Intrinsic value of CSP - CSPI

Previous Close

$11.69

  Intrinsic Value

$21.31

stock screener

  Rating & Target

str. buy

+82%

Previous close

$11.69

 
Intrinsic value

$21.31

 
Up/down potential

+82%

 
Rating

str. buy

We calculate the intrinsic value of CSPI 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 0.0

 

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, %
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  120
  129
  138
  148
  158
  169
  180
  192
  204
  216
  229
  243
  257
  271
  287
  303
  320
  337
  355
  375
  395
  416
  438
  461
  485
  510
  536
  564
  593
  624
Variable operating expenses, $m
  115
  124
  133
  142
  152
  162
  173
  184
  195
  207
  220
  233
  246
  261
  275
  291
  307
  324
  341
  360
  379
  399
  420
  442
  465
  490
  515
  542
  570
  599
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
  115
  124
  133
  142
  152
  162
  173
  184
  195
  207
  220
  233
  246
  261
  275
  291
  307
  324
  341
  360
  379
  399
  420
  442
  465
  490
  515
  542
  570
  599
Operating income, $m
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  21
  23
  24
  25
EBITDA, $m
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
Tax expense, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
Net income, $m
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12

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
  63
  68
  73
  78
  84
  89
  95
  101
  108
  114
  121
  128
  136
  143
  152
  160
  169
  178
  188
  198
  209
  220
  231
  243
  256
  270
  284
  298
  314
  330
Adjusted assets (=assets-cash), $m
  63
  68
  73
  78
  84
  89
  95
  101
  108
  114
  121
  128
  136
  143
  152
  160
  169
  178
  188
  198
  209
  220
  231
  243
  256
  270
  284
  298
  314
  330
Revenue / Adjusted assets
  1.905
  1.897
  1.890
  1.897
  1.881
  1.899
  1.895
  1.901
  1.889
  1.895
  1.893
  1.898
  1.890
  1.895
  1.888
  1.894
  1.893
  1.893
  1.888
  1.894
  1.890
  1.891
  1.896
  1.897
  1.895
  1.889
  1.887
  1.893
  1.889
  1.891
Average production assets, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
Working capital, $m
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
Total debt, $m
  3
  6
  9
  13
  16
  20
  23
  27
  31
  36
  40
  45
  49
  54
  60
  65
  71
  77
  83
  90
  96
  104
  111
  119
  127
  136
  145
  154
  164
  174
Total liabilities, $m
  41
  44
  47
  50
  54
  58
  61
  65
  69
  74
  78
  83
  87
  92
  98
  103
  109
  115
  121
  128
  134
  141
  149
  157
  165
  174
  183
  192
  202
  212
Total equity, $m
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
  117
Total liabilities and equity, $m
  64
  68
  73
  78
  84
  90
  95
  101
  107
  115
  121
  129
  135
  143
  152
  160
  169
  178
  188
  198
  208
  219
  231
  244
  256
  270
  284
  298
  314
  329
Debt-to-equity ratio
  0.130
  0.240
  0.350
  0.450
  0.540
  0.620
  0.690
  0.760
  0.820
  0.880
  0.930
  0.980
  1.020
  1.070
  1.110
  1.140
  1.180
  1.210
  1.240
  1.270
  1.300
  1.320
  1.350
  1.370
  1.390
  1.410
  1.430
  1.450
  1.470
  1.490
Adjusted equity ratio
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Funds from operations, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Cash from operations, $m
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $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 from investing activities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Free cash flow, $m
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Issuance/(repayment) of debt, $m
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
Total cash flow (excl. dividends), $m
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
Retained Cash Flow (-), $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
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
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
Cash available for distribution, $m
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
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
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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
  100.0

CSP Inc. and its subsidiaries develop and market information technology (IT) integration solutions, security and managed services, network adapters, and cluster computer systems. The Company operates in two segments: High Performance Products (HPP) and Technology Solutions (TS). The HPP segment comprises two product lines: its Multicomputer product portfolio of computing systems for digital signal processing (DSP) applications within the defense market, and its Myricom product line of network Ethernet adapters that are offered to both commercial and government customers. In the TS segment, the Company focuses on value added reseller (VAR) integrated solutions, including third-party hardware, software and technical computer-related consulting services and managed services. Its DSP product line utilizes hardware components and open source software to deliver computer solutions to the customers. It provides installation, integration, logistical assistance and other value-added services.

