Intrinsic value of Total System Services - TSS

Previous Close

$62.40

  Intrinsic Value

$727.09

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+1449%

Previous close

$62.40

 
Intrinsic value

$727.09

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+1449%

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

We calculate the intrinsic value of TSS 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 11.3

 

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, %
  50.00
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  4,170
  6,672
  10,308
  15,416
  22,368
  31,558
  43,385
  58,235
  76,466
  98,393
  124,279
  154,326
  188,678
  227,421
  270,586
  318,161
  370,097
  426,321
  486,741
  551,259
  619,779
  692,211
  768,479
  848,526
  932,315
  1,019,832
  1,111,091
  1,206,130
  1,305,011
  1,407,825
  1,514,687
Variable operating expenses, $m
 
  5,195
  7,848
  11,574
  16,646
  23,350
  31,979
  42,813
  56,114
  72,111
  90,996
  112,590
  137,652
  165,917
  197,408
  232,117
  270,008
  311,026
  355,106
  402,176
  452,165
  505,009
  560,651
  619,049
  680,178
  744,028
  810,606
  879,942
  952,082
  1,027,091
  1,105,053
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
  3,597
  5,195
  7,848
  11,574
  16,646
  23,350
  31,979
  42,813
  56,114
  72,111
  90,996
  112,590
  137,652
  165,917
  197,408
  232,117
  270,008
  311,026
  355,106
  402,176
  452,165
  505,009
  560,651
  619,049
  680,178
  744,028
  810,606
  879,942
  952,082
  1,027,091
  1,105,053
Operating income, $m
  573
  1,477
  2,461
  3,842
  5,722
  8,207
  11,406
  15,422
  20,352
  26,282
  33,283
  41,736
  51,026
  61,504
  73,177
  86,044
  100,090
  115,295
  131,635
  149,083
  167,614
  187,202
  207,828
  229,476
  252,136
  275,805
  300,485
  326,187
  352,929
  380,734
  409,634
EBITDA, $m
  947
  2,040
  3,151
  4,713
  6,838
  9,648
  13,264
  17,804
  23,378
  30,081
  37,995
  47,181
  57,683
  69,528
  82,725
  97,269
  113,148
  130,337
  148,809
  168,533
  189,482
  211,626
  234,943
  259,415
  285,031
  311,788
  339,688
  368,743
  398,974
  430,406
  463,077
Interest expense (income), $m
  84
  116
  204
  333
  513
  759
  1,084
  1,502
  2,027
  2,671
  3,447
  4,362
  5,424
  6,638
  8,008
  9,533
  11,215
  13,051
  15,038
  17,174
  19,455
  21,877
  24,437
  27,133
  29,963
  32,925
  36,018
  39,244
  42,604
  46,099
  49,734
Earnings before tax, $m
  461
  1,361
  2,256
  3,509
  5,209
  7,448
  10,322
  13,920
  18,325
  23,611
  29,836
  37,375
  45,603
  54,866
  65,170
  76,510
  88,874
  102,244
  116,596
  131,909
  148,159
  165,325
  183,391
  202,343
  222,173
  242,880
  264,466
  286,943
  310,325
  334,635
  359,900
Tax expense, $m
  161
  368
  609
  947
  1,406
  2,011
  2,787
  3,758
  4,948
  6,375
  8,056
  10,091
  12,313
  14,814
  17,596
  20,658
  23,996
  27,606
  31,481
  35,615
  40,003
  44,638
  49,516
  54,633
  59,987
  65,578
  71,406
  77,475
  83,788
  90,351
  97,173
Net income, $m
  320
  994
  1,647
  2,562
  3,802
  5,437
  7,535
  10,162
  13,378
  17,236
  21,781
  27,283
  33,290
  40,052
  47,574
  55,853
  64,878
  74,638
  85,115
  96,294
  108,156
  120,688
  133,875
  147,710
  162,187
  177,302
  193,061
  209,468
  226,537
  244,283
  262,727

