Intrinsic value of Fusion Connect, Inc. - FSNN

Previous Close

$0.24

  Intrinsic Value

$0.38

stock screener

  Rating & Target

str. buy

+56%

Previous close

$0.24

 
Intrinsic value

$0.38

 
Up/down potential

+56%

 
Rating

str. buy

We calculate the intrinsic value of FSNN 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 0.0

 

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, %
  27.60
  25.34
  23.31
  21.48
  19.83
  18.35
  17.01
  15.81
  14.73
  13.76
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.23
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
Revenue, $m
  193
  242
  298
  362
  433
  513
  600
  695
  798
  907
  1,024
  1,148
  1,279
  1,416
  1,560
  1,711
  1,868
  2,031
  2,202
  2,379
  2,564
  2,755
  2,954
  3,161
  3,376
  3,600
  3,832
  4,074
  4,326
  4,589
Variable operating expenses, $m
  169
  209
  256
  308
  367
  433
  505
  583
  667
  757
  843
  945
  1,052
  1,166
  1,284
  1,408
  1,537
  1,672
  1,813
  1,958
  2,110
  2,268
  2,432
  2,602
  2,779
  2,963
  3,155
  3,354
  3,561
  3,777
Fixed operating expenses, $m
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  34
  35
  36
  37
  38
  38
Total operating expenses, $m
  189
  230
  277
  330
  389
  456
  528
  607
  691
  782
  868
  971
  1,079
  1,193
  1,312
  1,436
  1,566
  1,702
  1,843
  1,989
  2,142
  2,300
  2,465
  2,636
  2,813
  2,998
  3,191
  3,391
  3,599
  3,815
Operating income, $m
  3
  11
  21
  31
  44
  57
  72
  88
  106
  125
  156
  177
  200
  223
  248
  274
  301
  330
  359
  390
  422
  455
  490
  525
  563
  601
  642
  684
  728
  773
EBITDA, $m
  26
  37
  50
  65
  82
  101
  121
  143
  167
  193
  221
  250
  281
  313
  347
  383
  420
  459
  499
  541
  585
  630
  677
  726
  777
  830
  886
  943
  1,003
  1,065
Interest expense (income), $m
  0
  24
  14
  20
  26
  33
  41
  50
  60
  71
  82
  94
  107
  121
  136
  151
  167
  184
  202
  220
  239
  259
  280
  301
  324
  347
  371
  396
  422
  449
  477
Earnings before tax, $m
  -21
  -3
  1
  5
  10
  16
  22
  28
  35
  43
  61
  70
  78
  87
  97
  107
  117
  128
  139
  151
  163
  175
  188
  202
  216
  231
  246
  262
  278
  296
Tax expense, $m
  0
  0
  0
  1
  3
  4
  6
  8
  10
  12
  17
  19
  21
  24
  26
  29
  32
  34
  38
  41
  44
  47
  51
  54
  58
  62
  66
  71
  75
  80
Net income, $m
  -21
  -3
  1
  4
  8
  12
  16
  21
  26
  31
  45
  51
  57
  64
  71
  78
  85
  93
  101
  110
  119
  128
  137
  147
  158
  168
  179
  191
  203
  216

