Intrinsic value of InnerWorkings, Inc. - INWK

Previous Close

$4.07

  Intrinsic Value

$4.09

stock screener

  Rating & Target

hold

0%

Previous close

$4.07

 
Intrinsic value

$4.09

 
Up/down potential

0%

 
Rating

hold

We calculate the intrinsic value of INWK 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
  1,161
  1,187
  1,218
  1,252
  1,290
  1,332
  1,377
  1,426
  1,479
  1,536
  1,597
  1,662
  1,731
  1,804
  1,882
  1,964
  2,051
  2,144
  2,241
  2,344
  2,453
  2,567
  2,688
  2,816
  2,950
  3,091
  3,239
  3,396
  3,560
  3,733
Variable operating expenses, $m
  1,027
  1,051
  1,078
  1,108
  1,141
  1,178
  1,218
  1,261
  1,308
  1,358
  1,408
  1,465
  1,526
  1,591
  1,659
  1,732
  1,809
  1,890
  1,976
  2,067
  2,163
  2,264
  2,370
  2,483
  2,601
  2,725
  2,856
  2,994
  3,139
  3,292
Fixed operating expenses, $m
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  125
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
  169
  173
  176
  180
  184
  188
Total operating expenses, $m
  1,127
  1,153
  1,183
  1,215
  1,250
  1,290
  1,332
  1,378
  1,427
  1,480
  1,533
  1,592
  1,656
  1,724
  1,795
  1,871
  1,951
  2,035
  2,124
  2,218
  2,318
  2,422
  2,532
  2,648
  2,770
  2,898
  3,032
  3,174
  3,323
  3,480
Operating income, $m
  33
  34
  36
  37
  40
  42
  45
  48
  52
  56
  64
  69
  75
  80
  87
  93
  101
  109
  117
  126
  135
  145
  156
  168
  180
  193
  207
  221
  237
  253
EBITDA, $m
  45
  46
  48
  50
  52
  55
  58
  62
  66
  70
  75
  80
  86
  92
  99
  107
  114
  123
  132
  141
  152
  163
  174
  186
  200
  214
  228
  244
  261
  278
Interest expense (income), $m
  4
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
Earnings before tax, $m
  26
  27
  28
  29
  31
  33
  35
  37
  40
  43
  50
  54
  59
  63
  68
  74
  79
  86
  92
  100
  107
  116
  125
  134
  144
  155
  166
  178
  191
  204
Tax expense, $m
  7
  7
  8
  8
  8
  9
  9
  10
  11
  12
  14
  15
  16
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
Net income, $m
  19
  20
  20
  21
  22
  24
  25
  27
  29
  32
  37
  40
  43
  46
  50
  54
  58
  63
  68
  73
  78
  84
  91
  98
  105
  113
  121
  130
  139
  149

