Intrinsic value of New Relic, Inc. - NEWR

Previous Close

$100.25

  Intrinsic Value

$59.90

stock screener

  Rating & Target

sell

-40%

Previous close

$100.25

 
Intrinsic value

$59.90

 
Up/down potential

-40%

 
Rating

sell

We calculate the intrinsic value of NEWR 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 5.8

 

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, %
  35.00
  32.00
  29.30
  26.87
  24.68
  22.71
  20.94
  19.35
  17.91
  16.62
  15.46
  14.41
  13.47
  12.63
  11.86
  11.18
  10.56
  10.00
  9.50
  9.05
  8.65
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
Revenue, $m
  479
  633
  818
  1,038
  1,294
  1,588
  1,920
  2,292
  2,702
  3,152
  3,639
  4,164
  4,724
  5,321
  5,952
  6,617
  7,316
  8,048
  8,813
  9,611
  10,442
  11,306
  12,206
  13,141
  14,112
  15,122
  16,171
  17,262
  18,396
  19,575
Variable operating expenses, $m
  403
  532
  687
  871
  1,086
  1,332
  1,611
  1,923
  2,267
  2,643
  3,051
  3,490
  3,961
  4,461
  4,990
  5,548
  6,133
  6,747
  7,388
  8,057
  8,754
  9,479
  10,233
  11,016
  11,831
  12,677
  13,557
  14,471
  15,422
  16,411
Fixed operating expenses, $m
  107
  110
  112
  115
  117
  120
  122
  125
  128
  131
  133
  136
  139
  142
  146
  149
  152
  155
  159
  162
  166
  169
  173
  177
  181
  185
  189
  193
  197
  202
Total operating expenses, $m
  510
  642
  799
  986
  1,203
  1,452
  1,733
  2,048
  2,395
  2,774
  3,184
  3,626
  4,100
  4,603
  5,136
  5,697
  6,285
  6,902
  7,547
  8,219
  8,920
  9,648
  10,406
  11,193
  12,012
  12,862
  13,746
  14,664
  15,619
  16,613
Operating income, $m
  -31
  -9
  19
  52
  91
  136
  187
  244
  308
  378
  455
  537
  624
  718
  817
  921
  1,031
  1,146
  1,266
  1,391
  1,522
  1,658
  1,800
  1,947
  2,100
  2,260
  2,425
  2,597
  2,777
  2,963
EBITDA, $m
  -14
  14
  47
  88
  135
  190
  252
  322
  399
  484
  576
  676
  782
  896
  1,016
  1,142
  1,275
  1,415
  1,560
  1,712
  1,871
  2,036
  2,208
  2,386
  2,572
  2,765
  2,965
  3,174
  3,391
  3,617
Interest expense (income), $m
  0
  0
  4
  10
  16
  24
  33
  43
  54
  67
  81
  97
  114
  132
  152
  172
  194
  217
  241
  267
  293
  321
  350
  380
  411
  443
  477
  512
  549
  586
  626
Earnings before tax, $m
  -31
  -13
  9
  36
  67
  103
  144
  190
  241
  296
  358
  423
  492
  566
  644
  727
  814
  904
  999
  1,098
  1,201
  1,309
  1,420
  1,536
  1,657
  1,783
  1,913
  2,049
  2,190
  2,337
Tax expense, $m
  0
  0
  2
  10
  18
  28
  39
  51
  65
  80
  97
  114
  133
  153
  174
  196
  220
  244
  270
  296
  324
  353
  383
  415
  447
  481
  517
  553
  591
  631
Net income, $m
  -31
  -13
  7
  26
  49
  75
  105
  139
  176
  216
  261
  309
  359
  413
  470
  531
  594
  660
  729
  802
  877
  955
  1,037
  1,122
  1,210
  1,301
  1,397
  1,496
  1,599
  1,706

