Intrinsic value of Tyler Technologies - TYL

Previous Close

$197.68

  Intrinsic Value

$62.74

stock screener

  Rating & Target

str. sell

-68%

Previous close

$197.68

 
Intrinsic value

$62.74

 
Up/down potential

-68%

 
Rating

str. sell

We calculate the intrinsic value of TYL 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, %
  27.92
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  756
  829
  906
  986
  1,069
  1,155
  1,245
  1,338
  1,435
  1,536
  1,641
  1,750
  1,863
  1,981
  2,104
  2,231
  2,365
  2,503
  2,648
  2,799
  2,957
  3,122
  3,294
  3,474
  3,662
  3,859
  4,065
  4,280
  4,506
  4,743
  4,990
Variable operating expenses, $m
 
  671
  727
  786
  846
  909
  975
  1,043
  1,114
  1,188
  1,264
  1,279
  1,362
  1,448
  1,538
  1,631
  1,729
  1,830
  1,936
  2,046
  2,162
  2,282
  2,408
  2,540
  2,677
  2,821
  2,972
  3,129
  3,294
  3,467
  3,648
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
  625
  671
  727
  786
  846
  909
  975
  1,043
  1,114
  1,188
  1,264
  1,279
  1,362
  1,448
  1,538
  1,631
  1,729
  1,830
  1,936
  2,046
  2,162
  2,282
  2,408
  2,540
  2,677
  2,821
  2,972
  3,129
  3,294
  3,467
  3,648
Operating income, $m
  131
  158
  179
  200
  222
  246
  270
  295
  321
  348
  376
  471
  501
  533
  566
  600
  636
  673
  712
  753
  795
  840
  886
  934
  985
  1,038
  1,093
  1,151
  1,212
  1,276
  1,342
EBITDA, $m
  181
  244
  266
  290
  314
  339
  366
  393
  422
  451
  482
  514
  548
  582
  618
  656
  695
  736
  778
  823
  869
  918
  968
  1,021
  1,076
  1,134
  1,195
  1,258
  1,324
  1,394
  1,467
Interest expense (income), $m
  0
  0
  2
  3
  5
  7
  8
  10
  12
  14
  16
  18
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  72
  77
  82
Earnings before tax, $m
  129
  158
  177
  197
  217
  239
  261
  285
  309
  334
  360
  452
  481
  510
  541
  572
  606
  640
  676
  714
  753
  794
  837
  882
  929
  978
  1,030
  1,083
  1,140
  1,199
  1,261
Tax expense, $m
  19
  43
  48
  53
  59
  65
  71
  77
  83
  90
  97
  122
  130
  138
  146
  155
  164
  173
  183
  193
  203
  214
  226
  238
  251
  264
  278
  293
  308
  324
  340
Net income, $m
  110
  115
  129
  144
  159
  174
  191
  208
  225
  244
  263
  330
  351
  372
  395
  418
  442
  467
  494
  521
  550
  580
  611
  644
  678
  714
  752
  791
  832
  875
  920

