Intrinsic value of GRAVITY Co., Ltd. - GRVY

Previous Close

$68.61

  Intrinsic Value

$772.43

stock screener

  Rating & Target

str. buy

+999%

Previous close

$68.61

 
Intrinsic value

$772.43

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of GRVY 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 0.5

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  213
  329
  492
  713
  1,007
  1,384
  1,857
  2,439
  3,138
  3,964
  4,922
  6,018
  7,253
  8,630
  10,148
  11,804
  13,597
  15,524
  17,582
  19,768
  22,078
  24,510
  27,063
  29,736
  32,527
  35,438
  38,469
  41,623
  44,902
  48,310
Variable operating expenses, $m
  189
  291
  436
  632
  892
  1,226
  1,646
  2,162
  2,781
  3,513
  4,362
  5,333
  6,428
  7,648
  8,993
  10,461
  12,051
  13,758
  15,582
  17,519
  19,566
  21,722
  23,985
  26,353
  28,827
  31,407
  34,093
  36,888
  39,794
  42,815
Fixed operating expenses, $m
  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
  2
  2
Total operating expenses, $m
  190
  292
  437
  633
  893
  1,227
  1,647
  2,163
  2,782
  3,514
  4,363
  5,334
  6,429
  7,649
  8,994
  10,462
  12,052
  13,759
  15,584
  17,521
  19,568
  21,724
  23,987
  26,355
  28,829
  31,409
  34,095
  36,890
  39,796
  42,817
Operating income, $m
  23
  36
  55
  80
  113
  156
  210
  276
  356
  450
  559
  683
  824
  980
  1,153
  1,341
  1,545
  1,764
  1,998
  2,247
  2,510
  2,786
  3,077
  3,381
  3,698
  4,029
  4,374
  4,733
  5,106
  5,493
EBITDA, $m
  23
  37
  56
  81
  115
  158
  213
  280
  360
  455
  566
  692
  834
  992
  1,167
  1,358
  1,564
  1,786
  2,023
  2,275
  2,541
  2,821
  3,115
  3,422
  3,744
  4,079
  4,428
  4,791
  5,169
  5,561
Interest expense (income), $m
  0
  0
  2
  5
  10
  16
  24
  34
  47
  63
  82
  104
  130
  160
  193
  231
  272
  317
  366
  418
  474
  533
  596
  662
  731
  804
  880
  959
  1,041
  1,127
  1,216
Earnings before tax, $m
  23
  34
  49
  70
  98
  132
  176
  229
  293
  368
  455
  553
  664
  787
  922
  1,069
  1,228
  1,399
  1,581
  1,773
  1,977
  2,191
  2,415
  2,650
  2,894
  3,150
  3,415
  3,692
  3,979
  4,278
Tax expense, $m
  6
  9
  13
  19
  26
  36
  48
  62
  79
  99
  123
  149
  179
  212
  249
  289
  332
  378
  427
  479
  534
  591
  652
  715
  781
  850
  922
  997
  1,074
  1,155
Net income, $m
  17
  25
  36
  51
  71
  97
  129
  167
  214
  269
  332
  404
  485
  575
  673
  781
  897
  1,021
  1,154
  1,294
  1,443
  1,599
  1,763
  1,934
  2,113
  2,299
  2,493
  2,695
  2,905
  3,123

