Intrinsic value of Splunk - SPLK

Previous Close

$60.76

  Intrinsic Value

$1.27

stock screener

  Rating & Target

str. sell

-98%

  Value-price divergence*

-85%

Previous close

$60.76

 
Intrinsic value

$1.27

 
Up/down potential

-98%

 
Rating

str. sell

 
Value-price divergence*

-85%

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

We calculate the intrinsic value of SPLK 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 2017), $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 8.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  42.22
  39.10
  35.69
  32.62
  29.86
  27.37
  25.14
  23.12
  21.31
  19.68
  18.21
  16.89
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
Revenue, $m
  950
  1,321
  1,793
  2,378
  3,088
  3,933
  4,922
  6,060
  7,351
  8,798
  10,400
  12,157
  14,066
  16,124
  18,327
  20,674
  23,159
  25,780
  28,535
  31,422
  34,441
  37,591
  40,873
  44,289
  47,842
  51,535
  55,374
  59,363
  63,508
  67,817
  72,297
Variable operating expenses, $m
 
  1,580
  2,139
  2,832
  3,674
  4,677
  5,849
  7,199
  8,730
  10,446
  12,346
  14,416
  16,680
  19,120
  21,733
  24,516
  27,463
  30,571
  33,838
  37,262
  40,841
  44,577
  48,469
  52,520
  56,733
  61,113
  65,665
  70,395
  75,310
  80,420
  85,732
Fixed operating expenses, $m
 
  163
  167
  171
  176
  180
  184
  189
  194
  199
  204
  209
  214
  219
  225
  230
  236
  242
  248
  254
  261
  267
  274
  281
  288
  295
  302
  310
  317
  325
  334
Total operating expenses, $m
  1,294
  1,743
  2,306
  3,003
  3,850
  4,857
  6,033
  7,388
  8,924
  10,645
  12,550
  14,625
  16,894
  19,339
  21,958
  24,746
  27,699
  30,813
  34,086
  37,516
  41,102
  44,844
  48,743
  52,801
  57,021
  61,408
  65,967
  70,705
  75,627
  80,745
  86,066
Operating income, $m
  -344
  -421
  -513
  -626
  -762
  -923
  -1,112
  -1,328
  -1,572
  -1,846
  -2,149
  -2,468
  -2,828
  -3,216
  -3,631
  -4,072
  -4,540
  -5,033
  -5,551
  -6,094
  -6,661
  -7,253
  -7,870
  -8,511
  -9,179
  -9,872
  -10,593
  -11,342
  -12,120
  -12,929
  -13,769
EBITDA, $m
  -309
  -382
  -464
  -565
  -686
  -831
  -999
  -1,192
  -1,410
  -1,654
  -1,924
  -2,220
  -2,541
  -2,887
  -3,257
  -3,651
  -4,067
  -4,507
  -4,969
  -5,453
  -5,959
  -6,486
  -7,036
  -7,608
  -8,203
  -8,821
  -9,463
  -10,131
  -10,824
  -11,545
  -12,294
Interest expense (income), $m
  4
  0
  8
  22
  40
  62
  87
  117
  152
  191
  235
  283
  337
  394
  457
  524
  595
  670
  750
  833
  921
  1,012
  1,108
  1,207
  1,311
  1,418
  1,530
  1,647
  1,768
  1,893
  2,024
Earnings before tax, $m
  -350
  -421
  -521
  -648
  -802
  -985
  -1,199
  -1,445
  -1,724
  -2,037
  -2,384
  -2,751
  -3,164
  -3,610
  -4,088
  -4,596
  -5,135
  -5,703
  -6,301
  -6,927
  -7,582
  -8,265
  -8,977
  -9,719
  -10,489
  -11,291
  -12,123
  -12,989
  -13,888
  -14,822
  -15,793
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
  -355
  -421
  -521
  -648
  -802
  -985
  -1,199
  -1,445
  -1,724
  -2,037
  -2,384
  -2,751
  -3,164
  -3,610
  -4,088
  -4,596
  -5,135
  -5,703
  -6,301
  -6,927
  -7,582
  -8,265
  -8,977
  -9,719
  -10,489
  -11,291
  -12,123
  -12,989
  -13,888
  -14,822
  -15,793

