Intrinsic value of USA Technologies - USAT

Previous Close

$6.25

  Intrinsic Value

$4.65

stock screener

  Rating & Target

sell

-26%

Previous close

$6.25

 
Intrinsic value

$4.65

 
Up/down potential

-26%

 
Rating

sell

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 2017), $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 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  35.06
  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
  7.33
Revenue, $m
  104
  161
  240
  349
  492
  676
  908
  1,192
  1,534
  1,937
  2,406
  2,941
  3,545
  4,218
  4,959
  5,769
  6,645
  7,587
  8,593
  9,661
  10,790
  11,979
  13,226
  14,532
  15,897
  17,319
  18,801
  20,342
  21,945
  23,610
  25,341
Variable operating expenses, $m
 
  148
  220
  319
  450
  618
  829
  1,089
  1,400
  1,769
  2,196
  2,683
  3,234
  3,848
  4,525
  5,264
  6,063
  6,923
  7,840
  8,815
  9,845
  10,930
  12,068
  13,260
  14,504
  15,802
  17,154
  18,560
  20,023
  21,543
  23,122
Fixed operating expenses, $m
 
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  16
  17
Total operating expenses, $m
  104
  156
  228
  328
  459
  627
  838
  1,099
  1,410
  1,779
  2,206
  2,693
  3,245
  3,859
  4,536
  5,276
  6,075
  6,935
  7,852
  8,828
  9,858
  10,943
  12,082
  13,274
  14,518
  15,817
  17,169
  18,576
  20,039
  21,559
  23,139
Operating income, $m
  0
  5
  12
  21
  33
  49
  69
  94
  123
  159
  199
  247
  300
  358
  423
  494
  570
  652
  740
  833
  932
  1,036
  1,145
  1,259
  1,378
  1,502
  1,631
  1,766
  1,906
  2,051
  2,203
EBITDA, $m
  6
  10
  18
  30
  46
  66
  91
  122
  160
  204
  256
  315
  381
  455
  537
  626
  723
  827
  938
  1,055
  1,180
  1,311
  1,449
  1,593
  1,743
  1,900
  2,064
  2,234
  2,411
  2,594
  2,785
Interest expense (income), $m
  1
  0
  1
  3
  5
  8
  12
  17
  23
  30
  39
  49
  60
  73
  87
  103
  120
  139
  158
  180
  202
  226
  251
  278
  305
  334
  364
  396
  428
  462
  497
Earnings before tax, $m
  -2
  5
  10
  18
  28
  41
  57
  77
  100
  128
  160
  198
  240
  285
  336
  391
  450
  514
  582
  654
  730
  809
  893
  981
  1,072
  1,168
  1,267
  1,370
  1,478
  1,589
  1,705
Tax expense, $m
  0
  1
  3
  5
  8
  11
  15
  21
  27
  35
  43
  54
  65
  77
  91
  106
  122
  139
  157
  176
  197
  219
  241
  265
  290
  315
  342
  370
  399
  429
  460
Net income, $m
  -2
  3
  7
  13
  20
  30
  42
  56
  73
  94
  117
  145
  175
  208
  245
  285
  329
  375
  425
  477
  533
  591
  652
  716
  783
  852
  925
  1,000
  1,079
  1,160
  1,245

