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Estimating The Fair Value Of Fusion Telecommunications International Inc (NASDAQ:FSNN)

In this article I am going to calculate the intrinsic value of Fusion Telecommunications International Inc (NASDAQ:FSNN) using the discounted cash flows (DCF) model. If you want to learn more about this method, the basis for my calculations can be found in detail in the Simply Wall St analysis model. If you are reading this after January 2018 then I highly recommend you check out the latest calculation for Fusion Telecommunications International here.

What’s the value?

I’ve used the 2-stage growth model, which simply means we take in account two stages of company’s growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have perpetual stable growth rate. To start off, I use the analyst consensus forecast of FSNN’s levered free cash flow (FCF) over the next five years and discounted these figures at the cost of equity of 8.49%. When estimates weren’t available, I’ve extrapolated the average annual growth rate over the previous five years, capped at a reasonable level. This resulted in a present value of 5-year cash flow of $16.2M. Keen to know how I arrived at this number? Take a look at our detailed analysis here.

NasdaqCM:FSNN Intrinsic Value Jan 5th 18
NasdaqCM:FSNN Intrinsic Value Jan 5th 18

The graph above shows how FSNN’s earnings are expected to move going forward, which should give you some color on FSNN’s outlook. Next, I calculate the terminal value, which accounts for all the future cash flows after the five years. I think it’s suitable to use the 10-year government bond rate of 2.8% as the perpetual growth rate, which is rightly below GDP growth, but more towards the conservative side. The present value of the terminal value after discounting it back five years is $63.8M.

The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is $80.0M. To get the intrinsic value per share, we divide this by the total number of shares outstanding. This results in an intrinsic value of $3.57, which, compared to the current share price of $3.73, we see that Fusion Telecommunications International is fair value, maybe slightly overvalued at the time of writing.

Next Steps:

Whilst important, DCF calculation shouldn’t be the only metric you look at when researching a company.

For FSNN, I’ve put together three pertinent factors you should further examine:

PS. Simply Wall St does a DCF calculation for every US stock every 6 hours, so if you want to find the intrinsic value of any other stock just search here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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