Intrinsic value of Tremor Video - TRMR

Previous Close

$3.75

  Intrinsic Value

$0.33

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-173%

Previous close

$3.75

 
Intrinsic value

$0.33

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-173%

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

We calculate the intrinsic value of TRMR 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 0.2

 

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, %
  -4.02
  32.40
  29.66
  27.19
  24.97
  22.98
  21.18
  19.56
  18.11
  16.79
  15.62
  14.55
  13.60
  12.74
  11.96
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
Revenue, $m
  167
  221
  287
  365
  456
  560
  679
  812
  959
  1,120
  1,295
  1,483
  1,685
  1,900
  2,127
  2,367
  2,619
  2,883
  3,158
  3,446
  3,746
  4,058
  4,383
  4,720
  5,071
  5,435
  5,814
  6,207
  6,617
  7,042
  7,485
Variable operating expenses, $m
 
  275
  356
  453
  566
  696
  843
  1,007
  1,190
  1,389
  1,606
  1,839
  2,089
  2,355
  2,636
  2,933
  3,246
  3,573
  3,915
  4,271
  4,643
  5,030
  5,432
  5,850
  6,285
  6,736
  7,206
  7,694
  8,201
  8,728
  9,277
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
  187
  275
  356
  453
  566
  696
  843
  1,007
  1,190
  1,389
  1,606
  1,839
  2,089
  2,355
  2,636
  2,933
  3,246
  3,573
  3,915
  4,271
  4,643
  5,030
  5,432
  5,850
  6,285
  6,736
  7,206
  7,694
  8,201
  8,728
  9,277
Operating income, $m
  -21
  -54
  -70
  -88
  -110
  -135
  -164
  -195
  -231
  -269
  -311
  -355
  -403
  -455
  -509
  -567
  -627
  -690
  -756
  -825
  -897
  -972
  -1,049
  -1,130
  -1,214
  -1,301
  -1,392
  -1,486
  -1,584
  -1,686
  -1,792
EBITDA, $m
  -12
  -48
  -62
  -79
  -99
  -121
  -147
  -176
  -208
  -243
  -281
  -321
  -365
  -412
  -461
  -513
  -567
  -624
  -684
  -746
  -811
  -879
  -949
  -1,022
  -1,098
  -1,177
  -1,259
  -1,345
  -1,433
  -1,525
  -1,621
Interest expense (income), $m
  0
  0
  1
  2
  3
  5
  6
  8
  10
  12
  15
  18
  21
  24
  27
  31
  35
  39
  43
  47
  52
  56
  61
  66
  72
  77
  83
  89
  95
  101
  108
Earnings before tax, $m
  -21
  -54
  -71
  -90
  -113
  -140
  -170
  -204
  -241
  -282
  -326
  -373
  -424
  -479
  -537
  -597
  -662
  -729
  -799
  -872
  -948
  -1,028
  -1,110
  -1,196
  -1,286
  -1,378
  -1,475
  -1,575
  -1,679
  -1,787
  -1,900
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
  -21
  -54
  -71
  -90
  -113
  -140
  -170
  -204
  -241
  -282
  -326
  -373
  -424
  -479
  -537
  -597
  -662
  -729
  -799
  -872
  -948
  -1,028
  -1,110
  -1,196
  -1,286
  -1,378
  -1,475
  -1,575
  -1,679
  -1,787
  -1,900