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,083
  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
  1,719
  1,272
  1,726
  2,289
  2,972
  3,786
  4,737
  5,833
  7,076
  8,468
  10,010
  11,701
  13,538
  15,518
  17,640
  19,898
  22,289
  24,812
  27,464
  30,243
  33,148
  36,180
  39,339
  42,627
  46,046
  49,601
  53,295
  57,134
  61,124
  65,271
  69,583
Adjusted assets (=assets-cash), $m
  636
  1,272
  1,726
  2,289
  2,972
  3,786
  4,737
  5,833
  7,076
  8,468
  10,010
  11,701
  13,538
  15,518
  17,640
  19,898
  22,289
  24,812
  27,464
  30,243
  33,148
  36,180
  39,339
  42,627
  46,046
  49,601
  53,295
  57,134
  61,124
  65,271
  69,583
Revenue / Adjusted assets
  1.494
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
  1.039
Average production assets, $m
  194
  270
  366
  485
  630
  802
  1,004
  1,236
  1,500
  1,795
  2,122
  2,480
  2,869
  3,289
  3,739
  4,217
  4,724
  5,259
  5,821
  6,410
  7,026
  7,669
  8,338
  9,035
  9,760
  10,513
  11,296
  12,110
  12,956
  13,835
  14,749
Working capital, $m
  693
  -132
  -179
  -238
  -309
  -393
  -492
  -606
  -735
  -880
  -1,040
  -1,216
  -1,407
  -1,612
  -1,833
  -2,067
  -2,316
  -2,578
  -2,854
  -3,142
  -3,444
  -3,759
  -4,087
  -4,429
  -4,784
  -5,154
  -5,537
  -5,936
  -6,351
  -6,782
  -7,230
Total debt, $m
  0
  231
  639
  1,146
  1,761
  2,493
  3,350
  4,335
  5,454
  6,707
  8,095
  9,617
  11,270
  13,053
  14,962
  16,994
  19,146
  21,417
  23,804
  26,305
  28,919
  31,648
  34,491
  37,450
  40,528
  43,727
  47,052
  50,507
  54,098
  57,830
  61,711
Total liabilities, $m
  913
  1,145
  1,553
  2,060
  2,675
  3,407
  4,264
  5,249
  6,368
  7,621
  9,009
  10,531
  12,184
  13,967
  15,876
  17,908
  20,060
  22,331
  24,718
  27,219
  29,833
  32,562
  35,405
  38,364
  41,442
  44,641
  47,966
  51,421
  55,012
  58,744
  62,625
Total equity, $m
  805
  127
  173
  229
  297
  379
  474
  583
  708
  847
  1,001
  1,170
  1,354
  1,552
  1,764
  1,990
  2,229
  2,481
  2,746
  3,024
  3,315
  3,618
  3,934
  4,263
  4,605
  4,960
  5,330
  5,713
  6,112
  6,527
  6,958
Total liabilities and equity, $m
  1,718
  1,272
  1,726
  2,289
  2,972
  3,786
  4,738
  5,832
  7,076
  8,468
  10,010
  11,701
  13,538
  15,519
  17,640
  19,898
  22,289
  24,812
  27,464
  30,243
  33,148
  36,180
  39,339
  42,627
  46,047
  49,601
  53,296
  57,134
  61,124
  65,271
  69,583
Debt-to-equity ratio
  0.000
  1.810
  3.700
  5.010
  5.920
  6.590
  7.070
  7.430
  7.710
  7.920
  8.090
  8.220
  8.320
  8.410
  8.480
  8.540
  8.590
  8.630
  8.670
  8.700
  8.720
  8.750
  8.770
  8.790
  8.800
  8.820
  8.830
  8.840
  8.850
  8.860
  8.870
Adjusted equity ratio
  -0.437
  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
  -355
  -421
  -521
  -648
  -802
  -985
  -1,199
  -1,445
  -1,724
  -2,037
  -2,384
  -2,751
  -3,164
  -3,610
  -4,088
  -4,596
  -5,135
  -5,703
  -6,301
  -6,927
  -7,582
  -8,265
  -8,977
  -9,719
  -10,489
  -11,291
  -12,123
  -12,989
  -13,888
  -14,822
  -15,793
Depreciation, amort., depletion, $m
  35
  39
  49
  61
  75
  93
  113
  136
  162
  192
  225
  248
  287
  329
  374
  422
  472
  526
  582
  641
  703
  767
  834
  903
  976
  1,051
  1,130
  1,211
  1,296
  1,383
  1,475
Funds from operations, $m
