Intrinsic value of Upland Software - UPLD

Previous Close

$22.00

  Intrinsic Value

$25.59

stock screener

  Rating & Target

hold

+16%

Previous close

$22.00

 
Intrinsic value

$25.59

 
Up/down potential

+16%

 
Rating

hold

We calculate the intrinsic value of UPLD 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 0.5

 

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, %
  7.14
  21.10
  19.49
  18.04
  16.74
  15.56
  14.51
  13.56
  12.70
  11.93
  11.24
  10.61
  10.05
  9.55
  9.09
  8.68
  8.31
  7.98
  7.69
  7.42
  7.17
  6.96
  6.76
  6.59
  6.43
  6.28
  6.16
  6.04
  5.94
  5.84
  5.76
Revenue, $m
  75
  91
  109
  128
  150
  173
  198
  225
  253
  283
  315
  349
  384
  421
  459
  499
  540
  583
  628
  675
  723
  773
  826
  880
  936
  995
  1,057
  1,120
  1,187
  1,256
  1,329
Variable operating expenses, $m
 
  53
  62
  72
  83
  95
  107
  121
  136
  151
  167
  177
  195
  214
  233
  253
  274
  296
  319
  343
  367
  393
  419
  447
  476
  506
  537
  569
  603
  638
  675
Fixed operating expenses, $m
 
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  66
  67
  69
  71
  72
  74
  76
  78
  80
  82
Total operating expenses, $m
  83
  93
  103
  114
  126
  139
  152
  167
  184
  200
  217
  228
  247
  268
  288
  309
  332
  355
  380
  405
  431
  459
  486
  516
  547
  578
  611
  645
  681
  718
  757
Operating income, $m
  -9
  -2
  6
  14
  24
  34
  45
  57
  70
  84
  98
  120
  136
  153
  171
  189
  208
  228
  248
  270
  292
  315
  339
  364
  390
  417
  446
  475
  506
  538
  572
EBITDA, $m
  1
  9
  18
  27
  38
  50
  62
  76
  90
  105
  121
  138
  156
  174
  194
  214
  235
  257
  280
  303
  328
  354
  381
  408
  437
  467
  499
  532
  566
  601
  639
Interest expense (income), $m
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  49
  53
  57
  60
  64
  69
  73
  77
  82
Earnings before tax, $m
  -12
  -5
  2
  9
  17
  26
  36
  46
  58
  69
  82
  102
  115
  130
  145
  160
  177
  194
  211
  230
  249
  269
  290
  311
  334
  357
  381
  407
  433
  461
  490
Tax expense, $m
  2
  0
  1
  3
  5
  7
  10
  13
  16
  19
  22
  27
  31
  35
  39
  43
  48
  52
  57
  62
  67
  73
  78
  84
  90
  96
  103
  110
  117
  124
  132
Net income, $m
  -14
  -5
  1
  7
  13
  19
  26
  34
  42
  51
  60
  74
  84
  95
  106
  117
  129
  141
  154
  168
  182
  196
  211
  227
  243
  261
  278
  297
  316
  336
  358

