Intrinsic value of Synacor - SYNC

Previous Close

$1.73

  Intrinsic Value

$0.17

stock screener

  Rating & Target

str. sell

-90%

Previous close

$1.73

 
Intrinsic value

$0.17

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of SYNC 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 0.1

 

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, %
  15.10
  14.09
  13.18
  12.36
  11.63
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.11
  5.99
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
Revenue, $m
  161
  184
  208
  234
  261
  290
  320
  351
  384
  418
  454
  491
  529
  569
  611
  654
  699
  746
  795
  845
  898
  953
  1,010
  1,069
  1,131
  1,196
  1,264
  1,334
  1,408
  1,485
Variable operating expenses, $m
  172
  196
  222
  249
  277
  307
  339
  372
  406
  442
  477
  516
  556
  598
  642
  687
  735
  784
  835
  888
  943
  1,001
  1,061
  1,123
  1,189
  1,257
  1,328
  1,402
  1,479
  1,560
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
  172
  196
  222
  249
  277
  307
  339
  372
  406
  442
  477
  516
  556
  598
  642
  687
  735
  784
  835
  888
  943
  1,001
  1,061
  1,123
  1,189
  1,257
  1,328
  1,402
  1,479
  1,560
Operating income, $m
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
EBITDA, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Interest expense (income), $m
  0
  0
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
Earnings before tax, $m
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -31
  -31
  -33
  -36
  -39
  -43
  -46
  -49
  -53
  -57
  -60
  -64
  -69
  -73
  -77
  -82
  -87
  -92
  -98
  -103
  -109
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
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -31
  -31
  -33
  -36
  -39
  -43
  -46
  -49
  -53
  -57
  -60
  -64
  -69
  -73
  -77
  -82
  -87
  -92
  -98
  -103
  -109

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
  125
  143
  162
  182
  203
  225
  248
  273
  298
  325
  353
  381
  411
  442
  475
  508
  543
  580
  617
  657
  698
  740
  785
  831
  879
  929
  982
  1,037
  1,094
  1,154
Adjusted assets (=assets-cash), $m
  125
  143
  162
  182
  203
  225
  248
  273
  298
  325
  353
  381
  411
  442
  475
  508
  543
  580
  617
  657
  698
  740
  785
  831
  879
  929
  982
  1,037
  1,094
  1,154
Revenue / Adjusted assets
  1.288
  1.287
  1.284
  1.286
  1.286
  1.289
  1.290
  1.286
  1.289
  1.286
  1.286
  1.289
  1.287
  1.287
  1.286
  1.287
  1.287
  1.286
  1.288
  1.286
  1.287
  1.288
  1.287
  1.286
  1.287
  1.287
  1.287
  1.286
  1.287
  1.287
Average production assets, $m
  37
  42
  48
  54
  60
  67
  74
  81
  89
  97
  105
  113
  122
  132
  141
  151
  162
  172
  184
  195
  207
  220
  233
  247
  261
  276
  292
  308
  325
  343
Working capital, $m
  -10
  -11
  -12
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
Total debt, $m
  14
  23
  32
  42
  53
  64
  76
  88
  101
  114
  128
  142
  157
  173
  189
  206
  223
  241
  260
  280
  300
  322
  344
  367
  391
  416
  442
  470
  498
  528
Total liabilities, $m
  63
  71
  81
  91
  101
  113
  124
  136
  149
  162
  176
  191
  206
  221
  237
  254
  272
  290
  309
  328
  349
  370
  392
  415
  440
  465
  491
  518
  547
  577
Total equity, $m
  63
  71
  81
  91
  101
  113
  124
  136
  149
  162
  176
  191
  206
  221
  237
  254
  272
  290
  309
  328
  349
  370
  392
  415
  440
  465
  491
  518
  547
  577
Total liabilities and equity, $m
  126
  142
  162
  182
  202
  226
  248
  272
  298
  324
  352
  382
  412
  442
  474
  508
  544
  580
  618
  656
  698
  740
  784
  830
  880
  930
  982
  1,036
  1,094
  1,154
Debt-to-equity ratio
  0.220
  0.320
  0.400
  0.460
  0.520
  0.570
  0.610
  0.640
  0.670
  0.700
  0.720
  0.750
  0.760
  0.780
  0.800
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.880
  0.890
  0.900
  0.900
  0.910
  0.910
  0.920
Adjusted equity ratio
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -31
  -31
  -33
  -36
  -39
  -43
  -46
  -49
  -53
  -57
  -60
  -64
  -69
  -73
  -77
  -82
  -87
  -92
  -98
  -103
  -109
Depreciation, amort., depletion, $m
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
  49
  52
  55
  58
  62
  65
  69
Funds from operations, $m
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
Change in working capital, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Cash from operations, $m
  0
  0
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
Maintenance CAPEX, $m
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -58
  -62
  -65
New CAPEX, $m
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
Cash from investing activities, $m
  -11
  -12
  -14
  -16
  -17
  -19
  -20
  -22
  -24
  -26
  -27
  -30
  -32
  -33
  -36
  -38
  -40
  -43
  -45
  -49
  -51
  -54
  -57
  -61
  -63
  -67
  -71
  -74
  -79
  -83
Free cash flow, $m
  -11
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -71
  -75
  -80
  -85
  -90
  -95
  -101
  -106
  -112
  -119
Issuance/(repayment) of debt, $m
  8
  9
  9
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Issuance/(repurchase) of shares, $m
  20
  22
  24
  27
  29
  32
  35
  38
  41
  44
  45
  48
  51
  55
  59
  63
  67
  71
  75
  80
  85
  90
  95
  101
  106
  112
  118
  125
  132
  139
Cash from financing (excl. dividends), $m  
  28
  31
  33
  37
  40
  43
  47
  50
  54
  57
  59
  62
  66
  71
  75
  80
  84
  89
  94
  100
  105
  111
  117
  124
  130
  137
  144
  152
  161
  169
Total cash flow (excl. dividends), $m
  17
  18
  19
  20
  21
  22
  22
  23
  24
  25
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
Retained Cash Flow (-), $m
  -20
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -44
  -45
  -48
  -51
  -55
  -59
  -63
  -67
  -71
  -75
  -80
  -85
  -90
  -95
  -101
  -106
  -112
  -118
  -125
  -132
  -139
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
  -3
  -4
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -19
  -21
  -24
  -26
  -29
  -32
  -35
  -37
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66
  -70
  -74
  -79
  -84
  -89
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
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -9
  -10
  -10
  -10
  -10
  -10
  -10
  -9
  -9
  -8
  -7
  -7
  -6
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
Current shareholders' claim on cash, %
  77.4
  60.4
  47.3
  37.3
  29.6
  23.6
  18.8
  15.1
  12.2
  9.8
  8.0
  6.6
  5.4
  4.5
  3.7
  3.0
  2.5
  2.1
  1.7
  1.4
  1.2
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2