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  43
  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
  154
  147
  190
  242
  303
  372
  451
  540
  637
  744
  860
  986
  1,120
  1,262
  1,413
  1,573
  1,740
  1,915
  2,099
  2,290
  2,489
  2,696
  2,912
  3,136
  3,369
  3,611
  3,863
  4,125
  4,396
  4,679
  4,974
Adjusted assets (=assets-cash), $m
  111
  147
  190
  242
  303
  372
  451
  540
  637
  744
  860
  986
  1,120
  1,262
  1,413
  1,573
  1,740
  1,915
  2,099
  2,290
  2,489
  2,696
  2,912
  3,136
  3,369
  3,611
  3,863
  4,125
  4,396
  4,679
  4,974
Revenue / Adjusted assets
  1.505
  1.503
  1.511
  1.508
  1.505
  1.505
  1.506
  1.504
  1.505
  1.505
  1.506
  1.504
  1.504
  1.506
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
Average production assets, $m
  19
  25
  33
  42
  52
  64
  77
  93
  109
  128
  148
  169
  192
  217
  242
  270
  299
  329
  360
  393
  427
  463
  500
  538
  578
  620
  663
  708
  754
  803
  853
Working capital, $m
  57
  19
  24
  31
  38
  47
  57
  68
  81
  94
  109
  125
  142
  160
  179
  199
  220
  242
  265
  289
  315
  341
  368
  396
  426
  457
  488
  521
  556
  592
  629
Total debt, $m
  1
  25
  55
  90
  131
  178
  231
  291
  357
  429
  508
  592
  683
  779
  881
  989
  1,102
  1,221
  1,345
  1,474
  1,609
  1,749
  1,895
  2,046
  2,204
  2,367
  2,537
  2,714
  2,898
  3,089
  3,288
Total liabilities, $m
  76
  99
  129
  164
  205
  252
  305
  365
  431
  503
  582
  666
  757
  853
  955
  1,063
  1,176
  1,295
  1,419
  1,548
  1,683
  1,823
  1,969
  2,120
  2,278
  2,441
  2,611
  2,788
  2,972
  3,163
  3,362
Total equity, $m
  79
  48
  62
  79
  98
  121
  146
  175
  206
  241
  279
  319
  363
  409
  458
  510
  564
  621
  680
  742
  806
  874
  944
  1,016
  1,092
  1,170
  1,252
  1,336
  1,424
  1,516
  1,611
Total liabilities and equity, $m
  155
  147
  191
  243
  303
  373
  451
  540
  637
  744
  861
  985
  1,120
  1,262
  1,413
  1,573
  1,740
  1,916
  2,099
  2,290
  2,489
  2,697
  2,913
  3,136
  3,370
  3,611
  3,863
  4,124
  4,396
  4,679
  4,973
Debt-to-equity ratio
  0.013
  0.530
  0.890
  1.140
  1.330
  1.470
  1.580
  1.660
  1.730
  1.780
  1.820
  1.850
  1.880
  1.910
  1.920
  1.940
  1.960
  1.970
  1.980
  1.990
  1.990
  2.000
  2.010
  2.010
  2.020
  2.020
  2.030
  2.030
  2.030
  2.040
  2.040
Adjusted equity ratio
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -21
  -54
  -71
  -90
  -113
  -140
  -170
  -204
  -241
  -282
  -326
  -373
  -424
  -479
  -537
  -597
  -662
  -729
  -799
  -872
  -948
  -1,028
  -1,110
  -1,196
  -1,286
  -1,378
  -1,475
  -1,575
  -1,679
  -1,787
  -1,900
Depreciation, amort., depletion, $m
  9
  6
  8
  9
  11
  14
  17
  20
  23
  27
  31
  34
  38
  43
  48
  54
  60
  66
  72
  79
  85
  93
  100
  108
  116
  124
  133
  142
  151
  161
  171
Funds from operations, $m
  -7
  -48
  -63
  -81
  -102
  -126
  -153
  -184
  -218
  -255
  -296
  -339
  -386
  -435
  -488
  -544
  -602
  -663
  -727
  -794
  -863
  -935
  -1,011
  -1,089
  -1,170
  -1,254
  -1,342
  -1,433
  -1,528
  -1,627
  -1,730
Change in working capital, $m
  0
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
Cash from operations, $m
  -7
  -52
  -68
  -87
  -110
  -135
  -163
  -195
  -230
  -269
  -310
  -355
  -403
  -453
  -507
  -564
  -623
  -685
  -750
  -818
  -888
  -962
  -1,038
  -1,117
  -1,199
  -1,285
  -1,374
  -1,466
  -1,563
  -1,663
  -1,767
Maintenance CAPEX, $m
  0
  -4
  -5
  -7
  -8
  -10
  -13
  -15
  -19
  -22
  -26
  -30
  -34
  -38
  -43
  -48
  -54
  -60
  -66
  -72
  -79
  -85
  -93
  -100
  -108
  -116
  -124
  -133
  -142
  -151
  -161
New CAPEX, $m
  -3
  -6
  -7
  -9
  -10
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
Cash from investing activities, $m
  -3
  -10
  -12
  -16
  -18
  -22
  -27
  -30
  -36
  -40
  -46
  -51
  -57
  -62
  -69
  -75
  -83
  -90
  -97
  -105
  -113
  -121
  -130
  -138
  -148
  -158
  -167
  -178
  -189
  -200
  -212
Free cash flow, $m
  -10
  -62
  -81
  -103
  -128
  -157
  -190
  -226
  -266
  -309
  -356
  -406
  -460
  -516
  -576
  -639
  -706
  -775
  -847
  -923
  -1,001
  -1,083
  -1,167
  -1,255
  -1,347
  -1,442
  -1,541
  -1,644
  -1,751
  -1,862
  -1,978
Issuance/(repayment) of debt, $m
  0
  24
  29
  35
  41
  47
  53
  60
  66
  72
  79
  85
  91
  96
  102
  108
  113
  119
  124
  129
  135
  140
  146
  152
  157
  164
  170
  177
  184
  191
  199
Issuance/(repurchase) of shares, $m
  -5
  66
  85
  107
  133
  162
  195
  232
  273
  316
  364
  413
  468
  525
  585
  649
  716
  786
  858
  934
  1,013
  1,095
  1,180
  1,269
  1,361
  1,457
  1,556
  1,660
  1,767
  1,879
  1,996
Cash from financing (excl. dividends), $m  
  -6
  90
  114
  142
  174
  209
  248
  292
  339
  388
  443
  498
  559
  621
  687
  757
  829
  905
  982
  1,063
  1,148
  1,235
  1,326
  1,421
  1,518
  1,621
  1,726
  1,837
  1,951
  2,070
  2,195
Total cash flow (excl. dividends), $m
  -17
  28
  33
  39
  46
  52
  59
  66
  73
  80
  87
  92
  99
  105
  111
  117
  123
  129
  135
  141
  147
  153
  159
  165
  172
  178
  185
  193
  200
  208
  217
Retained Cash Flow (-), $m
  22
  -66
  -85
  -107
  -133
  -162
  -195
  -232
  -273
  -316
  -364
  -413
  -468
  -525
  -585
  -649
  -716
  -786
  -858
  -934
  -1,013
  -1,095
  -1,180
  -1,269
  -1,361
  -1,457
  -1,556
  -1,660
  -1,767
  -1,879
  -1,996
Prev. year cash balance distribution, $m
 
