Intrinsic value of Aware, Inc. - AWRE

Previous Close

$3.72

  Intrinsic Value

$1.77

stock screener

  Rating & Target

str. sell

-52%

Previous close

$3.72

 
Intrinsic value

$1.77

 
Up/down potential

-52%

 
Rating

str. sell

We calculate the intrinsic value of AWRE 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 0.1

 

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, %
  32.60
  29.84
  27.36
  25.12
  23.11
  21.30
  19.67
  18.20
  16.88
  15.69
  14.62
  13.66
  12.80
  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
Revenue, $m
  21
  28
  35
  44
  54
  66
  78
  93
  108
  125
  144
  163
  184
  206
  230
  254
  280
  307
  335
  364
  395
  426
  459
  493
  529
  566
  604
  644
  686
  729
Variable operating expenses, $m
  20
  26
  32
  40
  50
  60
  72
  85
  99
  115
  131
  149
  168
  188
  210
  232
  256
  280
  306
  332
  360
  389
  419
  450
  483
  517
  552
  588
  626
  665
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
  20
  26
  32
  40
  50
  60
  72
  85
  99
  115
  131
  149
  168
  188
  210
  232
  256
  280
  306
  332
  360
  389
  419
  450
  483
  517
  552
  588
  626
  665
Operating income, $m
  1
  2
  3
  3
  4
  5
  6
  8
  9
  11
  13
  14
  16
  18
  20
  22
  24
  27
  29
  32
  34
  37
  40
  43
  46
  49
  53
  56
  60
  63
EBITDA, $m
  2
  3
  4
  5
  6
  8
  9
  11
  12
  14
  16
  19
  21
  24
  26
  29
  32
  35
  38
  42
  45
  49
  53
  57
  61
  65
  69
  74
  79
  83
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
Earnings before tax, $m
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
Tax expense, $m
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
Net income, $m
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  37
  39

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
  26
  33
  42
  53
  65
  79
  95
  112
  131
  151
  173
  197
  222
  249
  277
  307
  338
  370
  404
  439
  476
  514
  554
  595
  638
  682
  729
  777
  827
  879
Adjusted assets (=assets-cash), $m
  26
  33
  42
  53
  65
  79
  95
  112
  131
  151
  173
  197
  222
  249
  277
  307
  338
  370
  404
  439
  476
  514
  554
  595
  638
  682
  729
  777
  827
  879
Revenue / Adjusted assets
  0.808
  0.848
  0.833
  0.830
  0.831
  0.835
  0.821
  0.830
  0.824
  0.828
  0.832
  0.827
  0.829
  0.827
  0.830
  0.827
  0.828
  0.830
  0.829
  0.829
  0.830
  0.829
  0.829
  0.829
  0.829
  0.830
  0.829
  0.829
  0.830
  0.829
Average production assets, $m
  6
  7
  9
  12
  14
  17
  21
  24
  28
  33
  38
  43
  48
  54
  60
  67
  73
  80
  88
  95
  103
  112
  120
  129
  139
  148
  158
  169
  180
  191
Working capital, $m
  1
  2
  2
  3
  4
  5
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
Total debt, $m
  1
  3
  5
  8
  11
  14
  18
  22
  26
  31
  36
  42
  48
  54
  61
  68
  75
  82
  90
  99
  107
  116
  126
  135
  145
  156
  167
  178
  190
  202
Total liabilities, $m
  6
  8
  10
  12
  15
  19
  22
  26
  31
  36
  41
  46
  52
  59
  65
  72
  79
  87
  95
  103
  112
  121
  130
  140
  150
  160
  171
  183
  194
  207
Total equity, $m
  20
  25
  32
  41
  50
  60
  72
  86
  100
  116
  133
  151
  170
  190
  212
  235
  258
  283
  309
  336
  364
  393
  424
  455
  488
  522
  558
  594
  633
  672
Total liabilities and equity, $m
  26
  33
  42
  53
  65
  79
  94
  112
  131
  152
  174
  197
  222
  249
  277
  307
  337
  370
  404
  439
  476
  514
  554
  595
  638
  682
  729
  777
  827
  879
Debt-to-equity ratio
  0.080
  0.130
  0.170
  0.200
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  37
  39
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
Funds from operations, $m
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  59
Change in working capital, $m
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Cash from operations, $m
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  28
  30
  32
  35
  38
  40
  43
  46
  49
  53
  56
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -1
  -3
  -3
  -3
  -4
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -14
  -15
  -15
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
Free cash flow, $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  10
  11
  12
  13
  15
  16
  17
  19
  21
  22
  24
  26
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $m
  4
  4
  5
  6
  7
  7
  8
  8
  9
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  7
  7
  6
  6
  5
  5
  4
  3
  2
  2
  1
Cash from financing (excl. dividends), $m  
  5
  6
  7
  8
  10
  10
  12
  12
  13
  14
  14
  15
  15
  15
  16
  16
  16
  16
  16
  15
  16
  15
  15
  15
  15
  14
  14
  13
  14
  13
Total cash flow (excl. dividends), $m
  5
  6
  7
  8
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  32
  33
  35
  36
  37
  39
Retained Cash Flow (-), $m
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
Prev. year cash balance distribution, $m
  47
  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
  47
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
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
  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
Current shareholders' claim on cash, %
  83.5
  71.1
  61.5
  54.0
  48.0
  43.2
  39.3
  36.1
  33.5
  31.3
  29.5
  28.0
  26.8
  25.7
  24.8
  24.0
  23.4
  22.8
  22.3
  21.9
  21.6
  21.3
  21.0
  20.8
  20.7
  20.6
  20.5
  20.4
  20.3
  20.3

