Intrinsic value of Digital Turbine - APPS

Previous Close

$1.46

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$1.46

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

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 2017), $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 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
Revenue, $m
  97
  103
  109
  115
  121
  128
  135
  142
  150
  157
  166
  174
  184
  193
  203
  214
  225
  236
  248
  261
  274
  288
  303
  318
  334
  351
  369
  388
  407
  428
Variable operating expenses, $m
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
Fixed operating expenses, $m
  94
  96
  98
  100
  103
  105
  107
  109
  112
  114
  117
  119
  122
  125
  128
  130
  133
  136
  139
  142
  145
  148
  152
  155
  159
  162
  166
  169
  173
  177
Total operating expenses, $m
  119
  122
  125
  128
  132
  135
  139
  142
  146
  149
  146
  149
  154
  159
  163
  167
  172
  177
  182
  187
  193
  198
  205
  210
  217
  223
  230
  236
  244
  251
Operating income, $m
  -22
  -19
  -17
  -14
  -11
  -7
  -4
  0
  4
  8
  20
  25
  30
  35
  40
  46
  52
  59
  66
  73
  81
  90
  98
  108
  118
  128
  139
  151
  163
  177
EBITDA, $m
  -4
  -1
  2
  5
  9
  13
  17
  21
  26
  31
  36
  41
  47
  53
  60
  67
  74
  81
  90
  98
  107
  117
  127
  138
  150
  162
  174
  188
  202
  217
Interest expense (income), $m
  1
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
Earnings before tax, $m
  -24
  -22
  -20
  -18
  -16
  -14
  -11
  -8
  -6
  -2
  9
  13
  16
  20
  25
  29
  34
  39
  45
  51
  57
  63
  70
  78
  86
  94
  103
  112
  122
  133
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  3
  4
  5
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
Net income, $m
  -24
  -22
  -20
  -18
  -16
  -14
  -11
  -8
  -6
  -2
  7
  9
  12
  15
  18
  21
  25
  29
  33
  37
  41
  46
  51
  57
  63
  69
  75
  82
  89
  97

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
  114
  121
  128
  135
  142
  150
  158
  167
  176
  185
  195
  205
  216
  227
  239
  251
  264
  278
  292
  307
  322
  339
  356
  374
  393
  413
  434
  455
  478
  503
Adjusted assets (=assets-cash), $m
  114
  121
  128
  135
  142
  150
  158
  167
  176
  185
  195
  205
  216
  227
  239
  251
  264
  278
  292
  307
  322
  339
  356
  374
  393
  413
  434
  455
  478
  503
Revenue / Adjusted assets
  0.851
  0.851
  0.852
  0.852
  0.852
  0.853
  0.854
  0.850
  0.852
  0.849
  0.851
  0.849
  0.852
  0.850
  0.849
  0.853
  0.852
  0.849
  0.849
  0.850
  0.851
  0.850
  0.851
  0.850
  0.850
  0.850
  0.850
  0.853
  0.851
  0.851
Average production assets, $m
  93
  98
  104
  109
  115
  122
  128
  135
  142
  150
  158
  166
  175
  184
  194
  204
  214
  225
  237
  249
  261
  275
  289
  303
  319
  335
  352
  369
  388
  408
Working capital, $m
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -93
Total debt, $m
  12
  15
  18
  21
  24
  28
  31
  35
  38
  42
  47
  51
  55
  60
  65
  70
  76
  82
  88
  94
  100
  107
  115
  122
  130
  139
  148
  157
  166
  177
Total liabilities, $m
  48
  51
  54
  57
  60
  64
  67
  71
  74
  78
  82
  87
  91
  96
  101
  106
  112
  117
  123
  130
  136
  143
  151
  158
  166
  175
  183
  193
  202
  213
Total equity, $m
  66
  70
  74
  78
  82
  87
  91
  96
  101
  107
  112
  118
  124
  131
  138
  145
  152
  160
  168
  177
  186
  195
  205
  216
  227
  238
  250
  263
  276
  290
Total liabilities and equity, $m
  114
  121
  128
  135
  142
  151
  158
  167
  175
  185
  194
  205
  215
  227
  239
  251
  264
  277
  291
  307
  322
  338
  356
  374
  393
  413
  433
  456
  478
  503
Debt-to-equity ratio
  0.190
  0.220
  0.250
  0.270
  0.300
  0.320
  0.340
  0.360
  0.380
  0.400
  0.410
  0.430
  0.440
  0.460
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.600
  0.600
  0.610
Adjusted equity ratio
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -22
  -20
  -18
  -16
  -14
  -11
  -8
  -6
  -2
  7
  9
  12
  15
  18
  21
  25
  29
  33
  37
  41
  46
  51
  57
  63
  69
  75
  82
  89
  97
Depreciation, amort., depletion, $m
  17
  18
  18
  19
  20
  20
  21
  22
  22
  23
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
Funds from operations, $m
  -7
  -5
  -2
  1
  4
  7
  10
  13
  17
  21
  22
  26
  29
  33
  37
  42
  46
  51
  56
  62
  68
  74
  80
  87
  94
  102
  110
  119
  128
  138
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Cash from operations, $m
  -6
  -3
  -1
  2
  5
  8
  11
  15
  18
  22
  24
  28
  31
  35
  40
  44
  49
  54
  59
  65
  70
  77
  83
  90
  98
  106
  114
  123
  132
  142
Maintenance CAPEX, $m
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
New CAPEX, $m
  -6
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -15
  -14
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -26
  -28
  -29
  -30
  -32
  -35
  -36
  -38
  -39
  -41
  -44
  -45
  -48
  -50
  -53
  -56
  -59
Free cash flow, $m
  -20
  -18
  -16
  -14
  -12
  -10
  -8
  -5
  -2
  1
  1
  4
  6
  9
  12
  15
  18
  21
  25
  29
  33
  37
  42
  47
  52
  58
  64
  70
  77
  84
Issuance/(repayment) of debt, $m
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Issuance/(repurchase) of shares, $m
  28
  26
  24
  23
  20
  18
  16
  13
  11
  8
  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  
  31
  29
  27
  26
  23
  21
  19
  17
  15
  12
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Total cash flow (excl. dividends), $m
  11
  11
  11
  11
  11
  12
  12
  12
  12
  12
  5
  8
  11
  13
  17
  20
  23
  27
  31
  35
  40
  44
  49
  55
  60
  66
  73
  79
  87
  94
Retained Cash Flow (-), $m
  -28
  -26
  -24
  -23
  -20
  -18
  -16
  -13
  -11
  -8
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
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
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
Cash available for distribution, $m
  -17
  -15
  -13
  -11
  -9
  -7
  -4
  -1
  1
  5
  0
  2
  4
  7
  10
  13
  16
  19
  23
  26
  31
  35
  39
  44
  49
  55
  61
  67
  73
  80
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  -16
  -13
  -11
  -9
  -6
  -4
  -2
  -1
  1
  2
  0
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  77.6
  62.0
  50.7
  42.5
  36.4
  31.9
  28.6
  26.2
  24.5
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3

