Intrinsic value of VeriSign, Inc. - VRSN

Previous Close

$205.00

  Intrinsic Value

$24.66

stock screener

  Rating & Target

str. sell

-88%

Previous close

$205.00

 
Intrinsic value

$24.66

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of VRSN 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 24.5

 

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, %
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  1,264
  1,315
  1,371
  1,429
  1,491
  1,557
  1,626
  1,700
  1,778
  1,860
  1,946
  2,037
  2,133
  2,235
  2,341
  2,454
  2,572
  2,696
  2,827
  2,964
  3,109
  3,261
  3,421
  3,589
  3,765
  3,951
  4,146
  4,351
  4,566
  4,792
Variable operating expenses, $m
  496
  517
  538
  561
  585
  610
  637
  666
  696
  728
  756
  792
  829
  869
  910
  954
  999
  1,048
  1,099
  1,152
  1,208
  1,267
  1,329
  1,395
  1,463
  1,536
  1,611
  1,691
  1,775
  1,862
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
  496
  517
  538
  561
  585
  610
  637
  666
  696
  728
  756
  792
  829
  869
  910
  954
  999
  1,048
  1,099
  1,152
  1,208
  1,267
  1,329
  1,395
  1,463
  1,536
  1,611
  1,691
  1,775
  1,862
Operating income, $m
  767
  799
  833
  868
  906
  947
  989
  1,034
  1,082
  1,132
  1,190
  1,246
  1,304
  1,366
  1,431
  1,500
  1,572
  1,648
  1,728
  1,812
  1,901
  1,994
  2,091
  2,194
  2,302
  2,415
  2,535
  2,660
  2,792
  2,930
EBITDA, $m
  819
  852
  888
  926
  966
  1,009
  1,054
  1,102
  1,152
  1,205
  1,261
  1,320
  1,383
  1,448
  1,517
  1,590
  1,667
  1,747
  1,832
  1,921
  2,015
  2,113
  2,217
  2,326
  2,440
  2,561
  2,687
  2,820
  2,959
  3,106
Interest expense (income), $m
  116
  98
  -1
  2
  6
  9
  13
  18
  22
  27
  32
  37
  43
  49
  55
  62
  69
  76
  84
  92
  100
  109
  118
  128
  139
  150
  161
  173
  186
  199
  213
Earnings before tax, $m
  669
  800
  831
  863
  897
  933
  971
  1,012
  1,055
  1,100
  1,152
  1,203
  1,255
  1,311
  1,370
  1,431
  1,496
  1,565
  1,637
  1,712
  1,792
  1,875
  1,963
  2,055
  2,153
  2,255
  2,362
  2,474
  2,593
  2,717
Tax expense, $m
  181
  216
  224
  233
  242
  252
  262
  273
  285
  297
  311
  325
  339
  354
  370
  386
  404
  422
  442
  462
  484
  506
  530
  555
  581
  609
  638
  668
  700
  734
Net income, $m
  488
  584
  606
  630
  655
  681
  709
  739
  770
  803
  841
  878
  917
  957
  1,000
  1,045
  1,092
  1,142
  1,195
  1,250
  1,308
  1,369
  1,433
  1,500
  1,571
  1,646
  1,724
  1,806
  1,893
  1,983

