Intrinsic value of Financial Engines - FNGN

Previous Close

$29.25

  Intrinsic Value

$12.53

stock screener

  Rating & Target

str. sell

-57%

Previous close

$29.25

 
Intrinsic value

$12.53

 
Up/down potential

-57%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as FNGN.

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

We calculate the intrinsic value of FNGN 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
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  36.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
Revenue, $m
  424
  462
  501
  542
  584
  629
  674
  722
  772
  823
  877
  933
  991
  1,051
  1,114
  1,180
  1,248
  1,320
  1,394
  1,472
  1,554
  1,639
  1,728
  1,821
  1,918
  2,020
  2,126
  2,238
  2,355
  2,478
  2,606
Variable operating expenses, $m
 
  386
  416
  448
  480
  514
  549
  586
  624
  664
  705
  717
  761
  808
  856
  907
  959
  1,014
  1,071
  1,131
  1,194
  1,259
  1,327
  1,399
  1,474
  1,552
  1,634
  1,720
  1,810
  1,904
  2,002
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
  374
  386
  416
  448
  480
  514
  549
  586
  624
  664
  705
  717
  761
  808
  856
  907
  959
  1,014
  1,071
  1,131
  1,194
  1,259
  1,327
  1,399
  1,474
  1,552
  1,634
  1,720
  1,810
  1,904
  2,002
Operating income, $m
  50
  76
  85
  94
  104
  114
  125
  136
  148
  159
  172
  216
  229
  243
  258
  273
  289
  306
  323
  341
  360
  379
  400
  422
  444
  468
  492
  518
  545
  574
  604
EBITDA, $m
  74
  119
  129
  139
  150
  162
  173
  186
  198
  212
  225
  240
  255
  270
  286
  303
  321
  339
  358
  378
  399
  421
  444
  468
  493
  519
  547
  575
  605
  637
  670
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
Earnings before tax, $m
  49
  76
  85
  94
  103
  113
  123
  134
  145
  157
  169
  213
  226
  239
  253
  268
  283
  299
  316
  333
  352
  371
  391
  412
  433
  456
  480
  505
  531
  559
  588
Tax expense, $m
  20
  20
  23
  25
  28
  31
  33
  36
  39
  42
  46
  57
  61
  65
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  123
  130
  136
  143
  151
  159
Net income, $m
  29
  55
  62
  68
  75
  83
  90
  98
  106
  114
  123
  155
  165
  175
  185
  196
  207
  218
  231
  243
  257
  271
  285
  300
  316
  333
  351
  369
  388
  408
  429

