Intrinsic value of Amdocs Limited - DOX

Previous Close

$53.82

  Intrinsic Value

$32.01

stock screener

  Rating & Target

sell

-41%

Previous close

$53.82

 
Intrinsic value

$32.01

 
Up/down potential

-41%

 
Rating

sell

We calculate the intrinsic value of DOX 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 7.5

 

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, %
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  4,086
  4,210
  4,345
  4,493
  4,653
  4,825
  5,010
  5,207
  5,418
  5,643
  5,882
  6,135
  6,404
  6,688
  6,989
  7,307
  7,643
  7,997
  8,370
  8,764
  9,179
  9,615
  10,075
  10,559
  11,069
  11,605
  12,169
  12,761
  13,385
  14,040
Variable operating expenses, $m
  3,537
  3,643
  3,758
  3,884
  4,021
  4,168
  4,325
  4,494
  4,674
  4,866
  5,020
  5,237
  5,466
  5,709
  5,965
  6,237
  6,523
  6,825
  7,144
  7,480
  7,834
  8,207
  8,599
  9,012
  9,447
  9,905
  10,386
  10,892
  11,424
  11,983
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
  3,537
  3,643
  3,758
  3,884
  4,021
  4,168
  4,325
  4,494
  4,674
  4,866
  5,020
  5,237
  5,466
  5,709
  5,965
  6,237
  6,523
  6,825
  7,144
  7,480
  7,834
  8,207
  8,599
  9,012
  9,447
  9,905
  10,386
  10,892
  11,424
  11,983
Operating income, $m
  549
  567
  587
  609
  632
  657
  684
  713
  744
  777
  862
  899
  938
  980
  1,024
  1,071
  1,120
  1,172
  1,226
  1,284
  1,345
  1,409
  1,476
  1,547
  1,622
  1,700
  1,783
  1,870
  1,961
  2,057
EBITDA, $m
  723
  745
  769
  795
  823
  854
  886
  921
  959
  998
  1,041
  1,086
  1,133
  1,183
  1,237
  1,293
  1,352
  1,415
  1,481
  1,551
  1,624
  1,701
  1,783
  1,868
  1,958
  2,053
  2,153
  2,258
  2,368
  2,484
Interest expense (income), $m
  1
  0
  3
  6
  10
  13
  17
  22
  27
  32
  37
  43
  49
  56
  63
  70
  78
  86
  95
  104
  113
  124
  134
  146
  157
  170
  183
  197
  211
  227
  243
Earnings before tax, $m
  549
  564
  581
  599
  619
  640
  662
  686
  712
  740
  819
  850
  882
  917
  954
  993
  1,034
  1,077
  1,122
  1,171
  1,221
  1,274
  1,331
  1,390
  1,452
  1,517
  1,586
  1,658
  1,734
  1,814
Tax expense, $m
  148
  152
  157
  162
  167
  173
  179
  185
  192
  200
  221
  229
  238
  248
  258
  268
  279
  291
  303
  316
  330
  344
  359
  375
  392
  410
  428
  448
  468
  490
Net income, $m
  401
  412
  424
  437
  452
  467
  483
  501
  520
  540
  598
  620
  644
  670
  696
  725
  755
  786
  819
  854
  891
  930
  971
  1,014
  1,060
  1,107
  1,158
  1,210
  1,266
  1,324

