Today we are looking at Digital Turbine, Inc. (NASDAQ: APPS), to determine if you should buy APPS stock. We will look at APPS financial ratios, analyst ratings, and current valuation to determine a APPS forecast and price.
What Does APPS Do?
Digital Turbine, Inc., through its subsidiaries, provides media and mobile communication products and solutions for mobile operators, application advertisers, publishers, device original equipment manufacturers (OEMs), and other third parties. Its application media software platform that enables mobile operators and OEMs to control, manage, and monetize devices. The company also provides programmatic advertising and targeted media delivery services; and other products and professional services.
APPS Stock Analysis and Forecast
Digital Turbine, Inc. Competition and Comparables
In order to undergo a comparable analysis (to determine APPS stocks value), we need to first outline who APPS’s competitors are.
These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to APPS, and have a market cap similar to APPS (if possible).
By keeping this in mind, I found the following list of companies to be some of APPS stocks closest competitors:
NTNX, MSTR, SLAB, JCOM, BL, APPN, LITE, NCNO, NATI, COHR
APPS Stock News and Information
Recent news
APPS reported their Q4 2022 earnings recently (May 31 2022) after market close. APPS missed their estimated earnings, and had poor guidance. To learn more about the contents about this report click here.
Analysis of Digital Turbine, Inc. Stock Performance and Financial Ratios
Yearly:
- APPS Revenues: In FY 2022, APPS experienced a yearly increase in revenues of $434.02M (or 138.41%) resulting in a total revenue figure of $747.6M.
- APPS Cost of Revenues: In FY 2022, APPS experienced a yearly decrease in their cost of revenues of $-151.17M (-83.52%), resulting in a total revenue figure of $29.84M. Since the decrease (of -83.52%), in APPS’s cost of revenue was lesser (by -221.92%) than the increase (of 138.41%) in APPS’s revenues, we should expect that APPS experienced an increase (roughly 221.92%) in their FY gross profits.
- APPS Gross Profit: In FY 2022, APPS experienced a yearly increase in their gross profit of $585.19M (or 441.41%) resulting in a total gross profit of $717.76M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY.
- APPS EBITDA: In FY 2022, APPS experienced a yearly increase in their EBITDA of $3.47M (or 7.09%) resulting in a total EBITDA of $52.44M. This increase (of 7.09%) stems from the fact that APPS experienced a increase in their gross profits of 441.41% (as we saw in the previous bullet point).
- APPS Net Income: In FY 2022, APPS experienced a yearly decrease in their net income of $-19.34M (or -35.23%) resulting in a total net income of $35.55M.
- APPS EPS: As a result of APPS’s decrease in net income of $-19.34M, APPS’s EPS also decreased (by $-0.25) from $0.62 in FY 2021 to $0.37 in FY 2022.
Overall, it seemed as though APPS might have had a great year in 2021. This was certainly the case when looking at their revenues and gross profit. However, APPS had a poor financial performance in 2021 as they experienced decreases in both their net income and their EPS, which are two very important metrics.
Is APPS Share Dilution an Issue?
As part of their Q4 2022 earnings release, APPS stated that they currently have 96.97M Shares Outstanding (weighted average), which is up 417k shares (from 96.55M shares outstanding in Q3 2022). This is negligible as it represents less than a 1% share dilution.
Furthermore, APPS stock has up to 6.74M of shares that they can issue (thereby diluting APPS’s stock). This maximum dilution for the period would only have a dilutionary effect on APPS of 7.41%, which is substantial. Investors in APPS (and potential investors) should be aware of this as it can have adverse affects on the price of the APPS stock.
Latest APPS Stock Analyst Ratings
Here is the current analyst rating distribution for APPS. In total there are 21 APPS stock analyst ratings.
Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if APPS stock is a buy or sell
APPS Stock Rating and Forecast
Currently, we have 3 financial ratings that help investors get a general idea of a company’s valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate.
Firstly, APPS stock has a DCF rating of 5 — Very Strong. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating.
Secondly, APPS stock has an ROE rating of 3 — Neutral.. APPS’s current ROE is 11.25%, which justifies their rank of 3 — Neutral. ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently 9.33%. In my opinion, APPS has a somewhat high ROE, which is above the average ROE of their peers, as a result of this I would rate their ROE scre as a 4 rather than a 3.
Lastly, APPS stock has a P/E rating of 3 — Neutral. APPS stock price to earnings ratio is currently 44.49 which justifies their rank of 5 — Very Strong. Price to Earnings is the most commonly found financial metric and is best used when comparing a company’s p/e to the industry average. APPS operates in the Software-Application industry, which currently has an average P/E of 39.19 . As a result of APPS p/e being very high, and higher than the average p/e of their peers, I think that APPS should have a P/E rating of 2 or 1
Overall, based on the 3 previously mentioned fields, APPS stock has been given a comprehensive rating of 4 — Strong. This rating implies that they are Healthy financially.
APPS Stock Price Prediction and Valuation
The Latest APPS Ratings
As we know, APPS stock has been given an overall rating of 4 — Strong. This implies that APPS is sound fundamentally and is a good candidate for being “undervalued”. With this in mind, let’s proceed.
APPS Price Forecast Using Comparable Analysis
- Price to Book (P/B): APPS’s current P/B ratio is 5.07, compared to the average P/B ratio of APPS’s peers being 10.83. This implies that APPS is overvalued and their share price should change by a factor of 113.6% to be at fair value (based on APPS’s P/B compared to the P/B of their peers).
- Price to Equity (P/E): APPS stock P/E ratio is currently 44.49, compared to the average P/E ratio of APPS’s peers being 39.19 This implies that APPS is overvalued and their share price should change by a factor of -12% to be at fair value (based on APPS’s P/E compared to the P/E of their peers).
Overall, APPS stock is overvalued and needs to experience a change in stock price of (an average of) 50.8% to be considered “at fair value”.
Is APPS Stock a Buy or Sell?
Overall, due to the overall stock rating of (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that 4 — Strong APPS was overvalued and need to experience a price change of 50.8% in order to be at their fair value, I have concluded the following:
APPS seems to be financially healthy and undervalued. As a result of this, I believe that they are a great candidate for an investment.
Originally published at https://utradea.com.