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  425
  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
  6,366
  9,504
  14,684
  21,960
  31,863
  44,954
  61,801
  82,956
  108,926
  140,161
  177,035
  219,837
  268,772
  323,961
  385,450
  453,220
  527,204
  607,295
  693,363
  785,270
  882,876
  986,056
  1,094,700
  1,208,726
  1,328,083
  1,452,753
  1,582,751
  1,718,133
  1,858,990
  2,005,449
  2,157,674
Adjusted assets (=assets-cash), $m
  5,941
  9,504
  14,684
  21,960
  31,863
  44,954
  61,801
  82,956
  108,926
  140,161
  177,035
  219,837
  268,772
  323,961
  385,450
  453,220
  527,204
  607,295
  693,363
  785,270
  882,876
  986,056
  1,094,700
  1,208,726
  1,328,083
  1,452,753
  1,582,751
  1,718,133
  1,858,990
  2,005,449
  2,157,674
Revenue / Adjusted assets
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
Average production assets, $m
  1,560
  2,495
  3,855
  5,766
  8,366
  11,803
  16,226
  21,780
  28,598
  36,799
  46,480
  57,718
  70,566
  85,055
  101,199
  118,992
  138,416
  159,444
  182,041
  206,171
  231,797
  258,887
  287,411
  317,349
  348,686
  381,417
  415,548
  451,093
  488,074
  526,527
  566,493
Working capital, $m
  603
  367
  567
  848
  1,230
  1,736
  2,386
  3,203
  4,206
  5,412
  6,835
  8,488
  10,377
  12,508
  14,882
  17,499
  20,355
  23,448
  26,771
  30,319
  34,088
  38,072
  42,266
  46,669
  51,277
  56,091
  61,110
  66,337
  71,776
  77,430
  83,308
Total debt, $m
  3,364
  5,837
  9,509
  14,668
  21,689
  30,970
  42,915
  57,914
  76,327
  98,472
  124,616
  154,963
  189,658
  228,786
  272,382
  320,431
  372,886
  429,670
  490,692
  555,854
  625,057
  698,212
  775,240
  856,085
  940,709
  1,029,100
  1,121,269
  1,217,255
  1,317,122
  1,420,961
  1,528,889
Total liabilities, $m
  4,266
  6,739
  10,411
  15,570
  22,591
  31,872
  43,817
  58,816
  77,229
  99,374
  125,518
  155,865
  190,560
  229,688
  273,284
  321,333
  373,788
  430,572
  491,594
  556,756
  625,959
  699,114
  776,142
  856,987
  941,611
  1,030,002
  1,122,171
  1,218,157
  1,318,024
  1,421,863
  1,529,791
Total equity, $m
  2,100
  2,766
  4,273
  6,390
  9,272
  13,082
  17,984
  24,140
  31,697
  40,787
  51,517
  63,973
  78,213
  94,273
  112,166
  131,887
  153,416
  176,723
  201,769
  228,514
  256,917
  286,942
  318,558
  351,739
  386,472
  422,751
  460,581
  499,977
  540,966
  583,586
  627,883
Total liabilities and equity, $m
  6,366
  9,505
  14,684
  21,960
  31,863
  44,954
  61,801
  82,956
  108,926
  140,161
  177,035
  219,838
  268,773
  323,961
  385,450
  453,220
  527,204
  607,295
  693,363
  785,270
  882,876
  986,056
  1,094,700
  1,208,726
  1,328,083
  1,452,753
  1,582,752
  1,718,134
  1,858,990
  2,005,449
  2,157,674
Debt-to-equity ratio
  1.602
  2.110
  2.230
  2.300
  2.340
  2.370
  2.390
  2.400
  2.410
  2.410
  2.420
  2.420
  2.420
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
  2.430
Adjusted equity ratio
  0.282
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  320
  994
  1,647
  2,562
  3,802
  5,437
  7,535
  10,162
  13,378
  17,236
  21,781
  27,283
  33,290
  40,052
  47,574
  55,853
  64,878
  74,638
  85,115
  96,294
  108,156
  120,688
  133,875
  147,710
  162,187
  177,302
  193,061
  209,468
  226,537
  244,283
  262,727
Depreciation, amort., depletion, $m
  374
  563
  691
  871
  1,116
  1,441
  1,858
  2,382
  3,025
  3,799
  4,712
  5,445
  6,657
  8,024
  9,547
  11,226
  13,058
  15,042
  17,174
  19,450
  21,868
  24,423
  27,114
  29,939
