Intrinsic value of Groupon, Inc. - GRPN

Previous Close

$3.48

  Intrinsic Value

$1.70

stock screener

  Rating & Target

str. sell

-51%

Previous close

$3.48

 
Intrinsic value

$1.70

 
Up/down potential

-51%

 
Rating

str. sell

We calculate the intrinsic value of GRPN 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 2.0

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,690
  2,752
  2,822
  2,902
  2,990
  3,086
  3,191
  3,305
  3,428
  3,559
  3,700
  3,850
  4,010
  4,180
  4,360
  4,551
  4,754
  4,967
  5,193
  5,432
  5,684
  5,949
  6,229
  6,524
  6,835
  7,162
  7,506
  7,868
  8,249
  8,650
Variable operating expenses, $m
  2,663
  2,723
  2,793
  2,871
  2,958
  3,053
  3,156
  3,268
  3,389
  3,519
  3,643
  3,791
  3,948
  4,115
  4,293
  4,481
  4,680
  4,891
  5,113
  5,348
  5,596
  5,858
  6,133
  6,424
  6,729
  7,051
  7,390
  7,747
  8,122
  8,517
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
  2,663
  2,723
  2,793
  2,871
  2,958
  3,053
  3,156
  3,268
  3,389
  3,519
  3,643
  3,791
  3,948
  4,115
  4,293
  4,481
  4,680
  4,891
  5,113
  5,348
  5,596
  5,858
  6,133
  6,424
  6,729
  7,051
  7,390
  7,747
  8,122
  8,517
Operating income, $m
  27
  28
  29
  30
  32
  33
  35
  37
  39
  41
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
EBITDA, $m
  106
  108
  111
  114
  118
  122
  126
  130
  135
  140
  146
  152
  158
  165
  172
  179
  187
  196
  205
  214
  224
  235
  246
  257
  269
  282
  296
  310
  325
  341
Interest expense (income), $m
  0
  11
  12
  14
  16
  18
  20
  22
  25
  28
  31
  35
  38
  42
  46
  51
  55
  60
  66
  71
  77
  83
  90
  96
  104
  111
  119
  128
  137
  146
  156
Earnings before tax, $m
  16
  16
  15
  15
  14
  13
  12
  11
  10
  9
  22
  21
  20
  18
  17
  15
  13
  11
  9
  7
  5
  2
  0
  -3
  -6
  -9
  -12
  -15
  -19
  -22
Tax expense, $m
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  6
  6
  5
  5
  4
  4
  4
  3
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  12
  12
  11
  11
  10
  10
  9
  8
  8
  7
  16
  15
  14
  13
  12
  11
  9
  8
  7
  5
  3
  2
  0
  -3
  -6
  -9
  -12
  -15
  -19
  -22

