Intrinsic value of Evertec, Inc. - EVTC

Previous Close

$35.42

  Intrinsic Value

$72.19

stock screener

  Rating & Target

str. buy

+104%

Previous close

$35.42

 
Intrinsic value

$72.19

 
Up/down potential

+104%

 
Rating

str. buy

We calculate the intrinsic value of EVTC 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 2.6

 

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, %
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  539
  632
  734
  844
  962
  1,088
  1,222
  1,363
  1,511
  1,667
  1,830
  2,000
  2,178
  2,363
  2,555
  2,754
  2,962
  3,178
  3,402
  3,635
  3,878
  4,130
  4,392
  4,665
  4,949
  5,245
  5,554
  5,876
  6,211
  6,562
Variable operating expenses, $m
  76
  77
  79
  81
  84
  86
  89
  91
  94
  97
  35
  38
  41
  45
  48
  52
  56
  60
  64
  69
  73
  78
  83
  88
  94
  99
  105
  111
  118
  124
Fixed operating expenses, $m
  266
  272
  278
  284
  290
  296
  303
  309
  316
  323
  330
  338
  345
  353
  360
  368
  376
  385
  393
  402
  411
  420
  429
  438
  448
  458
  468
  478
  489
  499
Total operating expenses, $m
  342
  349
  357
  365
  374
  382
  392
  400
  410
  420
  365
  376
  386
  398
  408
  420
  432
  445
  457
  471
  484
  498
  512
  526
  542
  557
  573
  589
  607
  623
Operating income, $m
  198
  283
  377
  479
  589
  706
  830
  962
  1,101
  1,247
  1,465
  1,625
  1,792
  1,965
  2,146
  2,334
  2,530
  2,733
  2,945
  3,165
  3,393
  3,632
  3,880
  4,138
  4,407
  4,688
  4,981
  5,286
  5,605
  5,938
EBITDA, $m
  302
  395
  496
  606
  724
  851
  985
  1,127
  1,277
  1,434
  1,599
  1,771
  1,950
  2,137
  2,332
  2,535
  2,745
  2,965
  3,192
  3,429
  3,676
  3,933
  4,200
  4,478
  4,768
  5,070
  5,385
  5,714
  6,058
  6,416
Interest expense (income), $m
  23
  29
  36
  44
  53
  62
  72
  83
  94
  106
  119
  132
  146
  161
  176
  191
  208
  225
  242
  261
  280
  300
  320
  342
  364
  387
  411
  437
  463
  490
  519
Earnings before tax, $m
  168
  247
  333
  426
  526
  634
  747
  868
  995
  1,128
  1,333
  1,479
  1,631
  1,789
  1,955
  2,126
  2,305
  2,491
  2,684
  2,885
  3,094
  3,311
  3,538
  3,774
  4,020
  4,276
  4,544
  4,823
  5,115
  5,419
Tax expense, $m
  45
  67
  90
  115
  142
  171
  202
  234
  269
  305
  360
  399
  440
  483
  528
  574
  622
  672
  725
  779
  835
  894
  955
  1,019
  1,085
  1,155
  1,227
  1,302
  1,381
  1,463
Net income, $m
  123
  180
  243
  311
  384
  462
  546
  634
  726
  823
  973
  1,079
  1,191
  1,306
  1,427
  1,552
  1,683
  1,818
  1,959
  2,106
  2,258
  2,417
  2,583
  2,755
  2,934
  3,122
  3,317
  3,521
  3,734
  3,956

