Intrinsic value of Cass Information Systems - CASS

Previous Close

$71.20

  Intrinsic Value

$7.40

stock screener

  Rating & Target

str. sell

-90%

Previous close

$71.20

 
Intrinsic value

$7.40

 
Up/down potential

-90%

 
Rating

str. sell

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

Revenue (in 2017), $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 0.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  146
  156
  168
  180
  192
  205
  218
  232
  246
  261
  277
  293
  310
  328
  346
  366
  386
  407
  429
  452
  476
  501
  528
  555
  584
  615
  647
  680
  715
  752
Variable operating expenses, $m
  98
  101
  103
  106
  108
  111
  114
  117
  120
  124
  61
  64
  68
  72
  76
  80
  85
  89
  94
  99
  105
  110
  116
  122
  128
  135
  142
  149
  157
  165
Fixed operating expenses, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
Total operating expenses, $m
  102
  105
  107
  110
  112
  116
  119
  122
  125
  129
  66
  69
  73
  77
  82
  86
  91
  95
  100
  105
  111
  116
  123
  129
  135
  142
  149
  156
  165
  173
Operating income, $m
  43
  52
  61
  70
  79
  89
  99
  110
  121
  133
  211
  224
  237
  250
  265
  280
  295
  312
  329
  346
  365
  385
  405
  427
  449
  473
  497
  523
  551
  579
EBITDA, $m
  347
  373
  400
  429
  458
  489
  521
  554
  589
  625
  662
  701
  742
  785
  829
  876
  924
  975
  1,028
  1,083
  1,141
  1,202
  1,266
  1,332
  1,402
  1,475
  1,552
  1,632
  1,717
  1,805
Interest expense (income), $m
  2
  64
  62
  64
  67
  70
  73
  76
  79
  83
  86
  90
  93
  97
  102
  106
  110
  115
  120
  125
  130
  136
  142
  148
  154
  161
  168
  176
  183
  191
  200
Earnings before tax, $m
  -20
  -10
  -4
  3
  9
  16
  23
  31
  39
  47
  121
  130
  139
  149
  159
  169
  180
  192
  204
  216
  229
  243
  257
  272
  288
  305
  322
  340
  359
  379
Tax expense, $m
  0
  0
  0
  1
  3
  4
  6
  8
  10
  13
  33
  35
  38
  40
  43
  46
  49
  52
  55
  58
  62
  66
  69
  74
  78
  82
  87
  92
  97
  102
Net income, $m
  -20
  -10
  -4
  2
  7
  12
  17
  22
  28
  34
  89
  95
  102
  109
  116
  124
  132
  140
  149
  158
  167
  177
  188
  199
  210
  222
  235
  248
  262
  277

