Intrinsic value of Document Security Systems - DSS

Previous Close

$0.64

  Intrinsic Value

$0.02

stock screener

  Rating & Target

str. sell

-97%

  Value-price divergence*

-101%

Previous close

$0.64

 
Intrinsic value

$0.02

 
Up/down potential

-97%

 
Rating

str. sell

 
Value-price divergence*

-101%

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

We calculate the intrinsic value of DSS 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 0.0

 

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, %
  5.56
  25.00
  23.00
  21.20
  19.58
  18.12
  16.81
  15.63
  14.57
  13.61
  12.75
  11.97
  11.28
  10.65
  10.08
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
Revenue, $m
  19
  24
  29
  35
  42
  50
  58
  68
  77
  88
  99
  111
  124
  137
  150
  165
  180
  196
  212
  229
  246
  265
  284
  304
  324
  345
  368
  391
  415
  440
  466
Variable operating expenses, $m
 
  42
  52
  63
  75
  89
  104
  120
  138
  157
  176
  197
  220
  243
  268
  293
  320
  348
  377
  407
  438
  471
  505
  540
  576
  614
  654
  695
  738
  783
  829
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
  20
  42
  52
  63
  75
  89
  104
  120
  138
  157
  176
  197
  220
  243
  268
  293
  320
  348
  377
  407
  438
  471
  505
  540
  576
  614
  654
  695
  738
  783
  829
Operating income, $m
  -1
  -19
  -23
  -28
  -33
  -39
  -46
  -53
  -60
  -69
  -77
  -86
  -96
  -106
  -117
  -128
  -140
  -152
  -165
  -178
  -192
  -206
  -221
  -236
  -252
  -269
  -286
  -304
  -323
  -343
  -363
EBITDA, $m
  0
  -18
  -22
  -26
  -31
  -37
  -43
  -50
  -57
  -65
  -74
  -82
  -92
  -101
  -112
  -122
  -133
  -145
  -157
  -170
  -183
  -196
  -210
  -225
  -240
  -256
  -273
  -290
  -308
  -326
  -346
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
Earnings before tax, $m
  -1
  -19
  -23
  -28
  -34
  -40
  -47
  -54
  -62
  -70
  -79
  -89
  -99
  -109
  -120
  -132
  -144
  -157
  -170
  -183
  -197
  -212
  -227
  -243
  -260
  -277
  -295
  -313
  -333
  -353
  -374
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
  -1
  -19
  -23
  -28
  -34
  -40
  -47
  -54
  -62
  -70
  -79
  -89
  -99
  -109
  -120
  -132
  -144
  -157
  -170
  -183
  -197
  -212
  -227
  -243
  -260
  -277
  -295
  -313
  -333
  -353
  -374

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  18
  21
  25
  31
  37
  43
  51
  59
  67
  76
  86
  96
  107
  119
  131
  143
  156
  170
  184
  199
  214
  230
  246
  263
  281
  300
  319
  339
  360
  382
  405
Adjusted assets (=assets-cash), $m
  12
  21
  25
  31
  37
  43
  51
  59
  67
  76
  86
  96
  107
  119
  131
  143
  156
  170
  184
  199
  214
  230
  246
  263
  281
  300
  319
  339
  360
  382
  405
Revenue / Adjusted assets
  1.583
  1.143
  1.160
  1.129
  1.135
  1.163
  1.137
  1.153
  1.149
  1.158
  1.151
  1.156
  1.159
  1.151
  1.145
  1.154
  1.154
  1.153
  1.152
  1.151
  1.150
  1.152
  1.154
  1.156
  1.153
  1.150
  1.154
  1.153
  1.153
  1.152
  1.151
Average production assets, $m
  7
  9
  11
  13
  16
  18
  21
  25
  28
  32
  36
  41
  45
  50
  55
  61
  66
  72
  78
  84
  91
  97
  104
  112
  119
  127
  135
  144
  153
  162
  172
Working capital, $m
  2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -35
  -37
  -39
  -41
  -44
  -47
Total debt, $m
  6
  8
  13
  17
  22
  28
  34
  41
  48
  56
  64
  73
  82
  92
  102
  112
  123
  135
  147
  159
  172
  186
  200
  214
  230
  245
  262
  279
  296
  315
  334
Total liabilities, $m
  15
  17
  22
  26
  31
  37
  43
  50
  57
  65
  73
  82
  91
  101
  111
  121
  132
  144
  156
  168
  181
  195
  209
  223
  239
  254
  271
  288
  305
  324
  343
Total equity, $m
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  37
  40
  43
  46
  49
  52
  55
  58
  62
Total liabilities and equity, $m
  18
  20
  26
  31
  37
  44
  51
  59
  67
  77
  86
  97
  107
  119
  131
  143
  156
  170
  184
  198
  214
  230
  246
  263
  282
  300
  320
  340
  360
  382
  405
Debt-to-equity ratio
  2.000
  2.710
  3.240
  3.650
  3.970
  4.220
  4.410
  4.570
  4.700
  4.800
  4.890
  4.960
  5.030
  5.080
  5.130
  5.170
  5.200
  5.230
  5.260
  5.280
  5.300
  5.320
  5.340
  5.350
  5.370
  5.380
  5.390
  5.400
  5.410
  5.420
  5.430
Adjusted equity ratio
  -0.250
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152
  0.152

