Intrinsic value of Web.com Group - WEB

Previous Close

$27.99

  Intrinsic Value

$22.07

stock screener

  Rating & Target

sell

-21%

Previous close

$27.99

 
Intrinsic value

$22.07

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of WEB 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 1.4

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  764
  782
  802
  824
  849
  877
  907
  939
  974
  1,011
  1,051
  1,094
  1,139
  1,188
  1,239
  1,293
  1,351
  1,411
  1,476
  1,543
  1,615
  1,690
  1,770
  1,854
  1,942
  2,035
  2,133
  2,236
  2,344
  2,458
Variable operating expenses, $m
  714
  727
  743
  760
  779
  800
  823
  848
  875
  904
  809
  841
  876
  914
  953
  995
  1,039
  1,086
  1,135
  1,187
  1,242
  1,300
  1,361
  1,426
  1,494
  1,565
  1,640
  1,720
  1,803
  1,891
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
  714
  727
  743
  760
  779
  800
  823
  848
  875
  904
  809
  841
  876
  914
  953
  995
  1,039
  1,086
  1,135
  1,187
  1,242
  1,300
  1,361
  1,426
  1,494
  1,565
  1,640
  1,720
  1,803
  1,891
Operating income, $m
  51
  55
  59
  65
  70
  77
  84
  91
  99
  108
  243
  252
  263
  274
  286
  298
  312
  326
  341
  356
  373
  390
  408
  428
  448
  470
  492
  516
  541
  567
EBITDA, $m
  214
  219
  225
  231
  238
  246
  254
  264
  273
  284
  295
  307
  320
  333
  348
  363
  379
  396
  414
  433
  453
  474
  497
  520
  545
  571
  599
  627
  658
  690
Interest expense (income), $m
  16
  35
  36
  38
  39
  41
  44
  46
  49
  52
  55
  58
  61
  65
  69
  73
  78
  83
  88
  93
  99
  105
  111
  118
  125
  132
  140
  148
  157
  166
  175
Earnings before tax, $m
  16
  19
  22
  25
  29
  33
  37
  42
  47
  53
  185
  191
  198
  205
  213
  221
  229
  238
  247
  257
  268
  279
  291
  303
  316
  330
  344
  359
  375
  392
Tax expense, $m
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  50
  52
  53
  55
  57
  60
  62
  64
  67
  70
  72
  75
  79
  82
  85
  89
  93
  97
  101
  106
Net income, $m
  11
  14
  16
  18
  21
  24
  27
  31
  35
  39
  135
  139
  144
  150
  155
  161
  167
  174
  181
  188
  196
  204
  212
  221
  231
  241
  251
  262
  274
  286

