Intrinsic value of Stamps.com Inc. - STMP

Previous Close

$82.71

  Intrinsic Value

$420.06

stock screener

  Rating & Target

str. buy

+408%

Previous close

$82.71

 
Intrinsic value

$420.06

 
Up/down potential

+408%

 
Rating

str. buy

We calculate the intrinsic value of STMP 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, %
  28.50
  26.15
  24.04
  22.13
  20.42
  18.88
  17.49
  16.24
  15.12
  14.10
  13.19
  12.37
  11.64
  10.97
  10.38
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.37
  6.23
  6.11
Revenue, $m
  754
  952
  1,180
  1,441
  1,736
  2,063
  2,424
  2,818
  3,244
  3,702
  4,190
  4,708
  5,256
  5,833
  6,438
  7,072
  7,733
  8,423
  9,141
  9,889
  10,665
  11,473
  12,312
  13,184
  14,091
  15,033
  16,013
  17,032
  18,093
  19,198
Variable operating expenses, $m
  475
  586
  713
  859
  1,023
  1,206
  1,407
  1,627
  1,865
  2,120
  2,338
  2,627
  2,933
  3,255
  3,592
  3,946
  4,315
  4,700
  5,101
  5,518
  5,951
  6,402
  6,870
  7,357
  7,862
  8,388
  8,935
  9,504
  10,096
  10,712
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
  475
  586
  713
  859
  1,023
  1,206
  1,407
  1,627
  1,865
  2,120
  2,338
  2,627
  2,933
  3,255
  3,592
  3,946
  4,315
  4,700
  5,101
  5,518
  5,951
  6,402
  6,870
  7,357
  7,862
  8,388
  8,935
  9,504
  10,096
  10,712
Operating income, $m
  279
  366
  467
  583
  713
  857
  1,017
  1,191
  1,379
  1,582
  1,852
  2,081
  2,323
  2,578
  2,846
  3,126
  3,418
  3,723
  4,041
  4,371
  4,714
  5,071
  5,442
  5,828
  6,228
  6,645
  7,078
  7,528
  7,997
  8,486
EBITDA, $m
  350
  442
  548
  669
  806
  958
  1,125
  1,308
  1,506
  1,718
  1,945
  2,185
  2,440
  2,708
  2,988
  3,282
  3,590
  3,910
  4,243
  4,590
  4,951
  5,325
  5,715
  6,120
  6,540
  6,978
  7,433
  7,906
  8,398
  8,911
Interest expense (income), $m
  3
  3
  7
  11
  16
  22
  29
  36
  44
  52
  62
  72
  82
  94
  106
  119
  132
  146
  160
  175
  191
  208
  225
  243
  261
  280
  300
  321
  342
  365
  388
Earnings before tax, $m
  276
  359
  456
  566
  691
  829
  981
  1,147
  1,327
  1,520
  1,780
  1,999
  2,230
  2,472
  2,727
  2,994
  3,272
  3,563
  3,865
  4,180
  4,507
  4,846
  5,200
  5,567
  5,948
  6,345
  6,757
  7,186
  7,633
  8,098
Tax expense, $m
  74
  97
  123
  153
  186
  224
  265
  310
  358
  410
  481
  540
  602
  668
  736
  808
  884
  962
  1,044
  1,128
  1,217
  1,309
  1,404
  1,503
  1,606
  1,713
  1,824
  1,940
  2,061
  2,186
Net income, $m
  201
  262
  333
  413
  504
  605
  716
  838
  969
  1,110
  1,300
  1,459
  1,628
  1,805
  1,991
  2,186
  2,389
  2,601
  2,822
  3,051
  3,290
  3,538
  3,796
  4,064
  4,342
  4,632
  4,933
  5,246
  5,572
  5,911