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
  1,656
  1,724
  1,796
  1,873
  1,954
  2,040
  2,132
  2,228
  2,330
  2,437
  2,551
  2,670
  2,796
  2,929
  3,069
  3,216
  3,371
  3,533
  3,705
  3,885
  4,075
  4,274
  4,483
  4,704
  4,935
  5,178
  5,434
  5,702
  5,984
  6,281
Adjusted assets (=assets-cash), $m
  1,656
  1,724
  1,796
  1,873
  1,954
  2,040
  2,132
  2,228
  2,330
  2,437
  2,551
  2,670
  2,796
  2,929
  3,069
  3,216
  3,371
  3,533
  3,705
  3,885
  4,075
  4,274
  4,483
  4,704
  4,935
  5,178
  5,434
  5,702
  5,984
  6,281
Revenue / Adjusted assets
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
Average production assets, $m
  297
  309
  322
  336
  350
  366
  382
  400
  418
  437
  457
  479
  501
  525
  550
  577
  604
  634
  664
  697
  731
  766
  804
  843
  885
  928
  974
  1,022
  1,073
  1,126
Working capital, $m
  -936
  -975
  -1,016
  -1,059
  -1,105
  -1,154
  -1,205
  -1,260
  -1,317
  -1,378
  -1,442
  -1,510
  -1,581
  -1,656
  -1,735
  -1,818
  -1,906
  -1,998
  -2,095
  -2,197
  -2,304
  -2,416
  -2,535
  -2,659
  -2,790
  -2,928
  -3,072
  -3,224
  -3,384
  -3,551
Total debt, $m
  -24
  37
  102
  171
  244
  322
  404
  490
  582
  679
  781
  888
  1,002
  1,121
  1,247
  1,379
  1,519
  1,665
  1,819
  1,982
  2,152
  2,332
  2,520
  2,718
  2,927
  3,145
  3,375
  3,617
  3,871
  4,138
Total liabilities, $m
  1,490
  1,552
  1,617
  1,686
  1,759
  1,836
  1,918
  2,005
  2,097
  2,194
  2,296
  2,403
  2,517
  2,636
  2,762
  2,894
  3,034
  3,180
  3,334
  3,497
  3,667
  3,847
  4,035
  4,233
  4,442
  4,660
  4,890
  5,132
  5,386
  5,653
Total equity, $m
  166
  172
  180
  187
  195
  204
  213
  223
  233
  244
  255
  267
  280
  293
  307
  322
  337
  353
  370
  389
  407
  427
  448
  470
  494
  518
  543
  570
  598
  628
Total liabilities and equity, $m
  1,656
  1,724
  1,797
  1,873
  1,954
  2,040
  2,131
  2,228
  2,330
  2,438
  2,551
  2,670
  2,797
  2,929
  3,069
  3,216
  3,371
  3,533
  3,704
  3,886
  4,074
  4,274
  4,483
  4,703
  4,936
  5,178
  5,433
  5,702
  5,984
  6,281
Debt-to-equity ratio
  -0.150
  0.210
  0.570
  0.910
  1.250
  1.580
  1.890
  2.200
  2.500
  2.780
  3.060
  3.330
  3.580
  3.830
  4.060
  4.290
  4.510
  4.710
  4.910
  5.100
  5.280
  5.460
  5.620
  5.780
  5.930
  6.070
  6.210
  6.340
  6.470
  6.590
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  488
  584
  606
  630
  655
  681
  709
  739
  770
  803
  841
  878
  917
  957
  1,000
  1,045
  1,092
  1,142
  1,195
  1,250
  1,308
  1,369
  1,433
  1,500
  1,571
  1,646
  1,724
  1,806
  1,893
  1,983
Depreciation, amort., depletion, $m
  52
  54
  56
  58
  60
  62
  65
  68
  71
  74
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  120
  126
  132
  138
  145
  152
  160
  168
  176
Funds from operations, $m
  540
  638
  662
  688
  715
  744
  774
  806
  840
  876
  913
  953
  995
  1,039
  1,086
  1,135
  1,187
  1,241
  1,299
  1,359
  1,422
  1,489
  1,559
  1,632
  1,710
  1,791
  1,876
  1,966
  2,060
  2,159
Change in working capital, $m
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -54
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -113
  -118
  -124
  -131
  -138
  -144
  -152
  -160
  -168
Cash from operations, $m
  576
  676
  703
  731
  761
  792
  826
  861
  898
  937
  977
  1,020
  1,066
  1,114
  1,165
  1,218
  1,274
  1,333
  1,395
  1,461
  1,529
  1,601
  1,677
  1,757
  1,840
  1,928
  2,021
  2,118
  2,220
  2,327
Maintenance CAPEX, $m
  -45
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -132
  -138
  -145
  -152
  -160
  -168
New CAPEX, $m
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -39
  -41
  -44
  -46
  -48
  -51
  -53
Cash from investing activities, $m
  -57
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -98
  -102
  -107
  -112
  -118
  -123
  -130
  -136
  -143
  -150
  -158
  -165
  -173
  -182
  -191
  -200
  -211
  -221
Free cash flow, $m
  520
  618
  642
  667
  694
  722
  752
  784
  817
  853
  888
  927
  969
  1,012
  1,058
  1,106
  1,156
  1,210
  1,266
  1,325
  1,386
  1,451
  1,520
  1,592
  1,667
  1,747
  1,830
  1,917
  2,009
  2,106
Issuance/(repayment) of debt, $m
  -1,809
  61
  65
  69
  73
  78
  82
  87
  92
  97
  102
  108
  113
  119
  126
  132
  139
  147
  154
  162
  171
  179
  189
  198
  208
  219
  230
  242
  254
  267
Issuance/(repurchase) of shares, $m
  1,385
  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  
  -424
  61
  65
  69
  73
  78
  82
  87
  92
  97
  102
  108
  113
  119
  126
  132
  139
  147
  154
  162
  171
  179
  189
  198
  208
  219
  230
  242
  254
  267
Total cash flow (excl. dividends), $m
  95
  679
  707
  736
  767
  800
  834
  871
  909
  949
  990
  1,035
  1,082
  1,132
  1,184
  1,238
  1,296
  1,356
  1,420
  1,487
  1,557
  1,631
  1,708
  1,790
  1,875
  1,965
  2,060
  2,159
  2,263
  2,373
Retained Cash Flow (-), $m
  -1,873
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
Prev. year cash balance distribution, $m
  322
  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
  -1,456
  672
  699
  728
  759
  791
  825
  861
  899
  939
  979
  1,023
  1,069
  1,118
  1,170
  1,224
  1,280
  1,340
  1,403
  1,469
  1,538
  1,611
  1,687
  1,768
  1,852
  1,941
  2,034
  2,132
  2,235
  2,343
Discount rate, %
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
  -1,379
  599
  584
  566
  546
  523
  497
  469
  439
  408
  375
  341
  308
  274
  242
  210
  180
  152
  127
  104
  84
  66
  52
  39
  29
  21
  15
  10
  7
  5
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