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  134
  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
  840
  768
  834
  902
  972
  1,046
  1,122
  1,202
  1,284
  1,370
  1,459
  1,552
  1,649
  1,749
  1,854
  1,963
  2,077
  2,196
  2,320
  2,450
  2,585
  2,726
  2,874
  3,029
  3,191
  3,361
  3,538
  3,724
  3,918
  4,122
  4,336
Adjusted assets (=assets-cash), $m
  706
  768
  834
  902
  972
  1,046
  1,122
  1,202
  1,284
  1,370
  1,459
  1,552
  1,649
  1,749
  1,854
  1,963
  2,077
  2,196
  2,320
  2,450
  2,585
  2,726
  2,874
  3,029
  3,191
  3,361
  3,538
  3,724
  3,918
  4,122
  4,336
Revenue / Adjusted assets
  0.601
  0.602
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
Average production assets, $m
  129
  140
  152
  164
  177
  190
  204
  219
  234
  249
  266
  283
  300
  319
  338
  357
  378
  400
  422
  446
  471
  496
  523
  552
  581
  612
  644
  678
  714
  751
  790
Working capital, $m
  170
  39
  43
  46
  50
  53
  57
  61
  66
  70
  75
  79
  84
  89
  95
  100
  106
  112
  119
  125
  132
  139
  147
  155
  163
  172
  181
  190
  200
  211
  222
Total debt, $m
  0
  8
  17
  26
  35
  45
  55
  66
  77
  88
  100
  112
  125
  138
  152
  166
  181
  197
  213
  230
  248
  267
  286
  307
  328
  351
  374
  399
  424
  451
  479
Total liabilities, $m
  93
  101
  110
  119
  128
  138
  148
  159
  170
  181
  193
  205
  218
  231
  245
  259
  274
  290
  306
  323
  341
  360
  379
  400
  421
  444
  467
  492
  517
  544
  572
Total equity, $m
  747
  667
  724
  783
  844
  908
  974
  1,043
  1,115
  1,189
  1,267
  1,347
  1,431
  1,518
  1,609
  1,704
  1,803
  1,906
  2,014
  2,126
  2,244
  2,367
  2,495
  2,629
  2,770
  2,917
  3,071
  3,232
  3,401
  3,578
  3,764
Total liabilities and equity, $m
  840
  768
  834
  902
  972
  1,046
  1,122
  1,202
  1,285
  1,370
  1,460
  1,552
  1,649
  1,749
  1,854
  1,963
  2,077
  2,196
  2,320
  2,449
  2,585
  2,727
  2,874
  3,029
  3,191
  3,361
  3,538
  3,724
  3,918
  4,122
  4,336
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.060
  0.070
  0.070
  0.080
  0.080
  0.090
  0.090
  0.090
  0.100
  0.100
  0.100
  0.110
  0.110
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
Adjusted equity ratio
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  29
  55
  62
  68
  75
  83
  90
  98
  106
  114
  123
  155
  165
  175
  185
  196
  207
  218
  231
  243
  257
  271
  285
  300
  316
  333
  351
  369
  388
  408
  429
Depreciation, amort., depletion, $m
  24
  43
  44
  45
  46
  47
  48
  50
  51
  52
  54
  24
  25
  27
  28
  30
  32
  34
  36
  37
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
Funds from operations, $m
  78
  98
  106
  113
  121
  130
  138
  147
  157
  167
  177
  179
  190
  201
  213
  226
  239
  252
  266
  281
  296
  312
  329
  347
  365
  384
  405
  426
  448
  471
  495
Change in working capital, $m
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
Cash from operations, $m
  75
  95
  102
  110
  118
  126
  135
  143
  153
  162
  172
  174
  185
  196
  208
  220
  233
  246
  260
  274
  289
  305
  322
  339
  357
  376
  396
  416
  438
  461
  484
Maintenance CAPEX, $m
  0
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -37
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
New CAPEX, $m
  -14
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
Cash from investing activities, $m
  -249
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -36
  -37
  -39
  -42
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -62
  -66
  -69
  -72
  -75
  -80
  -83
  -88
  -92
  -97
  -102
Free cash flow, $m
  -174
  73
  79
  85
  91
  98
  105
  112
  119
  127
  135
  135
  144
  153
  162
  172
  182
  193
  204
  215
  227
  240
  253
  267
  281
  296
  312
  328
  346
  364
  382
Issuance/(repayment) of debt, $m
  0
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  25
  26
  27
  28
Issuance/(repurchase) of shares, $m
  7
  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 from financing (excl. dividends), $m  
  20
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  25
  26
  27
  28
Total cash flow (excl. dividends), $m
  -154
  81
  87
  94
  100
  107
  115
  122
  130
  138
  147
  147
  156
  166
  176
  186
  197
  208
  220
  232
  245
  259
  273
  287
  302
  319
  335
  353
  371
  390
  411
Retained Cash Flow (-), $m
  -332
  -54
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -74
  -77
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -108
  -112
  -118
  -123
  -128
  -134
  -141
  -147
  -154
  -161
  -169
  -177
  -185
Prev. year cash balance distribution, $m
 
  134
  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
 
  161
  31
  35
  39
  44
  48
  53
  59
  64
  69
  67
  73
  79
  85
  91
  98
  105
  112
  120
  128
  136
  144
  153
  162
  171
  181
  192
  202
  213
  225
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
 
  155
  28
  30
  32
  34
  35
  36
  37
  37
  36
  32
  31
  30
  28
  27
  25
  23
  21
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  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
  100.0

Financial Engines, Inc. is a provider of independent, technology-enabled financial advisory services, discretionary portfolio management, personalized investment advice, financial and retirement income planning, and financial education and guidance. The Company offers personalized plans for saving, investing, and generating retirement income, as well as by providing assessments of retirement income needs and readiness. The Company's advice and planning services cover employer-sponsored defined contribution (DC) accounts (401(k), 457, and 403(b) plans), individual retirement account (IRA) accounts, and taxable accounts. For individuals, the Company provides discretionary portfolio management, personalized investment advice, financial and retirement income planning, financial education and guidance. The Company maintains two types of relationships with individuals: DC plan participants in the workplace and Individuals outside the workplace.

