Intrinsic value of Perion Network - PERI

Previous Close

$0.97

  Intrinsic Value

$1.74

stock screener

  Rating & Target

str. buy

+80%

Previous close

$0.97

 
Intrinsic value

$1.74

 
Up/down potential

+80%

 
Rating

str. buy

We calculate the intrinsic value of PERI 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 2017), $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 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

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
  279
  286
  293
  302
  311
  321
  332
  343
  356
  370
  384
  400
  417
  434
  453
  473
  494
  516
  540
  564
  591
  618
  647
  678
  710
  744
  780
  818
  857
  899
Variable operating expenses, $m
  269
  275
  282
  289
  298
  307
  317
  328
  339
  352
  352
  366
  381
  397
  414
  432
  452
  472
  493
  516
  540
  565
  592
  620
  649
  680
  713
  748
  784
  822
Fixed operating expenses, $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 operating expenses, $m
  269
  275
  282
  289
  298
  307
  317
  328
  339
  352
  352
  366
  381
  397
  414
  432
  452
  472
  493
  516
  540
  565
  592
  620
  649
  680
  713
  748
  784
  822
Operating income, $m
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
EBITDA, $m
  44
  45
  47
  48
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
Interest expense (income), $m
  0
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  15
  16
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
Earnings before tax, $m
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
Tax expense, $m
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
Net income, $m
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  17
  18
  18
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34

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
  279
  286
  293
  302
  311
  321
  332
  343
  356
  370
  384
  400
  417
  434
  453
  473
  494
  516
  540
  564
  591
  618
  647
  678
  710
  744
  780
  818
  857
  899
Adjusted assets (=assets-cash), $m
  279
  286
  293
  302
  311
  321
  332
  343
  356
  370
  384
  400
  417
  434
  453
  473
  494
  516
  540
  564
  591
  618
  647
  678
  710
  744
  780
  818
  857
  899
Revenue / Adjusted assets
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
Average production assets, $m
  205
  210
  216
  222
  228
  236
  244
  252
  262
  272
  283
  294
  306
  319
  333
  348
  363
  379
  397
  415
  434
  454
  476
  498
  522
  547
  573
  601
  630
  661
Working capital, $m
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -93
  -97
  -102
  -106
  -112
  -117
  -123
  -129
Total debt, $m
  63
  66
  70
  74
  78
  83
  89
  95
  101
  108
  115
  123
  131
  140
  149
  159
  169
  180
  192
  204
  217
  231
  245
  260
  276
  293
  311
  329
  349
  370
Total liabilities, $m
  138
  142
  145
  149
  154
  159
  164
  170
  176
  183
  190
  198
  206
  215
  224
  234
  244
  255
  267
  279
  292
  306
  320
  336
  352
  368
  386
  405
  424
  445
Total equity, $m
  141
  144
  148
  152
  157
  162
  167
  173
  180
  187
  194
  202
  210
  219
  229
  239
  249
  261
  273
  285
  298
  312
  327
  342
  359
  376
  394
  413
  433
  454
Total liabilities and equity, $m
  279
  286
  293
  301
  311
  321
  331
  343
  356
  370
  384
  400
  416
  434
  453
  473
  493
  516
  540
  564
  590
  618
  647
  678
  711
  744
  780
  818
  857
  899
Debt-to-equity ratio
  0.450
  0.460
  0.470
  0.490
  0.500
  0.520
  0.530
  0.550
  0.560
  0.580
  0.590
  0.610
  0.620
  0.640
  0.650
  0.660
  0.680
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
Adjusted equity ratio
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  17
  18
  18
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
Depreciation, amort., depletion, $m
  34
  35
  35
  36
  36
  37
  38
  39
  40
  41
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  48
  50
  52
  55
  57
  60
  63
  66
Funds from operations, $m
  38
  39
  39
  40
  41
  42
  44
  45
  46
  48
  46
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  70
  74
  77
  80
  84
  88
  92
  96
  100
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Cash from operations, $m
  39
  40
  40
  41
  43
  44
  45
  46
  48
  50
  48
  49
  51
  53
  56
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
Maintenance CAPEX, $m
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -60
  -63
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
Cash from investing activities, $m
  -24
  -26
  -26
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -44
  -46
  -48
  -50
  -52
  -55
  -58
  -60
  -63
  -66
  -71
  -74
  -77
  -81
  -85
  -89
  -94
Free cash flow, $m
  14
  14
  14
  14
  14
  14
  14
  13
  13
  13
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  11
  11
  11
  11
  11
  12
  12
  12
  12
  13
Issuance/(repayment) of debt, $m
  2
  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
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  
  2
  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
Total cash flow (excl. dividends), $m
  17
  17
  18
  18
  18
  19
  19
  19
  20
  20
  17
  17
  18
  19
  19
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
Retained Cash Flow (-), $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
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
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
Cash available for distribution, $m
  14
  14
  14
  14
  14
  13
  13
  13
  13
  13
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  11
  11
  11
  11
  11
  12
  12
  12
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
  13
  13
  12
  11
  11
  10
  9
  8
  8
  7
  5
  4
  4
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  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
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9

