Intrinsic value of Versar - VSR

Previous Close

$1.29

  Intrinsic Value

$0.93

stock screener

  Rating & Target

sell

-28%

  Value-price divergence*

-37%

Previous close

$1.29

 
Intrinsic value

$0.93

 
Up/down potential

-28%

 
Rating

sell

 
Value-price divergence*

-37%

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

We calculate the intrinsic value of VSR 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 0.0

 

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, %
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
Revenue, $m
  168
  176
  185
  194
  204
  214
  225
  236
  248
  261
  274
  287
  302
  317
  333
  349
  367
  385
  404
  425
  446
  468
  491
  516
  542
  569
  597
  627
  659
  692
  726
Variable operating expenses, $m
 
  173
  182
  191
  201
  211
  221
  232
  244
  256
  269
  282
  296
  311
  327
  343
  360
  378
  397
  417
  438
  460
  483
  507
  532
  559
  587
  616
  647
  679
  713
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
  204
  173
  182
  191
  201
  211
  221
  232
  244
  256
  269
  282
  296
  311
  327
  343
  360
  378
  397
  417
  438
  460
  483
  507
  532
  559
  587
  616
  647
  679
  713
Operating income, $m
  -36
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
EBITDA, $m
  -30
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
Interest expense (income), $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
Earnings before tax, $m
  -37
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
Tax expense, $m
  1
  1
  1
  1
  1
  1
  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
Net income, $m
  -38
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  99
  104
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  178
  187
  197
  207
  217
  228
  239
  251
  264
Adjusted assets (=assets-cash), $m
  59
  64
  67
  71
  74
  78
  82
  86
  90
  95
  99
  104
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  178
  187
  197
  207
  217
  228
  239
  251
  264
Revenue / Adjusted assets
  2.847
  2.750
  2.761
  2.732
  2.757
  2.744
  2.744
  2.744
  2.756
  2.747
  2.768
  2.760
  2.745
  2.757
  2.752
  2.748
  2.759
  2.750
  2.748
  2.760
  2.753
  2.753
  2.758
  2.759
  2.751
  2.749
  2.751
  2.750
  2.757
  2.757
  2.750
Average production assets, $m
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Working capital, $m
  -2
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
Total debt, $m
  21
  19
  22
  25
  28
  31
  35
  38
  42
  46
  50
  55
  60
  65
  70
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
  147
  156
  166
  176
  187
  198
Total liabilities, $m
  60
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  99
  104
  109
  114
  120
  126
  132
  139
  146
  153
  161
  169
  177
  186
  195
  205
  215
  226
  237
Total equity, $m
  1
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Total liabilities and equity, $m
  61
  64
  68
  71
  74
  78
  82
  86
  90
  94
  99
  104
  110
  116
  121
  127
  133
  140
  147
  154
  162
  170
  179
  188
  197
  207
  217
  228
  239
  251
  263
Debt-to-equity ratio
  21.000
  2.910
  3.200
  3.480
  3.740
  3.990
  4.230
  4.460
  4.670
  4.880
  5.080
  5.260
  5.440
  5.610
  5.770
  5.920
  6.070
  6.210
  6.340
  6.470
  6.590
  6.710
  6.810
  6.920
  7.020
  7.110
  7.200
  7.290
  7.370
  7.450
  7.520
Adjusted equity ratio
  0.017
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -38
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
Depreciation, amort., depletion, $m
  6
  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
  3
  3
  3
  3
  3
Funds from operations, $m
  1
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
Change in working capital, $m
  3
  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
  3
  3
  3
  3
  3
Cash from operations, $m
  -2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
Maintenance CAPEX, $m
  0
  -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
  -3
  -3
  -3
  -3
New CAPEX, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -12
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Free cash flow, $m
  -14
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
Issuance/(repayment) of debt, $m
  13
  -2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Issuance/(repurchase) of shares, $m
  0
  4
  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  
  13
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Total cash flow (excl. dividends), $m
  -1
  2
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Retained Cash Flow (-), $m
  38
  -5
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Prev. year cash balance distribution, $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 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
 
  -3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
Discount rate, %
 
  14.20
  14.91
  15.66
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
  25.50
  26.78
  28.12
  29.52
  31.00
  32.55
  34.17
  35.88
  37.68
  39.56
  41.54
  43.62
  45.80
  48.09
  50.49
  53.02
  55.67
  58.45
PV of cash for distribution, $m
 
