Intrinsic value of Endurance International Group Holdings - EIGI

Previous Close

$9.05

  Intrinsic Value

$0.55

stock screener

  Rating & Target

str. sell

-94%

Previous close

$9.05

 
Intrinsic value

$0.55

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of EIGI 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 1.2

 

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, %
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
Revenue, $m
  1,246
  1,319
  1,394
  1,473
  1,556
  1,642
  1,732
  1,826
  1,924
  2,027
  2,135
  2,247
  2,365
  2,489
  2,619
  2,755
  2,897
  3,046
  3,202
  3,367
  3,539
  3,719
  3,908
  4,107
  4,315
  4,534
  4,763
  5,003
  5,256
  5,521
Variable operating expenses, $m
  1,278
  1,339
  1,402
  1,468
  1,537
  1,610
  1,685
  1,764
  1,847
  1,933
  1,793
  1,888
  1,987
  2,091
  2,200
  2,314
  2,434
  2,559
  2,690
  2,828
  2,973
  3,124
  3,283
  3,450
  3,625
  3,809
  4,001
  4,203
  4,415
  4,638
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
  1,278
  1,339
  1,402
  1,468
  1,537
  1,610
  1,685
  1,764
  1,847
  1,933
  1,793
  1,888
  1,987
  2,091
  2,200
  2,314
  2,434
  2,559
  2,690
  2,828
  2,973
  3,124
  3,283
  3,450
  3,625
  3,809
  4,001
  4,203
  4,415
  4,638
Operating income, $m
  -31
  -20
  -8
  5
  18
  32
  46
  61
  77
  94
  341
  359
  378
  398
  419
  441
  463
  487
  512
  538
  566
  595
  625
  657
  690
  725
  762
  800
  841
  883
EBITDA, $m
  462
  489
  517
  547
  577
  609
  642
  677
  714
  752
  792
  834
  878
  924
  972
  1,022
  1,075
  1,130
  1,188
  1,249
  1,313
  1,380
  1,450
  1,524
  1,601
  1,682
  1,767
  1,856
  1,950
  2,048
Interest expense (income), $m
  119
  155
  152
  163
  175
  188
  201
  215
  230
  245
  261
  277
  295
  313
  332
  352
  373
  395
  418
  442
  467
  494
  521
  550
  581
  613
  646
  682
  719
  758
  798
Earnings before tax, $m
  -186
  -171
  -171
  -170
  -170
  -170
  -169
  -168
  -168
  -167
  64
  65
  65
  66
  67
  68
  68
  69
  70
  71
  72
  73
  75
  76
  77
  79
  80
  81
  83
  85
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  17
  17
  18
  18
  18
  18
  18
  19
  19
  19
  20
  20
  20
  20
  21
  21
  22
  22
  22
  23
Net income, $m
  -186
  -171
  -171
  -170
  -170
  -170
  -169
  -168
  -168
  -167
  47
  47
  48
  48
  49
  49
  50
  51
  51
  52
  53
  54
  54
  55
  56
  57
  58
  59
  61
  62

