Intrinsic value of Nanotech Security Corp - NTS

Previous Close

$1.59

  Intrinsic Value

$0.07

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

0%

Previous close

$1.59

 
Intrinsic value

$0.07

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of NTS 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.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.00
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  5
  8
  12
  18
  27
  38
  52
  70
  92
  118
  149
  185
  226
  273
  324
  381
  444
  511
  584
  661
  743
  830
  921
  1,017
  1,118
  1,223
  1,332
  1,446
  1,565
  1,688
  1,816
Variable operating expenses, $m
 
  18
  27
  40
  59
  83
  114
  152
  200
  257
  325
  403
  493
  594
  707
  832
  967
  1,114
  1,272
  1,441
  1,620
  1,809
  2,009
  2,218
  2,437
  2,666
  2,904
  3,153
  3,411
  3,680
  3,959
Fixed operating expenses, $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
Total operating expenses, $m
  13
  18
  27
  40
  59
  83
  114
  152
  200
  257
  325
  403
  493
  594
  707
  832
  967
  1,114
  1,272
  1,441
  1,620
  1,809
  2,009
  2,218
  2,437
  2,666
  2,904
  3,153
  3,411
  3,680
  3,959
Operating income, $m
  -8
  -10
  -15
  -22
  -32
  -45
  -61
  -82
  -108
  -139
  -176
  -218
  -267
  -322
  -383
  -450
  -524
  -603
  -689
  -780
  -877
  -979
  -1,087
  -1,201
  -1,319
  -1,443
  -1,572
  -1,707
  -1,846
  -1,992
  -2,143
EBITDA, $m
  -5
  -6
  -9
  -14
  -20
  -29
  -40
  -53
  -70
  -90
  -113
  -141
  -172
  -207
  -247
  -290
  -337
  -388
  -444
  -502
  -565
  -631
  -700
  -773
  -850
  -929
  -1,013
  -1,099
  -1,189
  -1,283
  -1,380
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  2
  2
  3
  4
  5
  6
  8
  9
  11
  14
  16
  19
  21
  24
  28
  31
  35
  39
  43
  47
  51
  56
  61
  66
  71
Earnings before tax, $m
  -8
  -10
  -15
  -22
  -32
  -46
  -63
  -85
  -111
  -143
  -181
  -225
  -275
  -331
  -394
  -464
  -540
  -622
  -710
  -804
  -905
  -1,011
  -1,122
  -1,239
  -1,362
  -1,490
  -1,623
  -1,763
  -1,907
  -2,058
  -2,214
Tax expense, $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
  0
Net income, $m
  -8
  -10
  -15
  -22
  -32
  -46
  -63
  -85
  -111
  -143
  -181
  -225
  -275
  -331
  -394
  -464
  -540
  -622
  -710
  -804
  -905
  -1,011
  -1,122
  -1,239
  -1,362
  -1,490
  -1,623
  -1,763
  -1,907
  -2,058
  -2,214

