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Snap

NYSE:SNAP
Snowflake Description

Adequate balance sheet with limited growth.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
SNAP
NYSE
$15B
Market Cap
  1. Software
Company description

Snap Inc. operates as a camera company. It offers Snapchat, a camera application that helps people to communicate through short videos and images. More info.


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3 Month History
Industry
5yr Volatility vs Market
Competitors

Value

 Is Snap undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Snap to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Snap is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Snap's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Snap's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Snap is loss making, we can't compare it's value to the US Software industry average.
  • Snap is loss making, we can't compare the value of its earnings to the US market.
Price based on expected Growth
Does Snap's expected growth come at a high price?
  • Snap is loss making, we can't assess if it's growth is good value.
Price based on value of assets
What value do investors place on Snap's assets?
  • Snap is good value based on assets compared to the US Software industry average.
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Value checks
We assess Snap's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Software industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Software industry average (and greater than 0)? (1 check)
  5. Snap has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (50.75%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Snap is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$-1,305

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $856 × (1 + 2.47%) ÷ (9.64% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$12,233

Present value of terminal value:
$7,722

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$6,417 = $-1,305 + $7,722

Value = Total value / Shares Outstanding ($6,417 / 1,204)

Discount to Share Price

Value per share:
$5.33

Current discount (share price of $12.34): -131.58%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 9.64% = 2.47% + (0.952 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($14,860,580,690).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.952 = 0.951 (1 + (1- 30%) (0.11%))

Levered Beta used in calculation = 0.952



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Snap expected to perform in the next 1 to 3 years based on estimates from 32 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
51.8%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Snap expected to grow at an attractive rate?
  • Unable to compare Snap's earnings growth to the low risk savings rate as it is expected to be loss making during the next 1-3 years.
Growth vs Market Checks
  • Unable to compare Snap's earnings growth to the US market average as it is expected to be loss making during the next 1-3 years.
  • Snap's revenue growth is expected to exceed the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Snap is not considered high growth as it is expected to be loss making for the next 1-3 years.
  • Snap's revenue is expected to grow significantly at over 20% yearly.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Snap is expected to be perform poorly due to negative earnings.

Improvement & Relative to industry
  • Snap performance (ROE) can't be compared to the US Software industry due to having negative earnings in 3 years.
  • Snap performance (ROE) is expected to still be negative in 3 years.
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Future performance checks
We assess Snap's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Snap has a total score of 2/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Snap performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Snap's growth in the last year to its industry (Software).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Snap does not currently make a profit.
Earnings and Revenue History
Snap's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Snap has negative negative earnings from operations, therefore its ROE is meaningless.
  • Snap had negative or no Return on Assets (ROA) last year.
  • Return based on revenue producing assets (ROCE) is negative or zero.
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Past performance checks
We assess Snap's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Software industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Snap has a total score of 0/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Snap's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Snap's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Snap is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Snap's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Snap's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • Low level of unsold assets.
  • Total debt is covered by total short term assets, assets are 160.2x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Snap's level of debt (0.5% of total debt) compared to net worth is satisfactory (less than 40%).
  • Historical 5 year debt data not available.
  • Total debt is not well covered by annual operating cash flow (-4568%, less than 20% of total debt).
  • Interest on debt is well covered by earnings (EBIT is 250.4x coverage).
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Financial health checks
We assess Snap's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Snap has a total score of 4/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Snap's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0%
Current annual income from Snap dividends.
If you bought $2,000 of Snap shares you are expected to receive $0 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Not paying a dividend.
  • Not paying a dividend.
Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Not paying a notable dividend.
  • Not paying a notable dividend.
Current Payout to shareholders
What portion of Snap's earnings are paid to the shareholders as a dividend.
  • Not paying a notable dividend.
Future Payout to shareholders
  • Insufficient estimate data to determine if a dividend will be paid in 3 years.
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Income/ dividend checks
We assess Snap's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Snap afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Snap has a total score of 0/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Snap's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Evan Spiegel, image provided by Google.
Evan Spiegel
COMPENSATION $2,404,840
AGE 26
TENURE AS CEO 5.5 years
CEO Bio

Mr. Evan Spiegel is a Co-Founder of Snap Inc. and serves as its President. Mr. Spiegel has been Chief Executive Officer and Director of Snap Inc. since May 2012. Mr. Spiegel has been a Trustee of The Paley Center for Media since October 2017.