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
  2,758
  2,918
  3,085
  3,259
  3,442
  3,632
  3,831
  4,039
  4,257
  4,484
  4,723
  4,972
  5,233
  5,507
  5,794
  6,094
  6,409
  6,739
  7,085
  7,448
  7,829
  8,228
  8,646
  9,086
  9,546
  10,030
  10,537
  11,070
  11,628
  12,215
Adjusted assets (=assets-cash), $m
  2,758
  2,918
  3,085
  3,259
  3,442
  3,632
  3,831
  4,039
  4,257
  4,484
  4,723
  4,972
  5,233
  5,507
  5,794
  6,094
  6,409
  6,739
  7,085
  7,448
  7,829
  8,228
  8,646
  9,086
  9,546
  10,030
  10,537
  11,070
  11,628
  12,215
Revenue / Adjusted assets
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
Average production assets, $m
  2,631
  2,784
  2,944
  3,110
  3,284
  3,466
  3,655
  3,854
  4,062
  4,279
  4,506
  4,744
  4,994
  5,255
  5,528
  5,815
  6,115
  6,430
  6,760
  7,107
  7,470
  7,851
  8,250
  8,669
  9,109
  9,570
  10,054
  10,562
  11,095
  11,655
Working capital, $m
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
Total debt, $m
  1,871
  2,016
  2,166
  2,323
  2,487
  2,658
  2,837
  3,025
  3,221
  3,425
  3,640
  3,864
  4,100
  4,346
  4,604
  4,874
  5,158
  5,455
  5,766
  6,093
  6,435
  6,794
  7,171
  7,567
  7,981
  8,416
  8,873
  9,352
  9,855
  10,383
Total liabilities, $m
  2,482
  2,626
  2,776
  2,934
  3,098
  3,269
  3,448
  3,635
  3,831
  4,036
  4,250
  4,475
  4,710
  4,956
  5,214
  5,485
  5,768
  6,065
  6,377
  6,703
  7,046
  7,405
  7,782
  8,177
  8,592
  9,027
  9,484
  9,963
  10,465
  10,993
Total equity, $m
  276
  292
  308
  326
  344
  363
  383
  404
  426
  448
  472
  497
  523
  551
  579
  609
  641
  674
  709
  745
  783
  823
  865
  909
  955
  1,003
  1,054
  1,107
  1,163
  1,221
Total liabilities and equity, $m
  2,758
  2,918
  3,084
  3,260
  3,442
  3,632
  3,831
  4,039
  4,257
  4,484
  4,722
  4,972
  5,233
  5,507
  5,793
  6,094
  6,409
  6,739
  7,086
  7,448
  7,829
  8,228
  8,647
  9,086
  9,547
  10,030
  10,538
  11,070
  11,628
  12,214
Debt-to-equity ratio
  6.790
  6.910
  7.020
  7.130
  7.230
  7.320
  7.410
  7.490
  7.570
  7.640
  7.710
  7.770
  7.830
  7.890
  7.950
  8.000
  8.050
  8.090
  8.140
  8.180
  8.220
  8.260
  8.290
  8.330
  8.360
  8.390
  8.420
  8.450
  8.470
  8.500
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -186
  -171
  -171
  -170
  -170
  -170
  -169
  -168
  -168
  -167
  47
  47
  48
  48
  49
  49
  50
  51
  51
  52
  53
  54
  54
  55
  56
  57
  58
  59
  61
  62
Depreciation, amort., depletion, $m
  494
  509
  525
  542
  559
  577
  596
  616
  637
  658
  451
  474
  499
  525
  553
  581
  612
  643
  676
  711
  747
  785
  825
  867
  911
  957
  1,005
  1,056
  1,110
  1,165
Funds from operations, $m
  308
  338
  354
  371
  389
  408
  427
  448
  469
  491
  497
  522
  547
  574
  602
  631
  662
  694
  727
  763
  800
  839
  880
  922
  967
  1,014
  1,064
  1,116
  1,170
  1,227
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  309
  338
  355
  372
  390
  408
  428
  448
  470
  492
  498
  523
  548
  575
  603
  632
  663
  695
  729
  764
  801
  840
  881
  924
  969
  1,016
  1,066
  1,118
  1,172
  1,230
Maintenance CAPEX, $m
  -248
  -263
  -278
  -294
  -311
  -328
  -347
  -366
  -385
  -406
  -428
  -451
  -474
  -499
  -525
  -553
  -581
  -612
  -643
  -676
  -711
  -747
  -785
  -825
  -867
  -911
  -957
  -1,005
  -1,056
  -1,110
New CAPEX, $m
  -147
  -153
  -160
  -166
  -174
  -182
  -190
  -199
  -208
  -217
  -227
  -238
  -249
  -261
  -274
  -287
  -300
  -315
  -330
  -346
  -363
  -381
  -399
  -419
  -440
  -461
  -484
  -508
  -533
  -559
Cash from investing activities, $m
  -395
  -416
  -438
  -460
  -485
  -510
  -537
  -565
  -593
  -623
  -655
  -689
  -723
  -760
  -799
  -840
  -881
  -927
  -973
  -1,022
  -1,074
  -1,128
  -1,184
  -1,244
  -1,307
  -1,372
  -1,441
  -1,513
  -1,589
  -1,669
Free cash flow, $m
  -87
  -78
  -83
  -89
  -95
  -102
  -108
  -116
  -123
  -131
  -157
  -166
  -176
  -186
  -196
  -207
  -219
  -231
  -244
  -258
  -272
  -287
  -303
  -320
  -338
  -356
  -375
  -396
  -417
  -439
Issuance/(repayment) of debt, $m
  -36
  144
  150
  157
  164
  171
  179
  187
  196
  205
  214
  225
  235
  246
  258
  270
  283
  297
  311
  327
  342
  359
  377
  395
  415
  435
  457
  479
  503
  528
Issuance/(repurchase) of shares, $m
  379
  187
  188
  188
  188
  189
  189
  189
  190
  190
  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  
  343
  331
  338
  345
  352
  360
  368
  376
  386
  395
  214
  225
  235
  246
  258
  270
  283
  297
  311
  327
  342
  359
  377
  395
  415
  435
  457
  479
  503
  528
Total cash flow (excl. dividends), $m
  256
  254
  255
  256
  257
  258
  260
  261
  262
  264
  57
  58
  59
  61
  62
  63
  64
  66
  67
  69
  70
  72
  73
  75
  77
  79
  81
  84
  86
  88
Retained Cash Flow (-), $m
  -379
  -187
  -188
  -188
  -188
  -189
  -189
  -189
  -190
  -190
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
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
  60
  64
  67
  71
  75
  79
  84
  88
  93
  98
  103
  109
  115
  121
  127
  134
  140
  148
  155
  163
  172
  180
  190
  199
  209
  220
  231
  243
  255
  268
Cash available for distribution, $m
  -123
  67
  67
  68
  69
  70
  71
  72
  73
  74
  34
  33
  33
  33
  33
  33
  33
  33
  32
  32
  32
  32
  32
  31
  31
  31
  31
  30
  30
  30
Discount rate, %
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.71
  24.89
  26.14
  27.44
  28.81
  30.25
  31.77
  33.36
  35.02
  36.77
  38.61
  40.54
  42.57
  44.70
  46.93
  49.28
  51.75
  54.33
PV of cash for distribution, $m
  -109
  51
  45
  39
  33
  27
  23
  18
  15
  11
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  68.7
  64.3
  60.4
  57.0
  53.8
  51.1
  48.5
  46.2
  44.2
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3
  42.3