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
  1,525
  1,561
  1,601
  1,646
  1,696
  1,750
  1,810
  1,874
  1,944
  2,019
  2,098
  2,184
  2,274
  2,371
  2,473
  2,581
  2,696
  2,817
  2,945
  3,081
  3,224
  3,374
  3,533
  3,700
  3,876
  4,062
  4,257
  4,462
  4,678
  4,906
Adjusted assets (=assets-cash), $m
  1,525
  1,561
  1,601
  1,646
  1,696
  1,750
  1,810
  1,874
  1,944
  2,019
  2,098
  2,184
  2,274
  2,371
  2,473
  2,581
  2,696
  2,817
  2,945
  3,081
  3,224
  3,374
  3,533
  3,700
  3,876
  4,062
  4,257
  4,462
  4,678
  4,906
Revenue / Adjusted assets
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
Average production assets, $m
  705
  721
  739
  760
  783
  808
  836
  866
  898
  932
  969
  1,009
  1,051
  1,095
  1,142
  1,192
  1,245
  1,301
  1,361
  1,423
  1,489
  1,559
  1,632
  1,709
  1,791
  1,876
  1,966
  2,061
  2,161
  2,266
Working capital, $m
  -219
  -224
  -230
  -237
  -244
  -252
  -260
  -270
  -280
  -290
  -302
  -314
  -327
  -341
  -356
  -371
  -388
  -405
  -424
  -443
  -463
  -485
  -508
  -532
  -557
  -584
  -612
  -642
  -673
  -705
Total debt, $m
  670
  699
  731
  768
  809
  854
  902
  955
  1,012
  1,072
  1,138
  1,207
  1,281
  1,360
  1,443
  1,532
  1,625
  1,724
  1,829
  1,939
  2,056
  2,179
  2,308
  2,445
  2,588
  2,740
  2,899
  3,067
  3,243
  3,428
Total liabilities, $m
  1,245
  1,273
  1,306
  1,343
  1,384
  1,428
  1,477
  1,530
  1,586
  1,647
  1,712
  1,782
  1,856
  1,934
  2,018
  2,106
  2,200
  2,299
  2,403
  2,514
  2,630
  2,753
  2,883
  3,019
  3,163
  3,314
  3,474
  3,641
  3,818
  4,003
Total equity, $m
  281
  287
  295
  303
  312
  322
  333
  345
  358
  371
  386
  402
  418
  436
  455
  475
  496
  518
  542
  567
  593
  621
  650
  681
  713
  747
  783
  821
  861
  903
Total liabilities and equity, $m
  1,526
  1,560
  1,601
  1,646
  1,696
  1,750
  1,810
  1,875
  1,944
  2,018
  2,098
  2,184
  2,274
  2,370
  2,473
  2,581
  2,696
  2,817
  2,945
  3,081
  3,223
  3,374
  3,533
  3,700
  3,876
  4,061
  4,257
  4,462
  4,679
  4,906
Debt-to-equity ratio
  2.390
  2.430
  2.480
  2.540
  2.590
  2.650
  2.710
  2.770
  2.830
  2.890
  2.950
  3.000
  3.060
  3.120
  3.170
  3.220
  3.280
  3.330
  3.370
  3.420
  3.470
  3.510
  3.550
  3.590
  3.630
  3.670
  3.700
  3.730
  3.770
  3.800
Adjusted equity ratio
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  14
  16
  18
  21
  24
  27
  31
  35
  39
  135
  139
  144
  150
  155
  161
  167
  174
  181
  188
  196
  204
  212
  221
  231
  241
  251
  262
  274
  286
Depreciation, amort., depletion, $m
  164
  165
  166
  167
  168
  169
  171
  173
  174
  176
  52
  55
  57
  59
  62
  64
  67
  70
  74
  77
  80
  84
  88
  92
  97
  101
  106
  111
  117
  122
Funds from operations, $m
  175
  178
  181
  185
  189
  194
  198
  203
  209
  215
  187
  194
  201
  209
  217
  225
  234
  244
  254
  265
  276
  288
  301
  314
  328
  342
  358
  374
  391
  409
Change in working capital, $m
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
Cash from operations, $m
  180
  183
  187
  192
  196
  201
  207
  213
  219
  226
  199
  206
  214
  223
  232
  241
  251
  262
  273
  284
  297
  310
  323
  338
  353
  369
  386
  403
  422
  441
Maintenance CAPEX, $m
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -49
  -50
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -74
  -77
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
New CAPEX, $m
  -14
  -16
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -105
Cash from investing activities, $m
  -51
  -54
  -58
  -61
  -64
  -67
  -72
  -75
  -79
  -83
  -87
  -91
  -97
  -102
  -106
  -112
  -117
  -123
  -129
  -137
  -143
  -150
  -157
  -165
  -173
  -183
  -191
  -201
  -211
  -222
Free cash flow, $m
  128
  129
  130
  131
  132
  134
  136
  138
  140
  143
  111
  114
  118
  121
  125
  129
  134
  138
  143
  148
  154
  160
  166
  172
  179
  186
  194
  202
  211
  220
Issuance/(repayment) of debt, $m
  23
  29
  33
  37
  41
  45
  49
  53
  57
  61
  65
  69
  74
  79
  83
  88
  94
  99
  105
  110
  117
  123
  130
  136
  144
  151
  159
  168
  176
  185
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  
  23
  29
  33
  37
  41
  45
  49
  53
  57
  61
  65
  69
  74
  79
  83
  88
  94
  99
  105
  110
  117
  123
  130
  136
  144
  151
  159
  168
  176
  185
Total cash flow (excl. dividends), $m
  151
  158
  162
  168
  173
  178
  184
  190
  197
  203
  177
  184
  192
  200
  209
  218
  227
  237
  248
  259
  270
  283
  295
  309
  323
  338
  353
  370
  387
  405
Retained Cash Flow (-), $m
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
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
  145
  151
  155
  159
  164
  168
  173
  178
  184
  190
  162
  168
  175
  182
  190
  198
  206
  215
  224
  234
  244
  255
  266
  278
  291
  304
  317
  332
  347
  363
Discount rate, %
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
  133
  126
  116
  107
  97
  87
  77
  68
  59
  51
  35
  30
  24
  20
  16
  12
  9
  7
  5
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
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

