Intrinsic value of Teletech Holdings - TTEC

Previous Close

$41.50

  Intrinsic Value

$32.74

stock screener

  Rating & Target

sell

-21%

Previous close

$41.50

 
Intrinsic value

$32.74

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of TTEC 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -0.93
  14.70
  13.73
  12.86
  12.07
  11.36
  10.73
  10.15
  9.64
  9.18
  8.76
  8.38
  8.04
  7.74
  7.47
  7.22
  7.00
  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
Revenue, $m
  1,275
  1,462
  1,663
  1,877
  2,104
  2,343
  2,594
  2,857
  3,133
  3,420
  3,720
  4,032
  4,356
  4,693
  5,044
  5,408
  5,786
  6,179
  6,588
  7,014
  7,456
  7,917
  8,397
  8,897
  9,418
  9,962
  10,529
  11,122
  11,741
  12,387
  13,063
Variable operating expenses, $m
 
  1,358
  1,543
  1,740
  1,948
  2,168
  2,399
  2,641
  2,895
  3,159
  3,435
  3,708
  4,007
  4,317
  4,639
  4,974
  5,322
  5,684
  6,060
  6,451
  6,858
  7,282
  7,723
  8,183
  8,663
  9,163
  9,685
  10,230
  10,799
  11,394
  12,016
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
  1,223
  1,358
  1,543
  1,740
  1,948
  2,168
  2,399
  2,641
  2,895
  3,159
  3,435
  3,708
  4,007
  4,317
  4,639
  4,974
  5,322
  5,684
  6,060
  6,451
  6,858
  7,282
  7,723
  8,183
  8,663
  9,163
  9,685
  10,230
  10,799
  11,394
  12,016
Operating income, $m
  53
  104
  120
  138
  156
  175
  195
  216
  238
  261
  285
  323
  349
  376
  404
  434
  464
  496
  528
  562
  598
  635
  673
  713
  755
  799
  844
  892
  942
  993
  1,048
EBITDA, $m
  122
  163
  186
  209
  235
  261
  289
  319
  350
  382
  415
  450
  486
  524
  563
  603
  646
  690
  735
  783
  832
  883
  937
  993
  1,051
  1,112
  1,175
  1,241
  1,310
  1,382
  1,458
Interest expense (income), $m
  7
  10
  13
  16
  20
  24
  28
  32
  36
  41
  46
  51
  56
  62
  67
  73
  80
  86
  93
  100
  107
  114
  122
  130
  139
  147
  157
  166
  176
  187
  198
Earnings before tax, $m
  50
  95
  108
  121
  136
  151
  167
  184
  202
  220
  239
  272
  293
  315
  337
  360
  384
  410
  436
  463
  491
  521
  551
  583
  617
  651
  688
  726
  765
  807
  850
Tax expense, $m
  13
  26
  29
  33
  37
  41
  45
  50
  55
  59
  65
  74
  79
  85
  91
  97
  104
  111
  118
  125
  133
  141
  149
  158
  167
  176
  186
  196
  207
  218
  229
Net income, $m
  34
  69
  79
  89
  99
  110
  122
  135
  147
  161
  175
  199
  214
  230
  246
  263
  281
  299
  318
  338
  359
  380
  402
  426
  450
  476
  502
  530
  559
  589
  620

