Intrinsic value of CSG Systems International - CSGS

Previous Close

$41.76

  Intrinsic Value

$50.39

stock screener

  Rating & Target

buy

+21%

  Value-price divergence*

+81%

Previous close

$41.76

 
Intrinsic value

$50.39

 
Up/down potential

+21%

 
Rating

buy

 
Value-price divergence*

+81%

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

We calculate the intrinsic value of CSGS 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 1.4

 

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, %
  1.06
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  761
  785
  812
  841
  872
  905
  941
  979
  1,019
  1,062
  1,108
  1,156
  1,208
  1,262
  1,319
  1,380
  1,444
  1,511
  1,582
  1,657
  1,736
  1,819
  1,906
  1,998
  2,094
  2,196
  2,303
  2,416
  2,534
  2,658
  2,789
Variable operating expenses, $m
 
  666
  688
  712
  737
  764
  794
  825
  858
  894
  931
  951
  993
  1,038
  1,085
  1,135
  1,187
  1,243
  1,301
  1,363
  1,428
  1,496
  1,568
  1,643
  1,723
  1,807
  1,895
  1,987
  2,084
  2,187
  2,294
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
  637
  666
  688
  712
  737
  764
  794
  825
  858
  894
  931
  951
  993
  1,038
  1,085
  1,135
  1,187
  1,243
  1,301
  1,363
  1,428
  1,496
  1,568
  1,643
  1,723
  1,807
  1,895
  1,987
  2,084
  2,187
  2,294
Operating income, $m
  124
  119
  124
  129
  135
  140
  147
  154
  161
  168
  176
  205
  214
  224
  234
  245
  256
  268
  281
  294
  308
  323
  338
  354
  372
  390
  409
  429
  450
  472
  495
EBITDA, $m
  166
  150
  155
  161
  167
  173
  180
  187
  195
  203
  212
  221
  231
  242
  253
  264
  276
  289
  303
  317
  332
  348
  365
  383
  401
  421
  441
  463
  485
  509
  534
Interest expense (income), $m
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  65
Earnings before tax, $m
  100
  106
  110
  115
  120
  125
  130
  136
  142
  148
  155
  183
  191
  199
  208
  217
  226
  237
  247
  259
  271
  283
  296
  310
  325
  340
  357
  374
  392
  410
  430
Tax expense, $m
  37
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  49
  51
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
Net income, $m
  63
  78
  81
  84
  87
  91
  95
  99
  104
  108
  113
  133
  139
  145
  151
  158
  165
  173
  181
  189
  198
  207
  216
  227
  237
  249
  260
  273
  286
  300
  314