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 (APPS)

Valuation Ratios
P/E Ratio -4
Price to Sales 1.1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow -13.9
Price to Free Cash Flow -10.8
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 $92 million for the last fiscal year's total revenue generated by Digital Turbine. The default revenue input number comes from 2017 income statement of Digital Turbine. 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 5.8% 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 5.8%, whose default value for APPS is calculated based on our internal credit rating of Digital Turbine, 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.
    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 26.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $92 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 26.1% for Digital Turbine.

Corporate tax rate of 27% is the nominal tax rate for Digital Turbine. 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 4.1%.

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 95.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Digital Turbine 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 -21.7%. 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 - $62 million for Digital Turbine - 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 67 million for Digital Turbine 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 at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Digital Turbine: Fiscal 1Q Earnings Snapshot   [05:39PM  Associated Press]
▶ Digital Turbine Incs (NASDAQ:APPS) Shift From Loss To Profit   [Jun-27-18 08:53AM  Simply Wall St.]
▶ Digital Turbine: Fiscal 4Q Earnings Snapshot   [Jun-12-18 04:41PM  Associated Press]
▶ Digital Turbine's Earnings Preview   [07:27AM  Benzinga]
▶ Why Digital Turbine Inc (NASDAQ:APPS) Could Be A Buy   [May-17-18 01:15PM  Simply Wall St.]
▶ How Digital Turbine plans to scale in Durham   [May-02-18 08:35AM  American City Business Journals]
▶ Penny Stocks to Watch for April 2018   [Apr-02-18 08:47AM  Investopedia]
▶ Digital Turbine reports 3Q loss   [Feb-07-18 07:07PM  Associated Press]
▶ Is It Too Late To Buy Digital Turbine Inc (APPS)?   [Nov-18-17 06:44PM  Simply Wall St.]
▶ Digital Turbine reports 2Q loss   [Nov-07-17 06:49PM  Associated Press]
▶ Digital Turbine Inc (APPS): Time For A Financial Health Check   [Nov-02-17 03:32PM  Simply Wall St.]
▶ All You Need To Know About Digital Turbine Incs (APPS) Risks   [Oct-04-17 09:36AM  Simply Wall St.]
▶ Digital Turbine reports 1Q loss   [Aug-07-17 11:37PM  Associated Press]
▶ Digital Turbine reports 1Q loss   [06:35PM  Associated Press]
▶ Digital Turbine reports 4Q loss   [Jun-14-17 04:28PM  Associated Press]
▶ ETFs with exposure to Digital Turbine, Inc. : May 1, 2017   [May-01-17 03:36PM  Capital Cube]
▶ Digital Turbine Expands Ignite Platform Capabilities   [Feb-22-17 08:04AM  PR Newswire]
▶ Digital Turbine reports 3Q loss   [Feb-09-17 07:51AM  Associated Press]
▶ How Key Technology, Inc. (KTEC) Stacks Up Against Its Peers   [Dec-16-16 01:42PM  Insider Monkey]
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