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
  151
  148
  176
  208
  243
  281
  322
  365
  412
  461
  513
  567
  624
  684
  746
  811
  878
  948
  1,021
  1,097
  1,175
  1,257
  1,342
  1,431
  1,523
  1,618
  1,718
  1,822
  1,930
  2,043
  2,160
Adjusted assets (=assets-cash), $m
  122
  148
  176
  208
  243
  281
  322
  365
  412
  461
  513
  567
  624
  684
  746
  811
  878
  948
  1,021
  1,097
  1,175
  1,257
  1,342
  1,431
  1,523
  1,618
  1,718
  1,822
  1,930
  2,043
  2,160
Revenue / Adjusted assets
  0.615
  0.615
  0.619
  0.615
  0.617
  0.616
  0.615
  0.616
  0.614
  0.614
  0.614
  0.616
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
Average production assets, $m
  36
  43
  51
  61
  71
  82
  94
  106
  120
  134
  149
  165
  182
  199
  217
  236
  255
  276
  297
  319
  342
  366
  390
  416
  443
  471
  500
  530
  561
  594
  628
Working capital, $m
  7
  -24
  -29
  -34
  -40
  -46
  -53
  -60
  -68
  -76
  -84
  -93
  -102
  -112
  -122
  -133
  -144
  -156
  -168
  -180
  -193
  -206
  -220
  -235
  -250
  -266
  -282
  -299
  -317
  -335
  -355
Total debt, $m
  48
  65
  86
  110
  135
  163
  193
  226
  260
  296
  334
  375
  417
  461
  506
  554
  604
  656
  710
  765
  824
  884
  947
  1,012
  1,080
  1,150
  1,224
  1,300
  1,380
  1,463
  1,550
Total liabilities, $m
  92
  109
  130
  154
  179
  207
  237
  270
  304
  340
  378
  419
  461
  505
  550
  598
  648
  700
  754
  809
  868
  928
  991
  1,056
  1,124
  1,194
  1,268
  1,344
  1,424
  1,507
  1,594
Total equity, $m
  59
  39
  46
  55
  64
  74
  84
  96
  108
  121
  134
  149
  164
  179
  195
  212
  230
  248
  268
  287
  308
  329
  352
  375
  399
  424
  450
  477
  506
  535
  566
Total liabilities and equity, $m
  151
  148
  176
  209
  243
  281
  321
  366
  412
  461
  512
  568
  625
  684
  745
  810
  878
  948
  1,022
  1,096
  1,176
  1,257
  1,343
  1,431
  1,523
  1,618
  1,718
  1,821
  1,930
  2,042
  2,160
Debt-to-equity ratio
  0.814
  1.680
  1.870
  2.010
  2.130
  2.220
  2.290
  2.360
  2.410
  2.450
  2.490
  2.520
  2.550
  2.570
  2.590
  2.610
  2.630
  2.640
  2.650
  2.660
  2.670
  2.680
  2.690
  2.700
  2.710
  2.710
  2.720
  2.720
  2.730
  2.730
  2.740
Adjusted equity ratio
  0.246
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -14
  -5
  1
  7
  13
  19
  26
  34
  42
  51
  60
  74
  84
  95
  106
  117
  129
  141
  154
  168
  182
  196
  211
  227
  243
  261
  278
  297
  316
  336
  358
Depreciation, amort., depletion, $m
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  18
  19
  21
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
  53
  56
  60
  63
  67
Funds from operations, $m
  6
  7
  14
  20
  27
  35
  43
  52
  62
  72
  82
  92
  104
  116
  129
  142
  156
  171
  186
  202
  218
  235
  253
  271
  291
  311
  332
  353
  376
  400
  424
Change in working capital, $m
  2
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
Cash from operations, $m
  4
  11
  18
  25
  33
  41
  50
  59
  69
  80
  91
  101
  113
  126
  139
  153
  167
  182
  198
  214
  231
  249
  267
  286
  306
  326
  348
  370
  394
  418
  444
Maintenance CAPEX, $m
  0
  -4
  -5
  -5
  -6
  -8
  -9
  -10
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -60
  -63
New CAPEX, $m
  -1
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
Cash from investing activities, $m
  -13
  -11
  -13
  -14
  -16
  -19
  -21
  -23
  -24
  -27
  -29
  -32
  -35
  -36
  -39
  -42
  -45
  -47
  -50
  -54
  -57
  -60
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -93
  -97
Free cash flow, $m
  -9
  0
  6
  11
  16
  23
  29
  37
  44
  53
  62
  69
  79
  89
  100
  111
  123
  135
  147
  160
  174
  188
  203
  219
  235
  251
  269
  287
  306
  326
  346
Issuance/(repayment) of debt, $m
  22
  19
  21
  23
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  83
  87
Issuance/(repurchase) of shares, $m
  -1
  11
  6
  2
  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  
  20
  30
  27
  25
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  83
  87
Total cash flow (excl. dividends), $m
  10
  30
  33
  36
  42
  50
  59
  69
  79
  89
  100
  109
  121
  133
  146
  159
  172
  186
  201
  216
  232
  249
  266
  284
  303
  322
  342
  364
  386
  409
  433
Retained Cash Flow (-), $m
  1
  -11
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
Prev. year cash balance distribution, $m
 