  32,895
  35,983
  39,203
  42,556
  46,045
  49,672
  53,443
Funds from operations, $m
  646
  1,556
  2,338
  3,433
  4,919
  6,878
  9,393
  12,543
  16,403
  21,035
  26,493
  32,728
  39,947
  48,076
  57,121
  67,078
  77,936
  89,680
  102,289
  115,744
  130,024
  145,111
  160,990
  177,649
  195,081
  213,285
  232,263
  252,024
  272,582
  293,956
  316,170
Change in working capital, $m
  -72
  138
  200
  281
  382
  505
  650
  817
  1,003
  1,206
  1,424
  1,653
  1,889
  2,131
  2,374
  2,617
  2,857
  3,092
  3,323
  3,549
  3,769
  3,984
  4,195
  4,403
  4,608
  4,813
  5,019
  5,227
  5,438
  5,655
  5,877
Cash from operations, $m
  718
  1,419
  2,138
  3,152
  4,536
  6,372
  8,742
  11,727
  15,400
  19,829
  25,069
  31,076
  38,058
  45,945
  54,747
  64,462
  75,080
  86,588
  98,966
  112,195
  126,255
  141,127
  156,795
  173,246
  190,473
  208,472
  227,244
  246,797
  267,143
  288,301
  310,293
Maintenance CAPEX, $m
  0
  -147
  -235
  -364
  -544
  -789
  -1,113
  -1,531
  -2,055
  -2,698
  -3,472
  -4,385
  -5,445
  -6,657
  -8,024
  -9,547
  -11,226
  -13,058
  -15,042
  -17,174
  -19,450
  -21,868
  -24,423
  -27,114
  -29,939
  -32,895
  -35,983
  -39,203
  -42,556
  -46,045
  -49,672
New CAPEX, $m
  -143
  -936
  -1,360
  -1,910
  -2,600
  -3,437
  -4,423
  -5,554
  -6,818
  -8,201
  -9,681
  -11,238
  -12,848
  -14,490
  -16,144
  -17,793
  -19,424
  -21,028
  -22,597
  -24,130
  -25,626
  -27,090
  -28,524
  -29,937
  -31,337
  -32,732
  -34,131
  -35,544
  -36,982
  -38,452
  -39,966
Cash from investing activities, $m
  -2,493
  -1,083
  -1,595
  -2,274
  -3,144
  -4,226
  -5,536
  -7,085
  -8,873
  -10,899
  -13,153
  -15,623
  -18,293
  -21,147
  -24,168
  -27,340
  -30,650
  -34,086
  -37,639
  -41,304
  -45,076
  -48,958
  -52,947
  -57,051
  -61,276
  -65,627
  -70,114
  -74,747
  -79,538
  -84,497
  -89,638
Free cash flow, $m
  -1,775
  336
  543
  878
  1,392
  2,146
  3,206
  4,642
  6,527
  8,930
  11,916
  15,453
  19,765
  24,799
  30,579
  37,121
  44,430
  52,502
  61,327
  70,892
  81,179
  92,170
  103,847
  116,195
  129,198
  142,845
  157,130
  172,050
  187,606
  203,804
  220,654
Issuance/(repayment) of debt, $m
  1,942
  2,524
  3,672
  5,159
  7,021
  9,282
  11,945
  14,998
  18,413
  22,146
  26,144
  30,347
  34,695
  39,129
  43,595
  48,049
  52,454
  56,784
  61,023
  65,162
  69,203
  73,154
  77,029
  80,845
  84,624
  88,390
  92,169
  95,986
  99,867
  103,839
  107,928
Issuance/(repurchase) of shares, $m
  -19
  46
  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  
  1,895
  2,570
  3,672
  5,159
  7,021
  9,282
  11,945
  14,998
  18,413
  22,146
  26,144
  30,347
  34,695
  39,129
  43,595
  48,049
  52,454
  56,784
  61,023
  65,162
  69,203
  73,154
  77,029
  80,845
  84,624
  88,390
  92,169
  95,986
  99,867
  103,839
  107,928
Total cash flow (excl. dividends), $m
  109
  2,905
  4,215
  6,036
  8,414
  11,428
  15,150
  19,640
  24,940
  31,076
  38,060
  45,800
  54,460
  63,927
  74,175
  85,171
  96,884
  109,286
  122,350
  136,053
  150,382
  165,324
  180,876
  197,039
  213,822
  231,236
  249,299
  268,036
  287,473
  307,643
  328,581
Retained Cash Flow (-), $m
  -257
  -1,040
  -1,507
  -2,117
  -2,882
  -3,809
  -4,903
  -6,156
  -7,557
  -9,089
  -10,730
  -12,455
  -14,240
  -16,060
  -17,893
  -19,721
  -21,529
  -23,306
  -25,046
  -26,745
  -28,404
  -30,025
  -31,615
  -33,182
  -34,733
  -36,279
  -37,830
  -39,396
  -40,989
  -42,620
  -44,297
Prev. year cash balance distribution, $m
 
