Intrinsic value of Ceridian HCM Holding - CDAY

Previous Close

$43.75

  Intrinsic Value

$76.39

stock screener

  Rating & Target

str. buy

+75%

Previous close

$43.75

 
Intrinsic value

$76.39

 
Up/down potential

+75%

 
Rating

str. buy

We calculate the intrinsic value of CDAY 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 6.0

 

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, %
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  800
  852
  905
  961
  1,019
  1,080
  1,143
  1,209
  1,278
  1,350
  1,425
  1,503
  1,585
  1,671
  1,760
  1,854
  1,952
  2,055
  2,163
  2,276
  2,394
  2,518
  2,648
  2,784
  2,927
  3,076
  3,233
  3,398
  3,571
  3,752
Variable operating expenses, $m
  152
  147
  142
  136
  131
  125
  119
  112
  106
  99
  -139
  -146
  -154
  -163
  -171
  -180
  -190
  -200
  -211
  -222
  -233
  -245
  -258
  -271
  -285
  -299
  -315
  -331
  -348
  -365
Fixed operating expenses, $m
  586
  598
  612
  625
  639
  653
  667
  682
  697
  712
  728
  744
  760
  777
  794
  812
  830
  848
  866
  885
  905
  925
  945
  966
  987
  1,009
  1,031
  1,054
  1,077
  1,101
Total operating expenses, $m
  738
  745
  754
  761
  770
  778
  786
  794
  803
  811
  589
  598
  606
  614
  623
  632
  640
  648
  655
  663
  672
  680
  687
  695
  702
  710
  716
  723
  729
  736
Operating income, $m
  63
  106
  152
  200
  250
  302
  357
  415
  475
  539
  835
  905
  979
  1,056
  1,138
  1,223
  1,313
  1,408
  1,507
  1,612
  1,722
  1,838
  1,960
  2,089
  2,224
  2,367
  2,517
  2,675
  2,841
  3,016
EBITDA, $m
  337
  383
  432
  483
  536
  592
  650
  712
  776
  843
  914
  988
  1,066
  1,148
  1,235
  1,325
  1,421
  1,521
  1,626
  1,737
  1,854
  1,977
  2,106
  2,242
  2,386
  2,536
  2,695
  2,862
  3,038
  3,223
Interest expense (income), $m
  0
  86
  113
  143
  174
  206
  239
  274
  311
  349
  388
  430
  473
  518
  565
  615
  666
  720
  777
  836
  898
  963
  1,031
  1,103
  1,177
  1,256
  1,338
  1,424
  1,515
  1,610
  1,709
Earnings before tax, $m
  -24
  -7
  9
  26
  44
  63
  83
  104
  127
  151
  406
  433
  461
  491
  523
  557
  593
  631
  671
  714
  759
  807
  858
  911
  968
  1,029
  1,092
  1,160
  1,232
  1,307
Tax expense, $m
  0
  0
  2
  7
  12
  17
  22
  28
  34
  41
  110
  117
  124
  133
  141
  150
  160
  170
  181
  193
  205
  218
  232
  246
  261
  278
  295
  313
  333
  353
Net income, $m
  -24
  -7
  7
  19
  32
  46
  61
  76
  92
  110
  296
  316
  336
  358
  382
  406
  433
  460
  490
  521
  554
  589
  626
  665
  707
  751
  798
  847
  899
  954

