Intrinsic value of Bottomline Technologies, Inc. - EPAY

Previous Close

$45.14

  Intrinsic Value

$29.09

stock screener

  Rating & Target

sell

-36%

Previous close

$45.14

 
Intrinsic value

$29.09

 
Up/down potential

-36%

 
Rating

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 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 2.0

 

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, %
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  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
Revenue, $m
  434
  475
  519
  564
  611
  660
  711
  764
  819
  876
  935
  997
  1,061
  1,128
  1,198
  1,270
  1,346
  1,424
  1,506
  1,592
  1,682
  1,775
  1,873
  1,975
  2,082
  2,193
  2,310
  2,433
  2,561
  2,695
Variable operating expenses, $m
  171
  188
  205
  222
  240
  259
  279
  300
  321
  343
  363
  387
  412
  438
  465
  494
  523
  554
  585
  619
  654
  690
  728
  768
  809
  852
  898
  945
  995
  1,047
Fixed operating expenses, $m
  243
  249
  254
  260
  265
  271
  277
  283
  289
  296
  302
  309
  316
  323
  330
  337
  345
  352
  360
  368
  376
  384
  393
  401
  410
  419
  428
  438
  447
  457
Total operating expenses, $m
  414
  437
  459
  482
  505
  530
  556
  583
  610
  639
  665
  696
  728
  761
  795
  831
  868
  906
  945
  987
  1,030
  1,074
  1,121
  1,169
  1,219
  1,271
  1,326
  1,383
  1,442
  1,504
Operating income, $m
  19
  39
  60
  82
  105
  129
  155
  181
  208
  237
  269
  301
  333
  367
  402
  439
  478
  519
  561
  606
  652
  701
  752
  806
  863
  922
  984
  1,049
  1,118
  1,190
EBITDA, $m
  47
  69
  93
  117
  143
  170
  198
  227
  258
  290
  323
  358
  394
  431
  471
  512
  555
  600
  647
  697
  748
  803
  859
  919
  982
  1,047
  1,116
  1,189
  1,265
  1,345
Interest expense (income), $m
  3
  10
  12
  15
  17
  19
  22
  25
  28
  30
  33
  37
  40
  43
  47
  51
  54
  58
  63
  67
  71
  76
  81
  86
  92
  97
  103
  109
  116
  123
  130
Earnings before tax, $m
  9
  27
  46
  65
  86
  107
  130
  153
  178
  203
  233
  261
  290
  320
  352
  385
  420
  456
  494
  534
  576
  620
  666
  714
  765
  819
  875
  934
  996
  1,061
Tax expense, $m
  2
  7
  12
  18
  23
  29
  35
  41
  48
  55
  63
  70
  78
  86
  95
  104
  113
  123
  133
  144
  156
  167
  180
  193
  207
  221
  236
  252
  269
  286
Net income, $m
  7
  20
  33
  48
  63
  78
  95
  112
  130
  148
  170
  190
  211
  234
  257
  281
  306
  333
  361
  390
  420
  453
  486
  522
  559
  598
  639
  682
  727
  774

