Intrinsic value of TechTarget - TTGT

Previous Close

$12.14

  Intrinsic Value

$7.32

stock screener

  Rating & Target

sell

-40%

Previous close

$12.14

 
Intrinsic value

$7.32

 
Up/down potential

-40%

 
Rating

sell

We calculate the intrinsic value of TTGT 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 0.3

 

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, %
  -4.46
  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
  107
  109
  112
  115
  118
  121
  125
  129
  134
  139
  144
  150
  156
  163
  170
  177
  185
  193
  202
  211
  220
  231
  241
  253
  265
  277
  291
  305
  319
  335
  351
Variable operating expenses, $m
 
  19
  19
  20
  20
  20
  21
  21
  22
  22
  22
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
Fixed operating expenses, $m
 
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
Total operating expenses, $m
  100
  103
  105
  108
  111
  113
  116
  118
  122
  124
  127
  122
  124
  128
  131
  135
  139
  143
  146
  150
  154
  159
  163
  168
  172
  177
  182
  188
  193
  198
  204
Operating income, $m
  7
  6
  6
  6
  7
  8
  9
  11
  13
  15
  17
  29
  32
  35
  38
  42
  46
  51
  55
  60
  66
  72
  78
  85
  92
  100
  108
  117
  126
  136
  147
EBITDA, $m
  12
  16
  16
  16
  17
  18
  19
  21
  23
  25
  27
  30
  32
  36
  39
  43
  47
  51
  56
  61
  67
  73
  79
  86
  94
  101
  110
  119
  128
  138
  149
Interest expense (income), $m
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
Earnings before tax, $m
  5
  4
  4
  5
  5
  6
  7
  9
  10
  12
  15
  26
  29
  32
  35
  39
  43
  47
  52
  57
  62
  68
  74
  80
  87
  95
  103
  111
  120
  130
  140
Tax expense, $m
  3
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  35
  38
Net income, $m
  2
  3
  3
  3
  4
  5
  5
  6
  8
  9
  11
  19
  21
  23
  26
  28
  31
  34
  38
  41
  45
  49
  54
  59
  64
  69
  75
  81
  88
  95
  102

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  29
  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
  170
  144
  147
  151
  155
  160
  165
  171
  177
  183
  190
  198
  206
  214
  223
  233
  243
  254
  266
  278
  290
  304
  318
  333
  349
  365
  383
  401
  421
  441
  462
Adjusted assets (=assets-cash), $m
  141
  144
  147
  151
  155
  160
  165
  171
  177
  183
  190
  198
  206
  214
  223
  233
  243
  254
  266
  278
  290
  304
  318
  333
  349
  365
  383
  401
  421
  441
  462
Revenue / Adjusted assets
  0.759
  0.757
  0.762
  0.762
  0.761
  0.756
  0.758
  0.754
  0.757
  0.760
  0.758
  0.758
  0.757
  0.762
  0.762
  0.760
  0.761
  0.760
  0.759
  0.759
  0.759
  0.760
  0.758
  0.760
  0.759
  0.759
  0.760
  0.761
  0.758
  0.760
  0.760
Average production assets, $m
  11
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
Working capital, $m
  40
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Total debt, $m
  38
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  56
  59
  62
  65
  69
  73
  77
  81
  85
  90
  95
  100
  105
  111
  117
  123
  130
  137
Total liabilities, $m
  53
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Total equity, $m
  118
  97
  99
  102
  105
  108
  111
  115
  119
  124
  128
  133
  139
  144
  151
  157
  164
  171
  179
  187
  196
  205
  214
  224
  235
  246
  258
  270
  284
  297
  312
Total liabilities and equity, $m
  171
  144
  147
  151
  156
  160
  165
  171
  177
  184
  190
  197
  206
  214
  224
  233
  243
  254
  266
  278
  291
  304
  318
  333
  349
  365
  383
  401
  421
  441
  463
Debt-to-equity ratio
  0.322
  0.340
  0.340
  0.350
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.410
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
  0.430
  0.430
  0.430
  0.430
  0.440
  0.440
Adjusted equity ratio
  0.631
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  3
  3
  3
  4
  5
  5
  6
  8
  9
  11
  19
  21
  23
  26
  28
  31
  34
  38
  41
  45
  49
  54
  59
  64
  69
  75
  81
  88
  95
  102
Depreciation, amort., depletion, $m
  5
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
Funds from operations, $m
  20
  13
  13
  13
  14
  14
  15
  16
  18
  19
  21
  20
  22
  24
  27
  29
  32
  35
  39
  42
  46
  50
  55
  60
  65
  70
  76
  83
  89
  96
  104
Change in working capital, $m
  2
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Cash from operations, $m
  18
  13
  13
  13
  13
  14
  15
  16
  17
  18
  20
  19
  21
  23
  25
  28
  31
  34
  37
  41
  45
  49
  53
  58
  63
  68
  74
  80
  87
  94
  101
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
New CAPEX, $m
  -4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
Cash from investing activities, $m
  -4
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -4
  -4
Free cash flow, $m
  14
  12
  12
  12
  12
  13
  14
  15
  16
  17
  19
  18
  20
  22
  24
  27
  29
  32
  36
  39
  43
  47
  51
  56
  61
  66
  72
  78
  84
  91
  98
Issuance/(repayment) of debt, $m
  39
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
Issuance/(repurchase) of shares, $m
  -45
  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  
  -11
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
Total cash flow (excl. dividends), $m
  4
  13
  13
  13
  14
  14
  15
  16
  18
  19
  21
  20
  22
  25
  27
  30
  33
  36
  39
  43
  47
  51
  56
  61
  66
  71
  77
  84
  90
  98
  105
Retained Cash Flow (-), $m
  42
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Prev. year cash balance distribution, $m
 
