Intrinsic value of Cass Information Systems - CASS

Previous Close

$58.00

  Intrinsic Value

$70.61

stock screener

  Rating & Target

buy

+22%

Previous close

$58.00

 
Intrinsic value

$70.61

 
Up/down potential

+22%

 
Rating

buy

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

We calculate the intrinsic value of CASS 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  3.28
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
Revenue, $m
  126
  138
  150
  163
  176
  190
  205
  220
  235
  252
  269
  286
  304
  323
  343
  364
  385
  408
  431
  455
  481
  508
  535
  564
  595
  627
  660
  695
  731
  770
  810
Variable operating expenses, $m
 
  103
  112
  121
  131
  141
  152
  163
  175
  187
  199
  211
  224
  238
  253
  268
  284
  300
  317
  335
  354
  374
  394
  416
  438
  462
  486
  512
  539
  567
  596
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
  94
  103
  112
  121
  131
  141
  152
  163
  175
  187
  199
  211
  224
  238
  253
  268
  284
  300
  317
  335
  354
  374
  394
  416
  438
  462
  486
  512
  539
  567
  596
Operating income, $m
  32
  35
  38
  42
  45
  49
  53
  57
  61
  65
  70
  75
  80
  85
  90
  96
  102
  107
  114
  120
  127
  134
  141
  149
  157
  165
  174
  183
  193
  203
  213
EBITDA, $m
  41
  41
  45
  49
  53
  57
  61
  66
  70
  75
  80
  86
  91
  97
  103
  109
  115
  122
  129
  136
  144
  152
  160
  169
  178
  188
  198
  208
  219
  230
  242
Interest expense (income), $m
  2
  9
  13
  17
  21
  25
  30
  34
  39
  44
  49
  54
  60
  66
  72
  78
  85
  92
  99
  106
  114
  122
  131
  140
  149
  158
  169
  179
  190
  202
  214
Earnings before tax, $m
  32
  26
  26
  25
  24
  24
  23
  23
  22
  21
  20
  21
  20
  19
  19
  18
  17
  16
  15
  14
  13
  12
  10
  9
  8
  7
  5
  4
  2
  1
  -1
Tax expense, $m
  8
  7
  7
  7
  7
  6
  6
  6
  6
  6
  6
  6
  5
  5
  5
  5
  5
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
Net income, $m
  24
  19
  19
  18
  18
  17
  17
  16
  16
  15
  15
  15
  15
  14
  14
  13
  12
  12
  11
  10
  9
  8
  8
  7
  6
  5
  4
  3
  2
  1
  -1

