Intrinsic value of 8x8 Inc - EGHT

Previous Close

$24.77

  Intrinsic Value

$0.52

stock screener

  Rating & Target

str. sell

-98%

Previous close

$24.77

 
Intrinsic value

$0.52

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of EGHT 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 2.4

 

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, %
  19.00
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
Revenue, $m
  353
  416
  484
  557
  636
  720
  810
  905
  1,005
  1,109
  1,219
  1,334
  1,453
  1,577
  1,707
  1,841
  1,981
  2,126
  2,277
  2,434
  2,597
  2,767
  2,943
  3,127
  3,318
  3,518
  3,725
  3,942
  4,168
  4,404
Variable operating expenses, $m
  362
  425
  494
  569
  649
  735
  826
  922
  1,023
  1,129
  1,237
  1,353
  1,475
  1,601
  1,732
  1,869
  2,010
  2,158
  2,311
  2,470
  2,636
  2,808
  2,987
  3,174
  3,368
  3,570
  3,781
  4,001
  4,230
  4,469
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
  362
  425
  494
  569
  649
  735
  826
  922
  1,023
  1,129
  1,237
  1,353
  1,475
  1,601
  1,732
  1,869
  2,010
  2,158
  2,311
  2,470
  2,636
  2,808
  2,987
  3,174
  3,368
  3,570
  3,781
  4,001
  4,230
  4,469
Operating income, $m
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -19
  -20
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -59
  -62
  -66
EBITDA, $m
  7
  9
  10
  11
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  81
  85
  90
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  5
  6
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
Earnings before tax, $m
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -23
  -25
  -28
  -27
  -30
  -33
  -36
  -39
  -42
  -46
  -50
  -53
  -57
  -61
  -66
  -70
  -75
  -79
  -84
  -90
  -95
  -101
  -107
Tax expense, $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
Net income, $m
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -23
  -25
  -28
  -27
  -30
  -33
  -36
  -39
  -42
  -46
  -50
  -53
  -57
  -61
  -66
  -70
  -75
  -79
  -84
  -90
  -95
  -101
  -107

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
  206
  242
  282
  325
  371
  420
  472
  527
  585
  646
  710
  777
  847
  919
  995
  1,073
  1,154
  1,239
  1,327
  1,419
  1,514
  1,612
  1,715
  1,822
  1,934
  2,050
  2,171
  2,297
  2,429
  2,566
Adjusted assets (=assets-cash), $m
  206
  242
  282
  325
  371
  420
  472
  527
  585
  646
  710
  777
  847
  919
  995
  1,073
  1,154
  1,239
  1,327
  1,419
  1,514
  1,612
  1,715
  1,822
  1,934
  2,050
  2,171
  2,297
  2,429
  2,566
Revenue / Adjusted assets
  1.714
  1.719
  1.716
  1.714
  1.714
  1.714
  1.716
  1.717
  1.718
  1.717
  1.717
  1.717
  1.715
  1.716
  1.716
  1.716
  1.717
  1.716
  1.716
  1.715
  1.715
  1.717
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
Average production assets, $m
  70
  82
  96
  110
  126
  143
  160
  179
  199
  220
  241
  264
  288
  312
  338
  365
  392
  421
  451
  482
  514
  548
  583
  619
  657
  697
  738
  781
  825
  872
Working capital, $m
  -45
  -53
  -62
  -71
  -81
  -92
  -104
  -116
  -129
  -142
  -156
  -171
  -186
  -202
  -218
  -236
  -254
  -272
  -291
  -312
  -332
  -354
  -377
  -400
  -425
  -450
  -477
  -505
  -534
  -564
Total debt, $m
  11
  23
  37
  51
  67
  83
  101
  120
  139
  160
  182
  204
  228
  252
  278
  304
  332
  360
  390
  421
  453
  487
  521
  558
  595
  634
  675
  718
  763
  809
Total liabilities, $m
  70
  82
  95
  110
  125
  142
  160
  178
  198
  219
  240
  263
  286
  311
  336
  363
  390
  419
  449
  479
  512
  545
  580
  616
  654
  693
  734
  776
  821
  867
Total equity, $m
  136
  160
  187
  215
  245
  278
  313
  349
  388
  428
  470
  514
  561
  608
  658
  710
  764
  820
  879
  939
  1,002
  1,067
  1,136
  1,206
  1,280
  1,357
  1,437
  1,521
  1,608
  1,699
Total liabilities and equity, $m
  206
  242
  282
  325
  370
  420
  473
  527
  586
  647
  710
  777
  847
  919
  994
  1,073
  1,154
  1,239
  1,328
  1,418
  1,514
  1,612
  1,716
  1,822
  1,934
  2,050
  2,171
  2,297
  2,429
  2,566
Debt-to-equity ratio
  0.080
  0.150
  0.200
  0.240
  0.270
  0.300
  0.320
  0.340
  0.360
  0.370
  0.390
  0.400
  0.410
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.470
  0.480
Adjusted equity ratio
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -23
  -25
  -28
  -27
  -30
  -33
  -36
  -39
  -42
  -46
  -50
  -53
  -57
  -61
  -66
  -70
  -75
  -79
  -84
  -90
  -95
  -101
  -107
Depreciation, amort., depletion, $m
  16
  18
  21
  23
  26
  29
  32
  36
  39
  43
  43
  47
  51
  56
  60
  65
  70
  75
  81
  86
  92
  98
  104
  111
  117
  124
  132
  139
  147
  156
Funds from operations, $m
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
Change in working capital, $m
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -26
  -27
  -28
  -29
  -30
Cash from operations, $m
  14
  16
  17
  19
  20
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  51
  54
  57
  59
  62
  65
  69
  72
  76
  79
Maintenance CAPEX, $m
  -10
  -12
  -15
  -17
  -20
  -22
  -25
  -29
  -32
  -36
  -39
  -43
  -47
  -51
  -56
  -60
  -65
  -70
  -75
  -81
  -86
  -92
  -98
  -104
  -111
  -117
  -124
  -132
  -139
  -147
New CAPEX, $m
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
Cash from investing activities, $m
  -21
  -24
  -28
  -32
  -36
  -39
  -43
  -48
  -52
  -57
  -61
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -105
  -112
  -118
  -126
  -133
  -140
  -149
  -156
  -165
  -175
  -184
  -194
Free cash flow, $m
  -7
  -9
  -11
  -13
  -15
  -17
  -20
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -51
  -55
  -59
  -63
  -67
  -72
  -76
  -81
  -86
  -91
  -97
  -103
  -109
  -115
Issuance/(repayment) of debt, $m
  11
  12
  13
  14
  16
  17
  18
  19
  20
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  46
Issuance/(repurchase) of shares, $m
  31
  34
  38
  42
  46
  50
  55
  59
  64
  68
  69
  74
  79
  84
  89
  94
  100
  106
  112
  118
  124
  131
  138
  146
  153
  161
  170
  179
  188
  198
Cash from financing (excl. dividends), $m  
  42
  46
  51
  56
  62
  67
  73
  78
  84
  89
  91
  97
  103
  108
  114
  120
  128
  135
  142
  149
  156
  164
  173
  182
  191
  200
  211
  222
  233
  244
Total cash flow (excl. dividends), $m
  35
  38
  41
  44
  47
  50
  53
  56
  58
  61
  60
  63
  65
  68
  71
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  109
  114
  119
  124
  129
Retained Cash Flow (-), $m
  -31
  -34
  -38
  -42
  -46
  -50
  -55
  -59
  -64
  -68
  -69
  -74
  -79
  -84
  -89
  -94
  -100
  -106
  -112
  -118
  -124
  -131
  -138
  -146
  -153
  -161
  -170
  -179
  -188
  -198
Prev. year cash balance distribution, $m
  104
  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
  108
  3
  3
  2
  1
  -1
  -2
  -4
  -5
  -7
  -9
  -11
  -13
  -16
  -18
  -21
  -23
  -26
  -29
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
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
  104
  3
  2
  1
  0
  0
  -1
  -2
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
Current shareholders' claim on cash, %
  97.4
  95.0
  92.8
  90.7
  88.8
  87.0
  85.4
  83.8
  82.3
  80.9
  79.6
  78.3
  77.2
  76.0
  74.9
  73.9
  72.8
  71.9
  70.9
  70.0
  69.0
  68.1
  67.3
  66.4
  65.6
  64.8
  64.0
  63.2
  62.4
  61.7