  23
  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
 
  34
  11
  11
  11
  11
  12
  13
  14
  15
  16
  15
  17
  19
  21
  23
  26
  29
  32
  35
  38
  42
  46
  51
  55
  60
  66
  71
  77
  84
  91
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
 
  32
  10
  9
  9
  9
  9
  9
  9
  9
  8
  7
  7
  7
  7
  7
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
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

TechTarget, Inc. provides online content that helps buyers and sellers of corporate information technology (IT) products and services. The Company's offerings enable IT vendors to identify, reach and influence corporate IT decision makers researching specific IT purchases through customized marketing programs that include data analytics-driven intelligence solutions, demand generation and brand advertising. Its Websites focuses on IT sectors, such as storage, security or networking and for decision support information. Its content enables IT professionals to navigate the IT landscape where purchasing decisions can have financial and operational consequences. Its marketing opportunities and audience extensions are addressed using approximately nine distinct media groups, including Application Architecture and Development; Channel; CIO/IT Strategy; Data Center and Virtualization Technologies; Business Applications and Analytics; Networking; Security; Storage and TechnologyGuide.

FINANCIAL RATIOS  of  TechTarget (TTGT)

Valuation Ratios
P/E Ratio 166.9
Price to Sales 3.1
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 18.5
Price to Free Cash Flow 23.8
Growth Rates
Sales Growth Rate -4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 27.1%
Total Debt to Equity 32.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity 1.4%
Return On Equity - 3 Yr. Avg. 2.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 71%
Gross Margin - 3 Yr. Avg. 72.6%
EBITDA Margin 10.3%
EBITDA Margin - 3 Yr. Avg. 12.6%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 8%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 7.3%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 4%
Effective Tax Rate 60%
Eff/ Tax Rate - 3 Yr. Avg. 48.2%
Payout Ratio 0%

TTGT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TTGT stock intrinsic value calculation we used $107 million for the last fiscal year's total revenue generated by TechTarget. The default revenue input number comes from 2016 income statement of TechTarget. 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 TTGT 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 TTGT is calculated based on our internal credit rating of TechTarget, 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 TechTarget.
    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 TTGT stock the variable cost ratio is equal to 17.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $82 million in the base year in the intrinsic value calculation for TTGT 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 5.3% for TechTarget.

Corporate tax rate of 27% is the nominal tax rate for TechTarget. 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 TTGT 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 TTGT are equal to 9.8%.

Life of production assets of 20.8 years is the average useful life of capital assets used in TechTarget 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 TTGT is equal to 15.9%. 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 - $118 million for TechTarget - 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 27.401 million for TechTarget 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 TechTarget at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ The Market In 5 Minutes   [Aug-17-17 08:33AM  Benzinga]
▶ ETFs with exposure to TechTarget, Inc. : June 27, 2017   [Jun-27-17 03:54PM  Capital Cube]
▶ TechTarget posts 1Q loss   [May-10-17 06:38PM  Associated Press]
▶ TechTarget tops 4Q revenue forecasts   [05:57PM  Associated Press]
▶ Here is What Hedge Funds Think About TechTarget Inc (TTGT)   [Dec-08-16 07:06AM  at Insider Monkey]
▶ TechTarget Announces CFO Transition Plan   [09:21AM  Business Wire]
▶ TechTarget, Inc. Announces Stock Repurchase Program   [Jun-13-16 08:51AM  Business Wire]
▶ TechTarget, Inc. Announces Results of its Tender Offer   [Jun-09-16 08:54AM  Business Wire]
Financial statements of TTGT
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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