Intrinsic value of USA Technologies - USAT

Previous Close

$5.30

  Intrinsic Value

$1.60

stock screener

  Rating & Target

str. sell

-70%

  Value-price divergence*

-26%

Previous close

$5.30

 
Intrinsic value

$1.60

 
Up/down potential

-70%

 
Rating

str. sell

 
Value-price divergence*

-26%

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

We calculate the intrinsic value of USAT 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, %
  32.76
  30.00
  27.50
  25.25
  23.23
  21.40
  19.76
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
Revenue, $m
  77
  100
  128
  160
  197
  239
  286
  339
  396
  459
  526
  598
  675
  756
  842
  933
  1,027
  1,126
  1,229
  1,337
  1,449
  1,566
  1,687
  1,813
  1,943
  2,079
  2,220
  2,367
  2,520
  2,679
  2,845
Variable operating expenses, $m
 
  100
  127
  159
  195
  237
  283
  335
  391
  453
  519
  589
  664
  745
  829
  918
  1,011
  1,109
  1,210
  1,316
  1,426
  1,541
  1,660
  1,784
  1,913
  2,047
  2,186
  2,330
  2,481
  2,637
  2,800
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
  79
  100
  127
  159
  195
  237
  283
  335
  391
  453
  519
  589
  664
  745
  829
  918
  1,011
  1,109
  1,210
  1,316
  1,426
  1,541
  1,660
  1,784
  1,913
  2,047
  2,186
  2,330
  2,481
  2,637
  2,800
Operating income, $m
  -1
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  9
  11
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  35
  37
  39
  42
  44
EBITDA, $m
  4
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  21
  23
  26
  28
  31
  34
  37
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  82
  87
Interest expense (income), $m
  1
  0
  1
  2
  3
  5
  6
  8
  10
  12
  15
  17
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  57
  61
  66
  71
  76
  81
  87
  93
  99
Earnings before tax, $m
  -7
  0
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -8
  -8
  -9
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -55
Tax expense, $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
  0
Net income, $m
  -7
  0
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -8
  -8
  -9
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -55

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  19
  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
  85
  86
  109
  137
  169
  205
  245
  290
  340
  393
  451
  513
  578
  648
  722
  799
  880
  965
  1,054
  1,146
  1,242
  1,342
  1,445
  1,553
  1,665
  1,782
  1,903
  2,029
  2,160
  2,296
  2,438
Adjusted assets (=assets-cash), $m
  66
  86
  109
  137
  169
  205
  245
  290
  340
  393
  451
  513
  578
  648
  722
  799
  880
  965
  1,054
  1,146
  1,242
  1,342
  1,445
  1,553
  1,665
  1,782
  1,903
  2,029
  2,160
  2,296
  2,438
Revenue / Adjusted assets
  1.167
  1.163
  1.174
  1.168
  1.166
  1.166
  1.167
  1.169
  1.165
  1.168
  1.166
  1.166
  1.168
  1.167
  1.166
  1.168
  1.167
  1.167
  1.166
  1.167
  1.167
  1.167
  1.167
  1.167
  1.167
  1.167
  1.167
  1.167
  1.167
  1.167
  1.167
Average production assets, $m
  12
  15
  19
  24
  29
  36
  43
  50
  59
  68
  78
  89
  101
  113
  126
  139
  153
  168
  183
  199
  216
  233
  251
  270
  290
  310
  331
  353
  376
  399
  424
Working capital, $m
  5
  -8
  -10
  -12
  -15
  -19
  -22
  -26
  -31
  -36
  -41
  -47
  -53
  -59
  -66
  -73
  -80
  -88
  -96
  -104
  -113
  -122
  -132
  -141
  -152
  -162
  -173
  -185
  -197
  -209
  -222
Total debt, $m
  9
  8
  15
  25
  35
  47
  61
  76
  92
  110
  129
  150
  172
  195
  219
  245
  272
  300
  330
  361
  392
  426
  460
  496
  534
  572
  613
  655
  698
  743
  791
Total liabilities, $m
  30
  29
  36
  46
  56
  68
  82
  97
  113
  131
  150
  171
  193
  216
  240
  266
  293
  321
  351
  382
  413
  447
  481
  517
  555
  593
  634
  676
  719
  764
  812
Total equity, $m
  55
  57
  73
  91
  113
  137
  164
  194
  226
  262
  301
  342
  386
  432
  481
  533
  587
  644
  703
  764
  828
  895
  964
  1,036
  1,111
  1,188
  1,269
  1,353
  1,440
  1,531
  1,626
Total liabilities and equity, $m
  85
  86
  109
  137
  169
  205
  246
  291
  339
  393
  451
  513
  579
  648
  721
  799
  880
  965
  1,054
  1,146
  1,241
  1,342
  1,445
  1,553
  1,666
  1,781
  1,903
  2,029
  2,159
  2,295
  2,438
Debt-to-equity ratio
  0.164
  0.130
  0.210
  0.270
  0.310
  0.350
  0.370
  0.390
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.470
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.490
  0.490
Adjusted equity ratio
  0.652
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  0
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -8
  -8
  -9
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -55
Depreciation, amort., depletion, $m
  5
  3
  3
  4
  4
  5
  5
  6
  7
  8
  9
  9
  10
  11
  13
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  42
Funds from operations, $m
  6
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  0
  0
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
Change in working capital, $m
  0
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
Cash from operations, $m
  6
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
  5
  5
  4
  4
  3
  3
  3
  2
  2
  1
  1
Maintenance CAPEX, $m
  0
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
New CAPEX, $m
  -6
  -3
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -6
  -4
  -5
  -7
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -62
  -65
Free cash flow, $m
  0
  0
  -1
  -1
  -2
  -3
  -4
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -60
  -64
Issuance/(repayment) of debt, $m
  3
  7
  8
  9
  11
  12
  13
  15
  16
  18
  19
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
Issuance/(repurchase) of shares, $m
  5
  13
  16
  19
  23
  26
  30
  34
  38
  42
  46
  49
  53
  58
  62
  66
  71
  75
  80
  85
  89
  94
  100
  105
  110
  116
  122
  129
  135
  142
  149
Cash from financing (excl. dividends), $m  
  7
  20
  24
  28
  34
  38
  43
  49
  54
  60
  65
  70
  75
  81
  87
  92
  98
  103
  109
  116
  121
  127
  135
  141
  147
  155
  162
  171
  179
  187
  196
Total cash flow (excl. dividends), $m
  8
  20
  23
  27
  31
  35
  39
  43
  47
  51
  55
  58
  62
  65
  69
  72
  76
  79
  83
  86
  90
  93
  97
  101
  105
  109
  113
  118
  122
  127
  133
Retained Cash Flow (-), $m
  -2
  -13
  -16
  -19
  -23
  -26
  -30
  -34
  -38
  -42
  -46
  -49
  -53
  -58
  -62
  -66
  -71
  -75
  -80
  -85
  -89
  -94
  -100
  -105
  -110
  -116
  -122
  -129
  -135
  -142
  -149
Prev. year cash balance distribution, $m
 