Web.com Group, Inc. provides a range of Internet services to small businesses. The Company operates through Web services and products segment. The Company offers subscription-based solutions, including domains, hosting, Website design and management, search engine optimization, online marketing campaigns, local sales leads, social media, mobile products and e-commerce solutions. The Company offers Domain Name Registration and Services, Do-It-For-Me Web Solutions, Do-It-Yourself Web Solutions and Online Marketing Services. With the Yodle platform, the Company is able to provide its customers with an online, mobile and social presence and automates, manages and optimizes its customers' marketing activities and other consumer interactions. It offers a full suite of domain name services, including domain name registration, transfers, renewals, expiration protection and privacy services.

FINANCIAL RATIOS  of  Web.com Group (WEB)

Valuation Ratios
P/E Ratio 329.8
Price to Sales 1.9
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 10.3
Price to Free Cash Flow 12.4
Growth Rates
Sales Growth Rate 30.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 46.7%
Cap. Spend. - 3 Yr. Gr. Rate 8%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 275.3%
Total Debt to Equity 282.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 0.6%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.1%
Return On Equity 1.7%
Return On Equity - 3 Yr. Avg. 12.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 68.4%
Gross Margin - 3 Yr. Avg. 66.1%
EBITDA Margin 15.2%
EBITDA Margin - 3 Yr. Avg. 17.8%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 2%
Pre-Tax Margin - 3 Yr. Avg. 3.8%
Net Profit Margin 0.6%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 71.4%
Eff/ Tax Rate - 3 Yr. Avg. 63.5%
Payout Ratio 0%

WEB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WEB stock intrinsic value calculation we used $749.261 million for the last fiscal year's total revenue generated by Web.com Group. The default revenue input number comes from 0001 income statement of Web.com Group. 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 WEB stock valuation model: a) initial revenue growth rate of 2% 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 9.1%, whose default value for WEB is calculated based on our internal credit rating of Web.com Group, 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 Web.com Group.
    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 WEB stock the variable cost ratio is equal to 93.7%.

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 WEB 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 Web.com Group.

Corporate tax rate of 27% is the nominal tax rate for Web.com Group. 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 WEB 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 WEB are equal to 92.2%.

Life of production assets of 18.5 years is the average useful life of capital assets used in Web.com Group 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 WEB is equal to -28.7%. 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 - $274.636 million for Web.com Group - 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 49.487 million for Web.com Group 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 Web.com Group at the current share price and the inputted number of shares is $1.4 billion.

RELATED COMPANIES Price Int.Val. Rating
GDDY GoDaddy Cl A 64.56 97.26  buy
EIGI Endurance Inte 8.75 5.91  sell
TCX Tucows 54.89 57.18  hold
DLX Deluxe Corp. 50.85 107.52  str.buy
CRM Salesforce.com 132.49 79.56  sell
IBM International 121.44 191.80  buy

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.