  374
  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
 
  2,239
  2,708
  3,919
  5,532
  7,618
  10,248
  13,484
  17,382
  21,986
  27,329
  33,345
  40,220
  47,867
  56,282
  65,450
  75,355
  85,980
  97,304
  109,309
  121,978
  135,299
  149,261
  163,858
  179,089
  194,957
  211,470
  228,640
  246,484
  265,024
  284,284
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  2,079
  2,318
  3,069
  3,931
  4,870
  5,839
  6,781
  7,633
  8,337
  8,842
  9,090
  9,113
  8,888
  8,434
  7,790
  7,004
  6,128
  5,219
  4,324
  3,483
  2,728
  2,075
  1,532
  1,097
  762
  512
  332
  208
  126
  74
Current shareholders' claim on cash, %
  100
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5

Total System Services, Inc. provides payment processing, merchant, and related payment services to financial and nonfinancial institutions in the United States, Europe, Canada, Mexico, and internationally. It operates through four segments: North America Services, International Services, Merchant Services, and NetSpend. The company offers account processing and output services, including processing the card application, initiating service for the cardholder, processing card transaction for the issuing retailer or financial institution, and accumulating the accountÂ’s transactions. It also provides fraud management services to monitor the unauthorized use of accounts; fraud detection systems for identifying fraudulent transactions; and other services, such as customized communication services to cardholders, and information verification services associated with granting credit, debt collection, and customer service. In addition, the company offers processing services, acquiring solutions, related systems, and integrated support services, which include processing various payment forms, such as credit, debit, prepaid, electronic benefit transfer, and electronic check; authorization and capture of transactions; clearing and settlement of transactions; information reporting services related to transactions; merchant billing services; and point-of-sale equipment sales and service. Further, it provides general purpose reloadable prepaid debit cards and payroll cards, as well as alternative financial services to underbanked and other consumers. The company was founded in 1982 and is headquartered in Columbus, Georgia.

FINANCIAL RATIOS  of  Total System Services (TSS)

Valuation Ratios
P/E Ratio 35.8
Price to Sales 2.7
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 15.9
Price to Free Cash Flow 19.9
Growth Rates
Sales Growth Rate 50%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -29.6%
Cap. Spend. - 3 Yr. Gr. Rate -5.9%
Financial Strength
Quick Ratio 8
Current Ratio 0.2
LT Debt to Equity 157.8%
Total Debt to Equity 160.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 9%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 16.2%
Return On Equity - 3 Yr. Avg. 18.9%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 28.2%
Gross Margin - 3 Yr. Avg. 31.1%
EBITDA Margin 22%
EBITDA Margin - 3 Yr. Avg. 26.2%
Operating Margin 13.7%
Oper. Margin - 3 Yr. Avg. 16.4%
Pre-Tax Margin 11.1%
Pre-Tax Margin - 3 Yr. Avg. 15%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 11.3%
Effective Tax Rate 34.9%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 22.8%

