Intrinsic value of InnerWorkings - INWK

Previous Close

$4.77

  Intrinsic Value

$9.07

stock screener

  Rating & Target

str. buy

+90%

Previous close

$4.77

 
Intrinsic value

$9.07

 
Up/down potential

+90%

 
Rating

str. buy

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, %
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  1,182
  1,228
  1,277
  1,330
  1,386
  1,446
  1,509
  1,575
  1,646
  1,721
  1,800
  1,883
  1,971
  2,063
  2,161
  2,263
  2,371
  2,485
  2,605
  2,731
  2,864
  3,003
  3,150
  3,304
  3,466
  3,636
  3,815
  4,003
  4,201
  4,408
Variable operating expenses, $m
  1,045
  1,085
  1,128
  1,173
  1,222
  1,273
  1,328
  1,386
  1,447
  1,511
  1,557
  1,629
  1,705
  1,785
  1,869
  1,958
  2,051
  2,150
  2,253
  2,362
  2,477
  2,598
  2,724
  2,858
  2,998
  3,145
  3,300
  3,463
  3,634
  3,813
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
  1,145
  1,187
  1,233
  1,280
  1,331
  1,385
  1,442
  1,503
  1,566
  1,633
  1,682
  1,756
  1,835
  1,918
  2,005
  2,097
  2,193
  2,295
  2,401
  2,513
  2,632
  2,756
  2,886
  3,023
  3,167
  3,318
  3,476
  3,643
  3,818
  4,001
Operating income, $m
  37
  41
  45
  50
  55
  61
  67
  73
  80
  88
  118
  127
  136
  146
  156
  167
  178
  190
  203
  217
  232
  247
  263
  281
  299
  318
  339
  360
  383
  407
EBITDA, $m
  67
  72
  76
  81
  87
  93
  100
  107
  114
  122
  130
  139
  149
  159
  170
  182
  194
  207
  221
  235
  251
  267
  284
  303
  322
  342
  364
  387
  411
  436
Interest expense (income), $m
  4
  7
  8
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
  57
  60
Earnings before tax, $m
  30
  33
  37
  41
  45
  49
  55
  60
  66
  72
  101
  109
  116
  124
  133
  142
  152
  162
  173
  185
  197
  210
  224
  239
  255
  271
  288
  307
  326
  347
Tax expense, $m
  8
  9
  10
  11
  12
  13
  15
  16
  18
  19
  27
  29
  31
  34
  36
  38
  41
  44
  47
  50
  53
  57
  61
  65
  69
  73
  78
  83
  88
  94
Net income, $m
  22
  24
  27
  30
  33
  36
  40
  44
  48
  53
  74
  79
  85
  91
  97
  104
  111
  118
  126
  135
  144
  154
  164
  174
  186
  198
  211
  224
  238
  253

