Intrinsic value of Aware - AWRE

Previous Close

$3.60

  Intrinsic Value

$63.56

stock screener

  Rating & Target

str. buy

+999%

Previous close

$3.60

 
Intrinsic value

$63.56

 
Up/down potential

+999%

 
Rating

str. buy

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, %
  47.90
  43.61
  39.75
  36.27
  33.15
  30.33
  27.80
  25.52
  23.47
  21.62
  19.96
  18.46
  17.12
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.80
  10.22
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.25
  7.02
Revenue, $m
  24
  35
  48
  66
  88
  114
  146
  183
  226
  275
  330
  391
  458
  531
  610
  694
  784
  879
  980
  1,086
  1,196
  1,312
  1,433
  1,560
  1,691
  1,828
  1,970
  2,117
  2,271
  2,430
Variable operating expenses, $m
  5
  7
  9
  12
  16
  21
  27
  34
  43
  52
  62
  74
  86
  100
  115
  130
  147
  165
  184
  204
  225
  247
  269
  293
  318
  344
  370
  398
  427
  457
Fixed operating expenses, $m
  11
  11
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
Total operating expenses, $m
  16
  18
  21
  24
  28
  34
  40
  47
  56
  66
  76
  88
  101
  115
  130
  146
  163
  181
  201
  221
  242
  265
  287
  312
  337
  363
  390
  418
  448
  478
Operating income, $m
  8
  17
  28
  41
  59
  80
  106
  136
  170
  210
  254
  303
  357
  416
  480
  548
  621
  698
  779
  864
  954
  1,048
  1,146
  1,248
  1,354
  1,465
  1,580
  1,699
  1,823
  1,952
EBITDA, $m
  9
  18
  29
  44
  62
  84
  111
  142
  178
  219
  265
  316
  372
  434
  500
  571
  646
  726
  811
  900
  993
  1,091
  1,192
  1,299
  1,409
  1,524
  1,644
  1,768
  1,897
  2,031
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  23
  25
  28
  30
  32
  34
Earnings before tax, $m
  8
  16
  27
  41
  58
  79
  104
  134
  168
  207
  250
  299
  352
  410
  472
  539
  610
  686
  766
  850
  938
  1,030
  1,126
  1,226
  1,331
  1,439
  1,552
  1,669
  1,791
  1,918
Tax expense, $m
  2
  4
  7
  11
  16
  21
  28
  36
  45
  56
  68
  81
  95
  111
  127
  146
  165
  185
  207
  229
  253
  278
  304
  331
  359
  389
  419
  451
  484
  518
Net income, $m
  6
  12
  20
  30
  42
  58
  76
  98
  123
  151
  183
  218
  257
  299
  345
  393
  446
  501
  559
  620
  685
  752
  822
  895
  971
  1,051
  1,133
  1,219
  1,308
  1,400