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  -19
  -23
  -28
  -34
  -40
  -47
  -54
  -62
  -70
  -79
  -89
  -99
  -109
  -120
  -132
  -144
  -157
  -170
  -183
  -197
  -212
  -227
  -243
  -260
  -277
  -295
  -313
  -333
  -353
  -374
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
Funds from operations, $m
  10
  -18
  -22
  -27
  -32
  -38
  -44
  -51
  -59
  -67
  -75
  -85
  -94
  -104
  -115
  -126
  -137
  -149
  -162
  -175
  -188
  -202
  -217
  -232
  -248
  -264
  -281
  -299
  -317
  -337
  -357
Change in working capital, $m
  5
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Cash from operations, $m
  5
  -17
  -21
  -26
  -31
  -37
  -43
  -50
  -58
  -66
  -74
  -83
  -93
  -103
  -113
  -124
  -136
  -148
  -160
  -173
  -187
  -201
  -215
  -230
  -246
  -262
  -279
  -297
  -315
  -334
  -354
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
New CAPEX, $m
  0
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
Cash from investing activities, $m
  0
  -3
  -3
  -3
  -4
  -5
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -17
  -17
  -19
  -20
  -21
  -23
  -23
  -24
  -26
Free cash flow, $m
  5
  -20
  -24
  -29
  -35
  -41
  -48
  -56
  -64
  -73
  -82
  -91
  -102
  -112
  -124
  -135
  -147
  -160
  -173
  -187
  -201
  -216
  -232
  -248
  -265
  -282
  -300
  -319
  -338
  -359
  -380
Issuance/(repayment) of debt, $m
  -1
  3
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
Issuance/(repurchase) of shares, $m
  0
  19
  24
  29
  35
  41
  48
  55
  63
  72
  81
  90
  100
  111
  122
  134
  146
  159
  172
  185
  200
  215
  230
  246
  263
  280
  298
  316
  336
  356
  377
Cash from financing (excl. dividends), $m  
  -1
  22
  28
  34
  40
  47
  54
  62
  70
  80
  89
  99
  109
  121
  132
  145
  157
  171
  184
  197
  213
  228
  244
  261
  278
  296
  314
  333
  354
  374
  396
Total cash flow (excl. dividends), $m
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
Retained Cash Flow (-), $m
  1
  -19
  -24
  -29
  -35
  -41
  -48
  -55
  -63
  -72
  -81
  -90
  -100
  -111
  -122
  -134
  -146
  -159
  -172
  -185
  -200
  -215
  -230
  -246
  -263
  -280
  -298
  -316
  -336
  -356
  -377
Prev. year cash balance distribution, $m
 
  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
  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
 
  -16
  -20
  -25
  -30
  -36
  -42
  -49
  -57
  -65
  -73
  -83
  -92
  -103
  -113
  -125
  -136
  -149
  -161
  -175
  -189
  -203
  -218
  -233
  -249
  -266
  -284
  -302
  -321
  -340
  -361
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
 