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
  687
  753
  822
  894
  968
  1,046
  1,127
  1,211
  1,298
  1,388
  1,482
  1,580
  1,682
  1,788
  1,898
  2,013
  2,132
  2,257
  2,387
  2,523
  2,665
  2,813
  2,968
  3,130
  3,299
  3,476
  3,661
  3,855
  4,058
  4,271
Adjusted assets (=assets-cash), $m
  687
  753
  822
  894
  968
  1,046
  1,127
  1,211
  1,298
  1,388
  1,482
  1,580
  1,682
  1,788
  1,898
  2,013
  2,132
  2,257
  2,387
  2,523
  2,665
  2,813
  2,968
  3,130
  3,299
  3,476
  3,661
  3,855
  4,058
  4,271
Revenue / Adjusted assets
  0.632
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
Average production assets, $m
  231
  253
  276
  300
  325
  351
  378
  406
  436
  466
  498
  530
  565
  600
  637
  676
  716
  758
  801
  847
  895
  944
  996
  1,051
  1,107
  1,167
  1,229
  1,294
  1,362
  1,434
Working capital, $m
  -32
  -35
  -38
  -42
  -45
  -49
  -53
  -57
  -61
  -65
  -69
  -74
  -79
  -83
  -89
  -94
  -100
  -105
  -111
  -118
  -124
  -131
  -139
  -146
  -154
  -162
  -171
  -180
  -189
  -199
Total debt, $m
  182
  217
  253
  290
  329
  369
  411
  454
  500
  547
  596
  647
  700
  755
  812
  872
  934
  999
  1,066
  1,137
  1,211
  1,288
  1,368
  1,452
  1,540
  1,632
  1,729
  1,830
  1,935
  2,046
Total liabilities, $m
  357
  392
  428
  465
  504
  544
  586
  629
  675
  722
  771
  822
  875
  930
  987
  1,047
  1,109
  1,174
  1,241
  1,312
  1,386
  1,463
  1,543
  1,627
  1,715
  1,808
  1,904
  2,005
  2,110
  2,221
Total equity, $m
  330
  362
  395
  429
  465
  502
  541
  581
  623
  666
  711
  758
  807
  858
  911
  966
  1,024
  1,083
  1,146
  1,211
  1,279
  1,350
  1,425
  1,502
  1,583
  1,668
  1,757
  1,850
  1,948
  2,050
Total liabilities and equity, $m
  687
  754
  823
  894
  969
  1,046
  1,127
  1,210
  1,298
  1,388
  1,482
  1,580
  1,682
  1,788
  1,898
  2,013
  2,133
  2,257
  2,387
  2,523
  2,665
  2,813
  2,968
  3,129
  3,298
  3,476
  3,661
  3,855
  4,058
  4,271
Debt-to-equity ratio
  0.550
  0.600
  0.640
  0.680
  0.710
  0.730
  0.760
  0.780
  0.800
  0.820
  0.840
  0.850
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.950
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
  0.990
  1.000
Adjusted equity ratio
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  20
  33
  48
  63
  78
  95
  112
  130
  148
  170
  190
  211
  234
  257
  281
  306
  333
  361
  390
  420
  453
  486
  522
  559
  598
  639
  682
  727
  774
Depreciation, amort., depletion, $m
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  54
  57
  61
  65
  69
  73
  77
  81
  86
  91
  96
  102
  107
  113
  119
  125
  132
  139
  146
  154
Funds from operations, $m
  34
  50
  66
  83
  101
  119
  138
  159
  179
  201
  223
  247
  272
  298
  325
  354
  383
  414
  447
  481
  517
  554
  593
  635
  678
  723
  771
  821
  873
  928
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
Cash from operations, $m
  37
  53
  69
  86
  104
  123
  142
  162
  184
  206
  228
  252
  277
  303
  330
  359
  389
  420
  453
  487
  523
  561
  601
  642
  686
  731
  779
  830
  883
  938
Maintenance CAPEX, $m
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -73
  -77
  -81
  -86
  -91
  -96
  -102
  -107
  -113
  -119
  -125
  -132
  -139
  -146
New CAPEX, $m
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
Cash from investing activities, $m
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -73
  -77
  -82
  -87
  -91
  -97
  -102
  -108
  -113
  -119
  -125
  -132
  -139
  -146
  -154
  -161
  -170
  -178
  -187
  -197
  -207
  -217
Free cash flow, $m
  -7
  6
  19
  32
  47
  62
  77
  94
  111
  128
  146
  166
  186
  207
  229
  252
  276
  301
  328
  356
  385
  415
  447
  481
  516
  553
  592
  633
  675
  721
Issuance/(repayment) of debt, $m
  32
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  106
  111
Issuance/(repurchase) of shares, $m
  24
  12
  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  
  56
  46
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  106
  111
Total cash flow (excl. dividends), $m
  50
  52
  55
  70
  86
  102
  119
  137
  156
  175
  195
  216
  239
  262
  286
  312
  338
  366
  396
  426
  458
  492
  528
  565
  604
  645
  688
  733
  781
  831
Retained Cash Flow (-), $m
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -97
  -102
Prev. year cash balance distribution, $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
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
  31
  21
  22
  35
  50
  65
  81
  97
  114
  132
  150
  169
  190
  211
  233
  257
  281
  306
  333
  361
  390
  421
  453
  487
  523
  560
  599
  640
  684
  729
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
  29
  19
  19
  29
  39
  47
  54
  61
  66
  69
  71
  72
  72
  71
  68
  65
  61
  56
  51
  46
  40
  35
  30
  25
  20
  16
  13
  10
  7
  5
Current shareholders' claim on cash, %
  98.8
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2

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, Inc. (EPAY)

Valuation Ratios
P/E Ratio -51.2
Price to Sales 4.8
Price to Book 6.5
Price to Tangible Book
Price to Cash Flow 27.7
Price to Free Cash Flow 51.2
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 $394 million for the last fiscal year's total revenue generated by Bottomline Technologies, Inc.. The default revenue input number comes from 0001 income statement of Bottomline Technologies, Inc.. 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 10.1% 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, Inc., 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, Inc..
    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 39.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $238 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 6.7% for Bottomline Technologies, Inc..

Corporate tax rate of 27% is the nominal tax rate for Bottomline Technologies, Inc.. 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 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 EPAY are equal to 53.2%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Bottomline Technologies, Inc. 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 -7.4%. 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 - $310.932 million for Bottomline Technologies, Inc. - 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 43.212 million for Bottomline Technologies, Inc. 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, Inc. at the current share price and the inputted number of shares is $2.0 billion.

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