Intrinsic value of Conduent Incorporated - CNDT

Previous Close

$6.51

  Intrinsic Value

$5.02

stock screener

  Rating & Target

sell

-23%

Previous close

$6.51

 
Intrinsic value

$5.02

 
Up/down potential

-23%

 
Rating

sell

We calculate the intrinsic value of CNDT 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 1.4

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  5,501
  5,627
  5,772
  5,934
  6,114
  6,312
  6,527
  6,759
  7,010
  7,279
  7,567
  7,874
  8,201
  8,548
  8,917
  9,308
  9,722
  10,159
  10,621
  11,109
  11,624
  12,167
  12,740
  13,343
  13,978
  14,647
  15,351
  16,092
  16,871
  17,691
Variable operating expenses, $m
  2,902
  2,959
  3,025
  3,099
  3,180
  3,270
  3,367
  3,473
  3,587
  3,709
  3,433
  3,573
  3,721
  3,879
  4,046
  4,223
  4,411
  4,610
  4,819
  5,041
  5,274
  5,521
  5,780
  6,054
  6,342
  6,646
  6,965
  7,301
  7,655
  8,027
Fixed operating expenses, $m
  2,834
  2,896
  2,960
  3,025
  3,092
  3,160
  3,229
  3,300
  3,373
  3,447
  3,523
  3,600
  3,680
  3,761
  3,843
  3,928
  4,014
  4,103
  4,193
  4,285
  4,379
  4,476
  4,574
  4,675
  4,778
  4,883
  4,990
  5,100
  5,212
  5,327
Total operating expenses, $m
  5,736
  5,855
  5,985
  6,124
  6,272
  6,430
  6,596
  6,773
  6,960
  7,156
  6,956
  7,173
  7,401
  7,640
  7,889
  8,151
  8,425
  8,713
  9,012
  9,326
  9,653
  9,997
  10,354
  10,729
  11,120
  11,529
  11,955
  12,401
  12,867
  13,354
Operating income, $m
  -235
  -228
  -213
  -189
  -158
  -118
  -70
  -14
  50
  123
  611
  701
  800
  909
  1,028
  1,157
  1,296
  1,447
  1,609
  1,783
  1,970
  2,171
  2,385
  2,614
  2,858
  3,118
  3,395
  3,690
  4,004
  4,337
EBITDA, $m
  420
  433
  455
  486
  526
  574
  632
  699
  774
  859
  954
  1,058
  1,172
  1,297
  1,432
  1,579
  1,737
  1,908
  2,091
  2,287
  2,498
  2,723
  2,963
  3,219
  3,492
  3,783
  4,092
  4,420
  4,769
  5,139
Interest expense (income), $m
  0
  97
  102
  107
  112
  119
  126
  134
  142
  152
  162
  172
  184
  196
  209
  223
  238
  253
  270
  287
  305
  325
  345
  367
  390
  414
  439
  466
  494
  523
  554
Earnings before tax, $m
  -332
  -330
  -320
  -302
  -277
  -244
  -204
  -156
  -101
  -39
  438
  517
  604
  700
  805
  919
  1,043
  1,177
  1,322
  1,478
  1,646
  1,825
  2,018
  2,224
  2,444
  2,679
  2,930
  3,197
  3,481
  3,783
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  118
  140
  163
  189
  217
  248
  282
  318
  357
  399
  444
  493
  545
  600
  660
  723
  791
  863
  940
  1,021
Net income, $m
  -332
  -330
  -320
  -302
  -277
  -244
  -204
  -156
  -101
  -39
  320
  377
  441
  511
  588
  671
  761
  859
  965
  1,079
  1,201
  1,333
  1,473
  1,624
  1,784
  1,956
  2,139
  2,333
  2,541
  2,761

