Intrinsic value of Upland Software - UPLD

Previous Close

$23.41

  Intrinsic Value

$18.76

stock screener

  Rating & Target

hold

-20%

  Value-price divergence*

-294%

Previous close

$23.41

 
Intrinsic value

$18.76

 
Up/down potential

-20%

 
Rating

hold

 
Value-price divergence*

-294%

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

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 0.4

 

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
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
Revenue, $m
  75
  88
  101
  116
  131
  148
  166
  184
  204
  224
  246
  268
  291
  315
  341
  367
  394
  422
  451
  482
  514
  547
  581
  617
  654
  693
  733
  775
  819
  865
  913
Variable operating expenses, $m
 
  51
  58
  66
  74
  82
  91
  101
  110
  121
  132
  136
  148
  160
  173
  186
  200
  214
  229
  245
  261
  278
  295
  313
  332
  352
  372
  394
  416
  440
  464
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
  91
  99
  108
  117
  126
  136
  147
  158
  170
  182
  187
  200
  214
  228
  242
  258
  273
  290
  307
  325
  344
  362
  382
  403
  424
  446
  470
  494
  520
  546
Operating income, $m
  -9
  -4
  2
  8
  15
  22
  29
  37
  46
  55
  64
  81
  91
  101
  112
  124
  136
  148
  161
  175
  189
  203
  219
  235
  251
  269
  287
  306
  325
  346
  368
EBITDA, $m
  1
  7
  14
  20
  28
  36
  44
  53
  62
  72
  83
  93
  105
  116
  129
  141
  155
  168
  183
  198
  213
  229
  246
  264
  282
  301
  321
  342
  364
  387
  411
Interest expense (income), $m
  2
  3
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
  50
  53
  56
Earnings before tax, $m
  -12
  -6
  -2
  4
  9
  15
  22
  29
  36
  44
  51
  67
  75
  84
  94
  104
  114
  124
  135
  147
  159
  171
  184
  198
  212
  227
  243
  259
  276
  293
  312
Tax expense, $m
  2
  0
  0
  1
  3
  4
  6
  8
  10
  12
  14
  18
  20
  23
  25
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  70
  74
  79
  84
Net income, $m
  -14
  -6
  -2
  3
  7
  11
  16
  21
  26
  32
  38
  49
  55
  62
  68
  76
  83
  91
  99
  107
  116
  125
  135
  145
  155
  166
  177
  189
  201
  214
  228

