Intrinsic value of Limelight Networks, Inc. - LLNW

Previous Close

$2.36

  Intrinsic Value

$0.44

stock screener

  Rating & Target

str. sell

-81%

Previous close

$2.36

 
Intrinsic value

$0.44

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of LLNW 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 0.3

 

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
  200
  205
  210
  216
  222
  229
  237
  246
  255
  265
  275
  286
  298
  311
  324
  338
  353
  369
  386
  404
  422
  442
  463
  485
  508
  532
  558
  585
  613
  643
Variable operating expenses, $m
  139
  142
  145
  149
  153
  158
  163
  169
  175
  181
  180
  188
  195
  204
  212
  222
  232
  242
  253
  265
  277
  290
  303
  318
  333
  349
  366
  383
  402
  421
Fixed operating expenses, $m
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
  84
  86
  88
  90
  92
  94
  96
  98
  100
  103
  105
  107
  110
  112
  114
  117
  120
  122
  125
Total operating expenses, $m
  205
  210
  214
  220
  225
  232
  239
  246
  254
  262
  263
  272
  281
  292
  302
  314
  326
  338
  351
  365
  380
  395
  410
  428
  445
  463
  483
  503
  524
  546
Operating income, $m
  -5
  -5
  -5
  -4
  -3
  -3
  -2
  0
  1
  3
  12
  14
  17
  19
  22
  25
  28
  31
  35
  39
  43
  48
  52
  58
  63
  69
  75
  82
  89
  97
EBITDA, $m
  15
  15
  16
  17
  18
  19
  20
  22
  24
  26
  29
  32
  35
  38
  41
  45
  49
  54
  58
  63
  69
  74
  81
  87
  94
  101
  109
  118
  126
  136
Interest expense (income), $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
Earnings before tax, $m
  -5
  -5
  -5
  -4
  -4
  -3
  -2
  -1
  1
  2
  12
  14
  16
  18
  21
  23
  26
  30
  33
  37
  41
  45
  50
  55
  60
  66
  72
  79
  86
  93
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  20
  21
  23
  25
Net income, $m
  -5
  -5
  -5
  -4
  -4
  -3
  -2
  -1
  1
  2
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  37
  40
  44
  48
  53
  57
  62
  68

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
  185
  190
  194
  200
  206
  213
  220
  228
  236
  245
  255
  265
  276
  288
  300
  314
  327
  342
  358
  374
  392
  410
  429
  449
  471
  493
  517
  542
  568
  596
Adjusted assets (=assets-cash), $m
  185
  190
  194
  200
  206
  213
  220
  228
  236
  245
  255
  265
  276
  288
  300
  314
  327
  342
  358
  374
  392
  410
  429
  449
  471
  493
  517
  542
  568
  596
Revenue / Adjusted assets
  1.081
  1.079
  1.082
  1.080
  1.078
  1.075
  1.077
  1.079
  1.081
  1.082
  1.078
  1.079
  1.080
  1.080
  1.080
  1.076
  1.080
  1.079
  1.078
  1.080
  1.077
  1.078
  1.079
  1.080
  1.079
  1.079
  1.079
  1.079
  1.079
  1.079
Average production assets, $m
  68
  70
  71
  73
  76
  78
  81
  84
  87
  90
  94
  97
  101
  106
  110
  115
  120
  126
  131
  137
  144
  150
  157
  165
  173
  181
  190
  199
  208
  219
Working capital, $m
  8
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
  26
Total debt, $m
  1
  1
  2
  3
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  36
  39
  42
  46
  50
  54
  58
  62
  67
  72
  77
Total liabilities, $m
  34
  35
  36
  37
  38
  40
  41
  42
  44
  46
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
Total equity, $m
  151
  154
  158
  163
  168
  173
  179
  185
  192
  200
  207
  216
  225
  234
  244
  255
  267
  279
  291
  305
  319
  334
  349
  366
  383
  402
  421
  441
  463
  485
Total liabilities and equity, $m
  185
  189
  194
  200
  206
  213
  220
  227
  236
  246
  254
  265
  276
  288
  300
  313
  328
  343
  358
  375
  392
  410
  429
  450
  471
  494
  517
  542
  569
  596
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.020
  0.030
  0.030
  0.040
  0.050
  0.050
  0.060
  0.070
  0.070
  0.080
  0.080
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
Adjusted equity ratio
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  -5
  -5
  -4
  -4
  -3
  -2
  -1
  1
  2
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  37
  40
  44
  48
  53
  57
  62
  68
Depreciation, amort., depletion, $m
  20
  20
  20
  21
  21
  22
  22
  23
  23
  24
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
Funds from operations, $m
  15
  15
  16
  16
  17
  19
  20
  22
  24
  25
  25
  27
  30
  32
  35
  38
  41
  44
  48
  52
  56
  60
  65
  70
  75
  81
  87
  93
  100
  107
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  14
  15
  15
  16
  17
  18
  20
  22
  23
  25
  25
  27
  29
  32
  34
  37
  40
  43
  47
  51
  55
  59
  64
  69
  74
  80
  86
  92
  99
  106
Maintenance CAPEX, $m
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
New CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
Cash from investing activities, $m
  -13
  -14
  -14
  -15
  -15
  -15
  -17
  -17
  -18
  -18
  -20
  -21
  -21
  -22
  -24
  -25
  -26
  -26
  -28
  -29
  -31
  -33
  -34
  -35
  -37
  -39
  -41
  -43
  -46
  -47
Free cash flow, $m
  1
  1
  1
  1
  2
  2
  3
  4
  5
  6
  5
  6
  8
  9
  11
  13
  14
  17
  19
  21
  24
  27
  30
  33
  37
  41
  45
  49
  53
  58
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Issuance/(repurchase) of shares, $m
  8
  8
  9
  9
  9
  8
  8
  7
  6
  6
  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  
  9
  9
  10
  10
  10
  9
  9
  8
  8
  8
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Total cash flow (excl. dividends), $m
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  30
  34
  37
  41
  45
  49
  54
  58
  63
Retained Cash Flow (-), $m
  -8
  -8
  -9
  -9
  -9
  -8
  -8
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
Prev. year cash balance distribution, $m
  17
  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
  2
  2
  2
  3
  4
  5
  6
  6
  6
  -1
  0
  1
  2
  3
  4
  6
  7
  9
  11
  13
  15
  18
  20
  23
  26
  30
  33
  37
  41
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
  18
  2
  2
  2
  2
  3
  3
  4
  4
  3
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  96.8
  93.5
  90.4
  87.5
  84.7
  82.2
  80.1
  78.2
  76.6
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2
  75.2

