Intrinsic value of Globant S.A. - GLOB

Previous Close

$99.50

  Intrinsic Value

$11.38

stock screener

  Rating & Target

str. sell

-89%

Previous close

$99.50

 
Intrinsic value

$11.38

 
Up/down potential

-89%

 
Rating

str. sell

We calculate the intrinsic value of GLOB 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 3.6

 

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, %
  28.10
  25.79
  23.71
  21.84
  20.16
  18.64
  17.28
  16.05
  14.94
  13.95
  13.05
  12.25
  11.52
  10.87
  10.28
  9.76
  9.28
  8.85
  8.47
  8.12
  7.81
  7.53
  7.27
  7.05
  6.84
  6.66
  6.49
  6.34
  6.21
  6.09
Revenue, $m
  529
  665
  823
  1,003
  1,205
  1,430
  1,677
  1,946
  2,237
  2,549
  2,882
  3,235
  3,608
  4,000
  4,411
  4,841
  5,291
  5,759
  6,247
  6,754
  7,281
  7,829
  8,399
  8,991
  9,606
  10,246
  10,911
  11,603
  12,324
  13,074
Variable operating expenses, $m
  445
  557
  686
  834
  1,000
  1,184
  1,387
  1,608
  1,846
  2,102
  2,364
  2,654
  2,959
  3,281
  3,619
  3,972
  4,340
  4,725
  5,125
  5,541
  5,973
  6,423
  6,890
  7,376
  7,881
  8,405
  8,951
  9,519
  10,110
  10,725
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
  445
  557
  686
  834
  1,000
  1,184
  1,387
  1,608
  1,846
  2,102
  2,364
  2,654
  2,959
  3,281
  3,619
  3,972
  4,340
  4,725
  5,125
  5,541
  5,973
  6,423
  6,890
  7,376
  7,881
  8,405
  8,951
  9,519
  10,110
  10,725
Operating income, $m
  84
  109
  137
  169
  206
  246
  290
  339
  391
  447
  518
  581
  648
  718
  792
  870
  950
  1,035
  1,122
  1,213
  1,308
  1,406
  1,509
  1,615
  1,726
  1,840
  1,960
  2,084
  2,214
  2,348
EBITDA, $m
  108
  136
  169
  206
  247
  293
  344
  399
  459
  523
  591
  663
  740
  820
  905
  993
  1,085
  1,181
  1,281
  1,385
  1,493
  1,605
  1,722
  1,844
  1,970
  2,101
  2,237
  2,379
  2,527
  2,681
Interest expense (income), $m
  0
  12
  20
  30
  41
  54
  68
  84
  102
  121
  141
  164
  187
  213
  239
  267
  296
  327
  359
  392
  427
  463
  501
  540
  580
  622
  666
  712
  759
  808
  860
Earnings before tax, $m
  72
  89
  107
  128
  152
  178
  206
  237
  270
  305
  354
  394
  436
  479
  525
  573
  623
  676
  730
  786
  845
  906
  969
  1,035
  1,103
  1,174
  1,248
  1,325
  1,405
  1,489
Tax expense, $m
  20
  24
  29
  35
  41
  48
  56
  64
  73
  82
  96
  106
  118
  129
  142
  155
  168
  182
  197
  212
  228
  245
  262
  279
  298
  317
  337
  358
  379
  402
Net income, $m
  53
  65
  78
  94
  111
  130
  151
  173
  197
  223
  258
  287
  318
  350
  384
  419
  455
  493
  533
  574
  617
  661
  707
  755
  805
  857
  911
  967
  1,026
  1,087

