Intrinsic value of Redfin Corporation - RDFN

Previous Close

$16.98

  Intrinsic Value

$1.73

stock screener

  Rating & Target

str. sell

-90%

Previous close

$16.98

 
Intrinsic value

$1.73

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of RDFN 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 1.5

 

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, %
  29.60
  27.14
  24.93
  22.93
  21.14
  19.53
  18.07
  16.77
  15.59
  14.53
  13.58
  12.72
  11.95
  11.25
  10.63
  10.06
  9.56
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.77
  6.59
  6.43
  6.29
  6.16
Revenue, $m
  631
  802
  1,002
  1,232
  1,493
  1,784
  2,107
  2,460
  2,844
  3,257
  3,699
  4,170
  4,668
  5,193
  5,745
  6,323
  6,927
  7,558
  8,215
  8,899
  9,610
  10,349
  11,117
  11,915
  12,745
  13,607
  14,504
  15,437
  16,407
  17,418
Variable operating expenses, $m
  658
  836
  1,044
  1,284
  1,555
  1,858
  2,193
  2,561
  2,960
  3,390
  3,849
  4,339
  4,857
  5,403
  5,978
  6,579
  7,208
  7,864
  8,548
  9,260
  9,999
  10,769
  11,568
  12,398
  13,262
  14,159
  15,092
  16,062
  17,072
  18,124
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
  658
  836
  1,044
  1,284
  1,555
  1,858
  2,193
  2,561
  2,960
  3,390
  3,849
  4,339
  4,857
  5,403
  5,978
  6,579
  7,208
  7,864
  8,548
  9,260
  9,999
  10,769
  11,568
  12,398
  13,262
  14,159
  15,092
  16,062
  17,072
  18,124
Operating income, $m
  -27
  -34
  -42
  -51
  -62
  -74
  -87
  -101
  -116
  -133
  -150
  -169
  -189
  -211
  -233
  -256
  -281
  -306
  -333
  -361
  -390
  -420
  -451
  -483
  -517
  -552
  -588
  -626
  -665
  -706
EBITDA, $m
  -18
  -23
  -28
  -35
  -42
  -51
  -60
  -70
  -81
  -92
  -105
  -118
  -132
  -147
  -163
  -179
  -196
  -214
  -233
  -252
  -272
  -293
  -315
  -338
  -361
  -386
  -411
  -437
  -465
  -494
Interest expense (income), $m
  0
  7
  7
  10
  13
  17
  21
  25
  30
  36
  42
  49
  56
  63
  71
  79
  88
  97
  107
  117
  127
  138
  149
  161
  173
  186
  199
  212
  227
  241
  257
Earnings before tax, $m
  -34
  -41
  -52
  -64
  -78
  -94
  -112
  -131
  -152
  -175
  -199
  -225
  -252
  -281
  -312
  -344
  -378
  -413
  -450
  -488
  -527
  -569
  -611
  -656
  -702
  -750
  -800
  -852
  -906
  -963
Tax expense, $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
Net income, $m
  -34
  -41
  -52
  -64
  -78
  -94
  -112
  -131
  -152
  -175
  -199
  -225
  -252
  -281
  -312
  -344
  -378
  -413
  -450
  -488
  -527
  -569
  -611
  -656
  -702
  -750
  -800
  -852
  -906
  -963

