Intrinsic value of LendingTree, Inc. - TREE

Previous Close

$330.64

  Intrinsic Value

$257.86

stock screener

  Rating & Target

sell

-22%

Previous close

$330.64

 
Intrinsic value

$257.86

 
Up/down potential

-22%

 
Rating

sell

Our model is not good at valuating stocks of financial companies, such as TREE.

We calculate the intrinsic value of TREE 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 4.2

 

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, %
  25.90
  23.81
  21.93
  20.24
  18.71
  17.34
  16.11
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
Revenue, $m
  963
  1,192
  1,454
  1,748
  2,075
  2,435
  2,827
  3,251
  3,707
  4,192
  4,707
  5,251
  5,824
  6,424
  7,053
  7,709
  8,393
  9,105
  9,846
  10,616
  11,416
  12,248
  13,113
  14,011
  14,946
  15,917
  16,928
  17,980
  19,076
  20,217
Variable operating expenses, $m
  859
  1,051
  1,269
  1,514
  1,787
  2,088
  2,415
  2,769
  3,149
  3,554
  3,928
  4,383
  4,860
  5,362
  5,886
  6,434
  7,004
  7,599
  8,217
  8,860
  9,528
  10,222
  10,944
  11,694
  12,473
  13,284
  14,128
  15,006
  15,920
  16,873
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
  859
  1,051
  1,269
  1,514
  1,787
  2,088
  2,415
  2,769
  3,149
  3,554
  3,928
  4,383
  4,860
  5,362
  5,886
  6,434
  7,004
  7,599
  8,217
  8,860
  9,528
  10,222
  10,944
  11,694
  12,473
  13,284
  14,128
  15,006
  15,920
  16,873
Operating income, $m
  104
  142
  185
  234
  288
  347
  412
  482
  558
  638
  779
  869
  963
  1,063
  1,167
  1,275
  1,388
  1,506
  1,629
  1,756
  1,888
  2,026
  2,169
  2,318
  2,472
  2,633
  2,800
  2,974
  3,155
  3,344
EBITDA, $m
  180
  223
  272
  327
  388
  456
  529
  608
  693
  784
  881
  982
  1,090
  1,202
  1,320
  1,442
  1,570
  1,703
  1,842
  1,986
  2,136
  2,292
  2,453
  2,622
  2,796
  2,978
  3,167
  3,364
  3,569
  3,783
Interest expense (income), $m
  0
  20
  28
  37
  47
  58
  71
  85
  100
  117
  135
  153
  173
  194
  217
  240
  264
  290
  316
  344
  373
  403
  434
  466
  500
  535
  571
  609
  648
  689
  731
Earnings before tax, $m
  84
  114
  148
  187
  229
  276
  327
  382
  441
  504
  625
  695
  769
  846
  927
  1,011
  1,098
  1,190
  1,285
  1,383
  1,486
  1,592
  1,703
  1,818
  1,938
  2,062
  2,192
  2,326
  2,467
  2,613
Tax expense, $m
  23
  31
  40
  50
  62
  75
  88
  103
  119
  136
  169
  188
  208
  228
  250
  273
  297
  321
  347
  373
  401
  430
  460
  491
  523
  557
  592
  628
  666
  706
Net income, $m
  61
  83
  108
  136
  167
  202
  239
  279
  322
  368
  456
  508
  561
  618
  676
  738
  802
  868
  938
  1,010
  1,085
  1,162
  1,243
  1,327
  1,415
  1,505
  1,600
  1,698
  1,801
  1,908