Endurance International Group Holdings, Inc. (Endurance) is a provider of cloud-based platform solutions designed to help small and medium-sized businesses (SMBs) succeed online. The Company operates through two segments: Web Presence and Email Marketing. The Company's Web presence segment consists of Web hosting, domains and the related products and services. Its e-mail marketing segment consists of the products and services offered by Constant Contact, principally e-mail marketing, including event marketing, survey tools and SinglePlatform. The Company's products focuses on Web hosting and other Web presence solutions, such as domains, and it also offers security, site backup, domains, search engine optimization (SEO) and search engine marketing (SEM), Google Adwords, mobile solutions, social media enablement, Website analytics, e-mail marketing and productivity and e-commerce tools, among others. It conducts operations in the United States, Brazil, India, and the Netherlands.

FINANCIAL RATIOS  of  Endurance International Group Holdings (EIGI)

Valuation Ratios
P/E Ratio -16.7
Price to Sales 1.1
Price to Book 9.8
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 10.3
Growth Rates
Sales Growth Rate 49.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.4%
Cap. Spend. - 3 Yr. Gr. Rate 1.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 1574.2%
Total Debt to Equity 1608.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -1%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital -4.3%
Ret/ On T. Cap. - 3 Yr. Avg. -3.3%
Return On Equity -48%
Return On Equity - 3 Yr. Avg. -29.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 48.2%
Gross Margin - 3 Yr. Avg. 43.5%
EBITDA Margin 12%
EBITDA Margin - 3 Yr. Avg. 19.9%
Operating Margin -3.5%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin -17.1%
Pre-Tax Margin - 3 Yr. Avg. -8.1%
Net Profit Margin -6.6%
Net Profit Margin - 3 Yr. Avg. -5.6%
Effective Tax Rate 57.9%
Eff/ Tax Rate - 3 Yr. Avg. 14.9%
Payout Ratio 0%

EIGI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EIGI stock intrinsic value calculation we used $1177 million for the last fiscal year's total revenue generated by Endurance International Group Holdings. The default revenue input number comes from 2017 income statement of Endurance International Group Holdings. 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 EIGI stock valuation model: a) initial revenue growth rate of 5.9% 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 13.2%, whose default value for EIGI is calculated based on our internal credit rating of Endurance International Group Holdings, 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 Endurance International Group Holdings.
    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 EIGI stock the variable cost ratio is equal to 103.6%.

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 EIGI 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 8.1% for Endurance International Group Holdings.

Corporate tax rate of 27% is the nominal tax rate for Endurance International Group Holdings. 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 EIGI stock is equal to 5.1%.

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 EIGI are equal to 211.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Endurance International Group Holdings 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 EIGI is equal to -0.9%. 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 - $83 million for Endurance International Group Holdings - 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 137 million for Endurance International Group Holdings 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 Endurance International Group Holdings at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Endurance International: 2Q Earnings Snapshot   [Jul-26-18 10:47AM  Associated Press]
▶ Endurance International: 1Q Earnings Snapshot   [May-01-18 09:51AM  Associated Press]
▶ Endurance International posts 4Q profit   [Feb-13-18 07:43AM  Associated Press]
▶ Endurance International posts 3Q loss   [Oct-31-17 07:45AM  Associated Press]
▶ Endurance International Group names new CEO   [Aug-14-17 05:25PM  American City Business Journals]
▶ Endurance International posts 2Q loss   [Aug-01-17 10:56PM  Associated Press]
▶ HostGator Launches Upgraded Dedicated Server Platform   [Jul-24-17 07:00AM  PR Newswire]
▶ Endurance International posts 1Q loss   [May-02-17 07:23AM  Associated Press]
▶ Constant Contact Announces New General Manager   [Apr-24-17 04:15PM  PR Newswire]
▶ Endurance Announces CEO Transition Plan   [Apr-17-17 04:35PM  GlobeNewswire]
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