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
  1,675
  1,713
  1,757
  1,807
  1,862
  1,922
  1,987
  2,058
  2,134
  2,216
  2,304
  2,397
  2,497
  2,603
  2,715
  2,834
  2,960
  3,093
  3,234
  3,382
  3,539
  3,704
  3,879
  4,062
  4,256
  4,459
  4,674
  4,899
  5,137
  5,386
Adjusted assets (=assets-cash), $m
  1,675
  1,713
  1,757
  1,807
  1,862
  1,922
  1,987
  2,058
  2,134
  2,216
  2,304
  2,397
  2,497
  2,603
  2,715
  2,834
  2,960
  3,093
  3,234
  3,382
  3,539
  3,704
  3,879
  4,062
  4,256
  4,459
  4,674
  4,899
  5,137
  5,386
Revenue / Adjusted assets
  1.606
  1.607
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
  1.606
Average production assets, $m
  323
  330
  339
  348
  359
  370
  383
  397
  411
  427
  444
  462
  481
  502
  523
  546
  570
  596
  623
  652
  682
  714
  748
  783
  820
  859
  901
  944
  990
  1,038
Working capital, $m
  -815
  -834
  -855
  -879
  -906
  -935
  -967
  -1,001
  -1,039
  -1,078
  -1,121
  -1,167
  -1,215
  -1,267
  -1,321
  -1,379
  -1,440
  -1,505
  -1,574
  -1,646
  -1,722
  -1,803
  -1,887
  -1,977
  -2,071
  -2,170
  -2,274
  -2,384
  -2,500
  -2,621
Total debt, $m
  227
  257
  290
  328
  370
  417
  467
  521
  580
  643
  710
  782
  858
  940
  1,026
  1,117
  1,214
  1,316
  1,424
  1,538
  1,659
  1,786
  1,920
  2,061
  2,209
  2,366
  2,530
  2,703
  2,886
  3,077
Total liabilities, $m
  1,286
  1,316
  1,350
  1,388
  1,430
  1,476
  1,526
  1,581
  1,639
  1,702
  1,769
  1,841
  1,918
  1,999
  2,085
  2,176
  2,273
  2,375
  2,484
  2,598
  2,718
  2,845
  2,979
  3,120
  3,268
  3,425
  3,589
  3,763
  3,945
  4,137
Total equity, $m
  389
  397
  408
  419
  432
  446
  461
  477
  495
  514
  534
  556
  579
  604
  630
  657
  687
  718
  750
  785
  821
  859
  900
  942
  987
  1,035
  1,084
  1,137
  1,192
  1,250
Total liabilities and equity, $m
  1,675
  1,713
  1,758
  1,807
  1,862
  1,922
  1,987
  2,058
  2,134
  2,216
  2,303
  2,397
  2,497
  2,603
  2,715
  2,833
  2,960
  3,093
  3,234
  3,383
  3,539
  3,704
  3,879
  4,062
  4,255
  4,460
  4,673
  4,900
  5,137
  5,387
Debt-to-equity ratio
  0.580
  0.650
  0.710
  0.780
  0.860
  0.930
  1.010
  1.090
  1.170
  1.250
  1.330
  1.410
  1.480
  1.560
  1.630
  1.700
  1.770
  1.830
  1.900
  1.960
  2.020
  2.080
  2.130
  2.190
  2.240
  2.290
  2.330
  2.380
  2.420
  2.460
Adjusted equity ratio
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  12
  11
  11
  10
  10
  9
  8
  8
  7
  16
  15
  14
  13
  12
  11
  9
  8
  7
  5
  3
  2
  0
  -3
  -6
  -9
  -12
  -15
  -19
  -22
Depreciation, amort., depletion, $m
  79
  80
  82
  84
  86
  88
  91
  94
  97
  100
  89
  92
  96
  100
  105
  109
  114
  119
  125
  130
  136
  143
  150
  157
  164
  172
  180
  189
  198
  208
Funds from operations, $m
  91
  92
  93
  95
  96
  98
  100
  102
  104
  106
  105
  108
  111
  114
  117
  120
  124
  127
  131
  135
  140
  144
  149
  154
  158
  163
  168
  174
  179
  185
Change in working capital, $m
  -16
  -19
  -21
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -45
  -48
  -51
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -110
  -115
  -121
Cash from operations, $m
  107
  111
  115
  119
  123
  127
  132
  136
  141
  146
  148
  153
  159
  165
  171
  178
  185
  192
  200
  208
  216
  225
  234
  243
  252
  262
  272
  283
  295
  307
Maintenance CAPEX, $m
  -63
  -65
  -66
  -68
  -70
  -72
  -74
  -77
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -125
  -130
  -136
  -143
  -150
  -157
  -164
  -172
  -180
  -189
  -198
New CAPEX, $m
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -46
  -48
Cash from investing activities, $m
  -69
  -72
  -74
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -107
  -111
  -116
  -122
  -128
  -133
  -140
  -146
  -154
  -160
  -168
  -177
  -185
  -194
  -203
  -213
  -223
  -235
  -246
Free cash flow, $m
  37
  39
  40
  42
  43
  44
  45
  46
  47
  48
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  55
  57
  58
  58
  58
  59
  59
  60
  60
  61
Issuance/(repayment) of debt, $m
  25
  30
  34
  38
  42
  46
  50
  54
  59
  63
  67
  72
  76
  81
  86
  91
  97
  102
  108
  114
  120
  127
  134
  141
  149
  156
  165
  173
  182
  192
Issuance/(repurchase) of shares, $m
  0
  0
  0
  1
  2
  4
  6
  8
  10
  12
  4
  6
  9
  11
  14
  17
  20
  23
  26
  29
  33
  37
  41
  46
  51
  56
  62
  68
  74
  80
Cash from financing (excl. dividends), $m  
  25
  30
  34
  39
  44
  50
  56
  62
  69
  75
  71
  78
  85
  92
  100
  108
  117
  125
  134
  143
  153
  164
  175
  187
  200
  212
  227
  241
  256
  272
Total cash flow (excl. dividends), $m
  62
  68
  74
  80
  87
  94
  102
  109
  116
  123
  117
  125
  133
  141
  150
  159
  168
  177
  188
  198
  209
  220
  232
  245
  258
  271
  286
  301
  316
  333
Retained Cash Flow (-), $m
  -7
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -41
  -46
  -51
  -56
  -62
  -68
  -74
  -80
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
  55
  59
  64
  69
  75
  80
  86
  92
  98
  104
  96
  103
  110
  116
  124
  131
  139
  147
  155
  164
  173
  182
  191
  199
  207
  215
  224
  233
  242
  252
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
  53
  54
  55
  57
  58
  58
  58
  58
  56
  55
  46
  44
  42
  39
  36
  33
  30
  27
  24
  21
  18
  15
  13
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  99.9
  99.7
  99.4
  99.1
  98.7
  98.2
  98.1
  97.8
  97.5
  97.2
  96.7
  96.2
  95.7
  95.1
  94.4
  93.7
  93.0
  92.2
  91.3
  90.5
  89.5
  88.6
  87.6
  86.5
  85.4
  84.4