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  149
  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
  1,505
  1,482
  1,615
  1,753
  1,897
  2,047
  2,202
  2,364
  2,532
  2,706
  2,888
  3,077
  3,273
  3,477
  3,690
  3,912
  4,143
  4,384
  4,635
  4,897
  5,171
  5,458
  5,757
  6,069
  6,397
  6,739
  7,097
  7,472
  7,865
  8,276
  8,707
Adjusted assets (=assets-cash), $m
  1,356
  1,482
  1,615
  1,753
  1,897
  2,047
  2,202
  2,364
  2,532
  2,706
  2,888
  3,077
  3,273
  3,477
  3,690
  3,912
  4,143
  4,384
  4,635
  4,897
  5,171
  5,458
  5,757
  6,069
  6,397
  6,739
  7,097
  7,472
  7,865
  8,276
  8,707
Revenue / Adjusted assets
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
  0.093
Average production assets, $m
  23
  25
  27
  29
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  82
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
Working capital, $m
  0
  69
  75
  82
  88
  95
  102
  110
  118
  126
  134
  143
  152
  162
  172
  182
  193
  204
  216
  228
  240
  254
  268
  282
  297
  313
  330
  347
  366
  385
  405
Total debt, $m
  407
  365
  478
  595
  717
  844
  975
  1,112
  1,255
  1,402
  1,556
  1,716
  1,882
  2,055
  2,235
  2,423
  2,619
  2,823
  3,036
  3,258
  3,490
  3,733
  3,986
  4,251
  4,528
  4,818
  5,121
  5,439
  5,772
  6,120
  6,485
Total liabilities, $m
  1,297
  1,255
  1,368
  1,485
  1,607
  1,734
  1,865
  2,002
  2,145
  2,292
  2,446
  2,606
  2,772
  2,945
  3,125
  3,313
  3,509
  3,713
  3,926
  4,148
  4,380
  4,623
  4,876
  5,141
  5,418
  5,708
  6,011
  6,329
  6,662
  7,010
  7,375
Total equity, $m
  208
  227
  247
  268
  290
  313
  337
  362
  387
  414
  442
  471
  501
  532
  565
  598
  634
  671
  709
  749
  791
  835
  881
  929
  979
  1,031
  1,086
  1,143
  1,203
  1,266
  1,332
Total liabilities and equity, $m
  1,505
  1,482
  1,615
  1,753
  1,897
  2,047
  2,202
  2,364
  2,532
  2,706
  2,888
  3,077
  3,273
  3,477
  3,690
  3,911
  4,143
  4,384
  4,635
  4,897
  5,171
  5,458
  5,757
  6,070
  6,397
  6,739
  7,097
  7,472
  7,865
  8,276
  8,707
Debt-to-equity ratio
  1.957
  1.610
  1.930
  2.220
  2.470
  2.690
  2.890
  3.080
  3.240
  3.390
  3.520
  3.650
  3.760
  3.860
  3.960
  4.050
  4.130
  4.210
  4.280
  4.350
  4.410
  4.470
  4.530
  4.580
  4.630
  4.670
  4.720
  4.760
  4.800
  4.830
  4.870
Adjusted equity ratio
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  19
  19
  18
  18
  17
  17
  16
  16
  15
  15
  15
  15
  14
  14
  13
  12
  12
  11
  10
  9
  8
  8
  7
  6
  5
  4
  3
  2
  1
  -1
Depreciation, amort., depletion, $m
  9
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
Funds from operations, $m
  36
  25
  25
  25
  25
  25
  26
  26
  26
  26
  26
  26
  26
  26
  26
  26
  26
  26
  26
  26
  26
  27
  27
  27
  27
  27
  28
  28
  28
  28
  28
Change in working capital, $m
  1
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
Cash from operations, $m
  35
  19
  19
  19
  19
  18
  18
  18
  18
  18
  17
  17
  16
  16
  16
  16
  15
  15
  15
  14
  14
  13
  13
  12
  12
  11
  11
  10
  10
  9
  8
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
New CAPEX, $m
  -5
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Cash from investing activities, $m
  -42
  -7
  -7
  -7
  -8
  -8
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
Free cash flow, $m
  -7
  13
  12
  11
  10
  10
  9
  8
  7
  6
  5
  4
  3
  2
  1
  0
  -2
  -3
  -4
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
Issuance/(repayment) of debt, $m
  0
  107
  112
  117
  122
  127
  132
  137
  142
  148
  154
  160
  166
  173
  180
  188
  196
  204
  213
  222
  232
  242
  253
  265
  277
  290
  303
  318
  333
  348
  365
Issuance/(repurchase) of shares, $m
  -9
  0
  2
  3
  4
  5
  7
  8
  10
  11
  13
  14
  15
  17
  19
  21
  23
  25
  28
  30
  33
  35
  38
  41
  44
  47
  51
  55
  58
  62
  67
Cash from financing (excl. dividends), $m  
  30
  107
  114
  120
  126
  132
  139
  145
  152
  159
  167
  174
  181
  190
  199
  209
  219
  229
  241
  252
  265
  277
  291
  306
  321
  337
  354
  373
  391
  410
  432
Total cash flow (excl. dividends), $m
  24
  120
  126
  131
  136
  142
  147
  153
  159
  165
  172
  177
  185
  192
  200
  208
  217
  227
  236
  247
  258
  269
  281
  294
  308
  322
  337
  353
  369
  387
  405
Retained Cash Flow (-), $m
  -1
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -67
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
 