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
  174
  269
  402
  583
  823
  1,131
  1,519
  1,994
  2,566
  3,241
  4,025
  4,921
  5,931
  7,057
  8,297
  9,652
  11,118
  12,694
  14,376
  16,163
  18,052
  20,041
  22,129
  24,314
  26,596
  28,976
  31,455
  34,033
  36,715
  39,501
Adjusted assets (=assets-cash), $m
  174
  269
  402
  583
  823
  1,131
  1,519
  1,994
  2,566
  3,241
  4,025
  4,921
  5,931
  7,057
  8,297
  9,652
  11,118
  12,694
  14,376
  16,163
  18,052
  20,041
  22,129
  24,314
  26,596
  28,976
  31,455
  34,033
  36,715
  39,501
Revenue / Adjusted assets
  1.224
  1.223
  1.224
  1.223
  1.224
  1.224
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
Average production assets, $m
  1
  2
  3
  5
  7
  10
  13
  17
  22
  28
  34
  42
  51
  60
  71
  83
  95
  109
  123
  138
  155
  172
  189
  208
  228
  248
  269
  291
  314
  338
Working capital, $m
  -26
  -40
  -60
  -88
  -124
  -170
  -228
  -300
  -386
  -488
  -605
  -740
  -892
  -1,062
  -1,248
  -1,452
  -1,672
  -1,909
  -2,163
  -2,431
  -2,716
  -3,015
  -3,329
  -3,657
  -4,001
  -4,359
  -4,732
  -5,120
  -5,523
  -5,942
Total debt, $m
  40
  98
  180
  292
  439
  629
  867
  1,159
  1,511
  1,926
  2,408
  2,959
  3,581
  4,273
  5,036
  5,869
  6,771
  7,740
  8,774
  9,873
  11,035
  12,258
  13,542
  14,886
  16,290
  17,753
  19,278
  20,864
  22,513
  24,226
Total liabilities, $m
  107
  165
  247
  359
  506
  696
  934
  1,226
  1,578
  1,993
  2,475
  3,026
  3,647
  4,340
  5,103
  5,936
  6,838
  7,807
  8,841
  9,940
  11,102
  12,325
  13,609
  14,953
  16,357
  17,820
  19,345
  20,930
  22,579
  24,293
Total equity, $m
  67
  103
  155
  225
  317
  436
  585
  768
  988
  1,248
  1,549
  1,894
  2,283
  2,717
  3,194
  3,716
  4,280
  4,887
  5,535
  6,223
  6,950
  7,716
  8,520
  9,361
  10,239
  11,156
  12,110
  13,103
  14,135
  15,208
Total liabilities and equity, $m
  174
  268
  402
  584
  823
  1,132
  1,519
  1,994
  2,566
  3,241
  4,024
  4,920
  5,930
  7,057
  8,297
  9,652
  11,118
  12,694
  14,376
  16,163
  18,052
  20,041
  22,129
  24,314
  26,596
  28,976
  31,455
  34,033
  36,714
  39,501
Debt-to-equity ratio
  0.600
  0.950
  1.170
  1.300
  1.390
  1.440
  1.480
  1.510
  1.530
  1.540
  1.550
  1.560
  1.570
  1.570
  1.580
  1.580
  1.580
  1.580
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
Adjusted equity ratio
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  17
  25
  36
  51
  71
  97
  129
  167
  214
  269
  332
  404
  485
  575
  673
  781
  897
  1,021
  1,154
  1,294
  1,443
  1,599
  1,763
  1,934
  2,113
  2,299
  2,493
  2,695
  2,905
  3,123
Depreciation, amort., depletion, $m
  0
  1
  1
  1
  2
  2
  3
  4
  4
  6
  7
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  34
  38
  42
  46
  50
  54
  58
  63
  68
Funds from operations, $m
  17
  25
  37
  52
  73
  99
  131
  171
  218
  274
  339
  412
  495
  587
  687
  797
  916
  1,043
  1,178
  1,322
  1,474
  1,633
  1,801
  1,976
  2,158
  2,349
  2,547
  2,753
  2,968
  3,190
Change in working capital, $m
  -10
  -14
  -20
  -27
  -36
  -46
  -58
  -72
  -86
  -102
  -118
  -135
  -152
  -169
  -187
  -204
  -221
  -237
  -253
  -269
  -284
  -299
  -314
  -329
  -343
  -358
  -373
  -388
  -403
  -419
Cash from operations, $m
  27
  40
  57
  80
  109
  145
  189
  242
  304
  376
  457
  547
  647
  756
  874
  1,001
  1,136
  1,280
  1,432
  1,591
  1,758
  1,933
  2,115
  2,304
  2,502
  2,707
  2,920
  3,141
  3,371
  3,610
Maintenance CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -2
  -3
  -3
  -4
  -6
  -7
  -8
  -10
  -12
  -14
  -17
  -19
  -22
  -25
  -28
  -31
  -34
  -38
  -42
  -46
  -50
  -54
  -58
  -63
New CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -1
  -1
  -1
  -3
  -3
  -4
  -5
  -7
  -8
  -10
  -13
  -15
  -17
  -20
  -23
  -26
  -30
  -32
  -36
  -40
  -44
  -48
  -52
  -57
  -62
  -66
  -71
  -76
  -81
  -87
Free cash flow, $m
  26
  39
  55
  77
  106
  141
  184
  236
  296
  366
  444
  532
  630
  736
  851
  975
  1,107
  1,247
  1,395
  1,551
  1,714
  1,885
  2,063
  2,248
  2,441
  2,641
  2,849
  3,065
  3,290
  3,523
Issuance/(repayment) of debt, $m
  40
  58
  82
  111
  147
  190
  238
  292
  352
  415
  482
  551
  621
  692
  763
  833
  902
  969
  1,035
  1,099
  1,162
  1,223
  1,284
  1,344
  1,404
  1,464
  1,524
  1,586
  1,649
  1,714
Issuance/(repurchase) of shares, $m
  8
  12
  15
  19
  21
  22
  21
  16
  6
  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  
  48
  70
  97
  130
  168
  212
  259
  308
  358
  415
  482
  551
  621
  692
  763
  833
  902
  969
  1,035
  1,099
  1,162
  1,223
  1,284
  1,344
  1,404
  1,464
  1,524
  1,586
  1,649
  1,714
Total cash flow (excl. dividends), $m
  75
  109
  152
  207
  274
  353
  443
  544
  654
  781
  926
  1,083
  1,251
  1,428
  1,614
  1,808
  2,009
  2,216
  2,430
  2,650
  2,876
  3,108
  3,346
  3,592
  3,844
  4,105
  4,373
  4,651
  4,939
  5,237
Retained Cash Flow (-), $m
  -25
  -37
  -51
  -70
  -92
  -119
  -149
  -183
  -220
  -260
  -302
  -345
  -389
  -433
  -478
  -521
  -565
  -607
  -648
  -688
  -727
  -766
  -804
  -841
  -879
  -916
  -954
  -993
  -1,032
  -1,073
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
  50
  72
  101
  138
  182
  234
  294
  361
  434
  521
  625
  739
  862
  995
  1,137
  1,287
  1,444
  1,610
  1,782
  1,962
  2,149
  2,342
  2,543
  2,750
  2,966
  3,188
  3,419
  3,658
  3,906
  4,164
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
  48
  66
  88
  113
  141
  170
  199
  225
  249
  273
  297
  315
  328
  334
  334
  327
  314
  296
  274
  249
  222
  194
  167
  140
  115
  93
  73
  57
  43
  31
Current shareholders' claim on cash, %
  98.0
  96.4
  95.0
  93.9
  93.0
  92.3
  91.9
  91.7
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6

