Intrinsic value of ACI Worldwide - ACIW

Previous Close

$23.40

  Intrinsic Value

$12.18

stock screener

  Rating & Target

sell

-48%

Previous close

$23.40

 
Intrinsic value

$12.18

 
Up/down potential

-48%

 
Rating

sell

We calculate the intrinsic value of ACIW 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

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
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, %
  -3.82
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
Revenue, $m
  1,006
  1,047
  1,091
  1,138
  1,187
  1,239
  1,295
  1,353
  1,415
  1,481
  1,549
  1,622
  1,699
  1,779
  1,864
  1,953
  2,047
  2,146
  2,251
  2,360
  2,475
  2,596
  2,723
  2,857
  2,998
  3,146
  3,301
  3,464
  3,635
  3,815
  4,004
Variable operating expenses, $m
 
  916
  950
  987
  1,026
  1,067
  1,111
  1,157
  1,206
  1,257
  1,311
  1,277
  1,338
  1,401
  1,468
  1,538
  1,612
  1,690
  1,772
  1,859
  1,949
  2,045
  2,145
  2,250
  2,361
  2,477
  2,600
  2,728
  2,863
  3,005
  3,154
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
  785
  916
  950
  987
  1,026
  1,067
  1,111
  1,157
  1,206
  1,257
  1,311
  1,277
  1,338
  1,401
  1,468
  1,538
  1,612
  1,690
  1,772
  1,859
  1,949
  2,045
  2,145
  2,250
  2,361
  2,477
  2,600
  2,728
  2,863
  3,005
  3,154
Operating income, $m
  221
  131
  141
  151
  161
  172
  184
  197
  210
  224
  238
  345
  361
  378
  396
  415
  435
  456
  478
  501
  526
  552
  579
  607
  637
  668
  701
  736
  772
  811
  851
EBITDA, $m
  325
  261
  272
  284
  296
  309
  323
  338
  353
  370
  387
  405
  424
  444
  465
  488
  511
  536
  562
  589
  618
  648
  680
  713
  748
  785
  824
  865
  907
  952
  1,000
Interest expense (income), $m
  35
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  56
  59
  63
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  124
  131
  138
  146
  154
Earnings before tax, $m
  186
  103
  111
  119
  127
  136
  146
  156
  166
  177
  189
  292
  305
  319
  333
  349
  365
  381
  399
  418
  437
  458
  479
  502
  526
  551
  577
  605
  634
  665
  697
Tax expense, $m
  56
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  129
  136
  142
  149
  156
  163
  171
  180
  188
Net income, $m
  130
  76
  81
  87
  93
  99
  106
  114
  121
  129
  138
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  384
  402
  422
  442
  463
  485
  509

