Intrinsic value of Shutterstock - SSTK

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$45.29

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$45.29

 
Intrinsic value

$47.49

 
Up/down potential

+5%

 
Rating

hold

 
Value-price divergence* premium content

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

We calculate the intrinsic value of SSTK 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 1.6

 

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, %
  16.24
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.80
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
Revenue, $m
  494
  554
  617
  683
  753
  825
  901
  980
  1,063
  1,148
  1,237
  1,330
  1,426
  1,526
  1,630
  1,737
  1,850
  1,967
  2,088
  2,215
  2,347
  2,484
  2,628
  2,778
  2,934
  3,097
  3,268
  3,446
  3,633
  3,828
  4,032
Variable operating expenses, $m
 
  499
  556
  615
  677
  742
  810
  880
  954
  1,030
  1,110
  1,188
  1,273
  1,363
  1,455
  1,552
  1,652
  1,756
  1,865
  1,978
  2,096
  2,219
  2,347
  2,481
  2,620
  2,766
  2,919
  3,078
  3,245
  3,419
  3,601
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
  449
  499
  556
  615
  677
  742
  810
  880
  954
  1,030
  1,110
  1,188
  1,273
  1,363
  1,455
  1,552
  1,652
  1,756
  1,865
  1,978
  2,096
  2,219
  2,347
  2,481
  2,620
  2,766
  2,919
  3,078
  3,245
  3,419
  3,601
Operating income, $m
  46
  54
  61
  68
  76
  83
  91
  100
  109
  118
  127
  142
  152
  163
  174
  186
  198
  210
  223
  237
  251
  266
  281
  297
  314
  331
  349
  368
  388
  409
  431
EBITDA, $m
  66
  73
  81
  90
  99
  108
  118
  129
  139
  151
  162
  174
  187
  200
  214
  228
  243
  258
  274
  290
  308
  326
  345
  364
  385
  406
  428
  452
  476
  502
  529
Interest expense (income), $m
  0
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  10
  11
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
Earnings before tax, $m
  45
  54
  61
  67
  73
  80
  87
  95
  102
  110
  119
  132
  141
  150
  160
  170
  181
  191
  203
  215
  227
  240
  253
  267
  282
  297
  313
  330
  347
  365
  384
Tax expense, $m
  12
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  94
  99
  104
Net income, $m
  33
  40
  44
  49
  54
  59
  64
  69
  75
  81
  87
  96
  103
  110
  117
  124
  132
  140
  148
  157
  166
  175
  185
  195
  206
  217
  228
  241
  253
  267
  280

