Intrinsic value of USA Technologies - USAT

Previous Close

$9.20

  Intrinsic Value

$0.74

stock screener

  Rating & Target

str. sell

-92%

Previous close

$9.20

 
Intrinsic value

$0.74

 
Up/down potential

-92%

 
Rating

str. 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

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
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
  18.20
  16.88
  15.69
  14.62
  13.66
  12.79
  12.02
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
Revenue, $m
  104
  123
  144
  166
  191
  217
  244
  274
  305
  337
  371
  407
  444
  483
  523
  565
  609
  654
  701
  750
  801
  854
  909
  966
  1,026
  1,088
  1,153
  1,220
  1,290
  1,364
  1,440
Variable operating expenses, $m
 
  113
  132
  153
  175
  199
  224
  251
  279
  309
  340
  371
  405
  441
  477
  516
  555
  597
  640
  684
  731
  779
  829
  882
  936
  993
  1,052
  1,113
  1,177
  1,244
  1,314
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
  121
  140
  162
  184
  208
  233
  261
  289
  319
  350
  381
  416
  452
  488
  528
  567
  609
  652
  697
  744
  792
  843
  896
  950
  1,008
  1,067
  1,129
  1,193
  1,260
  1,331
Operating income, $m
  0
  1
  3
  5
  7
  9
  11
  13
  16
  18
  21
  25
  28
  31
  35
  38
  41
  45
  49
  53
  57
  61
  66
  70
  75
  80
  86
  91
  97
  103
  109
EBITDA, $m
  6
  5
  7
  10
  12
  15
  18
  21
  24
  27
  31
  34
  38
  42
  47
  51
  55
  60
  65
  70
  75
  81
  87
  93
  99
  105
  112
  119
  127
  134
  142
Interest expense (income), $m
  1
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
Earnings before tax, $m
  -2
  1
  3
  4
  5
  7
  9
  10
  12
  14
  16
  19
  22
  24
  26
  29
  32
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  83
Tax expense, $m
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  19
  20
  21
  22
Net income, $m
  -2
  1
  2
  3
  4
  5
  6
  8
  9
  10
  12
  14
  16
  17
  19
  21
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
  54
  57
  60

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
  100
  117
  136
  156
  177
  200
  224
  249
  275
  303
  332
  363
  394
  427
  462
  497
  534
  573
  613
  654
  698
  743
  789
  838
  889
  942
  997
  1,054
  1,114
  1,177
Adjusted assets (=assets-cash), $m
  85
  100
  117
  136
  156
  177
  200
  224
  249
  275
  303
  332
  363
  394
  427
  462
  497
  534
  573
  613
  654
  698
  743
  789
  838
  889
  942
  997
  1,054
  1,114
  1,177
Revenue / Adjusted assets
  1.224
  1.230
  1.231
  1.221
  1.224
  1.226
  1.220
  1.223
  1.225
  1.225
  1.224
  1.226
  1.223
  1.226
  1.225
  1.223
  1.225
  1.225
  1.223
  1.223
  1.225
  1.223
  1.223
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.223
Average production assets, $m
  12
  14
  17
  19
  22
  25
  28
  31
  35
  39
  43
  47
  51
  56
  60
  65
  70
  75
  81
  86
  92
  98
  105
  111
  118
  125
  133
  140
  148
  157
  166
Working capital, $m
  6
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
  32
  33
  35
  37
  40
  42
Total debt, $m
  11
  5
  9
  14
  19
  25
  31
  37
  43
  50
  58
  65
  73
  81
  90
  99
  108
  117
  127
  138
  148
  160
  171
  183
  196
  209
  223
  237
  252
  268
  284
Total liabilities, $m
  32
  26
  30
  35
  40
  46
  52
  58
  64
  71
  79
  86
  94
  102
  111
  120
  129
  138
  148
  159
  169
  181
  192
  204
  217
  230
  244
  258
  273
  289
  305
Total equity, $m
  66
  74
  87
  101
  115
  131
  148
  166
  184
  204
  225
  246
  269
  292
  317
  342
  369
  396
  424
  454
  485
  517
  550
  585
  621
  659
  698
  739
  781
  826
  872
Total liabilities and equity, $m
  98
  100
  117
  136
  155
  177
  200
  224
  248
  275
  304
  332
  363
  394
  428
  462
  498
  534
  572
  613
  654
  698
  742
  789
  838
  889
  942
  997
  1,054
  1,115
  1,177
Debt-to-equity ratio
  0.167
  0.070
  0.110
  0.140
  0.170
  0.190
  0.210
  0.220
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.330
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
  1
  2
  3
  4
  5
  6
  8
  9
  10
  12
  14
  16
  17
  19
  21
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
  54
  57
  60
Depreciation, amort., depletion, $m
  6
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
Funds from operations, $m
  -21
  5
  6
  8
  9
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  43
  47
  50
  54
  57
  61
  65
  69
  74
  78
  83
  88
  93
Change in working capital, $m
  -14
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  -7
  4
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  63
  68
  72
  76
  81
  86
  91
Maintenance CAPEX, $m
  0
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
New CAPEX, $m
  -4
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
Cash from investing activities, $m
  -4
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -28
  -29
  -31
  -32
  -35
  -36
  -38
  -40
Free cash flow, $m
  -11
  0
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  20
  21
  23
  25
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
Issuance/(repayment) of debt, $m
  -2
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
Issuance/(repurchase) of shares, $m
  6
  10
  11
  11
  11
  11
  11
  10
  10
  9
  9
  7
  7
  6
  5
  4
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4
  14
  15
  16
  16
  17
  17
  16
  17
  16
  16
  15
  15
  14
  14
  13
  12
  12
  11
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
Total cash flow (excl. dividends), $m
  -7
  14
  16
  17
  18
  19
  20
  22
  23
  24
  25
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
Retained Cash Flow (-), $m
  -11
  -11
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
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
 
  6
  3
  3
  3
  3
  4
  4
  4
  4
  4
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  7
  8
  9
  11
  12
  14
  16
  17
  19
  21
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
 
  6
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.9
  96.0
  94.5
  93.2
  92.0
  91.0
  90.2
  89.5
  88.9
  88.4
  88.0
  87.7
  87.4
  87.2
  87.1
  87.0
  86.9
  86.9
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8

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 -185.5
Price to Sales 3.6
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow -53
Price to Free Cash Flow -33.7
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 18.2% 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 54.17 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 $0.5 billion.

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COMPANY NEWS

▶ These 4 stocks are powering higher   [Dec-14-17 01:44PM  MarketWatch]
▶ USA Technologies reports 1Q loss   [Nov-08-17 07:25AM  Associated Press]
▶ USA Technologies To Acquire Cantaloupe Systems   [Nov-07-17 06:00AM  Business Wire]
▶ 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]
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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