Intrinsic value of Synchronoss Technologies - SNCR

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$16.05

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of SNCR 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 0.7

 

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, %
  11.45
  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
  477
  487
  498
  511
  525
  541
  558
  577
  598
  620
  644
  669
  696
  725
  756
  789
  823
  860
  899
  939
  983
  1,028
  1,076
  1,127
  1,180
  1,236
  1,295
  1,358
  1,423
  1,492
  1,565
Variable operating expenses, $m
 
  468
  479
  490
  503
  518
  533
  551
  569
  589
  611
  607
  631
  658
  685
  715
  746
  780
  815
  852
  891
  932
  976
  1,022
  1,070
  1,121
  1,174
  1,231
  1,290
  1,353
  1,418
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
  549
  468
  479
  490
  503
  518
  533
  551
  569
  589
  611
  607
  631
  658
  685
  715
  746
  780
  815
  852
  891
  932
  976
  1,022
  1,070
  1,121
  1,174
  1,231
  1,290
  1,353
  1,418
Operating income, $m
  -72
  18
  19
  20
  22
  23
  25
  27
  28
  31
  33
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  139
  146
EBITDA, $m
  27
  84
  86
  88
  91
  93
  96
  100
  103
  107
  111
  116
  120
  125
  131
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  213
  224
  234
  246
  258
  270
Interest expense (income), $m
  7
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  40
  42
  44
Earnings before tax, $m
  -75
  10
  10
  11
  12
  13
  14
  15
  17
  18
  19
  48
  50
  52
  54
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  93
  98
  102
Tax expense, $m
  -8
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
Net income, $m
  20
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  35
  36
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  194
  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
  1,165
  995
  1,018
  1,044
  1,073
  1,106
  1,142
  1,181
  1,223
  1,268
  1,317
  1,369
  1,424
  1,483
  1,546
  1,613
  1,684
  1,758
  1,838
  1,921
  2,009
  2,103
  2,201
  2,304
  2,413
  2,528
  2,649
  2,777
  2,911
  3,052
  3,200
Adjusted assets (=assets-cash), $m
  971
  995
  1,018
  1,044
  1,073
  1,106
  1,142
  1,181
  1,223
  1,268
  1,317
  1,369
  1,424
  1,483
  1,546
  1,613
  1,684
  1,758
  1,838
  1,921
  2,009
  2,103
  2,201
  2,304
  2,413
  2,528
  2,649
  2,777
  2,911
  3,052
  3,200
Revenue / Adjusted assets
  0.491
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
Average production assets, $m
  351
  193
  197
  202
  208
  214
  221
  229
  237
  246
  255
  265
  276
  287
  299
  312
  326
  341
  356
  372
  389
  407
  426
  446
  467
  490
  513
  538
  564
  591
  620
Working capital, $m
  210
  49
  50
  52
  53
  55
  56
  58
  60
  63
  65
  68
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
Total debt, $m
  267
  248
  259
  272
  286
  302
  320
  339
  360
  383
  407
  432
  460
  489
  520
  553
  588
  625
  665
  706
  750
  796
  844
  896
  950
  1,006
  1,066
  1,129
  1,196
  1,266
  1,339
Total liabilities, $m
  508
  493
  504
  517
  531
  547
  565
  584
  605
  628
  652
  677
  705
  734
  765
  798
  833
  870
  910
  951
  995
  1,041
  1,089
  1,141
  1,195
  1,251
  1,311
  1,374
  1,441
  1,511
  1,584
Total equity, $m
  657
  502
  514
  527
  542
  558
  577
  596
  617
  640
  665
  691
  719
  749
  781
  815
  850
  888
  928
  970
  1,015
  1,062
  1,111
  1,164
  1,219
  1,277
  1,338
  1,402
  1,470
  1,541
  1,616
Total liabilities and equity, $m
  1,165
  995
  1,018
  1,044
  1,073
  1,105
  1,142
  1,180
  1,222
  1,268
  1,317
  1,368
  1,424
  1,483
  1,546
  1,613
  1,683
  1,758
  1,838
  1,921
  2,010
  2,103
  2,200
  2,305
  2,414
  2,528
  2,649
  2,776
  2,911
  3,052
  3,200
Debt-to-equity ratio
  0.406
  0.490
  0.500
  0.520
  0.530
  0.540
  0.560
  0.570
  0.580
  0.600
  0.610
  0.630
  0.640
  0.650
  0.670
  0.680
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.830
Adjusted equity ratio
  0.507
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  35
  36
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
Depreciation, amort., depletion, $m
  99
  66
  67
  68
  69
  70
  72
  73
  75
  77
  78
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  103
  108
  113
  118
  124
Funds from operations, $m
  204
  73
  74
  76
  78
  80
  82
  84
  87
  90
  93
  88
  92
  95
  99
  103
  107
  112
  116
  122
  127
  132
  138
  145
  151
  158
  165
  173
  181
  189
  198
Change in working capital, $m
  61
  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 operations, $m
  143
  87
  73
  75
  76
  78
  80
  82
  85
  87
  90
  86
  89
  92
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  146
  152
  159
  167
  174
  182
  191
Maintenance CAPEX, $m
  0
  -38
  -39
  -39
  -40
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -118
New CAPEX, $m
  -59
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
Cash from investing activities, $m
  -99
  -42
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -64
  -66
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -121
  -128
  -134
  -140
  -147
Free cash flow, $m
  44
  46
  30
  30
  30
  30
  30
  31
  31
  31
  32
  25
  25
  26
  26
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  41
  42
  44
Issuance/(repayment) of debt, $m
  25
  10
  11
  13
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
Issuance/(repurchase) of shares, $m
  -24
  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  
  -9
  10
  11
  13
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
Total cash flow (excl. dividends), $m
  33
  55
  42
  43
  45
  46
  48
  50
  52
  54
  56
  50
  53
  55
  57
  60
  63
  65
  68
  71
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  117
Retained Cash Flow (-), $m
  -47
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
Prev. year cash balance distribution, $m
 
