Intrinsic value of Digital Turbine, Inc. - APPS

Previous Close

$6.52

  Intrinsic Value

$9.69

stock screener

  Rating & Target

buy

+49%

Previous close

$6.52

 
Intrinsic value

$9.69

 
Up/down potential

+49%

 
Rating

buy

We calculate the intrinsic value of APPS 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 0001), $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
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  33.80
  30.92
  28.33
  26.00
  23.90
  22.01
  20.31
  18.77
  17.40
  16.16
  15.04
  14.04
  13.13
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
Revenue, $m
  100
  131
  169
  212
  263
  321
  386
  459
  539
  626
  720
  821
  929
  1,043
  1,164
  1,291
  1,425
  1,564
  1,710
  1,862
  2,020
  2,185
  2,356
  2,534
  2,719
  2,911
  3,111
  3,319
  3,535
  3,760
Variable operating expenses, $m
  67
  87
  112
  141
  175
  213
  256
  305
  357
  415
  477
  544
  616
  692
  772
  856
  945
  1,037
  1,134
  1,235
  1,340
  1,449
  1,562
  1,680
  1,803
  1,930
  2,063
  2,200
  2,344
  2,493
Fixed operating expenses, $m
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  60
Total operating expenses, $m
  99
  119
  145
  175
  210
  248
  292
  342
  395
  454
  516
  584
  657
  734
  815
  900
  990
  1,083
  1,181
  1,283
  1,389
  1,499
  1,613
  1,732
  1,856
  1,985
  2,119
  2,257
  2,402
  2,553
Operating income, $m
  2
  12
  23
  37
  54
  73
  94
  117
  144
  172
  203
  236
  272
  309
  349
  391
  435
  481
  529
  580
  632
  686
  743
  802
  863
  927
  993
  1,061
  1,133
  1,207
EBITDA, $m
  4
  14
  27
  42
  59
  79
  101
  126
  154
  184
  217
  252
  289
  329
  371
  415
  462
  510
  561
  614
  670
  727
  787
  849
  914
  981
  1,051
  1,123
  1,199
  1,277
Interest expense (income), $m
  1
  1
  7
  14
  22
  31
  42
  55
  69
  85
  102
  121
  141
  163
  186
  211
  237
  265
  294
  324
  356
  389
  423
  459
  496
  534
  575
  616
  659
  704
  751
Earnings before tax, $m
  0
  5
  10
  16
  23
  30
  39
  49
  59
  70
  82
  95
  109
  123
  138
  154
  170
  187
  205
  224
  243
  263
  284
  306
  329
  352
  377
  402
  429
  456
Tax expense, $m
  0
  1
  3
  4
  6
  8
  11
  13
  16
  19
  22
  26
  29
  33
  37
  42
  46
  51
  55
  60
  66
  71
  77
  83
  89
  95
  102
  109
  116
  123
Net income, $m
  0
  3
  7
  11
  16
  22
  28
  35
  43
  51
  60
  69
  79
  90
  101
  112
  124
  137
  150
  163
  178
  192
  207
  223
  240
  257
  275
  293
  313
  333