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
  1,100
  1,290
  1,498
  1,723
  1,964
  2,221
  2,493
  2,781
  3,084
  3,402
  3,735
  4,082
  4,444
  4,821
  5,214
  5,621
  6,045
  6,486
  6,943
  7,419
  7,913
  8,428
  8,963
  9,520
  10,100
  10,704
  11,334
  11,991
  12,676
  13,392
Adjusted assets (=assets-cash), $m
  1,100
  1,290
  1,498
  1,723
  1,964
  2,221
  2,493
  2,781
  3,084
  3,402
  3,735
  4,082
  4,444
  4,821
  5,214
  5,621
  6,045
  6,486
  6,943
  7,419
  7,913
  8,428
  8,963
  9,520
  10,100
  10,704
  11,334
  11,991
  12,676
  13,392
Revenue / Adjusted assets
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
Average production assets, $m
  440
  516
  599
  689
  785
  888
  997
  1,112
  1,233
  1,360
  1,493
  1,632
  1,777
  1,928
  2,085
  2,248
  2,417
  2,593
  2,776
  2,966
  3,164
  3,370
  3,584
  3,806
  4,038
  4,280
  4,532
  4,794
  5,069
  5,355
Working capital, $m
  8
  9
  11
  13
  14
  16
  18
  20
  23
  25
  27
  30
  33
  35
  38
  41
  44
  48
  51
  55
  58
  62
  66
  70
  74
  79
  83
  88
  93
  98
Total debt, $m
  672
  819
  979
  1,152
  1,338
  1,537
  1,747
  1,970
  2,204
  2,449
  2,706
  2,974
  3,254
  3,545
  3,847
  4,162
  4,489
  4,829
  5,183
  5,550
  5,932
  6,329
  6,742
  7,172
  7,619
  8,086
  8,572
  9,080
  9,609
  10,161
Total liabilities, $m
  849
  996
  1,157
  1,330
  1,516
  1,714
  1,925
  2,147
  2,381
  2,627
  2,883
  3,152
  3,431
  3,722
  4,025
  4,340
  4,667
  5,007
  5,360
  5,727
  6,109
  6,506
  6,919
  7,349
  7,797
  8,264
  8,750
  9,257
  9,786
  10,339
Total equity, $m
  251
  294
  342
  393
  448
  506
  568
  634
  703
  776
  852
  931
  1,013
  1,099
  1,189
  1,282
  1,378
  1,479
  1,583
  1,691
  1,804
  1,922
  2,044
  2,170
  2,303
  2,441
  2,584
  2,734
  2,890
  3,053
Total liabilities and equity, $m
  1,100
  1,290
  1,499
  1,723
  1,964
  2,220
  2,493
  2,781
  3,084
  3,403
  3,735
  4,083
  4,444
  4,821
  5,214
  5,622
  6,045
  6,486
  6,943
  7,418
  7,913
  8,428
  8,963
  9,519
  10,100
  10,705
  11,334
  11,991
  12,676
  13,392
Debt-to-equity ratio
  2.680
  2.780
  2.870
  2.930
  2.990
  3.040
  3.070
  3.110
  3.130
  3.160
  3.180
  3.200
  3.210
  3.220
  3.240
  3.250
  3.260
  3.270
  3.270
  3.280
  3.290
  3.290
  3.300
  3.300
  3.310
  3.310
  3.320
  3.320
  3.320
  3.330
Adjusted equity ratio
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  123
  180
  243
  311
  384
  462
  546
  634
  726
  823
  973
  1,079
  1,191
  1,306
  1,427
  1,552
  1,683
  1,818
  1,959
  2,106
  2,258
  2,417
  2,583
  2,755
  2,934
  3,122
  3,317
  3,521
  3,734
  3,956
Depreciation, amort., depletion, $m
  105
  111
  119
  127
  136
  145
  154
  165
  176
  187
  133
  146
  159
  172
  186
  201
  216
  232
  248
  265
  283
  301
  320
  340
  361
  382
  405
  428
  453
  478
Funds from operations, $m
  228
  292
  362
  438
  520
  607
  700
  798
  902
  1,010
  1,106
  1,225
  1,349
  1,478
  1,613
  1,753
  1,898
  2,050
  2,207
  2,371
  2,541
  2,718
  2,903
  3,095
  3,295
  3,504
  3,722
  3,949
  4,186
  4,434
Change in working capital, $m
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
Cash from operations, $m
  226
  290
  360
  436
  518
  605
  698
  796
  899
  1,008
  1,104
  1,223
  1,347
  1,476
  1,610
  1,750
  1,895
  2,046
  2,204
  2,367
  2,537
  2,714
  2,899
  3,091
  3,291
  3,499
  3,717
  3,944
  4,181
  4,429
Maintenance CAPEX, $m
  -33
  -39
  -46
  -53
  -61
  -70
  -79
  -89
  -99
  -110
  -121
  -133
  -146
  -159
  -172
  -186
  -201
  -216
  -232
  -248
  -265
  -283
  -301
  -320
  -340
  -361
  -382
  -405
  -428
  -453
New CAPEX, $m
  -69
  -76
  -83
  -90
  -96
  -103
  -109
  -115
  -121
  -127
  -133
  -139
  -145
  -151
  -157
  -163
  -169
  -176
  -183
  -190
  -198
  -206
  -214
  -223
  -232
  -242
  -252
  -263
  -274
  -286
Cash from investing activities, $m
  -102
  -115
  -129
  -143
  -157
  -173
  -188
  -204
  -220
  -237
  -254
  -272
  -291
  -310
  -329
  -349
  -370
  -392
  -415
  -438
  -463
  -489
  -515
  -543
  -572
  -603
  -634
  -668
  -702
  -739
Free cash flow, $m
  124
  175
  231
  293
  360
  432
  510
  592
  679
  771
  849
  950
  1,056
  1,166
  1,281
  1,401
  1,525
  1,655
  1,789
  1,929
  2,075
  2,226
  2,384
  2,548
  2,719
  2,897
  3,083
  3,277
  3,479
  3,690
Issuance/(repayment) of debt, $m
  133
  147
  160
  173
  186
  198
  211
  222
  234
  245
  257
  268
  280
  291
  303
  315
  327
  340
  353
  367
  382
  397
  413
  430
  448
  467
  486
  507
  529
  552
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  
  133
  147
  160
  173
  186
  198
  211
  222
  234
  245
  257
  268
  280
  291
  303
  315
  327
  340
  353
  367
  382
  397
  413
  430
  448
  467
  486
  507
  529
  552
Total cash flow (excl. dividends), $m
  257
  322
  392
  466
  546
  631
  720
  814
  913
  1,016
  1,106
  1,219
  1,336
  1,457
  1,584
  1,715
  1,852
  1,995
  2,142
  2,296
  2,457
  2,623
  2,797
  2,978
  3,167
  3,364
  3,569
  3,784
  4,008
  4,243
Retained Cash Flow (-), $m
  -39
  -43
  -47
  -51
  -55
  -59
  -62
  -66
  -69
  -72
  -76
  -79
  -83
  -86
  -89
  -93
  -97
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -132
  -138
  -144
  -150
  -156
  -163
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
  218
  279
  344
  415
  491
  572
  658
  749
  844
  944
  1,030
  1,139
  1,253
  1,371
  1,494
  1,623
  1,756
  1,894
  2,038
  2,188
  2,344
  2,506
  2,675
  2,851
  3,035
  3,226
  3,426
  3,634
  3,852
  4,080
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  203
  241
  275
  303
  325
  340
  348
  349
  344
  332
  309
  288
  263
  236
  208
  179
  152
  126
  102
  81
  62
  47
  35
  25
  18
  12
  8
  5
  3
  2
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