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
  5,500
  5,666
  5,848
  6,047
  6,262
  6,494
  6,742
  7,008
  7,293
  7,595
  7,917
  8,258
  8,619
  9,002
  9,407
  9,835
  10,286
  10,763
  11,265
  11,795
  12,353
  12,941
  13,560
  14,212
  14,898
  15,619
  16,378
  17,176
  18,015
  18,897
Adjusted assets (=assets-cash), $m
  5,500
  5,666
  5,848
  6,047
  6,262
  6,494
  6,742
  7,008
  7,293
  7,595
  7,917
  8,258
  8,619
  9,002
  9,407
  9,835
  10,286
  10,763
  11,265
  11,795
  12,353
  12,941
  13,560
  14,212
  14,898
  15,619
  16,378
  17,176
  18,015
  18,897
Revenue / Adjusted assets
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
Average production assets, $m
  1,753
  1,806
  1,864
  1,927
  1,996
  2,070
  2,149
  2,234
  2,324
  2,421
  2,523
  2,632
  2,747
  2,869
  2,998
  3,135
  3,279
  3,431
  3,591
  3,760
  3,938
  4,125
  4,322
  4,530
  4,749
  4,978
  5,220
  5,475
  5,742
  6,023
Working capital, $m
  -98
  -101
  -104
  -108
  -112
  -116
  -120
  -125
  -130
  -135
  -141
  -147
  -154
  -161
  -168
  -175
  -183
  -192
  -201
  -210
  -220
  -231
  -242
  -253
  -266
  -279
  -292
  -306
  -321
  -337
Total debt, $m
  53
  112
  177
  248
  324
  406
  495
  589
  690
  797
  911
  1,033
  1,161
  1,297
  1,440
  1,592
  1,753
  1,922
  2,100
  2,288
  2,487
  2,695
  2,915
  3,146
  3,390
  3,646
  3,915
  4,198
  4,496
  4,809
Total liabilities, $m
  1,952
  2,011
  2,076
  2,147
  2,223
  2,305
  2,394
  2,488
  2,589
  2,696
  2,810
  2,931
  3,060
  3,196
  3,339
  3,491
  3,652
  3,821
  3,999
  4,187
  4,385
  4,594
  4,814
  5,045
  5,289
  5,545
  5,814
  6,097
  6,395
  6,708
Total equity, $m
  3,547
  3,654
  3,772
  3,900
  4,039
  4,188
  4,349
  4,520
  4,704
  4,899
  5,106
  5,326
  5,559
  5,806
  6,067
  6,343
  6,635
  6,942
  7,266
  7,608
  7,968
  8,347
  8,746
  9,167
  9,609
  10,074
  10,564
  11,078
  11,619
  12,188
Total liabilities and equity, $m
  5,499
  5,665
  5,848
  6,047
  6,262
  6,493
  6,743
  7,008
  7,293
  7,595
  7,916
  8,257
  8,619
  9,002
  9,406
  9,834
  10,287
  10,763
  11,265
  11,795
  12,353
  12,941
  13,560
  14,212
  14,898
  15,619
  16,378
  17,175
  18,014
  18,896
Debt-to-equity ratio
  0.020
  0.030
  0.050
  0.060
  0.080
  0.100
  0.110
  0.130
  0.150
  0.160
  0.180
  0.190
  0.210
  0.220
  0.240
  0.250
  0.260
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.390
Adjusted equity ratio
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  401
  412
  424
  437
  452
  467
  483
  501
  520
  540
  598
  620
  644
  670
  696
  725
  755
  786
  819
  854
  891
  930
  971
  1,014
  1,060
  1,107
  1,158
  1,210
  1,266
  1,324
Depreciation, amort., depletion, $m
  174
  178
  182
  186
  191
  196
  202
  208
  215
  221
  179
  187
  195
  204
  213
  222
  233
  243
  255
  267
  279
  293
  307
  321
  337
  353
  370
  388
  407
  427
Funds from operations, $m
  575
  590
  606
  624
  643
  663
  686
  709
  735
  761
  777
  807
  839
  873
  909
  947
  987
  1,029
  1,074
  1,121
  1,171
  1,223
  1,278
  1,336
  1,397
  1,461
  1,528
  1,599
  1,673
  1,751
Change in working capital, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Cash from operations, $m
  577
  593
  609
  627
  647
  668
  690
  714
  740
  767
  782
  813
  845
  880
  916
  955
  995
  1,038
  1,083
  1,131
  1,181
  1,233
  1,289
  1,347
  1,409
  1,473
  1,541
  1,613
  1,688
  1,767
Maintenance CAPEX, $m
  -121
  -124
  -128
  -132
  -137
  -142
  -147
  -152
  -158
  -165
  -172
  -179
  -187
  -195
  -204
  -213
  -222
  -233
  -243
  -255
  -267
  -279
  -293
  -307
  -321
  -337
  -353
  -370
  -388
  -407
New CAPEX, $m
  -50
  -53
  -58
  -63
  -69
  -74
  -79
  -85
  -91
  -96
  -102
  -109
  -115
  -122
  -129
  -136
  -144
  -152
  -160
  -169
  -178
  -187
  -197
  -208
  -219
  -230
  -242
  -254
  -267
  -281
Cash from investing activities, $m
  -171
  -177
  -186
  -195
  -206
  -216
  -226
  -237
  -249
  -261
  -274
  -288
  -302
  -317
  -333
  -349
  -366
  -385
  -403
  -424
  -445
  -466
  -490
  -515
  -540
  -567
  -595
  -624
  -655
  -688
Free cash flow, $m
  407
  415
  423
  432
  441
  452
  464
  477
  491
  506
  508
  525
  544
  563
  584
  606
  629
  654
  680
  707
  736
  767
  799
  833
  869
  907
  947
  988
  1,032
  1,079
Issuance/(repayment) of debt, $m
  53
  59
  65
  71
  76
  82
  88
  94
  101
  107
  114
  121
  128
  136
  144
  152
  160
  169
  178
  188
  198
  209
  220
  231
  243
  256
  269
  283
  298
  313
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  
  53
  59
  65
  71
  76
  82
  88
  94
  101
  107
  114
  121
  128
  136
  144
  152
  160
  169
  178
  188
  198
  209
  220
  231
  243
  256
  269
  283
  298
  313
Total cash flow (excl. dividends), $m
  460
  474
  488
  502
  518
  534
  552
  571
  591
  613
  622
  646
  672
  699
  727
  757
  789
  823
  858
  895
  934
  975
  1,019
  1,064
  1,112
  1,163
  1,216
  1,272
  1,330
  1,392
Retained Cash Flow (-), $m
  -98
  -107
  -118
  -128
  -139
  -149
  -160
  -172
  -183
  -195
  -207
  -220
  -233
  -247
  -261
  -276
  -291
  -307
  -324
  -342
  -360
  -379
  -399
  -420
  -442
  -465
  -489
  -515
  -541
  -569
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
  362
  367
  370
  374
  379
  385
  392
  400
  408
  418
  415
  426
  439
  452
  466
  482
  498
  515
  534
  553
  574
  596
  619
  644
  670
  698
  726
  757
  789
  823
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
  347
  336
  322
  308
  294
  279
  265
  250
  235
  219
  197
  182
  167
  152
  137
  122
  108
  95
  82
  70
  59
  49
  41
  33
  26
  20
  16
  12
  9
  6
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