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
  142
  164
  188
  214
  241
  269
  300
  331
  365
  399
  436
  474
  513
  554
  596
  640
  686
  734
  784
  835
  889
  945
  1,003
  1,063
  1,126
  1,192
  1,261
  1,332
  1,407
  1,485
Adjusted assets (=assets-cash), $m
  122
  142
  164
  188
  214
  241
  269
  300
  331
  365
  399
  436
  474
  513
  554
  596
  640
  686
  734
  784
  835
  889
  945
  1,003
  1,063
  1,126
  1,192
  1,261
  1,332
  1,407
  1,485
Revenue / Adjusted assets
  0.615
  0.620
  0.616
  0.617
  0.612
  0.614
  0.617
  0.613
  0.616
  0.614
  0.617
  0.615
  0.614
  0.614
  0.616
  0.616
  0.616
  0.615
  0.614
  0.615
  0.616
  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
  41
  48
  55
  62
  70
  78
  87
  96
  106
  116
  127
  138
  149
  161
  173
  186
  200
  214
  228
  243
  259
  275
  292
  309
  328
  347
  367
  388
  409
  432
Working capital, $m
  7
  -9
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -25
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -55
  -58
  -62
  -65
  -69
  -73
  -78
  -82
  -87
  -91
Total debt, $m
  48
  61
  77
  95
  114
  134
  155
  177
  201
  225
  251
  278
  305
  334
  365
  396
  429
  462
  498
  534
  572
  612
  653
  696
  741
  787
  836
  886
  939
  994
  1,052
Total liabilities, $m
  92
  105
  121
  139
  158
  178
  199
  221
  245
  269
  295
  322
  349
  378
  409
  440
  473
  506
  542
  578
  616
  656
  697
  740
  785
  831
  880
  930
  983
  1,038
  1,096
Total equity, $m
  59
  37
  43
  49
  56
  63
  71
  79
  87
  96
  105
  114
  124
  134
  145
  156
  168
  180
  192
  205
  219
  233
  247
  263
  279
  295
  312
  330
  349
  369
  389
Total liabilities and equity, $m
  151
  142
  164
  188
  214
  241
  270
  300
  332
  365
  400
  436
  473
  512
  554
  596
  641
  686
  734
  783
  835
  889
  944
  1,003
  1,064
  1,126
  1,192
  1,260
  1,332
  1,407
  1,485
Debt-to-equity ratio
  0.814
  1.640
  1.800
  1.920
  2.030
  2.120
  2.190
  2.260
  2.310
  2.360
  2.400
  2.430
  2.460
  2.490
  2.510
  2.540
  2.550
  2.570
  2.590
  2.600
  2.620
  2.630
  2.640
  2.650
  2.660
  2.670
  2.680
  2.680
  2.690
  2.700
  2.700
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
  -6
  -2
  3
  7
  11
  16
  21
  26
  32
  38
  49
  55
  62
  68
  76
  83
  91
  99
  107
  116
  125
  135
  145
  155
  166
  177
  189
  201
  214
  228
Depreciation, amort., depletion, $m
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
Funds from operations, $m
  6
  5
  10
  15
  20
  25
  31
  37
  43
  49
  56
  61
  69
  76
  85
  93
  102
  111
  120
  130
  140
  151
  162
  174
  186
  199
  212
  226
  240
  255
  271
Change in working capital, $m
  2
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
Cash from operations, $m
  4
  6
  11
  17
  22
  27
  32
  38
  45
  51
  58
  64
  71
  79
  87
  96
  104
  114
  123
  133
  143
  154
  166
  177
  190
  202
  216
  230
  244
  260
  276
Maintenance CAPEX, $m
  0
  -4
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
New CAPEX, $m
  -1
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  -13
  -10
  -10
  -12
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -35
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
Free cash flow, $m
  -9
  -4
  1
  5
  9
  13
  17
  22
  27
  32
  37
  41
  47
  54
  60
  67
  74
  82
  89
  97
  106
  114
  123
  133
  143
  153
  164
  175
  187
  199
  212
Issuance/(repayment) of debt, $m
  22
  15
  16
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
Issuance/(repurchase) of shares, $m
  -1
  12
  7
  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
Cash from financing (excl. dividends), $m  
  20
  27
  23
  22
  19
  20
  21
  22
  23
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
Total cash flow (excl. dividends), $m
  10
  23
  25
  26
  27
  33
  38
  44
  50
  57
  63
  68
  75
  83
  90
  98
  107
  115
  124
  134
  144
  154
  165
  176
  187
  200
  212
  226
  240
  254
  270
Retained Cash Flow (-), $m
  1
  -12
  -7
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
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
 
  38
  17
  20
  21
  26
  31
  36
  42
  48
  54
  59
  65
  72
  80
  87
  95
  103
  112
  121
  130
  140
  150
  161
  172
  183
  195
  208
  221
  235
  249
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
 
  36
  15
  16
  16
  18
  19
  21
  21
  21
  21
  20
  19
  18
  17
  15
  13
  12
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  95.1
  92.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5

Upland Software, Inc. provides cloud-based enterprise work management software in the United States and internationally. It offers a family of cloud-based enterprise work management software applications under the Upland brand for the information technology, process excellence, finance, professional services, and marketing functions in organizations. The company’s software applications address enterprise work challenges in various categories, including program and portfolio management, project management and collaboration, workflow automation and enterprise content management, digital engagement management, professional services automation, and financial management. It sells its products through a direct sales organization, as well as through distributors and value-added resellers. The company was formerly known as Silverback Enterprise Group, Inc. and changed its name to Upland Software, Inc. in November 2013. The company was founded in 2010 and is headquartered in Austin, Texas. Upland Software, Inc. is a subsidiary of Silverback Enterprise Group Inc.

FINANCIAL RATIOS  of  Upland Software (UPLD)

Valuation Ratios
P/E Ratio -29.7
Price to Sales 5.6
Price to Book 7.1
Price to Tangible Book
Price to Cash Flow 104.1
Price to Free Cash Flow 138.8
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 16.7% 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 10 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 -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 - $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 17.841 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 $0.4 billion.

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COMPANY NEWS

▶ 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]
Stock chart of UPLD 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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