Rating Update: Stock Rating F-Lowest (9/10/19)-Liveramp Holdings Inc (RAMP).

out_logo_500#04273.jpg

BUSINESS

Acxiom Corporation operates a technology and enablement services company in the United States, Europe, the Asia-Pacific, and internationally. The company operates through three segments: Connectivity, Audience Solutions, and Marketing Services. The Connectivity segment provides a foundational identity resolution layer, which enables its clients to identify and reach consumers across channels and measure the impact of marketing on sales. This segment offers LiveRamp IdentityLink, an identity resolution service that ties data back to real people and makes it possible to onboard that data for people-based marketing initiatives across digital channels. Its IdentityLink serves brands and agencies, marketing technology providers, data owners, and publishers.
out_plist#04273.jpg

INVESTMENT RATING

out_map1#04273.jpg

Reflecting future returns on capital that are forecasted to be below the cost of capital, RAMP is expected to be a Value Eraser.

Liveramp Holdings has a current Value Trend Rating of F (Lowest Rating).
With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing inconsistent signals. Liveramp Holdings has a very low Appreciation Score of 9 but a neutral Power Rating of 53, leading to the Lowest Value Trend Rating.

Liveramp Holdings’ stock is selling significantly above targeted value. The current stock price of $42.74 compares to targeted value 12 months forward of $16.
Liveramp Holdings’ very low appreciation potential results in an appreciation score of 9 (91% of the universe has greater appreciation potential.)
out_pt#04273.jpg

Liveramp Holdings has a Power Rating of 53. (This neutral Power Rating indicates that RAMP’s chances of enjoying attractive investment performance over the near to intermediate term are only average.)
Factors contributing to this neutral Power Rating include: is in a strong phase current; and recent price action has been neutral. An offsetting factor is the trend in RAMP’s earnings estimates has been unfavorable in recent months.

INVESTMENT PROFILE

RAMP’s financial strength is average. Financial strength rating is 55.
out_pfit1#04273.jpg

Relative to the S&P 500 Composite, Liveramp Holdings Inc has slightly more Value than Growth characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that RAMP is higher risk. Relative weaknesses include: low historical profitability, low financial strength, high stock price volatility, and high earnings variability. RAMP’s valuation is high: low dividend yield, high P/E ratio, and moderate price/book ratio. RAMP has unusually low market capitalization.

CURRENT SIGNALS

Liveramp Holdings’ current operations are eroding. Return on equity is falling, reflecting: falling asset utilization; declining pretax margin; falling tax keep rate; and falling leverage.

Liveramp Holdings’ current technical position is very weak. The stock price is in a 5.4 month down move. The stock has declined 23.6% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.

ALERTS

Positive development: significant quarterly sales acceleration occurred. Negative development: significant quarterly earnings deceleration occurred.
The stock is currently rated F.
On 9/10/19, Liveramp Holdings Inc (NYSE: RAMP) stock enjoyed a major increase of 13.3%, closing at $0.85. This advance was accompanied by normal trading volume. The stock has performed in line with the market over the last nine months and has risen 0.9% during the last week.

CASH FLOW

In 2019, Liveramp Holdings generated a very significant increase in cash of +$919.19 million (+646%). Sources of cash were much larger than uses. Cash consumed from 2019 EBITDA totaled -$122.60 million. Non-operating uses consumed -$26.87 million (+22% of EBITDA). Cash taxes contributed +$5.21 million (-4% of EBITDA). Withdrawal of investment from the business totalled +$577.19 million (-471% of EBITDA). On a net basis, debt investors received -$229.42 million (+187% of EBITDA) while equity investors supplied +$715.68 million (-584% of EBITDA).
out_cflow.1#04273.jpg

Liveramp Holdings’ Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Liveramp Holdings Inc Peer Group. In most years, Liveramp Holdings was in the third quartile and top quartile. Currently, Liveramp Holdings is upper quartile at +22% of EBITDA (-$26.87 million).

Liveramp Holdings’ Cash Taxes, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Liveramp Holdings Inc Peer Group. In most years, Liveramp Holdings was in the second quartile and top quartile. Currently, Liveramp Holdings is above median at -4% of EBITDA (+$5.21 million).