  27
  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
 
  46
  25
  27
  33
  41
  49
  57
  67
  76
  86
  95
  106
  117
  129
  142
  155
  168
  182
  197
  212
  227
  244
  261
  278
  297
  316
  336
  357
  379
  402
Discount rate, %
 
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
 
  43
  22
  22
  25
  28
  31
  33
  34
  34
  34
  32
  31
  29
  27
  24
  22
  19
  16
  13
  11
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  95.5
  93.6
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2

Upland Software Inc. is a provider of cloud-based enterprise work management software. The Company provides a family of cloud-based enterprise work management software applications for the information technology, process excellence, finance, professional services and marketing functions within organizations. Its software applications serve a range of enterprise work management needs, from strategic planning to task execution. It services customers ranging from corporations and Government agencies to small- and medium-sized businesses. Its customers operate in a range of industries, including financial services, retail, technology, manufacturing, education, consumer goods, media, and telecommunications, Government, food and beverage, healthcare and life sciences, chemicals and travel and hospitality. The Company provides a family of cloud-based enterprise work management software applications under the Upland brand.

FINANCIAL RATIOS  of  Upland Software (UPLD)

Valuation Ratios
P/E Ratio -28
Price to Sales 5.2
Price to Book 6.6
Price to Tangible Book
Price to Cash Flow 97.8
Price to Free Cash Flow 130.5
Growth Rates
Sales Growth Rate 7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 15
Current Ratio 0
LT Debt to Equity 78%
Total Debt to Equity 81.4%
Interest Coverage -5
Management Effectiveness
Return On Assets -8.5%
Ret/ On Assets - 3 Yr. Avg. -11.4%
Return On Total Capital -14.7%
Ret/ On T. Cap. - 3 Yr. Avg. -18.6%
Return On Equity -23.5%
Return On Equity - 3 Yr. Avg. -27.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 62.7%
Gross Margin - 3 Yr. Avg. 62.4%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. -7.6%
Operating Margin -10.7%
Oper. Margin - 3 Yr. Avg. -17.5%
Pre-Tax Margin -16%
Pre-Tax Margin - 3 Yr. Avg. -21.8%
Net Profit Margin -18.7%
Net Profit Margin - 3 Yr. Avg. -23.1%
Effective Tax Rate -16.7%
Eff/ Tax Rate - 3 Yr. Avg. -8.1%
Payout Ratio 0%

UPLD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UPLD stock intrinsic value calculation we used $75 million for the last fiscal year's total revenue generated by Upland Software. The default revenue input number comes from 2016 income statement of Upland Software. 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 UPLD stock valuation model: a) initial revenue growth rate of 21.1% 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 6.3%, whose default value for UPLD is calculated based on our internal credit rating of Upland Software, 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 Upland Software.
    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 UPLD stock the variable cost ratio is equal to 60%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $39 million in the base year in the intrinsic value calculation for UPLD 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 5.6% for Upland Software.

Corporate tax rate of 27% is the nominal tax rate for Upland Software. 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 UPLD 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 UPLD are equal to 47.3%.

Life of production assets of 9.4 years is the average useful life of capital assets used in Upland Software 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 UPLD is equal to -26.7%. 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 - $59 million for Upland Software - 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 20.599 million for Upland Software 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 Upland Software at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Upland Software reports 3Q loss   [Nov-09-17 06:14PM  Associated Press]
▶ Upland Software Appoints Joe Ross to Board of Directors   [Oct-05-17 04:15PM  PR Newswire]
▶ Upland Software reports 2Q loss   [Aug-10-17 09:31PM  Associated Press]
▶ Upland Software's latest buyout: $24M for mobile messaging company   [12:35PM  American City Business Journals]
▶ 3 Hot Small-Cap Tech Stocks   [Jun-20-17 12:25PM  Investopedia]
▶ 3 Small Cap-Growth Stocks You Can Buy Now   [May-17-17 08:02AM  Motley Fool]
▶ Why Upland Software Inc. Stock Popped Today   [Apr-24-17 05:50PM  Motley Fool]
▶ Upland Software reports 4Q loss   [Mar-23-17 04:23PM  Associated Press]
Financial statements of UPLD
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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