Calculating The Fair Value Of Workiva Inc. (NYSE:WK)

Simply Wall St.11-08

Key Insights Workiva's estimated fair value is US$99.65 based on 2 Stage Free Cash Flow to Equity With US$91.49 share price, Workiva appears to be trading close to its estimated fair value ...

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(NYSE:WK)","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n Workiva's estimated fair value is US$99.65 based on 2 Stage Free Cash Flow to Equity \n With US$91.49 share price, Workiva appears to be trading close to its estimated fair value \n  ...</p>\n\n<a href=\"https://finance.yahoo.com/news/calculating-fair-value-workiva-inc-144322868.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Calculating The Fair Value Of Workiva Inc. (NYSE:WK)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCalculating The Fair Value Of Workiva Inc. (NYSE:WK)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-08 22:43 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/calculating-fair-value-workiva-inc-144322868.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Workiva's estimated fair value is US$99.65 based on 2 Stage Free Cash Flow to Equity \n With US$91.49 share price, Workiva appears to be trading close to its estimated fair value \n  ...</p>\n\n<a href=\"https://finance.yahoo.com/news/calculating-fair-value-workiva-inc-144322868.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"WK","symbol_name":"Workiva","start_time":0,"source_url":"https://finance.yahoo.com/news/calculating-fair-value-workiva-inc-144322868.html","article_id":"2481688107","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/3wFOxca.gMo3EgB9BjBM9g--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/41bdd0c670f621394929d5266c5d6c72"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2481688107","pubTimestamp":1731077002,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Workiva's estimated fair value is US$99.65 based on 2 Stage Free Cash Flow to Equity. Analyst price target for WK is US$105, which is 5.5% above our fair value estimate. How far off is Workiva Inc.  from its intrinsic value?We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow  from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"WK":"Workiva","NYSE":"纽交所","LU1815336091.USD":"THREADNEEDLE (LUX) GLOBAL SMALLER COMPANIES \"AUP\" (USD) INC","LU0566484027.USD":"安本美国小盘成长股","FCF":"第一联邦金融","LU0757428866.USD":"THREADNEEDLE (LUX) GLOBAL SMALLER COMPANIES \"AE\" (USD) ACC","TV":"墨西哥电视","BK4023":"应用软件","LU1559883803.SGD":"Aberdeen Standard SICAV I - North American Smaller Companies Fund A Acc SGD-H","BK4100":"有线和卫星","BK4211":"区域性银行","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc"},"translate_title":"计算Workiva Inc.（纽约证券交易所股票代码：WK）的公允价值","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DCF":1,"FCF":1,"NYSE":1,"TV":1,"WK":1},"content_text":"Key Insights\n\n Workiva's estimated fair value is US$99.65 based on 2 Stage Free Cash Flow to Equity \n With US$91.49 share price, Workiva appears to be trading close to its estimated fair value \n  Analyst price target for WK is US$105, which is 5.5% above our fair value estimate \n\n How far off is Workiva Inc. (NYSE:WK) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by estimating the company's future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Believe it or not, it's not too difficult to follow, as you'll see from our example! \n Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. \n Check out our latest analysis for Workiva \n Crunching The Numbers \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars: \n 10-year free cash flow (FCF) estimate \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$110.8m\nUS$156.4m\nUS$192.0m\nUS$224.0m\nUS$252.0m\nUS$276.0m\nUS$296.6m\nUS$314.4m\nUS$330.1m\nUS$344.2m\n\n\nGrowth Rate Estimate Source\nAnalyst x6\nAnalyst x3\nEst @ 22.76%\nEst @ 16.72%\nEst @ 12.49%\nEst @ 9.53%\nEst @ 7.46%\nEst @ 6.00%\nEst @ 4.99%\nEst @ 4.28%\n\n\n Present Value ($, Millions) Discounted @ 7.2% \nUS$103\nUS$136\nUS$156\nUS$170\nUS$178\nUS$182\nUS$183\nUS$181\nUS$177\nUS$172\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$1.6b\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.6%. We discount the terminal cash flows to today's value at a cost of equity of 7.2%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$344m× (1 + 2.6%) ÷ (7.2%– 2.6%) = US$7.8b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$7.8b÷ ( 1 + 7.2%)10= US$3.9b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$5.5b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$91.5, the company appears about fair value at a 8.2% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NYSE:WK Discounted Cash Flow November 8th 2024\n \n\n The Assumptions \n We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Workiva as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.2%, which is based on a levered beta of 1.105. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Workiva\n\n\nStrength\n\n No major strengths identified for WK.\n\n\n\nWeakness\n\nShareholders have been diluted in the past year.\n\n\n\nOpportunity\n\nForecast to reduce losses next year.\n\n\nHas sufficient cash runway for more than 3 years based on current free cash flows.\n\n\n Current share price is below our estimate of fair value.\n\n\n Significant insider buying over the past 3 months.\n\n\nHave WK insiders been buying lately?\n\n\n\nThreat\n\nDebt is not well covered by operating cash flow.\n\n\nTotal liabilities exceed total assets, which raises the risk of financial distress.\n\n\nNot expected to become profitable over the next 3 years.\n\n\nIs WK well equipped to handle threats?\n\n\n\n Looking Ahead: \n Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Workiva, there are three fundamental elements you should look at: \n\n Risks: Consider for instance, the ever-present spectre of investment risk.   We've identified 3 warning signs  with Workiva (at least 1 which doesn't sit too well with us)  , and understanding these should be part of your investment process. \n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for WK's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2481688107"}