Intrinsic value of NIC - EGOV

Previous Close

$17.00

  Intrinsic Value

$20.87

stock screener

  Rating & Target

buy

+23%

Previous close

$17.00

 
Intrinsic value

$20.87

 
Up/down potential

+23%

 
Rating

buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of EGOV 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.90
  6.30
  6.17
  6.05
  5.95
  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
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  318
  338
  359
  381
  403
  427
  451
  477
  504
  532
  561
  592
  624
  657
  692
  729
  768
  808
  850
  894
  940
  989
  1,040
  1,093
  1,149
  1,208
  1,269
  1,334
  1,401
  1,472
  1,547
Variable operating expenses, $m
 
  194
  206
  219
  232
  245
  260
  274
  290
  306
  323
  340
  359
  378
  398
  419
  441
  464
  489
  514
  541
  569
  598
  628
  661
  694
  730
  767
  806
  847
  889
Fixed operating expenses, $m
 
  59
  61
  62
  64
  66
  67
  69
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
Total operating expenses, $m
  240
  253
  267
  281
  296
  311
  327
  343
  361
  378
  397
  416
  437
  458
  480
  503
  527
  552
  579
  607
  636
  666
  698
  730
  766
  802
  840
  880
  922
  966
  1,011
Operating income, $m
  78
  84
  92
  99
  107
  116
  125
  134
  144
  154
  164
  175
  187
  199
  212
  226
  240
  255
  271
  287
  305
  323
  342
  362
  383
  406
  429
  454
  480
  507
  536
EBITDA, $m
  85
  87
  94
  102
  111
  119
  128
  138
  147
  158
  169
  180
  192
  205
  218
  232
  246
  261
  277
  294
  312
  331
  350
  371
  392
  415
  439
  464
  491
  518
  548
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
Earnings before tax, $m
  78
  84
  92
  99
  107
  115
  124
  132
  142
  152
  162
  173
  184
  196
  209
  222
  236
  250
  265
  281
  298
  316
  335
  354
  375
  396
  419
  443
  468
  495
  523
Tax expense, $m
  22
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  64
  68
  72
  76
  81
  85
  90
  96
  101
  107
  113
  120
  126
  134
  141
Net income, $m
  56
  61
  67
  72
  78
  84
  90
  97
  104
  111
  118
  126
  134
  143
  152
  162
  172
  183
  194
  205
  218
  231
  244
  259
  274
  289
  306
  324
  342
  361
  382