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  279
  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
  502
  250
  278
  308
  340
  373
  407
  443
  480
  518
  559
  600
  644
  689
  736
  784
  835
  888
  943
  1,000
  1,060
  1,122
  1,186
  1,254
  1,325
  1,398
  1,475
  1,556
  1,640
  1,728
  1,821
Adjusted assets (=assets-cash), $m
  223
  250
  278
  308
  340
  373
  407
  443
  480
  518
  559
  600
  644
  689
  736
  784
  835
  888
  943
  1,000
  1,060
  1,122
  1,186
  1,254
  1,325
  1,398
  1,475
  1,556
  1,640
  1,728
  1,821
Revenue / Adjusted assets
  2.215
  2.216
  2.219
  2.218
  2.215
  2.212
  2.214
  2.212
  2.215
  2.216
  2.213
  2.217
  2.214
  2.215
  2.215
  2.216
  2.216
  2.215
  2.214
  2.215
  2.214
  2.214
  2.216
  2.215
  2.214
  2.215
  2.216
  2.215
  2.215
  2.215
  2.214
Average production assets, $m
  74
  83
  93
  102
  113
  124
  135
  147
  159
  172
  186
  199
  214
  229
  244
  261
  277
  295
  313
  332
  352
  373
  394
  417
  440
  465
  490
  517
  545
  574
  605
Working capital, $m
  136
  -160
  -178
  -197
  -218
  -239
  -260
  -283
  -307
  -332
  -358
  -384
  -412
  -441
  -471
  -502
  -535
  -568
  -603
  -640
  -678
  -718
  -759
  -803
  -848
  -895
  -944
  -996
  -1,050
  -1,106
  -1,165
Total debt, $m
  0
  10
  36
  63
  91
  120
  151
  183
  217
  252
  288
  325
  364
  405
  447
  491
  537
  584
  633
  685
  739
  794
  853
  914
  977
  1,044
  1,113
  1,185
  1,261
  1,340
  1,423
Total liabilities, $m
  215
  225
  251
  278
  306
  335
  366
  398
  432
  467
  503
  540
  579
  620
  662
  706
  752
  799
  848
  900
  954
  1,009
  1,068
  1,129
  1,192
  1,259
  1,328
  1,400
  1,476
  1,555
  1,638
Total equity, $m
  287
  25
  28
  31
  34
  37
  41
  44
  48
  52
  56
  60
  64
  69
  74
  78
  84
  89
  94
  100
  106
  112
  119
  125
  132
  140
  148
  156
  164
  173
  182
Total liabilities and equity, $m
  502
  250
  279
  309
  340
  372
  407
  442
  480
  519
  559
  600
  643
  689
  736
  784
  836
  888
  942
  1,000
  1,060
  1,121
  1,187
  1,254
  1,324
  1,399
  1,476
  1,556
  1,640
  1,728
  1,820
Debt-to-equity ratio
  0.000
  0.400
  1.280
  2.030
  2.670
  3.230
  3.720
  4.140
  4.520
  4.850
  5.150
  5.420
  5.660
  5.880
  6.080
  6.260
  6.430
  6.580
  6.720
  6.850
  6.970
  7.080
  7.190
  7.290
  7.380
  7.460
  7.540
  7.620
  7.690
  7.760
  7.820
Adjusted equity ratio
  0.036
  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
  33
  40
  44
  49
  54
  59
  64
  69
  75
  81
  87
  96
  103
  110
  117
  124
  132
  140
  148
  157
  166
  175
  185
  195
  206
  217
  228
  241
  253
  267
  280
Depreciation, amort., depletion, $m
  20
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  93
  98
Funds from operations, $m
  113
  58
  64
  70
  77
  83
  90
  98
  105
  113
  121
  129
  137
  147
  156
  166
  177
  187
  199
  210
  222
  235
  248
  262
  277
  292
  307
  324
  341
  359
  378
Change in working capital, $m
  12
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -56
  -59
Cash from operations, $m
  101
  87
  82
  89
  97
  104
  112
  121
  129
  138
  147
  155
  165
  176
  186
  197
  209
  221
  234
  247
  261
  275
  290
  306
  322
  339
  357
  376
  395
  416
  437
Maintenance CAPEX, $m
  0
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
  -93
New CAPEX, $m
  -40
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
Cash from investing activities, $m
  -57
  -21
  -22
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -53
  -55
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -90
  -95
  -101
  -106
  -111
  -117
  -124
Free cash flow, $m
  44
  66
  60
  65
  70
  75
  81
  87
  93
  99
  106
  112
  119
  126
  134
  142
  150
  159
  168
  177
  187
  197
  208
  219
  231
  243
  256
  270
  284
  298
  314
Issuance/(repayment) of debt, $m
  0
  10
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  54
  56
  58
  61
  64
  66
  69
  72
  76
  79
  83
Issuance/(repurchase) of shares, $m
  -50
  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  
  -54
  10
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  54
  56
  58
  61
  64
  66
  69
  72
  76
  79
  83
Total cash flow (excl. dividends), $m
  -17
  76
  85
  92
  98
  105
  112
  119
  126
  134
  142
  149
  158
  167
  176
  186
  196
  206
  217
  229
  241
  253
  267
  280
  295
  310
  326
  342
  360
  378
  397
Retained Cash Flow (-), $m
  2
  -17
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Prev. year cash balance distribution, $m
 
  279
  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
 
  338
  82
  89
  95
  102
  108
  115
  123
  130
  138
  145
  153
  162
  171
  181
  191
  201
  212
  223
  235
  247
  260
  274
  288
  302
  318
  334
  351
  369
  388
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
 
