Dropbox's latest share price worsens its valuation

, , ,
Integral service around a transaction
BY : Diego GutiérrezMarch Fri, 2019

Dropbox is positioning itself as a company to consider. It is achieving very high growth on a continuous basis, thanks to the trend towards digitalisation in medium-sized companies and the need for immediate access to all files.

In the following post we will analyse the financial variables behind the business idea and what strengths and weaknesses we find in this company.

Dropbox financial analysis

In the following tables we have summarised the most relevant Dropbox data through our analysis in company valuation.

We can see that sales have grown significantly, continuing a fairly strong growth, although somewhat lower than in 2017. However, the increase has been above average for companies in the sector.

This growth is reflected in an increase of 26% in the number of subscribers over the last year, a highly recurrent revenue pattern that partly "guarantees" revenues for the coming periods.

As can be seen in the ROE is quite negativeThis is due to the growth that the company has enjoyed, by increasing the size of the workforce and infrastructure to prepare for future growth.

Dropbox's latest share price worsens its valuation

It is worth mentioning that the company is directly funding this growth with capital increases without relying on financial debt for the time being, which is the main reason why the company decided to go public.

The growth on the assets side is mainly reflected in the financial investments account, which is made up of the more than 29 investments Dropbox has done inorganically in recent years to accelerate its growth.

With all this we can see that Dropbox is still far from achieving a certain economic stability and being able to self-finance its operations. However, this is understandable given the company's growth, and it is very likely that in the short term the company will start to take on debt in order to be able to maintain this growth without having to resort to future capital increases.

Dropbox Quote

Dropbox has suffered some stock market corrections since its IPO, in part due to a decline in the growth of 5% compared to the previous year and to the a marked increase in losses and cash requirements generated by the company's recurring operations during 2018.

Dropbox Quote

However, these corrections, which have lost almost 25% of the value of the initial shares, have come at a rather negative juncture, with fears of a new tech bubble, political tension in the US and the prospect of a possible recession in the global economy in the short term..

In other words, although Dropbox's financial statements show problems with regard to its ability to generate funds, a capital structure that is quite different from its peers and a rather small increase in efficiency, the company's share price has been punished by a somewhat pessimistic economic situation and by the poor results of some of the last few years of the company. company purchases have reported during 2018.


Final assessment

If Dropbox wants to have a bullish rally during 2019, it is going to have to prove that it is able to reduce net cash requirements. It should also borrowing to improve capital structure of the company and focus on its core business to increase the number of subscribers and building loyalty, as the end-of-year quotation will largely depend on the capacity of this increase.

The M&A Professionals

Meet our services



Do you want to be up to date?


Our diferentiation

Market Research Technology
Our team of market analysis specialists is continuously analyzing the investments of the most active markets in the industry in order to unceasingly contribute ideas of the current market situation and identify the most relevant trends for senior management. We integrate the most relevant sources of information which allows us to discover the most interesting companies for venture capital and similarly helps us to identify the investors with the highest probability of involvement in an M&A process to ensure the success of our sell-side operations.

The reports and deductions of our advisors provide a broad view of the sector, both geographically and from the complementary or adjacent markets perspective.
Technology Data Analytics
for M&A
Advanced data anlytics is a weapon". Intelfin is an artificial intelligence tool we use for investing and creating value in SMEs through competitive analytics and the enterprise environment.

IntelFin consists of a cognitive system, which, through the application of advanced analytical technologies, facilitates the automation of investment and financing decisions in the field of non-listed companies and especially SMEs in high-growth sectors.

The information related to these companies is characterized by their lack of transparency and heterogeneity; thus, it is necessary to develop an advanced analysis which is as much predictive as prescriptive and is developed in a natural language custom, suitable to obtain greater clarity and knowledge of the investment scope.

The IntelFin system focuses especially on analyzing the variables that define and influence the competitive environment of a sector and the positioning of a company, analyzing their influence on future value creation. Therefore, IntelFin supports strategic decision-making to senior management by resolving questions such as:

¿What are my competitors' priorities, strategies and expansion plans? Who's my competition? Which competitor is most likely to grow at a higher rate?
Which areas of activity/business models will receive the most investment? Which sectors are most attractive to investors?
Which companies are going to experience the most growth in the near future? Which companies are most likely to receive investment or be acquired?
Training Methodology
We have developed training programs in an innovative set-up which guarantees our teams the acquisition of technical competences both in the field of corporate finance and in the field of psychology, that is much needed when it comes to negotiation processes.

We have a culture of continuous improvement of our processes, closely related to the use of information systems that allow the enhancement of internal communication between our teams, as well as external communication with our customers. Hence, we extend best practices identified internally in an efficient and rapid manner among our members.

Are you one of those who prefer to be well informed when making decisions?