FINANCIAL RATIOS  of  CSP (CSPI)

Valuation Ratios
P/E Ratio 15.4
Price to Sales 0.4
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 15.4
Price to Free Cash Flow 15.4
Growth Rates
Sales Growth Rate 7.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 3.9%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 10.4%
Return On Equity 15.4%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 22.5%
Gross Margin - 3 Yr. Avg. 22.7%
EBITDA Margin 4.5%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin 2.7%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 66.7%

CSPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSPI stock intrinsic value calculation we used $111 million for the last fiscal year's total revenue generated by CSP. The default revenue input number comes from 2017 income statement of CSP. 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 CSPI stock valuation model: a) initial revenue growth rate of 7.9% 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 CSPI is calculated based on our internal credit rating of CSP, 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 CSP.
    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 CSPI stock the variable cost ratio is equal to 96%.

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 CSPI 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 CSP.

Corporate tax rate of 27% is the nominal tax rate for CSP. 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 CSPI stock is equal to 0.5%.

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 CSPI are equal to 1.6%.

Life of production assets of 10 years is the average useful life of capital assets used in CSP 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 CSPI is equal to -11.5%. 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 - $21 million for CSP - 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 4 million for CSP 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 CSP at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
IBM International 146.06 149.81  hold
HPQ HP 24.54 23.05  hold
INTC Intel 47.10 28.34  sell
DVMT Dell Technolog 95.01 203.89  str.buy
SILC Silicom 38.54 23.79  sell
CSCO Cisco Systems 45.87 37.63  hold
SMCI Super Micro Co 18.85 31.98  str.buy

COMPANY NEWS

▶ CSP Inc. to Host Earnings Call   [08:00AM  ACCESSWIRE]
▶ CSPi Closes on Sale of Germany Operations   [Jul-31-18 09:31AM  GlobeNewswire]
▶ CSPi Makes Top 100 Best Companies List   [Jul-23-18 10:05AM  GlobeNewswire]
▶ Does CSP Inc (NASDAQ:CSPI) Have A Place In Your Portfolio?   [Jun-26-18 09:55AM  Simply Wall St.]
▶ CSPi Expands Partner Network With Addition of Netanium   [May-23-18 09:00AM  GlobeNewswire]
▶ Income Investors Should Steer Clear of CSP Inc (NASDAQ:CSPI)   [Apr-04-18 01:11PM  Simply Wall St.]
▶ CSPi Recognized for Excellence in Managed IT Services   [Mar-20-18 09:02AM  GlobeNewswire]
▶ CSPi Reports First-Quarter Fiscal 2018 Financial Results   [Feb-12-18 04:00PM  GlobeNewswire]
▶ ETFs with exposure to CSP, Inc. : December 28, 2017   [Dec-28-17 12:00PM  Capital Cube]
▶ CSP, Inc.: Strong price momentum but will it sustain?   [Dec-22-17 11:22AM  Capital Cube]
▶ CSPi Named a "Best New Security Product" at VMWorld 2017   [Dec-07-17 09:01AM  GlobeNewswire]
▶ CSPi Joins Fortinet Fabric-Ready Partner Program   [Nov-28-17 09:01AM  GlobeNewswire]
▶ ETFs with exposure to CSP, Inc. : November 13, 2017   [Nov-13-17 12:08PM  Capital Cube]
▶ CSPi Announces the ARIA Software Defined Security Platform   [Nov-09-17 09:00AM  GlobeNewswire]
▶ ETFs with exposure to CSP, Inc. : September 7, 2017   [Sep-07-17 12:52PM  Capital Cube]
▶ CSP Inc. Promotes Two Senior Executives   [Aug-17-17 02:30PM  GlobeNewswire]
▶ CSPi Reports Third-Quarter Fiscal 2017 Financial Results   [Aug-14-17 08:44AM  GlobeNewswire]
▶ CSPi joins the Cisco Security Technology Alliance Ecosystem   [Jul-19-17 09:01AM  GlobeNewswire]
▶ CSP Inc. Announces Filing Extension for Form 10-Q   [May-15-17 09:00AM  GlobeNewswire]
▶ CSP Inc. Announces Filing Extension for Form 10-Q   [Feb-14-17 09:30AM  GlobeNewswire]
▶ CSPi to Attend FloCon 2017   [Jan-05-17 09:00AM  GlobeNewswire]
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.