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  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
  98
  131
  196
  285
  402
  552
  742
  974
  1,253
  1,583
  1,965
  2,403
  2,896
  3,446
  4,052
  4,713
  5,429
  6,199
  7,020
  7,893
  8,815
  9,787
  10,806
  11,873
  12,987
  14,150
  15,360
  16,619
  17,929
  19,289
  20,704
Adjusted assets (=assets-cash), $m
  85
  131
  196
  285
  402
  552
  742
  974
  1,253
  1,583
  1,965
  2,403
  2,896
  3,446
  4,052
  4,713
  5,429
  6,199
  7,020
  7,893
  8,815
  9,787
  10,806
  11,873
  12,987
  14,150
  15,360
  16,619
  17,929
  19,289
  20,704
Revenue / Adjusted assets
  1.224
  1.229
  1.224
  1.225
  1.224
  1.225
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
Average production assets, $m
  12
  18
  28
  40
  57
  78
  104
  137
  176
  223
  277
  338
  408
  485
  570
  663
  764
  873
  988
  1,111
  1,241
  1,378
  1,521
  1,671
  1,828
  1,992
  2,162
  2,339
  2,524
  2,715
  2,914
Working capital, $m
  6
  5
  7
  10
  14
  20
  26
  35
  44
  56
  70
  85
  103
  122
  144
  167
  193
  220
  249
  280
  313
  347
  384
  421
  461
  502
  545
  590
  636
  685
  735
Total debt, $m
  11
  13
  30
  53
  83
  122
  171
  231
  304
  389
  488
  601
  729
  871
  1,028
  1,200
  1,385
  1,584
  1,797
  2,023
  2,262
  2,514
  2,778
  3,054
  3,343
  3,644
  3,957
  4,283
  4,622
  4,975
  5,341
Total liabilities, $m
  32
  34
  51
  74
  104
  143
  192
  252
  325
  410
  509
  622
  750
  892
  1,049
  1,221
  1,406
  1,605
  1,818
  2,044
  2,283
  2,535
  2,799
  3,075
  3,364
  3,665
  3,978
  4,304
  4,643
  4,996
  5,362
Total equity, $m
  66
  97
  145
  211
  298
  409
  550
  722
  928
  1,173
  1,456
  1,780
  2,146
  2,553
  3,002
  3,492
  4,023
  4,593
  5,202
  5,849
  6,532
  7,252
  8,007
  8,798
  9,624
  10,485
  11,382
  12,315
  13,285
  14,293
  15,341
Total liabilities and equity, $m
  98
  131
  196
  285
  402
  552
  742
  974
  1,253
  1,583
  1,965
  2,402
  2,896
  3,445
  4,051
  4,713
  5,429
  6,198
  7,020
  7,893
  8,815
  9,787
  10,806
  11,873
  12,988
  14,150
  15,360
  16,619
  17,928
  19,289
  20,703
Debt-to-equity ratio
  0.167
  0.130
  0.210
  0.250
  0.280
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
Adjusted equity ratio
  0.706
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741
  0.741

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  3
  7
  13
  20
  30
  42
  56
  73
  94
  117
  145
  175
  208
  245
  285
  329
  375
  425
  477
  533
  591
  652
  716
  783
  852
  925
  1,000
  1,079
  1,160
  1,245
Depreciation, amort., depletion, $m
  6
  5
  7
  9
  12
  17
  22
  29
  36
  46
  56
  68
  82
  97
  114
  133
  153
  175
  198
  222
  248
  276
  304
  334
  366
  398
  432
  468
  505
  543
  583
Funds from operations, $m
  -21
  8
  14
  22
  33
  46
  64
  84
  110
  139
  174
  212
  256
  305
  359
  418
  481
  550
  622
  699
  781
  866
  956
  1,050
  1,148
  1,251
  1,357
  1,468
  1,583
  1,703
  1,828
Change in working capital, $m
  -14
  2
  2
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  20
  22
  23
  25
  27
  29
  31
  33
  34
  36
  38
  40
  41
  43
  45
  46
  48
  50
Cash from operations, $m
  -7
  7
  12
  19
  29
  41
  57
  76
  100
  128
  160
  197
  239
  286
  338
  394
  456
  522
  593
  668
  748
  832
  920
  1,012
  1,109
  1,209
  1,314
  1,423
  1,537
  1,655
  1,777
Maintenance CAPEX, $m
  0
  -2
  -4
  -6
  -8
  -11
  -16
  -21
  -27
  -35
  -45
  -55
  -68
  -82
  -97
  -114
  -133
  -153
  -175
  -198
  -222
  -248
  -276
  -304
  -334
  -366
  -398
  -432
  -468
  -505
  -543
New CAPEX, $m
  -4
  -6
  -9
  -12
  -16
  -21
  -27
  -33
  -39
  -46
  -54
  -62
  -69
  -77
  -85
  -93
  -101
  -108
  -116
  -123
  -130
  -137
  -143
  -150
  -157
  -164
  -170
  -177
  -184
  -192
  -199
Cash from investing activities, $m
  -4
  -8
  -13
  -18
  -24
  -32
  -43
  -54
  -66
  -81
  -99
  -117
  -137
  -159
  -182
  -207
  -234
  -261
  -291
  -321
  -352
  -385
  -419
  -454
  -491
  -530
  -568
  -609
  -652
  -697
  -742
Free cash flow, $m
  -11
  -2
  -1
  1
  4
  9
  15
  23
  33
  46
  62
  80
  102
  127
  155
  187
  223
  261
  303
  348
  396
  447
  501
  558
  618
  680
  746
  814
  885
  958
  1,035
Issuance/(repayment) of debt, $m
  -2
  12
  17
  23
  30
  39
  49
  60
  72
  85
  99
  113
  128
  142
  157
  171
  185
  199
  213
  226
  239
  252
  264
  276
  289
  301
  313
  326
  339
  352
  366
Issuance/(repurchase) of shares, $m
  6
  31
  41
  53
  66
  82
  99
  116
  134
  151
  166
  179
  191
  199
  204
  205
  202
  195
  184
  169
  151
  129
  103
  75
  43
  9
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4
  43
  58
  76
  96
  121
  148
  176
  206
  236
  265
  292
  319
  341
  361
  376
  387
  394
  397
  395
  390
  381
  367
  351
  332
  310
  313
  326
  339
  352
  366
Total cash flow (excl. dividends), $m
  -7
  41
  57
  77
  101
  129
  162
  199
  239
  282
  327
  373
  420
  468
  516
  563
  610
  655
  700
  743
  786
  827
  868
  909
  949
  990
  1,059
  1,140
  1,224
  1,311
  1,402
Retained Cash Flow (-), $m
  -11
  -34
  -48
  -66
  -87
  -112
  -140
  -172
  -207
  -244
  -284
  -324
  -366
  -407
  -449
  -490
  -531
  -570
  -609
  -647
  -684
  -720
  -755
  -791
  -826
  -861
  -897
  -933
  -970
  -1,008
  -1,048
Prev. year cash balance distribution, $m
 