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  57
  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
  846
  905
  1,029
  1,162
  1,302
  1,450
  1,605
  1,768
  1,939
  2,117
  2,302
  2,495
  2,696
  2,904
  3,121
  3,346
  3,580
  3,824
  4,077
  4,340
  4,614
  4,899
  5,196
  5,505
  5,828
  6,165
  6,516
  6,882
  7,265
  7,665
  8,084
Adjusted assets (=assets-cash), $m
  789
  905
  1,029
  1,162
  1,302
  1,450
  1,605
  1,768
  1,939
  2,117
  2,302
  2,495
  2,696
  2,904
  3,121
  3,346
  3,580
  3,824
  4,077
  4,340
  4,614
  4,899
  5,196
  5,505
  5,828
  6,165
  6,516
  6,882
  7,265
  7,665
  8,084
Revenue / Adjusted assets
  1.616
  1.615
  1.616
  1.615
  1.616
  1.616
  1.616
  1.616
  1.616
  1.615
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
  1.616
Average production assets, $m
  201
  230
  261
  295
  330
  368
  407
  449
  492
  537
  584
  633
  684
  737
  792
  849
  908
  970
  1,034
  1,101
  1,171
  1,243
  1,318
  1,397
  1,479
  1,564
  1,653
  1,746
  1,843
  1,945
  2,051
Working capital, $m
  254
  227
  258
  291
  326
  363
  402
  443
  486
  530
  577
  625
  675
  727
  782
  838
  897
  958
  1,021
  1,087
  1,156
  1,227
  1,301
  1,379
  1,460
  1,544
  1,632
  1,724
  1,820
  1,920
  2,025
Total debt, $m
  217
  289
  366
  448
  536
  628
  724
  826
  932
  1,042
  1,158
  1,278
  1,403
  1,532
  1,667
  1,807
  1,953
  2,104
  2,262
  2,426
  2,596
  2,773
  2,958
  3,150
  3,351
  3,560
  3,779
  4,007
  4,245
  4,494
  4,754
Total liabilities, $m
  491
  563
  640
  722
  810
  902
  998
  1,100
  1,206
  1,316
  1,432
  1,552
  1,677
  1,806
  1,941
  2,081
  2,227
  2,378
  2,536
  2,700
  2,870
  3,047
  3,232
  3,424
  3,625
  3,834
  4,053
  4,281
  4,519
  4,768
  5,028
Total equity, $m
  355
  342
  389
  439
  492
  548
  607
  668
  733
  800
  870
  943
  1,019
  1,098
  1,180
  1,265
  1,353
  1,445
  1,541
  1,641
  1,744
  1,852
  1,964
  2,081
  2,203
  2,330
  2,463
  2,602
  2,746
  2,898
  3,056
Total liabilities and equity, $m
  846
  905
  1,029
  1,161
  1,302
  1,450
  1,605
  1,768
  1,939
  2,116
  2,302
  2,495
  2,696
  2,904
  3,121
  3,346
  3,580
  3,823
  4,077
  4,341
  4,614
  4,899
  5,196
  5,505
  5,828
  6,164
  6,516
  6,883
  7,265
  7,666
  8,084
Debt-to-equity ratio
  0.611
  0.840
  0.940
  1.020
  1.090
  1.150
  1.190
  1.240
  1.270
  1.300
  1.330
  1.350
  1.380
  1.400
  1.410
  1.430
  1.440
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.510
  1.520
  1.530
  1.530
  1.540
  1.550
  1.550
  1.560
Adjusted equity ratio
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  34
  69
  79
  89
  99
  110
  122
  135
  147
  161
  175
  199
  214
  230
  246
  263
  281
  299
  318
  338
  359
  380
  402
  426
  450
  476
  502
  530
  559
  589
  620
Depreciation, amort., depletion, $m
  69
  59
  65
  72
  79
  87
  94
  103
  111
  120
  130
  127
  137
  147
  158
  170
  182
  194
  207
  220
  234
  249
  264
  279
  296
  313
  331
  349
  369
  389
  410
Funds from operations, $m
  70
  128
  144
  161
  178
  197
  217
  237
  259
  281
  305
  325
  351
  377
  404
  433
  462
  493
  525
  558
  593
  629
  666
  705
  746
  788
  833
  879
  927
  978
  1,031
Change in working capital, $m
  -38
  29
  31
  33
  35
  37
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  71
  74
  78
  81
  84
  88
  92
  96
  100
  105
Cash from operations, $m
  108
  99
  113
  127
  143
  160
  178
  196
  216
  237
  258
  277
  300
  325
  350
  376
  404
  432
  462
  492
  524
  557
  592
  628
  665
  704
  745
  787
  831
  878
  926
Maintenance CAPEX, $m
  0
  -40
  -46
  -52
  -59
  -66
  -74
  -81
  -90
  -98
  -107
  -117
  -127
  -137
  -147
  -158
  -170
  -182
  -194
  -207
  -220
  -234
  -249
  -264
  -279
  -296
  -313
  -331
  -349
  -369
  -389
New CAPEX, $m
  -51
  -29
  -32
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -79
  -82
  -85
  -89
  -93
  -97
  -102
  -106
Cash from investing activities, $m
  -100
  -69
  -78
  -86
  -95
  -104
  -113
  -122
  -133
  -143
  -154
  -166
  -178
  -190
  -202
  -215
  -229
  -244
  -258
  -274
  -289
  -306
  -324
  -343
  -361
  -381
  -402
  -424
  -446
  -471
  -495
Free cash flow, $m
  8
  30
  35
  42
  49
  56
  65
  74
  83
  93
  104
  111
  123
  135
  148
  161
  175
  189
  203
  219
  234
  251
  268
  286
  304
  323
  343
  363
  385
  407
  431
Issuance/(repayment) of debt, $m
  105
  72
  77
  82
  87
  92
  97
  101
  106
  111
  115
  120
  125
  130
  135
  140
  146
  151
  157
  164
  170
  177
  185
  192
  201
  209
  218
  228
  238
  249
  260
Issuance/(repurchase) of shares, $m
  -74
  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  
  20
  72
  77
  82
  87
  92
  97
  101
  106
  111
  115
  120
  125
  130
  135
  140
  146
  151
  157
  164
  170
  177
  185
  192
  201
  209
  218
  228
  238
  249
  260
Total cash flow (excl. dividends), $m
  13
  102
  113
  124
  136
  148
  161
  175
  189
  204
  219
  231
  248
  265
  283
  301
  320
  340
  361
  382
  405
  428
  453
  478
  505
  532
  561
  592
  623
  656
  691
Retained Cash Flow (-), $m
  79
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -99
  -104
  -108
  -112
  -117
  -122
  -127
  -133
  -139
  -145
  -151
  -158
Prev. year cash balance distribution, $m
 