Liveramp Holdings’ Business Re-investment, %EBITDA has suffered a very strong overall downtrend over the period. This downtrend was accompanied by a similar trend for the Liveramp Holdings Inc Peer Group. In most years, Liveramp Holdings was in the second quartile and top quartile. Currently, Liveramp Holdings is lower quartile at -471% of EBITDA (+$577.19 million).

Liveramp Holdings’ Debt Investors, %EBITDA has experienced a very strong overall uptrend over the period. This improvement was accompanied by stability for the Liveramp Holdings Inc Peer Group. In most years, Liveramp Holdings was in the lower quartile and top quartile. Currently, Liveramp Holdings is upper quartile at +187% of EBITDA (-$229.42 million).

Liveramp Holdings’ Equity Investors, %EBITDA has suffered a very strong overall downtrend over the period. This downtrend was accompanied by stability for the Liveramp Holdings Inc Peer Group. (Since 2017 Equity Investors, %EBITDA has accelerated very sharply.) In most years, Liveramp Holdings was in the second quartile and lower quartile. Currently, Liveramp Holdings is lower quartile at -584% of EBITDA (+$715.68 million).

Liveramp Holdings’ Change in Cash, %EBITDA has experienced a very strong overall downtrend over the period. This downtrend was accompanied by a similar trend for the Liveramp Holdings Inc Peer Group. (Since 2016 Change in Cash, %EBITDA has accelerated very sharply.) In most years, Liveramp Holdings was in the third quartile and second quartile. Currently, Liveramp Holdings is lower quartile at -750% of EBITDA (+$919.19 million).
out_cflow.2#04273.jpg

Liveramp Holdings’ Cash, %Revenue has enjoyed a very strong overall uptrend over the period. This improvement was accompanied by stability for the Liveramp Holdings Inc Peer Group. In most years, Liveramp Holdings was in the second quartile and third quartile. Currently, Liveramp Holdings is upper quartile at +372%.

PROFITABILITY

Liveramp Holdings’ return on equity reached a new post-2011 low in 2019.
This was due to very strong negative trend in pretax operating return and small positive trend in non-operating factors.
The productivity of Liveramp Holdings’ assets declined over the full period 2010-2019: asset turnover has suffered a very strong overall downtrend that accelerated very sharply after the 2017 level.
Reinforcing this trend, pretax margin experienced a very strong overall downtrend that decelerated very sharply from the 2015 level.
Non-operating factors (income taxes and financial leverage) had a minor positive influence on return on equity.
out_dpgrfs3#04273.jpg

Liveramp Holdings’ return on equity is substantially below median (-11.7%) for the four quarters ended June, 2019.
out_dpgrfs3.2#04273.jpg
Operating performance (pretax return on assets) is lower quartile (-13.4%) reflecting asset turnover that is lower quartile (0.21X) and lower quartile pretax margin (-63.0%).
Tax “keep” rate (income tax management) is at the lower quartile (77.0%) resulting in after tax return on assets that is lower quartile.
Financial leverage (leverage) is lower quartile (1.13X).

GROWTH RATES

There are no significant differences between Liveramp Holdings’ longer term growth and growth in recent years.
Liveramp Holdings’ historical income statement growth has been lower than balance sheet growth. Revenue growth has fallen short of asset growth; earnings growth has fallen short of equity growth.

Annual revenue growth has been -10.4% per year.

Total asset growth has been 1.7% per year.

Annual E.P.S. growth has been -19.5% per year.

Equity growth has been 9.0% per year.

Liveramp Holdings’ consensus growth rate forecast (average of Wall Street analysts) is 25.0% — substantially above the average of the historical growth measures.
out_growthgrf#04273.jpg

Relative to the Liveramp Holdings Inc Peer Group, Liveramp Holdings’ historical growth measures are erratic. Equity growth (9.0%) has been at the upper quartile. Total asset growth (1.7%) has been at the lower quartile. Revenue growth (-10.4%) has been lower quartile. E.P.S. growth (-19.5%) has been lower quartile.

Consensus growth forecast (25.0%) is at the upper quartile.
out_growthgrf.2#04273.jpg

PRICE HISTORY

Over the full time period, Liveramp Holdings’ stock price performance has been volatile and superior. Between November, 2008 and September, 2019, Liveramp Holdings’ stock price rose +469%; relative to the market, this was a +71% gain. Significant price moves during the period: 1) March, 2018 – September, 2018: +118%; 2) February, 2014 – September, 2014: -56%; 3) September, 2011 – February, 2014: +250%; and 4) June, 2009 – April, 2010: +116%.
out_price#04273.jpg

TOTAL INVESTMENT RETURNS

Current annual total return performance of 30.0% is upper quartile relative to the S&P 500 Composite.
In addition to being upper quartile relative to S&P 500 Composite, current annual total return performance through July, 2019 of 30.0% is upper quartile relative to Liveramp Holdings Inc Peer Group.