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
  27
  38
  54
  73
  98
  127
  162
  204
  252
  306
  367
  435
  510
  591
  678
  772
  872
  978
  1,090
  1,208
  1,331
  1,460
  1,595
  1,735
  1,881
  2,033
  2,191
  2,355
  2,526
  2,703
Adjusted assets (=assets-cash), $m
  27
  38
  54
  73
  98
  127
  162
  204
  252
  306
  367
  435
  510
  591
  678
  772
  872
  978
  1,090
  1,208
  1,331
  1,460
  1,595
  1,735
  1,881
  2,033
  2,191
  2,355
  2,526
  2,703
Revenue / Adjusted assets
  0.889
  0.921
  0.889
  0.904
  0.898
  0.898
  0.901
  0.897
  0.897
  0.899
  0.899
  0.899
  0.898
  0.898
  0.900
  0.899
  0.899
  0.899
  0.899
  0.899
  0.899
  0.899
  0.898
  0.899
  0.899
  0.899
  0.899
  0.899
  0.899
  0.899
Average production assets, $m
  7
  10
  13
  18
  24
  32
  41
  51
  63
  77
  92
  109
  128
  148
  170
  194
  219
  245
  273
  303
  334
  366
  400
  435
  472
  510
  550
  591
  634
  678
Working capital, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -13
  -15
  -16
  -18
  -21
  -23
  -25
  -28
  -30
  -33
  -36
  -38
  -41
  -44
  -48
  -51
Total debt, $m
  2
  5
  9
  14
  20
  28
  37
  47
  59
  73
  88
  106
  124
  145
  167
  191
  216
  243
  271
  301
  332
  365
  399
  434
  471
  510
  550
  591
  635
  679
Total liabilities, $m
  7
  10
  14
  19
  25
  32
  41
  52
  64
  77
  93
  110
  129
  149
  172
  195
  221
  247
  276
  305
  337
  369
  403
  439
  476
  514
  554
  596
  639
  684
Total equity, $m
  20
  29
  40
  55
  73
  95
  121
  152
  188
  229
  274
  325
  381
  441
  507
  577
  651
  731
  814
  902
  994
  1,091
  1,191
  1,296
  1,405
  1,519
  1,637
  1,759
  1,887
  2,019
Total liabilities and equity, $m
  27
  39
  54
  74
  98
  127
  162
  204
  252
  306
  367
  435
  510
  590
  679
  772
  872
  978
  1,090
  1,207
  1,331
  1,460
  1,594
  1,735
  1,881
  2,033
  2,191
  2,355
  2,526
  2,703
Debt-to-equity ratio
  0.110
  0.180
  0.230
  0.260
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
Adjusted equity ratio
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  12
  20
  30
  42
  58
  76
  98
  123
  151
  183
  218
  257
  299
  345
  393
  446
  501
  559
  620
  685
  752
  822
  895
  971
  1,051
  1,133
  1,219
  1,308
  1,400
Depreciation, amort., depletion, $m
  1
  1
  2
  2
  3
  4
  5
  6
  7
  9
  11
  13
  15
  17
  20
  23
  25
  29
  32
  35
  39
  43
  47
  51
  55
  59
  64
  69
  74
  79
Funds from operations, $m
  7
  13
  21
  32
  45
  62
  81
  104
  130
  160
  193
  231
  272
  316
  364
  416
  471
  529
  591
  656
  723
  794
  869
  946
  1,026
  1,110
  1,197
  1,287
  1,381
  1,479
Change in working capital, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  7
  13
  22
  32
  46
  62
  82
  104
  131
  161
  195
  232
  273
  318
  366
  418
  473
  531
  593
  658
  726
  797
  871
  948
  1,029
  1,113
  1,200
  1,290
  1,384
  1,482
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -20
  -23
  -25
  -29
  -32
  -35
  -39
  -43
  -47
  -51
  -55
  -59
  -64
  -69
  -74
New CAPEX, $m
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -14
  -15
  -17
  -19
  -20
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -44
Cash from investing activities, $m
  -3
  -4
  -5
  -7
  -8
  -10
  -13
  -15
  -18
  -21
  -24
  -28
  -32
  -35
  -39
  -44
  -48
  -52
  -57
  -62
  -66
  -71
  -77
  -82
  -88
  -93
  -99
  -105
  -112
  -118
Free cash flow, $m
  4
  10
  17
  26
  38
  52
  69
  89
  113
  140
  170
  204
  242
  283
  327
  374
  425
  479
  536
  597
  660
  726
  795
  867
  942
  1,020
  1,101
  1,185
  1,273
  1,364
Issuance/(repayment) of debt, $m
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  15
  17
  19
  21
  22
  24
  25
  27
  28
  30
  31
  33
  34
  36
  37
  38
  40
  42
  43
  45
Issuance/(repurchase) of shares, $m
  1
  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  
  3
  3
  4
  5
  6
  7
  9
  10
  12
  14
  15
  17
  19
  21
  22
  24
  25
  27
  28
  30
  31
  33
  34
  36
  37
  38
  40
  42
  43
  45
Total cash flow (excl. dividends), $m
  7
  13
  21
  31
  44
  59
  78
  100
  125
  154
  186
  221
  261
  303
  349
  398
  451
  506
  565
  626
  691
  758
  829
  902
  979
  1,058
  1,141
  1,227
  1,316
  1,409
Retained Cash Flow (-), $m
  -7
  -9
  -11
  -15
  -18
  -22
  -26
  -31
  -36
  -41
  -46
  -51
  -56
  -61
  -65
  -70
  -75
  -79
  -84
  -88
  -92
  -96
  -101
  -105
  -109
  -114
  -118
  -123
  -127
  -132
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
  48
  4
  9
  16
  26
  37
  52
  69
  89
  113
  140
  171
  205
  243
  284
  328
  376
  427
  481
  538
  599
  662
  728
  797
  870
  945
  1,023
  1,104
  1,189
  1,276
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
  46
  4
  8
  13
  20
  27
  35
  43
  51
  59
  67
  73
  78
  81
  83
  83
  82
  79
  74
  68
  62
  55
  48
  41
  34
  28
  22
  17
  13
  10
Current shareholders' claim on cash, %
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
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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 (AWRE)

Valuation Ratios
P/E Ratio 20.1
Price to Sales 3.7
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 20.1
Price to Free Cash Flow 20.1
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 $16.282 million for the last fiscal year's total revenue generated by Aware. The default revenue input number comes from 0001 income statement of Aware. 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 47.9% 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, 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.
    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 18.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 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.

Corporate tax rate of 27% is the nominal tax rate for Aware. 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 27.9%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Aware 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 -2.1%. 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 - $60.534 million for Aware - 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 21.578 million for Aware 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 at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Aware: 2Q Earnings Snapshot   [Jul-24-18 05:41PM  Associated Press]
▶ Aware: 1Q Earnings Snapshot   [Apr-24-18 04:56PM  Associated Press]
▶ Aware reports 4Q loss   [Feb-22-18 04:49PM  Associated Press]
▶ Aware posts 3Q profit   [Oct-24-17 05:23PM  Associated Press]
▶ Aware posts 2Q profit   [Jul-25-17 05:22PM  Associated Press]
▶ Aware posts 1Q profit   [Apr-25-17 04:49PM  Associated Press]
▶ Aware posts 4Q profit   [Feb-07-17 04:45PM  Associated Press]
▶ LD Micro Index Reconstitution as of February 1, 2017   [Feb-01-17 09:45AM  Accesswire]
▶ Aware posts 2Q profit   [Jul-26-16 06:01PM  AP]
▶ Aware posts 4Q profit   [Feb-09-16 05:56PM  AP]
▶ Aware posts 3Q profit   [Oct-22  05:49PM  AP]
▶ 10-Q for Aware, Inc. (Massachusetts)   [Jul-30  08:09PM  at Company Spotlight]

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