Gravity Co., Ltd. is a developer, distributor and publisher of online games in Japan and Taiwan. The Company's segments include online games, mobile games and other. Its principal product includes Ragnarok Online, which is a multiplayer online role playing game. It categorizes products into over three categories, such as online games; mobile games and applications, and other games and game-related products and services, including character-based merchandise and animation. It offers over five online games, such as Ragnarok Online, Ragnarok Online II, Requiem, Dragonica (Dragon Saga) and R.O.S.E. Online, which are action adventure massively multiplayer online role-playing games (MMORPG). It develops mobile games, including Ragnarok Online-Uprising: Valkyrie, Ragnarok Online Mobile Story and Ragnarok Violet, and also publishes mobile games licensed from third parties. It provides games for game consoles and handheld game consoles, such as Nintendo DS, Xbox 360 and the PlayStation series.

FINANCIAL RATIOS  of  GRAVITY Co., Ltd. (GRVY)

Valuation Ratios
P/E Ratio -4
Price to Sales 1.9
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow -11.9
Price to Free Cash Flow -11.9
Growth Rates
Sales Growth Rate -8.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -32.3%
Ret/ On Assets - 3 Yr. Avg. -26.2%
Return On Total Capital -44.1%
Ret/ On T. Cap. - 3 Yr. Avg. -34.3%
Return On Equity -44.1%
Return On Equity - 3 Yr. Avg. -34.3%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 16.1%
Gross Margin - 3 Yr. Avg. 19.2%
EBITDA Margin -32.3%
EBITDA Margin - 3 Yr. Avg. -19.6%
Operating Margin -48.4%
Oper. Margin - 3 Yr. Avg. -39.1%
Pre-Tax Margin -45.2%
Pre-Tax Margin - 3 Yr. Avg. -34.4%
Net Profit Margin -48.4%
Net Profit Margin - 3 Yr. Avg. -46.8%
Effective Tax Rate -7.1%
Eff/ Tax Rate - 3 Yr. Avg. -46%
Payout Ratio 0%

GRVY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GRVY stock intrinsic value calculation we used $133 million for the last fiscal year's total revenue generated by GRAVITY Co., Ltd.. The default revenue input number comes from 0001 income statement of GRAVITY Co., Ltd.. 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 GRVY stock valuation model: a) initial revenue growth rate of 60% 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 GRVY is calculated based on our internal credit rating of GRAVITY Co., Ltd., 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 GRAVITY Co., Ltd..
    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 GRVY stock the variable cost ratio is equal to 88.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1 million in the base year in the intrinsic value calculation for GRVY 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 GRAVITY Co., Ltd..

Corporate tax rate of 27% is the nominal tax rate for GRAVITY Co., Ltd.. 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 GRVY 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 GRVY are equal to 0.7%.

Life of production assets of 0 years is the average useful life of capital assets used in GRAVITY Co., Ltd. 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 GRVY is equal to -12.3%. 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 - $41.8050473778 million for GRAVITY Co., Ltd. - 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 6.949 million for GRAVITY Co., Ltd. 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 GRAVITY Co., Ltd. at the current share price and the inputted number of shares is $0.5 billion.

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