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
  728
  782
  839
  898
  960
  1,024
  1,090
  1,159
  1,231
  1,306
  1,384
  1,465
  1,550
  1,639
  1,731
  1,828
  1,929
  2,034
  2,144
  2,260
  2,380
  2,507
  2,639
  2,777
  2,922
  3,074
  3,234
  3,401
  3,576
  3,759
Adjusted assets (=assets-cash), $m
  728
  782
  839
  898
  960
  1,024
  1,090
  1,159
  1,231
  1,306
  1,384
  1,465
  1,550
  1,639
  1,731
  1,828
  1,929
  2,034
  2,144
  2,260
  2,380
  2,507
  2,639
  2,777
  2,922
  3,074
  3,234
  3,401
  3,576
  3,759
Revenue / Adjusted assets
  0.201
  0.199
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
Average production assets, $m
  2,373
  2,551
  2,737
  2,929
  3,130
  3,338
  3,555
  3,780
  4,014
  4,259
  4,513
  4,778
  5,055
  5,344
  5,645
  5,960
  6,289
  6,633
  6,992
  7,369
  7,762
  8,174
  8,605
  9,057
  9,530
  10,026
  10,545
  11,089
  11,660
  12,258
Working capital, $m
  -1,467
  -1,577
  -1,692
  -1,811
  -1,934
  -2,063
  -2,197
  -2,336
  -2,481
  -2,632
  -2,790
  -2,954
  -3,125
  -3,303
  -3,489
  -3,684
  -3,887
  -4,100
  -4,322
  -4,554
  -4,798
  -5,052
  -5,319
  -5,598
  -5,890
  -6,197
  -6,518
  -6,854
  -7,207
  -7,577
Total debt, $m
  1,140
  1,190
  1,241
  1,294
  1,349
  1,407
  1,466
  1,529
  1,593
  1,661
  1,731
  1,804
  1,881
  1,960
  2,043
  2,130
  2,221
  2,316
  2,415
  2,519
  2,628
  2,741
  2,860
  2,985
  3,116
  3,252
  3,396
  3,546
  3,703
  3,869
Total liabilities, $m
  655
  704
  755
  808
  864
  921
  981
  1,043
  1,108
  1,175
  1,246
  1,319
  1,395
  1,475
  1,558
  1,645
  1,736
  1,831
  1,930
  2,034
  2,142
  2,256
  2,375
  2,500
  2,630
  2,767
  2,910
  3,061
  3,218
  3,383
Total equity, $m
  73
  78
  84
  90
  96
  102
  109
  116
  123
  131
  138
  147
  155
  164
  173
  183
  193
  203
  214
  226
  238
  251
  264
  278
  292
  307
  323
  340
  358
  376
Total liabilities and equity, $m
  728
  782
  839
  898
  960
  1,023
  1,090
  1,159
  1,231
  1,306
  1,384
  1,466
  1,550
  1,639
  1,731
  1,828
  1,929
  2,034
  2,144
  2,260
  2,380
  2,507
  2,639
  2,778
  2,922
  3,074
  3,233
  3,401
  3,576
  3,759
Debt-to-equity ratio
  15.670
  15.200
  14.780
  14.400
  14.060
  13.740
  13.450
  13.190
  12.940
  12.720
  12.510
  12.310
  12.130
  11.960
  11.800
  11.660
  11.520
  11.390
  11.260
  11.150
  11.040
  10.940
  10.840
  10.750
  10.660
  10.580
  10.500
  10.430
  10.360
  10.290
Adjusted equity ratio
  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
  -20
  -10
  -4
  2
  7
  12
  17
  22
  28
  34
  89
  95
  102
  109
  116
  124
  132
  140
  149
  158
  167
  177
  188
  199
  210
  222
  235
  248
  262
  277
Depreciation, amort., depletion, $m
  303
  321
  340
  359
  379
  400
  422
  444
  468
  492
  451
  478
  506
  534
  565
  596
  629
  663
  699
  737
  776
  817
  861
  906
  953
  1,003
  1,054
  1,109
  1,166
  1,226
Funds from operations, $m
  283
  311
  336
  361
  386
  412
  439
  467
  496
  526
  540
  573
  607
  643
  680
  720
  760
  803
  848
  895
  943
  995
  1,048
  1,104
  1,163
  1,225
  1,289
  1,357
  1,428
  1,503
Change in working capital, $m
  -106
  -110
  -115
  -119
  -124
  -129
  -134
  -139
  -145
  -151
  -157
  -164
  -171
  -178
  -186
  -195
  -203
  -213
  -222
  -232
  -243
  -255
  -267
  -279
  -292
  -306
  -321
  -336
  -353
  -370
Cash from operations, $m
  389
  422
  451
  480
  510
  540
  573
  606
  641
  677
  697
  737
  778
  821
  867
  914
  964
  1,016
  1,070
  1,127
  1,187
  1,249
  1,315
  1,384
  1,456
  1,531
  1,610
  1,694
  1,781
  1,872
Maintenance CAPEX, $m
  -221
  -237
  -255
  -274
  -293
  -313
  -334
  -355
  -378
  -401
  -426
  -451
  -478
  -506
  -534
  -565
  -596
  -629
  -663
  -699
  -737
  -776
  -817
  -861
  -906
  -953
  -1,003
  -1,054
  -1,109
  -1,166
New CAPEX, $m
  -167
  -178
  -185
  -193
  -200
  -208
  -217
  -225
  -235
  -244
  -255
  -265
  -277
  -289
  -301
  -315
  -329
  -344
  -360
  -376
  -394
  -412
  -431
  -452
  -473
  -496
  -519
  -544
  -571
  -598
Cash from investing activities, $m
  -388
  -415
  -440
  -467
  -493
  -521
  -551
  -580
  -613
  -645
  -681
  -716
  -755
  -795
  -835
  -880
  -925
  -973
  -1,023
  -1,075
  -1,131
  -1,188
  -1,248
  -1,313
  -1,379
  -1,449
  -1,522
  -1,598
  -1,680
  -1,764
Free cash flow, $m
  2
  6
  10
  14
  16
  19
  22
  25
  28
  31
  17
  20
  24
  27
  31
  35
  39
  43
  47
  52
  56
  61
  66
  71
  77
  83
  89
  95
  101
  108
Issuance/(repayment) of debt, $m
  -37
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  143
  150
  158
  165
Issuance/(repurchase) of shares, $m
  106
  15
  9
  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
Cash from financing (excl. dividends), $m  
  69
  64
  60
  57
  55
  57
  60
  62
  65
  67
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  143
  150
  158
  165
Total cash flow (excl. dividends), $m
  72
  71
  71
  71
  72
  77
  82
  87
  93
  99
  87
  93
  100
  107
  114
  122
  130
  138
  146
  155
  165
  175
  185
  196
  207
  219
  232
  245
  259
  273
Retained Cash Flow (-), $m
  -106
  -15
  -9
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
Prev. year cash balance distribution, $m
  13
  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
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
Cash available for distribution, $m
  -21
  55
  61
  65
  66
  70
  75
  80
  86
  91
  79
  85
  92
  98
  105
  112
  119
  127
  135
  144
  153
  162
  172
  182
  193
  204
  216
  228
  241
  255
Discount rate, %
  14.30
  15.02
  15.77
  16.55
  17.38
  18.25
  19.16
  20.12
  21.13
  22.18
  23.29
  24.46
  25.68
  26.96
  28.31
  29.73
  31.22
  32.78
  34.41
  36.14
  37.94
  39.84
  41.83
  43.92
  46.12
  48.42
  50.85
  53.39
  56.06
  58.86
PV of cash for distribution, $m
  -19
  42
  40
  35
  29
  26
  22
  19
  15
  12
  8
  6
  5
  3
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  41.3
  36.9
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2
  35.2

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 36.5
Price to Sales 7
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 25
Price to Free Cash Flow 29.2
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 $135 million for the last fiscal year's total revenue generated by Cass Information Systems. The default revenue input number comes from 2017 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 7.8% 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 14.3%, 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 71%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4 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 5.4% 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 1.7%.

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 1630.5%.

Life of production assets of 10 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 -1007.8%. 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 - $0 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 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 $0.9 billion.

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COMPANY NEWS

▶ Cass: 2Q Earnings Snapshot   [Jul-26-18 09:20AM  Associated Press]
▶ Cass: 1Q Earnings Snapshot   [Apr-26-18 10:18AM  Associated Press]
▶ J.B. Hunt Profit Jumps on Strong Freight Demand Pricing Gains   [Apr-16-18 03:00PM  The Wall Street Journal]
▶ Cass posts 4Q profit   [Feb-01-18 09:23AM  Associated Press]
▶ 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]
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