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3
  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
  25
  35
  54
  81
  118
  167
  229
  308
  404
  520
  656
  815
  997
  1,201
  1,429
  1,681
  1,955
  2,252
  2,571
  2,912
  3,274
  3,656
  4,059
  4,482
  4,925
  5,387
  5,869
  6,371
  6,893
  7,436
  8,001
Adjusted assets (=assets-cash), $m
  22
  35
  54
  81
  118
  167
  229
  308
  404
  520
  656
  815
  997
  1,201
  1,429
  1,681
  1,955
  2,252
  2,571
  2,912
  3,274
  3,656
  4,059
  4,482
  4,925
  5,387
  5,869
  6,371
  6,893
  7,436
  8,001
Revenue / Adjusted assets
  0.227
  0.229
  0.222
  0.222
  0.229
  0.228
  0.227
  0.227
  0.228
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
Average production assets, $m
  11
  17
  26
  39
  56
  79
  109
  147
  193
  248
  313
  389
  475
  573
  681
  801
  932
  1,073
  1,226
  1,388
  1,561
  1,743
  1,935
  2,137
  2,348
  2,568
  2,798
  3,037
  3,286
  3,545
  3,814
Working capital, $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
  0
Total debt, $m
  7
  8
  13
  20
  30
  44
  61
  82
  108
  140
  177
  221
  270
  326
  388
  457
  532
  613
  700
  793
  892
  996
  1,106
  1,222
  1,342
  1,469
  1,600
  1,737
  1,880
  2,028
  2,182
Total liabilities, $m
  8
  10
  15
  22
  32
  46
  63
  84
  110
  142
  179
  223
  272
  328
  390
  459
  534
  615
  702
  795
  894
  998
  1,108
  1,224
  1,344
  1,471
  1,602
  1,739
  1,882
  2,030
  2,184
Total equity, $m
  16
  26
  40
  59
  86
  121
  167
  224
  294
  378
  477
  593
  725
  873
  1,039
  1,222
  1,421
  1,637
  1,869
  2,117
  2,380
  2,658
  2,951
  3,258
  3,580
  3,916
  4,267
  4,632
  5,011
  5,406
  5,817
Total liabilities and equity, $m
  24
  36
  55
  81
  118
  167
  230
  308
  404
  520
  656
  816
  997
  1,201
  1,429
  1,681
  1,955
  2,252
  2,571
  2,912
  3,274
  3,656
  4,059
  4,482
  4,924
  5,387
  5,869
  6,371
  6,893
  7,436
  8,001
Debt-to-equity ratio
  0.438
  0.300
  0.320
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
Adjusted equity ratio
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -8
  -10
  -15
  -22
  -32
  -46
  -63
  -85
  -111
  -143
  -181
  -225
  -275
  -331
  -394
  -464
  -540
  -622
  -710
  -804
  -905
  -1,011
  -1,122
  -1,239
  -1,362
  -1,490
  -1,623
  -1,763
  -1,907
  -2,058
  -2,214
Depreciation, amort., depletion, $m
  3
  3
  5
  8
  11
  16
  22
  29
  39
  50
  63
  78
  95
  115
  136
  160
  186
  215
  245
  278
  312
  349
  387
  427
  470
  514
  560
  607
  657
  709
  763
Funds from operations, $m
  -4
  -6
  -10
  -14
  -21
  -30
  -41
  -55
  -73
  -93
  -118
  -147
  -180
  -217
  -258
  -304
  -353
  -407
  -465
  -527
  -593
  -662
  -735
  -812
  -892
  -976
  -1,064
  -1,155
  -1,250
  -1,349
  -1,451
Change in working capital, $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
  0
Cash from operations, $m
  -4
  -6
  -10
  -14
  -21
  -30
  -41
  -55
  -73
  -93
  -118
  -147
  -180
  -217
  -258
  -304
  -353
  -407
  -465
  -527
  -593
  -662
  -735
  -812
  -892
  -976
  -1,064
  -1,155
  -1,250
  -1,349
  -1,451
Maintenance CAPEX, $m
  0
  -2
  -3
  -5
  -8
  -11
  -16
  -22
  -29
  -39
  -50
  -63
  -78
  -95
  -115
  -136
  -160
  -186
  -215
  -245
  -278
  -312
  -349
  -387
  -427
  -470
  -514
  -560
  -607
  -657
  -709
New CAPEX, $m
  0
  -6
  -9
  -13
  -18
  -23
  -30
  -37
  -46
  -55
  -65
  -76
  -86
  -98
  -109
  -120
  -131
  -142
  -152
  -162
  -173
  -182
  -192
  -202
  -211
  -220
  -230
  -239
  -249
  -259
  -269
Cash from investing activities, $m
  0
  -8
  -12
  -18
  -26
  -34
  -46
  -59
  -75
  -94
  -115
  -139
  -164
  -193
  -224
  -256
  -291
  -328
  -367
  -407
  -451
  -494
  -541
  -589
  -638
  -690
  -744
  -799
  -856
  -916
  -978
Free cash flow, $m
  -4
  -15
  -22
  -33
  -46
  -64
  -87
  -114
  -148
  -187
  -233
  -285
  -344
  -409
  -481
  -560
  -644
  -735
  -832
  -934
  -1,043
  -1,157
  -1,276
  -1,401
  -1,531
  -1,666
  -1,807
  -1,954
  -2,106
  -2,265
  -2,429
Issuance/(repayment) of debt, $m
  4
  4
  5
  7
  10
  13
  17
  21
  26
  32
  37
  43
  50
  56
  62
  69
  75
  81
  87
  93
  99
  104
  110
  115
  121
  126
  132
  137
  143
  148
  154
Issuance/(repurchase) of shares, $m
  0
  19
  29
  42
  59
  81
  108
  142
  181
  227
  280
  340
  407
  480
  560
  646
  739
  838
  942
  1,052
  1,168
  1,289
  1,415
  1,547
  1,684
  1,826
  1,974
  2,127
  2,287
  2,452
  2,624
Cash from financing (excl. dividends), $m  
  4
  23
  34
  49
  69
  94
  125
  163
  207
  259
  317
  383
  457
  536
  622
  715
  814
  919
  1,029
  1,145
  1,267
  1,393
  1,525
  1,662
  1,805
  1,952
  2,106
  2,264
  2,430
  2,600
  2,778
Total cash flow (excl. dividends), $m
  0
  8
  12
  17
  23
  30
  39
  49
  60
  72
  85
  98
  112
  127
  141
  155
  170
  184
  197
  211
  224
  237
  249
  262
  274
  286
  298
  311
  323
  336
  349
Retained Cash Flow (-), $m
  7
  -19
  -29
  -42
  -59
  -81
  -108
  -142
  -181
  -227
  -280
  -340
  -407
  -480
  -560
  -646
  -739
  -838
  -942
  -1,052
  -1,168
  -1,289
  -1,415
  -1,547
  -1,684
  -1,826
  -1,974
  -2,127
  -2,287
  -2,452
  -2,624
Prev. year cash balance distribution, $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 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
 