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
  674
  701
  729
  759
  791
  825
  861
  899
  940
  982
  1,027
  1,075
  1,125
  1,178
  1,233
  1,292
  1,354
  1,418
  1,487
  1,559
  1,634
  1,714
  1,798
  1,886
  1,978
  2,075
  2,178
  2,285
  2,398
  2,516
Adjusted assets (=assets-cash), $m
  674
  701
  729
  759
  791
  825
  861
  899
  940
  982
  1,027
  1,075
  1,125
  1,178
  1,233
  1,292
  1,354
  1,418
  1,487
  1,559
  1,634
  1,714
  1,798
  1,886
  1,978
  2,075
  2,178
  2,285
  2,398
  2,516
Revenue / Adjusted assets
  1.754
  1.752
  1.752
  1.752
  1.752
  1.753
  1.753
  1.752
  1.751
  1.753
  1.753
  1.752
  1.752
  1.751
  1.753
  1.752
  1.751
  1.752
  1.752
  1.752
  1.753
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
  1.752
Average production assets, $m
  156
  162
  169
  176
  183
  191
  199
  208
  217
  227
  238
  249
  260
  272
  285
  299
  313
  328
  344
  360
  378
  396
  416
  436
  457
  480
  504
  528
  554
  582
Working capital, $m
  141
  146
  152
  158
  165
  172
  180
  187
  196
  205
  214
  224
  234
  246
  257
  269
  282
  296
  310
  325
  341
  357
  375
  393
  412
  433
  454
  476
  500
  525
Total debt, $m
  142
  157
  173
  190
  208
  227
  247
  269
  291
  315
  341
  367
  395
  425
  456
  489
  524
  560
  599
  639
  682
  727
  774
  823
  875
  930
  987
  1,047
  1,111
  1,177
Total liabilities, $m
  379
  394
  410
  427
  445
  464
  484
  505
  528
  552
  577
  604
  632
  662
  693
  726
  761
  797
  836
  876
  919
  963
  1,010
  1,060
  1,112
  1,166
  1,224
  1,284
  1,347
  1,414
Total equity, $m
  295
  307
  319
  333
  347
  361
  377
  394
  412
  430
  450
  471
  493
  516
  540
  566
  593
  621
  651
  683
  716
  751
  787
  826
  866
  909
  954
  1,001
  1,050
  1,102
Total liabilities and equity, $m
  674
  701
  729
  760
  792
  825
  861
  899
  940
  982
  1,027
  1,075
  1,125
  1,178
  1,233
  1,292
  1,354
  1,418
  1,487
  1,559
  1,635
  1,714
  1,797
  1,886
  1,978
  2,075
  2,178
  2,285
  2,397
  2,516
Debt-to-equity ratio
  0.480
  0.510
  0.540
  0.570
  0.600
  0.630
  0.660
  0.680
  0.710
  0.730
  0.760
  0.780
  0.800
  0.820
  0.840
  0.860
  0.880
  0.900
  0.920
  0.940
  0.950
  0.970
  0.980
  1.000
  1.010
  1.020
  1.030
  1.050
  1.060
  1.070
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
  22
  24
  27
  30
  33
  36
  40
  44
  48
  53
  74
  79
  85
  91
  97
  104
  111
  118
  126
  135
  144
  154
  164
  174
  186
  198
  211
  224
  238
  253
Depreciation, amort., depletion, $m
  31
  31
  31
  32
  32
  32
  33
  33
  34
  34
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Funds from operations, $m
  52
  55
  58
  61
  65
  69
  73
  77
  82
  87
  86
  92
  98
  104
  111
  119
  127
  135
  144
  153
  163
  174
  185
  196
  209
  222
  236
  251
  266
  283
Change in working capital, $m
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
Cash from operations, $m
  47
  49
  52
  55
  58
  61
  65
  69
  73
  78
  77
  82
  87
  93
  100
  107
  114
  121
  130
  138
  147
  157
  167
  178
  190
  202
  215
  228
  243
  258
Maintenance CAPEX, $m
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
New CAPEX, $m
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
Cash from investing activities, $m
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -25
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
Free cash flow, $m
  34
  35
  37
  39
  42
  44
  47
  50
  53
  57
  55
  59
  63
  68
  73
  79
  84
  91
  97
  104
  112
  119
  128
  137
  146
  156
  167
  178
  190
  202
Issuance/(repayment) of debt, $m
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
  40
  43
  45
  47
  49
  52
  55
  57
  60
  63
  67
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  
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
  40
  43
  45
  47
  49
  52
  55
  57
  60
  63
  67
Total cash flow (excl. dividends), $m
  48
  50
  53
  56
  60
  63
  67
  72
  76
  81
  80
  86
  91
  98
  104
  112
  119
  127
  136
  145
  154
  164
  175
  186
  198
  211
  224
  238
  253
  269
Retained Cash Flow (-), $m
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
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
  37
  39
  41
  43
  46
  49
  52
  55
  58
  62
  60
  65
  70
  75
  80
  86
  92
  99
  106
  113
  121
  129
  138
  148
  158
  168
  179
  191
  204
  217
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
  35
  34
  34
  33
  32
  31
  30
  29
  27
  26
  22
  20
  18
  17
  15
  13
  11
  10
  8
  7
  5
  4
  3
  3
  2
  1
  1
  1
  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
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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 (INWK)

Valuation Ratios
P/E Ratio 64.5
Price to Sales 0.2
Price to Book 1
Price to Tangible Book
Price to Cash Flow 23.5
Price to Free Cash Flow -129
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 $1138.361 million for the last fiscal year's total revenue generated by InnerWorkings. The default revenue input number comes from 0001 income statement of InnerWorkings. 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 3.8% 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, 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.
    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.

Corporate tax rate of 27% is the nominal tax rate for InnerWorkings. 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 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 - 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 52.171 million for InnerWorkings 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 at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ InnerWorkings Secures Landmark Software Contract   [Nov-15-18 04:10PM  Business Wire]
▶ InnerWorkings: 3Q Earnings Snapshot   [06:32PM  Associated Press]
▶ InnerWorkings Announces Two Major Contract Expansions   [Sep-06-18 09:00AM  Business Wire]
▶ InnerWorkings: 2Q Earnings Snapshot   [Aug-14-18 05:02PM  Associated Press]
▶ InnerWorkings: 1Q Earnings Snapshot   [Jul-31-18 05:12PM  Associated Press]

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