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  127
  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
  241
  121
  129
  136
  145
  153
  162
  171
  181
  191
  201
  212
  224
  236
  248
  261
  275
  290
  305
  321
  337
  355
  373
  392
  412
  433
  455
  478
  502
  528
  555
Adjusted assets (=assets-cash), $m
  114
  121
  129
  136
  145
  153
  162
  171
  181
  191
  201
  212
  224
  236
  248
  261
  275
  290
  305
  321
  337
  355
  373
  392
  412
  433
  455
  478
  502
  528
  555
Revenue / Adjusted assets
  2.789
  2.793
  2.783
  2.801
  2.779
  2.791
  2.784
  2.789
  2.785
  2.785
  2.791
  2.792
  2.786
  2.784
  2.790
  2.793
  2.793
  2.786
  2.787
  2.785
  2.789
  2.786
  2.788
  2.788
  2.789
  2.790
  2.789
  2.791
  2.791
  2.788
  2.787
Average production assets, $m
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  57
  60
Working capital, $m
  125
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Total debt, $m
  0
  2
  9
  16
  23
  31
  39
  47
  56
  65
  74
  84
  94
  105
  116
  128
  141
  154
  167
  182
  196
  212
  228
  246
  264
  283
  303
  323
  345
  368
  392
Total liabilities, $m
  107
  109
  116
  123
  130
  138
  146
  154
  163
  172
  181
  191
  201
  212
  223
  235
  248
  261
  274
  289
  303
  319
  335
  353
  371
  390
  410
  430
  452
  475
  499
Total equity, $m
  134
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
  43
  46
  48
  50
  53
  55
Total liabilities and equity, $m
  241
  121
  129
  137
  144
  153
  162
  171
  181
  191
  201
  212
  223
  236
  248
  261
  276
  290
  304
  321
  337
  354
  372
  392
  412
  433
  456
  478
  502
  528
  554
Debt-to-equity ratio
  0.000
  0.170
  0.680
  1.160
  1.600
  2.010
  2.390
  2.750
  3.080
  3.390
  3.680
  3.960
  4.220
  4.460
  4.690
  4.910
  5.110
  5.310
  5.490
  5.660
  5.830
  5.980
  6.130
  6.270
  6.400
  6.530
  6.650
  6.760
  6.870
  6.970
  7.070
Adjusted equity ratio
  0.061
  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
  56
  61
  67
  72
  78
  84
  90
  97
  104
  111
  118
  126
  134
  143
  152
  162
  172
  183
  194
  205
  218
  231
  244
  259
  274
  289
  306
  324
  342
  361
  382
Depreciation, amort., depletion, $m
  7
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Funds from operations, $m
  89
  64
  70
  75
  81
  87
  94
  100
  108
  115
  123
  131
  139
  148
  158
  168
  178
  189
  200
  212
  225
  238
  252
  267
  283
  299
  316
  334
  353
  373
  394
Change in working capital, $m
  11
  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 operations, $m
  78
  64
  70
  75
  81
  87
  94
  101
  108
  115
  123
  131
  140
  149
  158
  168
  178
  189
  201
  213
  225
  239
  253
  267
  283
  299
  316
  334
  353
  373
  394
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
New CAPEX, $m
  -8
  -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 from investing activities, $m
  -8
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -13
  -13
  -14
  -14
Free cash flow, $m
  70
  61
  66
  72
  77
  83
  90
  96
  103
  110
  118
  125
  134
  142
  151
  161
  171
  182
  193
  204
  217
  229
  243
  257
  272
  288
  304
  322
  340
  360
  380
Issuance/(repayment) of debt, $m
  0
  2
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $m
  1
  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  
  1
  2
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  72
  63
  73
  79
  85
  91
  98
  104
  112
  119
  127
  135
  144
  153
  163
  173
  183
  195
  206
  219
  231
  245
  259
  274
  290
  307
  324
  343
  362
  382
  404
Retained Cash Flow (-), $m
  -18
  -5
  -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
  -2
  -3
  -3
Prev. year cash balance distribution, $m
 
  127
  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
 
  185
  72
  78
  84
  90
  97
  103
  111
  118
  126
  134
  143
  152
  161
  172
  182
  193
  205
  217
  230
  243
  258
  272
  288
  305
  322
  340
  360
  380
  401
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
 
  177
  66
  68
  69
  70
  70
  70
  69
  68
  66
  64
  61
  58
  54
  50
  46
  42
  38
  33
  29
  25
  21
  18
  15
  12
  9
  7
  6
  4
  3
Current shareholders' claim on cash, %
  100
  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

NIC Inc. is a provider of digital government services that help governments use technology to provide services to businesses and citizens. The Company operates through Outsourced Portals segment. The Company offers its services through two channels: primary outsourced portal businesses, and software and services businesses. In the primary outsourced portal businesses, the Company enters into contracts with state and local governments to design, build, and operate Internet-based, enterprise-wide portals on their behalf. Its software and services businesses include its subsidiaries that provide software development and payment processing services, other than outsourced portal services, to state and local governments, as well as federal agencies. The Company's outsourced portal businesses include interactive government services (IGS), driver history records (DHR), Portal software development and services, and Portal management.

