Intrinsic value of Enghouse Systems Limited - ENGH

Previous Close

$65.68

  Intrinsic Value

$40.96

stock screener

  Rating & Target

sell

-38%

Previous close

$65.68

 
Intrinsic value

$40.96

 
Up/down potential

-38%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ENGH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Enghouse Systems Limited (ENGH) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.52
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  325
  345
  367
  389
  412
  436
  461
  488
  515
  544
  574
  605
  638
  672
  708
  745
  784
  826
  869
  914
  961
  1,011
  1,063
  1,117
  1,174
  1,234
  1,297
  1,363
  1,432
  1,505
  1,581
Variable operating expenses, $m
 
  264
  279
  295
  312
  329
  347
  366
  386
  406
  428
  435
  459
  483
  509
  536
  564
  594
  625
  657
  691
  727
  765
  804
  845
  888
  933
  981
  1,030
  1,083
  1,137
Fixed operating expenses, $m
 
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  32
  33
  33
  34
  35
  36
  37
  38
Total operating expenses, $m
  267
  282
  298
  314
  332
  349
  368
  387
  408
  428
  451
  459
  483
  508
  534
  562
  591
  621
  653
  686
  720
  757
  796
  836
  878
  921
  967
  1,016
  1,066
  1,120
  1,175
Operating income, $m
  58
  63
  69
  75
  81
  87
  93
  100
  107
  115
  123
  146
  155
  164
  173
  183
  193
  204
  216
  227
  240
  253
  267
  282
  297
  313
  330
  347
  366
  385
  406
EBITDA, $m
  89
  91
  97
  104
  111
  118
  125
  133
  141
  150
  159
  168
  178
  188
  199
  210
  222
  234
  247
  260
  275
  290
  305
  322
  339
  357
  376
  396
  417
  439
  463
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
Earnings before tax, $m
  61
  63
  68
  74
  79
  85
  91
  98
  105
  112
  119
  142
  150
  158
  167
  176
  186
  196
  207
  218
  230
  242
  255
  269
  283
  298
  314
  331
  348
  366
  386
Tax expense, $m
  10
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  73
  77
  81
  85
  89
  94
  99
  104
Net income, $m
  51
  46
  50
  54
  58
  62
  67
  71
  76
  81
  87
  103
  109
  116
  122
  129
  136
  143
  151
  159
  168
  177
  186
  196
  207
  218
  229
  241
  254
  268
  282

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  130
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  462
  353
  375
  397
  421
  446
  471
  498
  526
  555
  586
  618
  651
  686
  723
  761
  801
  843
  887
  933
  982
  1,032
  1,085
  1,141
  1,199
  1,261
  1,325
  1,392
  1,463
  1,537
  1,615
Adjusted assets (=assets-cash), $m
  332
  353
  375
  397
  421
  446
  471
  498
  526
  555
  586
  618
  651
  686
  723
  761
  801
  843
  887
  933
  982
  1,032
  1,085
  1,141
  1,199
  1,261
  1,325
  1,392
  1,463
  1,537
  1,615
Revenue / Adjusted assets
  0.979
  0.977
  0.979
  0.980
  0.979
  0.978
  0.979
  0.980
  0.979
  0.980
  0.980
  0.979
  0.980
  0.980
  0.979
  0.979
  0.979
  0.980
  0.980
  0.980
  0.979
  0.980
  0.980
  0.979
  0.979
  0.979
  0.979
  0.979
  0.979
  0.979
  0.979
Average production assets, $m
  89
  95
  101
  107
  113
  120
  126
  134
  141
  149
  157
  166
  175
  184
  194
  204
  215
  226
  238
  250
  263
  277
  291
  306
  322
  338
  355
  373
  392
  412
  433
Working capital, $m
  85
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
  -93
  -98
  -103
  -108
  -114
  -120
  -126
  -133
  -139
  -147
  -154
  -162
  -170
  -179
  -188
  -198
  -208
  -218
Total debt, $m
  3
  13
  23
  34
  45
  56
  69
  81
  94
  108
  122
  137
  153
  170
  187
  205
  224
  243
  264
  286
  308
  332
  357
  383
  411
  439
  470
  501
  535
  569
  606
Total liabilities, $m
  155
  166
  176
  187
  198
  209
  222
  234
  247
  261
  275
  290
  306
  323
  340
  358
  377
  396
  417
  439
  461
  485
  510
  536
  564
  592
  623
  654
  688
  722
  759
Total equity, $m
  306
  187
  199
  211
  223
  236
  250
  264
  279
  294
  311
  327
  345
  364
  383
  403
  425
  447
  470
  495
  520
  547
  575
  605
  636
  668
  702
  738
  775
  815
  856
Total liabilities and equity, $m
  461
  353
  375
  398
  421
  445
  472
  498
  526
  555
  586
  617
  651
  687
  723
  761
  802
  843
  887
  934
  981
  1,032
  1,085
  1,141
  1,200
  1,260
  1,325
  1,392
  1,463
  1,537
  1,615
Debt-to-equity ratio
  0.010
  0.070
  0.120
  0.160
  0.200
  0.240
  0.270
  0.310
  0.340
  0.370
  0.390
  0.420
  0.440
  0.470
  0.490
  0.510
  0.530
  0.540
  0.560
  0.580
  0.590
  0.610
  0.620
  0.630
  0.650
  0.660
  0.670
  0.680
  0.690
  0.700
  0.710
Adjusted equity ratio
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  51
  46
  50
  54
  58
  62
  67
  71
  76
  81
  87
  103
  109
  116
  122
  129
  136
  143
  151
  159
  168
  177
  186
  196
  207
  218
  229
  241
  254
  268
  282
Depreciation, amort., depletion, $m
  31
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
Funds from operations, $m
  72
  74
  78
  83
  88
  93
  98
  104
  110
  116
  123
  125
  132
  140
  148
  156
  164
  173
  182
  192
  203
  213
  225
  237
  249
  262
  276
  291
  306
  322
  339
Change in working capital, $m
  -11
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  83
  77
  81
  86
  91
  96
  102
  108
  114
  120
  127
  130
  137
  144
  152
  161
  170
  179
  188
  198
  209
  220
  232
  244
  257
  271
  285
  300
  315
  332
  349
Maintenance CAPEX, $m
  0
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
New CAPEX, $m
  -3
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -25
  -18
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -38
  -39
  -42
  -43
  -46
  -49
  -50
  -53
  -56
  -58
  -61
  -65
  -68
  -72
  -75
Free cash flow, $m
  58
  59
  63
  67
  71
  75
  79
  84
  89
  94
  99
  100
  106
  112
  118
  125
  132
  139
  147
  155
  163
  172
  181
  191
  201
  212
  223
  235
  247
  260
  274
Issuance/(repayment) of debt, $m
  -2
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
Issuance/(repurchase) of shares, $m
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  0
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
Total cash flow (excl. dividends), $m
  58
  69
  73
  77
  82
  87
  91
  97
  102
  107
  113
  115
  122
  129
  136
  143
  151
  159
  167
  176
  186
  196
  206
  217
  229
  241
  253
  267
  280
  295
  310
Retained Cash Flow (-), $m
  -37
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
Prev. year cash balance distribution, $m
 
