Intrinsic value of SecureWorks Corp. - SCWX

Previous Close

$19.26

  Intrinsic Value

$0.25

stock screener

  Rating & Target

str. sell

-99%

Previous close

$19.26

 
Intrinsic value

$0.25

 
Up/down potential

-99%

 
Rating

str. sell

We calculate the intrinsic value of SCWX 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 1.6

 

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, %
  13.60
  12.74
  11.97
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
Revenue, $m
  532
  599
  671
  747
  826
  909
  997
  1,087
  1,182
  1,280
  1,383
  1,489
  1,600
  1,715
  1,834
  1,959
  2,088
  2,222
  2,362
  2,507
  2,659
  2,817
  2,982
  3,153
  3,333
  3,520
  3,716
  3,920
  4,134
  4,357
Variable operating expenses, $m
  605
  673
  746
  823
  904
  988
  1,076
  1,169
  1,265
  1,365
  1,403
  1,511
  1,624
  1,740
  1,862
  1,988
  2,119
  2,255
  2,397
  2,545
  2,699
  2,859
  3,026
  3,200
  3,382
  3,572
  3,771
  3,978
  4,195
  4,422
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
  605
  673
  746
  823
  904
  988
  1,076
  1,169
  1,265
  1,365
  1,403
  1,511
  1,624
  1,740
  1,862
  1,988
  2,119
  2,255
  2,397
  2,545
  2,699
  2,859
  3,026
  3,200
  3,382
  3,572
  3,771
  3,978
  4,195
  4,422
Operating income, $m
  -73
  -74
  -75
  -76
  -77
  -79
  -80
  -81
  -83
  -84
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -62
  -65
EBITDA, $m
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  45
  48
  52
  55
  59
  63
  67
  72
  76
  81
  86
  91
  96
  102
  108
  114
  120
  127
  134
  141
Interest expense (income), $m
  0
  0
  2
  5
  8
  10
  13
  17
  20
  23
  27
  30
  34
  38
  42
  47
  51
  56
  61
  66
  71
  77
  82
  88
  94
  101
  108
  115
  122
  130
  138
Earnings before tax, $m
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -51
  -57
  -62
  -68
  -74
  -80
  -87
  -94
  -101
  -108
  -116
  -124
  -133
  -141
  -150
  -160
  -170
  -180
  -191
  -202
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
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -51
  -57
  -62
  -68
  -74
  -80
  -87
  -94
  -101
  -108
  -116
  -124
  -133
  -141
  -150
  -160
  -170
  -180
  -191
  -202

