Intrinsic value of Altisource Portfolio Solutions - ASPS

Previous Close

$22.97

  Intrinsic Value

$29.35

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  Rating & Target

buy

+28%

Previous close

$22.97

 
Intrinsic value

$29.35

 
Up/down potential

+28%

 
Rating

buy

Our model is not good at valuating stocks of financial companies, such as ASPS.

We calculate the intrinsic value of ASPS 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 0001), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  961
  983
  1,008
  1,037
  1,068
  1,103
  1,140
  1,181
  1,225
  1,272
  1,322
  1,376
  1,433
  1,493
  1,558
  1,626
  1,698
  1,775
  1,856
  1,941
  2,031
  2,126
  2,226
  2,331
  2,442
  2,559
  2,682
  2,811
  2,948
  3,091
Variable operating expenses, $m
  690
  705
  723
  742
  764
  788
  814
  843
  873
  906
  920
  958
  997
  1,040
  1,084
  1,132
  1,182
  1,236
  1,292
  1,351
  1,414
  1,480
  1,549
  1,623
  1,700
  1,781
  1,867
  1,957
  2,052
  2,151
Fixed operating expenses, $m
  226
  231
  236
  241
  246
  252
  257
  263
  269
  275
  281
  287
  293
  300
  306
  313
  320
  327
  334
  342
  349
  357
  365
  373
  381
  389
  398
  406
  415
  425
Total operating expenses, $m
  916
  936
  959
  983
  1,010
  1,040
  1,071
  1,106
  1,142
  1,181
  1,201
  1,245
  1,290
  1,340
  1,390
  1,445
  1,502
  1,563
  1,626
  1,693
  1,763
  1,837
  1,914
  1,996
  2,081
  2,170
  2,265
  2,363
  2,467
  2,576
Operating income, $m
  46
  47
  50
  53
  58
  63
  69
  75
  83
  91
  121
  131
  142
  154
  167
  181
  196
  212
  230
  248
  268
  289
  312
  336
  361
  389
  417
  448
  480
  515
EBITDA, $m
  107
  110
  114
  118
  124
  130
  138
  146
  156
  166
  177
  190
  203
  218
  234
  250
  269
  288
  309
  331
  355
  380
  407
  435
  465
  498
  532
  568
  606
  646
Interest expense (income), $m
  23
  22
  23
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  39
  40
  43
  45
  47
  49
  52
  55
  57
  60
  64
  67
  70
  74
  78
  82
Earnings before tax, $m
  23
  25
  27
  29
  33
  37
  42
  47
  54
  61
  89
  98
  107
  117
  129
  141
  154
  168
  183
  199
  216
  235
  254
  275
  298
  322
  347
  374
  402
  433
Tax expense, $m
  6
  7
  7
  8
  9
  10
  11
  13
  14
  16
  24
  26
  29
  32
  35
  38
  41
  45
  49
  54
  58
  63
  69
  74
  80
  87
  94
  101
  109
  117
Net income, $m
  17
  18
  19
  21
  24
  27
  30
  34
  39
  44
  65
  71
  78
  86
  94
  103
  112
  122
  133
  145
  158
  171
  186
  201
  217
  235
  253
  273
  294
  316