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  116
  152
  195
  245
  304
  371
  446
  530
  622
  722
  831
  948
  1,072
  1,204
  1,344
  1,491
  1,645
  1,806
  1,975
  2,150
  2,333
  2,523
  2,721
  2,926
  3,140
  3,362
  3,593
  3,832
  4,082
  4,341
Adjusted assets (=assets-cash), $m
  116
  152
  195
  245
  304
  371
  446
  530
  622
  722
  831
  948
  1,072
  1,204
  1,344
  1,491
  1,645
  1,806
  1,975
  2,150
  2,333
  2,523
  2,721
  2,926
  3,140
  3,362
  3,593
  3,832
  4,082
  4,341
Revenue / Adjusted assets
  0.862
  0.862
  0.867
  0.865
  0.865
  0.865
  0.865
  0.866
  0.867
  0.867
  0.866
  0.866
  0.867
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
  0.866
Average production assets, $m
  33
  43
  55
  69
  86
  105
  126
  150
  176
  204
  235
  268
  303
  340
  379
  421
  464
  510
  557
  607
  659
  712
  768
  826
  886
  949
  1,014
  1,082
  1,152
  1,226
Working capital, $m
  -25
  -32
  -41
  -52
  -64
  -79
  -95
  -112
  -132
  -153
  -176
  -201
  -228
  -256
  -285
  -316
  -349
  -383
  -419
  -456
  -495
  -535
  -577
  -621
  -666
  -713
  -762
  -813
  -866
  -921
Total debt, $m
  25
  50
  79
  113
  153
  199
  250
  307
  369
  438
  512
  591
  676
  765
  860
  960
  1,065
  1,175
  1,289
  1,409
  1,533
  1,662
  1,797
  1,936
  2,082
  2,233
  2,389
  2,552
  2,722
  2,898
Total liabilities, $m
  79
  103
  132
  167
  207
  252
  303
  360
  423
  491
  565
  645
  729
  819
  914
  1,014
  1,119
  1,228
  1,343
  1,462
  1,586
  1,716
  1,850
  1,990
  2,135
  2,286
  2,443
  2,606
  2,776
  2,952
Total equity, $m
  37
  49
  62
  78
  97
  119
  143
  170
  199
  231
  266
  303
  343
  385
  430
  477
  526
  578
  632
  688
  747
  807
  871
  936
  1,005
  1,076
  1,150
  1,226
  1,306
  1,389
Total liabilities and equity, $m
  116
  152
  194
  245
  304
  371
  446
  530
  622
  722
  831
  948
  1,072
  1,204
  1,344
  1,491
  1,645
  1,806
  1,975
  2,150
  2,333
  2,523
  2,721
  2,926
  3,140
  3,362
  3,593
  3,832
  4,082
  4,341
Debt-to-equity ratio
  0.680
  1.020
  1.260
  1.440
  1.570
  1.670
  1.750
  1.810
  1.860
  1.890
  1.920
  1.950
  1.970
  1.990
  2.000
  2.010
  2.020
  2.030
  2.040
  2.050
  2.050
  2.060
  2.060
  2.070
  2.070
  2.080
  2.080
  2.080
  2.080
  2.090
Adjusted equity ratio
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  3
  7
  11
  16
  22
  28
  35
  43
  51
  60
  69
  79
  90
  101
  112
  124
  137
  150
  163
  178
  192
  207
  223
  240
  257
  275
  293
  313
  333
Depreciation, amort., depletion, $m
  2
  3
  3
  4
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
Funds from operations, $m
  2
  6
  11
  16
  22
  28
  36
  44
  53
  63
  74
  85
  97
  109
  122
  136
  151
  166
  182
  198
  215
  233
  251
  271
  290
  311
  333
  355
  379
  403
Change in working capital, $m
  -6
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
Cash from operations, $m
  9
  14
  20
  26
  34
  43
  52
  62
  73
  84
  97
  110
  123
  137
  152
  167
  183
  200
  217
  235
  254
  273
  293
  314
  336
  358
  382
  406
  432
  458
Maintenance CAPEX, $m
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66
New CAPEX, $m
  -8
  -10
  -12
  -14
  -17
  -19
  -21
  -24
  -26
  -28
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
Cash from investing activities, $m
  -9
  -12
  -14
  -17
  -21
  -24
  -27
  -31
  -35
  -38
  -43
  -46
  -50
  -54
  -58
  -63
  -68
  -73
  -77
  -82
  -87
  -92
  -97
  -102
  -107
  -114
  -119
  -126
  -132
  -139
Free cash flow, $m
  -1
  2
  5
  9
  14
  19
  25
  31
  38
  46
  54
  63
  73
  83
  93
  104
  116
  128
  141
  154
  168
  182
  197
  212
  228
  245
  262
  280
  299
  319
Issuance/(repayment) of debt, $m
  20
  24
  29
  34
  40
  45
  51
  57
  63
  68
  74
  79
  85
  90
  95
  100
  105
  110
  115
  119
  124
  129
  134
  140
  145
  151
  157
  163
  170
  176
Issuance/(repurchase) of shares, $m
  9
  8
  7
  5
  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
Cash from financing (excl. dividends), $m  
  29
  32
  36
  39
  42
  45
  51
  57
  63
  68
  74
  79
  85
  90
  95
  100
  105
  110
  115
  119
  124
  129
  134
  140
  145
  151
  157
  163
  170
  176
Total cash flow (excl. dividends), $m
  28
  34
  41
  48
  56
  64
  76
  88
  101
  114
  128
  143
  157
  173
  188
  204
  221
  238
  255
  273
  292
  311
  331
  352
  374
  396
  419
  444
  469
  495
Retained Cash Flow (-), $m
  -9
  -11
  -14
  -16
  -19
  -21
  -24
  -27
  -29
  -32
  -35
  -37
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
Prev. year cash balance distribution, $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 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
  19
  23
  27
  32
  37
  43
  52
  61
  71
  82
  93
  105
  117
  130
  143
  157
  171
  186
  201
  217
  233
  250
  268
  286
  305
  325
  345
  367
  389
  412
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
  18
  21
  24
  26
  29
  31
  35
  38
  41
  43
  44
  45
  45
  44
  42
  40
  37
  34
  31
  28
  24
  21
  18
  15
  12
  9
  7
  6
  4
  3
Current shareholders' claim on cash, %
  96.8
  94.7
  93.5
  92.8
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5