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  76
  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
  1,902
  1,901
  1,980
  2,065
  2,155
  2,250
  2,350
  2,456
  2,569
  2,687
  2,812
  2,944
  3,083
  3,229
  3,383
  3,545
  3,716
  3,896
  4,084
  4,283
  4,492
  4,712
  4,943
  5,185
  5,441
  5,709
  5,991
  6,287
  6,598
  6,924
  7,268
Adjusted assets (=assets-cash), $m
  1,826
  1,901
  1,980
  2,065
  2,155
  2,250
  2,350
  2,456
  2,569
  2,687
  2,812
  2,944
  3,083
  3,229
  3,383
  3,545
  3,716
  3,896
  4,084
  4,283
  4,492
  4,712
  4,943
  5,185
  5,441
  5,709
  5,991
  6,287
  6,598
  6,924
  7,268
Revenue / Adjusted assets
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
Average production assets, $m
  512
  533
  555
  579
  604
  631
  659
  689
  720
  754
  789
  826
  865
  906
  949
  994
  1,042
  1,093
  1,146
  1,201
  1,260
  1,321
  1,386
  1,454
  1,526
  1,601
  1,680
  1,763
  1,850
  1,942
  2,038
Working capital, $m
  32
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
  131
  138
  145
  152
  159
  167
  176
  184
Total debt, $m
  744
  713
  759
  809
  862
  917
  976
  1,039
  1,105
  1,174
  1,248
  1,325
  1,407
  1,492
  1,583
  1,678
  1,778
  1,884
  1,995
  2,111
  2,234
  2,363
  2,498
  2,641
  2,791
  2,948
  3,113
  3,287
  3,470
  3,662
  3,863
Total liabilities, $m
  1,147
  1,116
  1,162
  1,212
  1,265
  1,320
  1,379
  1,442
  1,508
  1,577
  1,651
  1,728
  1,810
  1,895
  1,986
  2,081
  2,181
  2,287
  2,398
  2,514
  2,637
  2,766
  2,901
  3,044
  3,194
  3,351
  3,516
  3,690
  3,873
  4,065
  4,266
Total equity, $m
  755
  785
  818
  853
  890
  929
  971
  1,014
  1,061
  1,110
  1,161
  1,216
  1,273
  1,334
  1,397
  1,464
  1,535
  1,609
  1,687
  1,769
  1,855
  1,946
  2,041
  2,142
  2,247
  2,358
  2,474
  2,596
  2,725
  2,860
  3,002
Total liabilities and equity, $m
  1,902
  1,901
  1,980
  2,065
  2,155
  2,249
  2,350
  2,456
  2,569
  2,687
  2,812
  2,944
  3,083
  3,229
  3,383
  3,545
  3,716
  3,896
  4,085
  4,283
  4,492
  4,712
  4,942
  5,186
  5,441
  5,709
  5,990
  6,286
  6,598
  6,925
  7,268
Debt-to-equity ratio
  0.985
  0.910
  0.930
  0.950
  0.970
  0.990
  1.010
  1.020
  1.040
  1.060
  1.070
  1.090
  1.100
  1.120
  1.130
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.270
  1.280
  1.290
Adjusted equity ratio
  0.372
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  130
  76
  81
  87
  93
  99
  106
  114
  121
  129
  138
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  384
  402
  422
  442
  463
  485
  509
Depreciation, amort., depletion, $m
  104
  130
  132
  133
  135
  137
  139
  141
  144
  146
  149
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  117
  123
  129
  135
  142
  149
Funds from operations, $m
  51
  205
  212
  220
  228
  236
  245
  255
  265
  275
  286
  274
  286
  299
  313
  327
  342
  358
  375
  393
  411
  431
  451
  473
  495
  519
  544
  570
  598
  627
  658
Change in working capital, $m
  -49
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  100
  204
  210
  218
  226
  234
  243
  252
  262
  272
  283
  270
  282
  295
  309
  323
  338
  354
  370
  388
  406
  425
  445
  467
  489
  512
  537
  563
  590
  619
  649
Maintenance CAPEX, $m
  0
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -117
  -123
  -129
  -135
  -142
New CAPEX, $m
  -63
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
Cash from investing activities, $m
  130
  -58
  -61
  -65
  -67
  -71
  -74
  -78
  -81
  -86
  -90
  -95
  -99
  -104
  -109
  -114
  -121
  -126
  -133
  -140
  -147
  -154
  -161
  -169
  -178
  -186
  -196
  -206
  -216
  -227
  -238
Free cash flow, $m
  230
  145
  149
  154
  158
  163
  169
  174
  180
  187
  193
  176
  183
  191
  199
  208
  217
  227
  237
  248
  260
  271
  284
  297
  311
  326
  341
  357
  374
  392
  411
Issuance/(repayment) of debt, $m
  -200
  45
  47
  50
  53
  56
  59
  62
  66
  70
  73
  77
  82
  86
  90
  95
  100
  105
  111
  117
  123
  129
  136
  142
  150
  157
  165
  174
  183
  192
  202
Issuance/(repurchase) of shares, $m
  -48
  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  
  -251
  45
  47
  50
  53
  56
  59
  62
  66
  70
  73
  77
  82
  86
  90
  95
  100
  105
  111
  117
  123
  129
  136
  142
  150
  157
  165
  174
  183
  192
  202
Total cash flow (excl. dividends), $m
  -26
  190
  196
  203
  211
  219
  228
  237
  246
  256
  267
  253
  265
  277
  290
  303
  318
  333
  348
  365
  382
  400
  420
  440
  461
  483
  507
  531
  557
  584
  612
Retained Cash Flow (-), $m
  -101
  -30
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -70
  -74
  -78
  -82
  -86
  -91
  -95
  -100
  -105
  -111
  -116
  -122
  -128
  -135
  -142
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
 
  160
  163
  168
  174
  180
  186
  193
  200
  207
  215
  199
  207
  217
  226
  236
  247
  258
  270
  283
  296
  310
  324
  340
  356
  372
  390
  409
  428
  449
  471
Discount rate, %
 
