Intrinsic value of XO Group - XOXO

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$17.59

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$17.59

 
Intrinsic value

$10.01

 
Up/down potential

-43%

 
Rating

sell

 
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 XOXO 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, %
  7.04
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  152
  164
  176
  189
  203
  217
  232
  247
  262
  279
  296
  314
  332
  352
  372
  393
  415
  438
  462
  487
  513
  540
  569
  599
  631
  664
  698
  735
  773
  812
  854
Variable operating expenses, $m
 
  144
  154
  166
  178
  190
  203
  216
  230
  244
  259
  274
  291
  308
  325
  344
  363
  383
  404
  426
  449
  473
  498
  524
  552
  581
  611
  643
  676
  711
  747
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
  134
  144
  154
  166
  178
  190
  203
  216
  230
  244
  259
  274
  291
  308
  325
  344
  363
  383
  404
  426
  449
  473
  498
  524
  552
  581
  611
  643
  676
  711
  747
Operating income, $m
  18
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  46
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  97
  102
  107
EBITDA, $m
  24
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  94
  99
  104
  109
  115
  121
  127
  134
  141
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  18
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  55
  58
  61
  65
  68
  72
  75
  79
  83
  87
  92
  97
  101
Tax expense, $m
  6
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
Net income, $m
  12
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
  61
  64
  67
  70
  74

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  106
  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
  210
  112
  121
  130
  139
  148
  158
  169
  179
  191
  202
  215
  227
  240
  254
  269
  284
  299
  316
  333
  351
  370
  389
  410
  431
  454
  478
  502
  528
  556
  584
Adjusted assets (=assets-cash), $m
  104
  112
  121
  130
  139
  148
  158
  169
  179
  191
  202
  215
  227
  240
  254
  269
  284
  299
  316
  333
  351
  370
  389
  410
  431
  454
  478
  502
  528
  556
  584
Revenue / Adjusted assets
  1.462
  1.464
  1.455
  1.454
  1.460
  1.466
  1.468
  1.462
  1.464
  1.461
  1.465
  1.460
  1.463
  1.467
  1.465
  1.461
  1.461
  1.465
  1.462
  1.462
  1.462
  1.459
  1.463
  1.461
  1.464
  1.463
  1.460
  1.464
  1.464
  1.460
  1.462
Average production assets, $m
  65
  70
  76
  81
  87
  93
  99
  106
  112
  119
  127
  134
  142
  150
  159
  168
  178
  187
  198
  208
  220
  231
  244
  257
  270
  284
  299
  314
  331
  348
  366
Working capital, $m
  101
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
Total debt, $m
  0
  3
  6
  9
  12
  15
  18
  22
  25
  29
  33
  37
  42
  46
  51
  56
  61
  66
  71
  77
  83
  90
  96
  103
  110
  118
  126
  134
  143
  152
  162
Total liabilities, $m
  36
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  106
  112
  118
  125
  131
  138
  145
  153
  161
  169
  178
  187
  197
Total equity, $m
  175
  74
  80
  86
  92
  98
  105
  112
  119
  126
  134
  142
  151
  159
  169
  178
  188
  198
  209
  221
  233
  245
  258
  272
  286
  301
  317
  333
  350
  368
  387
Total liabilities and equity, $m
  211
  112
  121
  130
  139
  148
  158
  169
  179
  190
  202
  214
  228
  240
  255
  269
  284
  299
  315
  333
  351
  370
  389
  410
  431
  454
  478
  502
  528
  555
  584
Debt-to-equity ratio
  0.000
  0.040
  0.070
  0.100
  0.130
  0.150
  0.170
  0.200
  0.210
  0.230
  0.250
  0.260
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
Adjusted equity ratio
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
  61
  64
  67
  70
  74
Depreciation, amort., depletion, $m
  6
  6
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
Funds from operations, $m
  26
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  93
  98
  103
  108
Change in working capital, $m
  -1
  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
  -1
  -1
  -1
  -1
Cash from operations, $m
  27
  22
  23
  25
  27
  29
  30
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  56
  60
  63
  66
  70
  73
  77
  81
  85
  90
  94
  99
  104
  109
Maintenance CAPEX, $m
  0
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
New CAPEX, $m
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
Cash from investing activities, $m
  -5
  -11
  -11
  -13
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -20
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -36
  -37
  -39
  -41
  -44
  -45
  -48
  -50
Free cash flow, $m
  22
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  37
  39
  42
  44
  46
  48
  51
  54
  56
  59
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Issuance/(repurchase) of shares, $m
  -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
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -5
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Total cash flow (excl. dividends), $m
  17
  13
  14
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  37
  39
  42
  44
  46
  48
  51
  54
  56
  59
  62
  66
  69
Retained Cash Flow (-), $m
  -16
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
Prev. year cash balance distribution, $m
 
