Intrinsic value of Vasco Data Security International - VDSI

Previous Close

$14.60

  Intrinsic Value

$8.47

stock screener

  Rating & Target

sell

-42%

  Value-price divergence*

-61%

Previous close

$14.60

 
Intrinsic value

$8.47

 
Up/down potential

-42%

 
Rating

sell

 
Value-price divergence*

-61%

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

We calculate the intrinsic value of VDSI 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 0.6

 

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, %
  -20.33
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  192
  196
  200
  205
  211
  218
  225
  232
  241
  250
  259
  269
  280
  292
  304
  317
  331
  346
  362
  378
  396
  414
  433
  454
  475
  498
  521
  547
  573
  601
  630
Variable operating expenses, $m
 
  31
  32
  33
  33
  34
  35
  36
  37
  39
  40
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
Fixed operating expenses, $m
 
  160
  164
  168
  172
  176
  181
  185
  190
  195
  200
  205
  210
  215
  220
  226
  232
  237
  243
  249
  256
  262
  269
  275
  282
  289
  296
  304
  311
  319
  327
Total operating expenses, $m
  183
  191
  196
  201
  205
  210
  216
  221
  227
  234
  240
  241
  247
  254
  260
  268
  276
  283
  291
  299
  309
  317
  327
  335
  345
  355
  365
  377
  387
  399
  411
Operating income, $m
  10
  5
  4
  5
  6
  7
  9
  11
  13
  16
  20
  29
  33
  38
  43
  49
  56
  63
  70
  79
  87
  97
  107
  118
  130
  142
  156
  170
  185
  202
  219
EBITDA, $m
  21
  14
  14
  15
  16
  17
  19
  21
  24
  27
  31
  35
  40
  45
  51
  57
  63
  71
  79
  87
  97
  106
  117
  129
  141
  154
  168
  183
  199
  216
  234
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  11
  5
  4
  5
  5
  7
  8
  10
  13
  16
  19
  28
  32
  37
  42
  48
  54
  61
  68
  76
  85
  94
  104
  115
  126
  139
  152
  166
  181
  197
  214
Tax expense, $m
  0
  1
  1
  1
  1
  2
  2
  3
  3
  4
  5
  8
  9
  10
  11
  13
  15
  16
  18
  21
  23
  25
  28
  31
  34
  37
  41
  45
  49
  53
  58
Net income, $m
  11
  3
  3
  3
  4
  5
  6
  7
  9
  11
  14
  20
  24
  27
  31
  35
  40
  45
  50
  56
  62
  69
  76
  84
  92
  101
  111
  121
  132
  144
  156

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  144
  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
  327
  187
  191
  196
  201
  208
  214
  222
  229
  238
  247
  257
  267
  278
  290
  303
  316
  330
  345
  360
  377
  395
  413
  432
  453
  474
  497
  521
  546
  573
  600
Adjusted assets (=assets-cash), $m
  183
  187
  191
  196
  201
  208
  214
  222
  229
  238
  247
  257
  267
  278
  290
  303
  316
  330
  345
  360
  377
  395
  413
  432
  453
  474
  497
  521
  546
  573
  600
Revenue / Adjusted assets
  1.049
  1.048
  1.047
  1.046
  1.050
  1.048
  1.051
  1.045
  1.052
  1.050
  1.049
  1.047
  1.049
  1.050
  1.048
  1.046
  1.047
  1.048
  1.049
  1.050
  1.050
  1.048
  1.048
  1.051
  1.049
  1.051
  1.048
  1.050
  1.049
  1.049
  1.050
Average production assets, $m
  46
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Working capital, $m
  139
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
Total debt, $m
  0
  2
  3
  5
  7
  9
  12
  15
  18
  21
  25
  28
  32
  37
  41
  46
  51
  56
  62
  68
  74
  81
  88
  96
  103
  112
  120
  130
  139
  149
  160
Total liabilities, $m
  71
  72
  73
  75
  77
  79
  82
  85
  88
  91
  95
  98
  102
  107
  111
  116
  121
  126
  132
  138
  144
  151
  158
  166
  173
  182
  190
  200
  209
  219
  230
Total equity, $m
  257
  115
  118
  121
  124
  128
  132
  137
  142
  147
  152
  158
  165
  172
  179
  187
  195
  204
  213
  222
  233
  243
  255
  267
  279
  293
  307
  321
  337
  353
  370
Total liabilities and equity, $m
  328
  187
  191
  196
  201
  207
  214
  222
  230
  238
  247
  256
  267
  279
  290
  303
  316
  330
  345
  360
  377
  394
  413
  433
  452
  475
  497
  521
  546
  572
  600
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.040
  0.060
  0.070
  0.090
  0.110
  0.130
  0.140
  0.160
  0.180
  0.200
  0.210
  0.230
  0.250
  0.260
  0.280
  0.290
  0.310
  0.320
  0.330
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
Adjusted equity ratio
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  3
  3
  3
  4
  5
  6
  7
  9
  11
  14
  20
  24
  27
  31
  35
  40
  45
  50
  56
  62
  69
  76
  84
  92
  101
  111
  121
  132
  144
  156
Depreciation, amort., depletion, $m
  11
  10
  10
  10
  10
  10
  11
  11
  11
  11
  11
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
Funds from operations, $m
  37
  13
  13
  14
  14
  15
  17
  18
  20
  23
  25
  27
  30
  34
  38
  42
  47
  53
  58
  65
  71
  78
  86
  94
  103
  113
  123
  134
  145
  158
  171
Change in working capital, $m
  9
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  28
  13
  13
  14
  14
  15
  17
  18
  20
  23
  25
  27
  30
  34
  38
  43
  48
  53
  59
  65
  72
  79
  87
  95
  104
  113
  124
  134
  146
  158
  171
Maintenance CAPEX, $m
  0
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
New CAPEX, $m
  -2
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from investing activities, $m
  -57
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
Free cash flow, $m
  -29
  8
  8
  8
  8
  9
  10
  11
  13
  15
  17
  19
  21
  25
  28
  32
  37
  42
  47
  53
  59
  65
  72
  80
  88
  97
  106
  116
  127
  138
  150
Issuance/(repayment) of debt, $m
  0
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
Total cash flow (excl. dividends), $m
  -29
  9
  9
  10
  10
  11
  13
  14
  16
  18
  21
  22
  25
  29
  33
  37
  42
  47
  53
  59
  65
  72
  79
  87
  96
  105
  115
  125
  137
  148
  161
Retained Cash Flow (-), $m
  -9
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
Prev. year cash balance distribution, $m
 
