Intrinsic value of Digital Turbine - APPS

Previous Close

$2.12

  Intrinsic Value

$7.65

stock screener

  Rating & Target

str. buy

+261%

Previous close

$2.12

 
Intrinsic value

$7.65

 
Up/down potential

+261%

 
Rating

str. buy

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

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  5.75
  21.70
  20.03
  18.53
  17.17
  15.96
  14.86
  13.88
  12.99
  12.19
  11.47
  10.82
  10.24
  9.72
  9.24
  8.82
  8.44
  8.09
  7.79
  7.51
  7.26
  7.03
  6.83
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
Revenue, $m
  92
  112
  134
  159
  187
  216
  249
  283
  320
  359
  400
  443
  489
  536
  586
  637
  691
  747
  805
  866
  929
  994
  1,062
  1,132
  1,206
  1,282
  1,361
  1,444
  1,530
  1,620
  1,714
Variable operating expenses, $m
 
  43
  50
  58
  67
  77
  87
  98
  110
  122
  135
  141
  156
  171
  186
  203
  220
  238
  256
  276
  296
  316
  338
  360
  384
  408
  433
  460
  487
  516
  546
Fixed operating expenses, $m
 
  81
  83
  85
  87
  89
  92
  94
  96
  99
  101
  104
  106
  109
  112
  114
  117
  120
  123
  126
  129
  133
  136
  139
  143
  146
  150
  154
  158
  162
  166
Total operating expenses, $m
  114
  124
  133
  143
  154
  166
  179
  192
  206
  221
  236
  245
  262
  280
  298
  317
  337
  358
  379
  402
  425
  449
  474
  499
  527
  554
  583
  614
  645
  678
  712
Operating income, $m
  -22
  -12
  1
  16
  32
  50
  70
  91
  114
  138
  164
  199
  227
  257
  288
  320
  354
  389
  426
  464
  504
  545
  588
  632
  679
  727
  778
  831
  886
  943
  1,003
EBITDA, $m
  -14
  -3
  10
  25
  42
  60
  80
  102
  125
  150
  176
  203
  232
  262
  294
  327
  361
  397
  434
  473
  513
  555
  599
  644
  692
  741
  792
  846
  902
  960
  1,021
Interest expense (income), $m
  1
  1
  2
  3
  4
  6
  7
  9
  11
  12
  14
  16
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  49
  53
  57
  60
  64
  69
  73
  77
Earnings before tax, $m
  -24
  -13
  -1
  13
  28
  45
  63
  83
  104
  126
  150
  182
  208
  236
  264
  294
  326
  358
  392
  427
  464
  502
  542
  583
  626
  671
  717
  766
  817
  870
  925
Tax expense, $m
  0
  0
  0
  3
  8
  12
  17
  22
  28
  34
  40
  49
  56
  64
  71
  79
  88
  97
  106
  115
  125
  136
  146
  157
  169
  181
  194
  207
  221
  235
  250
Net income, $m
  -24
  -13
  -1
  9
  20
  33
  46
  60
  76
  92
  109
  133
  152
  172
  193
  215
  238
  261
  286
  312
  339
  366
  395
  426
  457
  490
  524
  559
  596
  635
  676