FINANCIAL RATIOS  of  Financial Engines (FNGN)

Valuation Ratios
P/E Ratio 62.7
Price to Sales 4.3
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 24.3
Price to Free Cash Flow 29.8
Growth Rates
Sales Growth Rate 36.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 27.3%
Cap. Spend. - 3 Yr. Gr. Rate 7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 5%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 56.1%
Gross Margin - 3 Yr. Avg. 58%
EBITDA Margin 17.2%
EBITDA Margin - 3 Yr. Avg. 20.7%
Operating Margin 11.8%
Oper. Margin - 3 Yr. Avg. 16.4%
Pre-Tax Margin 11.6%
Pre-Tax Margin - 3 Yr. Avg. 16.3%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 10.1%
Effective Tax Rate 40.8%
Eff/ Tax Rate - 3 Yr. Avg. 38.3%
Payout Ratio 58.6%

FNGN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FNGN stock intrinsic value calculation we used $424 million for the last fiscal year's total revenue generated by Financial Engines. The default revenue input number comes from 2016 income statement of Financial Engines. 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 FNGN stock valuation model: a) initial revenue growth rate of 8.9% 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 4.3%, whose default value for FNGN is calculated based on our internal credit rating of Financial Engines, 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 Financial Engines.
    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 FNGN stock the variable cost ratio is equal to 84.2%.

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 FNGN 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 3.5% for Financial Engines.

Corporate tax rate of 27% is the nominal tax rate for Financial Engines. 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 FNGN 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 FNGN are equal to 30.3%.

Life of production assets of 11.9 years is the average useful life of capital assets used in Financial Engines 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 FNGN is equal to 8.5%. 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 - $747 million for Financial Engines - 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 62.376 million for Financial Engines 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 Financial Engines at the current share price and the inputted number of shares is $1.8 billion.

RELATED COMPANIES Price Int.Val. Rating
SCHW Charles Schwab 55.53 86.89  str.buy
TROW T. Rowe Price 114.47 134.95  buy
XRX Xerox 32.35 42.05  buy
MORN Morningstar 96.59 155.06  str.buy
BLK BlackRock 563.00 2,354.18  str.buy
NTRS Northern Trust 106.61 173.60  str.buy

COMPANY NEWS

▶ Understanding Interactive Brokers Groups Higher Valuation   [Dec-20-17 09:00AM  Market Realist]
▶ Interactive Brokers Commences Bitcoin Futures Trading   [Dec-19-17 07:32AM  Market Realist]
▶ Financial Engines tops 3Q profit forecasts   [Nov-02-17 06:37PM  Associated Press]
▶ Your Confidence About Your Retirement Planning Is Probably Misplaced   [Sep-07-17 11:56AM  The Wall Street Journal]
▶ Financial Engines Names New Chief Financial Officer   [Aug-10-17 05:00PM  Business Wire]
▶ Financial Engines misses Street 2Q forecasts   [Aug-08-17 11:17PM  Associated Press]
▶ Coursera hires CEO who helped his last company go public   [Jun-14-17 03:19PM  American City Business Journals]
▶ Which Stocks Are Showing Rising Relative Strength?   [Jun-08-17 04:50PM  Investor's Business Daily]
▶ Americans: Yep, We Want Fiduciary   [May-25-17 02:00PM  Barrons.com]
▶ Financial Engines beats 1Q profit forecasts   [May-04-17 06:35PM  Associated Press]
▶ Survey: 9 of 10 Investors Want Fiduciary Rule   [Apr-19-17 05:29PM  Barrons.com]
▶ [$$] More 401(k) Plans Turn to Managed Accounts for Autoenrolled Workers   [Apr-04-17 11:08AM  The Wall Street Journal]
Financial statements of FNGN
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.