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
  452
  569
  704
  857
  1,030
  1,222
  1,433
  1,663
  1,912
  2,179
  2,463
  2,765
  3,083
  3,419
  3,770
  4,138
  4,522
  4,922
  5,339
  5,773
  6,223
  6,692
  7,179
  7,685
  8,210
  8,757
  9,326
  9,917
  10,533
  11,174
Adjusted assets (=assets-cash), $m
  452
  569
  704
  857
  1,030
  1,222
  1,433
  1,663
  1,912
  2,179
  2,463
  2,765
  3,083
  3,419
  3,770
  4,138
  4,522
  4,922
  5,339
  5,773
  6,223
  6,692
  7,179
  7,685
  8,210
  8,757
  9,326
  9,917
  10,533
  11,174
Revenue / Adjusted assets
  1.170
  1.169
  1.169
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
Average production assets, $m
  112
  140
  174
  212
  254
  302
  354
  411
  472
  538
  608
  683
  761
  844
  931
  1,022
  1,116
  1,215
  1,318
  1,425
  1,536
  1,652
  1,772
  1,897
  2,027
  2,162
  2,302
  2,448
  2,600
  2,759
Working capital, $m
  48
  60
  74
  90
  108
  129
  151
  175
  201
  229
  259
  291
  325
  360
  397
  436
  476
  518
  562
  608
  655
  705
  756
  809
  865
  922
  982
  1,044
  1,109
  1,177
Total debt, $m
  60
  90
  124
  163
  207
  256
  310
  368
  431
  499
  571
  648
  729
  814
  903
  997
  1,094
  1,196
  1,302
  1,412
  1,526
  1,645
  1,769
  1,898
  2,031
  2,170
  2,314
  2,465
  2,621
  2,784
Total liabilities, $m
  115
  144
  179
  218
  262
  310
  364
  422
  486
  553
  626
  702
  783
  868
  958
  1,051
  1,149
  1,250
  1,356
  1,466
  1,581
  1,700
  1,823
  1,952
  2,085
  2,224
  2,369
  2,519
  2,675
  2,838
Total equity, $m
  337
  424
  525
  640
  768
  912
  1,069
  1,241
  1,426
  1,625
  1,837
  2,062
  2,300
  2,550
  2,813
  3,087
  3,373
  3,672
  3,983
  4,306
  4,643
  4,992
  5,355
  5,733
  6,125
  6,533
  6,957
  7,398
  7,858
  8,336
Total liabilities and equity, $m
  452
  568
  704
  858
  1,030
  1,222
  1,433
  1,663
  1,912
  2,178
  2,463
  2,764
  3,083
  3,418
  3,771
  4,138
  4,522
  4,922
  5,339
  5,772
  6,224
  6,692
  7,178
  7,685
  8,210
  8,757
  9,326
  9,917
  10,533
  11,174
Debt-to-equity ratio
  0.180
  0.210
  0.240
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  53
  65
  78
  94
  111
  130
  151
  173
  197
  223
  258
  287
  318
  350
  384
  419
  455
  493
  533
  574
  617
  661
  707
  755
  805
  857
  911
  967
  1,026
  1,087
Depreciation, amort., depletion, $m
  24
  28
  32
  37
  42
  47
  54
  60
  68
  76
  73
  82
  92
  102
  112
  123
  134
  146
  159
  172
  185
  199
  214
  229
  244
  260
  277
  295
  313
  332
Funds from operations, $m
  77
  93
  110
  130
  153
  177
  204
  233
  265
  299
  332
  370
  410
  452
  496
  542
  590
  640
  692
  746
  802
  860
  921
  984
  1,050
  1,118
  1,189
  1,262
  1,339
  1,419
Change in working capital, $m
  10
  12
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  35
  37
  39
  40
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  62
  65
  68
Cash from operations, $m
  67
  80
  96
  114
  134
  157
  182
  209
  239
  271
  302
  338
  376
  416
  459
  503
  549
  597
  648
  700
  754
  811
  870
  931
  994
  1,060
  1,129
  1,200
  1,274
  1,352
Maintenance CAPEX, $m
  -10
  -13
  -17
  -21
  -26
  -31
  -36
  -43
  -49
  -57
  -65
  -73
  -82
  -92
  -102
  -112
  -123
  -134
  -146
  -159
  -172
  -185
  -199
  -214
  -229
  -244
  -260
  -277
  -295
  -313
New CAPEX, $m
  -25
  -29
  -33
  -38
  -43
  -47
  -52
  -57
  -61
  -66
  -70
  -74
  -79
  -83
  -87
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -120
  -125
  -130
  -135
  -140
  -146
  -152
  -158
Cash from investing activities, $m
  -35
  -42
  -50
  -59
  -69
  -78
  -88
  -100
  -110
  -123
  -135
  -147
  -161
  -175
  -189
  -203
  -218
  -233
  -249
  -266
  -283
  -301
  -319
  -339
  -359
  -379
  -400
  -423
  -447
  -471
Free cash flow, $m
  32
  38
  46
  55
  66
  79
  93
  110
  128
  148
  167
  190
  215
  242
  270
  300
  331
  364
  398
  434
  471
  510
  550
  592
  636
  681
  728
  777
  827
  880
Issuance/(repayment) of debt, $m
  25
  30
  34
  39
  44
  49
  54
  58
  63
  68
  72
  77
  81
  85
  89
  93
  98
  102
  106
  110
  114
  119
  124
  128
  134
  139
  144
  150
  156
  163
Issuance/(repurchase) of shares, $m
  21
  22
  22
  21
  18
  13
  7
  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  
  46
  52
  56
  60
  62
  62
  61
  58
  63
  68
  72
  77
  81
  85
  89
  93
  98
  102
  106
  110
  114
  119
  124
  128
  134
  139
  144
  150
  156
  163
Total cash flow (excl. dividends), $m
  78
  90
  102
  115
  128
  141
  154
  168
  191
  216
  239
  267
  296
  327
  359
  393
  429
  466
  504
  544
  586
  629
  674
  721
  769
  820
  872
  927
  984
  1,043
Retained Cash Flow (-), $m
  -74
  -87
  -101
  -115
  -129
  -143
  -158
  -172
  -185
  -199
  -212
  -225
  -238
  -250
  -262
  -274
  -286
  -299
  -311
  -323
  -336
  -349
  -363
  -377
  -392
  -408
  -424
  -441
  -459
  -478
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
  4
  3
  2
  0
  -1
  -2
  -3
  -3
  6
  17
  27
  42
  58
  77
  97
  119
  142
  167
  193
  221
  250
  280
  311
  343
  377
  412
  448
  486
  524
  565
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
  4
  3
  2
  0
  -1
  -2
  -2
  -2
  3
  9
  13
  18
  22
  26
  29
  30
  31
  31
  30
  28
  26
  23
  20
  17
  15
  12
  10
  8
  6
  4
Current shareholders' claim on cash, %
  99.2
  98.6
  98.0
  97.7
  97.4
  97.2
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1