  338
  -382
  -472
  -587
  -727
  -892
  -1,086
  -1,309
  -1,562
  -1,845
  -2,159
  -2,503
  -2,877
  -3,281
  -3,714
  -4,174
  -4,662
  -5,177
  -5,718
  -6,286
  -6,879
  -7,498
  -8,143
  -8,815
  -9,513
  -10,239
  -10,994
  -11,778
  -12,592
  -13,439
  -14,318
Change in working capital, $m
  136
  -37
  -47
  -58
  -71
  -85
  -99
  -114
  -129
  -145
  -160
  -176
  -191
  -206
  -220
  -235
  -249
  -262
  -276
  -289
  -302
  -315
  -328
  -342
  -355
  -369
  -384
  -399
  -415
  -431
  -448
Cash from operations, $m
  202
  -344
  -425
  -529
  -655
  -808
  -987
  -1,195
  -1,433
  -1,700
  -1,999
  -2,328
  -2,687
  -3,075
  -3,493
  -3,940
  -4,414
  -4,915
  -5,443
  -5,997
  -6,577
  -7,183
  -7,815
  -8,473
  -9,158
  -9,870
  -10,610
  -11,379
  -12,178
  -13,008
  -13,870
Maintenance CAPEX, $m
  0
  -19
  -27
  -37
  -49
  -63
  -80
  -100
  -124
  -150
  -179
  -212
  -248
  -287
  -329
  -374
  -422
  -472
  -526
  -582
  -641
  -703
  -767
  -834
  -903
  -976
  -1,051
  -1,130
  -1,211
  -1,296
  -1,383
New CAPEX, $m
  -45
  -76
  -96
  -119
  -145
  -172
  -202
  -232
  -263
  -295
  -327
  -358
  -389
  -420
  -450
  -479
  -507
  -535
  -562
  -589
  -616
  -643
  -670
  -697
  -725
  -753
  -783
  -814
  -846
  -879
  -914
Cash from investing activities, $m
  -127
  -95
  -123
  -156
  -194
  -235
  -282
  -332
  -387
  -445
  -506
  -570
  -637
  -707
  -779
  -853
  -929
  -1,007
  -1,088
  -1,171
  -1,257
  -1,346
  -1,437
  -1,531
  -1,628
  -1,729
  -1,834
  -1,944
  -2,057
  -2,175
  -2,297
Free cash flow, $m
  75
  -439
  -548
  -684
  -849
  -1,043
  -1,269
  -1,528
  -1,820
  -2,145
  -2,505
  -2,898
  -3,324
  -3,782
  -4,272
  -4,792
  -5,342
  -5,922
  -6,531
  -7,168
  -7,834
  -8,529
  -9,252
  -10,004
  -10,786
  -11,599
  -12,444
  -13,322
  -14,234
  -15,182
  -16,168
Issuance/(repayment) of debt, $m
  0
  231
  409
  507
  615
  732
  856
  986
  1,119
  1,253
  1,388
  1,522
  1,653
  1,783
  1,909
  2,032
  2,153
  2,271
  2,387
  2,501
  2,615
  2,728
  2,843
  2,959
  3,078
  3,199
  3,325
  3,455
  3,591
  3,732
  3,881
Issuance/(repurchase) of shares, $m
  8
  548
  566
  704
  870
  1,066
  1,294
  1,554
  1,848
  2,176
  2,538
  2,920
  3,348
  3,808
  4,300
  4,822
  5,374
  5,955
  6,566
  7,205
  7,872
  8,568
  9,293
  10,047
  10,831
  11,646
  12,493
  13,372
  14,287
  15,237
  16,225
Cash from financing (excl. dividends), $m  
  -78
  779
  975
  1,211
  1,485
  1,798
  2,150
  2,540
  2,967
  3,429
  3,926
  4,442
  5,001
  5,591
  6,209
  6,854
  7,527
  8,226
  8,953
  9,706
  10,487
  11,296
  12,136
  13,006
  13,909
  14,845
  15,818
  16,827
  17,878
  18,969
  20,106
Total cash flow (excl. dividends), $m
  -3
  339
  427
  527
  637
  755
  881
  1,013
  1,147
  1,284
  1,421
  1,544
  1,678
  1,809
  1,937
  2,062
  2,184
  2,304
  2,421
  2,537
  2,653
  2,768
  2,885
  3,002
  3,123
  3,246
  3,373
  3,506
  3,643
  3,787
  3,937
Retained Cash Flow (-), $m
  54
  -548
  -566
  -704
  -870
  -1,066
  -1,294
  -1,554
  -1,848
  -2,176
  -2,538
  -2,920
  -3,348
  -3,808
  -4,300
  -4,822
  -5,374
  -5,955
  -6,566
  -7,205
  -7,872
  -8,568
  -9,293
  -10,047
  -10,831
  -11,646
  -12,493
  -13,372
  -14,287
  -15,237
  -16,225
Prev. year cash balance distribution, $m
 