Synacor, Inc. is a technology development, multiplatform services and revenue partner for video, Internet and communications providers, device manufacturers and enterprises. The Company enables its customers to provide their consumers engaging, multiscreen experiences with products that require scale, actionable data and implementation. Through its Managed Portals and Advertising solutions, the Company enables its customers to earn revenue by monetizing media among their consumers. Its Managed Portals are delivered across devices and under its customers' own brand names. The Company delivers content, such as top news, entertainment, and long- and short-form video and applications, on its Managed Portals. In addition, consumers have the ability through portals to manage their e-mail and messaging, pay bills, receive special promotions and perform other account management needs.

FINANCIAL RATIOS  of  Synacor (SYNC)

Valuation Ratios
P/E Ratio -4.9
Price to Sales 0.4
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 26.7
Growth Rates
Sales Growth Rate 15.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 14
Current Ratio 0
LT Debt to Equity 15%
Total Debt to Equity 17.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -12.1%
Ret/ On Assets - 3 Yr. Avg. -11.5%
Return On Total Capital -21.8%
Ret/ On T. Cap. - 3 Yr. Avg. -17.9%
Return On Equity -25.6%
Return On Equity - 3 Yr. Avg. -20%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 53.5%
Gross Margin - 3 Yr. Avg. 50.1%
EBITDA Margin -0.8%
EBITDA Margin - 3 Yr. Avg. 0.3%
Operating Margin -7.9%
Oper. Margin - 3 Yr. Avg. -5.4%
Pre-Tax Margin -7.9%
Pre-Tax Margin - 3 Yr. Avg. -5.7%
Net Profit Margin -8.7%
Net Profit Margin - 3 Yr. Avg. -7.8%
Effective Tax Rate -10%
Eff/ Tax Rate - 3 Yr. Avg. -27.1%
Payout Ratio 0%

SYNC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SYNC stock intrinsic value calculation we used $140.027 million for the last fiscal year's total revenue generated by Synacor. The default revenue input number comes from 0001 income statement of Synacor. 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 SYNC stock valuation model: a) initial revenue growth rate of 15.1% 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 SYNC is calculated based on our internal credit rating of Synacor, 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 Synacor.
    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 SYNC stock the variable cost ratio is equal to 107.1%.

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 SYNC 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 6.8% for Synacor.

Corporate tax rate of 27% is the nominal tax rate for Synacor. 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 SYNC 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 SYNC are equal to 23.1%.

Life of production assets of 4.8 years is the average useful life of capital assets used in Synacor 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 SYNC is equal to -6%. 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 - $54.345 million for Synacor - 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 38.965 million for Synacor 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 Synacor at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Synacor Reports 17% Increase in Recurring Software Revenue   [Nov-08-18 04:05PM  Business Wire]
▶ Synacor to Present at the 2018 MicroCap Conference in NYC   [Sep-27-18 05:33PM  Business Wire]
▶ Synacor Sees Hammer Chart Pattern: Time to Buy?   [Jul-12-18 05:22AM  Zacks]
▶ Top Ranked Momentum Stocks to Buy for July 3rd   [Jul-03-18 09:53AM  Zacks]
▶ Analysts Expect Breakeven For Synacor Inc (NASDAQ:SYNC)   [Jun-26-18 08:08AM  Simply Wall St.]
▶ Synacor Expands Relationship with Mediacom Communications   [Jun-05-18 08:30AM  Business Wire]

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