Intrinsic value of Agilysys - AGYS

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$9.49

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$9.49

 
Intrinsic value

$7.55

 
Up/down potential

-20%

 
Rating

sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of AGYS 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 0.2

 

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, %
  15.38
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  120
  128
  136
  144
  153
  162
  172
  182
  192
  203
  214
  226
  239
  252
  265
  279
  294
  310
  326
  343
  361
  379
  399
  420
  441
  464
  487
  512
  538
  566
  594
Variable operating expenses, $m
 
  72
  77
  81
  86
  91
  97
  102
  108
  114
  120
  125
  131
  138
  146
  154
  162
  170
  179
  189
  199
  209
  220
  231
  243
  255
  268
  282
  296
  311
  327
Fixed operating expenses, $m
 
  59
  61
  62
  64
  66
  67
  69
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
Total operating expenses, $m
  125
  131
  138
  143
  150
  157
  164
  171
  179
  186
  194
  201
  209
  218
  228
  238
  248
  258
  269
  282
  294
  306
  320
  333
  348
  363
  378
  395
  412
  430
  449
Operating income, $m
  -4
  -4
  -2
  0
  3
  5
  8
  11
  14
  17
  20
  26
  29
  33
  37
  42
  46
  51
  56
  61
  67
  73
  80
  86
  93
  101
  109
  117
  126
  136
  146
EBITDA, $m
  0
  1
  4
  6
  9
  11
  14
  17
  21
  24
  28
  31
  35
  39
  44
  49
  54
  59
  64
  70
  76
  83
  90
  97
  104
  113
  121
  130
  140
  150
  160
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
Earnings before tax, $m
  -4
  -4
  -2
  0
  2
  5
  7
  10
  13
  16
  19
  24
  27
  31
  35
  39
  43
  48
  53
  58
  63
  69
  75
  81
  88
  95
  103
  111
  119
  128
  138
Tax expense, $m
  0
  0
  0
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  35
  37
Net income, $m
  -4
  -4
  -2
  0
  2
  3
  5
  7
  9
  11
  14
  17
  20
  23
  25
  28
  32
  35
  38
  42
  46
  50
  55
  59
  64
  69
  75
  81
  87
  94
  100

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  61
  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
  185
  132
  140
  149
  158
  168
  178
  188
  199
  210
  222
  234
  247
  260
  274
  289
  304
  320
  337
  354
  373
  392
  412
  433
  456
  479
  504
  529
  556
  584
  614
Adjusted assets (=assets-cash), $m
  124
  132
  140
  149
  158
  168
  178
  188
  199
  210
  222
  234
  247
  260
  274
  289
  304
  320
  337
  354
  373
  392
  412
  433
  456
  479
  504
  529
  556
  584
  614
Revenue / Adjusted assets
  0.968
  0.970
  0.971
  0.966
  0.968
  0.964
  0.966
  0.968
  0.965
  0.967
  0.964
  0.966
  0.968
  0.969
  0.967
  0.965
  0.967
  0.969
  0.967
  0.969
  0.968
  0.967
  0.968
  0.970
  0.967
  0.969
  0.966
  0.968
  0.968
  0.969
  0.967
Average production assets, $m
  60
  64
  68
  72
  77
  81
  86
  91
  96
  102
  107
  113
  119
  126
  133
  140
  147
  155
  163
  171
  180
  190
  200
  210
  221
  232
  244
  256
  269
  283
  297
Working capital, $m
  42
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
Total debt, $m
  0
  4
  8
  13
  17
  22
  27
  32
  37
  43
  49
  55
  61
  68
  75
  82
  90
  98
  106
  115
  124
  134
  144
  155
  166
  178
  190
  203
  216
  230
  245
Total liabilities, $m
  62
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
  278
  292
  307
Total equity, $m
  123
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
  278
  292
  307
Total liabilities and equity, $m
  185
  132
  140
  150
  158
  168
  178
  188
  198
  210
  222
  234
  246
  260
  274
  288
  304
  320
  336
  354
  372
  392
  412
  434
  456
  480
  504
  530
  556
  584
  614
Debt-to-equity ratio
  0.000
  0.060
  0.120
  0.170
  0.220
  0.260
  0.300
  0.340
  0.380
  0.410
  0.440
  0.470
  0.500
  0.520
  0.550
  0.570
  0.590
  0.610
  0.630
  0.650
  0.670
  0.680
  0.700
  0.710
  0.730
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
Adjusted equity ratio
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  -4
  -2
  0
  2
  3
  5
  7
  9
  11
  14
  17
  20
  23
  25
  28
  32
  35
  38
  42
  46
  50
  55
  59
  64
  69
  75
  81
  87
  94
  100
Depreciation, amort., depletion, $m
  4
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
Funds from operations, $m
  10
  1
  3
  6
  8
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  35
  39
  43
  47
  51
  55
  60
  65
  70
  75
  81
  87
  94
  100
  108
  115
Change in working capital, $m
  3
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
Cash from operations, $m
  7
  9
  5
  7
  9
  11
  13
  15
  18
  20
  23
  25
  28
  31
  34
  38
  41
  45
  49
  53
  58
  63
  68
  73
  79
  85
  91
  98
  105
  112
  120
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
New CAPEX, $m
  -21
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from investing activities, $m
  -21
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -24
  -24
  -26
  -27
  -28
Free cash flow, $m
  -14
  3
  -3
  -1
  1
  3
  4
  6
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  33
  37
  40
  44
  48
  53
  57
  62
  67
  73
  79
  85
  91
Issuance/(repayment) of debt, $m
  0
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
Issuance/(repurchase) of shares, $m
  0
  0
  3
  1
  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  
  -1
  4
  7
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
Total cash flow (excl. dividends), $m
  -14
  7
  2
  4
  6
  7
  9
  11
  13
  16
  18
  20
  22
  25
  28
  31
  35
  38
  42
  46
  50
  54
  59
  63
  69
  74
  80
  86
  92
  99
  106
Retained Cash Flow (-), $m
  1
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
Prev. year cash balance distribution, $m
 