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  56
  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
  1,358
  1,427
  1,559
  1,696
  1,839
  1,988
  2,143
  2,303
  2,470
  2,644
  2,824
  3,012
  3,207
  3,410
  3,621
  3,841
  4,070
  4,309
  4,558
  4,818
  5,090
  5,373
  5,669
  5,979
  6,303
  6,642
  6,996
  7,367
  7,756
  8,163
  8,589
Adjusted assets (=assets-cash), $m
  1,302
  1,427
  1,559
  1,696
  1,839
  1,988
  2,143
  2,303
  2,470
  2,644
  2,824
  3,012
  3,207
  3,410
  3,621
  3,841
  4,070
  4,309
  4,558
  4,818
  5,090
  5,373
  5,669
  5,979
  6,303
  6,642
  6,996
  7,367
  7,756
  8,163
  8,589
Revenue / Adjusted assets
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
Average production assets, $m
  394
  432
  472
  514
  557
  602
  649
  697
  748
  800
  855
  912
  971
  1,032
  1,096
  1,163
  1,232
  1,304
  1,380
  1,458
  1,541
  1,626
  1,716
  1,810
  1,908
  2,010
  2,118
  2,230
  2,348
  2,471
  2,600
Working capital, $m
  -79
  -148
  -162
  -176
  -191
  -207
  -223
  -240
  -257
  -275
  -294
  -313
  -333
  -355
  -377
  -399
  -423
  -448
  -474
  -501
  -529
  -559
  -590
  -622
  -656
  -691
  -728
  -766
  -807
  -849
  -893
Total debt, $m
  10
  52
  97
  143
  192
  242
  294
  349
  405
  464
  525
  589
  655
  724
  795
  870
  948
  1,029
  1,113
  1,201
  1,293
  1,390
  1,490
  1,595
  1,705
  1,820
  1,940
  2,066
  2,197
  2,335
  2,480
Total liabilities, $m
  442
  484
  529
  575
  624
  674
  726
  781
  837
  896
  957
  1,021
  1,087
  1,156
  1,227
  1,302
  1,380
  1,461
  1,545
  1,633
  1,725
  1,822
  1,922
  2,027
  2,137
  2,252
  2,372
  2,498
  2,629
  2,767
  2,912
Total equity, $m
  916
  944
  1,031
  1,121
  1,216
  1,314
  1,416
  1,523
  1,633
  1,748
  1,867
  1,991
  2,120
  2,254
  2,393
  2,539
  2,690
  2,848
  3,013
  3,185
  3,364
  3,552
  3,748
  3,952
  4,166
  4,390
  4,625
  4,870
  5,127
  5,396
  5,677
Total liabilities and equity, $m
  1,358
  1,428
  1,560
  1,696
  1,840
  1,988
  2,142
  2,304
  2,470
  2,644
  2,824
  3,012
  3,207
  3,410
  3,620
  3,841
  4,070
  4,309
  4,558
  4,818
  5,089
  5,374
  5,670
  5,979
  6,303
  6,642
  6,997
  7,368
  7,756
  8,163
  8,589
Debt-to-equity ratio
  0.011
  0.060
  0.090
  0.130
  0.160
  0.180
  0.210
  0.230
  0.250
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.380
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
Adjusted equity ratio
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  110
  115
  129
  144
  159
  174
  191
  208
  225
  244
  263
  330
  351
  372
  395
  418
  442
  467
  494
  521
  550
  580
  611
  644
  678
  714
  752
  791
  832
  875
  920
Depreciation, amort., depletion, $m
  50
  86
  88
  90
  92
  94
  96
  98
  101
  103
  106
  44
  46
  49
  52
  56
  59
  62
  66
  70
  74
  78
  82
  87
  91
  96
  101
  107
  112
  118
  124
Funds from operations, $m
  218
  201
  217
  233
  250
  268
  287
  306
  326
  347
  369
  374
  397
  422
  447
  473
  501
  530
  560
  591
  624
  658
  693
  731
  770
  810
  853
  898
  944
  993
  1,045
Change in working capital, $m
  26
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
Cash from operations, $m
  192
  214
  230
  247
  265
  284
  303
  323
  344
  365
  388
  393
  417
  443
  469
  496
  525
  555
  586
  618
  652
  687
  724
  763
  803
  846
  890
  936
  985
  1,036
  1,089
Maintenance CAPEX, $m
  0
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -41
  -44
  -46
  -49
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -107
  -112
  -118
New CAPEX, $m
  -38
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -61
  -64
  -67
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -98
  -103
  -107
  -112
  -118
  -123
  -129
Cash from investing activities, $m
  -51
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -107
  -113
  -119
  -125
  -131
  -137
  -145
  -152
  -160
  -168
  -176
  -185
  -194
  -203
  -213
  -225
  -235
  -247
Free cash flow, $m
  141
  157
  170
  183
  197
  212
  227
  243
  260
  277
  295
  296
  315
  335
  356
  377
  400
  423
  448
  473
  500
  528
  557
  587
  619
  652
  686
  723
  760
  800
  842
Issuance/(repayment) of debt, $m
  -56
  42
  45
  47
  48
  50
  52
  54
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
Issuance/(repurchase) of shares, $m
  -82
  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  
  -138
  42
  45
  47
  48
  50
  52
  54
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
Total cash flow (excl. dividends), $m
  3
  198
  214
  230
  246
  262
  280
  298
  316
  336
  356
  359
  381
  404
  427
  452
  478
  504
  532
  561
  592
  624
  657
  692
  728
  767
  807
  848
  892
  938
  986
Retained Cash Flow (-), $m
  -57
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -110
  -115
  -119
  -124
  -129
  -134
  -140
  -145
  -152
  -158
  -165
  -172
  -179
  -187
  -196
  -205
  -214
  -224
  -234
  -245
  -257
  -269
  -282
Prev. year cash balance distribution, $m
 
  56
  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
 
  171
  127
  139
  151
  164
  178
  191
  206
  221
  237
  235
  252
  270
  288
  306
  326
  346
  368
  390
  413
  436
  461
  487
  514
  543
  572
  603
  635
  669
  704
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
 
