Intrinsic value of Silver Spring Networks - SSNI

Previous Close

$12.68

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-75%

Previous close

$12.68

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-75%

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

We calculate the intrinsic value of SSNI 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 0.6

 

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, %
  -36.53
  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
  311
  317
  325
  333
  342
  353
  364
  376
  390
  404
  420
  436
  454
  473
  493
  514
  537
  561
  586
  613
  641
  670
  702
  735
  769
  806
  845
  885
  928
  973
  1,020
Variable operating expenses, $m
 
  134
  138
  141
  145
  149
  154
  159
  165
  171
  178
  184
  191
  199
  208
  217
  226
  236
  247
  258
  270
  282
  295
  309
  324
  339
  356
  373
  391
  410
  430
Fixed operating expenses, $m
 
  209
  214
  220
  225
  231
  237
  242
  249
  255
  261
  268
  274
  281
  288
  295
  303
  310
  318
  326
  334
  343
  351
  360
  369
  378
  388
  397
  407
  417
  428
Total operating expenses, $m
  331
  343
  352
  361
  370
  380
  391
  401
  414
  426
  439
  452
  465
  480
  496
  512
  529
  546
  565
  584
  604
  625
  646
  669
  693
  717
  744
  770
  798
  827
  858
Operating income, $m
  -20
  -26
  -27
  -28
  -28
  -28
  -27
  -26
  -24
  -22
  -19
  -15
  -11
  -7
  -3
  2
  8
  14
  21
  28
  37
  45
  55
  65
  76
  88
  101
  115
  130
  146
  163
EBITDA, $m
  -11
  -25
  -26
  -27
  -27
  -27
  -26
  -25
  -23
  -21
  -18
  -15
  -11
  -7
  -3
  2
  8
  14
  21
  28
  37
  45
  55
  65
  76
  88
  101
  115
  130
  146
  163
Interest expense (income), $m
  0
  0
  -2
  -2
  -2
  -1
  -1
  0
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  20
  21
  23
  25
  27
Earnings before tax, $m
  -19
  -26
  -25
  -26
  -26
  -26
  -26
  -25
  -24
  -23
  -21
  -17
  -14
  -11
  -8
  -3
  1
  7
  12
  19
  26
  33
  41
  50
  60
  70
  82
  94
  107
  121
  135
Tax expense, $m
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  3
  5
  7
  9
  11
  14
  16
  19
  22
  25
  29
  33
  37
Net income, $m
  -22
  -26
  -25
  -26
  -26
  -26
  -26
  -25
  -24
  -23
  -21
  -17
  -14
  -11
  -8
  -3
  1
  5
  9
  14
  19
  24
  30
  37
  44
  51
  60
  68
  78
  88
  99

