Intrinsic value of PCM - PCMI

Previous Close

$12.85

  Intrinsic Value

$56.05

stock screener

  Rating & Target

str. buy

+336%

  Value-price divergence*

-158%

Previous close

$12.85

 
Intrinsic value

$56.05

 
Up/down potential

+336%

 
Rating

str. buy

 
Value-price divergence*

-158%

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

We calculate the intrinsic value of PCMI 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, %
  35.44
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  2,251
  2,368
  2,491
  2,619
  2,754
  2,895
  3,044
  3,199
  3,362
  3,533
  3,712
  3,901
  4,098
  4,305
  4,523
  4,751
  4,990
  5,242
  5,506
  5,783
  6,073
  6,378
  6,699
  7,035
  7,388
  7,759
  8,148
  8,556
  8,985
  9,435
  9,908
Variable operating expenses, $m
 
  2,126
  2,236
  2,351
  2,471
  2,598
  2,730
  2,869
  3,015
  3,168
  3,328
  3,488
  3,665
  3,850
  4,045
  4,249
  4,463
  4,688
  4,924
  5,171
  5,431
  5,704
  5,991
  6,291
  6,607
  6,939
  7,287
  7,652
  8,035
  8,438
  8,861
Fixed operating expenses, $m
 
  204
  209
  214
  220
  225
  231
  237
  242
  249
  255
  261
  268
  274
  281
  288
  295
  303
  310
  318
  326
  334
  343
  351
  360
  369
  378
  388
  397
  407
  417
Total operating expenses, $m
  2,216
  2,330
  2,445
  2,565
  2,691
  2,823
  2,961
  3,106
  3,257
  3,417
  3,583
  3,749
  3,933
  4,124
  4,326
  4,537
  4,758
  4,991
  5,234
  5,489
  5,757
  6,038
  6,334
  6,642
  6,967
  7,308
  7,665
  8,040
  8,432
  8,845
  9,278
Operating income, $m
  35
  38
  46
  54
  63
  73
  83
  93
  105
  117
  129
  151
  165
  181
  197
  214
  232
  251
  272
  293
  316
  340
  365
  392
  421
  451
  483
  517
  552
  590
  630
EBITDA, $m
  51
  51
  59
  68
  77
  87
  97
  108
  120
  132
  145
  159
  174
  190
  206
  224
  242
  262
  283
  305
  329
  353
  379
  407
  436
  467
  500
  535
  571
  610
  651
Interest expense (income), $m
  5
  5
  5
  6
  7
  8
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
Earnings before tax, $m
  29
  33
  40
  48
  56
  64
  73
  83
  93
  103
  115
  135
  148
  162
  176
  192
  208
  226
  244
  263
  284
  306
  329
  354
  379
  407
  436
  467
  499
  534
  570
Tax expense, $m
  11
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  37
  40
  44
  48
  52
  56
  61
  66
  71
  77
  83
  89
  95
  102
  110
  118
  126
  135
  144
  154
Net income, $m
  18
  24
  29
  35
  41
  47
  53
  60
  68
  76
  84
  99
  108
  118
  129
  140
  152
  165
  178
  192
  207
  223
  240
  258
  277
  297
  318
  341
  364
  389
  416

