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GreenSky Earnings Power Value (EPV)

: $11.23 (As of Sep21)
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As of Sep21, GreenSky's earnings power value is $11.23. *

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

Margin of Safety is -1.55

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future. Assumption: Current profitability is sustainable.


GreenSky Earnings Power Value (EPV) Historical Data

The historical data trend for GreenSky's Earnings Power Value (EPV) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

GreenSky Annual Data
Trend Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
Earnings Power Value (EPV)
Premium Member Only - - - - -

GreenSky Quarterly Data
Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21
Earnings Power Value (EPV) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only - - - 5.23 11.23

Competitive Comparison

For the Software - Infrastructure subindustry, GreenSky's Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

   

GreenSky Earnings Power Value (EPV) Distribution

For the Software industry and Technology sector, GreenSky's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where GreenSky's Earnings Power Value (EPV) falls into.



GreenSky Earnings Power Value (EPV) Calculation

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.

GreenSky's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 438.7
DDA 7.5
Operating Margin % 27.30
SGA * 25% 28.4
Tax Rate % -7.81
Maintenance Capex 9.9
Cash and Cash Equivalents 242.0
Short-Term Debt 278.3
Long-Term Debt 468.3
Shares Outstanding (Diluted) 103.0

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.

2. Look at average margins over a business/Industry cycle: Average Operating Margin = 27.30%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = $ Mil, Average Operating Margin = 27.30%, Average Adjusted SGA = 28.4,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 438.7 * 27.30% +28.4 = $148.167609006 Mil.

4. Multiply by one minus Average Tax Rate (NOPAT):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = -7.81%, and "Normalized" EBIT = $148.167609006 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = 148.167609006 * ( 1 - -7.81% ) = $159.74024010741 Mil.

5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 7.5 * 0.5 * -7.81% = $-0.292409499 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = 159.74024010741 + -0.292409499 = $159.44783060841 Mil.

6. Adjusted for Maintenance Capital Expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
GreenSky's Average Maintenance CAPEX = $9.9 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. GreenSky's current cash and cash equivalent = $242.0 Mil.
GreenSky's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 468.3 + 278.3 = $746.623 Mil.
GreenSky's current Shares Outstanding (Diluted Average) = 103.0 Mil.

GreenSky's Earnings Power Value (EPV) for Sep21 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( 159.44783060841 - 9.9)/ 9%+242.0-746.623 )/103.0
=11.23

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( 11.226396300259-11.40 )/11.226396300259
= -1.55%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.


GreenSky  (NAS:GSKY) Earnings Power Value (EPV) Explanation

Assumption: Current profitability is sustainable.

Earnings power value (EPV) uses a very basic equation which assumes no growth, although it does rely on an assumption about the cost of capital as well as the fact that current earnings are sustainable. It also involves several adjustments to clean up the underlying Earnings figures.


Be Aware

Though using today's earnings in calculating Earnings Power Value, GuruFocus is normalizing these earnings to the business cycle. This eliminates the effects on profitability of valuing the firm at different points in the business cycle. This means that we are considering the average earnings over 5 years.


GreenSky Earnings Power Value (EPV) Related Terms

Thank you for viewing the detailed overview of GreenSky's Earnings Power Value (EPV) provided by GuruFocus.com. Please click on the following links to see related term pages.


GreenSky Business Description

GreenSky logo
Industry
Technology » Software NAICS : 511210 SIC : 7379
Traded in Other Exchanges
N/A
Address
5565 Glenridge Connector, Suite 700, Atlanta, GA, USA, 30342
GreenSky Inc operates as a technology company. The company offers a proprietary technology infrastructure platform to supports the full transaction lifecycle, including credit application, underwriting, and real-time allocation. Its platform caters to merchants, consumers, and banks.
Executives
Kevin Goldstein officer: EVP - Chief Credit Officer 5565 GLENRIDGE CONNECTOR SUITE 700 ATLANTA 2Q 30342
Kang Andrew officer: EVP and CFO 5565 GLENRIDGE CONNECTOR SUITE 700 ATLANTA GA 30342
Nagy Angela M officer: SVP, Chief Accounting Officer 1155 PERIMETER CENTER WEST ATLANTA GA 30338
Freishtat Gregg Steven director 5860 WINTERTHUR DRIVE ATLANTA GA 30328
Sheft Robert director, 10 percent owner 623 FIFTH AVENUE 26TH FLOOR NEW YORK NY 10022
Babbit Joel M. director 3120 BRECKINRIDGE BLVD. DULUTH GA 30099
Bacci Arthur J director PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> Ownership Information: BACCI ARTHUR J a.header:link {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:visited {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:hover {color: #191970;}
Coulter James G other: Former 10% Owner 301 COMMERCE STREET SUITE 3300 FORT WORTH TX 76102
Tpg Growth Ii Advisors, Inc. other: Former 10% Owner 301 COMMERCE STREET SUITE 3300 FORT WORTH TX 76102
Bonderman David other: Former 10% Owner 301 COMMERCE STREET SUITE 3300 FORT WORTH TX 76102
Rickard Lois Elizabeth officer: Chief Human Resources Officer 1230 PEACHTREE ST NE SUITE 1000 ATLANTA GA 30309
Fox Steven E officer: EVP - Chief Legal Officer 229 PEACHTREE ST NE 2700 INTERNATIONAL TOWER ATLANTA GA 303031603
Vastani Minaz officer: Chief Technology Officer 5565 GLENRIDGE CONNECTOR, SUITE 700 ATLANTA GA 30342
Gupta Ritesh officer: EVP, Operations 5565 GLENRIDGE CONNECTOR SUITE 700 ATLANTA GA 30342
Kelly Dennis I officer: President, Patient Solutions 10720 SIKES PL STE 300 CHARLOTTE NC 28277

GreenSky Headlines

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