  -15
  -19
  -22
  -25
  -28
  -31
  -33
  -35
  -37
  -39
  -39
  -39
  -39
  -38
  -37
  -35
  -32
  -30
  -27
  -24
  -21
  -18
  -15
  -13
  -10
  -8
  -6
  -5
  -4
  -3
Current shareholders' claim on cash, %
  100
  25.5
  6.6
  1.7
  0.5
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Document Security Systems, Inc., through its subsidiaries, engages in the development, management, marketing, and sale of paper and plastic products to protect information from unauthorized scanning, copying, and digital imaging in the United States and internationally. The company’s DSS Packaging and Printing Group segment produces custom paperboard packaging products for pharmaceutical, beverage, photo packaging, toy, specialty foods, direct marketing, and other industries; and provides secure and commercial printing services for end-user customers. This segment also offers security papers, vital records, prescription papers, birth certificates, receipts, manuals, identification materials, entertainment tickets, secure coupons, parts tracking forms, brochures, direct mailing pieces, catalogs, business cards, etc. Its DSS Plastics Group segment manufactures laminated and surface printed cards comprising magnetic stripes, bar codes, holograms, signature panels, invisible ink, micro fine printing, guilloche patterns, biometric, radio frequency identification, and watermarks for printed plastic documents, such as ID cards, event badges, and driver’s licenses. The company’s DSS Digital Group segment provides data center centric solutions to businesses and governments through the cloud. This segment also develops, markets, and sells digital information services, including data hosting, disaster recovery, and data back-up and security services. Its DSS Technology Management segment acquires or internally develops patented technology or intellectual property assets. Document Security Systems, Inc. markets its anti-counterfeiting products and technologies under the AuthentiGuard brand name. The company was formerly known as New Sky Communications, Inc. and changed its name to Document Security Systems, Inc. in July 1992. Document Security Systems, Inc. was founded in 1984 and is headquartered in Rochester, New York.

FINANCIAL RATIOS  of  Document Security Systems (DSS)

Valuation Ratios
P/E Ratio -8.6
Price to Sales 0.5
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 1.7
Price to Free Cash Flow 1.7
Growth Rates
Sales Growth Rate 5.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 166.7%
Total Debt to Equity 200%
Interest Coverage 0
Management Effectiveness
Return On Assets -5.9%
Ret/ On Assets - 3 Yr. Avg. -51.9%
Return On Total Capital -9.5%
Ret/ On T. Cap. - 3 Yr. Avg. -62%
Return On Equity -28.6%
Return On Equity - 3 Yr. Avg. -95.2%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 42.1%
Gross Margin - 3 Yr. Avg. 40%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. -100%
Operating Margin -5.3%
Oper. Margin - 3 Yr. Avg. -114.7%
Pre-Tax Margin -5.3%
Pre-Tax Margin - 3 Yr. Avg. -114.7%
Net Profit Margin -5.3%
Net Profit Margin - 3 Yr. Avg. -103.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0.7%
Payout Ratio 0%

DSS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DSS stock intrinsic value calculation we used $19 million for the last fiscal year's total revenue generated by Document Security Systems. The default revenue input number comes from 2016 income statement of Document Security Systems. 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 DSS stock valuation model: a) initial revenue growth rate of 25% 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 DSS is calculated based on our internal credit rating of Document Security Systems, 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 Document Security Systems.
    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 DSS stock the variable cost ratio is equal to 178.9%.

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 DSS 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 Document Security Systems.

Corporate tax rate of 27% is the nominal tax rate for Document Security Systems. 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 DSS 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 DSS are equal to 36.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Document Security Systems 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 DSS is equal to -10%. 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 - $3 million for Document Security Systems - 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 12.496 million for Document Security Systems 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 Document Security Systems at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ DSS Sponsors Brand Protection Conference   [Jul-27-16 07:30AM  Marketwired]
▶ DSS Files Patent Infringement Claims Against Intel   [Feb-17  09:15AM  PR Newswire]
▶ Document for Document Security Systems, Inc.   [Feb-11  03:00AM  at Company Spotlight]
▶ Document Security Systems, Inc. Litigation Update   [Jan-06  09:04AM  at noodls]
▶ Fourth Quarter 10Q for Document Security Systems, Inc.   [Dec-24  03:00AM  Company Spotlight]
Stock chart of DSS Financial statements of DSS
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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