Intrinsic value of Gridsum Holding Inc. - GSUM

Previous Close

$2.71

  Intrinsic Value

$0.59

stock screener

  Rating & Target

str. sell

-78%

Previous close

$2.71

 
Intrinsic value

$0.59

 
Up/down potential

-78%

 
Rating

str. sell

We calculate the intrinsic value of GSUM 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 0.1

 

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, %
  35.50
  32.45
  29.71
  27.23
  25.01
  23.01
  21.21
  19.59
  18.13
  16.82
  15.63
  14.57
  13.61
  12.75
  11.98
  11.28
  10.65
  10.09
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
Revenue, $m
  96
  127
  165
  210
  263
  323
  392
  469
  554
  647
  748
  857
  974
  1,098
  1,229
  1,368
  1,514
  1,666
  1,826
  1,992
  2,166
  2,346
  2,534
  2,729
  2,932
  3,143
  3,362
  3,590
  3,827
  4,073
Variable operating expenses, $m
  118
  155
  201
  256
  320
  393
  477
  570
  673
  786
  908
  1,040
  1,182
  1,332
  1,492
  1,660
  1,837
  2,022
  2,216
  2,418
  2,629
  2,848
  3,076
  3,313
  3,559
  3,815
  4,081
  4,357
  4,645
  4,944
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
  118
  155
  201
  256
  320
  393
  477
  570
  673
  786
  908
  1,040
  1,182
  1,332
  1,492
  1,660
  1,837
  2,022
  2,216
  2,418
  2,629
  2,848
  3,076
  3,313
  3,559
  3,815
  4,081
  4,357
  4,645
  4,944
Operating income, $m
  -21
  -28
  -36
  -46
  -57
  -70
  -85
  -101
  -119
  -139
  -160
  -183
  -208
  -235
  -263
  -292
  -324
  -356
  -390
  -426
  -463
  -502
  -542
  -583
  -627
  -672
  -719
  -767
  -818
  -871
EBITDA, $m
  -18
  -24
  -31
  -40
  -50
  -62
  -75
  -89
  -105
  -123
  -143
  -163
  -186
  -209
  -234
  -261
  -288
  -317
  -348
  -380
  -413
  -447
  -483
  -520
  -559
  -599
  -641
  -684
  -729
  -776
Interest expense (income), $m
  0
  2
  5
  8
  12
  16
  21
  27
  34
  42
  50
  60
  70
  81
  92
  105
  118
  132
  146
  162
  178
  194
  212
  230
  248
  268
  288
  309
  331
  354
  378
Earnings before tax, $m
  -24
  -33
  -44
  -57
  -73
  -91
  -112
  -135
  -161
  -189
  -220
  -253
  -289
  -327
  -368
  -410
  -455
  -502
  -552
  -603
  -657
  -713
  -771
  -832
  -895
  -960
  -1,028
  -1,098
  -1,172
  -1,248
Tax expense, $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
Net income, $m
  -24
  -33
  -44
  -57
  -73
  -91
  -112
  -135
  -161
  -189
  -220
  -253
  -289
  -327
  -368
  -410
  -455
  -502
  -552
  -603
  -657
  -713
  -771
  -832
  -895
  -960
  -1,028
  -1,098
  -1,172
  -1,248

