Intrinsic value of 2U, Inc. - TWOU

Previous Close

$37.64

  Intrinsic Value

$2.81

stock screener

  Rating & Target

str. sell

-93%

Previous close

$37.64

 
Intrinsic value

$2.81

 
Up/down potential

-93%

 
Rating

str. sell

We calculate the intrinsic value of TWOU 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 2.2

 

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, %
  32.80
  30.02
  27.52
  25.27
  23.24
  21.42
  19.77
  18.30
  16.97
  15.77
  14.69
  13.72
  12.85
  12.07
  11.36
  10.72
  10.15
  9.64
  9.17
  8.76
  8.38
  8.04
  7.74
  7.46
  7.22
  7.00
  6.80
  6.62
  6.45
  6.31
Revenue, $m
  547
  711
  907
  1,136
  1,400
  1,700
  2,037
  2,409
  2,818
  3,262
  3,742
  4,255
  4,802
  5,382
  5,993
  6,635
  7,309
  8,013
  8,748
  9,514
  10,312
  11,141
  12,003
  12,899
  13,830
  14,797
  15,803
  16,849
  17,936
  19,068
Variable operating expenses, $m
  602
  782
  995
  1,245
  1,534
  1,861
  2,228
  2,635
  3,081
  3,566
  4,084
  4,644
  5,241
  5,873
  6,540
  7,242
  7,977
  8,746
  9,548
  10,384
  11,254
  12,159
  13,100
  14,078
  15,094
  16,150
  17,247
  18,388
  19,575
  20,810
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
  602
  782
  995
  1,245
  1,534
  1,861
  2,228
  2,635
  3,081
  3,566
  4,084
  4,644
  5,241
  5,873
  6,540
  7,242
  7,977
  8,746
  9,548
  10,384
  11,254
  12,159
  13,100
  14,078
  15,094
  16,150
  17,247
  18,388
  19,575
  20,810
Operating income, $m
  -55
  -70
  -88
  -109
  -133
  -161
  -191
  -225
  -263
  -303
  -342
  -389
  -439
  -492
  -548
  -606
  -668
  -732
  -799
  -869
  -942
  -1,018
  -1,097
  -1,179
  -1,264
  -1,352
  -1,444
  -1,540
  -1,639
  -1,742
EBITDA, $m
  -24
  -31
  -39
  -49
  -61
  -73
  -88
  -104
  -122
  -141
  -162
  -184
  -207
  -233
  -259
  -287
  -316
  -346
  -378
  -411
  -446
  -481
  -519
  -557
  -598
  -639
  -683
  -728
  -775
  -824
Interest expense (income), $m
  0
  0
  2
  4
  7
  10
  13
  17
  22
  27
  32
  38
  45
  52
  59
  67
  75
  83
  92
  102
  112
  122
  133
  144
  155
  167
  180
  193
  206
  220
  235
Earnings before tax, $m
  -55
  -72
  -92
  -116
  -143
  -174
  -209
  -247
  -289
  -336
  -380
  -433
  -490
  -551
  -614
  -681
  -751
  -825
  -901
  -981
  -1,064
  -1,151
  -1,241
  -1,334
  -1,431
  -1,532
  -1,637
  -1,746
  -1,859
  -1,977
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
  -55
  -72
  -92
  -116
  -143
  -174
  -209
  -247
  -289
  -336
  -380
  -433
  -490
  -551
  -614
  -681
  -751
  -825
  -901
  -981
  -1,064
  -1,151
  -1,241
  -1,334
  -1,431
  -1,532
  -1,637
  -1,746
  -1,859
  -1,977

