Some more info SGSI

From Simply WALL STREET FYI



SGSI VALUE
Is Spectrum Global Solutions undervalued based on future cash flows and its price relative to the stock market?


INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Undervalued
About right
$0.08
$0.01
Future cashflow value
Currentshare price
How is this discounted cash flow calculated?

CURRENT DISCOUNT
Intrinsic value >50% Share price is $0.0115 vs Future cash flow value of $0.0823
CURRENT DISCOUNT CHECKS
Spectrum Global Solutions's share price is below the future cash flow value, and at a moderate discount (> 20%).
Spectrum Global Solutions's share price is below the future cash flow value, and at a substantial discount (> 40%).

PRICE RELATIVE TO MARKET
PRICE BASED ON PAST EARNINGS
Professional Services
Market
SGSI
0x
30x
60x
PE -1.0x
Spectrum Global Solutions is loss making, we can't compare it's value to the US Professional Services industry average.
Spectrum Global Solutions is loss making, we can't compare the value of its earnings to the US market.

PRICE BASED ON EXPECTED GROWTH
SGSI
0x
2x
4x
PEG -x
Unable to calculate PEG ratio for Spectrum Global Solutions, we can't assess if its growth is good value.

PRICE BASED ON VALUE OF ASSETS
Professional Services
Market
SGSI
0x
10x
20x
PB -0.8x
Spectrum Global Solutions has negative assets, we can't compare the value of its assets to the US Professional Services industry average.
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VALUE CHECKS
We assess Spectrum Global Solutions's value by looking at:
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. )
Is the PE ratio less than the market average, and/ or less than the Professional Services industry average (and greater than 0)? (2 checks)
Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
Is the PB ratio less than the Professional Services industry average (and greater than 0)? (1 check)
Spectrum Global Solutions has a total score of 2/6, 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 (0%).

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 Spectrum Global Solutions 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
2018 2019 2020 2021 2022
Levered FCF (USD, Millions) $2.31 $2.74 $3.24 $3.79 $4.40
Source Extrapolated @ (20%, capped from 87.24%) Extrapolated @ (19%, capped from 87.24%) Extrapolated @ (18%, capped from 87.24%) Extrapolated @ (17%, capped from 87.24%) Extrapolated @ (16%, capped from 87.24%)
Present Value
Discounted (@ 12.08%) $2.06 $2.18 $2.30 $2.40 $2.48
Present value of next 5 years cash flows:
$11

Terminal Value
Terminal Value = FCF2022 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $4 × (1 + 2.47%) ÷ (12.08% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$47

Present value of terminal value:
$26

Equity Value
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$38 = $11 + $26

Value = Total value / Shares Outstanding ($38 / 461)

Discount to Share Price
Value per share (USD): $0.08

Current discount (share price of $0.01): 86.03%



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 = 12.08% = 2.47% + (1.277 * 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 ($2,671,956).

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

1.277 = 0.678 (1 + (1- 2.7%) (90.76%))

Levered Beta used in calculation = 1.277



Assumptions
The risk free rate of 2.47% is from the 10 year government bond rate in USD.
The bottom-up beta is estimated by analysing other companies in the same industry.
The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
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.

SGSI FUTURE PERFORMANCE
How is Spectrum Global Solutions expected to perform in the next 1 to 3 years based on estimates from 0 analysts?

Spectrum Global Solutions is not covered by any analysts.
Annual Growth Rate 7.7% Expected Professional Services industry annual growth in earnings.
EARNINGS GROWTH VS LOW RISK SAVINGS
Unable to compare Spectrum Global Solutions's earnings growth to the low risk savings rate as no estimate data is available.
GROWTH VS MARKET CHECKS
Unable to compare Spectrum Global Solutions's earnings growth to the US market average as no estimate data is available.
Unable to compare Spectrum Global Solutions's revenue growth to the US market average as no estimate data is available.

