Intrinsic value of Genpact Limited - G

Previous Close

$37.79

  Intrinsic Value

$32.62

stock screener

  Rating & Target

hold

-14%

Previous close

$37.79

 
Intrinsic value

$32.62

 
Up/down potential

-14%

 
Rating

hold

We calculate the intrinsic value of G 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 7.2

 

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, %
  13.70
  12.83
  12.05
  11.34
  10.71
  10.14
  9.62
  9.16
  8.75
  8.37
  8.03
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.46
  5.41
Revenue, $m
  3,412
  3,850
  4,314
  4,803
  5,317
  5,856
  6,420
  7,008
  7,621
  8,259
  8,922
  9,612
  10,329
  11,074
  11,848
  12,652
  13,489
  14,359
  15,265
  16,207
  17,189
  18,212
  19,279
  20,391
  21,552
  22,765
  24,031
  25,354
  26,737
  28,183
Variable operating expenses, $m
  2,978
  3,340
  3,723
  4,127
  4,553
  4,998
  5,464
  5,950
  6,457
  6,984
  7,376
  7,946
  8,538
  9,154
  9,794
  10,459
  11,151
  11,870
  12,618
  13,398
  14,209
  15,055
  15,937
  16,856
  17,816
  18,818
  19,865
  20,959
  22,102
  23,298
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
  2,978
  3,340
  3,723
  4,127
  4,553
  4,998
  5,464
  5,950
  6,457
  6,984
  7,376
  7,946
  8,538
  9,154
  9,794
  10,459
  11,151
  11,870
  12,618
  13,398
  14,209
  15,055
  15,937
  16,856
  17,816
  18,818
  19,865
  20,959
  22,102
  23,298
Operating income, $m
  434
  510
  591
  675
  765
  858
  956
  1,058
  1,164
  1,275
  1,547
  1,666
  1,790
  1,920
  2,054
  2,193
  2,338
  2,489
  2,646
  2,809
  2,980
  3,157
  3,342
  3,535
  3,736
  3,946
  4,166
  4,395
  4,635
  4,886
EBITDA, $m
  657
  742
  831
  925
  1,025
  1,128
  1,237
  1,350
  1,468
  1,591
  1,719
  1,852
  1,990
  2,134
  2,283
  2,438
  2,599
  2,767
  2,941
  3,123
  3,312
  3,509
  3,715
  3,929
  4,153
  4,387
  4,630
  4,885
  5,152
  5,431
Interest expense (income), $m
  18
  70
  86
  103
  121
  139
  159
  180
  201
  224
  247
  272
  297
  323
  351
  379
  409
  440
  472
  505
  539
  575
  613
  652
  693
  736
  780
  826
  875
  925
  978
Earnings before tax, $m
  364
  424
  488
  555
  625
  699
  776
  857
  940
  1,027
  1,275
  1,369
  1,467
  1,569
  1,675
  1,784
  1,899
  2,018
  2,141
  2,270
  2,404
  2,544
  2,690
  2,842
  3,001
  3,166
  3,339
  3,520
  3,710
  3,907
Tax expense, $m
  98
  115
  132
  150
  169
  189
  210
  231
  254
  277
  344
  370
  396
  424
  452
  482
  513
  545
  578
  613
  649
  687
  726
  767
  810
  855
  902
  950
  1,002
  1,055
Net income, $m
  266
  310
  356
  405
  456
  510
  567
  625
  686
  750
  931
  1,000
  1,071
  1,145
  1,222
  1,303
  1,386
  1,473
  1,563
  1,657
  1,755
  1,857
  1,964
  2,075
  2,190
  2,311
  2,438
  2,570
  2,708
  2,852