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  108
  124
  149
  177
  207
  240
  276
  314
  355
  398
  443
  491
  542
  594
  649
  707
  766
  828
  893
  960
  1,029
  1,102
  1,177
  1,255
  1,337
  1,421
  1,509
  1,601
  1,697
  1,796
  1,900
Adjusted assets (=assets-cash), $m
  102
  124
  149
  177
  207
  240
  276
  314
  355
  398
  443
  491
  542
  594
  649
  707
  766
  828
  893
  960
  1,029
  1,102
  1,177
  1,255
  1,337
  1,421
  1,509
  1,601
  1,697
  1,796
  1,900
Revenue / Adjusted assets
  0.902
  0.903
  0.899
  0.898
  0.903
  0.900
  0.902
  0.901
  0.901
  0.902
  0.903
  0.902
  0.902
  0.902
  0.903
  0.901
  0.902
  0.902
  0.901
  0.902
  0.903
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
Average production assets, $m
  11
  13
  15
  18
  21
  25
  28
  32
  36
  41
  46
  51
  56
  61
  67
  73
  79
  85
  92
  99
  106
  113
  121
  129
  137
  146
  155
  165
  174
  185
  195
Working capital, $m
  -7
  -16
  -19
  -22
  -26
  -31
  -35
  -40
  -45
  -51
  -56
  -63
  -69
  -76
  -83
  -90
  -97
  -105
  -114
  -122
  -131
  -140
  -150
  -160
  -170
  -181
  -192
  -204
  -216
  -228
  -242
Total debt, $m
  10
  20
  31
  44
  57
  72
  88
  106
  124
  143
  164
  186
  208
  232
  257
  283
  310
  338
  367
  397
  428
  461
  495
  530
  567
  605
  645
  686
  729
  774
  821
Total liabilities, $m
  46
  56
  67
  80
  93
  108
  124
  142
  160
  179
  200
  222
  244
  268
  293
  319
  346
  374
  403
  433
  464
  497
  531
  566
  603
  641
  681
  722
  765
  810
  857
Total equity, $m
  62
  68
  82
  97
  114
  132
  151
  172
  195
  218
  243
  270
  297
  326
  357
  388
  421
  455
  490
  527
  565
  605
  646
  689
  734
  780
  829
  879
  931
  986
  1,043
Total liabilities and equity, $m
  108
  124
  149
  177
  207
  240
  275
  314
  355
  397
  443
  492
  541
  594
  650
  707
  767
  829
  893
  960
  1,029
  1,102
  1,177
  1,255
  1,337
  1,421
  1,510
  1,601
  1,696
  1,796
  1,900
Debt-to-equity ratio
  0.161
  0.290
  0.380
  0.450
  0.500
  0.550
  0.580
  0.610
  0.640
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.740
  0.750
  0.750
  0.760
  0.760
  0.770
  0.770
  0.770
  0.780
  0.780
  0.780
  0.780
  0.780
  0.790
Adjusted equity ratio
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -13
  -1
  9
  20
  33
  46
  60
  76
  92
  109
  133
  152
  172
  193
  215
  238
  261
  286
  312
  339
  366
  395
  426
  457
  490
  524
  559
  596
  635
  676
Depreciation, amort., depletion, $m
  8
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
Funds from operations, $m
  -4
  -4
  8
  19
  30
  43
  56
  71
  87
  103
  121
  138
  157
  178
  199
  222
  245
  269
  295
  321
  348
  377
  407
  437
  470
  503
  538
  574
  612
  652
  693
Change in working capital, $m
  3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
Cash from operations, $m
  -7
  -2
  11
  22
  34
  47
  61
  76
  92
  109
  127
  144
  164
  184
  206
  229
  253
  277
  303
  329
  357
  386
  416
  447
  480
  514
  549
  586
  625
  665
  707
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
New CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
Cash from investing activities, $m
  -1
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -7
  -9
  -9
  -10
  -10
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -22
  -23
  -25
  -26
  -28
Free cash flow, $m
  -8
  -5
  7
  18
  29
  41
  55
  69
  85
  101
  118
  135
  154
  174
  195
  217
  240
  264
  288
  314
  341
  369
  398
  428
  460
  493
  527
  562
  600
  638
  679
Issuance/(repayment) of debt, $m
  5
  10
  11
  12
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
Issuance/(repurchase) of shares, $m
  0
  25
  15
  6
  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  
  3
  35
  26
  18
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
Total cash flow (excl. dividends), $m
  -5
  31
  33
  36
  43
  56
  71
  86
  103
  121
  139
  156
  176
  198
  220
  243
  267
  292
  317
  344
  372
  402
  432
  463
  496
  531
  566
  604
  643
  683
  726
Retained Cash Flow (-), $m
  20
  -25
  -15
  -15
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -55
  -57
Prev. year cash balance distribution, $m
 
  6
  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
 
  11
  19
  21
  26
  38
  51
  66
  81
  97
  114
  130
  149
  169
  190
  211
  234
  257
  282
  308
  334
  362
  391
  421
  452
  484
  518
  553
  590
  629
  669
Discount rate, %
 
  6.20
  6.51
  6.84
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.04
  20.00
  21.00
  22.05
  23.15
  24.30
  25.52
PV of cash for distribution, $m
 
  10
  16
  17
  20
  27
  33
  37
  41
  44
  45
  45
  44
  43
  40
  37
  34
  30
  26
  22
  18
  15
  12
  9
  7
  5
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  100
  83.3
  76.1
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8

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 -5.9
Price to Sales 1.5
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow -20.2
Price to Free Cash Flow -15.7
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 21.7% 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 6.2%, 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 40.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $79 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 10% 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 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 11.4%.

Life of production assets of 10.9 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 -14.1%. 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 66.609 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

▶ 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]
▶ How a flight to North Carolina could benefit Austin businesses   [Oct-25-16 03:45PM  at bizjournals.com]
▶ Why the RDU-AUS flight is big news in the Triangle   [11:29AM  at bizjournals.com]
▶ Digital Turbine's Appia turnaround plan   [Aug-10-16 11:45AM  at bizjournals.com]
Financial statements of APPS
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