Intrinsic value of Startek - SRT

Previous Close

$11.72

  Intrinsic Value

$2.58

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

+115%

Previous close

$11.72

 
Intrinsic value

$2.58

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

+115%

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

We calculate the intrinsic value of SRT 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 0.2

 

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, %
  8.87
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  307
  313
  320
  329
  338
  348
  359
  372
  385
  399
  414
  431
  448
  467
  487
  508
  530
  553
  578
  605
  632
  662
  693
  725
  760
  796
  834
  874
  916
  960
  1,007
Variable operating expenses, $m
 
  100
  102
  105
  108
  111
  114
  118
  123
  127
  132
  136
  142
  148
  154
  160
  167
  175
  183
  191
  200
  209
  219
  229
  240
  251
  264
  276
  290
  304
  318
Fixed operating expenses, $m
 
  216
  222
  227
  233
  239
  245
  251
  257
  264
  270
  277
  284
  291
  298
  306
  313
  321
  329
  337
  346
  354
  363
  372
  382
  391
  401
  411
  421
  432
  443
Total operating expenses, $m
  304
  316
  324
  332
  341
  350
  359
  369
  380
  391
  402
  413
  426
  439
  452
  466
  480
  496
  512
  528
  546
  563
  582
  601
  622
  642
  665
  687
  711
  736
  761
Operating income, $m
  3
  -3
  -3
  -3
  -3
  -2
  0
  2
  5
  9
  12
  18
  23
  28
  35
  42
  49
  57
  66
  76
  87
  98
  110
  124
  138
  153
  169
  187
  205
  225
  246
EBITDA, $m
  15
  0
  -1
  0
  0
  2
  3
  6
  9
  12
  16
  21
  26
  31
  38
  45
  53
  61
  70
  80
  91
  102
  115
  128
  143
  158
  175
  192
  211
  231
  253
Interest expense (income), $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Earnings before tax, $m
  1
  -5
  -5
  -5
  -5
  -4
  -2
  0
  3
  6
  10
  15
  20
  25
  31
  38
  45
  53
  62
  72
  82
  93
  105
  118
  132
  147
  163
  180
  198
  217
  238
Tax expense, $m
  1
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  7
  8
  10
  12
  14
  17
  19
  22
  25
  28
  32
  36
  40
  44
  49
  53
  59
  64
Net income, $m
  0
  -5
  -5
  -5
  -5
  -4
  -2
  0
  2
  4
  7
  11
  14
  18
  23
  28
  33
  39
  45
  52
  60
  68
  77
  86
  96
  107
  119
  131
  144
  159
  174

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  107
  108
  111
  113
  117
  120
  124
  128
  133
  138
  143
  149
  155
  161
  168
  175
  183
  191
  200
  209
  218
  228
  239
  250
  262
  275
  288
  302
  316
  332
  348
Adjusted assets (=assets-cash), $m
  106
  108
  111
  113
  117
  120
  124
  128
  133
  138
  143
  149
  155
  161
  168
  175
  183
  191
  200
  209
  218
  228
  239
  250
  262
  275
  288
  302
  316
  332
  348
Revenue / Adjusted assets
  2.896
  2.898
  2.883
  2.912
  2.889
  2.900
  2.895
  2.906
  2.895
  2.891
  2.895
  2.893
  2.890
  2.901
  2.899
  2.903
  2.896
  2.895
  2.890
  2.895
  2.899
  2.904
  2.900
  2.900
  2.901
  2.895
  2.896
  2.894
  2.899
  2.892
  2.894
Average production assets, $m
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  65
Working capital, $m
  11
  40
  41
  42
  43
  44
  46
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
Total debt, $m
  34
  34
  36
  37
  39
  41
  43
  46
  48
  51
  54
  58
  61
  65
  69
  73
  77
  82
  87
  92
  98
  103
  110
  116
  123
  130
  138
  146
  154
  163
  172
Total liabilities, $m
  62
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
Total equity, $m
  45
  46
  47
  48
  50
  51
  53
  55
  56
  59
  61
  63
  66
  69
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
  148
Total liabilities and equity, $m
  107
  108
  111
  113
  117
  120
  124
  129
  132
  138
  143
  149
  155
  162
  168
  175
  183
  191
  200
  209
  219
  228
  240
  250
  262
  275
  288
  302
  316
  332
  348
Debt-to-equity ratio
  0.756
  0.740
  0.760
  0.770
  0.790
  0.800
  0.820
  0.840
  0.860
  0.870
  0.890
  0.910
  0.930
  0.940
  0.960
  0.980
  0.990
  1.010
  1.020
  1.040
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
Adjusted equity ratio
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  -5
  -5
  -5
  -5
  -4
  -2
  0
  2
  4
  7
  11
  14
  18
  23
  28
  33
  39
  45
  52
  60
  68
  77
  86
  96
  107
  119
  131
  144
  159
  174
Depreciation, amort., depletion, $m
  12
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
Funds from operations, $m
  7
  -2
  -2
  -2
  -2
  0
  1
  3
  5
  8
  11
  14
  17
  22
  26
  31
  37
  43
  49
  56
  64
  72
  81
  91
  101
  112
  124
  137
  150
  165
  180
Change in working capital, $m
  -4
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  11
  -3
  -3
  -3
  -3
  -2
  0
  2
  4
  6
  9
  12
  15
  19
  24
  28
  34
  40
  46
  53
  60
  69
  77
  87
  97
  108
  119
  132
  145
  159
  174
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
New CAPEX, $m
  -4
  0
  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
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  -5
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -9
Free cash flow, $m
  6
  -5
  -6
  -6
  -5
  -5
  -3
  -1
  1
  3
  5
  8
  11
  15
  19
  24
  29
  35
  41
  48
  55
  63
  71
  80
  90
  100
  112
  124
  137
  150
  165
Issuance/(repayment) of debt, $m
  -9
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
Issuance/(repurchase) of shares, $m
  0
  6
  6
  6
  6
  5
  4
  2
  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  
  -9
  7
  7
  8
  8
  7
  6
  4
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
Total cash flow (excl. dividends), $m
  -2
  2
  2
  2
  2
  3
  3
  3
  3
  5
  8
  11
  15
  19
  23
  28
  33
  39
  46
  53
  60
  68
  77
  87
  97
  108
  119
  132
  145
  159
  174
Retained Cash Flow (-), $m
  -3
  -6
  -6
  -6
  -6
  -5
  -4
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
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
 
