Intrinsic value of Bottomline Technologies - EPAY

Previous Close

$60.82

  Intrinsic Value

$3.03

stock screener

  Rating & Target

str. sell

-95%

Previous close

$60.82

 
Intrinsic value

$3.03

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of EPAY 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 2.3

 

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, %
  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
  356
  364
  374
  384
  396
  408
  422
  437
  454
  471
  490
  510
  531
  553
  577
  602
  629
  657
  687
  719
  752
  787
  824
  863
  905
  948
  993
  1,041
  1,092
  1,145
Variable operating expenses, $m
  359
  366
  375
  384
  395
  406
  419
  433
  447
  463
  443
  461
  480
  501
  522
  545
  569
  595
  622
  651
  681
  713
  746
  782
  819
  858
  899
  943
  988
  1,036
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
  359
  366
  375
  384
  395
  406
  419
  433
  447
  463
  443
  461
  480
  501
  522
  545
  569
  595
  622
  651
  681
  713
  746
  782
  819
  858
  899
  943
  988
  1,036
Operating income, $m
  -3
  -2
  -1
  0
  1
  2
  3
  5
  6
  8
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
EBITDA, $m
  75
  77
  79
  81
  83
  86
  89
  92
  96
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
  241
Interest expense (income), $m
  3
  18
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
Earnings before tax, $m
  -21
  -21
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
Net income, $m
  -21
  -21
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  13
  13
  13
  13
  13
  13
  13
  13

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
  629
  643
  660
  679
  699
  722
  746
  773
  801
  832
  865
  900
  938
  977
  1,020
  1,064
  1,112
  1,162
  1,214
  1,270
  1,329
  1,391
  1,457
  1,526
  1,598
  1,675
  1,755
  1,840
  1,929
  2,023
Adjusted assets (=assets-cash), $m
  629
  643
  660
  679
  699
  722
  746
  773
  801
  832
  865
  900
  938
  977
  1,020
  1,064
  1,112
  1,162
  1,214
  1,270
  1,329
  1,391
  1,457
  1,526
  1,598
  1,675
  1,755
  1,840
  1,929
  2,023
Revenue / Adjusted assets
  0.566
  0.566
  0.567
  0.566
  0.567
  0.565
  0.566
  0.565
  0.567
  0.566
  0.566
  0.567
  0.566
  0.566
  0.566
  0.566
  0.566
  0.565
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
Average production assets, $m
  413
  422
  433
  445
  459
  473
  490
  507
  526
  546
  568
  591
  615
  641
  669
  698
  729
  762
  797
  833
  872
  913
  956
  1,001
  1,048
  1,099
  1,151
  1,207
  1,265
  1,327
Working capital, $m
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
Total debt, $m
  191
  199
  208
  219
  231
  244
  258
  273
  290
  308
  327
  347
  368
  391
  416
  441
  468
  497
  528
  560
  594
  630
  667
  707
  749
  793
  839
  888
  939
  993
Total liabilities, $m
  362
  371
  380
  391
  403
  416
  430
  445
  462
  479
  498
  519
  540
  563
  587
  613
  640
  669
  699
  732
  766
  801
  839
  879
  921
  965
  1,011
  1,060
  1,111
  1,165
Total equity, $m
  267
  273
  280
  288
  296
  306
  316
  328
  340
  353
  367
  382
  398
  414
  432
  451
  471
  492
  515
  539
  564
  590
  618
  647
  678
  710
  744
  780
  818
  858
Total liabilities and equity, $m
  629
  644
  660
  679
  699
  722
  746
  773
  802
  832
  865
  901
  938
  977
  1,019
  1,064
  1,111
  1,161
  1,214
  1,271
  1,330
  1,391
  1,457
  1,526
  1,599
  1,675
  1,755
  1,840
  1,929
  2,023
Debt-to-equity ratio
  0.710
  0.730
  0.740
  0.760
  0.780
  0.800
  0.820
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.940
  0.960
  0.980
  0.990
  1.010
  1.020
  1.040
  1.050
  1.070
  1.080
  1.090
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
Adjusted equity ratio
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -21
  -21
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  13
  13
  13
  13
  13
  13
  13
  13
Depreciation, amort., depletion, $m
  78
  79
  80
  81
  82
  84
  86
  87
  89
  91
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  115
  121
  127
  133
Funds from operations, $m
  57
  58
  59
  61
  62
  64
  65
  67
  69
  71
  69
  71
  74
  76
  79
  82
  85
  89
  92
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  145
Change in working capital, $m
  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
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  57
  58
  60
  61
  62
  64
  66
  68
  70
  72
  69
  72
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  109
  114
  118
  124
  129
  135
  141
  147
Maintenance CAPEX, $m
  -41
  -41
  -42
  -43
  -45
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -121
  -127
New CAPEX, $m
  -7
  -9
  -11
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -58
  -61
Cash from investing activities, $m
  -48
  -50
  -53
  -55
  -58
  -61
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -117
  -122
  -128
  -134
  -141
  -148
  -155
  -163
  -171
  -179
  -188
Free cash flow, $m
  9
  8
  7
  6
  4
  3
  2
  1
  0
  -1
  -7
  -8
  -9
  -11
  -12
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
Issuance/(repayment) of debt, $m
  7
  8
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
Issuance/(repurchase) of shares, $m
  25
  27
  27
  28
  29
  30
  31
  31
  32
  33
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
Cash from financing (excl. dividends), $m  
  32
  35
  37
  39
  41
  43
  45
  46
  49
  51
  21
  23
  26
  28
  30
  33
  35
  38
  40
  43
  47
  50
  53
  57
  60
  64
  67
  72
  76
  81
Total cash flow (excl. dividends), $m
  42
  43
  44
  44
  45
  46
  47
  48
  49
  50
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
Retained Cash Flow (-), $m
  -25
  -27
  -27
  -28
  -29
  -30
  -31
  -31
  -32
  -33
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
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
  32
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  45
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  79
  82
  86
  90
  95
  99
Cash available for distribution, $m
  16
  16
  16
  16
  16
  16
  16
  16
  17
  17
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
  16
  15
  14
  13
  13
  12
  11
  10
  9
  9
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.9
  97.8
  96.7
  95.6
  94.5
  93.5
  92.4
  91.4
  90.4
  89.4
  89.3
  89.3
  89.2
  89.1
  88.9
  88.8
  88.6
  88.4
  88.2
  88.0
  87.7
  87.5
  87.2
  87.0
  86.7
  86.4
  86.1
  85.8
  85.5
  85.2