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
  6,816
  6,973
  7,152
  7,354
  7,577
  7,821
  8,088
  8,376
  8,686
  9,020
  9,376
  9,757
  10,162
  10,593
  11,050
  11,534
  12,047
  12,589
  13,161
  13,766
  14,404
  15,077
  15,786
  16,534
  17,321
  18,150
  19,022
  19,940
  20,906
  21,921
Adjusted assets (=assets-cash), $m
  6,816
  6,973
  7,152
  7,354
  7,577
  7,821
  8,088
  8,376
  8,686
  9,020
  9,376
  9,757
  10,162
  10,593
  11,050
  11,534
  12,047
  12,589
  13,161
  13,766
  14,404
  15,077
  15,786
  16,534
  17,321
  18,150
  19,022
  19,940
  20,906
  21,921
Revenue / Adjusted assets
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
Average production assets, $m
  2,420
  2,476
  2,540
  2,611
  2,690
  2,777
  2,872
  2,974
  3,084
  3,203
  3,329
  3,465
  3,608
  3,761
  3,924
  4,096
  4,278
  4,470
  4,673
  4,888
  5,115
  5,354
  5,605
  5,871
  6,150
  6,445
  6,754
  7,080
  7,423
  7,784
Working capital, $m
  66
  68
  69
  71
  73
  76
  78
  81
  84
  87
  91
  94
  98
  103
  107
  112
  117
  122
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
  202
  212
Total debt, $m
  1,640
  1,721
  1,814
  1,918
  2,034
  2,160
  2,298
  2,448
  2,609
  2,781
  2,966
  3,163
  3,373
  3,596
  3,833
  4,084
  4,349
  4,630
  4,927
  5,240
  5,570
  5,919
  6,286
  6,674
  7,081
  7,511
  7,962
  8,438
  8,938
  9,464
Total liabilities, $m
  3,531
  3,612
  3,705
  3,809
  3,925
  4,051
  4,189
  4,339
  4,500
  4,672
  4,857
  5,054
  5,264
  5,487
  5,724
  5,975
  6,240
  6,521
  6,818
  7,131
  7,461
  7,810
  8,177
  8,565
  8,972
  9,402
  9,853
  10,329
  10,829
  11,355
Total equity, $m
  3,286
  3,361
  3,447
  3,544
  3,652
  3,770
  3,898
  4,037
  4,187
  4,348
  4,519
  4,703
  4,898
  5,106
  5,326
  5,559
  5,806
  6,068
  6,344
  6,635
  6,943
  7,267
  7,609
  7,969
  8,349
  8,748
  9,169
  9,611
  10,077
  10,566
Total liabilities and equity, $m
  6,817
  6,973
  7,152
  7,353
  7,577
  7,821
  8,087
  8,376
  8,687
  9,020
  9,376
  9,757
  10,162
  10,593
  11,050
  11,534
  12,046
  12,589
  13,162
  13,766
  14,404
  15,077
  15,786
  16,534
  17,321
  18,150
  19,022
  19,940
  20,906
  21,921
Debt-to-equity ratio
  0.500
  0.510
  0.530
  0.540
  0.560
  0.570
  0.590
  0.610
  0.620
  0.640
  0.660
  0.670
  0.690
  0.700
  0.720
  0.730
  0.750
  0.760
  0.780
  0.790
  0.800
  0.810
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
Adjusted equity ratio
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -332
  -330
  -320
  -302
  -277
  -244
  -204
  -156
  -101
  -39
  320
  377
  441
  511
  588
  671
  761
  859
  965
  1,079
  1,201
  1,333
  1,473
  1,624
  1,784
  1,956
  2,139
  2,333
  2,541
  2,761
Depreciation, amort., depletion, $m
  655
  661
  668
  675
  683
  692
  702
  713
  724
  736
  343
  357
  372
  388
  404
  422
  441
  461
  482
  504
  527
  552
  578
  605
  634
  664
  696
  730
  765
  802
Funds from operations, $m
  323
  331
  348
  373
  407
  448
  498
  556
  623
  698
  663
  734
  813
  899
  992
  1,093
  1,202
  1,320
  1,447
  1,583
  1,729
  1,884
  2,051
  2,229
  2,418
  2,620
  2,835
  3,063
  3,306
  3,564
Change in working capital, $m
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Cash from operations, $m
  322
  330
  346
  371
  405
  446
  496
  553
  620
  694
  660
  731
  809
  895
  988
  1,088
  1,197
  1,315
  1,441
  1,577
  1,722
  1,878
  2,044
  2,222
  2,411
  2,612
  2,827
  3,054
  3,297
  3,554
Maintenance CAPEX, $m
  -244
  -250
  -255
  -262
  -269
  -277
  -286
  -296
  -307
  -318
  -330
  -343
  -357
  -372
  -388
  -404
  -422
  -441
  -461
  -482
  -504
  -527
  -552
  -578
  -605
  -634
  -664
  -696
  -730
  -765
New CAPEX, $m
  -49
  -56
  -64
  -71
  -79
  -87
  -95
  -102
  -110
  -118
  -127
  -135
  -144
  -153
  -162
  -172
  -182
  -192
  -203
  -215
  -227
  -239
  -252
  -265
  -279
  -294
  -310
  -326
  -343
  -361
Cash from investing activities, $m
  -293
  -306
  -319
  -333
  -348
  -364
  -381
  -398
  -417
  -436
  -457
  -478
  -501
  -525
  -550
  -576
  -604
  -633
  -664
  -697
  -731
  -766
  -804
  -843
  -884
  -928
  -974
  -1,022
  -1,073
  -1,126
Free cash flow, $m
  29
  25
  27
  38
  56
  82
  115
  155
  203
  258
  203
  252
  308
  370
  438
  512
  593
  681
  777
  880
  992
  1,112
  1,240
  1,378
  1,526
  1,684
  1,852
  2,032
  2,224
  2,428
Issuance/(repayment) of debt, $m
  73
  81
  93
  104
  115
  127
  138
  149
  161
  173
  185
  197
  210
  223
  237
  251
  266
  281
  297
  313
  331
  349
  367
  387
  408
  429
  452
  475
  500
  526
Issuance/(repurchase) of shares, $m
  396
  405
  406
  399
  384
  362
  332
  295
  251
  199
  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  
  469
  486
  499
  503
  499
  489
  470
  444
  412
  372
  185
  197
  210
  223
  237
  251
  266
  281
  297
  313
  331
  349
  367
  387
  408
  429
  452
  475
  500
  526
Total cash flow (excl. dividends), $m
  497
  511
  526
  541
  556
  570
  585
  600
  615
  630
  387
  450
  518
  593
  674
  763
  859
  962
  1,074
  1,194
  1,322
  1,460
  1,608
  1,765
  1,934
  2,113
  2,304
  2,508
  2,724
  2,954
Retained Cash Flow (-), $m
  -396
  -405
  -406
  -399
  -384
  -362
  -332
  -295
  -251
  -199
  -172
  -183
  -195
  -208
  -220
  -233
  -247
  -261
  -276
  -291
  -308
  -324
  -342
  -360
  -379
  -399
  -420
  -442
  -465
  -490
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
  102
  106
  120
  142
  172
  208
  253
  304
  364
  431
  216
  266
  323
  385
  454
  529
  612
  701
  798
  902
  1,015
  1,136
  1,266
  1,405
  1,554
  1,714
  1,884
  2,065
  2,259
  2,465
Discount rate, %
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
  97
  96
  103
  115
  130
  147
  165
  182
  199
  213
  96
  105
  113
  117
  120
  119
  116
  111
  104
  96
  86
  76
  65
  55
  46
  37
  29
  22
  17
  12
Current shareholders' claim on cash, %
  85.1
  72.3
  61.7
  52.9
  45.8
  40.2
  35.7
  32.2
  29.6
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7
  27.7