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
  287
  380
  493
  628
  785
  965
  1,170
  1,399
  1,653
  1,931
  2,233
  2,558
  2,906
  3,277
  3,669
  4,083
  4,518
  4,974
  5,450
  5,947
  6,465
  7,004
  7,565
  8,148
  8,753
  9,383
  10,037
  10,716
  11,423
  12,159
Adjusted assets (=assets-cash), $m
  287
  380
  493
  628
  785
  965
  1,170
  1,399
  1,653
  1,931
  2,233
  2,558
  2,906
  3,277
  3,669
  4,083
  4,518
  4,974
  5,450
  5,947
  6,465
  7,004
  7,565
  8,148
  8,753
  9,383
  10,037
  10,716
  11,423
  12,159
Revenue / Adjusted assets
  0.334
  0.334
  0.335
  0.334
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
Average production assets, $m
  11
  15
  19
  24
  30
  38
  45
  54
  64
  75
  87
  99
  113
  127
  143
  159
  176
  193
  212
  231
  251
  272
  294
  317
  340
  365
  390
  416
  444
  472
Working capital, $m
  48
  64
  83
  105
  131
  162
  196
  234
  277
  323
  374
  428
  487
  549
  615
  684
  757
  833
  913
  996
  1,083
  1,173
  1,267
  1,365
  1,466
  1,572
  1,681
  1,795
  1,913
  2,037
Total debt, $m
  87
  145
  215
  298
  395
  507
  634
  776
  934
  1,106
  1,293
  1,495
  1,711
  1,940
  2,184
  2,440
  2,710
  2,993
  3,288
  3,596
  3,917
  4,251
  4,599
  4,960
  5,336
  5,726
  6,132
  6,553
  6,991
  7,447
Total liabilities, $m
  178
  236
  306
  389
  487
  598
  725
  867
  1,025
  1,197
  1,384
  1,586
  1,802
  2,032
  2,275
  2,532
  2,801
  3,084
  3,379
  3,687
  4,008
  4,343
  4,690
  5,052
  5,427
  5,817
  6,223
  6,644
  7,082
  7,538
Total equity, $m
  109
  145
  187
  239
  298
  367
  445
  532
  628
  734
  848
  972
  1,104
  1,245
  1,394
  1,552
  1,717
  1,890
  2,071
  2,260
  2,457
  2,662
  2,875
  3,096
  3,326
  3,565
  3,814
  4,072
  4,341
  4,620
Total liabilities and equity, $m
  287
  381
  493
  628
  785
  965
  1,170
  1,399
  1,653
  1,931
  2,232
  2,558
  2,906
  3,277
  3,669
  4,084
  4,518
  4,974
  5,450
  5,947
  6,465
  7,005
  7,565
  8,148
  8,753
  9,382
  10,037
  10,716
  11,423
  12,158
Debt-to-equity ratio
  0.800
  1.000
  1.150
  1.250
  1.330
  1.380
  1.430
  1.460
  1.490
  1.510
  1.520
  1.540
  1.550
  1.560
  1.570
  1.570
  1.580
  1.580
  1.590
  1.590
  1.590
  1.600
  1.600
  1.600
  1.600
  1.610
  1.610
  1.610
  1.610
  1.610
Adjusted equity ratio
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -33
  -44
  -57
  -73
  -91
  -112
  -135
  -161
  -189
  -220
  -253
  -289
  -327
  -368
  -410
  -455
  -502
  -552
  -603
  -657
  -713
  -771
  -832
  -895
  -960
  -1,028
  -1,098
  -1,172
  -1,248
Depreciation, amort., depletion, $m
  3
  4
  5
  6
  7
  8
  10
  12
  14
  16
  17
  20
  23
  25
  29
  32
  35
  39
  42
  46
  50
  54
  59
  63
  68
  73
  78
  83
  89
  94
Funds from operations, $m
  -21
  -29
  -39
  -52
  -66
  -83
  -102
  -124
  -147
  -174
  -202
  -233
  -266
  -302
  -339
  -379
  -420
  -464
  -509
  -557
  -607
  -659
  -712
  -768
  -827
  -887
  -950
  -1,015
  -1,083
  -1,154
Change in working capital, $m
  13
  16
  19
  23
  26
  30
  34
  38
  42
  47
  51
  54
  58
  62
  66
  69
  73
  76
  80
  83
  87
  90
  94
  98
  101
  105
  110
  114
  118
  123
Cash from operations, $m
  -33
  -45
  -58
  -74
  -92
  -113
  -136
  -162
  -190
  -220
  -253
  -288
  -325
  -364
  -405
  -448
  -493
  -540
  -589
  -640
  -694
  -749
  -806
  -866
  -928
  -992
  -1,059
  -1,129
  -1,201
  -1,277
Maintenance CAPEX, $m
  -2
  -2
  -3
  -4
  -5
  -6
  -8
  -9
  -11
  -13
  -15
  -17
  -20
  -23
  -25
  -29
  -32
  -35
  -39
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -78
  -83
  -89
New CAPEX, $m
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
Cash from investing activities, $m
  -5
  -6
  -7
  -9
  -11
  -13
  -16
  -18
  -21
  -24
  -27
  -30
  -34
  -37
  -40
  -45
  -49
  -53
  -58
  -61
  -66
  -71
  -76
  -82
  -87
  -92
  -98
  -104
  -110
  -118
Free cash flow, $m
  -38
  -50
  -66
  -83
  -103
  -126
  -152
  -180
  -211
  -244
  -280
  -318
  -358
  -401
  -445
  -492
  -542
  -593
  -646
  -702
  -760
  -820
  -883
  -947
  -1,015
  -1,085
  -1,158
  -1,233
  -1,312
  -1,394
Issuance/(repayment) of debt, $m
  47
  58
  70
  83
  97
  112
  127
  142
  157
  172
  187
  202
  216
  230
  243
  257
  270
  283
  295
  308
  321
  334
  348
  361
  375
  390
  405
  422
  438
  456
Issuance/(repurchase) of shares, $m
  52
  68
  87
  108
  133
  160
  190
  222
  257
  295
  334
  377
  421
  468
  517
  568
  621
  676
  733
  792
  854
  918
  984
  1,053
  1,125
  1,199
  1,276
  1,357
  1,440
  1,527
Cash from financing (excl. dividends), $m  
  99
  126
  157
  191
  230
  272
  317
  364
  414
  467
  521
  579
  637
  698
  760
  825
  891
  959
  1,028
  1,100
  1,175
  1,252
  1,332
  1,414
  1,500
  1,589
  1,681
  1,779
  1,878
  1,983
Total cash flow (excl. dividends), $m
  61
  75
  91
  108
  127
  146
  165
  184
  204
  224
  242
  261
  279
  297
  315
  332
  349
  365
  382
  398
  415
  432
  449
  467
  485
  504
  524
  545
  567
  589
Retained Cash Flow (-), $m
  -52
  -68
  -87
  -108
  -133
  -160
  -190
  -222
  -257
  -295
  -334
  -377
  -421
  -468
  -517
  -568
  -621
  -676
  -733
  -792
  -854
  -918
  -984
  -1,053
  -1,125
  -1,199
  -1,276
  -1,357
  -1,440
  -1,527
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
  9
  7
  4
  0
  -6
  -14
  -25
  -38
  -53
  -72
  -92
  -116
  -142
  -171
  -202
  -236
  -272
  -310
  -351
  -394
  -439
  -486
  -535
  -586
  -639
  -695
  -752
  -812
  -874
  -938
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
  9
  7
  4
  0
  -5
  -10
  -17
  -24
  -31
  -37
  -44
  -49
  -54
  -57
  -59
  -60
  -59
  -57
  -54
  -50
  -45
  -40
  -35
  -30
  -25
  -20
  -16
  -13
  -10
  -7
Current shareholders' claim on cash, %
  61.6
  38.5
  24.3
  15.6
  10.2
  6.7
  4.5
  3.0
  2.1
  1.4
  1.0
  0.7
  0.5
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Gridsum Holding Inc. is a holding company. The Company provides data analysis software for multinational and domestic enterprises, and government agencies in China. The Company's technology, the Gridsum Big Data Platform performs multi-dimensional correlation analysis and analyzes real-time events. The Company offers various types of solutions and technologies. The Company's software products are designed for a range of commercial and governmental applications. The Company's products focus on digital marketing analytics and automation solutions. The Company offers Web analytics solutions based on data warehouse technology to build solutions on a distributed data warehouse architecture, using the open-source Hadoop framework. The Company delivers its solutions as cloud-based software-as-a-service (SaaS) offerings that manage information technology (IT) support costs by outsourcing hardware and software maintenance and support.

