Intrinsic value of Inspired Entertainment, Inc. - INSE

Previous Close

$8.13

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$8.13

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of INSE 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 0.2

 

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
  144
  147
  151
  155
  160
  165
  171
  177
  183
  190
  198
  206
  214
  223
  233
  243
  254
  266
  278
  290
  304
  318
  333
  349
  365
  383
  401
  421
  441
  463
Variable operating expenses, $m
  111
  114
  116
  119
  123
  127
  131
  135
  140
  146
  146
  152
  159
  165
  173
  180
  188
  197
  206
  215
  225
  236
  247
  258
  271
  284
  297
  311
  327
  342
Fixed operating expenses, $m
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  55
  57
  58
  59
  60
  62
  63
  65
  66
  67
  69
  70
  72
  74
  75
  77
Total operating expenses, $m
  152
  156
  159
  163
  168
  173
  178
  183
  189
  196
  197
  204
  212
  219
  228
  237
  246
  256
  266
  277
  288
  301
  313
  325
  340
  354
  369
  385
  402
  419
Operating income, $m
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  1
  2
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  20
  23
  26
  29
  32
  36
  39
  43
EBITDA, $m
  15
  16
  16
  17
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  36
  39
  42
  45
  48
  52
  56
  60
  65
  69
  74
  80
  85
  91
  98
  104
Interest expense (income), $m
  11
  21
  17
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
Earnings before tax, $m
  -29
  -25
  -25
  -26
  -27
  -27
  -28
  -29
  -29
  -30
  -26
  -27
  -27
  -28
  -29
  -29
  -30
  -31
  -31
  -32
  -32
  -33
  -34
  -34
  -35
  -35
  -36
  -36
  -37
  -37
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
  -29
  -25
  -25
  -26
  -27
  -27
  -28
  -29
  -29
  -30
  -26
  -27
  -27
  -28
  -29
  -29
  -30
  -31
  -31
  -32
  -32
  -33
  -34
  -34
  -35
  -35
  -36
  -36
  -37
  -37

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
  212
  217
  223
  229
  236
  243
  252
  261
  270
  281
  292
  304
  316
  330
  344
  359
  375
  392
  410
  428
  448
  469
  491
  515
  539
  565
  592
  621
  651
  682
Adjusted assets (=assets-cash), $m
  212
  217
  223
  229
  236
  243
  252
  261
  270
  281
  292
  304
  316
  330
  344
  359
  375
  392
  410
  428
  448
  469
  491
  515
  539
  565
  592
  621
  651
  682
Revenue / Adjusted assets
  0.679
  0.677
  0.677
  0.677
  0.678
  0.679
  0.679
  0.678
  0.678
  0.676
  0.678
  0.678
  0.677
  0.676
  0.677
  0.677
  0.677
  0.679
  0.678
  0.678
  0.679
  0.678
  0.678
  0.678
  0.677
  0.678
  0.677
  0.678
  0.677
  0.679
Average production assets, $m
  95
  97
  100
  103
  106
  109
  113
  117
  121
  126
  131
  136
  142
  148
  154
  161
  168
  176
  184
  192
  201
  210
  220
  231
  242
  253
  265
  278
  292
  306
Working capital, $m
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
Total debt, $m
  102
  107
  112
  117
  124
  130
  138
  146
  155
  164
  174
  185
  196
  208
  221
  234
  249
  264
  280
  297
  315
  334
  354
  374
  397
  420
  444
  470
  497
  525
Total liabilities, $m
  191
  195
  200
  206
  212
  219
  227
  235
  243
  253
  263
  273
  285
  297
  309
  323
  337
  353
  369
  386
  403
  422
  442
  463
  485
  508
  533
  558
  586
  614
Total equity, $m
  21
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
Total liabilities and equity, $m
  212
  217
  222
  229
  236
  243
  252
  261
  270
  281
  292
  303
  317
  330
  343
  359
  374
  392
  410
  429
  448
  469
  491
  514
  539
  564
  592
  620
  651
  682
Debt-to-equity ratio
  4.820
  4.920
  5.020
  5.130
  5.240
  5.360
  5.480
  5.600
  5.720
  5.840
  5.960
  6.080
  6.200
  6.310
  6.420
  6.530
  6.640
  6.740
  6.840
  6.930
  7.020
  7.110
  7.200
  7.280
  7.360
  7.430
  7.500
  7.570
  7.640
  7.700
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
  -29
  -25
  -25
  -26
  -27
  -27
  -28
  -29
  -29
  -30
  -26
  -27
  -27
  -28
  -29
  -29
  -30
  -31
  -31
  -32
  -32
  -33
  -34
  -34
  -35
  -35
  -36
  -36
  -37
  -37
Depreciation, amort., depletion, $m
  24
  24
  25
  25
  26
  26
  27
  28
  29
  30
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
Funds from operations, $m
  -6
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  1
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  14
  15
  17
  19
  22
  24
Change in working capital, $m
  0
  0
  0
  0
  -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
Cash from operations, $m
  -6
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  24
  26
Maintenance CAPEX, $m
  -19
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
Cash from investing activities, $m
  -21
  -21
  -21
  -23
  -24
  -24
  -26
  -27
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
Free cash flow, $m
  -26
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -34
  -35
  -36
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -43
  -44
  -45
  -46
Issuance/(repayment) of debt, $m
  -29
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
Issuance/(repurchase) of shares, $m
  63
  25
  26
  27
  27
  28
  29
  30
  30
  31
  27
  28
  29
  29
  30
  31
  31
  32
  33
  34
  34
  35
  36
  36
  37
  38
  38
  39
  40
  40
Cash from financing (excl. dividends), $m  
  34
  29
  31
  33
  33
  35
  36
  38
  39
  40
  37
  39
  40
  41
  43
  45
  45
  47
  49
  51
  52
  54
  56
  57
  59
  61
  62
  65
  67
  68
Total cash flow (excl. dividends), $m
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  19
  20
  22
  23
Retained Cash Flow (-), $m
  -63
  -25
  -26
  -27
  -27
  -28
  -29
  -30
  -30
  -31
  -27
  -28
  -29
  -29
  -30
  -31
  -31
  -32
  -33
  -34
  -34
  -35
  -36
  -36
  -37
  -38
  -38
  -39
  -40
  -40
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
  -56
  -17
  -17
  -18
  -18
  -18
  -18
  -19
  -19
  -19
  -19
  -19
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -19
  -19
  -19
  -18
  -18
Discount rate, %
  10.60
  11.13
  11.69
  12.27
  12.88
  13.53
  14.21
  14.92
  15.66
  16.44
  17.27
  18.13
  19.04
  19.99
  20.99
  22.04
  23.14
  24.30
  25.51
  26.79
  28.12
  29.53
  31.01
  32.56
  34.19
  35.90
  37.69
  39.57
  41.55
  43.63
PV of cash for distribution, $m
  -50
  -14
  -12
  -11
  -10
  -8
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  22.8
  10.4
  4.7
  2.2
  1.0
  0.4
  0.2
  0.1
  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
  0.0
  0.0
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Inspired Entertainment, Inc., formerly Hydra Industries Acquisition Corp., is a global games technology company. The Company is engaged in developing and operating digital games and networks. The Company is engaged in supplying Virtual Sports, Mobile Gaming and Server-Based Gaming (SBG) systems with associated terminals and digital content to regulated betting, gaming and lottery operators around the world. The Company operates through two segments: Server Based Gaming and Virtual Sports. The Company operates approximately 25,000 digital gaming terminals and supplies its Virtual Sports products in over 35,000 venues and on approximately 100 Websites in over 30 countries. The Company provides digital gaming solutions on its network that accommodates a range of devices, including land-based gaming machine products, mobile devices, such as smartphones and tablets, as well as personal computer (PC) and social applications.