  164
  117
  121
  125
  127
  129
  129
  129
  127
  124
  112
  108
  102
  97
  90
  83
  75
  68
  60
  52
  45
  38
  32
  26
  21
  17
  13
  10
  7
  5
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

Tyler Technologies, Inc. is a provider of information management solutions and services for the public sector, with a focus on local governments. The Company operates through two segments: Enterprise Software (ES) segment and The Appraisal and Tax (A&T) segment. ES segment provides municipal and county governments and schools with software systems and services for information technology and automation needs that includes back-office functions, such as financial management, courts and justice processes, public safety, planning regulatory and maintenance, and land and vital records management. A&T segment provides systems and software that automate the appraisal and assessment of real and personal property, as well as property appraisal outsourcing services for local governments and taxing authorities.

FINANCIAL RATIOS  of  Tyler Technologies (TYL)

Valuation Ratios
P/E Ratio 66.1
Price to Sales 9.6
Price to Book 7.9
Price to Tangible Book
Price to Cash Flow 37.9
Price to Free Cash Flow 47.2
Growth Rates
Sales Growth Rate 27.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 192.3%
Cap. Spend. - 3 Yr. Gr. Rate 7.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 1.1%
Total Debt to Equity 1.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.1%
Ret/ On Assets - 3 Yr. Avg. 8.8%
Return On Total Capital 11.9%
Ret/ On T. Cap. - 3 Yr. Avg. 14.1%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 14.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 47%
Gross Margin - 3 Yr. Avg. 47%
EBITDA Margin 23.7%
EBITDA Margin - 3 Yr. Avg. 22.5%
Operating Margin 17.3%
Oper. Margin - 3 Yr. Avg. 18.3%
Pre-Tax Margin 17.1%
Pre-Tax Margin - 3 Yr. Avg. 18.1%
Net Profit Margin 14.6%
Net Profit Margin - 3 Yr. Avg. 12.5%
Effective Tax Rate 14.7%
Eff/ Tax Rate - 3 Yr. Avg. 30.6%
Payout Ratio 0%

TYL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TYL stock intrinsic value calculation we used $756 million for the last fiscal year's total revenue generated by Tyler Technologies. The default revenue input number comes from 2016 income statement of Tyler Technologies. 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 TYL stock valuation model: a) initial revenue growth rate of 9.7% 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 TYL is calculated based on our internal credit rating of Tyler Technologies, 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 Tyler Technologies.
    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 TYL stock the variable cost ratio is equal to 81.7%.

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 TYL 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 Tyler Technologies.

Corporate tax rate of 27% is the nominal tax rate for Tyler Technologies. 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 TYL 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 TYL are equal to 52.1%.

Life of production assets of 20.9 years is the average useful life of capital assets used in Tyler Technologies 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 TYL is equal to -17.9%. 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 - $916 million for Tyler Technologies - 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 37.673 million for Tyler Technologies 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 Tyler Technologies at the current share price and the inputted number of shares is $7.4 billion.

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COMPANY NEWS

▶ San Diego Courts to Use Tylers Odyssey for All Case Types   [Jan-09-18 09:17AM  Business Wire]
▶ Weekly CFO Sells Highlight   [Dec-21-17 10:29AM  GuruFocus.com]
▶ Here's why tech stocks are tanking right now: NYSE trader   [Nov-29-17 01:20PM  Yahoo Finance Video]
▶ Tyler Technologies beats 3Q profit forecasts   [Oct-25-17 06:31PM  Associated Press]
▶ Tyler Technologies Launches Traversa Ride 360 Application   [Oct-17-17 09:17AM  Business Wire]
▶ Santa Fe Selects Multiple Tyler Technologies Solutions   [Aug-08-17 09:17AM  Business Wire]
▶ Tyler Technologies Acquires Digital Health Department, Inc.   [Aug-02-17 11:00AM  Business Wire]
▶ Tyler Technologies Reports Earnings for Second Quarter 2017   [Jul-26-17 04:17PM  Business Wire]
▶ A Deep Analysis of 6 Five-Star Companies   [Jun-02-17 06:11PM  GuruFocus.com]
▶ [$$] Dispute Resolution Startup Modria Acquired by Tyler Technologies   [May-30-17 04:08PM  The Wall Street Journal]
▶ Tyler Technologies Acquires Modria   [01:00PM  Business Wire]
▶ Tyler Technologies tops 1Q profit forecasts   [Apr-26-17 06:36PM  Associated Press]
Financial statements of TYL
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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