Valuation

Mikkel Sanderhoff

Student thesis: Master thesis

Abstract

Zendesk is a young Danish company founded in 2007. With a mission to help companies deliver exceptional customer service, Zendesk has in a short time grown larger and is now one of the leading suppliers on the market for cloud-based helpdesk-software, developed to handle Business to Customer support. Their modern customer service platform is being offered in 40 different languages and is utilized by more than 40,000 customers worldwide. Today Zendesk’s headquarters is located in Silicon Valley in the United States and in 2014 it was quoted on the New York Stock Exchange. My valuation of the company will be built on a fundamental analysis, which include the following two analyses; strategic analysis (internal and external) ang financial analysis. The result of the two analyses will be compiled in a SWOT-analysis, which functions as an overall Framework Model. Finally, the Residual Income Model will be applied to a final valuation of the company. Throughout this paper, it has been concluded that Zendesk has a strong and user-friendly product. As I see it, there is a prevalent customer satisfaction among the users. The unique features of Zendesk’s products create a high flow of support cases. The user can easily navigate in the system, which makes it simple to both create and reply to the support cases. It is estimated that the market for this kind of support system has growth potential. However, the future growth can be affected by several external factors and throughout my analysis of the company’s external relations, it appeared that the company strongly depends on several factors. Firstly, there is an uncertainty to whether the company can achieve the desired growth if external changes occur, which can affect the injection of capital to the company. The injection of capital is currently the principal element for Zendesk’s future growth. Secondly, it can be affected by currency demand and supply, and also the interest rate in the capital markets. 3 Furthermore, the dependency of the future demand comes into perspective. Zendesk is in its growth phase and it is crucial that they are able to follow the future customer tendencies and the technological development. Their future growth will be limited if they do not follow these tendencies. In the financial analysis it was remarkable that a supplementary note was stated in the auditor’s report regarding the internal controls in the bookkeeping. It is however not evaluated to have big significance on the accounts, since the audit have carried out tests to a sufficient degree. The profitability analysis showed that the company had a negative result, which was caused by high operating costs connected to the company’s growth plans. Even though the company in the short run loses money, it can be presumed that the future sales will offset the negative result. In this paper Zendesk is valuated to have a shared value USD 33.98, which is above the market price today at USD 29.39 the 14th of September 2016.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages115