Intrinsic value of Brightcove Inc. - BCOV

Previous Close

$8.15

  Intrinsic Value

$0.41

stock screener

  Rating & Target

str. sell

-95%

Previous close

$8.15

 
Intrinsic value

$0.41

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of BCOV 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 0.3

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  168
  172
  177
  182
  187
  193
  200
  207
  214
  223
  232
  241
  251
  262
  273
  285
  297
  311
  325
  340
  356
  372
  390
  408
  428
  448
  470
  492
  516
  541
Variable operating expenses, $m
  43
  44
  45
  46
  48
  49
  51
  52
  54
  56
  58
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  106
  112
  117
  123
  128
  135
Fixed operating expenses, $m
  142
  145
  148
  152
  155
  158
  162
  165
  169
  173
  177
  180
  184
  189
  193
  197
  201
  206
  210
  215
  220
  224
  229
  234
  239
  245
  250
  256
  261
  267
Total operating expenses, $m
  185
  189
  193
  198
  203
  207
  213
  217
  223
  229
  235
  240
  246
  254
  261
  268
  275
  283
  291
  300
  309
  317
  326
  336
  345
  357
  367
  379
  389
  402
Operating income, $m
  -17
  -17
  -17
  -16
  -15
  -14
  -13
  -11
  -9
  -7
  -3
  0
  4
  8
  12
  17
  22
  28
  34
  40
  48
  55
  63
  72
  82
  92
  103
  114
  126
  139
EBITDA, $m
  -12
  -12
  -12
  -11
  -10
  -9
  -7
  -5
  -3
  0
  3
  6
  10
  14
  19
  24
  29
  35
  42
  48
  56
  64
  73
  82
  92
  102
  114
  126
  138
  152
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
Earnings before tax, $m
  -17
  -17
  -17
  -17
  -16
  -15
  -13
  -12
  -10
  -8
  -4
  -1
  2
  6
  10
  15
  20
  25
  31
  37
  44
  51
  59
  68
  77
  86
  97
  108
  120
  132
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  36
Net income, $m
  -17
  -17
  -17
  -17
  -16
  -15
  -13
  -12
  -10
  -8
  -4
  -1
  2
  4
  7
  11
  14
  18
  23
  27
  32
  37
  43
  49
  56
  63
  71
  79
  87
  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
  136
  139
  143
  147
  151
  156
  161
  167
  173
  180
  187
  195
  203
  211
  221
  230
  240
  251
  263
  275
  288
  301
  315
  330
  346
  362
  380
  398
  417
  438
Adjusted assets (=assets-cash), $m
  136
  139
  143
  147
  151
  156
  161
  167
  173
  180
  187
  195
  203
  211
  221
  230
  240
  251
  263
  275
  288
  301
  315
  330
  346
  362
  380
  398
  417
  438
Revenue / Adjusted assets
  1.235
  1.237
  1.238
  1.238
  1.238
  1.237
  1.242
  1.240
  1.237
  1.239
  1.241
  1.236
  1.236
  1.242
  1.235
  1.239
  1.238
  1.239
  1.236
  1.236
  1.236
  1.236
  1.238
  1.236
  1.237
  1.238
  1.237
  1.236
  1.237
  1.235
Average production assets, $m
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  83
  86
  90
  95
  99
  104
  109
  114
  120
  126
Working capital, $m
  -27
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -64
  -68
  -71
  -74
  -78
  -82
  -86
Total debt, $m
  1
  3
  5
  6
  9
  11
  13
  16
  19
  22
  25
  29
  33
  37
  41
  46
  51
  56
  61
  67
  73
  79
  86
  93
  100
  108
  116
  125
  134
  143
Total liabilities, $m
  64
  65
  67
  69
  71
  73
  76
  79
  81
  85
  88
  92
  95
  99
  104
  108
  113
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
  206
Total equity, $m
  72
  74
  76
  78
  80
  83
  86
  89
  92
  95
  99
  103
  108
  112
  117
  122
  127
  133
  139
  146
  152
  159
  167
  175
  183
  192
  201
  211
  221
  232
Total liabilities and equity, $m
  136
  139
  143
  147
  151
  156
  162
  168
  173
  180
  187
  195
  203
  211
  221
  230
  240
  251
  262
  275
  287
  300
  315
  330
  345
  362
  379
  398
  417
  438
Debt-to-equity ratio
  0.020
  0.040
  0.060
  0.080
  0.110
  0.130
  0.160
  0.180
  0.210
  0.230
  0.260
  0.280
  0.310
  0.330
  0.350
  0.370
  0.400
  0.420
  0.440
  0.460
  0.480
  0.490
  0.510
  0.530
  0.550
  0.560
  0.580
  0.590
  0.600
  0.620
Adjusted equity ratio
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -17
  -17
  -17
  -17
  -16
  -15
  -13
  -12
  -10
  -8
  -4
  -1
  2
  4
  7
  11
  14
  18
  23
  27
  32
  37
  43
  49
  56
  63
  71
  79
  87
  97
Depreciation, amort., depletion, $m
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Funds from operations, $m
  -12
  -12
  -12
  -11
  -10
  -9
  -8
  -6
  -4
  -1
  2
  5
  8
  11
  14
  17
  21
  26
  30
  35
  40
  46
  52
  59
  66
  74
  82
  90
  99
  109
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Cash from operations, $m
  -11
  -11
  -11
  -10
  -10
  -8
  -7
  -5
  -3
  0
  3
  6
  9
  12
  16
  19
  23
  28
  32
  37
  43
  49
  55
  62
  69
  77
  85
  94
  103
  113
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Cash from investing activities, $m
  -5
  -5
  -5
  -5
  -5
  -5
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -18
Free cash flow, $m
  -16
  -16
  -16
  -16
  -15
  -14
  -13
  -11
  -9
  -7
  -4
  -1
  1
  4
  7
  10
  14
  18
  22
  26
  31
  37
  42
  48
  55
  62
  70
  78
  86
  95
Issuance/(repayment) of debt, $m
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Issuance/(repurchase) of shares, $m
  18
  19
  19
  19
  18
  17
  16
  15
  13
  11
  8
  5
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  19
  20
  21
  21
  20
  19
  18
  18
  16
  14
  11
  9
  7
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Total cash flow (excl. dividends), $m
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  11
  15
  19
  23
  27
  32
  37
  43
  49
  55
  62
  70
  78
  86
  95
  105
Retained Cash Flow (-), $m
  -18
  -19
  -19
  -19
  -18
  -17
  -16
  -15
  -13
  -11
  -8
  -5
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
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
  -15
  -15
  -14
  -14
  -13
  -12
  -10
  -8
  -6
  -4
  -1
  2
  3
  4
  6
  10
  13
  17
  21
  26
  31
  36
  41
  48
  54
  61
  69
  76
  85
  94
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
  -14
  -13
  -13
  -11
  -10
  -9
  -7
  -5
  -4
  -2
  0
  1
  1
  1
  2
  2
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
Current shareholders' claim on cash, %
  94.3
  88.8
  83.8
  79.2
  75.0
  71.4
  68.2
  65.5
  63.3
  61.5
  60.4
  59.7
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3