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
  548
  723
  935
  1,186
  1,479
  1,815
  2,195
  2,619
  3,089
  3,602
  4,159
  4,758
  5,399
  6,081
  6,802
  7,563
  8,361
  9,198
  10,072
  10,984
  11,933
  12,922
  13,950
  15,018
  16,128
  17,282
  18,481
  19,727
  21,024
  22,372
Adjusted assets (=assets-cash), $m
  548
  723
  935
  1,186
  1,479
  1,815
  2,195
  2,619
  3,089
  3,602
  4,159
  4,758
  5,399
  6,081
  6,802
  7,563
  8,361
  9,198
  10,072
  10,984
  11,933
  12,922
  13,950
  15,018
  16,128
  17,282
  18,481
  19,727
  21,024
  22,372
Revenue / Adjusted assets
  0.874
  0.876
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
  0.875
Average production assets, $m
  80
  106
  137
  173
  216
  265
  321
  383
  451
  526
  608
  695
  789
  889
  994
  1,105
  1,222
  1,344
  1,472
  1,605
  1,744
  1,888
  2,038
  2,194
  2,357
  2,525
  2,701
  2,883
  3,072
  3,269
Working capital, $m
  -151
  -199
  -258
  -327
  -408
  -500
  -605
  -722
  -851
  -993
  -1,146
  -1,312
  -1,488
  -1,676
  -1,875
  -2,084
  -2,305
  -2,535
  -2,776
  -3,027
  -3,289
  -3,562
  -3,845
  -4,139
  -4,445
  -4,763
  -5,094
  -5,437
  -5,795
  -6,166
Total debt, $m
  80
  178
  297
  438
  603
  792
  1,005
  1,244
  1,508
  1,796
  2,109
  2,446
  2,806
  3,189
  3,595
  4,022
  4,471
  4,941
  5,432
  5,945
  6,478
  7,034
  7,611
  8,212
  8,836
  9,484
  10,158
  10,859
  11,587
  12,345
Total liabilities, $m
  308
  406
  525
  667
  831
  1,020
  1,233
  1,472
  1,736
  2,024
  2,337
  2,674
  3,034
  3,418
  3,823
  4,250
  4,699
  5,169
  5,660
  6,173
  6,707
  7,262
  7,840
  8,440
  9,064
  9,712
  10,386
  11,087
  11,815
  12,573
Total equity, $m
  240
  317
  409
  519
  648
  795
  961
  1,147
  1,353
  1,578
  1,822
  2,084
  2,365
  2,664
  2,979
  3,312
  3,662
  4,029
  4,411
  4,811
  5,227
  5,660
  6,110
  6,578
  7,064
  7,569
  8,095
  8,641
  9,208
  9,799
Total liabilities and equity, $m
  548
  723
  934
  1,186
  1,479
  1,815
  2,194
  2,619
  3,089
  3,602
  4,159
  4,758
  5,399
  6,082
  6,802
  7,562
  8,361
  9,198
  10,071
  10,984
  11,934
  12,922
  13,950
  15,018
  16,128
  17,281
  18,481
  19,728
  21,023
  22,372
Debt-to-equity ratio
  0.330
  0.560
  0.730
  0.840
  0.930
  1.000
  1.050
  1.080
  1.110
  1.140
  1.160
  1.170
  1.190
  1.200
  1.210
  1.210
  1.220
  1.230
  1.230
  1.240
  1.240
  1.240
  1.250
  1.250
  1.250
  1.250
  1.250
  1.260
  1.260
  1.260
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
  -31
  -13
  7
  26
  49
  75
  105
  139
  176
  216
  261
  309
  359
  413
  470
  531
  594
  660
  729
  802
  877
  955
  1,037
  1,122
  1,210
  1,301
  1,397
  1,496
  1,599
  1,706
Depreciation, amort., depletion, $m
  17
  22
  29
  36
  45
  54
  65
  78
  92
  107
  122
  139
  158
  178
  199
  221
  244
  269
  294
  321
  349
  378
  408
  439
  471
  505
  540
  577
  614
  654
Funds from operations, $m
  -14
  9
  35
  62
  94
  130
  171
  217
  267
  323
  383
  448
  517
  591
  669
  752
  838
  929
  1,024
  1,123
  1,226
  1,333
  1,444
  1,560
  1,681
  1,806
  1,937
  2,072
  2,213
  2,360
Change in working capital, $m
  -39
  -48
  -58
  -69
  -81
  -93
  -105
  -117
  -129
  -142
  -153
  -165
  -177
  -188
  -199
  -210
  -220
  -231
  -241
  -251
  -262
  -272
  -283
  -294
  -306
  -318
  -330
  -344
  -357
  -372
Cash from operations, $m
  25
  58
  94
  131
  174
  222
  275
  334
  397
  464
  536
  613
  694
  779
  868
  961
  1,058
  1,159
  1,265
  1,374
  1,487
  1,605
  1,728
  1,855
  1,987
  2,124
  2,267
  2,416
  2,570
  2,732
Maintenance CAPEX, $m
  -12
  -16
  -21
  -27
  -35
  -43
  -53
  -64
  -77
  -90
  -105
  -122
  -139
  -158
  -178
  -199
  -221
  -244
  -269
  -294
  -321
  -349
  -378
  -408
  -439
  -471
  -505
  -540
  -577
  -614
New CAPEX, $m
  -21
  -26
  -31
  -37
  -43
  -49
  -56
  -62
  -69
  -75
  -81
  -88
  -94
  -100
  -105
  -111
  -117
  -122
  -128
  -133
  -139
  -144
  -150
  -156
  -162
  -169
  -175
  -182
  -189
  -197
Cash from investing activities, $m
  -33
  -42
  -52
  -64
  -78
  -92
  -109
  -126
  -146
  -165
  -186
  -210
  -233
  -258
  -283
  -310
  -338
  -366
  -397
  -427
  -460
  -493
  -528
  -564
  -601
  -640
  -680
  -722
  -766
  -811
Free cash flow, $m
  -7
  16
  42
  67
  97
  130
  167
  207
  251
  299
  350
  404
  461
  522
  585
  651
  721
  793
  868
  946
  1,028
  1,112
  1,200
  1,291
  1,386
  1,484
  1,587
  1,694
  1,805
  1,920
Issuance/(repayment) of debt, $m
  80
  99
  119
  141
  165
  189
  214
  239
  264
  289
  313
  337
  360
  383
  405
  427
  449
  470
  491
  512
  534
  555
  578
  600
  624
  648
  674
  701
  728
  758
Issuance/(repurchase) of shares, $m
  93
  90
  86
  84
  79
  72
  61
  47
  30
  9
  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  
  173
  189
  205
  225
  244
  261
  275
  286
  294
  298
  313
  337
  360
  383
  405
  427
  449
  470
  491
  512
  534
  555
  578
  600
  624
  648
  674
  701
  728
  758
Total cash flow (excl. dividends), $m
  166
  204
  247
  292
  341
  391
  442
  493
  545
  596
  663
  741
  821
  905
  990
  1,079
  1,169
  1,263
  1,359
  1,459
  1,561
  1,668
  1,778
  1,892
  2,010
  2,133
  2,261
  2,394
  2,533
  2,678
Retained Cash Flow (-), $m
  -93
  -90
  -93
  -110
  -128
  -147
  -166
  -186
  -206
  -225
  -244
  -263
  -281
  -299
  -316
  -333
  -350
  -366
  -383
  -399
  -416
  -433
  -450
  -468
  -486
  -505
  -525
  -546
  -568
  -591
Prev. year cash balance distribution, $m
  37
  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
  110
  115
  154
  182
  212
  243
  275
  307
  339
  371
  419
  478
  541
  606
  674
  746
  820
  897
  976
  1,059
  1,145
  1,235
  1,327
  1,424
  1,524
  1,627
  1,736
  1,848
  1,965
  2,087
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
  105
  105
  134
  150
  165
  177
  186
  192
  195
  195
  199
  204
  206
  203
  198
  189
  178
  165
  150
  135
  118
  102
  87
  73
  59
  47
  37
  29
  21
  16
Current shareholders' claim on cash, %
  95.0
  91.6
  89.2
  87.4
  86.1
  85.1
  84.5
  84.0
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8