Groupon, Inc. operates online local commerce marketplaces around the world that connect merchants to consumers by offering goods and services at a discount. The Company operates through three segments: North America, which represents the United States and Canada; EMEA, which consists of Europe, and the Middle East and Africa, and the remainder of its international operations (Rest of World). It offers goods and services in three primary categories: Local Deals (Local), Groupon Goods (Goods) and Groupon Getaways (Travel). Its Local category includes offerings from local and national merchants, as well as local events. Its Goods category offers customers the ability to find deals on merchandise across various product lines, including electronics, sporting goods, jewelry, toys, household items and apparel. Through its Travel category, it features travel offers at both discounted and market rates, including hotels, airfare and package deals covering both domestic and international travel.

FINANCIAL RATIOS  of  Groupon, Inc. (GRPN)

Valuation Ratios
P/E Ratio -10.1
Price to Sales 0.6
Price to Book 7.4
Price to Tangible Book
Price to Cash Flow 16.8
Price to Free Cash Flow 42.7
Growth Rates
Sales Growth Rate 0.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.4%
Cap. Spend. - 3 Yr. Gr. Rate 1.8%
Financial Strength
Quick Ratio 30
Current Ratio 0.1
LT Debt to Equity 75.4%
Total Debt to Equity 86.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -11%
Ret/ On Assets - 3 Yr. Avg. -4.4%
Return On Total Capital -38.3%
Ret/ On T. Cap. - 3 Yr. Avg. -14.9%
Return On Equity -53.2%
Return On Equity - 3 Yr. Avg. -19.9%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 43.2%
Gross Margin - 3 Yr. Avg. 45.2%
EBITDA Margin -1.5%
EBITDA Margin - 3 Yr. Avg. 1%
Operating Margin -3.5%
Oper. Margin - 3 Yr. Avg. -1.7%
Pre-Tax Margin -5.9%
Pre-Tax Margin - 3 Yr. Avg. -3.2%
Net Profit Margin -6.2%
Net Profit Margin - 3 Yr. Avg. -2.6%
Effective Tax Rate 1.6%
Eff/ Tax Rate - 3 Yr. Avg. -160.3%
Payout Ratio 0%

GRPN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GRPN stock intrinsic value calculation we used $2637 million for the last fiscal year's total revenue generated by Groupon, Inc.. The default revenue input number comes from 0001 income statement of Groupon, 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 GRPN stock valuation model: a) initial revenue growth rate of 2% 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 GRPN is calculated based on our internal credit rating of Groupon, 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 Groupon, 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 GRPN stock the variable cost ratio is equal to 99%.

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 GRPN 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 Groupon, Inc..

Corporate tax rate of 27% is the nominal tax rate for Groupon, 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 GRPN 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 GRPN are equal to 12%.

Life of production assets of 4.2 years is the average useful life of capital assets used in Groupon, 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 GRPN is equal to -30.3%. 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 - $381.248 million for Groupon, 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 569.405 million for Groupon, 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 Groupon, Inc. at the current share price and the inputted number of shares is $2.0 billion.

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