VeriSign, Inc. is a provider of domain name registry services and Internet security. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet's Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services. DDoS Protection Services supports online business continuity by providing monitoring and mitigation services against DDoS attacks. Managed DNS Services is a hosting service that delivers DNS resolution for the availability of Web-based systems.

FINANCIAL RATIOS  of  VeriSign, Inc. (VRSN)

Valuation Ratios
P/E Ratio 47.9
Price to Sales 18.5
Price to Book -17.6
Price to Tangible Book
Price to Cash Flow 31.6
Price to Free Cash Flow 42.4
Growth Rates
Sales Growth Rate 7.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 314.6%
Cap. Spend. - 3 Yr. Gr. Rate 20.8%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity -103%
Total Debt to Equity -155.5%
Interest Coverage 6
Management Effectiveness
Return On Assets 22.5%
Ret/ On Assets - 3 Yr. Avg. 20.6%
Return On Total Capital 60.2%
Ret/ On T. Cap. - 3 Yr. Avg. 56.2%
Return On Equity -38.8%
Return On Equity - 3 Yr. Avg. -43.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 82.7%
Gross Margin - 3 Yr. Avg. 82%
EBITDA Margin 66.1%
EBITDA Margin - 3 Yr. Avg. 63%
Operating Margin 60.1%
Oper. Margin - 3 Yr. Avg. 57.7%
Pre-Tax Margin 50.9%
Pre-Tax Margin - 3 Yr. Avg. 48.3%
Net Profit Margin 38.6%
Net Profit Margin - 3 Yr. Avg. 36.4%
Effective Tax Rate 24.1%
Eff/ Tax Rate - 3 Yr. Avg. 24.6%
Payout Ratio 0%

VRSN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRSN stock intrinsic value calculation we used $1215 million for the last fiscal year's total revenue generated by VeriSign, Inc.. The default revenue input number comes from 0001 income statement of VeriSign, 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 VRSN stock valuation model: a) initial revenue growth rate of 4% 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 5.6%, whose default value for VRSN is calculated based on our internal credit rating of VeriSign, 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 VeriSign, 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 VRSN stock the variable cost ratio is equal to 39.3%.

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 VRSN 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 5.5% for VeriSign, Inc..

Corporate tax rate of 27% is the nominal tax rate for VeriSign, 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 VRSN 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 VRSN are equal to 23.5%.

Life of production assets of 6.4 years is the average useful life of capital assets used in VeriSign, 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 VRSN is equal to -74.1%. 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 - $-1385.474 million for VeriSign, 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 119.700 million for VeriSign, 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 VeriSign, Inc. at the current share price and the inputted number of shares is $24.5 billion.

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