FINANCIAL RATIOS  of  NIC (EGOV)

Valuation Ratios
P/E Ratio 20
Price to Sales 3.5
Price to Book 8.4
Price to Tangible Book
Price to Cash Flow 14.4
Price to Free Cash Flow 16
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 60%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 23.2%
Ret/ On Assets - 3 Yr. Avg. 21.9%
Return On Total Capital 44.8%
Ret/ On T. Cap. - 3 Yr. Avg. 40.9%
Return On Equity 44.8%
Return On Equity - 3 Yr. Avg. 40.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 41.5%
Gross Margin - 3 Yr. Avg. 41%
EBITDA Margin 26.7%
EBITDA Margin - 3 Yr. Avg. 26.3%
Operating Margin 24.5%
Oper. Margin - 3 Yr. Avg. 23.5%
Pre-Tax Margin 24.5%
Pre-Tax Margin - 3 Yr. Avg. 23.5%
Net Profit Margin 17.6%
Net Profit Margin - 3 Yr. Avg. 15.4%
Effective Tax Rate 28.2%
Eff/ Tax Rate - 3 Yr. Avg. 34.5%
Payout Ratio 76.8%

EGOV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EGOV stock intrinsic value calculation we used $318 million for the last fiscal year's total revenue generated by NIC. The default revenue input number comes from 2016 income statement of NIC. 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 EGOV stock valuation model: a) initial revenue growth rate of 6.3% 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 EGOV is calculated based on our internal credit rating of NIC, 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 NIC.
    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 EGOV stock the variable cost ratio is equal to 57.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $58 million in the base year in the intrinsic value calculation for EGOV 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 3.5% for NIC.

Corporate tax rate of 27% is the nominal tax rate for NIC. 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 EGOV 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 EGOV are equal to 3.9%.

Life of production assets of 1.8 years is the average useful life of capital assets used in NIC 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 EGOV is equal to -0.6%. 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 - $134 million for NIC - 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 66.867 million for NIC 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 NIC at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ Arkansas First to Launch Gov2Go One-Tap Payments   [Jan-16-18 08:00AM  Business Wire]
▶ City of Victoria, Kansas, Now Accepts Electronic Payments   [Jan-11-18 08:00AM  Business Wire]
▶ The Awards Keep Coming for the New Nebraska DMV Website   [Jan-05-18 10:13AM  Business Wire]
▶ Nebraska Branding: Hot Steel and Mobile Inspections   [Dec-22-17 08:00AM  Business Wire]
▶ Utah State Legislature Launches Redesigned Website   [Dec-21-17 12:35PM  Business Wire]
▶ Peter Lynch Checklist Identifies 4 Good Companies   [Dec-15-17 05:29PM  GuruFocus.com]
▶ City of Gaylord, Kansas, Now Accepts Electronic Payments   [Dec-11-17 08:00AM  Business Wire]
▶ Utah Honored with National Innovation Award   [Dec-04-17 11:00AM  Business Wire]
▶ Connecticut is Serving Those Who Served   [08:00AM  Business Wire]
▶ City of Tribune, Kansas, Now Accepts Electronic Payments   [Dec-01-17 08:00AM  Business Wire]
▶ Utah Hunting and Fishing Services Wins Two National Awards   [Nov-29-17 11:00AM  Business Wire]
▶ Utah Department of Public Safety Launches News Website   [Nov-28-17 05:02PM  Business Wire]
▶ ETFs with exposure to NIC, Inc. : November 27, 2017   [Nov-27-17 01:17PM  Capital Cube]
▶ Now Track Utah Legislation on Apple Watch   [Nov-22-17 11:00AM  Business Wire]
▶ ETFs with exposure to NIC, Inc. : November 17, 2017   [Nov-17-17 11:46AM  Capital Cube]
▶ Arkansas State Website Wins Two Awards   [Nov-14-17 11:03AM  Business Wire]
▶ NIC beats Street 3Q forecasts   [Nov-01-17 05:15PM  Associated Press]
▶ NIC Inc. to Host Earnings Call   [12:10PM  ACCESSWIRE]
▶ Hawaii State Library Website Wins Silver W3 Award   [Oct-27-17 08:00AM  Business Wire]
▶ NIC to Announce Third Quarter 2017 Results on November 1   [Oct-09-17 11:01AM  Business Wire]
Financial statements of EGOV
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