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
  1,200
  1,353
  1,515
  1,686
  1,865
  2,053
  2,249
  2,454
  2,668
  2,890
  3,122
  3,362
  3,612
  3,871
  4,141
  4,421
  4,713
  5,016
  5,331
  5,660
  6,002
  6,359
  6,731
  7,118
  7,523
  7,946
  8,387
  8,848
  9,331
  9,835
Adjusted assets (=assets-cash), $m
  1,200
  1,353
  1,515
  1,686
  1,865
  2,053
  2,249
  2,454
  2,668
  2,890
  3,122
  3,362
  3,612
  3,871
  4,141
  4,421
  4,713
  5,016
  5,331
  5,660
  6,002
  6,359
  6,731
  7,118
  7,523
  7,946
  8,387
  8,848
  9,331
  9,835
Revenue / Adjusted assets
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
Average production assets, $m
  414
  467
  523
  582
  644
  708
  776
  847
  921
  997
  1,077
  1,160
  1,246
  1,336
  1,429
  1,526
  1,626
  1,731
  1,840
  1,953
  2,071
  2,194
  2,323
  2,457
  2,596
  2,742
  2,894
  3,054
  3,220
  3,394
Working capital, $m
  -49
  -55
  -62
  -69
  -76
  -84
  -92
  -100
  -109
  -118
  -127
  -137
  -147
  -158
  -169
  -180
  -192
  -204
  -217
  -231
  -245
  -259
  -274
  -290
  -307
  -324
  -342
  -361
  -380
  -401
Total debt, $m
  44
  91
  141
  193
  248
  306
  367
  430
  496
  564
  635
  709
  786
  866
  949
  1,036
  1,126
  1,219
  1,316
  1,417
  1,523
  1,633
  1,747
  1,866
  1,991
  2,121
  2,257
  2,399
  2,548
  2,703
Total liabilities, $m
  370
  417
  467
  519
  574
  632
  693
  756
  822
  890
  961
  1,035
  1,112
  1,192
  1,275
  1,362
  1,452
  1,545
  1,642
  1,743
  1,849
  1,958
  2,073
  2,192
  2,317
  2,447
  2,583
  2,725
  2,874
  3,029
Total equity, $m
  830
  936
  1,048
  1,166
  1,291
  1,421
  1,557
  1,698
  1,846
  2,000
  2,160
  2,326
  2,499
  2,679
  2,865
  3,059
  3,261
  3,471
  3,689
  3,917
  4,154
  4,400
  4,658
  4,926
  5,206
  5,498
  5,804
  6,123
  6,457
  6,806
Total liabilities and equity, $m
  1,200
  1,353
  1,515
  1,685
  1,865
  2,053
  2,250
  2,454
  2,668
  2,890
  3,121
  3,361
  3,611
  3,871
  4,140
  4,421
  4,713
  5,016
  5,331
  5,660
  6,003
  6,358
  6,731
  7,118
  7,523
  7,945
  8,387
  8,848
  9,331
  9,835
Debt-to-equity ratio
  0.050
  0.100
  0.130
  0.170
  0.190
  0.220
  0.240
  0.250
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
  0.390
  0.390
  0.390
  0.400
Adjusted equity ratio
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -51
  -57
  -62
  -68
  -74
  -80
  -87
  -94
  -101
  -108
  -116
  -124
  -133
  -141
  -150
  -160
  -170
  -180
  -191
  -202
Depreciation, amort., depletion, $m
  90
  93
  97
  100
  104
  108
  112
  116
  121
  126
  65
  70
  76
  81
  87
  92
  99
  105
  112
  118
  126
  133
  141
  149
  157
  166
  175
  185
  195
  206
Funds from operations, $m
  17
  17
  17
  17
  16
  16
  16
  15
  15
  15
  14
  14
  13
  13
  12
  12
  12
  11
  11
  10
  9
  9
  8
  8
  7
  6
  6
  5
  4
  3
Change in working capital, $m
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
Cash from operations, $m
  23
  23
  23
  23
  24
  24
  24
  24
  24
  24
  24
  24
  24
  24
  23
  23
  23
  23
  23
  23
  23
  23
  23
  23
  23
  23
  24
  24
  24
  24
Maintenance CAPEX, $m
  -22
  -25
  -28
  -32
  -35
  -39
  -43
  -47
  -51
  -56
  -60
  -65
  -70
  -76
  -81
  -87
  -92
  -99
  -105
  -112
  -118
  -126
  -133
  -141
  -149
  -157
  -166
  -175
  -185
  -195
New CAPEX, $m
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -113
  -118
  -123
  -128
  -134
  -140
  -146
  -152
  -159
  -166
  -174
Cash from investing activities, $m
  -72
  -78
  -84
  -91
  -97
  -104
  -111
  -118
  -125
  -133
  -140
  -148
  -156
  -166
  -174
  -184
  -193
  -204
  -214
  -225
  -236
  -249
  -261
  -275
  -289
  -303
  -318
  -334
  -351
  -369
Free cash flow, $m
  -49
  -55
  -61
  -67
  -74
  -80
  -87
  -94
  -101
  -109
  -117
  -125
  -133
  -142
  -151
  -160
  -170
  -180
  -190
  -202
  -213
  -225
  -238
  -251
  -265
  -280
  -295
  -311
  -328
  -345
Issuance/(repayment) of debt, $m
  44
  47
  50
  53
  55
  58
  61
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  110
  115
  119
  125
  130
  136
  142
  149
  155
Issuance/(repurchase) of shares, $m
  172
  182
  192
  202
  212
  222
  232
  243
  254
  265
  211
  223
  235
  248
  261
  274
  289
  304
  319
  336
  353
  371
  390
  410
  431
  452
  475
  500
  525
  551
Cash from financing (excl. dividends), $m  
  216
  229
  242
  255
  267
  280
  293
  306
  320
  333
  282
  297
  312
  328
  344
  360
  379
  397
  416
  437
  458
  481
  505
  529
  556
  582
  611
  642
  674
  706
Total cash flow (excl. dividends), $m
  167
  175
  181
  187
  194
  200
  206
  212
  218
  224
  166
  172
  179
  186
  193
  201
  209
  217
  226
  235
  245
  256
  266
  278
  290
  303
  316
  331
  346
  361
Retained Cash Flow (-), $m
  -172
  -182
  -192
  -202
  -212
  -222
  -232
  -243
  -254
  -265
  -211
  -223
  -235
  -248
  -261
  -274
  -289
  -304
  -319
  -336
  -353
  -371
  -390
  -410
  -431
  -452
  -475
  -500
  -525
  -551
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
  -5
  -8
  -11
  -15
  -18
  -22
  -27
  -31
  -36
  -40
  -45
  -51
  -56
  -62
  -67
  -74
  -80
  -86
  -93
  -100
  -108
  -115
  -123
  -132
  -140
  -150
  -159
  -169
  -179
  -190
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
  -5
  -7
  -10
  -12
  -14
  -16
  -18
  -19
  -20
  -21
  -22
  -22
  -21
  -21
  -20
  -19
  -17
  -16
  -14
  -13
  -11
  -10
  -8
  -7
  -5
  -4
  -3
  -3
  -2
  -1
Current shareholders' claim on cash, %
  90.1
  81.8
  74.6
  68.5
  63.2
  58.5
  54.3
  50.7
  47.4
  44.4
  42.3
  40.4
  38.6
  36.9
  35.3
  33.8
  32.3
  31.0
  29.7
  28.5
  27.4
  26.3
  25.2
  24.2
  23.3
  22.4
  21.5
  20.7
  19.9
  19.1