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  831
  850
  872
  897
  924
  954
  986
  1,022
  1,059
  1,100
  1,144
  1,190
  1,239
  1,292
  1,348
  1,407
  1,469
  1,535
  1,605
  1,679
  1,757
  1,839
  1,925
  2,017
  2,113
  2,214
  2,320
  2,432
  2,550
  2,674
Adjusted assets (=assets-cash), $m
  831
  850
  872
  897
  924
  954
  986
  1,022
  1,059
  1,100
  1,144
  1,190
  1,239
  1,292
  1,348
  1,407
  1,469
  1,535
  1,605
  1,679
  1,757
  1,839
  1,925
  2,017
  2,113
  2,214
  2,320
  2,432
  2,550
  2,674
Revenue / Adjusted assets
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.157
  1.156
  1.156
  1.156
  1.157
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
  1.156
Average production assets, $m
  205
  209
  215
  221
  228
  235
  243
  252
  261
  271
  282
  293
  305
  318
  332
  346
  362
  378
  395
  413
  433
  453
  474
  497
  520
  545
  571
  599
  628
  658
Working capital, $m
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
Total debt, $m
  420
  432
  446
  462
  479
  498
  519
  541
  566
  592
  619
  649
  681
  714
  750
  788
  828
  870
  914
  962
  1,011
  1,064
  1,119
  1,177
  1,239
  1,303
  1,371
  1,443
  1,518
  1,597
Total liabilities, $m
  531
  543
  557
  573
  590
  610
  630
  653
  677
  703
  731
  760
  792
  826
  861
  899
  939
  981
  1,026
  1,073
  1,123
  1,175
  1,230
  1,289
  1,350
  1,415
  1,482
  1,554
  1,629
  1,708
Total equity, $m
  300
  307
  315
  324
  334
  344
  356
  369
  382
  397
  413
  430
  447
  466
  487
  508
  530
  554
  579
  606
  634
  664
  695
  728
  763
  799
  838
  878
  920
  965
Total liabilities and equity, $m
  831
  850
  872
  897
  924
  954
  986
  1,022
  1,059
  1,100
  1,144
  1,190
  1,239
  1,292
  1,348
  1,407
  1,469
  1,535
  1,605
  1,679
  1,757
  1,839
  1,925
  2,017
  2,113
  2,214
  2,320
  2,432
  2,549
  2,673
Debt-to-equity ratio
  1.400
  1.410
  1.420
  1.430
  1.440
  1.450
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
  1.560
  1.570
  1.580
  1.590
  1.590
  1.600
  1.610
  1.620
  1.620
  1.630
  1.640
  1.640
  1.650
  1.650
Adjusted equity ratio
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  17
  18
  19
  21
  24
  27
  30
  34
  39
  44
  65
  71
  78
  86
  94
  103
  112
  122
  133
  145
  158
  171
  186
  201
  217
  235
  253
  273
  294
  316
Depreciation, amort., depletion, $m
  62
  63
  64
  65
  66
  68
  69
  71
  73
  75
  56
  59
  61
  64
  66
  69
  72
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  120
  126
  132
Funds from operations, $m
  79
  81
  83
  86
  90
  94
  100
  105
  112
  119
  121
  130
  139
  149
  160
  172
  185
  198
  212
  228
  244
  262
  281
  300
  321
  344
  368
  393
  419
  448
Change in working capital, $m
  0
  0
  0
  0
  0
  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
Cash from operations, $m
  78
  80
  83
  86
  90
  94
  99
  105
  111
  118
  121
  129
  138
  148
  159
  171
  183
  197
  211
  227
  243
  260
  279
  299
  320
  342
  366
  391
  417
  445
Maintenance CAPEX, $m
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -95
  -99
  -104
  -109
  -114
  -120
  -126
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
Cash from investing activities, $m
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -58
  -59
  -62
  -65
  -67
  -71
  -74
  -78
  -81
  -84
  -88
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -142
  -149
  -157
Free cash flow, $m
  34
  35
  35
  37
  39
  41
  44
  48
  52
  56
  56
  61
  68
  74
  82
  90
  99
  108
  118
  129
  141
  154
  167
  182
  197
  213
  230
  249
  269
  289
Issuance/(repayment) of debt, $m
  11
  12
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  65
  68
  72
  75
  79
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
Cash from financing (excl. dividends), $m  
  11
  12
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  65
  68
  72
  75
  79
Total cash flow (excl. dividends), $m
  44
  47
  49
  52
  56
  60
  65
  70
  76
  82
  83
  91
  99
  108
  118
  128
  139
  151
  163
  177
  191
  206
  222
  240
  258
  278
  298
  320
  344
  369
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
Prev. year cash balance distribution, $m
  45
  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
  83
  40
  41
  44
  46
  49
  53
  57
  62
  67
  68
  74
  81
  89
  97
  106
  116
  127
  138
  150
  163
  177
  191
  207
  224
  241
  260
  280
  301
  324
Discount rate, %
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
  78
  35
  34
  33
  32
  31
  31
  30
  29
  27
  24
  23
  21
  19
  18
  16
  14
  12
  10
  9
  7
  6
  4
  3
  3
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Altisource Portfolio Solutions S.A. is a marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries. The Company's business processes, vendor and electronic payment management software and behavioral science-based analytics manage outcomes for marketplace participants. It operates through three segments: Mortgage Services, Financial Services and Technology Services. The Mortgage Services segment provides loan servicers, originators, rental property investors and real estate consumers with products, services and technologies. The Financial Services segment provides collection services to debt originators and servicers and customer relationship management services. The Technology Services segment provides software and data analytics solutions that support management of mortgage and real estate activities and marketplace transactions across mortgage and real estate lifecycles and information technology infrastructure management services.