  -11
  -17
  -25
  -36
  -51
  -70
  -93
  -121
  -156
  -196
  -242
  -294
  -353
  -419
  -491
  -569
  -654
  -745
  -841
  -944
  -1,052
  -1,166
  -1,285
  -1,410
  -1,540
  -1,676
  -1,817
  -1,964
  -2,117
  -2,275
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  -10
  -15
  -20
  -27
  -34
  -42
  -50
  -57
  -64
  -70
  -74
  -76
  -76
  -74
  -70
  -65
  -58
  -51
  -44
  -36
  -29
  -23
  -18
  -13
  -9
  -7
  -4
  -3
  -2
  -1
Current shareholders' claim on cash, %
  100
  82.4
  68.6
  57.8
  49.1
  42.1
  36.3
  31.5
  27.6
  24.3
  21.4
  19.0
  17.0
  15.2
  13.6
  12.3
  11.1
  10.0
  9.1
  8.3
  7.5
  6.9
  6.3
  5.8
  5.3
  4.8
  4.4
  4.1
  3.8
  3.5
  3.2

Nanotech Security Corp. is an identity company, providing light-based nanotechnology and optical thin film (OTF). The Company operates through two segments: Security Features and Surveillance. The Security Features segment provides nano-optics and OTF for use in anti-counterfeiting and authentication processes and products, including currency, legal documents and commercial products. The Surveillance segment designs and sells surveillance and intelligence gathering equipment for the law enforcement and defense industries in the United States and Canada. The Surveillance segment offers the P-25 digital transmission system allowing federal, state and local law enforcement agencies to communicate with each other over a single frequency using both digital and analog frequencies, and the release of the Echo 8i that converts analog audio signals to digital, enabling secure and wireless smart-phone connectivity. It also customizes and retrofits surveillance vans and mobile command centers.

FINANCIAL RATIOS  of  Nanotech Security Corp (NTS)

Valuation Ratios
P/E Ratio -10.7
Price to Sales 17.1
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow -21.4
Price to Free Cash Flow -21.4
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 25%
Total Debt to Equity 43.8%
Interest Coverage 0
Management Effectiveness
Return On Assets -30.2%
Ret/ On Assets - 3 Yr. Avg. -15.8%
Return On Total Capital -32.7%
Ret/ On T. Cap. - 3 Yr. Avg. -17.4%
Return On Equity -41%
Return On Equity - 3 Yr. Avg. -21.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 60%
Gross Margin - 3 Yr. Avg. 50%
EBITDA Margin -100%
EBITDA Margin - 3 Yr. Avg. -103.3%
Operating Margin -160%
Oper. Margin - 3 Yr. Avg. -176.7%
Pre-Tax Margin -160%
Pre-Tax Margin - 3 Yr. Avg. -153.3%
Net Profit Margin -160%
Net Profit Margin - 3 Yr. Avg. -86.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 33.3%
Payout Ratio 0%

NTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NTS stock intrinsic value calculation we used $5 million for the last fiscal year's total revenue generated by Nanotech Security Corp. The default revenue input number comes from 2016 income statement of Nanotech Security Corp. 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 NTS stock valuation model: a) initial revenue growth rate of 60% 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 7%, whose default value for NTS is calculated based on our internal credit rating of Nanotech Security Corp, 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 Nanotech Security Corp.
    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 NTS stock the variable cost ratio is equal to 220%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NTS 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 Nanotech Security Corp.

Corporate tax rate of 27% is the nominal tax rate for Nanotech Security Corp. 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 NTS 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 NTS are equal to 210%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Nanotech Security Corp 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 NTS is equal to 0%. 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 - $16 million for Nanotech Security Corp - 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 56.765 million for Nanotech Security Corp 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 Nanotech Security Corp at the current share price and the inputted number of shares is $0.1 billion.

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Financial statements of NTS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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