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
  444
  556
  686
  833
  999
  1,182
  1,383
  1,602
  1,838
  2,090
  2,360
  2,645
  2,946
  3,263
  3,594
  3,941
  4,303
  4,681
  5,074
  5,482
  5,907
  6,348
  6,807
  7,284
  7,779
  8,294
  8,830
  9,388
  9,968
  10,573
Adjusted assets (=assets-cash), $m
  444
  556
  686
  833
  999
  1,182
  1,383
  1,602
  1,838
  2,090
  2,360
  2,645
  2,946
  3,263
  3,594
  3,941
  4,303
  4,681
  5,074
  5,482
  5,907
  6,348
  6,807
  7,284
  7,779
  8,294
  8,830
  9,388
  9,968
  10,573
Revenue / Adjusted assets
  0.435
  0.435
  0.434
  0.435
  0.433
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
Average production assets, $m
  159
  200
  246
  299
  358
  424
  496
  575
  660
  750
  847
  949
  1,057
  1,171
  1,290
  1,415
  1,545
  1,680
  1,821
  1,968
  2,120
  2,279
  2,443
  2,614
  2,792
  2,977
  3,169
  3,369
  3,578
  3,795
Working capital, $m
  -56
  -71
  -87
  -106
  -127
  -150
  -175
  -203
  -233
  -265
  -299
  -335
  -373
  -413
  -456
  -499
  -545
  -593
  -643
  -695
  -749
  -805
  -863
  -923
  -986
  -1,051
  -1,119
  -1,190
  -1,263
  -1,340
Total debt, $m
  266
  368
  484
  617
  766
  931
  1,111
  1,308
  1,521
  1,748
  1,990
  2,247
  2,518
  2,803
  3,102
  3,414
  3,740
  4,079
  4,433
  4,801
  5,183
  5,580
  5,993
  6,422
  6,868
  7,332
  7,814
  8,316
  8,838
  9,382
Total liabilities, $m
  400
  501
  618
  750
  899
  1,064
  1,245
  1,442
  1,654
  1,881
  2,124
  2,380
  2,651
  2,936
  3,235
  3,547
  3,873
  4,213
  4,566
  4,934
  5,316
  5,714
  6,126
  6,555
  7,001
  7,465
  7,947
  8,449
  8,971
  9,516
Total equity, $m
  44
  56
  69
  83
  100
  118
  138
  160
  184
  209
  236
  264
  295
  326
  359
  394
  430
  468
  507
  548
  591
  635
  681
  728
  778
  829
  883
  939
  997
  1,057
Total liabilities and equity, $m
  444
  557
  687
  833
  999
  1,182
  1,383
  1,602
  1,838
  2,090
  2,360
  2,644
  2,946
  3,262
  3,594
  3,941
  4,303
  4,681
  5,073
  5,482
  5,907
  6,349
  6,807
  7,283
  7,779
  8,294
  8,830
  9,388
  9,968
  10,573
Debt-to-equity ratio
  6.000
  6.610
  7.060
  7.400
  7.670
  7.870
  8.040
  8.170
  8.270
  8.360
  8.440
  8.500
  8.550
  8.590
  8.630
  8.660
  8.690
  8.720
  8.740
  8.760
  8.770
  8.790
  8.800
  8.820
  8.830
  8.840
  8.850
  8.860
  8.870
  8.870
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
  -21
  -3
  1
  4
  8
  12
  16
  21
  26
  31
  45
  51
  57
  64
  71
  78
  85
  93
  101
  110
  119
  128
  137
  147
  158
  168
  179
  191
  203
  216
Depreciation, amort., depletion, $m
  23
  26
  30
  34
  38
  43
  49
  55
  61
  68
  65
  73
  81
  90
  99
  109
  119
  129
  140
  151
  163
  175
  188
  201
  215
  229
  244
  259
  275
  292
Funds from operations, $m
  2
  23
  30
  38
  46
  55
  65
  76
  87
  100
  110
  124
  138
  154
  170
  187
  204
  222
  241
  261
  282
  303
  325
  348
  372
  397
  423
  450
  479
  508
Change in working capital, $m
  -12
  -14
  -16
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
Cash from operations, $m
  14
  37
  47
  56
  67
  78
  90
  103
  117
  132
  144
  160
  177
  194
  212
  231
  250
  270
  291
  313
  336
  359
  383
  409
  435
  463
  491
  521
  552
  584
Maintenance CAPEX, $m
  -10
  -12
  -15
  -19
  -23
  -28
  -33
  -38
  -44
  -51
  -58
  -65
  -73
  -81
  -90
  -99
  -109
  -119
  -129
  -140
  -151
  -163
  -175
  -188
  -201
  -215
  -229
  -244
  -259
  -275
New CAPEX, $m
  -34
  -40
  -47
  -53
  -59
  -66
  -72
  -78
  -85
  -91
  -97
  -102
  -108
  -114
  -119
  -125
  -130
  -135
  -141
  -147
  -152
  -158
  -165
  -171
  -178
  -185
  -192
  -200
  -208
  -217
Cash from investing activities, $m
  -44
  -52
  -62
  -72
  -82
  -94
  -105
  -116
  -129
  -142
  -155
  -167
  -181
  -195
  -209
  -224
  -239
  -254
  -270
  -287
  -303
  -321
  -340
  -359
  -379
  -400
  -421
  -444
  -467
  -492
Free cash flow, $m
  -30
  -16
  -15
  -16
  -16
  -15
  -14
  -13
  -12
  -10
  -10
  -8
  -4
  -1
  3
  7
  11
  16
  21
  26
  32
  38
  44
  50
  56
  63
  70
  77
  85
  92
Issuance/(repayment) of debt, $m
  -178
  101
  117
  133
  149
  165
  181
  197
  212
  227
  242
  257
  271
  285
  299
  312
  326
  340
  354
  368
  382
  397
  413
  429
  446
  464
  482
  502
  522
  544
Issuance/(repurchase) of shares, $m
  295
  15
  12
  11
  9
  7
  4
  1
  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  
  117
  116
  129
  144
  158
  172
  185
  198
  212
  227
  242
  257
  271
  285
  299
  312
  326
  340
  354
  368
  382
  397
  413
  429
  446
  464
  482
  502
  522
  544
Total cash flow (excl. dividends), $m
  87
  100
  114
  128
  142
  156
  171
  185
  201
  218
  232
  249
  266
  284
  301
  319
  337
  356
  375
  394
  414
  435
  456
  479
  502
  527
  552
  579
  607
  636
Retained Cash Flow (-), $m
  -295
  -15
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -25
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
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
  -208
  86
  101
  113
  126
  138
  151
  163
  177
  192
  205
  221
  236
  252
  268
  284
  301
  318
  335
  353
  372
  391
  410
  431
  453
  475
  499
  523
  549
  576
Discount rate, %
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
  24.20
  25.41
  26.68
  28.02
  29.42
  30.89
  32.43
  34.05
  35.76
  37.54
  39.42
  41.39
  43.46
  45.63
  47.92
  50.31
  52.83
  55.47
  58.24
  61.15
  64.21
PV of cash for distribution, $m
  -180
  63
  63
  58
  53
  46
  40
  33
  27
  22
  17
  13
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  37.7
  30.8
  26.6
  24.0
  22.5
  21.7
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6
  21.6