Perion Network Ltd. is a global technology company. It is engaged in delivering advertising solutions to brands and publishers. It operates through High Impact Advertising solutions segment. It provides execution, ranging from high-impact advertisement formats to branded search, and a unified social and mobile programmatic platform. Its business solutions include Undertone, Codefuel, Growmobile, IncrediMail and Smilebox. Undertone offers engaging digital advertising, which is designed to capture consumer attention and drive engagement, delivering these advertisements across a portfolio of Websites and mobile applications. CodeFuel is an engagement and monetization suite delivering solutions for both content publishers and advertisers. Growmobile offers automated marketing solutions ranging from social advertising to user engagement. IncrediMail is a unified messaging application. Smilebox is a photo sharing and social expression product and offers various formats, themes and styles.

FINANCIAL RATIOS  of  Perion Network (PERI)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2.5
Price to Free Cash Flow 3.1
Growth Rates
Sales Growth Rate 41.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 28.8%
Total Debt to Equity 37.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -65.4%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -85.8%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -100.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 94.6%
Gross Margin - 3 Yr. Avg. 63.6%
EBITDA Margin 9.3%
EBITDA Margin - 3 Yr. Avg. -1.4%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. -4.6%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. -5.9%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -10.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.8%
Payout Ratio 0%

PERI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PERI stock intrinsic value calculation we used $274 million for the last fiscal year's total revenue generated by Perion Network. The default revenue input number comes from 2017 income statement of Perion Network. 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 PERI 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 PERI is calculated based on our internal credit rating of Perion Network, 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 Perion Network.
    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 PERI stock the variable cost ratio is equal to 96.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PERI 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 8.6% for Perion Network.

Corporate tax rate of 27% is the nominal tax rate for Perion Network. 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 PERI stock is equal to 0.8%.

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 PERI are equal to 73.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Perion Network 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 PERI is equal to -14.3%. 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 - $138 million for Perion Network - 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 77 million for Perion Network 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 Perion Network at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Perion Announces Standard & Poors Maalot Credit Rating   [Jun-14-18 08:00AM  Business Wire]
▶ Perion Network: 1Q Earnings Snapshot   [May-10-18 08:46AM  Associated Press]
▶ Perion Reports First Quarter 2018 Results   [07:45AM  Business Wire]
▶ Perion Network reports 4Q loss   [09:45AM  Associated Press]
▶ Perion Network Ltd. to Host Earnings Call   [Nov-09-17 07:50AM  ACCESSWIRE]
▶ Perion Network posts 3Q profit   [07:31AM  Associated Press]
▶ Perion Reports Third Quarter 2017 Results   [07:00AM  Business Wire]
▶ Perion Network reports 2Q loss   [Aug-03-17 07:41PM  Associated Press]
▶ Perion Reports Second Quarter 2017 Results   [07:00AM  Business Wire]
▶ Perion Network reports 1Q loss   [May-04-17 09:24AM  Associated Press]
▶ Perion Reports First Quarter 2017 Results   [07:40AM  GlobeNewswire]
▶ Perion to Present at The MicroCap Conference on April 4   [Mar-28-17 10:00AM  GlobeNewswire]
▶ Perion Network posts 4Q profit   [Mar-07-17 07:26AM  Associated Press]
▶ Perion Reports Q3 2016 Results   [07:00AM  GlobeNewswire]
▶ Undertone Names Robert Schwartz as President   [Oct-13-16 10:00AM  Marketwired]
▶ Josef Mandelbaum to Step Down as CEO of Perion   [Sep-27-16 02:44AM  GlobeNewswire]
▶ Perion Network posts 2Q profit   [Aug-03-16 08:41AM  AP]
▶ Perion Network Rises on Improved Guidance   [Dec-31  08:50AM  24/7 Wall St.]
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