SafePath® Connected Life Platform   [Sep-12-18 06:30AM  Business Wire]
▶ Smith Micro Reports Second Quarter 2018 Financial Results   [Jul-24-18 04:05PM  Business Wire]
▶ Smith Micro Reports First Quarter 2018 Financial Results   [May-09-18 04:05PM  Business Wire]
▶ Smith Micro Reports 2017 Third Quarter Financial Results   [Oct-25-17 04:05PM  Business Wire]
▶ Smith Micro Reports 2017 Second Quarter Financial Results   [Aug-08-17 04:05PM  Business Wire]
▶ Smith Micro Reports 2017 First Quarter Financial Results   [May-03-17 04:05PM  Business Wire]
Financial statements of SMSI
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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