CEO Compensation
  • Evan's compensation has increased whilst company is loss making.
  • Evan's compensation is higher than average for a company of this size and profit level.
Management Team Tenure

Average tenure and age of the Snap management team in years:

3.6
Average Tenure
39.9
Average Age
  • The tenure for the Snap management team is about average.
Management Team

Evan Spiegel

TITLE
Co-Founder
COMPENSATION
$2M
AGE
26
TENURE
5.5 yrs

Robert Murphy

TITLE
Co-Founder
COMPENSATION
$259K
AGE
28

Imran Khan

TITLE
Chief Strategy Officer
COMPENSATION
$5M
AGE
39
TENURE
2.8 yrs

Timothy Sehn

TITLE
Senior Vice President of Engineering
COMPENSATION
$41M
AGE
36
TENURE
4.2 yrs

Andrew Vollero

TITLE
Chief Financial Officer
AGE
50
TENURE
1.8 yrs

Chris Handman

TITLE
General Counsel
AGE
44
TENURE
3.5 yrs

Tom Conrad

TITLE
Vice President of Product
AGE
47

Steve Horowitz

TITLE
Vice President of Hardware
AGE
49
Board of Directors Tenure

Average tenure and age of the Snap board of directors in years:

2.8
Average Tenure
52.1
Average Age
  • The average tenure for the Snap board of directors is less than 3 years, this suggests a new board.
Board of Directors

Michael Lynton

TITLE
Chairman
AGE
57
TENURE
1.2 yrs

Evan Spiegel

TITLE
Co-Founder
COMPENSATION
$2M
AGE
26
TENURE
5.5 yrs

Robert Murphy

TITLE
Co-Founder
COMPENSATION
$259K
AGE
28
TENURE
5.5 yrs

A.G. Lafley

TITLE
Independent Director
COMPENSATION
$3M
AGE
70
TENURE
1.3 yrs

Stan Meresman

TITLE
Independent Director
AGE
70
TENURE
2.3 yrs

Mitch Lasky

TITLE
Independent Director
AGE
55
TENURE
4.9 yrs

Joanna Coles

TITLE
Independent Director
COMPENSATION
$111K
AGE
54
TENURE
1.9 yrs

Scott Miller

TITLE
Independent Director
COMPENSATION
$1M
AGE
64
TENURE
1.1 yrs

Chris Young

TITLE
Independent Director
COMPENSATION
$1M
AGE
45
TENURE
1.1 yrs
Recent Insider Trading
  • Snap insiders have only sold shares in the past 3 months.
Who owns this company?
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Management checks
We assess Snap's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Snap has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

Snap Inc. operates as a camera company. It offers Snapchat, a camera application that helps people to communicate through short videos and images. The company also provides a suite of content tools for partners to build, edit, and publish snaps and attachments based on editorial content; and Spectacles, which are sunglasses that capture video from a human perspective. The company was formerly known as Snapchat, Inc. and changed its name to Snap Inc. in September 2016. Snap Inc. was founded in 2010 and is headquartered in Venice, California.

Details
Name: Snap Inc.
Ticker: SNAP
Exchange: NYSE
Founded: 2010
Market Cap: $14,860,580,690
Shares outstanding: 1,204,260,996
Website: http://www.snap.com
Address: Snap Inc.
63 Market Street,
Venice,
California, 90291,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NYSE SNAP Class A Non-Voting Common Stock New York Stock Exchange US USD 02. Mar 2017
SWX SNAP Class A Non-Voting Common Stock SIX Swiss Exchange CH CHF 02. Mar 2017
Number of employees
Current staff
Staff numbers
1,859
Snap employees.
Industry
Industry: Application Software
Sector: Software and Services