Aware, Inc. is a provider of software and services to the biometrics industry. The Company's software products are used in government and commercial biometrics systems to identify or authenticate people. Its products provide biometric functionality and are used to capture, verify, format, compress and decompress biometric images, as well as aggregate, analyze, process, match and transport those images within biometric systems. It sells biometrics software products and services through systems integrators and original equipment manufacturers (OEMs), and directly to end user customers. Its software products enable functions in biometrics systems, including enrollment, analysis and processing of biometric images and data on workstations or mobile devices; integration of peripheral biometric capture devices; centralized workflow, transaction processing and subsystem integration, and matching of biometric samples against biometric databases to authenticate or verify identities.

FINANCIAL RATIOS  of  Aware, Inc. (AWRE)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 3.8
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 20.8
Price to Free Cash Flow 20.8
Growth Rates
Sales Growth Rate 10%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.3%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 7%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 86.4%
Gross Margin - 3 Yr. Avg. 82.1%
EBITDA Margin 31.8%
EBITDA Margin - 3 Yr. Avg. 30.1%
Operating Margin 27.3%
Oper. Margin - 3 Yr. Avg. 25.5%
Pre-Tax Margin 27.3%
Pre-Tax Margin - 3 Yr. Avg. 25.5%
Net Profit Margin 18.2%
Net Profit Margin - 3 Yr. Avg. 21.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 12.3%
Payout Ratio 0%

AWRE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AWRE stock intrinsic value calculation we used $16 million for the last fiscal year's total revenue generated by Aware, Inc.. The default revenue input number comes from 0001 income statement of Aware, Inc.. 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 AWRE stock valuation model: a) initial revenue growth rate of 32.6% 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 AWRE is calculated based on our internal credit rating of Aware, Inc., 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 Aware, Inc..
    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 AWRE stock the variable cost ratio is equal to 93.8%.

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 AWRE 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 Aware, Inc..

Corporate tax rate of 27% is the nominal tax rate for Aware, Inc.. 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 AWRE 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 AWRE are equal to 26.2%.

Life of production assets of 9.5 years is the average useful life of capital assets used in Aware, Inc. 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 AWRE is equal to 6.9%. 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 - $61.897 million for Aware, Inc. - 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 21.570 million for Aware, Inc. 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 Aware, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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