Globant S.A. is a digitally native technology services company. The Company’s principal operating subsidiary is based in Buenos Aires, Argentina. During the year ended December 31, 2015, 83.7% of its revenues were generated by clients in North America, 11.0% in Latin America and Asia, and 5.3% in Europe. It builds digital journeys, which consists of different software products, including mobile apps, Web apps, sensors and other software and hardware appliances that work orchestrated by a backend that uses big data and fast data to create a understanding of each consumer and how to act upon each scenario. The Company delivers digital journeys with a comprehensive approach that includes Stay Relevant, which helps its customers stay fit for the future of their industries; Discover, which think and conceive specific digital journeys for each customer; Build, which creates each digital journey leveraging the work of its Studios, its services over platforms and its agile pods methodologies.

FINANCIAL RATIOS  of  Globant S.A. (GLOB)

Valuation Ratios
P/E Ratio 95.8
Price to Sales 10.7
Price to Book 16.5
Price to Tangible Book
Price to Cash Flow 111.2
Price to Free Cash Flow 492.5
Growth Rates
Sales Growth Rate 27.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 27.9%
Financial Strength
Quick Ratio 5
Current Ratio 0.1
LT Debt to Equity 9.1%
Total Debt to Equity 15.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 14.2%
Ret/ On Assets - 3 Yr. Avg. 16.5%
Return On Total Capital 17%
Ret/ On T. Cap. - 3 Yr. Avg. 20.4%
Return On Equity 19.5%
Return On Equity - 3 Yr. Avg. 22.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 40.6%
Gross Margin - 3 Yr. Avg. 38.9%
EBITDA Margin 18.9%
EBITDA Margin - 3 Yr. Avg. 21.2%
Operating Margin 15.5%
Oper. Margin - 3 Yr. Avg. 16.8%
Pre-Tax Margin 15.5%
Pre-Tax Margin - 3 Yr. Avg. 17.4%
Net Profit Margin 11.1%
Net Profit Margin - 3 Yr. Avg. 12.1%
Effective Tax Rate 28%
Eff/ Tax Rate - 3 Yr. Avg. 30.2%
Payout Ratio 0%

GLOB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GLOB stock intrinsic value calculation we used $413 million for the last fiscal year's total revenue generated by Globant S.A.. The default revenue input number comes from 0001 income statement of Globant S.A.. 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 GLOB stock valuation model: a) initial revenue growth rate of 28.1% 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 GLOB is calculated based on our internal credit rating of Globant S.A., 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 Globant S.A..
    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 GLOB stock the variable cost ratio is equal to 84.7%.

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 GLOB 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 32.8% for Globant S.A..

Corporate tax rate of 27% is the nominal tax rate for Globant S.A.. 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 GLOB 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 GLOB are equal to 21.1%.

Life of production assets of 8.3 years is the average useful life of capital assets used in Globant S.A. 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 GLOB is equal to 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 - $263.404 million for Globant S.A. - 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 35.951 million for Globant S.A. 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 Globant S.A. at the current share price and the inputted number of shares is $3.6 billion.

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