What is Digital River Forward Rate of Return (Yacktman) %?
Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. Digital River's forward rate of return for was 4.02%.
The historical rank and industry rank for Digital River's Forward Rate of Return (Yacktman) % or its related term are showing as below:
FRA:RIV's Forward Rate of Return (Yacktman) % is not ranked *
in the Software industry.
Industry Median: 13.45 * Ranked among companies with meaningful Forward Rate of Return (Yacktman) % only.
Unlike the Earnings Yield %, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
Digital River Forward Rate of Return (Yacktman) % Historical Data
The historical data trend for Digital River's Forward Rate of Return (Yacktman) % 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.
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Digital River Forward Rate of Return (Yacktman) % Chart
Competitive Comparison of Digital River's Forward Rate of Return (Yacktman) %
For the Software - Application subindustry, Digital River's Forward Rate of Return (Yacktman) %, along with its competitors' market caps and Forward Rate of Return (Yacktman) % 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.
Digital River's Forward Rate of Return (Yacktman) % Distribution in the Software Industry
For the Software industry and Technology sector, Digital River's Forward Rate of Return (Yacktman) % distribution charts can be found below:
* The bar in red indicates where Digital River's Forward Rate of Return (Yacktman) % falls into.
Digital River Forward Rate of Return (Yacktman) % Calculation
Forward Rate of Return is a concept that Don Yacktman uses in his investment approach. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. He said in the interview (March 2012, when the S&P 500 was at about 1400):
If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.
The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).
Digital River's Forward Rate of Return of Sep. 2014 is
Forward Rate of Return
=
Normalized Free Cash Flow
/
Price
+
5-Year EBITDA Growth Rate
=
1.10838095
/
11.38
+
-0.0721
=
2.53 %
* 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.
Digital River (FRA:RIV) Forward Rate of Return (Yacktman) % Explanation
Unlike the Earnings Yield, the Forward Rate of Return uses the normalized Free Cash Flow of the past five years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year average growth rate of EBITDA per share as the growth rate, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over five years. The reason we use five years is to make it comparable to the growth rate.
Be Aware
In the Forward Rate of Return calculation, the growth rate is added directly to today's free cash flow yield. Therefore the calculation is reliable only if the company can grow at the same rate in the future as it did in the past. Investors should pay close attention to this when researching growth stocks. A more accurate measurement for return is Return on Capital.
Digital River Forward Rate of Return (Yacktman) % Related Terms
Thank you for viewing the detailed overview of Digital River's Forward Rate of Return (Yacktman) % provided by GuruFocus.com. Please click on the following links to see related term pages.
Digital River, Inc., was incorporated in Delaware in February 1994. The Company provides end-to-end e-commerce and marketing solutions to a variety of companies in software, consumer electronics, computer games, video games, and other markets. It offers its clients, services that enables them to quickly and cost effectively establish an online sales channel capability and to subsequently manage and grow online sales while mitigating risks. Its services include design, development and hosting of online stores and shopping carts, store merchandising and optimization, order management, denied parties screening, export controls and management, tax compliance and management, fraud management, digital product delivery via download, physical product fulfillment, subscription management, online marketing including e-mail marketing, management of affiliate programs, paid search programs, payment processing services, website optimization, web analytics and reporting, and CD production and delivery. Its products and services allow its clients to focus on promoting and marketing their products and brands while leveraging its investments in technology and infrastructure to facilitate the purchase of products through their online websites. Shoppers could browse for products and make purchases online. The Company typically is the seller of record for transactions through its client branded stores. It also processes the buyer's payment as the merchant of record, including collection and remittance of applicable taxes. The Company's e-commerce store solutions range from simple remote control models to more comprehensive online store models. In addition to the services the Company provides, that facilitate the completion of an online transaction, it also offers services designed to increase traffic to its clients' websites and the associated online stores and to improve the sales productivity of those stores. The Company's services include paid search advertising, search engine optimization affiliate marketing, store optimization, multi-variant testing, web analytic services and e-mail optimization. All of the services are designed to help its clients acquire customers more effectively, sell to those customers more often and more efficiently, and increase the lifetime value of each customer. The Company sells its products and services to consumers through the Internet. It sells and markets its services for clients through a direct sales force located in offices in the United States, Europe and Asia Pacific. Some of the competitors of the Company are Art Technology Group, Inc., IBM Corporation, IBM Global Services, Accenture, Inc., GSI Commerce, Inc., asknet Inc., Arvato, ValueClick, Inc. and aQuantive, Inc. The Company is subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the internet.
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