  3
  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
 
  9
  8
  11
  14
  18
  22
  27
  32
  38
  44
  49
  55
  61
  67
  73
  79
  85
  91
  97
  102
  108
  113
  118
  124
  129
  162
  207
  254
  303
  354
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
 
  9
  8
  10
  12
  14
  16
  18
  20
  22
  23
  23
  23
  23
  23
  22
  20
  19
  17
  15
  13
  11
  9
  8
  6
  5
  5
  4
  4
  3
  3
Current shareholders' claim on cash, %
  100
  90.6
  83.3
  77.4
  72.5
  68.6
  65.3
  62.5
  60.1
  58.1
  56.4
  55.0
  53.8
  52.8
  51.9
  51.1
  50.5
  50.0
  49.6
  49.3
  49.0
  48.8
  48.6
  48.5
  48.5
  48.5
  48.5
  48.5
  48.5
  48.5
  48.5

USA Technologies, Inc. provides technology-enabled solutions and value-added services that facilitate electronic payment transactions within the unattended point of sale (POS) market. The Company is a provider in the small ticket, beverage and food vending industry and is also engaged in offering solutions and services to other unattended market segments, such as amusement, commercial laundry, kiosk and others. It has designed and marketed systems and solutions that facilitate electronic payment options, as well as telemetry and machine-to-machine (M2M) services, which include the ability to remotely monitor, control and report on the results of distributed assets containing its electronic payment solutions. The Company derives its revenues from license and transaction fees resulting from connections to, as well as services provided by, its ePort Connect service.

FINANCIAL RATIOS  of  USA Technologies (USAT)

Valuation Ratios
P/E Ratio -126
Price to Sales 2.4
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow -36
Price to Free Cash Flow -22.9
Growth Rates
Sales Growth Rate 35.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -18.3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 1.5%
Total Debt to Equity 16.7%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.1%
Ret/ On Assets - 3 Yr. Avg. -3.3%
Return On Total Capital -2.8%
Ret/ On T. Cap. - 3 Yr. Avg. -5.3%
Return On Equity -3.3%
Return On Equity - 3 Yr. Avg. -6%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 26%
Gross Margin - 3 Yr. Avg. 27.9%
EBITDA Margin 4.8%
EBITDA Margin - 3 Yr. Avg. 4%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. -0.9%
Pre-Tax Margin -1.9%
Pre-Tax Margin - 3 Yr. Avg. -4.2%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. -4.2%
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 $104 million for the last fiscal year's total revenue generated by USA Technologies. The default revenue input number comes from 2017 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 54.5% 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 92.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $8 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 10% 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 11.5%.

Life of production assets of 3.9 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 2.9%. 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 - $66 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 50.018 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 $0.3 billion.

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COMPANY NEWS

▶ USA Technologies Maeve Duska to Speak at Money 20/20   [Oct-20-17 08:15AM  Business Wire]
▶ There's a Big World out There for Mobile Payments   [Oct-08-17 07:20AM  TheStreet.com]
▶ There's a Big World out There for Mobile Payments   [Oct-06-17 12:00PM  TheStreet.com]
▶ USA Technologies beats 4Q profit forecasts   [Aug-22-17 11:33PM  Associated Press]
▶ 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]
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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