FINANCIAL RATIOS  of  Inspired Entertainment, Inc. (INSE)

Valuation Ratios
P/E Ratio -3.4
Price to Sales 1.3
Price to Book -82.9
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow -9.8
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 3
Current Ratio 0.2
LT Debt to Equity -5800%
Total Debt to Equity -6200%
Interest Coverage -3
Management Effectiveness
Return On Assets -25.4%
Ret/ On Assets - 3 Yr. Avg. -10.1%
Return On Total Capital -49.7%
Ret/ On T. Cap. - 3 Yr. Avg. -18.3%
Return On Equity -134.2%
Return On Equity - 3 Yr. Avg. -46.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 78%
Gross Margin - 3 Yr. Avg. 26%
EBITDA Margin -3.3%
EBITDA Margin - 3 Yr. Avg. -1.1%
Operating Margin -8.9%
Oper. Margin - 3 Yr. Avg. -3%
Pre-Tax Margin -39.8%
Pre-Tax Margin - 3 Yr. Avg. -13.3%
Net Profit Margin -39.8%
Net Profit Margin - 3 Yr. Avg. -13.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

INSE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INSE stock intrinsic value calculation we used $141 million for the last fiscal year's total revenue generated by Inspired Entertainment, Inc.. The default revenue input number comes from 0001 income statement of Inspired Entertainment, 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 INSE 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 10.6%, whose default value for INSE is calculated based on our internal credit rating of Inspired Entertainment, 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 Inspired Entertainment, 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 INSE stock the variable cost ratio is equal to 77.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $40 million in the base year in the intrinsic value calculation for INSE 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 16.2% for Inspired Entertainment, Inc..

Corporate tax rate of 27% is the nominal tax rate for Inspired Entertainment, 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 INSE 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 INSE are equal to 66.1%.

Life of production assets of 3.4 years is the average useful life of capital assets used in Inspired Entertainment, 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 INSE is equal to -11.2%. 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 - $-12.467 million for Inspired Entertainment, 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 21.494 million for Inspired Entertainment, 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 Inspired Entertainment, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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