Current 5-year total return performance of 23.5% is upper quartile relative to the S&P 500 Composite.
Through July, 2019, with upper quartile current 5-year total return of 23.5% relative to S&P 500 Composite, Liveramp Holdings’ total return performance is upper quartile relative to Liveramp Holdings Inc Peer Group.
out_quartret#04273.jpg

VALUATION BENCHMARKS

Relative to S&P 500 Composite, RAMP’s overall valuation is quite high. The highest factor, the ratio of enterprise value/revenue, is upper quartile. Ratio of enterprise value/assets is below median. Price/equity ratio is below median. Price/earnings ratio is unavailable. Ratio of enterprise value/earnings before interest and taxes is unavailable.

Relative to Liveramp Holdings Inc Peer Group, RAMP’s overall valuation is quite high. The highest factor, the ratio of enterprise value/revenue, is upper quartile. Ratio of enterprise value/assets is slightly above median. Price/equity ratio is slightly above median. Price/earnings ratio is unavailable. Ratio of enterprise value/earnings before interest and taxes is unavailable.
out_tradv#04273.jpg

Liveramp Holdings has a major value gap compared to the median valuation. For RAMP to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 6.25X to 1.59X. If RAMP’s ratio of enterprise value/revenue were to fall to 1.59X, its stock price would be lower by $-21 to $22.
For RAMP to fall to lower quartile valuation relative to the Liveramp Holdings Inc Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 6.25X to 1.35X. If RAMP’s ratio of enterprise value/revenue were to fall to 1.35X, its stock price would decline by $-22 from the current level of $43.

VALUE TARGETS

Reflecting future returns on capital that are forecasted to be below the cost of capital, RAMP is expected to be a Value Eraser.
Liveramp Holdings’ current Price Target of $16 represents a -63% change from the current price of $42.74.
Liveramp Holdings’ very low appreciation potential results in an appreciation score of 9 (91% of the universe has greater appreciation potential.)
With this low Appreciation Score of 9, the neutral Power Rating of 53 results in an Value Trend Rating of F.
out_vc#04273.jpg

Liveramp Holdings’ current Price Target is $16 (-39% from the 2019 Target of $26 and -63% from the 09/10/19 price of $42.74). This dramatic fall in the Target is the result of a -2% decrease in the equity base and a -38% decrease in the price/equity multiple. The forecasted decline in return on equity has a very large negative impact on the price/equity multiple and the forecasted increase in cost of equity has a very slight negative impact as well. Partially offsetting these Drivers, the forecasted decline in growth has a very large positive impact.
out_wc.1#04273.jpg
out_wc.2#04273.jpg

PTR’s return on equity forecast is 1.5% — below our recent forecasts. Forecasted return on equity suffered a dramatic, erratic decline between 2011 and 2019. The current forecast is significantly below the 2011 peak of 12%.

PTR’s growth forecast is 3.0% — slightly above our recent forecasts. Forecasted growth erratic between 2015 and 2019. The current forecast is steady at the 2015 peak of 1%.

PTR’s cost of equity forecast is 5.1% — in line with recent levels. Forecasted cost of equity enjoyed a dramatic, erratic decline between 2011 and 2019. The current forecast is steady at the 2011 peak of 6.0%.
out_vc.2#04273.jpg
At Liveramp Holdings’ current price of $42.74, investors are placing a negative value of $-5 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of -2.0% per year, and a return on equity of 7.1% versus a cost of equity of 5.0%.
PTR’s 2021 Price Target of $16 is based on these forecasts and reflects an estimated value of existing assets of $-217 and a value of future investments of $232.

About John Lafferty 57444 Articles
During his career, John has developed valuation and stock rating methodologies, managed institutional portfolios and mutual funds, and provided equity research to institutional investors on thousands of companies. He has been Director of Research at PTR since its inception in 2004.

Be the first to comment

Leave a Reply

Your email address will not be published.


*


This site uses Akismet to reduce spam. Learn how your comment data is processed.