  324
  75
  77
  78
  79
  79
  78
  77
  75
  72
  69
  65
  62
  58
  53
  48
  44
  39
  34
  30
  26
  22
  18
  15
  12
  9
  7
  5
  4
  3
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

Shutterstock, Inc. provides content products and services in North America, Europe, and internationally. The company offers digital imagery services, which include licensed photographs, illustrations, vectors, and video clips that customers use in their visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications, and video content; and commercial music services comprising music tracks and sound effects that are used to complement the digital imagery. It also provides digital asset management services through its WebDAM, a cloud-based digital asset management platform, which offers tools for customers to manage content assets. The company serves business customers, marketing agencies, and media organizations. Shutterstock, Inc. was founded in 2003 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Shutterstock (SSTK)

Valuation Ratios
P/E Ratio 47.8
Price to Sales 3.2
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 15.6
Price to Free Cash Flow 25.9
Growth Rates
Sales Growth Rate 16.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 185.7%
Cap. Spend. - 3 Yr. Gr. Rate 23.4%
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 6.8%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 11.5%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 11.5%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 58.9%
Gross Margin - 3 Yr. Avg. 59.4%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 12.9%
Operating Margin 9.1%
Oper. Margin - 3 Yr. Avg. 10.2%
Pre-Tax Margin 9.1%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 6.7%
Net Profit Margin - 3 Yr. Avg. 6%
Effective Tax Rate 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 36.6%
Payout Ratio 0%

SSTK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SSTK stock intrinsic value calculation we used $494 million for the last fiscal year's total revenue generated by Shutterstock. The default revenue input number comes from 2016 income statement of Shutterstock. 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 SSTK stock valuation model: a) initial revenue growth rate of 12.1% 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 SSTK is calculated based on our internal credit rating of Shutterstock, 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 Shutterstock.
    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 SSTK stock the variable cost ratio is equal to 90.3%.

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 SSTK 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 Shutterstock.

Corporate tax rate of 27% is the nominal tax rate for Shutterstock. 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 SSTK 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 SSTK are equal to 15%.

Life of production assets of 6.2 years is the average useful life of capital assets used in Shutterstock 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 SSTK is equal to -28.9%. 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 - $287 million for Shutterstock - 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 34.583 million for Shutterstock 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 Shutterstock at the current share price and the inputted number of shares is $1.6 billion.


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COMPANY NEWS

▶ Shutterstock Contributors Earn Over $500 Million   [May-23-17 07:04AM  PR Newswire]
▶ Tepid Results Reveal Shutterstock's Vulnerabilities   [May-03-17 09:32AM  Motley Fool]
▶ Shutterstock misses 1Q profit forecasts   [07:20AM  Associated Press]
▶ Shutterstock to Present at Upcoming Investor Conferences   [Apr-20-17 04:03PM  PR Newswire]
▶ Shutterstock to Showcase all the Glamour of The Met Gala   [Apr-06-17 09:00AM  PR Newswire]
▶ What Happened in the Stock Market Today   [Feb-27-17 05:00PM  Motley Fool]
▶ Why Shutterstock Inc. Stock Tumbled Today   [01:28PM  Motley Fool]
▶ Is Shutterstock Inc (SSTK) Going to Burn These Hedge Funds?   [Dec-13-16 08:27AM  at Insider Monkey]
▶ Why Shutterstock, Inc. Fell 20% in November   [Dec-07-16 09:00AM  at Motley Fool]
▶ Shutterstock Shares Fall on Weak Sales, Guidance   [Nov-04-16 05:06PM  at Motley Fool]
▶ Shutterstock Editor Makes Design Effortless   [Oct-20-16 06:00AM  PR Newswire]
▶ Bulls Drove These 5 Stocks to 52-Week Highs Yesterday   [Sep-21-16 09:45AM  at Insider Monkey]
▶ 7 Flexible Ways to Make Side Money   [11:00AM  at Investopedia]
▶ New Strong Buy Stocks for August 18th   [Aug-18-16 08:29AM  Zacks]
Stock chart of SSTK Financial statements of SSTK Annual reports of SSTK
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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