  57
  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
 
  115
  66
  74
  83
  92
  103
  113
  125
  137
  149
  158
  172
  186
  201
  216
  232
  248
  265
  283
  301
  320
  340
  361
  383
  405
  429
  453
  478
  505
  533
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
 
  110
  60
  64
  68
  72
  74
  77
  78
  78
  78
  75
  73
  71
  67
  63
  59
  54
  49
  44
  38
  33
  28
  24
  19
  16
  13
  10
  7
  6
  4
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

TeleTech Holdings, Inc. (TeleTech) is a customer service provider that delivers consulting, technology, growth and customer care solutions on a global scale. The Company operates through four segments: Customer Management Services (CMS), Customer Growth Services (CGS), Customer Technology Services (CTS) and Customer Strategy Services (CSS). The CMS segment designs and manages clients' front-to-back office processes to deliver just-in-time, personalized, multi-channel interactions. The CGS segment offers integrated sales and marketing solutions to help its clients in the business-to-consumer or business-to-business markets. The CTS segment includes operational and system design consulting, customer experience technology product, implementation and integration consulting services, and management of clients cloud and on premise solutions. The CSS segment provides professional services in customer experience strategy, and system and operational process optimization.

FINANCIAL RATIOS  of  Teletech Holdings (TTEC)

Valuation Ratios
P/E Ratio 56.3
Price to Sales 1.5
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 17.7
Price to Free Cash Flow 33.6
Growth Rates
Sales Growth Rate -0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.9%
Cap. Spend. - 3 Yr. Gr. Rate 0.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 61.1%
Total Debt to Equity 61.1%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 6.1%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 8.6%
Return On Equity - 3 Yr. Avg. 12.7%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 26.2%
Gross Margin - 3 Yr. Avg. 27.6%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 11.7%
Operating Margin 4.1%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 6.2%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 26%
Eff/ Tax Rate - 3 Yr. Avg. 24.1%
Payout Ratio 52.9%

TTEC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TTEC stock intrinsic value calculation we used $1275 million for the last fiscal year's total revenue generated by Teletech Holdings. The default revenue input number comes from 2016 income statement of Teletech Holdings. 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 TTEC stock valuation model: a) initial revenue growth rate of 14.7% 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 TTEC is calculated based on our internal credit rating of Teletech Holdings, 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 Teletech Holdings.
    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 TTEC stock the variable cost ratio is equal to 93%.

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 TTEC 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 4.4% for Teletech Holdings.

Corporate tax rate of 27% is the nominal tax rate for Teletech Holdings. 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 TTEC 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 TTEC are equal to 15.7%.

Life of production assets of 4.7 years is the average useful life of capital assets used in Teletech Holdings 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 TTEC is equal to 15.5%. 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 - $355 million for Teletech Holdings - 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 46.46 million for Teletech Holdings 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 Teletech Holdings at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ TeleTech misses 3Q profit forecasts   [Nov-08-17 07:50PM  Associated Press]
▶ TeleTech Increases its Credit Facility to $1.2 Billion   [Nov-01-17 08:05AM  PR Newswire]
▶ TeleTech tops Street 2Q forecasts   [Aug-07-17 07:25PM  Associated Press]
▶ Rising Star 2017 Award Recognition Goes to TeleTech   [Jun-30-17 07:45AM  PR Newswire]
▶ Colorado call-center company to close North Carolina location, lay off 171 workers   [Jun-20-17 05:10PM  American City Business Journals]
▶ Call-center company laying off 171 workers in Charlotte   [03:02PM  American City Business Journals]
▶ Five Strong Buys Bucking Market Trends   [May-18-17 07:18PM  Zacks]
▶ Which Comes First: The Brand or the Customer Experience?   [May-17-17 08:59AM  PR Newswire]
▶ How Does Automation Impact the Customer Experience?   [May-16-17 08:59AM  PR Newswire]
▶ TeleTech beats Street 1Q forecasts   [May-09-17 07:34PM  Associated Press]
▶ Give Customers Facts, Not Confusion   [Mar-21-17 07:00AM  PR Newswire]
Financial statements of TTEC
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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