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  118
  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
  447
  456
  466
  478
  492
  507
  523
  541
  560
  581
  603
  627
  652
  679
  708
  739
  771
  805
  842
  880
  920
  963
  1,008
  1,056
  1,106
  1,158
  1,214
  1,272
  1,333
  1,398
  1,466
Adjusted assets (=assets-cash), $m
  329
  456
  466
  478
  492
  507
  523
  541
  560
  581
  603
  627
  652
  679
  708
  739
  771
  805
  842
  880
  920
  963
  1,008
  1,056
  1,106
  1,158
  1,214
  1,272
  1,333
  1,398
  1,466
Revenue / Adjusted assets
  0.945
  0.695
  0.697
  0.697
  0.695
  0.696
  0.696
  0.695
  0.696
  0.695
  0.697
  0.695
  0.696
  0.697
  0.696
  0.696
  0.696
  0.697
  0.696
  0.697
  0.697
  0.696
  0.696
  0.696
  0.695
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
Average production assets, $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
Working capital, $m
  15
  -32
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -84
  -89
  -93
  -97
  -102
Total debt, $m
  0
  -69
  -59
  -49
  -36
  -23
  -8
  8
  25
  44
  64
  85
  108
  133
  158
  186
  215
  246
  279
  313
  349
  388
  428
  471
  516
  563
  613
  666
  721
  779
  840
Total liabilities, $m
  479
  410
  420
  430
  443
  456
  471
  487
  504
  523
  543
  564
  587
  612
  637
  665
  694
  725
  758
  792
  828
  867
  907
  950
  995
  1,042
  1,092
  1,145
  1,200
  1,258
  1,319
Total equity, $m
  -32
  46
  47
  48
  49
  51
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
  111
  116
  121
  127
  133
  140
  147
Total liabilities and equity, $m
  447
  456
  467
  478
  492
  507
  523
  541
  560
  581
  603
  627
  652
  680
  708
  739
  771
  806
  842
  880
  920
  963
  1,008
  1,056
  1,106
  1,158
  1,213
  1,272
  1,333
  1,398
  1,466
Debt-to-equity ratio
  0.000
  -1.510
  -1.270
  -1.020
  -0.740
  -0.460
  -0.160
  0.140
  0.450
  0.750
  1.060
  1.360
  1.660
  1.950
  2.240
  2.520
  2.790
  3.050
  3.310
  3.560
  3.800
  4.030
  4.250
  4.460
  4.670
  4.860
  5.050
  5.230
  5.410
  5.570
  5.730
Adjusted equity ratio
  -0.456
  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
  -22
  -26
  -25
  -26
  -26
  -26
  -26
  -25
  -24
  -23
  -21
  -17
  -14
  -11
  -8
  -3
  1
  5
  9
  14
  19
  24
  30
  37
  44
  51
  60
  68
  78
  88
  99
Depreciation, amort., depletion, $m
  9
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  21
  -25
  -24
  -25
  -25
  -25
  -25
  -24
  -23
  -22
  -20
  -17
  -14
  -11
  -8
  -3
  1
  5
  9
  14
  19
  24
  30
  37
  44
  51
  60
  68
  78
  88
  99
Change in working capital, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
Cash from operations, $m
  21
  -25
  -23
  -24
  -24
  -24
  -24
  -23
  -22
  -20
  -18
  -16
  -13
  -9
  -6
  -1
  3
  7
  12
  16
  22
  27
  33
  40
  47
  55
  63
  72
  82
  92
  104
Maintenance CAPEX, $m
  0
  1
  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
New CAPEX, $m
  -25
  -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
Cash from investing activities, $m
  -34
  -4
  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
Free cash flow, $m
  -13
  -29
  -23
  -24
  -24
  -24
  -24
  -23
  -22
  -20
  -18
  -16
  -13
  -9
  -6
  -1
  3
  7
  12
  16
  22
  27
  33
  40
  47
  55
  63
  72
  82
  92
  104
Issuance/(repayment) of debt, $m
  0
  -69
  9
  11
  12
  13
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
  61
Issuance/(repurchase) of shares, $m
  5
  104
  26
  27
  28
  28
  28
  27
  26
  25
  23
  20
  17
  14
  10
  6
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2
  35
  35
  38
  40
  41
  43
  43
  43
  44
  43
  41
  40
  38
  36
  33
  31
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
  61
Total cash flow (excl. dividends), $m
  -15
  6
  12
  14
  15
  17
  18
  20
  22
  23
  25
  26
  27
  29
  31
  33
  35
  38
  44
  51
  58
  66
  74
  83
  92
  102
  113
  125
  137
  151
  165
Retained Cash Flow (-), $m
  -2
  -104
  -26
  -27
  -28
  -28
  -28
  -27
  -26
  -25
  -23
  -20
  -17
  -14
  -10
  -6
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
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
 
  -98
  -14
  -13
  -12
  -11
  -9
  -7
  -4
  -1
  2
  6
  10
  15
  20
  26
  31
  35
  41
  47
  54
  61
  69
  78
  87
  97
  108
  119
  131
  144
  158
Discount rate, %
 
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
 
  -93
  -12
  -11
  -9
  -8
  -6
  -4
  -2
  -1
  1
  2
  3
  4
  5
  5
  5
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  31.8
  20.2
  12.8
  8.2
  5.3
  3.5
  2.4
  1.6
  1.2
  0.9
  0.7
  0.6
  0.5
  0.5
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4
  0.4