Fusion Telecommunications International, Inc. is a United States-based provider of integrated cloud solutions, including cloud voice, cloud connectivity, cloud infrastructure, cloud computing, and managed cloud-based applications to businesses, and voice over Internet Protocol (VoIP)-based voice services to carriers. The Company operates through two segments: Business Services and Carrier Services. Through Business Services segment, it provides cloud voice, cloud connectivity, cloud infrastructure, cloud computing and managed cloud-based applications to businesses of all sizes. Its suite of business services includes unified communications as a service, session initiation protocol trunking solution and file sharing solution. The Carrier Services segment includes termination of domestic and international carrier traffic utilizing VoIP technology. It offers solutions to small, medium and large businesses. It offers domestic and international VoIP services to carriers around the world.

FINANCIAL RATIOS  of  Fusion Connect, Inc. (FSNN)

Valuation Ratios
P/E Ratio -0.4
Price to Sales 0
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -1
Growth Rates
Sales Growth Rate 19.6%
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 38%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 1077.8%
Total Debt to Equity 1122.2%
Interest Coverage 0
Management Effectiveness
Return On Assets -11%
Ret/ On Assets - 3 Yr. Avg. -5.7%
Return On Total Capital -13.1%
Ret/ On T. Cap. - 3 Yr. Avg. -9.8%
Return On Equity -113%
Return On Equity - 3 Yr. Avg. -67.4%
Asset Turnover 1
Profitability Ratios
Gross Margin 44.3%
Gross Margin - 3 Yr. Avg. 44.7%
EBITDA Margin -0.8%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin -6.6%
Oper. Margin - 3 Yr. Avg. -6.5%
Pre-Tax Margin -11.5%
Pre-Tax Margin - 3 Yr. Avg. -10.1%
Net Profit Margin -10.7%
Net Profit Margin - 3 Yr. Avg. -7.3%
Effective Tax Rate 7.1%
Eff/ Tax Rate - 3 Yr. Avg. 19%
Payout Ratio 0%

FSNN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FSNN stock intrinsic value calculation we used $151 million for the last fiscal year's total revenue generated by Fusion Connect, Inc.. The default revenue input number comes from 0001 income statement of Fusion Connect, 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 FSNN stock valuation model: a) initial revenue growth rate of 27.6% 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 15.6%, whose default value for FSNN is calculated based on our internal credit rating of Fusion Connect, 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 Fusion Connect, 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 FSNN stock the variable cost ratio is equal to 89.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $20 million in the base year in the intrinsic value calculation for FSNN 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 Fusion Connect, Inc..

Corporate tax rate of 27% is the nominal tax rate for Fusion Connect, 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 FSNN 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 FSNN are equal to 82.7%.

Life of production assets of 13 years is the average useful life of capital assets used in Fusion Connect, 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 FSNN is equal to -29.2%. 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 - $-229.212 million for Fusion Connect, 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 82.112 million for Fusion Connect, 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 Fusion Connect, Inc. at the current share price and the inputted number of shares is $0.0 billion.

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