Bottomline Technologies (de), Inc. is engaged in providing a set of cloud-based business payment, digital banking, fraud prevention, payment and financial document solutions. The Company helps businesses pay and get paid. It offers hosted or Software as a Service (SaaS) solutions, as well as software designed to run on-site at the customer's location. It operates through four segments: Payments and Transactional Documents, Hosted Solutions, Digital Banking and Other. The Payments and Transactional Documents segment is a supplier of software products that provide a range of financial business process management solutions, including making and collecting payments and generating and storing business documents. The Hosted Solutions segment provides customers with SaaS technology offerings. The Digital Banking segment provides solutions to banking and financial institution customers. The Other segment consists of its healthcare and cyber fraud and risk management operating segments.

FINANCIAL RATIOS  of  Bottomline Technologies (EPAY)

Valuation Ratios
P/E Ratio -69
Price to Sales 6.5
Price to Book 8.7
Price to Tangible Book
Price to Cash Flow 37.3
Price to Free Cash Flow 69
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 16.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 70.2%
Interest Coverage -12
Management Effectiveness
Return On Assets -4.8%
Ret/ On Assets - 3 Yr. Avg. -3.8%
Return On Total Capital -7.2%
Ret/ On T. Cap. - 3 Yr. Avg. -6%
Return On Equity -11.8%
Return On Equity - 3 Yr. Avg. -9.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 53.9%
Gross Margin - 3 Yr. Avg. 56.3%
EBITDA Margin 2.6%
EBITDA Margin - 3 Yr. Avg. 6.2%
Operating Margin -6.3%
Oper. Margin - 3 Yr. Avg. -2.6%
Pre-Tax Margin -10.9%
Pre-Tax Margin - 3 Yr. Avg. -7.1%
Net Profit Margin -9.5%
Net Profit Margin - 3 Yr. Avg. -8.6%
Effective Tax Rate 13.2%
Eff/ Tax Rate - 3 Yr. Avg. -37%
Payout Ratio 0%

EPAY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EPAY stock intrinsic value calculation we used $349 million for the last fiscal year's total revenue generated by Bottomline Technologies. The default revenue input number comes from 2017 income statement of Bottomline Technologies. 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 EPAY 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 4.3%, whose default value for EPAY is calculated based on our internal credit rating of Bottomline Technologies, 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 Bottomline Technologies.
    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 EPAY stock the variable cost ratio is equal to 101%.

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 EPAY 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 9.7% for Bottomline Technologies.

Corporate tax rate of 27% is the nominal tax rate for Bottomline Technologies. 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 EPAY stock is equal to 9.1%.

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 EPAY are equal to 115.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Bottomline Technologies 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 EPAY is equal to -2.6%. 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 - $262 million for Bottomline Technologies - 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 38 million for Bottomline Technologies 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 Bottomline Technologies at the current share price and the inputted number of shares is $2.3 billion.

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COMPANY NEWS

▶ Bottomline Technologies: Fiscal 3Q Earnings Snapshot   [May-03-18 07:07PM  Associated Press]
▶ Bottomline Technologies Launches New Paymode-X APIs   [Mar-20-18 06:00AM  GlobeNewswire]
▶ Bottomline Technologies Wins Prestigious Payment Award   [Feb-06-18 04:00AM  GlobeNewswire]
▶ Bottomline Technologies posts 2Q profit   [Feb-01-18 05:43PM  Associated Press]
▶ Bottomline Technologies posts 1Q loss   [Nov-02-17 06:42PM  Associated Press]
▶ Bottomline Technologies Expands Global Scale   [Oct-16-17 09:00AM  GlobeNewswire]
▶ Bottomline Technologies Embraces New Standards   [Oct-05-17 11:01AM  GlobeNewswire]
▶ Bottomline Technologies posts 4Q loss   [Aug-10-17 10:43PM  Associated Press]
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