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
  533
  693
  883
  1,106
  1,364
  1,656
  1,983
  2,346
  2,744
  3,177
  3,643
  4,143
  4,676
  5,240
  5,835
  6,461
  7,117
  7,803
  8,518
  9,264
  10,041
  10,848
  11,687
  12,560
  13,466
  14,408
  15,388
  16,406
  17,465
  18,567
Adjusted assets (=assets-cash), $m
  533
  693
  883
  1,106
  1,364
  1,656
  1,983
  2,346
  2,744
  3,177
  3,643
  4,143
  4,676
  5,240
  5,835
  6,461
  7,117
  7,803
  8,518
  9,264
  10,041
  10,848
  11,687
  12,560
  13,466
  14,408
  15,388
  16,406
  17,465
  18,567
Revenue / Adjusted assets
  1.026
  1.026
  1.027
  1.027
  1.026
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
Average production assets, $m
  187
  243
  310
  389
  479
  582
  697
  824
  964
  1,116
  1,280
  1,455
  1,642
  1,840
  2,050
  2,269
  2,500
  2,741
  2,992
  3,254
  3,527
  3,810
  4,105
  4,411
  4,730
  5,061
  5,405
  5,762
  6,134
  6,521
Working capital, $m
  -28
  -37
  -47
  -59
  -73
  -88
  -106
  -125
  -147
  -170
  -195
  -221
  -250
  -280
  -312
  -345
  -380
  -417
  -455
  -495
  -536
  -579
  -624
  -671
  -719
  -769
  -822
  -876
  -933
  -992
Total debt, $m
  34
  74
  123
  180
  245
  320
  403
  496
  597
  708
  827
  954
  1,090
  1,234
  1,386
  1,545
  1,712
  1,887
  2,070
  2,260
  2,458
  2,664
  2,878
  3,100
  3,332
  3,572
  3,821
  4,081
  4,351
  4,632
Total liabilities, $m
  136
  177
  225
  282
  348
  422
  506
  598
  700
  810
  929
  1,057
  1,192
  1,336
  1,488
  1,648
  1,815
  1,990
  2,172
  2,362
  2,560
  2,766
  2,980
  3,203
  3,434
  3,674
  3,924
  4,183
  4,453
  4,734
Total equity, $m
  397
  516
  658
  824
  1,016
  1,233
  1,477
  1,748
  2,044
  2,367
  2,714
  3,087
  3,483
  3,904
  4,347
  4,813
  5,302
  5,813
  6,346
  6,902
  7,480
  8,082
  8,707
  9,357
  10,032
  10,734
  11,464
  12,222
  13,011
  13,832
Total liabilities and equity, $m
  533
  693
  883
  1,106
  1,364
  1,655
  1,983
  2,346
  2,744
  3,177
  3,643
  4,144
  4,675
  5,240
  5,835
  6,461
  7,117
  7,803
  8,518
  9,264
  10,040
  10,848
  11,687
  12,560
  13,466
  14,408
  15,388
  16,405
  17,464
  18,566
Debt-to-equity ratio
  0.080
  0.140
  0.190
  0.220
  0.240
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -55
  -72
  -92
  -116
  -143
  -174
  -209
  -247
  -289
  -336
  -380
  -433
  -490
  -551
  -614
  -681
  -751
  -825
  -901
  -981
  -1,064
  -1,151
  -1,241
  -1,334
  -1,431
  -1,532
  -1,637
  -1,746
  -1,859
  -1,977
Depreciation, amort., depletion, $m
  32
  39
  49
  60
  73
  87
  103
  121
  141
  162
  180
  205
  231
  259
  289
  320
  352
  386
  421
  458
  497
  537
  578
  621
  666
  713
  761
  812
  864
  918
Funds from operations, $m
  -24
  -33
  -43
  -56
  -70
  -87
  -105
  -126
  -149
  -173
  -200
  -229
  -259
  -291
  -326
  -362
  -399
  -439
  -480
  -523
  -568
  -614
  -662
  -713
  -765
  -819
  -876
  -934
  -995
  -1,059
Change in working capital, $m
  -7
  -9
  -10
  -12
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
Cash from operations, $m
  -17
  -24
  -33
  -44
  -56
  -71
  -88
  -107
  -127
  -150
  -175
  -202
  -231
  -261
  -294
  -328
  -364
  -402
  -442
  -483
  -526
  -571
  -618
  -666
  -717
  -769
  -823
  -880
  -939
  -1,000
Maintenance CAPEX, $m
  -20
  -26
  -34
  -44
  -55
  -67
  -82
  -98
  -116
  -136
  -157
  -180
  -205
  -231
  -259
  -289
  -320
  -352
  -386
  -421
  -458
  -497
  -537
  -578
  -621
  -666
  -713
  -761
  -812
  -864
New CAPEX, $m
  -46
  -56
  -67
  -78
  -90
  -103
  -115
  -127
  -140
  -152
  -164
  -176
  -187
  -198
  -209
  -220
  -230
  -241
  -251
  -262
  -273
  -284
  -295
  -306
  -318
  -331
  -344
  -358
  -372
  -387
Cash from investing activities, $m
  -66
  -82
  -101
  -122
  -145
  -170
  -197
  -225
  -256
  -288
  -321
  -356
  -392
  -429
  -468
  -509
  -550
  -593
  -637
  -683
  -731
  -781
  -832
  -884
  -939
  -997
  -1,057
  -1,119
  -1,184
  -1,251
Free cash flow, $m
  -83
  -107
  -134
  -166
  -202
  -241
  -285
  -332
  -383
  -438
  -496
  -558
  -623
  -691
  -762
  -837
  -914
  -995
  -1,079
  -1,166
  -1,257
  -1,351
  -1,449
  -1,551
  -1,656
  -1,766
  -1,880
  -1,999
  -2,122
  -2,251
Issuance/(repayment) of debt, $m
  34
  41
  49
  57
  66
  74
  83
  93
  101
  110
  119
  128
  136
  144
  152
  160
  167
  175
  183
  190
  198
  206
  214
  222
  231
  240
  250
  260
  270
  281
Issuance/(repurchase) of shares, $m
  153
  191
  234
  282
  334
  391
  452
  517
  586
  658
  728
  806
  887
  971
  1,058
  1,147
  1,240
  1,336
  1,435
  1,537
  1,643
  1,752
  1,866
  1,984
  2,107
  2,234
  2,366
  2,504
  2,648
  2,798
Cash from financing (excl. dividends), $m  
  187
  232
  283
  339
  400
  465
  535
  610
  687
  768
  847
  934
  1,023
  1,115
  1,210
  1,307
  1,407
  1,511
  1,618
  1,727
  1,841
  1,958
  2,080
  2,206
  2,338
  2,474
  2,616
  2,764
  2,918
  3,079
Total cash flow (excl. dividends), $m
  105
  125
  148
  173
  198
  225
  251
  278
  304
  330
  351
  376
  400
  424
  447
  470
  493
  515
  538
  561
  584
  607
  631
  656
  681
  708
  736
  765
  796
  828
Retained Cash Flow (-), $m
  -153
  -191
  -234
  -282
  -334
  -391
  -452
  -517
  -586
  -658
  -728
  -806
  -887
  -971
  -1,058
  -1,147
  -1,240
  -1,336
  -1,435
  -1,537
  -1,643
  -1,752
  -1,866
  -1,984
  -2,107
  -2,234
  -2,366
  -2,504
  -2,648
  -2,798
Prev. year cash balance distribution, $m
  406
  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
  357
  -66
  -86
  -109
  -136
  -167
  -201
  -240
  -282
  -327
  -377
  -430
  -487
  -547
  -610
  -677
  -747
  -820
  -897
  -976
  -1,059
  -1,145
  -1,235
  -1,328
  -1,425
  -1,526
  -1,630
  -1,739
  -1,852
  -1,970
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
  342
  -60
  -75
  -90
  -105
  -121
  -136
  -150
  -162
  -172
  -179
  -184
  -185
  -184
  -179
  -172
  -163
  -151
  -138
  -124
  -110
  -95
  -81
  -68
  -55
  -45
  -35
  -27
  -20
  -15
Current shareholders' claim on cash, %
  85.8
  74.3
  64.8
  57.0
  50.4
  44.8
  40.1
  36.0
  32.5
  29.5
  26.8
  24.5
  22.4
  20.6
  18.9
  17.4
  16.1
  14.9
  13.8
  12.8
  11.9
  11.1
  10.3
  9.6
  8.9
  8.3
  7.8
  7.3
  6.8
  6.4