New Relic, Inc. (New Relic) is a provider of enterprise software. The Company's cloud-based platform and range of products enable organizations to collect, store and analyze software data in real time. The Company's New Relic Software Analytics Cloud consists of an integrated suite of products, a data database and an open platform. New Relic offers an integrated suite of products, namely, New Relic APM, for application performance management; New Relic Mobile, for mobile application performance management; New Relic Servers, for server monitoring for cloud and data centers; New Relic Browser, for end user experience monitoring and performance monitoring; New Relic Synthetics, for software testing through simulated usage; New Relic Plugins, plugins to extend its functionality into other applications; New Relic Alerts, for policy management and delivering alerts across entire suite of products, and New Relic Insights, for real-time big data analytics for business managers.

FINANCIAL RATIOS  of  New Relic, Inc. (NEWR)

Valuation Ratios
P/E Ratio -87.6
Price to Sales 20.3
Price to Book 28.6
Price to Tangible Book
Price to Cash Flow 281.1
Price to Free Cash Flow -890.2
Growth Rates
Sales Growth Rate 45.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 38.9%
Cap. Spend. - 3 Yr. Gr. Rate 9.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -18.9%
Ret/ On Assets - 3 Yr. Avg. -24.7%
Return On Total Capital -32.1%
Ret/ On T. Cap. - 3 Yr. Avg. -35.2%
Return On Equity -32.1%
Return On Equity - 3 Yr. Avg. -35.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 81%
Gross Margin - 3 Yr. Avg. 80.5%
EBITDA Margin -16%
EBITDA Margin - 3 Yr. Avg. -27.3%
Operating Margin -23.6%
Oper. Margin - 3 Yr. Avg. -35.5%
Pre-Tax Margin -23.2%
Pre-Tax Margin - 3 Yr. Avg. -35.2%
Net Profit Margin -23.2%
Net Profit Margin - 3 Yr. Avg. -35.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

NEWR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEWR stock intrinsic value calculation we used $355 million for the last fiscal year's total revenue generated by New Relic, Inc.. The default revenue input number comes from 0001 income statement of New Relic, 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 NEWR stock valuation model: a) initial revenue growth rate of 35% 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 NEWR is calculated based on our internal credit rating of New Relic, 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 New Relic, 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 NEWR stock the variable cost ratio is equal to 84.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $105 million in the base year in the intrinsic value calculation for NEWR 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 New Relic, Inc..

Corporate tax rate of 27% is the nominal tax rate for New Relic, 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 NEWR 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 NEWR are equal to 16.7%.

Life of production assets of 2.8 years is the average useful life of capital assets used in New Relic, 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 NEWR is equal to -31.5%. 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 - $215.104 million for New Relic, 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 57.387 million for New Relic, 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 New Relic, Inc. at the current share price and the inputted number of shares is $5.8 billion.

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