  165
  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
 
  210
  30
  30
  30
  30
  30
  30
  30
  31
  31
  24
  25
  25
  26
  26
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
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
 
  201
  28
  26
  25
  23
  22
  20
  19
  18
  16
  11
  10
  10
  9
  8
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  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
  100.0

Synchronoss Technologies, Inc. provides cloud solutions and software-based activation for mobile carriers, enterprises, retailers, and original equipment manufacturers (OEMs) worldwide. The company’s solutions include activation and provisioning software for devices and services, cloud-based sync, backup, storage and content engagement capabilities, broadband connectivity solutions, analytics, identity/access management, and secure mobility management that enable communications service providers, cable operators/multi-services operators, and OEMs with embedded connectivity, multi-channel retailers, medium and large enterprises, and their consumers, as well as other customers to accelerate and monetize value-add services for secure and broadband networks and connected devices. Its Activation Services, Synchronoss Personal Cloud, and Enterprise and Integrated Life platforms provide automated on-demand, end-to-end order processing, transaction management, service provisioning, device activation, intelligent connectivity and content transfer, synchronization and social media, identity and access management, and secure mobility management, as well as enterprise-wide sharing/collaboration through multiple channels, including e-commerce, m-commerce, telesales, enterprise, indirect, and retail outlets. The company markets and sells its services through direct sales force and strategic partners. Synchronoss Technologies, Inc. was founded in 2000 and is headquartered in Bridgewater, New Jersey.

FINANCIAL RATIOS  of  Synchronoss Technologies (SNCR)

Valuation Ratios
P/E Ratio 36.4
Price to Sales 1.5
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 5.1
Price to Free Cash Flow 8.7
Growth Rates
Sales Growth Rate 11.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.3%
Cap. Spend. - 3 Yr. Gr. Rate -4.2%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 36.2%
Total Debt to Equity 40.6%
Interest Coverage -10
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 3.2%
Return On Equity - 3 Yr. Avg. 6.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 59.3%
Gross Margin - 3 Yr. Avg. 61%
EBITDA Margin 6.5%
EBITDA Margin - 3 Yr. Avg. 17.9%
Operating Margin -15.1%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin -15.7%
Pre-Tax Margin - 3 Yr. Avg. 0.1%
Net Profit Margin 4.2%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 10.7%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 0%

SNCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SNCR stock intrinsic value calculation we used $477 million for the last fiscal year's total revenue generated by Synchronoss Technologies. The default revenue input number comes from 2016 income statement of Synchronoss Technologies. 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 SNCR 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 SNCR is calculated based on our internal credit rating of Synchronoss Technologies, 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 Synchronoss Technologies.
    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 SNCR stock the variable cost ratio is equal to 96.4%.

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 SNCR 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 Synchronoss Technologies.

Corporate tax rate of 27% is the nominal tax rate for Synchronoss Technologies. 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 SNCR 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 SNCR are equal to 39.6%.

Life of production assets of 4.4 years is the average useful life of capital assets used in Synchronoss Technologies 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 SNCR is equal to 10.1%. 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 - $657 million for Synchronoss Technologies - 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 42.857 million for Synchronoss Technologies 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 Synchronoss Technologies at the current share price and the inputted number of shares is $0.7 billion.


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COMPANY NEWS

▶ Company News for June 26, 2017   [10:16AM  Zacks]
▶ Synchronoss Stock Pops On Takeover Offer After Long Swoon   [04:11PM  Investor's Business Daily]
▶ Story Stocks from Briefing.com   [12:34PM  Briefing.com]
▶ Stocks Open Tightly Mixed; This Bank Leads Dow, Cat Downgraded   [09:44AM  Investor's Business Daily]
Stock chart of SNCR Financial statements of SNCR Annual reports of SNCR
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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