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  277
  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
  892
  769
  795
  823
  854
  886
  921
  958
  998
  1,040
  1,085
  1,133
  1,183
  1,236
  1,292
  1,351
  1,414
  1,480
  1,549
  1,623
  1,700
  1,781
  1,867
  1,957
  2,051
  2,151
  2,256
  2,366
  2,482
  2,604
  2,732
Adjusted assets (=assets-cash), $m
  615
  769
  795
  823
  854
  886
  921
  958
  998
  1,040
  1,085
  1,133
  1,183
  1,236
  1,292
  1,351
  1,414
  1,480
  1,549
  1,623
  1,700
  1,781
  1,867
  1,957
  2,051
  2,151
  2,256
  2,366
  2,482
  2,604
  2,732
Revenue / Adjusted assets
  1.237
  1.021
  1.021
  1.022
  1.021
  1.021
  1.022
  1.022
  1.021
  1.021
  1.021
  1.020
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
  1.021
Average production assets, $m
  108
  111
  114
  119
  123
  128
  133
  138
  144
  150
  156
  163
  170
  178
  186
  195
  204
  213
  223
  234
  245
  256
  269
  282
  295
  310
  325
  341
  357
  375
  393
Working capital, $m
  308
  82
  85
  88
  92
  95
  99
  103
  107
  112
  116
  121
  127
  132
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  231
  242
  254
  266
  279
  293
Total debt, $m
  416
  387
  407
  430
  454
  480
  507
  537
  569
  602
  638
  675
  715
  758
  802
  849
  899
  951
  1,007
  1,065
  1,126
  1,191
  1,259
  1,331
  1,406
  1,485
  1,568
  1,656
  1,748
  1,845
  1,947
Total liabilities, $m
  641
  612
  632
  655
  679
  705
  732
  762
  794
  827
  863
  900
  940
  983
  1,027
  1,074
  1,124
  1,176
  1,232
  1,290
  1,351
  1,416
  1,484
  1,556
  1,631
  1,710
  1,793
  1,881
  1,973
  2,070
  2,172
Total equity, $m
  251
  158
  163
  169
  175
  182
  189
  196
  205
  213
  222
  232
  242
  253
  265
  277
  290
  303
  318
  333
  348
  365
  383
  401
  421
  441
  462
  485
  509
  534
  560
Total liabilities and equity, $m
  892
  770
  795
  824
  854
  887
  921
  958
  999
  1,040
  1,085
  1,132
  1,182
  1,236
  1,292
  1,351
  1,414
  1,479
  1,550
  1,623
  1,699
  1,781
  1,867
  1,957
  2,052
  2,151
  2,255
  2,366
  2,482
  2,604
  2,732
Debt-to-equity ratio
  1.657
  2.450
  2.500
  2.550
  2.590
  2.640
  2.690
  2.730
  2.780
  2.820
  2.870
  2.910
  2.950
  2.990
  3.030
  3.070
  3.100
  3.140
  3.170
  3.200
  3.230
  3.260
  3.290
  3.320
  3.340
  3.370
  3.390
  3.410
  3.440
  3.460
  3.480
Adjusted equity ratio
  -0.042
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  63
  78
  81
  84
  87
  91
  95
  99
  104
  108
  113
  133
  139
  145
  151
  158
  165
  173
  181
  189
  198
  207
  216
  227
  237
  249
  260
  273
  286
  300
  314
Depreciation, amort., depletion, $m
  42
  31
  32
  32
  32
  33
  33
  34
  34
  35
  36
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
Funds from operations, $m
  42
  109
  112
  116
  120
  124
  128
  133
  138
  143
  149
  150
  156
  163
  170
  178
  186
  194
  203
  212
  222
  232
  243
  255
  267
  279
  293
  307
  322
  337
  353
Change in working capital, $m
  -42
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Cash from operations, $m
  84
  106
  109
  113
  116
  120
  125
  129
  134
  139
  144
  145
  151
  157
  164
  171
  179
  187
  195
  204
  214
  224
  234
  245
  257
  269
  282
  295
  309
  324
  340
Maintenance CAPEX, $m
  0
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
New CAPEX, $m
  -22
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
Cash from investing activities, $m
  -52
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -21
  -23
  -23
  -25
  -26
  -28
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -54
  -55
Free cash flow, $m
  32
  92
  95
  97
  100
  103
  107
  110
  114
  118
  123
  122
  127
  133
  138
  144
  150
  157
  164
  171
  179
  187
  196
  205
  215
  225
  236
  247
  258
  271
  284
Issuance/(repayment) of debt, $m
  7
  20
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
  92
  97
  102
Issuance/(repurchase) of shares, $m
  -24
  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  
  -19
  20
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
  92
  97
  102
Total cash flow (excl. dividends), $m
  18
  112
  115
  120
  124
  129
  134
  140
  146
  152
  159
  160
  167
  175
  183
  191
  200
  210
  219
  230
  241
  252
  264
  277
  290
  304
  319
  334
  351
  368
  385
Retained Cash Flow (-), $m
  95
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
Prev. year cash balance distribution, $m
 
  98
  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
 
  205
  110
  114
  118
  123
  127
  132
  138
  143
  149
  150
  157
  164
  171
  179
  187
  196
  205
  215
  225
  235
  247
  258
  271
  284
  297
  312
  327
  343
  359
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
 
  197
  101
  99
  97
  95
  92
  89
  86
  82
  78
  71
  67
  62
  58
  53
  48
  43
  38
  33
  29
  24
  20
  17
  14
  11
  9
  7
  5
  4
  3
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