FINANCIAL RATIOS  of  Gridsum Holding Inc. (GSUM)

Valuation Ratios
P/E Ratio -8.1
Price to Sales 1.4
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow -2.3
Price to Free Cash Flow -2
Growth Rates
Sales Growth Rate 70.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 43.1%
Financial Strength
Quick Ratio 8
Current Ratio 0.4
LT Debt to Equity 0%
Total Debt to Equity 7.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -7.5%
Ret/ On Assets - 3 Yr. Avg. -11.6%
Return On Total Capital -12.1%
Ret/ On T. Cap. - 3 Yr. Avg. -31.7%
Return On Equity -12.8%
Return On Equity - 3 Yr. Avg. -33.2%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 86.2%
Gross Margin - 3 Yr. Avg. 84.9%
EBITDA Margin -3.4%
EBITDA Margin - 3 Yr. Avg. -12.5%
Operating Margin -8.6%
Oper. Margin - 3 Yr. Avg. -19%
Pre-Tax Margin -10.3%
Pre-Tax Margin - 3 Yr. Avg. -18.6%
Net Profit Margin -17.2%
Net Profit Margin - 3 Yr. Avg. -21.9%
Effective Tax Rate -66.7%
Eff/ Tax Rate - 3 Yr. Avg. -27.8%
Payout Ratio 0%

GSUM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GSUM stock intrinsic value calculation we used $71 million for the last fiscal year's total revenue generated by Gridsum Holding Inc.. The default revenue input number comes from 0001 income statement of Gridsum Holding 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 GSUM stock valuation model: a) initial revenue growth rate of 35.5% 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 GSUM is calculated based on our internal credit rating of Gridsum Holding 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 Gridsum Holding 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 GSUM stock the variable cost ratio is equal to 122.5%.

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 GSUM 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 Gridsum Holding Inc..

Corporate tax rate of 27% is the nominal tax rate for Gridsum Holding 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 GSUM 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 GSUM are equal to 11.6%.

Life of production assets of 1.8 years is the average useful life of capital assets used in Gridsum Holding 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 GSUM is equal to 50%. 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 - $80.6662636034 million for Gridsum Holding 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 30.832 million for Gridsum Holding 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 Gridsum Holding Inc. at the current share price and the inputted number of shares is $0.1 billion.

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