  -3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
  73.4
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Versar, Inc. operates as a project management company in the United States and internationally. The company operates through three segments: Engineering and Construction Management (ECM); Environmental Services (ESG); and Professional Services (PSG). The ECM segment provides design services, such as planning, land use planning, space utilization studies, requirements definition and scoping, programming, cost estimates, infrastructure and traffic planning, privatization studies, and other feasibility studies; and construction management services, including construction oversight, inspection, job site evaluations, and construction documentation and other services. It also offers other related services comprising system optimization and commissioning, scheduling, and quality assurance/control; and actual construction services. This segment serves federal, state, local, international, and commercial clients. The ESG segment provides environmental solutions consisting of remediation and compliance, exposure and risk assessment, natural resources, and unexploded ordnance/military munitions response programs; and air, greenhouse gas, energy, and cultural resources services to federal and state agencies, as well as to commercial customers. The PSG segment offers an array of environmental management, planning, and engineering services to the DoD installations and to the U.S. Department of Commerce. This segment provides energy, water, and solid waste programs for various U.S. Army and U.S. Army Reserve installations; cleaning landfill and disposal sites; facility and utilities integration, water program management, and air quality program management; staff augmentation services; biological and physical sciences support services; logistics program management, operations, budgeting, and transportation support services; and onsite professional services. Versar, Inc. was founded in 1969 and is headquartered in Springfield, Virginia.

FINANCIAL RATIOS  of  Versar (VSR)

Valuation Ratios
P/E Ratio -0.3
Price to Sales 0.1
Price to Book 12.9
Price to Tangible Book
Price to Cash Flow -6.4
Price to Free Cash Flow -4.3
Growth Rates
Sales Growth Rate 5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 200%
Total Debt to Equity 2100%
Interest Coverage 0
Management Effectiveness
Return On Assets -50.7%
Ret/ On Assets - 3 Yr. Avg. -16.4%
Return On Total Capital -110.1%
Ret/ On T. Cap. - 3 Yr. Avg. -35.9%
Return On Equity -190%
Return On Equity - 3 Yr. Avg. -62.5%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 1.8%
Gross Margin - 3 Yr. Avg. 6.2%
EBITDA Margin -18.5%
EBITDA Margin - 3 Yr. Avg. -5.1%
Operating Margin -21.4%
Oper. Margin - 3 Yr. Avg. -7.1%
Pre-Tax Margin -22%
Pre-Tax Margin - 3 Yr. Avg. -7.5%
Net Profit Margin -22.6%
Net Profit Margin - 3 Yr. Avg. -7.3%
Effective Tax Rate -2.7%
Eff/ Tax Rate - 3 Yr. Avg. 32.4%
Payout Ratio 0%

VSR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VSR stock intrinsic value calculation we used $168 million for the last fiscal year's total revenue generated by Versar. The default revenue input number comes from 2016 income statement of Versar. 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 VSR stock valuation model: a) initial revenue growth rate of 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 14.2%, whose default value for VSR is calculated based on our internal credit rating of Versar, 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 Versar.
    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 VSR stock the variable cost ratio is equal to 98.2%.

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 VSR 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 Versar.

Corporate tax rate of 27% is the nominal tax rate for Versar. 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 VSR 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 VSR are equal to 4.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Versar 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 VSR is equal to 8.9%. 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 - $1 million for Versar - 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 9.702 million for Versar 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 Versar at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Versar CEO gets bump to pay package in challenging year   [May-25-17 02:50PM  American City Business Journals]
▶ Versar thwarts one threat of stock exchange delisting but faces another   [May-15-17 12:35PM  American City Business Journals]
▶ Versar, Inc. Announces FY2016 Earnings Conference Call   [Mar-07-17 08:00AM  Accesswire]
▶ Versar, Inc. Announces New Forbearance Agreement   [Nov-01-16 08:00AM  Accesswire]
▶ Versar shares face potential delisting from stock exchange   [Oct-20-16 01:47PM  at bizjournals.com]
▶ [$$] Government Contractor Versar Works to Refinance Debt   [Oct-11-16 04:32PM  at The Wall Street Journal]
▶ Versar, Inc. Awarded Up To $20m IDIQ Contract with EPA   [Sep-06-16 08:30AM  Accesswire]
▶ Versar, Inc. Announces Third Quarter Fiscal 2016 Results   [May-16-16 08:15AM  PR Newswire]
▶ *** DATA NOT AVAILABLE ***   [Jan-29-16 10:21AM  at noodls]
Stock chart of VSR Financial statements of VSR Annual reports of VSR
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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