  61
  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
 
  64
  0
  0
  1
  3
  4
  6
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  33
  37
  40
  44
  48
  53
  57
  62
  67
  73
  79
  85
  91
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
 
  61
  0
  0
  1
  2
  3
  4
  5
  6
  6
  7
  7
  7
  7
  7
  7
  7
  6
  6
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  100.0
  97.9
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
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Agilysys, Inc., together with its subsidiaries, operates as a developer and marketer of hardware and software products and services to the hospitality industry in North America, Europe, and Asia. It specializes in point-of-sale, property management, inventory and procurement, workforce management, and mobile and wireless solutions that are designed to streamline operations, improve efficiency, increasing guest recruitment and wallet share, and enhance the overall guest experience. The company also offers support and maintenance of software and hardware products, and subscription services; and professional services. It serves various sectors, including gaming; hotels, resorts, and cruise; foodservice management; and restaurants, universities, stadia, and healthcare. The company was formerly known as Pioneer-Standard Electronics, Inc. and changed its name to Agilysys, Inc. in 2003. Agilysys, Inc. was founded in 1963 and is based in Alpharetta, Georgia.

FINANCIAL RATIOS  of  Agilysys (AGYS)

Valuation Ratios
P/E Ratio -54.4
Price to Sales 1.8
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 31.1
Price to Free Cash Flow -15.6
Growth Rates
Sales Growth Rate 15.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 5%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.2%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital -3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 0.4%
Return On Equity -3.2%
Return On Equity - 3 Yr. Avg. 0.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 56.7%
Gross Margin - 3 Yr. Avg. 59.2%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. -0.6%
Operating Margin -4.2%
Oper. Margin - 3 Yr. Avg. -7.2%
Pre-Tax Margin -3.3%
Pre-Tax Margin - 3 Yr. Avg. -6.9%
Net Profit Margin -3.3%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 15.9%
Payout Ratio 0%

AGYS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AGYS stock intrinsic value calculation we used $120 million for the last fiscal year's total revenue generated by Agilysys. The default revenue input number comes from 2016 income statement of Agilysys. 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 AGYS stock valuation model: a) initial revenue growth rate of 6.5% 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 AGYS is calculated based on our internal credit rating of Agilysys, 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 Agilysys.
    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 AGYS stock the variable cost ratio is equal to 56.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $58 million in the base year in the intrinsic value calculation for AGYS 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 Agilysys.

Corporate tax rate of 27% is the nominal tax rate for Agilysys. 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 AGYS 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 AGYS are equal to 50%.

Life of production assets of 20 years is the average useful life of capital assets used in Agilysys 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 AGYS is equal to -15.8%. 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 - $123 million for Agilysys - 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 23.18 million for Agilysys 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 Agilysys at the current share price and the inputted number of shares is $0.2 billion.


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COMPANY NEWS

▶ ETFs with exposure to Agilysys, Inc. : April 11, 2017   [Apr-11-17 02:11PM  Capital Cube]
▶ Agilysys reports 3Q loss   [Feb-09-17 05:21PM  Associated Press]
▶ Is Agilysys, Inc. (AGYS) a Good Stock to Buy?   [Dec-13-16 03:45AM  at Insider Monkey]
▶ Agilysys Recognized for Groundbreaking Mobile POS Solution   [Dec-01-16 07:45AM  Business Wire]
▶ Agilysys to Exhibit at U.K.s HOSPACE 2016   [Nov-10-16 05:00AM  Business Wire]
▶ Agilysys Announces Senior Management Changes   [08:30AM  Business Wire]
▶ Agilysys Sponsors Research on Next-Generation POS Systems   [Sep-15-16 07:45AM  Business Wire]
▶ Agilysys to Webcast Investor Day Presentations on August 31   [Aug-25-16 10:45AM  Business Wire]
▶ Agilysys reports 1Q loss   [07:08AM  AP]
Stock chart of AGYS Financial statements of AGYS
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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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