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
  663
  678
  695
  715
  736
  760
  786
  814
  844
  877
  911
  948
  988
  1,030
  1,074
  1,121
  1,171
  1,224
  1,279
  1,338
  1,400
  1,465
  1,534
  1,607
  1,684
  1,764
  1,849
  1,938
  2,032
  2,131
Adjusted assets (=assets-cash), $m
  663
  678
  695
  715
  736
  760
  786
  814
  844
  877
  911
  948
  988
  1,030
  1,074
  1,121
  1,171
  1,224
  1,279
  1,338
  1,400
  1,465
  1,534
  1,607
  1,684
  1,764
  1,849
  1,938
  2,032
  2,131
Revenue / Adjusted assets
  1.751
  1.751
  1.753
  1.751
  1.753
  1.753
  1.752
  1.752
  1.752
  1.751
  1.753
  1.753
  1.752
  1.751
  1.752
  1.752
  1.751
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
Average production assets, $m
  153
  157
  161
  165
  170
  176
  182
  188
  195
  203
  211
  219
  228
  238
  248
  259
  271
  283
  296
  309
  324
  339
  355
  372
  389
  408
  428
  448
  470
  493
Working capital, $m
  138
  141
  145
  149
  154
  158
  164
  170
  176
  183
  190
  198
  206
  215
  224
  234
  244
  255
  267
  279
  292
  306
  320
  335
  351
  368
  385
  404
  424
  444
Total debt, $m
  136
  144
  154
  165
  177
  191
  205
  221
  238
  256
  275
  296
  318
  342
  367
  393
  421
  451
  482
  515
  550
  587
  626
  666
  709
  755
  802
  853
  905
  961
Total liabilities, $m
  372
  381
  391
  402
  414
  427
  442
  458
  474
  493
  512
  533
  555
  579
  604
  630
  658
  688
  719
  752
  787
  824
  862
  903
  946
  991
  1,039
  1,089
  1,142
  1,197
Total equity, $m
  290
  297
  304
  313
  323
  333
  344
  357
  370
  384
  399
  415
  433
  451
  470
  491
  513
  536
  560
  586
  613
  642
  672
  704
  737
  773
  810
  849
  890
  933
Total liabilities and equity, $m
  662
  678
  695
  715
  737
  760
  786
  815
  844
  877
  911
  948
  988
  1,030
  1,074
  1,121
  1,171
  1,224
  1,279
  1,338
  1,400
  1,466
  1,534
  1,607
  1,683
  1,764
  1,849
  1,938
  2,032
  2,130
Debt-to-equity ratio
  0.470
  0.490
  0.510
  0.530
  0.550
  0.570
  0.600
  0.620
  0.640
  0.670
  0.690
  0.710
  0.740
  0.760
  0.780
  0.800
  0.820
  0.840
  0.860
  0.880
  0.900
  0.910
  0.930
  0.950
  0.960
  0.980
  0.990
  1.000
  1.020
  1.030
Adjusted equity ratio
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  20
  20
  21
  22
  24
  25
  27
  29
  32
  37
  40
  43
  46
  50
  54
  58
  63
  68
  73
  78
  84
  91
  98
  105
  113
  121
  130
  139
  149
Depreciation, amort., depletion, $m
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Funds from operations, $m
  31
  31
  32
  33
  35
  36
  38
  40
  43
  46
  47
  51
  54
  58
  62
  67
  72
  77
  82
  88
  95
  102
  109
  117
  125
  133
  143
  153
  163
  174
Change in working capital, $m
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
Cash from operations, $m
  28
  28
  29
  29
  30
  31
  33
  35
  37
  39
  40
  43
  46
  49
  53
  57
  61
  66
  71
  76
  82
  88
  94
  101
  109
  117
  125
  134
  143
  153
Maintenance CAPEX, $m
  -8
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
New CAPEX, $m
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
Free cash flow, $m
  17
  17
  17
  17
  17
  17
  18
  19
  20
  21
  22
  24
  26
  28
  31
  34
  37
  40
  44
  48
  52
  56
  61
  67
  72
  78
  85
  92
  99
  107
Issuance/(repayment) of debt, $m
  7
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  7
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
Total cash flow (excl. dividends), $m
  25
  25
  26
  28
  29
  31
  33
  35
  37
  40
  41
  45
  48
  52
  56
  60
  65
  70
  75
  81
  87
  93
  100
  108
  115
  124
  132
  142
  152
  162
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
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
  19
  19
  19
  19
  20
  20
  21
  22
  24
  25
  26
  28
  31
  33
  36
  39
  43
  47
  51
  55
  60
  65
  70
  76
  82
  88
  95
  103
  111
  119
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  18
  17
  16
  15
  14
  13
  12
  12
  11
  10
  9
  9
  8
  7
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  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
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InnerWorkings, Inc. is a marketing execution company. The Company's software applications and databases create an integrated solution that stores, analyzes and tracks the production capabilities of its supplier network, as well as detailed pricing data. The Company's segments include North America and International. The North America segment includes operations in the United States and Canada. The International segment includes operations in Mexico, South America, Central America, Europe, the Middle East, Africa and Asia. The Company procures products for clients across a range of industries, such as retail, financial services, hospitality, consumer packaged goods, non-profits, healthcare, pharmaceuticals, food and beverage, broadcasting and cable and transportation. The Company's clients are classified into over two categories, enterprise and transactional. The Company provides marketing materials to its transactional clients on an order-by-order basis.

FINANCIAL RATIOS  of  InnerWorkings, Inc. (INWK)

Valuation Ratios
P/E Ratio 55
Price to Sales 0.2
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 20
Price to Free Cash Flow -110.1
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.3%
Cap. Spend. - 3 Yr. Gr. Rate 1.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 40.4%
Total Debt to Equity 40.4%
Interest Coverage 5
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. 1.4%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.6%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. 1.9%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 24.2%
Gross Margin - 3 Yr. Avg. 23.5%
EBITDA Margin 3.4%
EBITDA Margin - 3 Yr. Avg. 3.4%
Operating Margin 1.8%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 1.4%
Pre-Tax Margin - 3 Yr. Avg. 1.3%
Net Profit Margin 0.4%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 73.3%
Eff/ Tax Rate - 3 Yr. Avg. 6.8%
Payout Ratio 0%

INWK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INWK stock intrinsic value calculation we used $1138 million for the last fiscal year's total revenue generated by InnerWorkings, Inc.. The default revenue input number comes from 0001 income statement of InnerWorkings, 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 INWK 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 6%, whose default value for INWK is calculated based on our internal credit rating of InnerWorkings, 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 InnerWorkings, 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 INWK stock the variable cost ratio is equal to 88.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $98 million in the base year in the intrinsic value calculation for INWK 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 InnerWorkings, Inc..

Corporate tax rate of 27% is the nominal tax rate for InnerWorkings, 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 INWK 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 INWK are equal to 13.2%.

Life of production assets of 19.8 years is the average useful life of capital assets used in InnerWorkings, 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 INWK is equal to 11.9%. 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 - $284.545 million for InnerWorkings, 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 51.783 million for InnerWorkings, 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 InnerWorkings, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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