  101
  106
  110
  114
  119
  124
  128
  133
  139
  144
  149
  155
  161
  167
  174
  182
  190
  198
  207
  216
  225
  235
  246
  258
  269
  282
  295
  309
  324
  338
Discount rate, %
 
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
 
  94
  90
  86
  81
  75
  69
  63
  57
  51
  45
  39
  34
  29
  24
  20
  16
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  99.8
  99.5
  99.0
  98.5
  97.9
  97.2
  96.5
  95.7
  94.9
  94.0
  93.2
  92.3
  91.4
  90.4
  89.4
  88.4
  87.4
  86.3
  85.3
  84.2
  83.1
  82.1
  81.0
  79.9
  78.7
  77.6
  76.5
  75.4
  74.3

Cass Information Systems, Inc. (Cass) is a provider of payment and information processing services to manufacturing, distribution and retail enterprises across the United States with operating locations in Missouri, Ohio, Massachusetts, South Carolina and Florida. The Company provides transportation invoice rating, payment processing, auditing, accounting and transportation information. It is also a processor and payer of energy invoices, including electricity, gas, waste, and other facility related expenses. The Company operates in two segments: Information Services and Banking Services. The Information Services segment provides transportation, energy, telecommunication, and environmental invoice processing and payment services to large corporations. The Banking Services segment provides banking services primarily to privately held businesses and churches. The Company, through its bank subsidiary, Cass Commercial Bank (the Bank), provides commercial banking services.

FINANCIAL RATIOS  of  Cass Information Systems (CASS)

Valuation Ratios
P/E Ratio 29.7
Price to Sales 5.7
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 20.4
Price to Free Cash Flow 23.8
Growth Rates
Sales Growth Rate 3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.7%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 195.7%
Interest Coverage 17
Management Effectiveness
Return On Assets 1.7%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital 3.7%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 11.6%
Return On Equity - 3 Yr. Avg. 11.7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 98.4%
Gross Margin - 3 Yr. Avg. 98.1%
EBITDA Margin 34.1%
EBITDA Margin - 3 Yr. Avg. 34.5%
Operating Margin 25.4%
Oper. Margin - 3 Yr. Avg. 25.8%
Pre-Tax Margin 25.4%
Pre-Tax Margin - 3 Yr. Avg. 25.8%
Net Profit Margin 19%
Net Profit Margin - 3 Yr. Avg. 19.3%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 25.3%
Payout Ratio 41.7%

CASS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CASS stock intrinsic value calculation we used $126 million for the last fiscal year's total revenue generated by Cass Information Systems. The default revenue input number comes from 2016 income statement of Cass Information Systems. 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 CASS stock valuation model: a) initial revenue growth rate of 9.4% 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 7.9%, whose default value for CASS is calculated based on our internal credit rating of Cass Information Systems, 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 Cass Information Systems.
    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 CASS stock the variable cost ratio is equal to 74.6%.

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 CASS 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 Cass Information Systems.

Corporate tax rate of 27% is the nominal tax rate for Cass Information Systems. 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 CASS 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 CASS are equal to 17.9%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Cass Information Systems 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 CASS is equal to 50%. 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 - $208 million for Cass Information Systems - 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 12.618 million for Cass Information Systems 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 Cass Information Systems at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Cass posts 3Q profit   [Oct-26-17 08:53AM  Associated Press]
▶ Cass posts 2Q profit   [Jul-28-17 01:24AM  Associated Press]
▶ Cass posts 1Q profit   [Apr-27-17 09:38AM  Associated Press]
▶ Cass posts 4Q profit   [Feb-02-17 08:16AM  Associated Press]
▶ U.S. Shipping Demand Turns Upward on Consumer Spending   [Nov-25-16 02:31PM  at The Wall Street Journal]
▶ Today's Top Supply Chain and Logistics News From WSJ   [Aug-16-16 06:33AM  at The Wall Street Journal]
▶ Freight Shipments, Spending Declined in July   [Aug-15-16 03:49PM  at The Wall Street Journal]
▶ Transport Stocks Are Making Chart-Watchers Nervous About the Market   [Jul-07-16 03:51PM  at The Wall Street Journal]
Financial statements of CASS
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