Intrinsic value of WisdomTree Investments, Inc. - WETF

Previous Close

$6.36

  Intrinsic Value

$12.67

stock screener

  Rating & Target

str. buy

+99%

Previous close

$6.36

 
Intrinsic value

$12.67

 
Up/down potential

+99%

 
Rating

str. buy

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

We calculate the intrinsic value of WETF 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 1.0

 

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, %
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  305
  338
  372
  407
  444
  483
  524
  565
  609
  654
  702
  750
  801
  854
  909
  967
  1,026
  1,088
  1,153
  1,220
  1,291
  1,364
  1,441
  1,521
  1,605
  1,692
  1,784
  1,879
  1,979
  2,084
Variable operating expenses, $m
  217
  233
  249
  267
  285
  304
  323
  343
  365
  387
  341
  364
  389
  415
  441
  469
  498
  528
  560
  593
  627
  662
  700
  738
  779
  822
  866
  912
  961
  1,012
Fixed operating expenses, $m
  11
  11
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
Total operating expenses, $m
  228
  244
  261
  279
  297
  317
  336
  356
  378
  401
  355
  378
  404
  430
  456
  485
  514
  544
  577
  610
  644
  680
  718
  757
  798
  841
  886
  932
  982
  1,033
Operating income, $m
  77
  93
  111
  129
  147
  167
  188
  209
  231
  254
  347
  372
  398
  425
  453
  482
  512
  544
  576
  611
  647
  684
  723
  764
  807
  851
  898
  947
  998
  1,051
EBITDA, $m
  153
  170
  188
  207
  226
  247
  268
  291
  314
  338
  363
  389
  416
  444
  473
  503
  535
  568
  603
  638
  676
  715
  756
  798
  843
  889
  938
  989
  1,042
  1,098
Interest expense (income), $m
  0
  16
  21
  27
  33
  39
  45
  52
  59
  66
  73
  81
  89
  97
  106
  115
  125
  134
  144
  155
  166
  178
  190
  202
  215
  229
  243
  258
  274
  290
  307
Earnings before tax, $m
  61
  72
  84
  96
  109
  122
  136
  150
  165
  181
  266
  283
  300
  318
  337
  357
  378
  399
  421
  445
  469
  494
  521
  549
  577
  608
  639
  673
  707
  744
Tax expense, $m
  16
  19
  23
  26
  29
  33
  37
  41
  45
  49
  72
  76
  81
  86
  91
  96
  102
  108
  114
  120
  127
  133
  141
  148
  156
  164
  173
  182
  191
  201
Net income, $m
  44
  53
  61
  70
  79
  89
  99
  110
  121
  132
  194
  206
  219
  232
  246
  261
  276
  291
  308
  325
  342
  361
  380
  400
  422
  444
  467
  491
  516
  543