FINANCIAL RATIOS  of  Altisource Portfolio Solutions (ASPS)

Valuation Ratios
P/E Ratio 9.6
Price to Sales 0.3
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 2.7
Growth Rates
Sales Growth Rate -5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.1%
Cap. Spend. - 3 Yr. Gr. Rate -7.5%
Financial Strength
Quick Ratio 35
Current Ratio 0.1
LT Debt to Equity 767.2%
Total Debt to Equity 777%
Interest Coverage 3
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 11.8%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 11.6%
Return On Equity 51.8%
Return On Equity - 3 Yr. Avg. 93.4%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 30.8%
Gross Margin - 3 Yr. Avg. 33.3%
EBITDA Margin 15.2%
EBITDA Margin - 3 Yr. Avg. 17.3%
Operating Margin 7%
Oper. Margin - 3 Yr. Avg. 10.2%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. 7.7%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 6.4%
Effective Tax Rate 29.5%
Eff/ Tax Rate - 3 Yr. Avg. 17.1%
Payout Ratio 0%

ASPS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASPS stock intrinsic value calculation we used $942.213 million for the last fiscal year's total revenue generated by Altisource Portfolio Solutions. The default revenue input number comes from 0001 income statement of Altisource Portfolio Solutions. 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 ASPS 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 6.1%, whose default value for ASPS is calculated based on our internal credit rating of Altisource Portfolio Solutions, 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 Altisource Portfolio Solutions.
    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 ASPS stock the variable cost ratio is equal to 71.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $221 million in the base year in the intrinsic value calculation for ASPS 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 5.4% for Altisource Portfolio Solutions.

Corporate tax rate of 27% is the nominal tax rate for Altisource Portfolio Solutions. 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 ASPS 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 ASPS are equal to 21.3%.

Life of production assets of 4.4 years is the average useful life of capital assets used in Altisource Portfolio Solutions 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 ASPS is equal to 1.5%. 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 - $338.612 million for Altisource Portfolio Solutions - 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 18.878 million for Altisource Portfolio Solutions 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 Altisource Portfolio Solutions at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Altisource Portfolio: 3Q Earnings Snapshot   [09:23AM  Associated Press]
▶ Altisource Announces Appointment of CFO   [Aug-31-18 05:54PM  GlobeNewswire]
▶ Lenders One Names Michael Kuentz as Chief Executive Officer   [Aug-02-18 04:34PM  GlobeNewswire]
▶ Altisource Portfolio: 2Q Earnings Snapshot   [Jul-26-18 10:36AM  Associated Press]
▶ New Strong Sell Stocks for May 16th   [May-16-18 06:40AM  Zacks]
▶ New Strong Sell Stocks for April 30th   [Apr-30-18 05:26AM  Zacks]
▶ Altisource Portfolio: 1Q Earnings Snapshot   [10:14AM  Associated Press]
▶ Owners.com Survey Reveals Changing Home Buyer Behaviors   [Apr-03-18 09:00AM  GlobeNewswire]
▶ Altisource Portfolio posts 4Q profit   [Feb-22-18 10:37AM  Associated Press]
▶ Here are the top housing markets for buyers and sellers   [Dec-12-17 11:12AM  MarketWatch]
▶ Altisource Portfolio posts 3Q profit   [08:38AM  Associated Press]
▶ Is It Time To Sell Altisource Portfolio Solutions SA (ASPS)?   [Oct-04-17 09:26AM  Simply Wall St.]
▶ Top Ranked Value Stocks to Buy for August 31st   [Aug-31-17 10:43AM  Zacks]
▶ Altisource Portfolio posts 2Q profit   [Aug-09-17 10:19PM  Associated Press]
▶ Altisource Announces Organizational Changes   [08:57AM  GlobeNewswire]

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