ANNUAL GROWTH RATES COMPARISON
7.7%
4.7%
10.8%
6.2%
4.5%
Spectrum Global Solutions
Professional Services
Market
Low risk savings
Earnings Growth
Revenue Growth

ANALYSTS GROWTH EXPECTATIONS
USD
Revenue
Cash Flow
Earnings
2015
2016
2017
2018
$-10M
$15M
Actual
Super high growth metrics
HIGH GROWTH CHECKS
Unable to determine if Spectrum Global Solutions is high growth as no earnings estimate data is available.
Unable to determine if Spectrum Global Solutions is high growth as no revenue estimate data is available.

PAST AND FUTURE EARNINGS PER SHARE
USD
2015
2016
2017
2018
$-0.07
$0
Historical Range of past estimatesAnalyst's Estimate Range of estimates

PERFORMANCE IN 3 YEARS
+3 years
Professional Services
Spectrum Global Solutions
0.0%
20.0%
-%
Return
on Equity

Unable to establish if Spectrum Global Solutions will efficiently use shareholders’ funds in the future without estimates of Return on Equity.
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FUTURE PERFORMANCE CHECKS
We assess Spectrum Global Solutions's future performance by looking at:
Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
Is the annual earnings growth rate expected to be above 20%? (1 check)
Is the annual revenue growth rate expected to be above 20%? (1 check)
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.
Spectrum Global Solutions has a total score of 0/6, 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.

SGSI PAST PERFORMANCE
How has Spectrum Global Solutions performed over the past 5 years?


PAST EARNINGS GROWTH
14.4%
9.2%
-28.1%
-13.3%
Spectrum Global Solutions 5 yr pa
Spectrum Global Solutions 1 yr
Professional Services 1 yr
Market 5 yr pa

PAST EARNINGS GROWTH ANALYSIS
Spectrum Global Solutions does not make a profit and their year on year earnings growth rate was negative over the past 5 years.
Unable to compare Spectrum Global Solutions's 1-year earnings growth to the 5-year average as it is not currently profitable.
Unable to compare Spectrum Global Solutions's 1-year growth to the US Professional Services industry average as it is not currently profitable.

EARNINGS AND REVENUE HISTORY
USD
Revenue
Earnings
2012
2013
2014
2015
2016
2017
2018
$-10M
$15M

PERFORMANCE LAST YEAR
-%
Return
on Equity

Professional Services
Spectrum Global Solutions
-20%
Return
on Assets

-%
Return
on Capital
It is difficult to establish if Spectrum Global Solutions has efficiently used shareholders’ funds last year (Return on Equity greater than 20%) due to its liabilities exceeding its assets.
It is difficult to establish if Spectrum Global Solutions has efficiently used its assets last year compared to the US Professional Services industry average (Return on Assets) as it is loss-making.
It is difficult to establish if Spectrum Global Solutions improved its use of capital last year versus 3 years ago (Return on Capital Employed) due to its liabilities exceeding its assets.
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PAST PERFORMANCE CHECKS
We assess Spectrum Global Solutions's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the Professional Services industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
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.
Spectrum Global Solutions 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.

SGSI HEALTH
How is Spectrum Global Solutions's financial health and their level of debt?


NET WORTH
USD
2011
2012
2013
2014
2015
2016
2017
2018
$0
$5M
Net worth

USD
Short term
Long term
Net worth
Liabilities
Assets
Spectrum Global Solutions's short term (1 year) commitments are greater than its holdings of cash and other short term assets.
Spectrum Global Solutions has no long term commitments.
BALANCE SHEET

HISTORICAL DEBT
USD
Debt
Net worth (Equity)
2012
2013
2014
2015
2016
2017
2018
$-5M
$5M
Spectrum Global Solutions has negative shareholder equity (liabilities exceed assets), this is a more serious situation compared with a high debt level.
Irrelevant to check if Spectrum Global Solutions's debt level has increased considering it has negative shareholder equity.

CASH RUNWAY ANALYSIS
For companies that have on average been loss making in the past we analyse their runway based on operating expenses, which includes recurring G&A and R&D. Analysis based on the most recent financials.