  -4
  -4
  -4
  -4
  -3
  -1
  1
  1
  3
  6
  9
  12
  16
  20
  25
  30
  36
  42
  49
  56
  64
  73
  82
  92
  102
  114
  126
  139
  153
  167
Discount rate, %
 
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
 
  -4
  -4
  -4
  -3
  -2
  -1
  1
  1
  2
  3
  3
  4
  5
  5
  5
  5
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  97.0
  93.8
  90.8
  88.1
  85.9
  84.5
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8

StarTek, Inc. provides business process outsourcing services in the United States, Canada, Honduras, Jamaica, and the Philippines. It operates in three segments: Domestic, Nearshore, and Offshore. The company’s service offerings include customer care, sales support, inbound sales, complex order processing, accounts receivable management, technical and product support, up-sell and cross-sell opportunities, customer intelligence analytics, and other industry-specific processes. It offers technical and product support services through telephone, e-mail, chat, facsimile, and the Internet; and sales support services comprising lead generation, direct sales, account management and retention programs, and marketing analysis and modeling. The company’s provisioning and order processing services comprise full life cycle order management and technical sales support for high-end telecommunications services, such as wire-line, wireless, data, and customer premise equipment; order fallout from its clients' automated systems; and direct-to-consumer services, such as provisioning, order processing, and transfer of accounts between client service providers. Its receivables management services consist of first and third party collections services for clients in the telecommunication, cable and media, and healthcare industries; healthcare services include customer care, sales support, accounts receivable management, remote patient care, and medical triage to providers, payers, pharmaceutical, and medical devices; and industry-specific processes comprise training curriculum development, workforce management, customer analytics, quality monitoring services, and dispositions. The company was founded in 1987 and is headquartered in Greenwood Village, Colorado.

FINANCIAL RATIOS  of  Startek (SRT)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.6
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 16.8
Price to Free Cash Flow 26.5
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -15%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 11.1%
Total Debt to Equity 75.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -5.9%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -9.6%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -13.9%
Asset Turnover 2.8
Profitability Ratios
Gross Margin 11.7%
Gross Margin - 3 Yr. Avg. 10.7%
EBITDA Margin 4.9%
EBITDA Margin - 3 Yr. Avg. 2.4%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. -2%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. -2.3%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -2.6%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 31.1%
Payout Ratio 0%

SRT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRT stock intrinsic value calculation we used $307 million for the last fiscal year's total revenue generated by Startek. The default revenue input number comes from 2016 income statement of Startek. 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 SRT stock valuation model: a) initial revenue growth rate of 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 5.7%, whose default value for SRT is calculated based on our internal credit rating of Startek, 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 Startek.
    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 SRT stock the variable cost ratio is equal to 31.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $211 million in the base year in the intrinsic value calculation for SRT 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 5.1% for Startek.

Corporate tax rate of 27% is the nominal tax rate for Startek. 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 SRT 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 SRT are equal to 6.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Startek 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 SRT is equal to 12.7%. 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 - $45 million for Startek - 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 15.617 million for Startek 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 Startek at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
SYKE Sykes Enterpri 26.14 62.71  str.buy
ATTO Atento 11.90 9.62  hold
CVG Convergys 22.92 29.48  buy

COMPANY NEWS

▶ StarTek posts 2Q profit   [Aug-09-17 05:06PM  Associated Press]
▶ STARTEK Reports Second Quarter 2017 Results   [04:05PM  Business Wire]
▶ STARTEK Announces Partnership with TriageLogic   [Jul-19-17 04:05PM  Business Wire]
▶ STARTEK Joins Russell 2000 Index   [Jun-27-17 04:05PM  Business Wire]
▶ ETFs with exposure to Startek, Inc. : June 8, 2017   [Jun-08-17 01:57PM  Capital Cube]
▶ Startek, Inc.: Strong price momentum but will it sustain?   [May-12-17 02:32PM  Capital Cube]
▶ StarTek posts 1Q profit   [May-10-17 04:58PM  Associated Press]
▶ STARTEK Reports First Quarter 2017 Results   [04:05PM  Business Wire]
▶ StarTek posts 4Q profit   [04:26PM  Associated Press]
▶ STARTEK Reports Third Quarter 2016 Results   [04:05PM  Business Wire]
▶ STARTEK Reports Second Quarter 2016 Results   [04:05PM  Business Wire]
▶ STARTEK Hires Cory White as Chief of Sales & Marketing   [Jun-07-16 09:00AM  Business Wire]
▶ STARTEK Reports First Quarter 2016 Results   [04:05PM  Business Wire]
▶ CFO Moves: Pegasystems Inc., StarTek   [Nov-13  05:07PM  at The Wall Street Journal]
Stock chart of SRT Financial statements of SRT
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.