Brightcove Inc. is a global provider of cloud-based services for video. The Company's products and services include Brightcove Video Cloud (Video Cloud), Brightcove Zencoder (Zencoder), Brightcove Once (Once), Brightcove Perform (Perform), Brightcove Video Marketing Suite (Video Marketing Suite), Brightcove Lift (Lift), Brightcove OTT Flow (OTT Flow) and Brightcove Enterprise Video Suite (Enterprise Video Suite), among others. Video Cloud is an online video platform. Video Cloud enables its customers to publish and distribute video to Internet-connected devices. Zencoder is a cloud-based video encoding service. Once is a cloud-based advertisement insertion and video stitching service. Perform is a cloud-based service for creating and managing video player experiences. Video Marketing Suite is a suite of video technologies designed to address the needs of marketers to drive awareness, engagement and conversion.

FINANCIAL RATIOS  of  Brightcove Inc. (BCOV)

Valuation Ratios
P/E Ratio -27.7
Price to Sales 1.8
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 25.2
Price to Free Cash Flow 46.2
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 66.7%
Cap. Spend. - 3 Yr. Gr. Rate 4.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 1.3%
Total Debt to Equity 1.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -7.6%
Ret/ On Assets - 3 Yr. Avg. -9.5%
Return On Total Capital -12.7%
Ret/ On T. Cap. - 3 Yr. Avg. -15.5%
Return On Equity -12.8%
Return On Equity - 3 Yr. Avg. -15.7%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 62.7%
Gross Margin - 3 Yr. Avg. 64.2%
EBITDA Margin -1.3%
EBITDA Margin - 3 Yr. Avg. -2.1%
Operating Margin -6%
Oper. Margin - 3 Yr. Avg. -7.7%
Pre-Tax Margin -6.7%
Pre-Tax Margin - 3 Yr. Avg. -8.5%
Net Profit Margin -6.7%
Net Profit Margin - 3 Yr. Avg. -8.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -4.8%
Payout Ratio 0%

BCOV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BCOV stock intrinsic value calculation we used $165 million for the last fiscal year's total revenue generated by Brightcove Inc.. The default revenue input number comes from 0001 income statement of Brightcove 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 BCOV stock valuation model: a) initial revenue growth rate of 2% 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 BCOV is calculated based on our internal credit rating of Brightcove 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 Brightcove 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 BCOV stock the variable cost ratio is equal to 25.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $139 million in the base year in the intrinsic value calculation for BCOV 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 5.4% for Brightcove Inc..

Corporate tax rate of 27% is the nominal tax rate for Brightcove 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 BCOV 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 BCOV are equal to 23.2%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Brightcove 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 BCOV is equal to -15.8%. 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 - $70.614 million for Brightcove 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 36.646 million for Brightcove 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 Brightcove Inc. at the current share price and the inputted number of shares is $0.3 billion.

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