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
  4,014
  4,529
  5,075
  5,651
  6,256
  6,890
  7,553
  8,245
  8,966
  9,716
  10,497
  11,308
  12,152
  13,028
  13,938
  14,885
  15,869
  16,893
  17,958
  19,067
  20,222
  21,426
  22,681
  23,990
  25,356
  26,782
  28,271
  29,828
  31,455
  33,157
Adjusted assets (=assets-cash), $m
  4,014
  4,529
  5,075
  5,651
  6,256
  6,890
  7,553
  8,245
  8,966
  9,716
  10,497
  11,308
  12,152
  13,028
  13,938
  14,885
  15,869
  16,893
  17,958
  19,067
  20,222
  21,426
  22,681
  23,990
  25,356
  26,782
  28,271
  29,828
  31,455
  33,157
Revenue / Adjusted assets
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
Average production assets, $m
  1,102
  1,244
  1,393
  1,551
  1,717
  1,892
  2,074
  2,264
  2,462
  2,668
  2,882
  3,105
  3,336
  3,577
  3,827
  4,087
  4,357
  4,638
  4,930
  5,235
  5,552
  5,882
  6,227
  6,586
  6,961
  7,353
  7,762
  8,189
  8,636
  9,103
Working capital, $m
  386
  435
  487
  543
  601
  662
  725
  792
  861
  933
  1,008
  1,086
  1,167
  1,251
  1,339
  1,430
  1,524
  1,623
  1,725
  1,831
  1,942
  2,058
  2,178
  2,304
  2,435
  2,572
  2,715
  2,865
  3,021
  3,185
Total debt, $m
  1,595
  1,906
  2,234
  2,581
  2,945
  3,327
  3,726
  4,142
  4,576
  5,028
  5,498
  5,986
  6,494
  7,022
  7,570
  8,140
  8,732
  9,348
  9,990
  10,657
  11,353
  12,077
  12,833
  13,621
  14,443
  15,301
  16,198
  17,135
  18,115
  19,139
Total liabilities, $m
  2,417
  2,727
  3,055
  3,402
  3,766
  4,148
  4,547
  4,963
  5,397
  5,849
  6,319
  6,808
  7,315
  7,843
  8,391
  8,961
  9,553
  10,170
  10,811
  11,478
  12,174
  12,898
  13,654
  14,442
  15,264
  16,123
  17,019
  17,956
  18,936
  19,960
Total equity, $m
  1,598
  1,803
  2,020
  2,249
  2,490
  2,742
  3,006
  3,281
  3,568
  3,867
  4,178
  4,501
  4,836
  5,185
  5,548
  5,924
  6,316
  6,723
  7,147
  7,589
  8,048
  8,527
  9,027
  9,548
  10,092
  10,659
  11,252
  11,872
  12,519
  13,196
Total liabilities and equity, $m
  4,015
  4,530
  5,075
  5,651
  6,256
  6,890
  7,553
  8,244
  8,965
  9,716
  10,497
  11,309
  12,151
  13,028
  13,939
  14,885
  15,869
  16,893
  17,958
  19,067
  20,222
  21,425
  22,681
  23,990
  25,356
  26,782
  28,271
  29,828
  31,455
  33,156
Debt-to-equity ratio
  1.000
  1.060
  1.110
  1.150
  1.180
  1.210
  1.240
  1.260
  1.280
  1.300
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.400
  1.410
  1.420
  1.420
  1.430
  1.430
  1.440
  1.440
  1.440
  1.450
  1.450
Adjusted equity ratio
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  266
  310
  356
  405
  456
  510
  567
  625
  686
  750
  931
  1,000
  1,071
  1,145
  1,222
  1,303
  1,386
  1,473
  1,563
  1,657
  1,755
  1,857
  1,964
  2,075
  2,190
  2,311
  2,438
  2,570
  2,708
  2,852
Depreciation, amort., depletion, $m
  223
  232
  241
  250
  260
  270
  281
  293
  304
  317
  173
  186
  200
  214
  229
  245
  261
  278
  295
  313
  332
  352
  373
  394
  417
  440
  465
  490
  517
  545
Funds from operations, $m
  489
  541
  597
  655
  716
  781
  848
  918
  991
  1,067
  1,103
  1,186
  1,271
  1,359
  1,452
  1,547
  1,647
  1,751
  1,858
  1,971
  2,088
  2,209
  2,336
  2,469
  2,607
  2,752
  2,903
  3,060
  3,225
  3,397
Change in working capital, $m
  46
  49
  52
  55
  58
  61
  64
  66
  69
  72
  75
  78
  81
  84
  87
  91
  95
  98
  102
  107
  111
  116
  121
  126
  131
  137
  143
  150
  156
  163
Cash from operations, $m
  442
  492
  544
  600
  658
  720
  784
  851
  922
  995
  1,028
  1,108
  1,190
  1,275
  1,364
  1,456
  1,552
  1,652
  1,756
  1,864
  1,977
  2,094
  2,216
  2,343
  2,476
  2,615
  2,759
  2,911
  3,069
  3,234
Maintenance CAPEX, $m
  -58
  -66
  -74
  -83
  -93
  -103
  -113
  -124
  -136
  -147
  -160
  -173
  -186
  -200
  -214
  -229
  -245
  -261
  -278
  -295
  -313
  -332
  -352
  -373
  -394
  -417
  -440
  -465
  -490
  -517
New CAPEX, $m
  -132
  -141
  -150
  -158
  -166
  -174
  -182
  -190
  -198
  -206
  -214
  -223
  -232
  -241
  -250
  -260
  -270
  -281
  -292
  -304
  -317
  -330
  -345
  -359
  -375
  -392
  -409
  -427
  -447
  -467
Cash from investing activities, $m
  -190
  -207
  -224
  -241
  -259
  -277
  -295
  -314
  -334
  -353
  -374
  -396
  -418
  -441
  -464
  -489
  -515
  -542
  -570
  -599
  -630
  -662
  -697
  -732
  -769
  -809
  -849
  -892
  -937
  -984
Free cash flow, $m
  252
  284
  320
  358
  399
  443
  489
  537
  588
  641
  654
  712
  772
  835
  900
  967
  1,038
  1,110
  1,186
  1,264
  1,346
  1,431
  1,519
  1,611
  1,707
  1,806
  1,910
  2,019
  2,132
  2,250
Issuance/(repayment) of debt, $m
  291
  310
  328
  347
  364
  382
  399
  417
  434
  452
  470
  488
  508
  528
  548
  570
  593
  616
  641
  668
  695
  725
  755
  788
  822
  859
  897
  937
  980
  1,024
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  
  291
  310
  328
  347
  364
  382
  399
  417
  434
  452
  470
  488
  508
  528
  548
  570
  593
  616
  641
  668
  695
  725
  755
  788
  822
  859
  897
  937
  980
  1,024
Total cash flow (excl. dividends), $m
  543
  594
  648
  705
  764
  825
  888
  954
  1,022
  1,093
  1,124
  1,201
  1,280
  1,362
  1,448
  1,537
  1,630
  1,727
  1,827
  1,932
  2,041
  2,155
  2,275
  2,399
  2,529
  2,665
  2,807
  2,956
  3,111
  3,274
Retained Cash Flow (-), $m
  -194
  -205
  -217
  -229
  -241
  -252
  -264
  -275
  -287
  -299
  -311
  -323
  -336
  -349
  -362
  -377
  -392
  -407
  -424
  -441
  -460
  -479
  -499
  -521
  -544
  -568
  -593
  -620
  -648
  -677
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
  350
  389
  431
  476
  523
  572
  624
  678
  735
  794
  814
  878
  944
  1,014
  1,086
  1,161
  1,238
  1,319
  1,403
  1,491
  1,582
  1,676
  1,775
  1,878
  1,985
  2,097
  2,214
  2,336
  2,464
  2,597
Discount rate, %
  5.50
  5.78
  6.06
  6.37
  6.69
  7.02
  7.37
  7.74
  8.13
  8.53
  8.96
  9.41
  9.88
  10.37
  10.89
  11.43
  12.01
  12.61
  13.24
  13.90
  14.59
  15.32
  16.09
  16.89
  17.74
  18.62
  19.56
  20.53
  21.56
  22.64
PV of cash for distribution, $m
  332
  348
  361
  372
  378
  381
  379
  374
  364
  350
  317
  298
  278
  255
  230
  205
  180
  156
  132
  110
  91
  73
  57
  44
  33
  25
  18
  13
  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