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7
  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
  630
  655
  689
  725
  762
  801
  842
  885
  931
  978
  1,028
  1,080
  1,134
  1,192
  1,252
  1,315
  1,381
  1,451
  1,524
  1,600
  1,681
  1,765
  1,854
  1,947
  2,045
  2,147
  2,255
  2,368
  2,487
  2,611
  2,742
Adjusted assets (=assets-cash), $m
  623
  655
  689
  725
  762
  801
  842
  885
  931
  978
  1,028
  1,080
  1,134
  1,192
  1,252
  1,315
  1,381
  1,451
  1,524
  1,600
  1,681
  1,765
  1,854
  1,947
  2,045
  2,147
  2,255
  2,368
  2,487
  2,611
  2,742
Revenue / Adjusted assets
  3.613
  3.615
  3.615
  3.612
  3.614
  3.614
  3.615
  3.615
  3.611
  3.612
  3.611
  3.612
  3.614
  3.612
  3.613
  3.613
  3.613
  3.613
  3.613
  3.614
  3.613
  3.614
  3.613
  3.613
  3.613
  3.614
  3.613
  3.613
  3.613
  3.614
  3.613
Average production assets, $m
  47
  50
  52
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  110
  116
  121
  128
  134
  141
  148
  155
  163
  171
  180
  189
  198
  208
Working capital, $m
  -5
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
  183
  193
  202
  213
  223
  235
  246
  259
  272
  285
  300
  315
  331
  347
  365
  383
  402
  422
  443
  466
Total debt, $m
  137
  156
  183
  211
  241
  272
  305
  339
  375
  412
  452
  493
  537
  582
  630
  680
  733
  788
  846
  907
  971
  1,039
  1,109
  1,183
  1,261
  1,342
  1,428
  1,518
  1,612
  1,711
  1,815
Total liabilities, $m
  501
  521
  548
  576
  606
  637
  670
  704
  740
  777
  817
  858
  902
  947
  995
  1,045
  1,098
  1,153
  1,211
  1,272
  1,336
  1,404
  1,474
  1,548
  1,626
  1,707
  1,793
  1,883
  1,977
  2,076
  2,180
Total equity, $m
  128
  134
  141
  149
  156
  164
  173
  182
  191
  200
  211
  221
  233
  244
  257
  270
  283
  297
  312
  328
  345
  362
  380
  399
  419
  440
  462
  485
  510
  535
  562
Total liabilities and equity, $m
  629
  655
  689
  725
  762
  801
  843
  886
  931
  977
  1,028
  1,079
  1,135
  1,191
  1,252
  1,315
  1,381
  1,450
  1,523
  1,600
  1,681
  1,766
  1,854
  1,947
  2,045
  2,147
  2,255
  2,368
  2,487
  2,611
  2,742
Debt-to-equity ratio
  1.070
  1.160
  1.300
  1.420
  1.540
  1.660
  1.760
  1.870
  1.960
  2.060
  2.150
  2.230
  2.310
  2.380
  2.460
  2.520
  2.590
  2.650
  2.710
  2.770
  2.820
  2.870
  2.920
  2.960
  3.010
  3.050
  3.090
  3.130
  3.160
  3.200
  3.230
Adjusted equity ratio
  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
  0.205

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  24
  29
  35
  41
  47
  53
  60
  68
  76
  84
  99
  108
  118
  129
  140
  152
  165
  178
  192
  207
  223
  240
  258
  277
  297
  318
  341
  364
  389
  416
Depreciation, amort., depletion, $m
  16
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
Funds from operations, $m
  156
  38
  43
  49
  55
  61
  68
  75
  83
  91
  100
  107
  117
  127
  138
  150
  162
  176
  190
  204
  220
  237
  254
  273
  293
  313
  335
  359
  383
  409
  437
Change in working capital, $m
  60
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
Cash from operations, $m
  96
  32
  37
  43
  48
  55
  61
  68
  75
  83
  92
  98
  108
  117
  128
  139
  151
  164
  177
  191
  206
  222
  239
  257
  276
  296
  317
  339
  363
  388
  415
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
New CAPEX, $m
  -9
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
Cash from investing activities, $m
  -11
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -24
  -24
  -26
  -27
  -28
  -30
Free cash flow, $m
  85
  24
  30
  35
  40
  46
  52
  58
  65
  73
  80
  86
  95
  105
  114
  125
  136
  148
  161
  174
  188
  203
  219
  236
  254
  273
  293
  314
  336
  360
  385
Issuance/(repayment) of debt, $m
  -75
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  94
  99
  104
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  
  -89
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  94
  99
  104
Total cash flow (excl. dividends), $m
  -4
  50
  57
  63
  70
  77
  84
  93
  101
  110
  120
  128
  139
  150
  162
  175
  189
  203
  219
  235
  252
  270
  290
  310
  331
  354
  378
  404
  430
  459
  489
Retained Cash Flow (-), $m
  -18
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
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
 
