Intrinsic value of Bottomline Technologies - EPAY

Previous Close

$30.53

  Intrinsic Value

$10.77

stock screener

  Rating & Target

str. sell

-65%

  Value-price divergence*

-14%

Previous close

$30.53

 
Intrinsic value

$10.77

 
Up/down potential

-65%

 
Rating

str. sell

 
Value-price divergence*

-14%

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

We calculate the intrinsic value of EPAY 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 2017), $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 1.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.75
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  349
  373
  397
  423
  450
  478
  507
  537
  568
  601
  635
  671
  708
  747
  788
  831
  875
  922
  971
  1,022
  1,076
  1,132
  1,191
  1,252
  1,317
  1,385
  1,456
  1,530
  1,608
  1,690
  1,776
Variable operating expenses, $m
 
  375
  397
  421
  445
  470
  497
  524
  553
  583
  615
  614
  648
  683
  721
  760
  800
  843
  888
  935
  984
  1,035
  1,089
  1,145
  1,204
  1,266
  1,331
  1,399
  1,471
  1,546
  1,624
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
  371
  375
  397
  421
  445
  470
  497
  524
  553
  583
  615
  614
  648
  683
  721
  760
  800
  843
  888
  935
  984
  1,035
  1,089
  1,145
  1,204
  1,266
  1,331
  1,399
  1,471
  1,546
  1,624
Operating income, $m
  -21
  -2
  0
  2
  5
  7
  10
  12
  15
  18
  21
  57
  61
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  107
  113
  118
  125
  131
  138
  145
  152
EBITDA, $m
  21
  42
  45
  48
  51
  54
  58
  61
  65
  68
  72
  76
  81
  85
  90
  94
  99
  105
  110
  116
  122
  129
  135
  142
  150
  157
  165
  174
  183
  192
  202
Interest expense (income), $m
  3
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
Earnings before tax, $m
  -38
  -4
  -2
  -1
  1
  3
  5
  7
  9
  11
  13
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  119
Tax expense, $m
  -5
  0
  0
  0
  0
  1
  1
  2
  2
  3
  3
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
Net income, $m
  -33
  -4
  -2
  -1
  1
  2
  3
  5
  6
  8
  9
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  127
  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
  617
  524
  558
  594
  632
  671
  711
  754
  798
  844
  892
  942
  995
  1,050
  1,107
  1,167
  1,229
  1,295
  1,364
  1,436
  1,511
  1,590
  1,672
  1,759
  1,850
  1,945
  2,044
  2,149
  2,259
  2,374
  2,495
Adjusted assets (=assets-cash), $m
  490
  524
  558
  594
  632
  671
  711
  754
  798
  844
  892
  942
  995
  1,050
  1,107
  1,167
  1,229
  1,295
  1,364
  1,436
  1,511
  1,590
  1,672
  1,759
  1,850
  1,945
  2,044
  2,149
  2,259
  2,374
  2,495
Revenue / Adjusted assets
  0.712
  0.712
  0.711
  0.712
  0.712
  0.712
  0.713
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.711
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
Average production assets, $m
  83
  88
  94
  100
  106
  113
  120
  127
  134
  142
  150
  158
  167
  176
  186
  196
  207
  218
  229
  241
  254
  267
  281
  296
  311
  327
  344
  361
  380
  399
  419
Working capital, $m
  -88
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -53
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -111
  -117
  -123
  -130
  -136
  -143
  -150
  -158
Total debt, $m
  184
  72
  89
  105
  123
  141
  160
  180
  200
  221
  244
  267
  292
  317
  344
  372
  401
  431
  463
  497
  532
  568
  607
  647
  689
  733
  780
  828
  879
  933
  989
Total liabilities, $m
  355
  243
  260
  276
  294
  312
  331
  351
  371
  392
  415
  438
  463
  488
  515
  543
  572
  602
  634
  668
  703
  739
  778
  818
  860
  904
  951
  999
  1,050
  1,104
  1,160
Total equity, $m
  262
  280
  299
  318
  338
  359
  381
  403
  427
  452
  477
  504
  532
  562
  592
  624
  658
  693
  730
  768
  808
  850
  895
  941
  990
  1,040
  1,094
  1,150
  1,208
  1,270
  1,335
Total liabilities and equity, $m
  617
  523
  559
  594
  632
  671
  712
  754
  798
  844
  892
  942
  995
  1,050
  1,107
  1,167
  1,230
  1,295
  1,364
  1,436
  1,511
  1,589
  1,673
  1,759
  1,850
  1,944
  2,045
  2,149
  2,258
  2,374
  2,495
Debt-to-equity ratio
  0.702
  0.260
  0.300
  0.330
  0.360
  0.390
  0.420
  0.450
  0.470
  0.490
  0.510
  0.530
  0.550
  0.560
  0.580
  0.600
  0.610
  0.620
  0.630
  0.650
  0.660
  0.670
  0.680
  0.690
  0.700
  0.700
  0.710
  0.720
  0.730
  0.730
  0.740
Adjusted equity ratio
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -33
  -4
  -2
  -1
  1
  2
  3
  5
  6
  8
  9
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
Depreciation, amort., depletion, $m
  42
  44
  45
  46
  46
  47
  48
  49
  50
  51
  52
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  50
Funds from operations, $m
  71
  40
  43
  45
  47
  49
  51
  54
  56
  58
  61
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  93
  98
  103
  108
  113
  119
  124
  131
  137
Change in working capital, $m
  4
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
Cash from operations, $m
  67
  42
  45
  47
  50
  52
  54
  56
  59
  61
  64
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  99
  103
  108
  114
  119
  125
  131
  138
  145
Maintenance CAPEX, $m
  0
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -28
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
Cash from investing activities, $m
  -46
  -15
  -16
  -17
  -18
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -39
  -42
  -43
  -46
  -48
  -50
  -53
  -56
  -59
  -61
  -64
  -67
Free cash flow, $m
  21
  27
  29
  30
  31
  32
  34
  35
  36
  38
  39
  31
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  77
Issuance/(repayment) of debt, $m
  0
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
  49
  51
  54
  56
Issuance/(repurchase) of shares, $m
  -40
  22
  21
  20
  19
  19
  18
  18
  17
  17
  16
  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  
  -40
  37
  37
  37
  36
  37
  37
  38
  38
  38
  38
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
  49
  51
  54
  56
Total cash flow (excl. dividends), $m
  -24
  64
  65
  67
  68
  69
  71
  72
  74
  76
  78
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
  115
  121
  127
  133
Retained Cash Flow (-), $m
  33
  -22
  -21
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -62
  -65
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
 