  144
  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
 
  151
  7
  7
  7
  8
  8
  10
  11
  13
  15
  16
  19
  22
  26
  30
  34
  38
  43
  49
  55
  61
  68
  75
  83
  92
  101
  111
  121
  132
  144
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
 
  145
  6
  6
  6
  6
  6
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  8
  8
  8
  7
  6
  6
  5
  4
  4
  3
  2
  2
  1
  1
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
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VASCO Data Security International, Inc., together with its subsidiaries, designs, develops, markets, and supports hardware and software security systems that manage and secure access to information assets worldwide. The company offers VACMAN Controller, a host system software authentication platform that combines technologies in one platform; IDENTIKEY Authentication Server that adds server functionality to the VACMAN core authentication platform; DIGIPASS as a Service, a cloud-based authentication service primarily for enterprise customers; and MYDIGIPASS solutions for end user authentication in the cloud. It also provides IDENTIKEY Appliance, an authentication solution that offers two-factor authentication for remote access to a corporate network or to Web-based in-house business applications; IDENTIKEY Virtual Appliance, a virtualized authentication appliance that secures remote access to corporate networks and Web-based applications; IDENTIKEY Federation Server, a server appliance that provides an identity and access management platform; and DPaaS and MDP cloud services for B2B and B2E applications. In addition, the company offers DIGIPASS Hardware authenticators to support authentication and digital signatures for applications running on desktop PCs, laptops, tablets, and smart phones; DIGIPASS Software authenticators, which provides customers with security for access to their networks and applications without having to carry a standalone hardware device; and DIGIPASS for Apps, a software development kit; IDENTIKEY risk manager, an anti-fraud solution; and eSignLive is an electronic signature products.The company sells its security solutions through its direct sales force, distributors, resellers, and systems integrators. VASCO Data Security International, Inc. was founded in 1991 and is headquartered in Oakbrook Terrace, Illinois.

FINANCIAL RATIOS  of  Vasco Data Security International (VDSI)

Valuation Ratios
P/E Ratio 53.2
Price to Sales 3
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 20.9
Price to Free Cash Flow 22.5
Growth Rates
Sales Growth Rate -20.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 13.4%
Return On Equity 4.4%
Return On Equity - 3 Yr. Avg. 13.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 68.2%
Gross Margin - 3 Yr. Avg. 63.5%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 19%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 14.9%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. 15.2%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 13.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 10.3%
Payout Ratio 0%

VDSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VDSI stock intrinsic value calculation we used $192 million for the last fiscal year's total revenue generated by Vasco Data Security International. The default revenue input number comes from 2016 income statement of Vasco Data Security International. 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 VDSI stock valuation model: a) initial revenue growth rate of 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 VDSI is calculated based on our internal credit rating of Vasco Data Security International, 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 Vasco Data Security International.
    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 VDSI stock the variable cost ratio is equal to 16.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $156 million in the base year in the intrinsic value calculation for VDSI 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 Vasco Data Security International.

Corporate tax rate of 27% is the nominal tax rate for Vasco Data Security International. 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 VDSI 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 VDSI are equal to 24%.

Life of production assets of 10.3 years is the average useful life of capital assets used in Vasco Data Security International 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 VDSI is equal to -2.6%. 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 - $257 million for Vasco Data Security International - 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 38.005 million for Vasco Data Security International 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 Vasco Data Security International at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Vasco posts 1Q profit   [Apr-27-17 06:08PM  Associated Press]
▶ VASCO Reports Results for First Quarter 2017   [04:05PM  GlobeNewswire]
▶ Pass On Wal-Mart After Earnings   [Feb-21-17 10:02AM  at Investopedia]
▶ Why VASCO Data Security International Shares Plunged Today   [Feb-15-17 01:35PM  at Motley Fool]
▶ Vasco posts 4Q profit   [Feb-14-17 05:07PM  AP]
▶ VASCO Announces Participation in Upcoming Conferences   [Jan-04-17 08:00AM  GlobeNewswire]
▶ Vasco posts 3Q profit   [Oct-27-16 07:29PM  AP]
▶ What is Going On With These Five Falling Stocks?   [Oct-19-16 01:38PM  at Insider Monkey]
Stock chart of VDSI Financial statements of VDSI Annual reports of VDSI
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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