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
  1,017
  1,125
  1,239
  1,357
  1,481
  1,611
  1,745
  1,885
  2,030
  2,181
  2,338
  2,502
  2,671
  2,847
  3,031
  3,222
  3,420
  3,627
  3,843
  4,068
  4,302
  4,547
  4,803
  5,070
  5,349
  5,640
  5,945
  6,264
  6,598
  6,948
Adjusted assets (=assets-cash), $m
  1,017
  1,125
  1,239
  1,357
  1,481
  1,611
  1,745
  1,885
  2,030
  2,181
  2,338
  2,502
  2,671
  2,847
  3,031
  3,222
  3,420
  3,627
  3,843
  4,068
  4,302
  4,547
  4,803
  5,070
  5,349
  5,640
  5,945
  6,264
  6,598
  6,948
Revenue / Adjusted assets
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
Average production assets, $m
  207
  229
  252
  276
  301
  328
  355
  383
  413
  444
  476
  509
  543
  579
  616
  655
  696
  738
  782
  827
  875
  925
  977
  1,031
  1,088
  1,147
  1,209
  1,274
  1,342
  1,413
Working capital, $m
  -33
  -36
  -40
  -44
  -48
  -52
  -57
  -61
  -66
  -71
  -76
  -81
  -87
  -92
  -98
  -104
  -111
  -118
  -125
  -132
  -139
  -147
  -156
  -164
  -173
  -183
  -193
  -203
  -214
  -225
Total debt, $m
  262
  331
  403
  478
  557
  638
  723
  812
  904
  1,000
  1,099
  1,202
  1,310
  1,421
  1,537
  1,658
  1,784
  1,915
  2,051
  2,194
  2,342
  2,497
  2,659
  2,828
  3,005
  3,189
  3,382
  3,584
  3,795
  4,017
Total liabilities, $m
  643
  712
  784
  859
  938
  1,020
  1,105
  1,193
  1,285
  1,381
  1,480
  1,583
  1,691
  1,802
  1,919
  2,039
  2,165
  2,296
  2,433
  2,575
  2,723
  2,878
  3,040
  3,209
  3,386
  3,570
  3,763
  3,965
  4,177
  4,398
Total equity, $m
  373
  413
  455
  498
  544
  591
  640
  692
  745
  801
  858
  918
  980
  1,045
  1,112
  1,182
  1,255
  1,331
  1,410
  1,493
  1,579
  1,669
  1,763
  1,861
  1,963
  2,070
  2,182
  2,299
  2,422
  2,550
Total liabilities and equity, $m
  1,016
  1,125
  1,239
  1,357
  1,482
  1,611
  1,745
  1,885
  2,030
  2,182
  2,338
  2,501
  2,671
  2,847
  3,031
  3,221
  3,420
  3,627
  3,843
  4,068
  4,302
  4,547
  4,803
  5,070
  5,349
  5,640
  5,945
  6,264
  6,599
  6,948
Debt-to-equity ratio
  0.700
  0.800
  0.890
  0.960
  1.020
  1.080
  1.130
  1.170
  1.210
  1.250
  1.280
  1.310
  1.340
  1.360
  1.380
  1.400
  1.420
  1.440
  1.450
  1.470
  1.480
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
  1.560
  1.570
  1.580
Adjusted equity ratio
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  53
  61
  70
  79
  89
  99
  110
  121
  132
  194
  206
  219
  232
  246
  261
  276
  291
  308
  325
  342
  361
  380
  400
  422
  444
  467
  491
  516
  543
Depreciation, amort., depletion, $m
  76
  77
  77
  78
  79
  80
  81
  82
  83
  84
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
Funds from operations, $m
  120
  129
  138
  148
  158
  169
  180
  191
  203
  216
  210
  223
  237
  252
  267
  283
  299
  316
  334
  352
  372
  392
  413
  435
  458
  482
  507
  534
  561
  590
Change in working capital, $m
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
Cash from operations, $m
  124
  133
  142
  152
  162
  173
  184
  196
  208
  221
  215
  229
  243
  258
  273
  289
  305
  323
  341
  359
  379
  400
  421
  443
  467
  491
  517
  544
  572
  601
Maintenance CAPEX, $m
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
New CAPEX, $m
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
Cash from investing activities, $m
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -60
  -62
  -65
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -116
Free cash flow, $m
  96
  104
  111
  119
  128
  137
  146
  156
  166
  176
  168
  180
  191
  204
  216
  229
  243
  257
  272
  288
  304
  321
  338
  357
  376
  396
  417
  439
  462
  486
Issuance/(repayment) of debt, $m
  66
  69
  72
  75
  78
  82
  85
  89
  92
  96
  99
  103
  107
  112
  116
  121
  126
  131
  137
  142
  148
  155
  162
  169
  177
  185
  193
  202
  211
  221
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  
  66
  69
  72
  75
  78
  82
  85
  89
  92
  96
  99
  103
  107
  112
  116
  121
  126
  131
  137
  142
  148
  155
  162
  169
  177
  185
  193
  202
  211
  221
Total cash flow (excl. dividends), $m
  162
  172
  183
  195
  206
  219
  231
  244
  258
  272
  268
  283
  299
  315
  332
  350
  369
  388
  409
  430
  452
  476
  500
  526
  552
  580
  610
  641
  673
  707
Retained Cash Flow (-), $m
  -39
  -40
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -83
  -86
  -90
  -94
  -98
  -102
  -107
  -112
  -117
  -123
  -128
Prev. year cash balance distribution, $m
  24
  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
  147
  132
  142
  151
  161
  171
  182
  193
  204
  216
  210
  223
  236
  250
  265
  280
  296
  312
  330
  347
  366
  386
  406
  428
  450
  473
  498
  524
  550
  578
Discount rate, %
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
  141
  120
  121
  122
  121
  120
  118
  114
  110
  105
  92
  87
  81
  74
  68
  61
  54
  48
  41
  35
  30
  24
  20
  16
  12
  9
  7
  5
  4
  3
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