  44
  50
  56
  62
  69
  76
  84
  92
  100
  110
  117
  127
  138
  150
  162
  175
  189
  204
  219
  236
  253
  271
  291
  311
  333
  356
  380
  406
  433
  462
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  41
  43
  44
  45
  45
  45
  44
  42
  40
  38
  34
  31
  28
  25
  21
  18
  15
  13
  10
  8
  6
  5
  3
  2
  2
  1
  1
  0
  0
  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
  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

PCM, Inc. operates as a multi-vendor provider of technology products and solutions, and consumer products primarily in the United States and Canada. The company operates through three segments: Commercial, Public Sector, and Canada. It primarily sells device products, servers, storage products, networks, printers, and related accessories and devices. The company also provides value-added services, such as custom configured systems, software licensing asset management, image management, product asset tagging, and asset disposal services, as well as software value-added reseller services, managed services, cloud-based services, consulting, and IT management and related services. PCM, Inc. markets its products, services, and solutions to individual; commercial businesses; state, local, and federal governments; and educational institutions through its sales force, field and internal service teams, direct marketing channels, and data centers. The company was formerly known as PC Mall Inc. and changed its name to PCM, Inc. in December 2012. PCM, Inc. was founded in 1987 and is headquartered in El Segundo, California.

FINANCIAL RATIOS  of  PCM (PCMI)

Valuation Ratios
P/E Ratio 8.5
Price to Sales 0.1
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 1.6
Price to Free Cash Flow 1.8
Growth Rates
Sales Growth Rate 35.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -86.4%
Cap. Spend. - 3 Yr. Gr. Rate -11.9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 14.8%
Total Debt to Equity 107%
Interest Coverage 7
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital 6.3%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 15.1%
Return On Equity - 3 Yr. Avg. 1.4%
Asset Turnover 3.7
Profitability Ratios
Gross Margin 14.2%
Gross Margin - 3 Yr. Avg. 13.9%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 1.2%
Operating Margin 1.6%
Oper. Margin - 3 Yr. Avg. 0.4%
Pre-Tax Margin 1.3%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 37.9%
Eff/ Tax Rate - 3 Yr. Avg. 40.7%
Payout Ratio 0%

PCMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCMI stock intrinsic value calculation we used $2251 million for the last fiscal year's total revenue generated by PCM. The default revenue input number comes from 2016 income statement of PCM. 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 PCMI stock valuation model: a) initial revenue growth rate of 5.2% 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 7.3%, whose default value for PCMI is calculated based on our internal credit rating of PCM, 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 PCM.
    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 PCMI stock the variable cost ratio is equal to 89.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $199 million in the base year in the intrinsic value calculation for PCMI 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 PCM.

Corporate tax rate of 27% is the nominal tax rate for PCM. 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 PCMI 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 PCMI are equal to 2.1%.

Life of production assets of 10 years is the average useful life of capital assets used in PCM 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 PCMI is equal to 4.7%. 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 - $128 million for PCM - 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 11.601 million for PCM 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 PCM at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ PCM Announces Increase to Share Repurchase Program   [Aug-09-17 05:23PM  GlobeNewswire]
▶ PCM Ranked #2 on MSP 501   [Jul-31-17 09:00AM  GlobeNewswire]
▶ PCM posts 2Q profit   [Jul-26-17 11:08PM  Associated Press]
▶ PCM Reports Second Quarter Results   [04:02PM  GlobeNewswire]
▶ PCM to Release Q2 2017 Results July 26, 2017   [Jul-21-17 10:07PM  GlobeNewswire]
▶ PCM Announces FORTUNE 1000 Debut   [Jul-06-17 09:00AM  GlobeNewswire]
▶ ETFs with exposure to PCM, Inc. : June 26, 2017   [Jun-26-17 04:39PM  Capital Cube]
▶ PCM Added to Russell 3000® Index   [09:00AM  GlobeNewswire]
▶ Top Ranked Value Stocks to Buy for June 14th   [Jun-14-17 10:25AM  Zacks]
Stock chart of PCMI Financial statements of PCMI
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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