Shutterstock Inc Valuation – August 2018 $SSTK

Company Profile (excerpt from Reuters): Shutterstock, Inc. (Shutterstock), incorporated on May 3, 2012, is a global technology company that operates a two-sided marketplace for professionals to license content. The Company’s library of content includes digital imagery, which consists of licensed photographs, vectors, illustrations and video clips that customers use in their visual communications, such as Websites, digital and print marketing materials, corporate communications, books, publications and video content, and commercial music, which consists of music tracks and sound effects and which is often used to complement digital imagery. It also offers digital asset management services through its cloud-based digital asset management platform (webdam). This service provides tools for customers to manage creative content and brand management assets. Its global marketplace brings together users and contributors of content by providing a collection of content its customers can pay to license and incorporate into their work and by compensating contributors as their content is licensed to customers. Its customers include Marketing Agencies, Marketing Agencies and Other Organizations.


Downloadable PDF version of this valuation:

ModernGraham Valuation of SSTK – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,688,458,839 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.68 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 9866.67% Pass
6. Moderate PEmg Ratio PEmg < 20 53.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.98 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.68 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $0.96
MG Growth Estimate 3.72%
MG Value $15.24
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $13.87
MG Value based on 0% Growth $8.13
Market Implied Growth Rate 22.48%
Current Price $51.15
% of Intrinsic Value 335.54%

Shutterstock Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.77 in 2014 to an estimated $0.96 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 22.48% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Shutterstock Inc revealed the company was trading above its Graham Number of $18.12. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 53.47, which was below the industry average of 92.05, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.65.

Shutterstock Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.65
Graham Number $18.12
PEmg 53.47
Current Ratio 1.68
PB Ratio 4.98
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $361,892,000
Total Current Liabilities $216,004,000
Long-Term Debt $0
Total Assets $593,255,000
Intangible Assets $118,254,000
Total Liabilities $234,342,000
Shares Outstanding (Diluted Average) 34,913,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.61
Dec2017 $0.47
Dec2016 $0.91
Dec2015 $0.54
Dec2014 $0.61
Dec2013 $0.77
Dec2012 $1.79

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.96
Dec2017 $0.64
Dec2016 $0.79
Dec2015 $0.74
Dec2014 $0.77
Dec2013 $0.73
Dec2012 $0.60

Recommended Reading:

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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