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
  7,145
  7,605
  8,084
  8,583
  9,102
  9,643
  10,207
  10,795
  11,410
  12,051
  12,720
  13,420
  14,152
  14,917
  15,718
  16,555
  17,432
  18,350
  19,312
  20,319
  21,375
  22,481
  23,640
  24,856
  26,130
  27,467
  28,869
  30,339
  31,881
  33,499
Adjusted assets (=assets-cash), $m
  7,145
  7,605
  8,084
  8,583
  9,102
  9,643
  10,207
  10,795
  11,410
  12,051
  12,720
  13,420
  14,152
  14,917
  15,718
  16,555
  17,432
  18,350
  19,312
  20,319
  21,375
  22,481
  23,640
  24,856
  26,130
  27,467
  28,869
  30,339
  31,881
  33,499
Revenue / Adjusted assets
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
Average production assets, $m
  1,324
  1,410
  1,498
  1,591
  1,687
  1,787
  1,892
  2,001
  2,115
  2,234
  2,358
  2,488
  2,623
  2,765
  2,913
  3,069
  3,231
  3,401
  3,580
  3,766
  3,962
  4,167
  4,382
  4,607
  4,844
  5,091
  5,351
  5,624
  5,910
  6,209
Working capital, $m
  -4,421
  -4,706
  -5,002
  -5,311
  -5,632
  -5,967
  -6,316
  -6,680
  -7,060
  -7,457
  -7,871
  -8,305
  -8,757
  -9,231
  -9,726
  -10,244
  -10,787
  -11,355
  -11,950
  -12,574
  -13,227
  -13,911
  -14,629
  -15,381
  -16,169
  -16,997
  -17,864
  -18,774
  -19,728
  -20,729
Total debt, $m
  1,469
  1,854
  2,256
  2,673
  3,108
  3,562
  4,035
  4,528
  5,042
  5,580
  6,141
  6,727
  7,341
  7,982
  8,653
  9,354
  10,089
  10,859
  11,664
  12,509
  13,393
  14,320
  15,292
  16,310
  17,378
  18,498
  19,673
  20,905
  22,198
  23,554
Total liabilities, $m
  5,988
  6,373
  6,774
  7,192
  7,627
  8,081
  8,553
  9,047
  9,561
  10,099
  10,660
  11,246
  11,859
  12,501
  13,171
  13,873
  14,608
  15,378
  16,183
  17,028
  17,912
  18,839
  19,811
  20,829
  21,897
  23,017
  24,192
  25,424
  26,717
  28,073
Total equity, $m
  1,157
  1,232
  1,310
  1,390
  1,474
  1,562
  1,654
  1,749
  1,848
  1,952
  2,061
  2,174
  2,293
  2,417
  2,546
  2,682
  2,824
  2,973
  3,129
  3,292
  3,463
  3,642
  3,830
  4,027
  4,233
  4,450
  4,677
  4,915
  5,165
  5,427
Total liabilities and equity, $m
  7,145
  7,605
  8,084
  8,582
  9,101
  9,643
  10,207
  10,796
  11,409
  12,051
  12,721
  13,420
  14,152
  14,918
  15,717
  16,555
  17,432
  18,351
  19,312
  20,320
  21,375
  22,481
  23,641
  24,856
  26,130
  27,467
  28,869
  30,339
  31,882
  33,500
Debt-to-equity ratio
  1.270
  1.510
  1.720
  1.920
  2.110
  2.280
  2.440
  2.590
  2.730
  2.860
  2.980
  3.090
  3.200
  3.300
  3.400
  3.490
  3.570
  3.650
  3.730
  3.800
  3.870
  3.930
  3.990
  4.050
  4.110
  4.160
  4.210
  4.250
  4.300
  4.340
Adjusted equity ratio
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -7
  7
  19
  32
  46
  61
  76
  92
  110
  296
  316
  336
  358
  382
  406
  433
  460
  490
  521
  554
  589
  626
  665
  707
  751
  798
  847
  899
  954
Depreciation, amort., depletion, $m
  274
  277
  280
  283
  286
  290
  293
  297
  300
  304
  79
  83
  87
  92
  97
  102
  108
  113
  119
  126
  132
  139
  146
  154
  161
  170
  178
  187
  197
  207
Funds from operations, $m
  250
  270
  287
  302
  318
  335
  354
  373
  393
  414
  375
  399
  424
  451
  479
  509
  540
  574
  609
  647
  686
  728
  772
  819
  868
  921
  976
  1,034
  1,096
  1,161
Change in working capital, $m
  -274
  -285
  -296
  -308
  -321
  -335
  -349
  -364
  -380
  -397
  -414
  -433
  -453
  -473
  -495
  -518
  -543
  -568
  -595
  -623
  -653
  -684
  -717
  -752
  -789
  -827
  -867
  -910
  -954
  -1,001
Cash from operations, $m
  524
  555
  583
  610
  640
  670
  703
  737
  773
  811
  789
  832
  877
  924
  974
  1,027
  1,083
  1,142
  1,204
  1,270
  1,339
  1,412
  1,490
  1,571
  1,657
  1,748
  1,843
  1,944
  2,050
  2,163
Maintenance CAPEX, $m
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -79
  -83
  -87
  -92
  -97
  -102
  -108
  -113
  -119
  -126
  -132
  -139
  -146
  -154
  -161
  -170
  -178
  -187
  -197
New CAPEX, $m
  -81
  -85
  -89
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -124
  -130
  -136
  -142
  -148
  -155
  -163
  -170
  -178
  -187
  -196
  -205
  -215
  -225
  -236
  -248
  -260
  -273
  -286
  -300
Cash from investing activities, $m
  -122
  -129
  -136
  -142
  -149
  -156
  -165
  -172
  -181
  -189
  -198
  -209
  -219
  -229
  -240
  -252
  -265
  -278
  -291
  -306
  -322
  -337
  -354
  -371
  -390
  -409
  -430
  -451
  -473
  -497
Free cash flow, $m
  401
  425
  447
  468
  490
  514
  539
  565
  592
  622
  591
  623
  658
  695
  734
  775
  818
  864
  913
  964
  1,018
  1,075
  1,136
  1,200
  1,267
  1,338
  1,414
  1,493
  1,577
  1,666
Issuance/(repayment) of debt, $m
  349
  386
  401
  418
  435
  453
  473
  493
  515
  537
  561
  587
  613
  641
  671
  702
  735
  769
  806
  844
  884
  927
  972
  1,019
  1,068
  1,120
  1,175
  1,232
  1,292
  1,356
Issuance/(repurchase) of shares, $m
  90
  81
  71
  62
  52
  42
  31
  19
  7
  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  
  439
  467
  472
  480
  487
  495
  504
  512
  522
  537
  561
  587
  613
  641
  671
  702
  735
  769
  806
  844
  884
  927
  972
  1,019
  1,068
  1,120
  1,175
  1,232
  1,292
  1,356
Total cash flow (excl. dividends), $m
  840
  892
  919
  948
  977
  1,009
  1,042
  1,077
  1,114
  1,159
  1,152
  1,210
  1,271
  1,336
  1,404
  1,477
  1,553
  1,633
  1,718
  1,808
  1,902
  2,002
  2,107
  2,218
  2,335
  2,458
  2,588
  2,725
  2,870
  3,022
Retained Cash Flow (-), $m
  -90
  -81
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -104
  -109
  -113
  -119
  -124
  -130
  -136
  -142
  -149
  -156
  -163
  -171
  -179
  -188
  -197
  -206
  -217
  -227
  -238
  -250
  -262
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
  750
  811
  842
  867
  893
  921
  951
  982
  1,015
  1,055
  1,043
  1,097
  1,153
  1,212
  1,275
  1,341
  1,411
  1,485
  1,563
  1,645
  1,732
  1,823
  1,920
  2,021
  2,129
  2,242
  2,361
  2,487
  2,620
  2,759
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
  719
  742
  733
  714
  692
  669
  642
  614
  583
  553
  496
  468
  438
  407
  374
  341
  307
  273
  241
  209
  179
  151
  126
  103
  83
  65
  51
  38
  29
  21
Current shareholders' claim on cash, %
  98.5
  97.3
  96.3
  95.5
  94.8
  94.3
  94.0
  93.8
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7
  93.7