Amdocs Limited is a provider of software and services for communications, entertainment and media industry service providers. The Company develops, implements and manages software and services associated with business support systems (BSS), operational support systems (OSS) and network operations to enable service providers to introduce new products and services, process orders, monetize data, support new business models and enhance their understanding of their customers. The Company's segment provides software products and services. Its services include strategic business consulting, systems integration and transformation, managed services and testing. Its managed services provide multi-year, flexible and tailored business processes and applications services, including application development and maintenance, information technology (IT) and infrastructure services, testing and professional services.

FINANCIAL RATIOS  of  Amdocs Limited (DOX)

Valuation Ratios
P/E Ratio 17.8
Price to Sales 2
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow 15.4
Growth Rates
Sales Growth Rate 4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.3%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 514
Management Effectiveness
Return On Assets 8.3%
Ret/ On Assets - 3 Yr. Avg. 8.1%
Return On Total Capital 12.1%
Ret/ On T. Cap. - 3 Yr. Avg. 11.9%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 12.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 35.2%
Gross Margin - 3 Yr. Avg. 35.3%
EBITDA Margin 18.9%
EBITDA Margin - 3 Yr. Avg. 18.8%
Operating Margin 13.4%
Oper. Margin - 3 Yr. Avg. 13.5%
Pre-Tax Margin 13.3%
Pre-Tax Margin - 3 Yr. Avg. 13.5%
Net Profit Margin 11.3%
Net Profit Margin - 3 Yr. Avg. 11.5%
Effective Tax Rate 14.8%
Eff/ Tax Rate - 3 Yr. Avg. 14.5%
Payout Ratio 27.9%

DOX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DOX stock intrinsic value calculation we used $3975 million for the last fiscal year's total revenue generated by Amdocs Limited. The default revenue input number comes from 0001 income statement of Amdocs Limited. 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 DOX stock valuation model: a) initial revenue growth rate of 2.8% 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 4.3%, whose default value for DOX is calculated based on our internal credit rating of Amdocs Limited, 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 Amdocs Limited.
    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 DOX stock the variable cost ratio is equal to 86.6%.

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 DOX 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 Amdocs Limited.

Corporate tax rate of 27% is the nominal tax rate for Amdocs Limited. 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 DOX 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 DOX are equal to 42.9%.

Life of production assets of 14.1 years is the average useful life of capital assets used in Amdocs Limited 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 DOX is equal to -2.4%. 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 - $3448.879 million for Amdocs Limited - 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 139.046 million for Amdocs Limited 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 Amdocs Limited at the current share price and the inputted number of shares is $7.5 billion.

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