TSS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TSS stock intrinsic value calculation we used $4170 million for the last fiscal year's total revenue generated by Total System Services. The default revenue input number comes from 2016 income statement of Total System Services. 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 TSS stock valuation model: a) initial revenue growth rate of 60% 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 7.7%, whose default value for TSS is calculated based on our internal credit rating of Total System Services, 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 Total System Services.
    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 TSS stock the variable cost ratio is equal to 80.8%.

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 TSS 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 Total System Services.

Corporate tax rate of 27% is the nominal tax rate for Total System Services. 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 TSS 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 TSS are equal to 37.4%.

Life of production assets of 10.6 years is the average useful life of capital assets used in Total System Services 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 TSS is equal to 5.5%. 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 - $2100 million for Total System Services - 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 181.621 million for Total System Services 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 Total System Services at the current share price and the inputted number of shares is $11.3 billion.

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COMPANY NEWS

▶ How These Two Online Payment Processors Figure In Future Mergers   [Jul-24-17 04:25PM  Investor's Business Daily]
▶ Electronic Payment Sector Swipes Ahead Of S&P, Gets Price Hikes   [Jul-18-17 04:25PM  Investor's Business Daily]
▶ Stocks With Rising Composite Ratings: Total System Services   [Jul-03-17 11:03AM  Investor's Business Daily]
▶ TSYS to Broadcast Second-Quarter 2017 Results   [Jun-28-17 09:00AM  Business Wire]
▶ TSYS Named to The Civic 50 in 2017   [08:30AM  Business Wire]
▶ TSYS Extends Payments Agreement with Valley National Bank   [Jun-19-17 09:00AM  Business Wire]
▶ TSYS Announces Foresight Score with Featurespace   [Jun-12-17 08:30AM  Business Wire]
▶ TSYS Announces Second-Quarter 2017 Dividend   [Jun-07-17 04:15PM  Business Wire]
▶ TSYS Enables Tokenization for Commercial Card Issuers   [May-30-17 09:00AM  Business Wire]
▶ TSYS to Host 2017 Investor Day in New York   [09:00AM  Business Wire]
▶ Total System beats 1Q profit forecasts   [Apr-25-17 04:30PM  Associated Press]
▶ TSYS Reports First Quarter Earnings   [04:15PM  Business Wire]
▶ TSYS subsidiary NetSpend settles Federal Trade Commission charges   [Apr-07-17 07:27AM  American City Business Journals]
▶ TSYS subsidiary NetSpend settles Federal Trade Commission charges   [Apr-02-17 10:35AM  at bizjournals.com]
▶ TSYS to Broadcast First-Quarter 2017 Results   [Mar-30-17 09:00AM  Business Wire]
▶ TSYS Announces First-Quarter 2017 Dividend   [Mar-08-17 09:00AM  Business Wire]
▶ Netspend Hires Jeff Johnson to Lead Commercial Prepaid   [Mar-02-17 09:00AM  Business Wire]
▶ Columbus lands $25M credit card production facility with 145 jobs   [Feb-27-17 02:56PM  at bizjournals.com]
▶ TSYS Announces Executive Transition   [09:15AM  Business Wire]
▶ TSYS Renews Payments Agreement with Advanzia Bank   [Dec-06-16 04:00AM  Business Wire]
▶ TSYS Announces Fourth-Quarter 2016 Dividend   [Dec-02-16 09:00AM  Business Wire]
▶ TSYS Signs Payments Agreement with Virgin Money   [Nov-30-16 04:00AM  Business Wire]
Stock chart of TSS Financial statements of TSS Annual reports of TSS
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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