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
  1,096
  1,383
  1,715
  2,095
  2,523
  2,999
  3,524
  4,096
  4,715
  5,380
  6,090
  6,844
  7,640
  8,478
  9,358
  10,279
  11,240
  12,243
  13,287
  14,373
  15,502
  16,676
  17,896
  19,163
  20,480
  21,850
  23,274
  24,756
  26,298
  27,904
Adjusted assets (=assets-cash), $m
  1,096
  1,383
  1,715
  2,095
  2,523
  2,999
  3,524
  4,096
  4,715
  5,380
  6,090
  6,844
  7,640
  8,478
  9,358
  10,279
  11,240
  12,243
  13,287
  14,373
  15,502
  16,676
  17,896
  19,163
  20,480
  21,850
  23,274
  24,756
  26,298
  27,904
Revenue / Adjusted assets
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
Average production assets, $m
  326
  411
  510
  623
  750
  891
  1,047
  1,217
  1,401
  1,599
  1,810
  2,034
  2,271
  2,520
  2,781
  3,055
  3,341
  3,639
  3,949
  4,272
  4,607
  4,956
  5,319
  5,696
  6,087
  6,494
  6,917
  7,358
  7,816
  8,294
Working capital, $m
  -32
  -40
  -50
  -61
  -73
  -87
  -102
  -118
  -136
  -155
  -176
  -198
  -221
  -245
  -270
  -297
  -325
  -354
  -384
  -415
  -448
  -482
  -517
  -554
  -592
  -631
  -673
  -715
  -760
  -806
Total debt, $m
  129
  209
  302
  408
  528
  661
  808
  968
  1,142
  1,328
  1,527
  1,738
  1,961
  2,195
  2,442
  2,700
  2,969
  3,250
  3,542
  3,846
  4,162
  4,491
  4,832
  5,187
  5,556
  5,940
  6,338
  6,753
  7,185
  7,635
Total liabilities, $m
  307
  387
  480
  587
  706
  840
  987
  1,147
  1,320
  1,506
  1,705
  1,916
  2,139
  2,374
  2,620
  2,878
  3,147
  3,428
  3,720
  4,024
  4,341
  4,669
  5,011
  5,366
  5,735
  6,118
  6,517
  6,932
  7,364
  7,813
Total equity, $m
  789
  996
  1,235
  1,508
  1,817
  2,159
  2,537
  2,949
  3,395
  3,874
  4,385
  4,927
  5,501
  6,104
  6,738
  7,401
  8,093
  8,815
  9,566
  10,348
  11,162
  12,007
  12,885
  13,797
  14,746
  15,732
  16,757
  17,824
  18,935
  20,091
Total liabilities and equity, $m
  1,096
  1,383
  1,715
  2,095
  2,523
  2,999
  3,524
  4,096
  4,715
  5,380
  6,090
  6,843
  7,640
  8,478
  9,358
  10,279
  11,240
  12,243
  13,286
  14,372
  15,503
  16,676
  17,896
  19,163
  20,481
  21,850
  23,274
  24,756
  26,299
  27,904
Debt-to-equity ratio
  0.160
  0.210
  0.240
  0.270
  0.290
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.360
  0.360
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
Adjusted equity ratio
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  201
  262
  333
  413
  504
  605
  716
  838
  969
  1,110
  1,300
  1,459
  1,628
  1,805
  1,991
  2,186
  2,389
  2,601
  2,822
  3,051
  3,290
  3,538
  3,796
  4,064
  4,342
  4,632
  4,933
  5,246
  5,572
  5,911
Depreciation, amort., depletion, $m
  71
  76
  81
  87
  93
  100
  108
  117
  126
  137
  93
  104
  116
  129
  143
  157
  171
  187
  203
  219
  236
  254
  273
  292
  312
  333
  355
  377
  401
  425
Funds from operations, $m
  272
  338
  413
  500
  597
  705
  825
  955
  1,095
  1,246
  1,392
  1,563
  1,744
  1,934
  2,134
  2,342
  2,560
  2,787
  3,024
  3,270
  3,526
  3,792
  4,069
  4,356
  4,654
  4,965
  5,287
  5,623
  5,973
  6,337
Change in working capital, $m
  -7
  -8
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
Cash from operations, $m
  279
  346
  423
  511
  610
  719
  840
  971
  1,113
  1,265
  1,413
  1,585
  1,767
  1,958
  2,159
  2,369
  2,588
  2,816
  3,054
  3,302
  3,559
  3,826
  4,104
  4,392
  4,692
  5,004
  5,329
  5,666
  6,017
  6,383
Maintenance CAPEX, $m
  -13
  -17
  -21
  -26
  -32
  -38
  -46
  -54
  -62
  -72
  -82
  -93
  -104
  -116
  -129
  -143
  -157
  -171
  -187
  -203
  -219
  -236
  -254
  -273
  -292
  -312
  -333
  -355
  -377
  -401
New CAPEX, $m
  -72
  -85
  -99
  -113
  -127
  -142
  -156
  -170
  -184
  -198
  -211
  -224
  -237
  -249
  -261
  -274
  -286
  -298
  -310
  -323
  -336
  -349
  -363
  -377
  -392
  -407
  -423
  -440
  -458
  -477
Cash from investing activities, $m
  -85
  -102
  -120
  -139
  -159
  -180
  -202
  -224
  -246
  -270
  -293
  -317
  -341
  -365
  -390
  -417
  -443
  -469
  -497
  -526
  -555
  -585
  -617
  -650
  -684
  -719
  -756
  -795
  -835
  -878
Free cash flow, $m
  194
  244
  303
  372
  450
  539
  638
  747
  867
  996
  1,120
  1,268
  1,426
  1,593
  1,768
  1,953
  2,146
  2,347
  2,557
  2,776
  3,004
  3,241
  3,487
  3,743
  4,009
  4,285
  4,572
  4,871
  5,182
  5,505
Issuance/(repayment) of debt, $m
  68
  80
  93
  106
  120
  133
  147
  160
  173
  186
  199
  211
  223
  235
  246
  258
  269
  281
  292
  304
  316
  329
  342
  355
  369
  383
  399
  415
  432
  450
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  
  68
  80
  93
  106
  120
  133
  147
  160
  173
  186
  199
  211
  223
  235
  246
  258
  269
  281
  292
  304
  316
  329
  342
  355
  369
  383
  399
  415
  432
  450
Total cash flow (excl. dividends), $m
  262
  324
  396
  478
  570
  673
  785
  908
  1,040
  1,182
  1,319
  1,479
  1,649
  1,827
  2,015
  2,210
  2,415
  2,628
  2,850
  3,080
  3,320
  3,570
  3,829
  4,098
  4,378
  4,669
  4,971
  5,286
  5,613
  5,955
Retained Cash Flow (-), $m
  -176
  -206
  -239
  -273
  -308
  -343
  -378
  -412
  -446
  -479
  -511
  -543
  -573
  -604
  -633
  -663
  -692
  -722
  -752
  -782
  -813
  -845
  -878
  -913
  -949
  -986
  -1,025
  -1,067
  -1,110
  -1,156
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
  86
  118
  157
  205
  262
  330
  407
  496
  594
  703
  808
  937
  1,076
  1,224
  1,381
  1,547
  1,722
  1,906
  2,098
  2,298
  2,507
  2,724
  2,950
  3,185
  3,429
  3,682
  3,946
  4,219
  4,503
  4,798
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
  83
  108
  137
  169
  203
  239
  275
  310
  341
  369
  384
  400
  409
  411
  405
  393
  375
  351
  323
  292
  259
  226
  193
  162
  133
  107
  85
  65
  49
  36
Current shareholders' claim on cash, %
  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
  100.0