Secureworks Corp. is a holding company. The Company provides intelligence-driven information security solutions. The Company is focused on protecting the Company's clients from cyber-attacks. The Company's solutions enable companies to fortify their cyber defenses to prevent security breaches, detect malicious activity in real time, prioritize and respond to security incidents, and predict emerging threats. The Company offered managed security and threat intelligence on a subscription basis under contracts with initial terms that typically range from one to three years and, as of February 3, 2017. The Company's integrated suite of solutions includes Managed security, Threat intelligence, Security and risk consulting and Incident response.

FINANCIAL RATIOS  of  SecureWorks Corp. (SCWX)

Valuation Ratios
P/E Ratio -40.8
Price to Sales 3.6
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow -221.7
Price to Free Cash Flow -59.7
Growth Rates
Sales Growth Rate 26.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 111.1%
Cap. Spend. - 3 Yr. Gr. Rate 25.9%
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 -4%
Ret/ On Assets - 3 Yr. Avg. -5.5%
Return On Total Capital -5.8%
Ret/ On T. Cap. - 3 Yr. Avg. -7.9%
Return On Equity -5.9%
Return On Equity - 3 Yr. Avg. -8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 50.5%
Gross Margin - 3 Yr. Avg. 47%
EBITDA Margin -5.6%
EBITDA Margin - 3 Yr. Avg. -11.5%
Operating Margin -15.1%
Oper. Margin - 3 Yr. Avg. -23.2%
Pre-Tax Margin -14.7%
Pre-Tax Margin - 3 Yr. Avg. -23.7%
Net Profit Margin -8.8%
Net Profit Margin - 3 Yr. Avg. -14.8%
Effective Tax Rate 39.7%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio 0%

SCWX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCWX stock intrinsic value calculation we used $468 million for the last fiscal year's total revenue generated by SecureWorks Corp.. The default revenue input number comes from 0001 income statement of SecureWorks Corp.. 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 SCWX stock valuation model: a) initial revenue growth rate of 13.6% 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 SCWX is calculated based on our internal credit rating of SecureWorks Corp., 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 SecureWorks Corp..
    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 SCWX stock the variable cost ratio is equal to 115.4%.

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 SCWX 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 SecureWorks Corp..

Corporate tax rate of 27% is the nominal tax rate for SecureWorks Corp.. 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 SCWX 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 SCWX are equal to 77.9%.

Life of production assets of 16.5 years is the average useful life of capital assets used in SecureWorks Corp. 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 SCWX is equal to -9.2%. 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 - $731.09 million for SecureWorks Corp. - 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 81.558 million for SecureWorks Corp. 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 SecureWorks Corp. at the current share price and the inputted number of shares is $1.6 billion.

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