Limelight Networks, Inc. operates a distributed network and provides a suite of integrated services marketed as the Limelight Orchestrate Platform. The Company is engaged in providing content delivery and related services and solutions for global businesses to help them deliver their digital content across Internet, mobile, and social channels. Its services include content delivery services, mobile delivery services, video content management services, performance services, cloud-based storage services and cloud-based content security services. Its solutions include software and device manufacturers, media and broadcasters, and gaming. Limelight services incorporate content and application security, file management, video transformation, distributed storage functionality, and the analytics and reporting associated with them. The Company operates in three geographic areas: Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific.

FINANCIAL RATIOS  of  Limelight Networks, Inc. (LLNW)

Valuation Ratios
P/E Ratio -3.4
Price to Sales 1.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 36.1
Price to Free Cash Flow -84.2
Growth Rates
Sales Growth Rate -1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -12%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage -72
Management Effectiveness
Return On Assets -33.6%
Ret/ On Assets - 3 Yr. Avg. -17.9%
Return On Total Capital -43.8%
Ret/ On T. Cap. - 3 Yr. Avg. -22.2%
Return On Equity -44%
Return On Equity - 3 Yr. Avg. -22.3%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 42.3%
Gross Margin - 3 Yr. Avg. 40.3%
EBITDA Margin -31%
EBITDA Margin - 3 Yr. Avg. -11.9%
Operating Margin -43.5%
Oper. Margin - 3 Yr. Avg. -25.1%
Pre-Tax Margin -43.5%
Pre-Tax Margin - 3 Yr. Avg. -24.3%
Net Profit Margin -44%
Net Profit Margin - 3 Yr. Avg. -24.5%
Effective Tax Rate -1.4%
Eff/ Tax Rate - 3 Yr. Avg. -0.5%
Payout Ratio 0%

LLNW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LLNW stock intrinsic value calculation we used $196 million for the last fiscal year's total revenue generated by Limelight Networks, Inc.. The default revenue input number comes from 0001 income statement of Limelight Networks, 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 LLNW 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 4.3%, whose default value for LLNW is calculated based on our internal credit rating of Limelight Networks, 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 Limelight Networks, 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 LLNW stock the variable cost ratio is equal to 69.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $65 million in the base year in the intrinsic value calculation for LLNW 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 Limelight Networks, Inc..

Corporate tax rate of 27% is the nominal tax rate for Limelight Networks, 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 LLNW 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 LLNW are equal to 34%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Limelight Networks, 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 LLNW is equal to 4%. 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 - $165.151 million for Limelight Networks, 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 114.245 million for Limelight Networks, 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 Limelight Networks, Inc. at the current share price and the inputted number of shares is $0.3 billion.

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