Post by
JonathanJSmith on Mar 07, 2023 4:22pm
Why I like Perion
I'm kind of bored so, I might as well be the first to post on this board in over several years.
For S&G, and since I'm a shareholder and every now and then like to validate my investment thesis, I did a DCF on Perion based on this year's expected numbers. The model assumes the following: 15% linear growth rate, 9% discount rate, 3% perpetual growth rate.
------------------
Discounted Cash Flow Analysis: PERI
Shares outstanding: 44.7mm
PV(n) = CF(n)/(1+R)^n, R=discount rate, Present value of cash flow in year n
PPV = CF(n)(1+g)/(R-g), g = estimated growth rate of cash flow (over long term), Perpetuity Present Value after n years
n = 10, calculating present value of future cash flows for the next n years
CF(n=0) = 120.00, estimated cash flow based on current flows, n=0
rexp_inc = 0.150, expected annual increase in revenues/CF(%) (from years 1 - n)
g = 0.030, estimated perpetual growth rate after year n
R = 9% , estimated discount rate
Net Present Value (NPV):
Year CF(n)(mm) NPV(CF)(mm)
2023 120.00 120.00
2024 138.00 126.61
2025 158.70 133.57
2026 182.51 140.93
2027 209.88 148.68
2028 241.36 156.87
2029 277.57 165.50
2030 319.20 174.61
2031 367.08 184.23
2032 422.15 194.37
subtotal: 2436.45 NPV(∑10): 1545.37
Net (N) Perpetuity Present Value (PPV):
PPV= 7246.83 This value brings all future perceived cash flows after year n to year n.
NPPV(n)=3061.14 This value is the net present value of the PPV calculated above at the discount rate (from year n).
PPS = $103.05 Estimated Price-Per-Share derived from calculations above
MCe = $4.607b Estimated market cap
------------------
As you can see, Perion is currently trading substantively below its intrinsic value.
According to Maoz Sigron, Perion's CFO, Bing's adoption of ChatGPT should be a boon for Perion (Raymond James Institutional Investors Conference 03/2023). Furthermore, Perion's cookieless technology SORT is expected to be SASSEd near the end of Q2. This in itself, considering that its effectiveness is around 3x better than Google's (and the industry's), will undoubtedly result in higher revenues and FCF. Is a step function forthcoming?
To cut it short, when you compare Perion against its peers, it's a diamond in the rough. It'll only be a matter of time before the street recognizes this and affords Perion a similar valuation to its peers, and that folks, will be triple digits :).
Sentiment: Strong Buy
Cheers,
JJ