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
  182
  231
  289
  355
  430
  514
  607
  709
  819
  939
  1,066
  1,202
  1,345
  1,497
  1,656
  1,822
  1,996
  2,178
  2,367
  2,564
  2,769
  2,982
  3,204
  3,434
  3,673
  3,921
  4,180
  4,449
  4,728
  5,020
Adjusted assets (=assets-cash), $m
  182
  231
  289
  355
  430
  514
  607
  709
  819
  939
  1,066
  1,202
  1,345
  1,497
  1,656
  1,822
  1,996
  2,178
  2,367
  2,564
  2,769
  2,982
  3,204
  3,434
  3,673
  3,921
  4,180
  4,449
  4,728
  5,020
Revenue / Adjusted assets
  3.467
  3.472
  3.467
  3.470
  3.472
  3.471
  3.471
  3.470
  3.473
  3.469
  3.470
  3.469
  3.471
  3.469
  3.469
  3.470
  3.470
  3.470
  3.471
  3.471
  3.471
  3.470
  3.470
  3.470
  3.470
  3.470
  3.470
  3.470
  3.470
  3.470
Average production assets, $m
  39
  49
  61
  75
  91
  109
  129
  150
  173
  199
  226
  254
  285
  317
  350
  386
  423
  461
  501
  543
  586
  631
  678
  727
  777
  830
  885
  942
  1,001
  1,062
Working capital, $m
  14
  18
  22
  27
  33
  39
  46
  54
  63
  72
  81
  92
  103
  114
  126
  139
  152
  166
  181
  196
  211
  228
  245
  262
  280
  299
  319
  340
  361
  383
Total debt, $m
  116
  160
  212
  272
  339
  415
  499
  590
  690
  797
  912
  1,034
  1,163
  1,299
  1,442
  1,592
  1,749
  1,912
  2,083
  2,260
  2,445
  2,636
  2,836
  3,043
  3,258
  3,481
  3,714
  3,956
  4,208
  4,470
Total liabilities, $m
  164
  208
  260
  320
  387
  463
  546
  638
  738
  845
  959
  1,081
  1,211
  1,347
  1,490
  1,640
  1,797
  1,960
  2,131
  2,308
  2,492
  2,684
  2,883
  3,090
  3,306
  3,529
  3,762
  4,004
  4,255
  4,518
Total equity, $m
  18
  23
  29
  36
  43
  51
  61
  71
  82
  94
  107
  120
  135
  150
  166
  182
  200
  218
  237
  256
  277
  298
  320
  343
  367
  392
  418
  445
  473
  502
Total liabilities and equity, $m
  182
  231
  289
  356
  430
  514
  607
  709
  820
  939
  1,066
  1,201
  1,346
  1,497
  1,656
  1,822
  1,997
  2,178
  2,368
  2,564
  2,769
  2,982
  3,203
  3,433
  3,673
  3,921
  4,180
  4,449
  4,728
  5,020
Debt-to-equity ratio
  6.370
  6.930
  7.340
  7.650
  7.890
  8.070
  8.210
  8.330
  8.420
  8.490
  8.550
  8.600
  8.640
  8.680
  8.710
  8.740
  8.760
  8.780
  8.800
  8.810
  8.830
  8.840
  8.850
  8.860
  8.870
  8.880
  8.890
  8.890
  8.900
  8.900
Adjusted equity ratio
  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
  0.100
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -34
  -41
  -52
  -64
  -78
  -94
  -112
  -131
  -152
  -175
  -199
  -225
  -252
  -281
  -312
  -344
  -378
  -413
  -450
  -488
  -527
  -569
  -611
  -656
  -702
  -750
  -800
  -852
  -906
  -963
Depreciation, amort., depletion, $m
  9
  11
  13
  16
  19
  23
  27
  31
  36
  41
  45
  51
  57
  63
  70
  77
  85
  92
  100
  109
  117
  126
  136
  145
  155
  166
  177
  188
  200
  212
Funds from operations, $m
  -25
  -30
  -38
  -48
  -59
  -71
  -85
  -100
  -117
  -134
  -153
  -174
  -195
  -218
  -242
  -267
  -293
  -321
  -349
  -379
  -410
  -442
  -476
  -511
  -547
  -584
  -623
  -664
  -706
  -750
Change in working capital, $m
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
Cash from operations, $m
  -28
  -34
  -43
  -53
  -65
  -78
  -92
  -108
  -125
  -143
  -163
  -184
  -206
  -230
  -254
  -280
  -307
  -335
  -364
  -394
  -426
  -459
  -493
  -528
  -565
  -603
  -643
  -684
  -728
  -772
Maintenance CAPEX, $m
  -6
  -8
  -10
  -12
  -15
  -18
  -22
  -26
  -30
  -35
  -40
  -45
  -51
  -57
  -63
  -70
  -77
  -85
  -92
  -100
  -109
  -117
  -126
  -136
  -145
  -155
  -166
  -177
  -188
  -200
New CAPEX, $m
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
Cash from investing activities, $m
  -15
  -18
  -22
  -26
  -31
  -36
  -42
  -48
  -53
  -60
  -67
  -74
  -81
  -89
  -97
  -105
  -114
  -123
  -132
  -142
  -152
  -162
  -173
  -185
  -196
  -208
  -221
  -234
  -247
  -262
Free cash flow, $m
  -43
  -52
  -65
  -79
  -96
  -114
  -134
  -155
  -178
  -203
  -230
  -258
  -288
  -319
  -351
  -385
  -421
  -458
  -496
  -536
  -578
  -621
  -666
  -712
  -761
  -811
  -864
  -918
  -975
  -1,034
Issuance/(repayment) of debt, $m
  -2
  44
  52
  60
  68
  76
  84
  92
  99
  107
  115
  122
  129
  136
  143
  150
  157
  164
  170
  177
  184
  192
  199
  207
  215
  224
  233
  242
  252
  262
Issuance/(repurchase) of shares, $m
  78
  46
  57
  71
  86
  103
  121
  142
  164
  187
  211
  238
  267
  297
  328
  361
  395
  431
  469
  507
  548
  590
  634
  679
  726
  775
  826
  879
  934
  992
Cash from financing (excl. dividends), $m  
  76
  90
  109
  131
  154
  179
  205
  234
  263
  294
  326
  360
  396
  433
  471
  511
  552
  595
  639
  684
  732
  782
  833
  886
  941
  999
  1,059
  1,121
  1,186
  1,254
Total cash flow (excl. dividends), $m
  32
  38
  45
  51
  58
  65
  71
  78
  85
  91
  96
  102
  108
  114
  120
  126
  131
  137
  143
  149
  155
  161
  167
  174
  180
  187
  195
  203
  211
  220
Retained Cash Flow (-), $m
  -78
  -46
  -57
  -71
  -86
  -103
  -121
  -142
  -164
  -187
  -211
  -238
  -267
  -297
  -328
  -361
  -395
  -431
  -469
  -507
  -548
  -590
  -634
  -679
  -726
  -775
  -826
  -879
  -934
  -992
Prev. year cash balance distribution, $m
  398
  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
  352
  -7
  -13
  -20
  -28
  -38
  -50
  -64
  -79
  -96
  -115
  -136
  -158
  -182
  -208
  -235
  -264
  -294
  -326
  -359
  -393
  -429
  -467
  -505
  -546
  -588
  -631
  -676
  -723
  -772
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
  338
  -7
  -11
  -16
  -22
  -28
  -34
  -40
  -45
  -50
  -55
  -58
  -60
  -61
  -61
  -60
  -57
  -54
  -50
  -46
  -41
  -36
  -31
  -26
  -21
  -17
  -14
  -10
  -8
  -6
Current shareholders' claim on cash, %
  50.0
  31.1
  19.4
  12.2
  7.7
  4.9
  3.1
  2.0
  1.3
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  0.1
  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