Silver Spring Networks, Inc. operates as a networking platform and solutions provider for smart energy networks. Its networking platform provides customers to communicate with devices connected to the power grid. The company’s SilverLink Data platform enables its customers to use the data generated by devices on the network to provide insights for decision making. It offers various solutions include advanced metering solution, which provides utilities with two-way communication, enabling utilities to remotely perform functions, such as reading meter usage, capturing time-of-use consumption data, connecting and disconnecting service, and detecting power outages; distribution automation solution that provides two-way communication from distribution devices along the power grid to the back office or substations, providing utilities with real-time information for grid monitoring and control; demand-side management solutions that consist of energy efficiency, demand response, and electric vehicle charging management; street light solutions; and Starfish, a wireless IPv6 network service for the IoT. In addition, the company provides professional services that include network design and optimization, deployment support, software and systems integration, program management, consulting, and training; managed services and SaaS, such as disaster recovery services; and technical, network, and product support at various service levels. It operates in the United States, Canada, Australia, New Zealand, South America, Asia, and Europe. The company was formerly known as Real Time Techcomm, Inc. and changed its name to Silver Spring Networks, Inc. in August 2002. Silver Spring Networks, Inc. was founded in 2002 and is headquartered in Redwood City, California.

FINANCIAL RATIOS  of  Silver Spring Networks (SSNI)

Valuation Ratios
P/E Ratio -30.1
Price to Sales 2.1
Price to Book -20.7
Price to Tangible Book
Price to Cash Flow 31.5
Price to Free Cash Flow -165.4
Growth Rates
Sales Growth Rate -36.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 400%
Cap. Spend. - 3 Yr. Gr. Rate 44.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.5
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -4.9%
Ret/ On Assets - 3 Yr. Avg. -1.9%
Return On Total Capital 66.7%
Ret/ On T. Cap. - 3 Yr. Avg. 18.7%
Return On Equity 66.7%
Return On Equity - 3 Yr. Avg. 18.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 44.4%
Gross Margin - 3 Yr. Avg. 39.9%
EBITDA Margin -3.2%
EBITDA Margin - 3 Yr. Avg. -9.2%
Operating Margin -6.4%
Oper. Margin - 3 Yr. Avg. -11.9%
Pre-Tax Margin -6.1%
Pre-Tax Margin - 3 Yr. Avg. -11.7%
Net Profit Margin -7.1%
Net Profit Margin - 3 Yr. Avg. -12.4%
Effective Tax Rate -15.8%
Eff/ Tax Rate - 3 Yr. Avg. -4.4%
Payout Ratio 0%

SSNI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SSNI stock intrinsic value calculation we used $311 million for the last fiscal year's total revenue generated by Silver Spring Networks. The default revenue input number comes from 2016 income statement of Silver Spring Networks. 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 SSNI 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 5.9%, whose default value for SSNI is calculated based on our internal credit rating of Silver Spring Networks, 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 Silver Spring Networks.
    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 SSNI stock the variable cost ratio is equal to 42.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $204 million in the base year in the intrinsic value calculation for SSNI 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 Silver Spring Networks.

Corporate tax rate of 27% is the nominal tax rate for Silver Spring Networks. 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 SSNI 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 SSNI are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Silver Spring Networks 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 SSNI 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 - $-32 million for Silver Spring Networks - 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 50.534 million for Silver Spring Networks 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 Silver Spring Networks at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Why Silver Spring Networks Stock Fell Today   [May-10-17 12:46PM  Motley Fool]
▶ Silver Spring Networks reports 1Q loss   [05:03AM  Associated Press]
▶ This Week in Solar   [Feb-25-17 09:03AM  Motley Fool]
▶ This Week in Solar   [09:03AM  at Motley Fool]
▶ Why Silver Spring Networks, Inc. Stock Plunged Today   [Feb-22-17 01:50PM  Motley Fool]
▶ Is Piper Jaffray Companies (PJC) A Good Stock To Buy?   [Dec-18-16 10:03PM  at Insider Monkey]
▶ Is Natera Inc (NTRA) A Good Stock To Buy?   [Dec-05-16 02:22AM  at Insider Monkey]
▶ 2 Rock-Solid Internet of Things Stocks With P/Es Under 15   [Oct-16-16 02:44PM  at Motley Fool]
▶ The Fed finally accepts slow growth forever   [Oct-04-16 12:11PM  at MarketWatch]
Stock chart of SSNI Financial statements of SSNI
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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