Digital Turbine, Inc. is engaged in delivering end-to-end products and solutions for mobile operators, application advertisers, device original equipment manufacturers (OEMs) and other third parties to enable them to monetize mobile content. The Company operates its business in two operating segments: Advertising and Content. The Advertising segment consists of two businesses: Operator and OEM (O&O) and Advertiser and Publisher (A&P). The O&O business is an advertiser solution for carrier and OEM inventory consisting of services, such as Ignite, a mobile device management platform and Discover, an intelligent application discovery platform. Its A&P business is a mobile user acquisition network across the world consisting of services, such as syndicated network and real time bidding (RTB). The Content segment consists of services, including Marketplace, which is an application and content store, and Pay, which is a content management and mobile payment solution.

FINANCIAL RATIOS  of  Digital Turbine, Inc. (APPS)

Valuation Ratios
P/E Ratio -18.1
Price to Sales 4.7
Price to Book 7
Price to Tangible Book
Price to Cash Flow -62
Price to Free Cash Flow -48.2
Growth Rates
Sales Growth Rate 5.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 16.1%
Total Debt to Equity 16.1%
Interest Coverage -23
Management Effectiveness
Return On Assets -20%
Ret/ On Assets - 3 Yr. Avg. -23.9%
Return On Total Capital -29.3%
Ret/ On T. Cap. - 3 Yr. Avg. -31.6%
Return On Equity -33.3%
Return On Equity - 3 Yr. Avg. -35.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 14.1%
Gross Margin - 3 Yr. Avg. 15.7%
EBITDA Margin -16.3%
EBITDA Margin - 3 Yr. Avg. -37.8%
Operating Margin -23.9%
Oper. Margin - 3 Yr. Avg. -46.1%
Pre-Tax Margin -26.1%
Pre-Tax Margin - 3 Yr. Avg. -48%
Net Profit Margin -26.1%
Net Profit Margin - 3 Yr. Avg. -49.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.4%
Payout Ratio 0%

APPS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APPS stock intrinsic value calculation we used $75 million for the last fiscal year's total revenue generated by Digital Turbine, Inc.. The default revenue input number comes from 0001 income statement of Digital Turbine, Inc.. 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 APPS stock valuation model: a) initial revenue growth rate of 33.8% 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 APPS is calculated based on our internal credit rating of Digital Turbine, Inc., 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 Digital Turbine, Inc..
    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 APPS stock the variable cost ratio is equal to 66.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $31 million in the base year in the intrinsic value calculation for APPS 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 27.6% for Digital Turbine, Inc..

Corporate tax rate of 27% is the nominal tax rate for Digital Turbine, Inc.. 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 APPS 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 APPS are equal to 32.6%.

Life of production assets of 17.5 years is the average useful life of capital assets used in Digital Turbine, Inc. 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 APPS is equal to -24.5%. 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 - $27.672 million for Digital Turbine, Inc. - 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 78.572 million for Digital Turbine, Inc. 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 Digital Turbine, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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