Spectrum Global Solutions's cash level is insufficient to cover its current level of operating expenses for the upcoming year.
Spectrum Global Solutions's cash level is insufficient to cover its operating expenses for the upcoming year, if it continues to grow at historical rates of 25% each year.
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FINANCIAL HEALTH CHECKS
We assess Spectrum Global Solutions's financial health by checking for:
Are short term assets greater than short term liabilities? (1 check)
Are short term assets greater than long term liabilities? (1 check)
Has the debt to equity ratio increased in the past 5 years? (1 check)
Is the debt to equity ratio over 40%? (1 check)
Is the debt covered by operating cash flow? (1 check)
Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
Spectrum Global Solutions has a total score of 1/6, see the detailed checks below.
For companies that are loss making and have been so on average in the past we replace the last 2 checks with:
Does cash and short term investments cover stable operating expenses (recurring G&A and R&D) for more than 3 years? (1 check)
Does cash and short term investments cover growing operating expenses (recurring G&A and R&D) for more than 3 years? (1 check)


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

SGSI DIVIDENDS
What is Spectrum Global Solutions's current dividend yield, its reliability and sustainability?

ANNUAL DIVIDEND INCOME
Dividend payments 0% Current annual income from Spectrum Global Solutions dividends.
DIVIDEND AMOUNT
Unable to evaluate Spectrum Global Solutions's dividend against the low risk savings benchmark as the company has not reported any payouts.
Unable to evaluate Spectrum Global Solutions's dividend against the market benchmark as the company has not reported any payouts.

ANNUALIZED HISTORICAL AND FUTURE DIVIDENDS
DPS
Professional Services
Market
2019
0%
3%
2.28%2.96%
Unable to perform a dividend volatility check as Spectrum Global Solutions has not reported any payouts.
Unable to verify if Spectrum Global Solutions's dividend has been increasing as the company has not reported any payouts.

CURRENT PAYOUT TO SHAREHOLDERS
0%Now
Unable to calculate sustainability of dividends as Spectrum Global Solutions has not reported any payouts.

FUTURE PAYOUT TO SHAREHOLDERS
0%+3 yrs
Insufficient estimate data to determine if a dividend will be paid in 3 years and that it will be sustainable.
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INCOME/ DIVIDEND CHECKS
We assess Spectrum Global Solutions's dividend by checking for:
Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
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)
Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
If they have paid a dividend for 10 years has it increased in this time? (1 check)
How sustainable is the dividend, can Spectrum Global Solutions afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
Spectrum Global Solutions 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.
SGSI MANAGEMENT
What is the CEO of Spectrum Global Solutions's salary, the management and board of directors tenure and is there insider trading?


CEO
Roger Ponder, image provided by Google.Roger Ponder
AGE 64
TENURE AS CEO 0.9 years
CEO BIO
CEO COMPENSATION
Total Compensation
Salary
Spectrum Global Solutions's Earnings
Insufficient data for Roger to compare compensation growth.
Insufficient data for Roger to establish whether their compensation is reasonable for a company of this size and profit level.
MANAGEMENT TEAM TENURE
Average tenure of the Spectrum Global Solutions management team in years:

0.9
AVERAGE TENURE

The average tenure for the Spectrum Global Solutions management team is less than 2 years, this suggests a new team.
MANAGEMENT TEAM

BOARD OF DIRECTORS

RECENT INSIDER TRADING
SOLD
BOUGHT
0-3 months
3-6 months
6-9 months
9-12 months
No 3 month insider trading information.

WHO OWNS THIS COMPANY?
Individual Insiders
General Public
General
Public
Individual
Insiders
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MANAGEMENT CHECKS
We assess Spectrum Global Solutions's management by checking for:
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)
Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
Is the average tenure of the management team less than 2 years? (1 check)
Is the average tenure of the board of directors team less than 3 years? (1 check)
Spectrum Global Solutions 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.

SGSI NEWS
Spectrum Global Solutions to Present at the Inaugural LD Micro Virtual Conference - Press Release - Digital Journal
LOS ANGELES, CA / ACCESSWIRE / March 5, 2018 / Spectrum Global Solutions, Inc. … (OTC PINK: SGSI) is a leading provider of telecommunications engineering and infrastructure services, professional staffing and solutions across the United States, Canada, Puerto Rico, Guam and Caribbean today announced that it will be presenting at the inaugural LD Micro Virtual Conference on Tuesday, March 6th at 2.30PM PST / 5.30PM EST. … Hayter President of Spectrum Global Solutions will be giving the presentation and answering questions from investors.