  805
  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
 
  596
  -139
  -178
  -234
  -311
  -413
  -542
  -701
  -892
  -1,117
  -1,376
  -1,671
  -2,000
  -2,363
  -2,760
  -3,190
  -3,652
  -4,144
  -4,667
  -5,219
  -5,800
  -6,409
  -7,045
  -7,709
  -8,400
  -9,119
  -9,867
  -10,643
  -11,450
  -12,287
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
 
  572
  -127
  -155
  -193
  -241
  -299
  -366
  -438
  -513
  -586
  -654
  -713
  -760
  -793
  -810
  -811
  -795
  -763
  -719
  -663
  -600
  -532
  -462
  -393
  -327
  -266
  -212
  -165
  -125
  -93
Current shareholders' claim on cash, %
  100
  50.0
  34.6
  24.6
  17.8
  13.1
  9.8
  7.4
  5.6
  4.3
  3.3
  2.5
  2.0
  1.5
  1.2
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0

Splunk Inc. provides software solutions that enable organizations to gain real-time operational intelligence in the United States and internationally. The company’s products enable users to collect, index, search, explore, monitor, and analyze data regardless of format or source. It offers Splunk Enterprise, a machine data platform with collection, indexing, search, reporting, analysis, alerting, monitoring, and data management capabilities; and Splunk Cloud service. The company also provides Splunk Light, which offers log search and analysis for small IT environments; and Hunk, a Splunk analytics software, for exploring, analyzing, and visualizing data stored in Hadoop and Amazon S3. In addition, it offers Splunk Enterprise Security, which addresses emerging security threats; Splunk User Behavior Analytics that detects cyber-attacks and insider threats; and Splunk IT Service Intelligence, which monitors health and key performance indicators of critical IT services, as well as Splunk App for AWS to ensure cloud security and compliance; Splunk App for Stream to capture, analyze, and correlate network wire data; and DB Connect to get enterprise context; Palo Alto Networks App for Splunk to gain visibility to Palo Alto Networks firewalls; and Splunk App for Salesforce. Further, the company operates Splunkbase and Splunk Answers Websites, which provide an environment to share apps, collaborate on the use of its software, and provide community-based support, as well as offers application programming interfaces and software development kits. Additionally, it offers maintenance and customer support, training, and consulting and implementation services. The company serves cloud and online services, education, financial services, government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology, and telecommunications industries. Splunk Inc. was incorporated in 2003 and is headquartered in San Francisco, California.

FINANCIAL RATIOS  of  Splunk (SPLK)

Valuation Ratios
P/E Ratio -23.5
Price to Sales 8.8
Price to Book 10.4
Price to Tangible Book
Price to Cash Flow 41.3
Price to Free Cash Flow 53.1
Growth Rates
Sales Growth Rate 42.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.8%
Cap. Spend. - 3 Yr. Gr. Rate 38%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage -87
Management Effectiveness
Return On Assets -21.6%
Ret/ On Assets - 3 Yr. Avg. -20.2%
Return On Total Capital -42.7%
Ret/ On T. Cap. - 3 Yr. Avg. -34.4%
Return On Equity -42.7%
Return On Equity - 3 Yr. Avg. -34.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 79.9%
Gross Margin - 3 Yr. Avg. 82.6%
EBITDA Margin -32.7%
EBITDA Margin - 3 Yr. Avg. -39.3%
Operating Margin -36.2%
Oper. Margin - 3 Yr. Avg. -42.4%
Pre-Tax Margin -36.8%
Pre-Tax Margin - 3 Yr. Avg. -42.5%
Net Profit Margin -37.4%
Net Profit Margin - 3 Yr. Avg. -42.4%
Effective Tax Rate -1.4%
Eff/ Tax Rate - 3 Yr. Avg. 0.1%
Payout Ratio 0%

SPLK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPLK stock intrinsic value calculation we used $950 million for the last fiscal year's total revenue generated by Splunk. The default revenue input number comes from 2017 income statement of Splunk. 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 SPLK stock valuation model: a) initial revenue growth rate of 39.1% 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 SPLK is calculated based on our internal credit rating of Splunk, 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 Splunk.
    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 SPLK stock the variable cost ratio is equal to 119.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $159 million in the base year in the intrinsic value calculation for SPLK 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 Splunk.