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
 
  149
  140
  133
  125
  117
  108
  99
  90
  81
  73
  57
  50
  43
  36
  30
  25
  20
  16
  13
  10
  7
  5
  4
  3
  2
  1
  1
  0
  0
  0
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

ACI Worldwide, Inc. develops, markets, installs and supports a line of software products and services primarily focused on facilitating electronic payments. The Company also distributes or acts as a sales agent for software developed by third parties. Its products and services are used principally by financial institutions, retailers, billers and electronic payment processors, both in domestic and international markets. The Company's products are sold and supported through distribution networks covering three geographic regions, including the Americas, Europe/Middle East/Africa (EMEA) and Asia/Pacific. The Company's products and services are used by a range of transaction-generating endpoints, including automated teller machines (ATM), retail merchant point-of-sale (POS) terminals, bank branches, corporations and Internet commerce sites. The Company provides payment solutions to financial institutions globally for both retail banking and transaction banking services.

FINANCIAL RATIOS  of  ACI Worldwide (ACIW)

Valuation Ratios
P/E Ratio 21.1
Price to Sales 2.7
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 27.5
Price to Free Cash Flow 74.2
Growth Rates
Sales Growth Rate -3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.6%
Cap. Spend. - 3 Yr. Gr. Rate 13.8%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 86.6%
Total Debt to Equity 98.5%
Interest Coverage 6
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 8.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 18.5%
Return On Equity - 3 Yr. Avg. 14.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 55.8%
Gross Margin - 3 Yr. Avg. 55.3%
EBITDA Margin 32.3%
EBITDA Margin - 3 Yr. Avg. 25.8%
Operating Margin 22%
Oper. Margin - 3 Yr. Avg. 15.9%
Pre-Tax Margin 18.5%
Pre-Tax Margin - 3 Yr. Avg. 13%
Net Profit Margin 12.9%
Net Profit Margin - 3 Yr. Avg. 9.2%
Effective Tax Rate 30.1%
Eff/ Tax Rate - 3 Yr. Avg. 28.7%
Payout Ratio 0%

ACIW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACIW stock intrinsic value calculation we used $1006 million for the last fiscal year's total revenue generated by ACI Worldwide. The default revenue input number comes from 2016 income statement of ACI Worldwide. 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 ACIW stock valuation model: a) initial revenue growth rate of 4.1% 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 7.4%, whose default value for ACIW is calculated based on our internal credit rating of ACI Worldwide, 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 ACI Worldwide.
    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 ACIW stock the variable cost ratio is equal to 87.8%.

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 ACIW 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 4.2% for ACI Worldwide.

Corporate tax rate of 27% is the nominal tax rate for ACI Worldwide. 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 ACIW 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 ACIW are equal to 50.9%.

Life of production assets of 13.7 years is the average useful life of capital assets used in ACI Worldwide 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 ACIW is equal to 4.6%. 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 - $755 million for ACI Worldwide - 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 118.218 million for ACI Worldwide 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 ACI Worldwide at the current share price and the inputted number of shares is $2.8 billion.

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COMPANY NEWS

▶ ACI Worldwide beats Street 3Q forecasts   [10:27AM  Associated Press]
▶ ACI Worldwide Powers Digital Banking for MB Financial   [Oct-17-17 10:00AM  GlobeNewswire]
▶ ACI Worldwide to Attend Upcoming Investor Conferences   [Aug-07-17 08:00AM  GlobeNewswire]
▶ ACI Worldwide reports 2Q loss   [01:24AM  Associated Press]
▶ Exclusive: Former Red Hat CFO Joins CloudBees   [Jul-24-17 06:41PM  Fortune]
▶ ETFs with exposure to ACI Worldwide, Inc. : July 14, 2017   [Jul-14-17 12:36PM  Capital Cube]
▶ With JPMorgan, BofA Earnings On Tap, ATM Software Stock Sets Up   [Jul-13-17 11:14AM  Investor's Business Daily]
▶ ACI Worldwide Expands in Romania   [Jul-11-17 02:00AM  GlobeNewswire]
▶ ACI Worldwide Brings Alipay to Africa via Peach Payments   [Jun-26-17 07:00AM  GlobeNewswire]
Financial statements of ACIW
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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