Intrinsic value of GlobalSCAPE - GSB

Previous Close

$3.89

  Intrinsic Value

$8.64

stock screener

  Rating & Target

str. buy

+122%

  Value-price divergence*

-98%

Previous close

$3.89

 
Intrinsic value

$8.64

 
Up/down potential

+122%

 
Rating

str. buy

 
Value-price divergence*

-98%

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

We calculate the intrinsic value of GSB 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 0.1

 

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, %
  6.45
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
Revenue, $m
  33
  38
  43
  48
  54
  60
  66
  73
  79
  87
  94
  102
  110
  118
  127
  136
  145
  155
  165
  176
  187
  198
  210
  223
  236
  249
  263
  278
  294
  310
  327
Variable operating expenses, $m
 
  30
  33
  37
  42
  46
  51
  56
  61
  66
  72
  76
  82
  89
  95
  102
  109
  116
  124
  132
  140
  149
  157
  167
  176
  187
  197
  208
  220
  232
  244
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
  28
  30
  33
  37
  42
  46
  51
  56
  61
  66
  72
  76
  82
  89
  95
  102
  109
  116
  124
  132
  140
  149
  157
  167
  176
  187
  197
  208
  220
  232
  244
Operating income, $m
  6
  8
  9
  11
  12
  14
  15
  17
  19
  20
  22
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
EBITDA, $m
  8
  10
  11
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  46
  49
  52
  55
  59
  62
  66
  69
  73
  77
  82
  86
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
Earnings before tax, $m
  6
  8
  9
  11
  12
  13
  15
  16
  18
  19
  21
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
  49
  52
  55
  58
  62
  65
  69
  72
  76
Tax expense, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
Net income, $m
  4
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12
  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
  50
  43
  49
  55
  62
  69
  76
  84
  92
  100
  108
  117
  127
  136
  146
  157
  168
  179
  191
  203
  215
  229
  242
  257
  272
  287
  303
  320
  338
  357
  376
Adjusted assets (=assets-cash), $m
  38
  43
  49
  55
  62
  69
  76
  84
  92
  100
  108
  117
  127
  136
  146
  157
  168
  179
  191
  203
  215
  229
  242
  257
  272
  287
  303
  320
  338
  357
  376
Revenue / Adjusted assets
  0.868
  0.884
  0.878
  0.873
  0.871
  0.870
  0.868
  0.869
  0.859
  0.870
  0.870
  0.872
  0.866
  0.868
  0.870
  0.866
  0.863
  0.866
  0.864
  0.867
  0.870
  0.865
  0.868
  0.868
  0.868
  0.868
  0.868
  0.869
  0.870
  0.868
  0.870
Average production assets, $m
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
  36
  37
  40
Working capital, $m
  3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
Total debt, $m
  0
  3
  6
  9
  13
  16
  20
  24
  28
  32
  37
  42
  47
  52
  57
  62
  68
  74
  80
  87
  93
  100
  107
  115
  123
  131
  140
  149
  158
  168
  178
Total liabilities, $m
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  57
  62
  67
  72
  77
  82
  88
  94
  100
  107
  113
  120
  127
  135
  143
  151
  160
  169
  178
  188
  198
Total equity, $m
  30
  21
  23
  26
  29
  33
  36
  40
  43
  47
  51
  56
  60
  65
  69
  74
  79
  85
  90
  96
  102
  108
  115
  122
  129
  136
  144
  152
  160
  169
  178
Total liabilities and equity, $m
  50
  44
  49
  55
  62
  69
  76
  84
  91
  99
  108
  118
  127
  137
  146
  156
  167
  179
  190
  203
  215
  228
  242
  257
  272
  287
  304
  321
  338
  357
  376
Debt-to-equity ratio
  0.000
  0.140
  0.250
  0.350
  0.430
  0.500
  0.560
  0.610
  0.650
  0.690
  0.720
  0.750
  0.780
  0.800
  0.820
  0.840
  0.860
  0.870
  0.890
  0.900
  0.910
  0.930
  0.940
  0.950
  0.950
  0.960
  0.970
  0.980
  0.980
  0.990
  1.000
Adjusted equity ratio
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56
Depreciation, amort., depletion, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
Funds from operations, $m
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  24
  25
  27
  29
  30
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  57
  60
Change in working capital, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
Cash from operations, $m
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  38
  40
  42
  44
  47
  50
  52
  55
  58
  61
Maintenance CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
New CAPEX, $m
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -14
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
Free cash flow, $m
  -7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  55
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  1
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
Total cash flow (excl. dividends), $m
  -6
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  66
Retained Cash Flow (-), $m
  -5
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Prev. year cash balance distribution, $m
 