2U, Inc. is a provider of an integrated solution consisting of cloud-based software-as-a-service (SaaS) combined with technology-enabled services (together, the Platform) that allows colleges and universities to deliver online degree programs. The Company's SaaS technology consists of a learning environment (Online Campus), which acts as the hub for all student and faculty academic and social interaction, and a suite of integrated applications, which the Company uses to launch, operate and support the Company's clients' programs. The Company also provides a suite of technology-enabled services optimized with data analysis and machine learning techniques that support the complete lifecycle of a higher education program, including attracting students, advising students through the admissions application process, providing technical, success coaching and other support, facilitating accessibility to individuals with disabilities, and facilitating in-program field placements.

FINANCIAL RATIOS  of  2U, Inc. (TWOU)

Valuation Ratios
P/E Ratio -84.5
Price to Sales 8.6
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow 354.9
Price to Free Cash Flow -93.4
Growth Rates
Sales Growth Rate 37.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 71.4%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
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 -8.8%
Ret/ On Assets - 3 Yr. Avg. -21.8%
Return On Total Capital -10.7%
Ret/ On T. Cap. - 3 Yr. Avg. -30.5%
Return On Equity -10.7%
Return On Equity - 3 Yr. Avg. -30.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 64.1%
Gross Margin - 3 Yr. Avg. 60.1%
EBITDA Margin -5.3%
EBITDA Margin - 3 Yr. Avg. -13.2%
Operating Margin -10.2%
Oper. Margin - 3 Yr. Avg. -17.7%
Pre-Tax Margin -10.2%
Pre-Tax Margin - 3 Yr. Avg. -18.2%
Net Profit Margin -10.2%
Net Profit Margin - 3 Yr. Avg. -18.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

TWOU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TWOU stock intrinsic value calculation we used $412 million for the last fiscal year's total revenue generated by 2U, Inc.. The default revenue input number comes from 0001 income statement of 2U, 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 TWOU stock valuation model: a) initial revenue growth rate of 32.8% 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 TWOU is calculated based on our internal credit rating of 2U, 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 2U, 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 TWOU stock the variable cost ratio is equal to 110.4%.

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 TWOU 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 2U, Inc..

Corporate tax rate of 27% is the nominal tax rate for 2U, 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 TWOU 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 TWOU are equal to 34.2%.

Life of production assets of 7.1 years is the average useful life of capital assets used in 2U, 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 TWOU is equal to -5.2%. 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 - $705.009 million for 2U, 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 58.210 million for 2U, 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 2U, Inc. at the current share price and the inputted number of shares is $2.2 billion.

RELATED COMPANIES Price Int.Val. Rating
INST Instructure, I 41.34 5.17  str.sell
LRN K12 Inc 29.41 120.82  str.buy
AMZN Amazon.com, In 1,911.30 1,840.60  hold

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.