Corporate tax rate of 27% is the nominal tax rate for Splunk. 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 SPLK 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 SPLK are equal to 20.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Splunk 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 SPLK is equal to -10%. 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 - $805 million for Splunk - 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 133.752 million for Splunk 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 Splunk at the current share price and the inputted number of shares is $8.1 billion.

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COMPANY NEWS

▶ Splunk: A Great Stock to Defend Against Ransomware   [Aug-02-17 08:35PM  Motley Fool]
▶ 3 Value Stocks for Bold Investors   [Aug-01-17 11:00AM  Motley Fool]
▶ Everything Investors Need to Know About Splunk   [Jul-22-17 02:31PM  Motley Fool]
▶ Key Takeaways From SplunkLive! 2017   [Jul-12-17 03:32PM  Benzinga]
▶ 3 Reasonably Valued Tech Stocks That Are Worth a Look   [Jul-10-17 09:00AM  TheStreet.com]
▶ Splunk's Transition Year: What You Need to Know   [Jul-06-17 07:32PM  Motley Fool]
▶ Deals That Could Speed Up Cisco's Software Makeover   [Jul-01-17 07:00AM  TheStreet.com]
▶ Rackspace makes deal with data company to streamline operations   [Jun-30-17 02:40PM  American City Business Journals]
▶ ETFs with exposure to Splunk, Inc. : June 28, 2017   [Jun-28-17 03:03PM  Capital Cube]
▶ Splunk Introduces Splunk Insights for Ransomware   [Jun-27-17 02:16PM  Business Wire]
▶ What This Splunk Downgrade Really Means   [Jun-15-17 12:10PM  24/7 Wall St.]
▶ Story Stocks from Briefing.com   [10:08AM  Briefing.com]
▶ ETFs with exposure to Splunk, Inc. : June 12, 2017   [Jun-12-17 02:28PM  Capital Cube]
▶ Splunk Inc. to Participate in Upcoming Investor Conference   [Jun-01-17 08:00AM  Business Wire]
▶ Roundtable: 1 Stock That Reminds Me of Facebook   [May-30-17 07:33PM  Motley Fool]
▶ Stock Futures Mixed After Positive Q1 GDP Data   [08:50AM  Investor's Business Daily]
▶ Splunk Beats Expectations, Again   [07:32AM  Motley Fool]
▶ Solid Start for Splunk   [12:40AM  Morningstar]
▶ Splunk reports 1Q loss   [04:07PM  Associated Press]
▶ 3 Stocks In Or Near Buy Range With Earnings Due: Investing Action Plan   [May-24-17 04:32PM  Investor's Business Daily]
▶ Splunk Cloud Launches on AWS Marketplace   [Apr-20-17 08:00AM  Business Wire]
▶ Splunk Stock Climbs on 'Buy' Rating at BTIG   [Apr-18-17 11:06AM  TheStreet.com]
▶ CORRECTING and REPLACING Yelp Democratizes Data with Splunk   [Apr-13-17 02:29PM  Business Wire]
▶ ETFs with exposure to Splunk, Inc. : April 5, 2017   [Apr-05-17 05:30PM  Capital Cube]
▶ Splunk in 2 Charts   [03:30PM  Motley Fool]
▶ Story Stocks from Briefing.com   [Apr-03-17 12:22PM  Briefing.com]
▶ Splunk 10K Alerts To Possible Activist Involvement   [Mar-30-17 09:51AM  Benzinga]
▶ Can Splunk Finally Get Its Kicks Above $66?   [Mar-28-17 03:39PM  TheStreet.com]
▶ Splunk and New Relic Power Digital Business Success   [Mar-22-17 08:00AM  Business Wire]
▶ Splunk Inc. Makes It 9 Straight   [08:00AM  at Motley Fool]
Stock chart of SPLK Financial statements of SPLK
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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