CSG Systems International, Inc. provides business support solutions primarily to the communications industry. Its suite of solutions comprises Advanced Convergent Platform, a billing and customer care platform for cable and satellite providers; Singleview suite, an integrated customer care, billing, and real-time rating and charging solution; Total Service Mediation (TSM) framework that supports offline and real-time mediation requirements; and Wholesale Business Management Solution (WBMS), a settlements system, which handles voice, data, and content services. The company’s solutions also include customer interaction management solutions that process interactive voice, SMS/text, print, e-mail, Web, and fax messages on behalf of clients; and content management and monetization solutions that enable content providers to manage subscriber preferences and offer digital content. It also licenses software products, such as WBMS, TSM, and Singleview products; and offers professional services to implement, configure, and maintain software products. The company also provides its services to the content distribution, and media and entertainment industries. It operates in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company was founded in 1994 and is headquartered in Englewood, Colorado.

FINANCIAL RATIOS  of  CSG Systems International (CSGS)

Valuation Ratios
P/E Ratio 21.4
Price to Sales 1.8
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 16
Price to Free Cash Flow 21.7
Growth Rates
Sales Growth Rate 1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.5%
Cap. Spend. - 3 Yr. Gr. Rate -9.9%
Financial Strength
Quick Ratio 6
Current Ratio 0.1
LT Debt to Equity 146.2%
Total Debt to Equity 165.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.6%
Return On Equity 21.1%
Return On Equity - 3 Yr. Avg. 16.3%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 50.7%
Gross Margin - 3 Yr. Avg. 49.5%
EBITDA Margin 20.2%
EBITDA Margin - 3 Yr. Avg. 18.5%
Operating Margin 16.3%
Oper. Margin - 3 Yr. Avg. 13.8%
Pre-Tax Margin 13.1%
Pre-Tax Margin - 3 Yr. Avg. 11.4%
Net Profit Margin 8.3%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 37%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 38.1%

CSGS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSGS stock intrinsic value calculation we used $761 million for the last fiscal year's total revenue generated by CSG Systems International. The default revenue input number comes from 2016 income statement of CSG Systems International. 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 CSGS stock valuation model: a) initial revenue growth rate of 3.2% 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 CSGS is calculated based on our internal credit rating of CSG Systems International, 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 CSG Systems International.
    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 CSGS stock the variable cost ratio is equal to 84.9%.

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 CSGS 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 CSG Systems International.

Corporate tax rate of 27% is the nominal tax rate for CSG Systems International. 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 CSGS 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 CSGS are equal to 14.1%.

Life of production assets of 10 years is the average useful life of capital assets used in CSG Systems International 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 CSGS is equal to 10.5%. 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 - $251 million for CSG Systems International - 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 32.477 million for CSG Systems International 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 CSG Systems International at the current share price and the inputted number of shares is $1.4 billion.

RELATED COMPANIES Price Int.Val. Rating
DOX Amdocs 66.32 61.48  hold
SNCR Synchronoss Te 16.67 9.77  sell
APPS Digital Turbin 1.06 0.02  str.sell
ORCL Oracle 51.17 53.68  hold
MNDO MIND C.T.I. 2.45 4.15  str.buy
IBM International 146.19 167.94  hold
EVOL Evolving Syste 4.90 6.23  buy

COMPANY NEWS

▶ CSG Systems International Approves Quarterly Dividend   [May-22-17 09:00AM  Business Wire]
▶ CSG Systems posts 1Q profit   [May-03-17 06:08PM  Associated Press]
▶ TalkTalk TV to Deliver New TV Experience with Ascendon   [Feb-28-17 02:00AM  Business Wire]
▶ New Strong Sell Stocks for February 27th   [Feb-27-17 08:30AM  Zacks]
▶ CSG International to Exhibit at Mobile World Congress 2017   [Feb-20-17 12:09PM  Business Wire]
▶ CSG Systems posts 4Q profit   [05:42PM  AP]
▶ CSG Systems posts 3Q profit   [Nov-02-16 05:53PM  AP]
▶ CSG International Expands Global Cable Reach   [Sep-20-16 09:00AM  Business Wire]
▶ CSG Systems International Approves Quarterly Dividend   [Aug-29-16 09:00AM  Business Wire]
▶ CSG Systems posts 2Q profit   [Aug-03-16 06:21PM  AP]
Stock chart of CSGS Financial statements of CSGS Annual reports of CSGS
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

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

Copyright © X-FIN.com 2005-2017. All rigths reserved.