8x8, Inc. provides cloud-based, enterprise-class software solutions. The Company's solutions are delivered through Software as a Service (SaaS) business model. Its segments include Americas and Europe. Its software platform brings together cloud, mobile, collaboration, video and data science technologies. Through a combination of open application program interface (API) and pre-built integrations, its solutions leverage critical customer context from internal data systems and customer relationship management (CRM) systems. Its software product, branded as 8x8 Virtual Office, delivers voice as a service across the world. 8x8 Virtual Office enables a customer to use a single business phone number to place and receive calls from any supported device. It provides software to enable a multi-channel contact center under the 8x8 Virtual Contact Center brand. Its Virtual Office Meetings software solution is a tool for teams within the enterprise to meet and collaborate on a shared project.

FINANCIAL RATIOS  of  8x8 Inc (EGHT)

Valuation Ratios
P/E Ratio -453.3
Price to Sales 9
Price to Book 7.8
Price to Tangible Book
Price to Cash Flow 80.9
Price to Free Cash Flow 161.9
Growth Rates
Sales Growth Rate 21.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.5%
Ret/ On Assets - 3 Yr. Avg. -0.8%
Return On Total Capital -1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity -1.8%
Return On Equity - 3 Yr. Avg. -1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 75.5%
Gross Margin - 3 Yr. Avg. 73.5%
EBITDA Margin 2%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin -2.8%
Oper. Margin - 3 Yr. Avg. -1.4%
Pre-Tax Margin -2%
Pre-Tax Margin - 3 Yr. Avg. -0.6%
Net Profit Margin -2%
Net Profit Margin - 3 Yr. Avg. -1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 25.6%
Payout Ratio 0%

EGHT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EGHT stock intrinsic value calculation we used $297 million for the last fiscal year's total revenue generated by 8x8 Inc. The default revenue input number comes from 0001 income statement of 8x8 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 EGHT stock valuation model: a) initial revenue growth rate of 19% 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 EGHT is calculated based on our internal credit rating of 8x8 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 8x8 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 EGHT stock the variable cost ratio is equal to 102.7%.

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 EGHT 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 8x8 Inc.

Corporate tax rate of 27% is the nominal tax rate for 8x8 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 EGHT 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 EGHT are equal to 19.8%.

Life of production assets of 5.6 years is the average useful life of capital assets used in 8x8 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 EGHT is equal to -12.8%. 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 - $218.774 million for 8x8 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 95.592 million for 8x8 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 8x8 Inc at the current share price and the inputted number of shares is $2.4 billion.

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