  43
  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
 
  5
  -52
  -68
  -87
  -110
  -136
  -166
  -199
  -237
  -277
  -321
  -369
  -420
  -474
  -532
  -593
  -656
  -723
  -793
  -866
  -942
  -1,022
  -1,104
  -1,190
  -1,279
  -1,371
  -1,467
  -1,567
  -1,671
  -1,779
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
 
  5
  -47
  -59
  -72
  -85
  -99
  -112
  -125
  -136
  -145
  -153
  -157
  -160
  -159
  -156
  -151
  -143
  -133
  -122
  -110
  -97
  -85
  -72
  -61
  -50
  -40
  -31
  -24
  -18
  -13
Current shareholders' claim on cash, %
  100
  57.5
  33.5
  19.7
  11.7
  7.0
  4.2
  2.6
  1.6
  1.0
  0.6
  0.4
  0.2
  0.1
  0.1
  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
  0.0

Tremor Video, Inc. is an advertising technology company. The Company provides software for video advertising effectiveness. The Company operates through online video advertising services segment. Its technology optimizes performance of video advertisement campaigns across all screens, including computers, smartphones, tablets and connected televisions. The Company's buyer platform enables advertisers, agencies and other buyers of advertising to discover, buy, optimize and measure the effectiveness of their video advertisement campaigns. The Company's technology analyzes video content, detects viewer and system attributes, and uses its repository of stored third-party data to optimize and target the delivery of advertisement campaigns. Its buyers can transact directly on its buyer platform through the Tremor Video DSP, a user interface that allows them to manage the execution of their campaigns on a programmatic basis. The Company also offers a seller platform, the Tremor Video SSP.

FINANCIAL RATIOS  of  Tremor Video (TRMR)

Valuation Ratios
P/E Ratio -9
Price to Sales 1.1
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow -27
Price to Free Cash Flow -18.9
Growth Rates
Sales Growth Rate -4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -62.5%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 1.3%
Total Debt to Equity 1.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -13%
Ret/ On Assets - 3 Yr. Avg. -16.8%
Return On Total Capital -23.2%
Ret/ On T. Cap. - 3 Yr. Avg. -24.8%
Return On Equity -23.3%
Return On Equity - 3 Yr. Avg. -24.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 45.5%
Gross Margin - 3 Yr. Avg. 41.7%
EBITDA Margin -7.2%
EBITDA Margin - 3 Yr. Avg. -12.5%
Operating Margin -12%
Oper. Margin - 3 Yr. Avg. -17.3%
Pre-Tax Margin -12.6%
Pre-Tax Margin - 3 Yr. Avg. -17.3%
Net Profit Margin -12.6%
Net Profit Margin - 3 Yr. Avg. -17.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

TRMR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRMR stock intrinsic value calculation we used $167 million for the last fiscal year's total revenue generated by Tremor Video. The default revenue input number comes from 2016 income statement of Tremor Video. 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 TRMR stock valuation model: a) initial revenue growth rate of 32.4% 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 TRMR is calculated based on our internal credit rating of Tremor Video, 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 Tremor Video.
    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 TRMR stock the variable cost ratio is equal to 124.6%.

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 TRMR 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 Tremor Video.

Corporate tax rate of 27% is the nominal tax rate for Tremor Video. 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 TRMR 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 TRMR are equal to 11.4%.

Life of production assets of 3.3 years is the average useful life of capital assets used in Tremor Video 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 TRMR is equal to 8.4%. 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 - $79 million for Tremor Video - 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 52.086 million for Tremor Video 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 Tremor Video at the current share price and the inputted number of shares is $0.2 billion.

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Financial statements of TRMR
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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