Redfin Corporation is engaged in providing residential real estate brokerage services. The customer can search for homes by neighborhood, city or MLS number, or can refine results using detailed parameters, such as price and number of beds or baths. The Company serves home buyers and sellers. The Company offers online tools to consumers, including Redfin Estimate, which is an automated home-valuation tool. The customer can search homes for sale in Austin, Atlanta, Baltimore, Boston, Charlotte, Chicago, Dallas, Denver, Fort Lauderdale, Houston, Lake Tahoe, Las Vegas, Los Angeles, Miami, Philadelphia, Phoenix, Portland, OR, Raleigh, San Antonio, San Diego, San Francisco, Sacramento, San Jose, Seattle and Washington. The Company serves over 80 metro areas across the United States.

FINANCIAL RATIOS  of  Redfin Corporation (RDFN)

Valuation Ratios
P/E Ratio -58.7
Price to Sales 5.1
Price to Book 14.7
Price to Tangible Book
Price to Cash Flow -150.1
Price to Free Cash Flow -58.7
Growth Rates
Sales Growth Rate 42.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 180%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0.4
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -17.8%
Ret/ On Assets - 3 Yr. Avg. -21.9%
Return On Total Capital -23.5%
Ret/ On T. Cap. - 3 Yr. Avg. -27.1%
Return On Equity -23.5%
Return On Equity - 3 Yr. Avg. -27.1%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 31.1%
Gross Margin - 3 Yr. Avg. 27.6%
EBITDA Margin -6.4%
EBITDA Margin - 3 Yr. Avg. -12.6%
Operating Margin -8.6%
Oper. Margin - 3 Yr. Avg. -15.1%
Pre-Tax Margin -8.6%
Pre-Tax Margin - 3 Yr. Avg. -14.9%
Net Profit Margin -8.6%
Net Profit Margin - 3 Yr. Avg. -14.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

RDFN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RDFN stock intrinsic value calculation we used $487 million for the last fiscal year's total revenue generated by Redfin Corporation. The default revenue input number comes from 0001 income statement of Redfin Corporation. 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 RDFN stock valuation model: a) initial revenue growth rate of 29.6% 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 RDFN is calculated based on our internal credit rating of Redfin Corporation, 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 Redfin Corporation.
    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 RDFN stock the variable cost ratio is equal to 104.3%.

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 RDFN 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 6.1% for Redfin Corporation.

Corporate tax rate of 27% is the nominal tax rate for Redfin Corporation. 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 RDFN 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 RDFN are equal to 6.1%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Redfin Corporation 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 RDFN is equal to 2.2%. 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 - $371.938 million for Redfin Corporation - 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 90.368 million for Redfin Corporation 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 Redfin Corporation at the current share price and the inputted number of shares is $1.5 billion.

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