Conduent Incorporated is a provider of business process services, including transaction-intensive processing, analytics and automation services. The Company's segments include Commercial Industries, Healthcare and Public Sector. The Commercial Industries segment provides business process services and customized solutions to clients in a range of industries (other than healthcare). The Healthcare segment provides industry-centric business process services to clients across the healthcare industry, including providers, payers, employers, pharmaceutical and life science companies and government agencies. The Public Sector segment provides government-centric business process services and subject matter experts to the United States federal, state and local and foreign governments. The Government Health Enterprise (HE) Medicaid Platform for all current state clients and Student Loan businesses are included in Other.

FINANCIAL RATIOS  of  Conduent Incorporated (CNDT)

Valuation Ratios
P/E Ratio -1.3
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow -16.5
Growth Rates
Sales Growth Rate -3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.1%
Cap. Spend. - 3 Yr. Gr. Rate -8.2%
Financial Strength
Quick Ratio 14
Current Ratio 0.2
LT Debt to Equity 55.8%
Total Debt to Equity 56.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -11.7%
Ret/ On Assets - 3 Yr. Avg. -5.8%
Return On Total Capital -18.6%
Ret/ On T. Cap. - 3 Yr. Avg. -9.7%
Return On Equity -22.9%
Return On Equity - 3 Yr. Avg. -11.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 14.2%
Gross Margin - 3 Yr. Avg. 13.6%
EBITDA Margin -9.6%
EBITDA Margin - 3 Yr. Avg. 0.8%
Operating Margin -18.7%
Oper. Margin - 3 Yr. Avg. -8.2%
Pre-Tax Margin -19.1%
Pre-Tax Margin - 3 Yr. Avg. -9.2%
Net Profit Margin -15.3%
Net Profit Margin - 3 Yr. Avg. -7.6%
Effective Tax Rate 19.9%
Eff/ Tax Rate - 3 Yr. Avg. -59.6%
Payout Ratio 0%

CNDT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNDT stock intrinsic value calculation we used $5393 million for the last fiscal year's total revenue generated by Conduent Incorporated. The default revenue input number comes from 0001 income statement of Conduent Incorporated. 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 CNDT stock valuation model: a) initial revenue growth rate of 2% 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 4.7%, whose default value for CNDT is calculated based on our internal credit rating of Conduent Incorporated, 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 Conduent Incorporated.
    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 CNDT stock the variable cost ratio is equal to 52.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2773 million in the base year in the intrinsic value calculation for CNDT 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 6.2% for Conduent Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Conduent Incorporated. 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 CNDT 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 CNDT are equal to 44%.

Life of production assets of 9.7 years is the average useful life of capital assets used in Conduent Incorporated 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 CNDT is equal to 1.2%. 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 - $3222 million for Conduent Incorporated - 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 211.906 million for Conduent Incorporated 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 Conduent Incorporated at the current share price and the inputted number of shares is $1.4 billion.

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