  12
  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
 
  19
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  57
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
 
  19
  8
  8
  8
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  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
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GlobalSCAPE, Inc., together with its subsidiaries, develops and distributes software, delivers cloud-based solutions, and provides associated services for secure information exchange for enterprises and consumers worldwide. It offers managed file transfer solutions, including enhanced file transfer (EFT) products and solutions; cloud-based EFT solutions; and secure content mobility solutions, which enable to connect and share documents, pictures, videos, and music while minimizing the storage of data in the cloud. The company also provides Wide Area File Services software that offers a file sharing, collaboration, and replication solution for enterprises with a file access and data protection combination that centralizes data storage and IT administration facilities; Mail Express, a client-server application, which allows users to send and receive e-mail attachments of unlimited size; and CuteFTP, a client side software product installed on a user’s local computer that enables file transfers from or to a file transfer server. In addition, it offers various professional services, such as product customization and system integration, solution quickstart implementations, business process and workflow, policy development, education and training, and solution health checks, as well as engineering services; and maintenance and support services. The company primarily serves the finance, health care, energy, retail, manufacturing, and engineering markets. GlobalSCAPE, Inc. was founded in 1996 and is headquartered in San Antonio, Texas.

FINANCIAL RATIOS  of  GlobalSCAPE (GSB)

Valuation Ratios
P/E Ratio 20.9
Price to Sales 2.5
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 12
Price to Free Cash Flow 16.7
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
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 8.5%
Ret/ On Assets - 3 Yr. Avg. 9.7%
Return On Total Capital 14.5%
Ret/ On T. Cap. - 3 Yr. Avg. 17%
Return On Equity 14.5%
Return On Equity - 3 Yr. Avg. 17.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 81.8%
Gross Margin - 3 Yr. Avg. 82.5%
EBITDA Margin 24.2%
EBITDA Margin - 3 Yr. Avg. 25.2%
Operating Margin 15.2%
Oper. Margin - 3 Yr. Avg. 18.8%
Pre-Tax Margin 18.2%
Pre-Tax Margin - 3 Yr. Avg. 19.8%
Net Profit Margin 12.1%
Net Profit Margin - 3 Yr. Avg. 13.1%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 34%
Payout Ratio 25%

GSB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GSB stock intrinsic value calculation we used $33 million for the last fiscal year's total revenue generated by GlobalSCAPE. The default revenue input number comes from 2016 income statement of GlobalSCAPE. 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 GSB stock valuation model: a) initial revenue growth rate of 14.3% 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 GSB is calculated based on our internal credit rating of GlobalSCAPE, 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 GlobalSCAPE.
    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 GSB stock the variable cost ratio is equal to 78.8%.

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 GSB 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 GlobalSCAPE.

Corporate tax rate of 27% is the nominal tax rate for GlobalSCAPE. 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 GSB 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 GSB are equal to 12.1%.

Life of production assets of 10 years is the average useful life of capital assets used in GlobalSCAPE 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 GSB 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 - $30 million for GlobalSCAPE - 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 20.979 million for GlobalSCAPE 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 GlobalSCAPE at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ ETFs with exposure to GlobalSCAPE, Inc. : July 4, 2017   [Jul-04-17 03:00PM  Capital Cube]
▶ San Antonio tech company's profits surge in first quarter   [May-02-17 09:33AM  American City Business Journals]
▶ A peek at executive pay inside Globalscape for 2016   [Apr-11-17 01:35PM  American City Business Journals]
▶ GlobalSCAPE Insiders Invest in Company   [Mar-23-17 05:15PM  GuruFocus.com]
▶ SABJ announces finalists for 2016 Tech Titans awards   [Nov-09-16 06:59PM  at bizjournals.com]
▶ Former Globascape CEO tackles startup software venture   [Nov-07-16 03:25PM  at bizjournals.com]
Financial statements of GSB
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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