  43
  45
  47
  48
  49
  49
  50
  51
  51
  52
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
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
 
  41
  41
  41
  39
  38
  36
  34
  32
  29
  27
  13
  13
  12
  11
  10
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
Current shareholders' claim on cash, %
  100
  98.3
  96.8
  95.4
  94.2
  93.1
  92.1
  91.2
  90.4
  89.6
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0
  89.0

Bottomline Technologies (de), Inc. is engaged in providing a set of cloud-based business payment, digital banking, fraud prevention, payment and financial document solutions. The Company helps businesses pay and get paid. It offers hosted or Software as a Service (SaaS) solutions, as well as software designed to run on-site at the customer's location. It operates through four segments: Payments and Transactional Documents, Hosted Solutions, Digital Banking and Other. The Payments and Transactional Documents segment is a supplier of software products that provide a range of financial business process management solutions, including making and collecting payments and generating and storing business documents. The Hosted Solutions segment provides customers with SaaS technology offerings. The Digital Banking segment provides solutions to banking and financial institution customers. The Other segment consists of its healthcare and cyber fraud and risk management operating segments.

FINANCIAL RATIOS  of  Bottomline Technologies (EPAY)

Valuation Ratios
P/E Ratio -35.3
Price to Sales 3.3
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow 17.4
Price to Free Cash Flow 29.8
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 21.7%
Cap. Spend. - 3 Yr. Gr. Rate 22.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 70.2%
Interest Coverage -12
Management Effectiveness
Return On Assets -4.8%
Ret/ On Assets - 3 Yr. Avg. -3.8%
Return On Total Capital -7.2%
Ret/ On T. Cap. - 3 Yr. Avg. -6%
Return On Equity -11.8%
Return On Equity - 3 Yr. Avg. -9.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 53.9%
Gross Margin - 3 Yr. Avg. 56.3%
EBITDA Margin 2%
EBITDA Margin - 3 Yr. Avg. 5.2%
Operating Margin -6.3%
Oper. Margin - 3 Yr. Avg. -2.6%
Pre-Tax Margin -10.9%
Pre-Tax Margin - 3 Yr. Avg. -7.1%
Net Profit Margin -9.5%
Net Profit Margin - 3 Yr. Avg. -8.6%
Effective Tax Rate 13.2%
Eff/ Tax Rate - 3 Yr. Avg. -37%
Payout Ratio 0%

EPAY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EPAY stock intrinsic value calculation we used $349 million for the last fiscal year's total revenue generated by Bottomline Technologies. The default revenue input number comes from 2017 income statement of Bottomline Technologies. 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 EPAY stock valuation model: a) initial revenue growth rate of 6.8% 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 EPAY is calculated based on our internal credit rating of Bottomline Technologies, 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 Bottomline Technologies.
    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 EPAY stock the variable cost ratio is equal to 101.1%.

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 EPAY 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 Bottomline Technologies.

Corporate tax rate of 27% is the nominal tax rate for Bottomline Technologies. 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 EPAY 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 EPAY are equal to 23.6%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Bottomline Technologies 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 EPAY is equal to -8.9%. 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 - $262 million for Bottomline Technologies - 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 40.62 million for Bottomline Technologies 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 Bottomline Technologies at the current share price and the inputted number of shares is $1.2 billion.

RELATED COMPANIES Price Int.Val. Rating
ORCL Oracle 48.74 29.52  sell
ACIW ACI Worldwide 22.50 14.52  sell
IBM International 144.82 172.25  hold
QTWO Q2 Holdings 40.20 0.52  str.sell
MSFT Microsoft 75.31 60.76  hold
FISV Fiserv 124.05 64.35  sell
SAP SAP ADR 109.74 148.41  buy
NCR NCR 36.62 25.44  sell

COMPANY NEWS

▶ Bottomline Technologies posts 4Q loss   [Aug-10-17 10:43PM  Associated Press]
▶ Bottomline Technologies posts 3Q loss   [Apr-27-17 06:30PM  Associated Press]
▶ Bottomline Technologies posts 2Q loss   [Feb-01-17 05:14PM  Associated Press]
▶ Is Bottomline Technologies (EPAY) A Good Stock To Buy?   [Dec-04-16 10:46PM  at Insider Monkey]
▶ Bottomline Technologies posts 4Q loss   [Aug-25-16 04:51PM  AP]
▶ Bottomline Announces New Board Members   [May-23-16 09:00AM  GlobeNewswire]
▶ [$$] Barclays strikes UK mobile payments deal   [May-08-16 01:02PM  at Financial Times]
Financial statements of EPAY
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.