WisdomTree Investments, Inc. is an asset management company that focuses on exchange-traded funds (ETFs). The Company's family of ETFs includes funds that track its own indexes, funds that track third party indexes and actively managed funds. It operates as an exchange traded products sponsor and asset manager providing investment advisory services in the United States, Europe, Canada and Japan. These activities are reported in its U.S. Business segment that comprises its the United States business and Japan sales office, which primarily engages in selling its United States listed ETFs to Japanese institutions, and International Business segment, that comprises its European business and Canadian business. Its United States listed products include International Hedged Equity ETFs, Equity ETFs, Fixed Income ETFs, Currency ETFs, Alternative Strategy ETFs and Commodity ETFs. Its portfolio of Non-the United States listed products include WisdomTree UCITS ETFs, Boost ETPs and Canadian ETFs.

FINANCIAL RATIOS  of  WisdomTree Investments, Inc. (WETF)

Valuation Ratios
P/E Ratio 33.4
Price to Sales 4
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 15.8
Price to Free Cash Flow 16.1
Growth Rates
Sales Growth Rate -26.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate -30.1%
Financial Strength
Quick Ratio NaN
Current Ratio 1.4
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 9.6%
Ret/ On Assets - 3 Yr. Avg. 24.8%
Return On Total Capital 11.9%
Ret/ On T. Cap. - 3 Yr. Avg. 30.6%
Return On Equity 11.9%
Return On Equity - 3 Yr. Avg. 30.6%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 26%
EBITDA Margin - 3 Yr. Avg. 37.6%
Operating Margin 25.1%
Oper. Margin - 3 Yr. Avg. 37.1%
Pre-Tax Margin 25.6%
Pre-Tax Margin - 3 Yr. Avg. 37.2%
Net Profit Margin 11.9%
Net Profit Margin - 3 Yr. Avg. 23.9%
Effective Tax Rate 53.6%
Eff/ Tax Rate - 3 Yr. Avg. 37.6%
Payout Ratio 169.2%

WETF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WETF stock intrinsic value calculation we used $274 million for the last fiscal year's total revenue generated by WisdomTree Investments, Inc.. The default revenue input number comes from 0001 income statement of WisdomTree Investments, 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 WETF stock valuation model: a) initial revenue growth rate of 11.3% 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 4.8%, whose default value for WETF is calculated based on our internal credit rating of WisdomTree Investments, 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 WisdomTree Investments, 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 WETF stock the variable cost ratio is equal to 73.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 million in the base year in the intrinsic value calculation for WETF 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 8.1% for WisdomTree Investments, Inc..

Corporate tax rate of 27% is the nominal tax rate for WisdomTree Investments, 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 WETF 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 WETF are equal to 67.8%.

Life of production assets of 277.8 years is the average useful life of capital assets used in WisdomTree Investments, 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 WETF is equal to -10.8%. 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 - $358.335 million for WisdomTree Investments, 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 155.367 million for WisdomTree Investments, 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 WisdomTree Investments, Inc. at the current share price and the inputted number of shares is $1.0 billion.

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