Stamps.com Inc. is a provider of Internet-based mailing and shipping solutions in the United States. The Company offers mailing and shipping products and services to its customers under the Stamps.com, Endicia, ShipStation, ShipWorks and ShippingEasy brands. It operates through the Internet Mailing and Shipping Services segment. Under the Stamps.com and Endicia brands, customers use its United States Postal Service (USPS) only solutions to mail and ship a range of mail pieces and packages through the USPS. USPS mailing and shipping solutions enable users to print electronic postage directly onto envelopes, plain paper, or labels using only a standard personal computer, printer and Internet connection. The Company offers USPS mailing and shipping services, multi-carrier shipping services, mailing and shipping services, branded insurance and international postage solutions. The Company offers customized postage under the PhotoStamps and PictureItPostage brand names.

FINANCIAL RATIOS  of  Stamps.com Inc. (STMP)

Valuation Ratios
P/E Ratio 18.6
Price to Sales 3.8
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 9.4
Price to Free Cash Flow 10
Growth Rates
Sales Growth Rate 70.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 300%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio 18
Current Ratio 0.1
LT Debt to Equity 37.8%
Total Debt to Equity 39.4%
Interest Coverage 40
Management Effectiveness
Return On Assets 13.5%
Ret/ On Assets - 3 Yr. Avg. 9.7%
Return On Total Capital 16.3%
Ret/ On T. Cap. - 3 Yr. Avg. 11.5%
Return On Equity 24.5%
Return On Equity - 3 Yr. Avg. 14.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 82.7%
Gross Margin - 3 Yr. Avg. 79.9%
EBITDA Margin 38.2%
EBITDA Margin - 3 Yr. Avg. 19.6%
Operating Margin 33%
Oper. Margin - 3 Yr. Avg. 15.7%
Pre-Tax Margin 32.1%
Pre-Tax Margin - 3 Yr. Avg. 15.2%
Net Profit Margin 20.6%
Net Profit Margin - 3 Yr. Avg. 14.6%
Effective Tax Rate 35.9%
Eff/ Tax Rate - 3 Yr. Avg. 5%
Payout Ratio 0%

STMP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STMP stock intrinsic value calculation we used $587 million for the last fiscal year's total revenue generated by Stamps.com Inc.. The default revenue input number comes from 0001 income statement of Stamps.com 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 STMP stock valuation model: a) initial revenue growth rate of 28.5% 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 STMP is calculated based on our internal credit rating of Stamps.com 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 Stamps.com 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 STMP stock the variable cost ratio is equal to 65.1%.

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 STMP 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 Stamps.com Inc..

Corporate tax rate of 27% is the nominal tax rate for Stamps.com 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 STMP 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 STMP are equal to 43.2%.

Life of production assets of 19.5 years is the average useful life of capital assets used in Stamps.com 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 STMP is equal to -4.2%. 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 - $613.665 million for Stamps.com 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 17.546 million for Stamps.com 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 Stamps.com Inc. at the current share price and the inputted number of shares is $1.5 billion.

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