EVERTEC, Inc. is a transaction processing company. The Company provides a range of merchant acquiring, payment processing and business process management services. The Company operates through three segments: Merchant Acquiring, Payment Processing and Business Solutions. As of December 31, 2016, it managed a system of electronic payment networks that processed over two billion transactions annually. It offers a range of services for core bank processing, cash processing and technology outsourcing. It owns and operates the ATH network, which is a personal identification number (PIN) debit network in Latin America. It serves a range of financial institutions, merchants, corporations and government agencies with solutions that enable them to issue, process and accept transactions securely. The Company's range of services spans the entire transaction processing value chain and includes a range of front-end customer-facing solutions.

FINANCIAL RATIOS  of  Evertec, Inc. (EVTC)

Valuation Ratios
P/E Ratio 34.3
Price to Sales 6.6
Price to Book 24.5
Price to Tangible Book
Price to Cash Flow 15.3
Price to Free Cash Flow 20.4
Growth Rates
Sales Growth Rate 4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.6%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 1
Current Ratio 0.4
LT Debt to Equity 570.5%
Total Debt to Equity 616.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 11%
Return On Total Capital 9.9%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 73.9%
Return On Equity - 3 Yr. Avg. 75.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 54.9%
Gross Margin - 3 Yr. Avg. 55.4%
EBITDA Margin 42.6%
EBITDA Margin - 3 Yr. Avg. 44.4%
Operating Margin 27.7%
Oper. Margin - 3 Yr. Avg. 27.4%
Pre-Tax Margin 21.3%
Pre-Tax Margin - 3 Yr. Avg. 21.3%
Net Profit Margin 19.2%
Net Profit Margin - 3 Yr. Avg. 20.1%
Effective Tax Rate 9.6%
Eff/ Tax Rate - 3 Yr. Avg. 6%
Payout Ratio 40%

EVTC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EVTC stock intrinsic value calculation we used $454 million for the last fiscal year's total revenue generated by Evertec, Inc.. The default revenue input number comes from 0001 income statement of Evertec, 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 EVTC stock valuation model: a) initial revenue growth rate of 18.7% 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 7.1%, whose default value for EVTC is calculated based on our internal credit rating of Evertec, 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 Evertec, 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 EVTC stock the variable cost ratio is equal to 16.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $260 million in the base year in the intrinsic value calculation for EVTC 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 Evertec, Inc..

Corporate tax rate of 27% is the nominal tax rate for Evertec, 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 EVTC 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 EVTC are equal to 81.6%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Evertec, 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 EVTC is equal to 1.5%. 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 - $211.459 million for Evertec, 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 72.352 million for Evertec, 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 Evertec, Inc. at the current share price and the inputted number of shares is $2.6 billion.

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