  130
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  188
  62
  65
  69
  73
  78
  82
  87
  92
  97
  98
  104
  110
  116
  123
  130
  137
  144
  152
  160
  169
  178
  188
  198
  208
  219
  231
  243
  256
  269
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  180
  56
  57
  57
  57
  56
  56
  54
  53
  51
  47
  44
  42
  39
  36
  33
  30
  27
  23
  20
  17
  15
  12
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Enghouse Systems Limited develops enterprise software solutions for a range of vertical markets. The Company operates through two segments: the Interactive Management Group and the Asset Management Group. The Interactive Management Group specializes in customer interaction software and services that are designed to manage customer communications across the enterprise. Its technologies include contact center, attendant console, voice response, dialers, agent performance optimization and analytics that support telephony environment, deployed on premise or in the cloud. The Asset Management Group provides a range of products to telecom service providers, utilities, and the oil and gas industry. Its products include Operations Support Systems (OSS), Business Support Systems (BSS), Mobile Value Added Services (VAS) solutions and conversion services. The Asset Management Group also provides fleet routing, dispatch, scheduling, communications and emergency control center solutions.

FINANCIAL RATIOS  of  Enghouse Systems Limited (ENGH)

Valuation Ratios
P/E Ratio 34.8
Price to Sales 5.5
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 21.4
Price to Free Cash Flow 22.2
Growth Rates
Sales Growth Rate 5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 1%
Total Debt to Equity 1%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.6%
Ret/ On Assets - 3 Yr. Avg. 10.7%
Return On Total Capital 17.5%
Ret/ On T. Cap. - 3 Yr. Avg. 16.5%
Return On Equity 17.7%
Return On Equity - 3 Yr. Avg. 16.6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 69.2%
Gross Margin - 3 Yr. Avg. 68.7%
EBITDA Margin 28.3%
EBITDA Margin - 3 Yr. Avg. 26%
Operating Margin 17.8%
Oper. Margin - 3 Yr. Avg. 16%
Pre-Tax Margin 18.8%
Pre-Tax Margin - 3 Yr. Avg. 16.4%
Net Profit Margin 15.7%
Net Profit Margin - 3 Yr. Avg. 14%
Effective Tax Rate 16.4%
Eff/ Tax Rate - 3 Yr. Avg. 14.4%
Payout Ratio 31.4%

ENGH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ENGH stock intrinsic value calculation we used $325 million for the last fiscal year's total revenue generated by Enghouse Systems Limited. The default revenue input number comes from 2017 income statement of Enghouse Systems Limited. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ENGH stock valuation model: a) initial revenue growth rate of 6.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ENGH is calculated based on our internal credit rating of Enghouse Systems Limited, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Enghouse Systems Limited.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ENGH stock the variable cost ratio is equal to 76.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $18 million in the base year in the intrinsic value calculation for ENGH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Enghouse Systems Limited.

Corporate tax rate of 27% is the nominal tax rate for Enghouse Systems Limited. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ENGH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ENGH are equal to 27.4%.

Life of production assets of 7.6 years is the average useful life of capital assets used in Enghouse Systems Limited operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ENGH is equal to -13.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $306 million for Enghouse Systems Limited - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 26.996 million for Enghouse Systems Limited is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Enghouse Systems Limited at the current share price and the inputted number of shares is $1.8 billion.

RELATED COMPANIES Price Int.Val. Rating
CSU Constellation 840.85 843.70  hold
OTEX Open Text Corp 44.12 92.31  str.buy
BB BlackBerry Lim 15.12 1.39  str.sell
DSG Descartes Syst 34.05 4.95  str.sell
Financial statements of ENGH
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.