  11
  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
 
  17
  7
  8
  8
  9
  9
  9
  9
  9
  9
  9
  8
  8
  7
  6
  5
  4
  3
  2
  0
  -1
  -3
  -4
  -6
  -7
  -9
  -11
  -13
  -15
  -17
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
 
  17
  7
  7
  7
  7
  7
  6
  6
  5
  5
  4
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  92.7
  86.2
  80.6
  75.6
  71.2
  67.2
  63.7
  60.5
  57.7
  55.1
  52.8
  50.7
  48.7
  46.9
  45.3
  43.7
  42.3
  40.9
  39.7
  38.5
  37.3
  36.2
  35.2
  34.2
  33.3
  32.4
  31.6
  30.8
  30.0
  29.2

USA Technologies, Inc. provides wireless networking, cashless transactions, asset monitoring, and other value-added services principally to the small ticket and unattended point of sale (POS) markets in the United States and internationally. The company designs and markets systems and solutions that facilitate electronic payment options, as well as telemetry and machine-to-machine (M2M) services to remotely monitor, control, and report on the results of distributed assets containing its electronic payment solutions. Its ePort Connect solution offers POS options, card processing services, wireless connectivity, online sales reporting, M2M telemetry and DEX data transfer, over-the-air update capabilities, deployment planning, and value-added services, as well as premium services comprising planning, project management, installation support, marketing, and performance evaluation. The company's products include ePort, a device that is used in self-service, unattended markets comprising vending, amusement and arcade, and various other kiosk applications, as well as facilitates cashless payments by capturing payment information and transmitting it to its network for authorization with the payment system. USA Technologies, Inc. was founded in 1992 and is headquartered in Malvern, Pennsylvania.

FINANCIAL RATIOS  of  USA Technologies (USAT)

Valuation Ratios
P/E Ratio -28.6
Price to Sales 2.6
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 33.4
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 32.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 200%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 1.8%
Total Debt to Equity 16.4%
Interest Coverage -6
Management Effectiveness
Return On Assets -7.5%
Ret/ On Assets - 3 Yr. Avg. 14.3%
Return On Total Capital -11.4%
Ret/ On T. Cap. - 3 Yr. Avg. 17.6%
Return On Equity -13%
Return On Equity - 3 Yr. Avg. 19.3%
Asset Turnover 1
Profitability Ratios
Gross Margin 28.6%
Gross Margin - 3 Yr. Avg. 31.2%
EBITDA Margin -1.3%
EBITDA Margin - 3 Yr. Avg. 6.4%
Operating Margin -2.6%
Oper. Margin - 3 Yr. Avg. -0.9%
Pre-Tax Margin -9.1%
Pre-Tax Margin - 3 Yr. Avg. -3.6%
Net Profit Margin -9.1%
Net Profit Margin - 3 Yr. Avg. 18.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

USAT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USAT stock intrinsic value calculation we used $77 million for the last fiscal year's total revenue generated by USA Technologies. The default revenue input number comes from 2016 income statement of USA 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 USAT stock valuation model: a) initial revenue growth rate of 30% 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 USAT is calculated based on our internal credit rating of USA 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 USA 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 USAT stock the variable cost ratio is equal to 100%.

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 USAT 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 13.3% for USA Technologies.

Corporate tax rate of 27% is the nominal tax rate for USA 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 USAT 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 USAT are equal to 14.9%.

Life of production assets of 10 years is the average useful life of capital assets used in USA 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 USAT is equal to -7.8%. 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 - $55 million for USA 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 38.87 million for USA 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 USA Technologies at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ USA Technologies, Inc. Announces Pricing of Public Offering   [Jul-20-17 07:30AM  Business Wire]
▶ USA Technologies to Provide Cashless Services to JuiceBot   [Jun-26-17 08:15AM  Business Wire]
▶ USA Technologies meets 3Q profit forecasts   [07:08AM  Associated Press]
▶ USA Technologies tops 2Q profit forecasts   [04:16PM  Associated Press]
▶ Is USA Technologies, Inc. (USAT) a Good Stock to Buy?   [Dec-12-16 05:54PM  at Insider Monkey]
▶ [$$] Coliseum Capital Wants More for Its Accuride Shares   [Oct-15-16 12:01AM  at Barrons.com]
▶ Consumers Respond to Apple Pay Messaging with More Payments   [Jun-16-16 01:26PM  Business Wire]
Stock chart of USAT Financial statements of USAT
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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