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
  1,128
  1,396
  1,703
  2,047
  2,430
  2,852
  3,311
  3,807
  4,340
  4,909
  5,512
  6,149
  6,819
  7,523
  8,258
  9,027
  9,827
  10,661
  11,529
  12,431
  13,368
  14,342
  15,355
  16,407
  17,501
  18,638
  19,822
  21,054
  22,337
  23,674
Adjusted assets (=assets-cash), $m
  1,128
  1,396
  1,703
  2,047
  2,430
  2,852
  3,311
  3,807
  4,340
  4,909
  5,512
  6,149
  6,819
  7,523
  8,258
  9,027
  9,827
  10,661
  11,529
  12,431
  13,368
  14,342
  15,355
  16,407
  17,501
  18,638
  19,822
  21,054
  22,337
  23,674
Revenue / Adjusted assets
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
Average production assets, $m
  274
  339
  413
  496
  589
  692
  803
  923
  1,053
  1,191
  1,337
  1,491
  1,654
  1,824
  2,003
  2,189
  2,384
  2,586
  2,796
  3,015
  3,242
  3,479
  3,724
  3,979
  4,245
  4,520
  4,808
  5,106
  5,418
  5,742
Working capital, $m
  -10
  -12
  -15
  -17
  -21
  -24
  -28
  -33
  -37
  -42
  -47
  -53
  -58
  -64
  -71
  -77
  -84
  -91
  -98
  -106
  -114
  -122
  -131
  -140
  -149
  -159
  -169
  -180
  -191
  -202
Total debt, $m
  519
  683
  871
  1,083
  1,318
  1,577
  1,859
  2,164
  2,491
  2,840
  3,210
  3,601
  4,013
  4,445
  4,897
  5,368
  5,860
  6,372
  6,905
  7,459
  8,034
  8,632
  9,254
  9,900
  10,571
  11,270
  11,997
  12,753
  13,541
  14,362
Total liabilities, $m
  692
  857
  1,045
  1,257
  1,492
  1,751
  2,033
  2,338
  2,665
  3,014
  3,384
  3,775
  4,187
  4,619
  5,071
  5,542
  6,034
  6,546
  7,079
  7,633
  8,208
  8,806
  9,428
  10,074
  10,745
  11,444
  12,171
  12,927
  13,715
  14,536
Total equity, $m
  435
  539
  657
  790
  938
  1,101
  1,278
  1,470
  1,675
  1,895
  2,128
  2,373
  2,632
  2,904
  3,188
  3,484
  3,793
  4,115
  4,450
  4,798
  5,160
  5,536
  5,927
  6,333
  6,755
  7,194
  7,651
  8,127
  8,622
  9,138
Total liabilities and equity, $m
  1,127
  1,396
  1,702
  2,047
  2,430
  2,852
  3,311
  3,808
  4,340
  4,909
  5,512
  6,148
  6,819
  7,523
  8,259
  9,026
  9,827
  10,661
  11,529
  12,431
  13,368
  14,342
  15,355
  16,407
  17,500
  18,638
  19,822
  21,054
  22,337
  23,674
Debt-to-equity ratio
  1.190
  1.270
  1.330
  1.370
  1.410
  1.430
  1.450
  1.470
  1.490
  1.500
  1.510
  1.520
  1.520
  1.530
  1.540
  1.540
  1.540
  1.550
  1.550
  1.550
  1.560
  1.560
  1.560
  1.560
  1.560
  1.570
  1.570
  1.570
  1.570
  1.570
Adjusted equity ratio
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  61
  83
  108
  136
  167
  202
  239
  279
  322
  368
  456
  508
  561
  618
  676
  738
  802
  868
  938
  1,010
  1,085
  1,162
  1,243
  1,327
  1,415
  1,505
  1,600
  1,698
  1,801
  1,908
Depreciation, amort., depletion, $m
  76
  81
  87
  93
  100
  108
  117
  126
  136
  146
  102
  114
  126
  139
  153
  167
  182
  197
  213
  230
  248
  266
  284
  304
  324
  345
  367
  390
  414
  438
Funds from operations, $m
  137
  164
  195
  230
  268
  310
  356
  405
  458
  514
  558
  621
  688
  757
  829
  905
  984
  1,066
  1,151
  1,240
  1,332
  1,428
  1,527
  1,631
  1,739
  1,850
  1,967
  2,088
  2,214
  2,346
Change in working capital, $m
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
Cash from operations, $m
  139
  167
  198
  233
  271
  313
  359
  409
  462
  519
  564
  627
  693
  763
  836
  912
  991
  1,073
  1,159
  1,248
  1,340
  1,436
  1,536
  1,640
  1,748
  1,860
  1,977
  2,099
  2,225
  2,357
Maintenance CAPEX, $m
  -17
  -21
  -26
  -32
  -38
  -45
  -53
  -61
  -70
  -80
  -91
  -102
  -114
  -126
  -139
  -153
  -167
  -182
  -197
  -213
  -230
  -248
  -266
  -284
  -304
  -324
  -345
  -367
  -390
  -414
New CAPEX, $m
  -57
  -65
  -74
  -84
  -93
  -102
  -111
  -120
  -129
  -138
  -146
  -155
  -163
  -171
  -178
  -186
  -194
  -202
  -210
  -219
  -227
  -236
  -246
  -255
  -265
  -276
  -287
  -299
  -311
  -324
Cash from investing activities, $m
  -74
  -86
  -100
  -116
  -131
  -147
  -164
  -181
  -199
  -218
  -237
  -257
  -277
  -297
  -317
  -339
  -361
  -384
  -407
  -432
  -457
  -484
  -512
  -539
  -569
  -600
  -632
  -666
  -701
  -738
Free cash flow, $m
  66
  81
  98
  117
  140
  166
  195
  227
  262
  300
  326
  370
  417
  466
  518
  572
  629
  689
  751
  815
  883
  952
  1,025
  1,100
  1,179
  1,260
  1,345
  1,433
  1,524
  1,620
Issuance/(repayment) of debt, $m
  143
  165
  188
  212
  235
  259
  282
  305
  327
  349
  370
  391
  412
  432
  452
  472
  492
  512
  533
  554
  576
  598
  622
  646
  672
  698
  727
  756
  788
  821
Issuance/(repurchase) of shares, $m
  28
  21
  10
  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  
  171
  186
  198
  212
  235
  259
  282
  305
  327
  349
  370
  391
  412
  432
  452
  472
  492
  512
  533
  554
  576
  598
  622
  646
  672
  698
  727
  756
  788
  821
Total cash flow (excl. dividends), $m
  237
  266
  296
  329
  376
  425
  477
  532
  590
  650
  697
  761
  828
  898
  970
  1,044
  1,121
  1,201
  1,283
  1,369
  1,458
  1,551
  1,647
  1,746
  1,850
  1,959
  2,072
  2,189
  2,312
  2,440
Retained Cash Flow (-), $m
  -89
  -104
  -118
  -133
  -148
  -163
  -177
  -192
  -206
  -219
  -233
  -246
  -259
  -271
  -284
  -297
  -309
  -322
  -335
  -348
  -362
  -376
  -391
  -406
  -422
  -439
  -457
  -476
  -495
  -516
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
  148
  162
  177
  196
  228
  262
  300
  341
  384
  430
  464
  516
  570
  626
  686
  747
  812
  879
  949
  1,021
  1,096
  1,175
  1,256
  1,340
  1,428
  1,520
  1,615
  1,714
  1,817
  1,924
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  140
  145
  149
  154
  166
  176
  184
  190
  192
  192
  184
  179
  171
  161
  149
  136
  122
  108
  93
  79
  66
  54
  43
  34
  26
  19
  14
  10
  7
  5
Current shareholders' claim on cash, %
  99.2
  98.7
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5