Genpact Limited is engaged in providing digitally powered business process management and services. The Company is also engaged in designing, transforming and running a combination of processes, as well as providing solutions that combine elements of its service offerings. The Company's segments include Business process outsourcing and Information technology services. The Company offers various vertical activities, which include banking and financial services, capital markets, consumer product goods services, healthcare, infrastructure and manufacturing services, insurance and life sciences. In addition to these vertical activities, it also offers analytics and research, collections and customer services, consulting and transformation services, core industry operations services, enterprise application services, finance and accounting (F&A) services, information technology (IT) infrastructure management services, and supply chain and procurement services.

FINANCIAL RATIOS  of  Genpact Limited (G)

Valuation Ratios
P/E Ratio 27.8
Price to Sales 2.9
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 29.2
Growth Rates
Sales Growth Rate 4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 43.5%
Cap. Spend. - 3 Yr. Gr. Rate 12.7%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 54.4%
Total Debt to Equity 70%
Interest Coverage 19
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 9%
Return On Total Capital 12.6%
Ret/ On T. Cap. - 3 Yr. Avg. 11.2%
Return On Equity 20.8%
Return On Equity - 3 Yr. Avg. 18%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 39.5%
Gross Margin - 3 Yr. Avg. 39.5%
EBITDA Margin 16.7%
EBITDA Margin - 3 Yr. Avg. 16.3%
Operating Margin 13.3%
Oper. Margin - 3 Yr. Avg. 13.1%
Pre-Tax Margin 12.8%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 10.5%
Net Profit Margin - 3 Yr. Avg. 9.6%
Effective Tax Rate 18.8%
Eff/ Tax Rate - 3 Yr. Avg. 20.8%
Payout Ratio 0%

G stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the G stock intrinsic value calculation we used $3001 million for the last fiscal year's total revenue generated by Genpact Limited. The default revenue input number comes from 0001 income statement of Genpact 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 G stock valuation model: a) initial revenue growth rate of 13.7% 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 5.5%, whose default value for G is calculated based on our internal credit rating of Genpact 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 Genpact 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 G stock the variable cost ratio is equal to 87.9%.

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 G 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 Genpact Limited.

Corporate tax rate of 27% is the nominal tax rate for Genpact 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 G 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 G are equal to 32.3%.

Life of production assets of 16.7 years is the average useful life of capital assets used in Genpact 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 G is equal to 11.3%. 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 - $1404.182 million for Genpact 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 189.387 million for Genpact 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 Genpact Limited at the current share price and the inputted number of shares is $7.2 billion.

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