FINANCIAL RATIOS  of  Ceridian HCM Holding (CDAY)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CDAY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CDAY stock intrinsic value calculation we used $750.7 million for the last fiscal year's total revenue generated by Ceridian HCM Holding. The default revenue input number comes from 0001 income statement of Ceridian HCM Holding. 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 CDAY stock valuation model: a) initial revenue growth rate of 6.6% 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 CDAY is calculated based on our internal credit rating of Ceridian HCM Holding, 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 Ceridian HCM Holding.
    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 CDAY stock the variable cost ratio is equal to 20.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $573 million in the base year in the intrinsic value calculation for CDAY 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 7.7% for Ceridian HCM Holding.

Corporate tax rate of 27% is the nominal tax rate for Ceridian HCM Holding. 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 CDAY 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 CDAY are equal to 165.5%.

Life of production assets of 41.3 years is the average useful life of capital assets used in Ceridian HCM Holding 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 CDAY is equal to -552.5%. 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 - $1091.2 million for Ceridian HCM Holding - 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 137.645 million for Ceridian HCM Holding 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 Ceridian HCM Holding at the current share price and the inputted number of shares is $6.0 billion.

COMPANY NEWS

▶ Tech Stocks Thrashed Again On Threat Of More China Tariffs   [Sep-17-18 04:21PM  Investor's Business Daily]
▶ Small Caps Lead Quiet Session; Nasdaq, S&P 500 Mostly Flat; Adobe Jumps   [Sep-14-18 04:23PM  Investor's Business Daily]
▶ IBD Stock Of The Day: Ceridian Aims To Make Work Life A Better Place   [Sep-13-18 02:55PM  Investor's Business Daily]
▶ Ceridian to Present at Upcoming Investor Conferences   [Aug-29-18 04:30PM  GlobeNewswire]
▶ Ceridian Announces UK HCM Executive Summit   [Aug-28-18 04:00AM  GlobeNewswire]
▶ Ceridian Reports Second Quarter 2018 Results   [Aug-08-18 04:30PM  GlobeNewswire]
▶ Ceridian launches Dayforce in the UK   [Jul-31-18 07:00AM  GlobeNewswire]
▶ Ceridian Announces the Appointment of New Directors   [Jul-24-18 04:30PM  GlobeNewswire]
▶ Ceridian Reports First Quarter 2018 Results   [06:30AM  GlobeNewswire]
▶ DocuSign stock soars after IPO as cloud fever continues   [Apr-27-18 05:36PM  MarketWatch]
▶ NLight stock jumps on first day of trading   [Apr-26-18 12:40PM  MarketWatch]
▶ IIROC Trade Resumption - CDAY   [11:21AM  CNW Group]
▶ IIROC Trading Halt - CDAY   [07:58AM  CNW Group]

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