  106
  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
 
  114
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
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
 
  109
  8
  8
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  7
  7
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
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
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XO Group Inc. provides consumer multiplatform media services to the wedding, pregnancy and parenting, and nesting markets. It operates a network of Websites under various brands, such as The Knot, which offers wedding resources through wedding Website and mobile apps, national and local wedding magazines, and nationally published books; The Bump, a pregnancy and parenting brand that provides personalized information, content, and tools for anyone at any stage of their journey from fertility to pregnancy and parenting through the toddler years; and The Nest, which focuses on young nesters setting up homes and navigating new lives together. The company also offers national online advertising products, including sponsored and brand-integrated content, digital and native banner advertisements, placement in our online search tools, and direct e-mail marketing; local online advertising products comprising digital advertisements and direct e-mail marketing; and transaction offerings that include a registry service that enables users to create, manage, and share multiple retail store registries from a single source. XO Group Inc.’s transaction offerings also include retailer and local vendor offerings, such as invitations, stationery, reception decor, personalized gifts, and health and beauty offerings. In addition, it publishes The Knot Weddings magazines. The company was formerly known as The Knot, Inc. and changed its name to XO Group Inc. in June 2011. XO Group Inc. was founded in 1996 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  XO Group (XOXO)

Valuation Ratios
P/E Ratio 38.6
Price to Sales 3
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 17.1
Price to Free Cash Flow 20.1
Growth Rates
Sales Growth Rate 7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
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 5.9%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.4%
Return On Equity 7.2%
Return On Equity - 3 Yr. Avg. 3.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 93.4%
Gross Margin - 3 Yr. Avg. 90.1%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 13.2%
Operating Margin 11.8%
Oper. Margin - 3 Yr. Avg. 10.3%
Pre-Tax Margin 11.8%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 3.8%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 65.9%
Payout Ratio 0%

XOXO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XOXO stock intrinsic value calculation we used $152 million for the last fiscal year's total revenue generated by XO Group. The default revenue input number comes from 2016 income statement of XO Group. 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 XOXO stock valuation model: a) initial revenue growth rate of 7.9% 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 XOXO is calculated based on our internal credit rating of XO Group, 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 XO Group.
    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 XOXO stock the variable cost ratio is equal to 87.5%.

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 XOXO 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 XO Group.

Corporate tax rate of 27% is the nominal tax rate for XO Group. 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 XOXO 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 XOXO are equal to 42.8%.

Life of production assets of 10.8 years is the average useful life of capital assets used in XO Group 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 XOXO is equal to -3.3%. 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 - $175 million for XO Group - 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 26.526 million for XO Group 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 XO Group at the current share price and the inputted number of shares is $0.5 billion.


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COMPANY NEWS

▶ ETFs with exposure to XO Group, Inc. : April 7, 2017   [Apr-07-17 05:49PM  Capital Cube]
▶ [$$] Joor CEO Mona Bijoor Steps Away   [Mar-07-17 05:38PM  The Wall Street Journal]
▶ [$$] Joor CEO Mona Bijoor Steps Away   [05:38PM  at The Wall Street Journal]
▶ XO Group beats 4Q profit forecasts   [04:41PM  Associated Press]
▶ Top 2017 Wedding Trends Unveiled by The Knot   [Jan-17-17 11:57AM  PR Newswire]
▶ [$$] Northern Right Shakes Up Small Companies   [Dec-24-16 12:01AM  at Barrons.com]
▶ Should You Avoid XO Group Inc (XOXO)?   [Dec-09-16 04:24AM  at Insider Monkey]
▶ The Knot Surpasses One Million Followers On Instagram   [Jul-14-16 10:35AM  PR Newswire]
▶ Young Americans twin debt problems: marriage and college   [May-26-16 10:39AM  at MarketWatch]
▶ The Knot Unveils the Top Trends in Weddings for 2016   [Jan-21-16 12:00PM  PR Newswire]
▶ Will brides say yes to this $12,500 proposal?   [Jan-14-16 11:44AM  at CNBC]
Stock chart of XOXO Financial statements of XOXO
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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