LendingTree, Inc. (LendingTree) is engaged in operating an online loan marketplace for consumers seeking loans and other credit-based offerings. The Company's online marketplace provides consumers with access to product offerings from various lenders, which it refers to as Network Lenders, including mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, personal loans, student loans, small business loans and other related offerings. In addition, the Company offers tools and resources, including free credit scores that facilitate comparison shopping for these loans and other credit-based offerings. The Company offers its products in categories, including mortgage products and non-mortgage products. Its mortgage products category includes its purchase and refinance products. Its non-mortgage products include lending products and other products.

FINANCIAL RATIOS  of  LendingTree, Inc. (TREE)

Valuation Ratios
P/E Ratio 144.4
Price to Sales 10.2
Price to Book 16.9
Price to Tangible Book
Price to Cash Flow 81.2
Price to Free Cash Flow 278.4
Growth Rates
Sales Growth Rate 51.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 385.7%
Cap. Spend. - 3 Yr. Gr. Rate 62.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.7%
Ret/ On Assets - 3 Yr. Avg. 12.3%
Return On Total Capital 11.4%
Ret/ On T. Cap. - 3 Yr. Avg. 16.6%
Return On Equity 11.4%
Return On Equity - 3 Yr. Avg. 16.6%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 96.6%
Gross Margin - 3 Yr. Avg. 96.1%
EBITDA Margin 15.1%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 13.5%
Oper. Margin - 3 Yr. Avg. 8%
Pre-Tax Margin 13.5%
Pre-Tax Margin - 3 Yr. Avg. 8%
Net Profit Margin 7%
Net Profit Margin - 3 Yr. Avg. 10.4%
Effective Tax Rate 40.4%
Eff/ Tax Rate - 3 Yr. Avg. 19.4%
Payout Ratio 0%

TREE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TREE stock intrinsic value calculation we used $765 million for the last fiscal year's total revenue generated by LendingTree, Inc.. The default revenue input number comes from 0001 income statement of LendingTree, 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 TREE stock valuation model: a) initial revenue growth rate of 25.9% 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 5.4%, whose default value for TREE is calculated based on our internal credit rating of LendingTree, 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 LendingTree, 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 TREE stock the variable cost ratio is equal to 90.7%.

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 TREE 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 LendingTree, Inc..

Corporate tax rate of 27% is the nominal tax rate for LendingTree, 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 TREE 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 TREE are equal to 28.4%.

Life of production assets of 13.1 years is the average useful life of capital assets used in LendingTree, 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 TREE is equal to -1%. 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 - $346.208 million for LendingTree, 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 12.827 million for LendingTree, 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 LendingTree, Inc. at the current share price and the inputted number of shares is $4.2 billion.

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