Intrinsic value of GSE Systems, Inc. - GVP

Previous Close

$2.46

  Intrinsic Value

$7.28

stock screener

  Rating & Target

str. buy

+196%

Previous close

$2.46

 
Intrinsic value

$7.28

 
Up/down potential

+196%

 
Rating

str. buy

We calculate the intrinsic value of GVP 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 0.0

 

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, %
  41.50
  37.85
  34.57
  31.61
  28.95
  26.55
  24.40
  22.46
  20.71
  19.14
  17.73
  16.45
  15.31
  14.28
  13.35
  12.52
  11.76
  11.09
  10.48
  9.93
  9.44
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
  6.91
  6.72
Revenue, $m
  100
  138
  186
  245
  316
  400
  498
  610
  736
  877
  1,032
  1,202
  1,386
  1,584
  1,796
  2,020
  2,258
  2,508
  2,771
  3,046
  3,334
  3,634
  3,946
  4,271
  4,609
  4,960
  5,325
  5,704
  6,098
  6,508
Variable operating expenses, $m
  98
  135
  181
  238
  307
  389
  483
  592
  714
  851
  1,002
  1,167
  1,345
  1,538
  1,743
  1,961
  2,192
  2,435
  2,690
  2,957
  3,236
  3,527
  3,830
  4,145
  4,473
  4,814
  5,168
  5,537
  5,919
  6,317
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
  98
  135
  181
  238
  307
  389
  483
  592
  714
  851
  1,002
  1,167
  1,345
  1,538
  1,743
  1,961
  2,192
  2,435
  2,690
  2,957
  3,236
  3,527
  3,830
  4,145
  4,473
  4,814
  5,168
  5,537
  5,919
  6,317
Operating income, $m
  3
  4
  5
  7
  9
  12
  15
  18
  22
  26
  30
  35
  41
  47
  53
  59
  66
  74
  81
  90
  98
  107
  116
  126
  136
  146
  157
  168
  179
  191
EBITDA, $m
  4
  5
  7
  9
  11
  14
  18
  22
  26
  31
  37
  43
  50
  57
  64
  72
  81
  90
  99
  109
  119
  130
  141
  153
  165
  177
  190
  204
  218
  232
Interest expense (income), $m
  0
  0
  1
  1
  2
  4
  5
  7
  9
  11
  13
  16
  19
  23
  27
  31
  35
  39
  44
  49
  54
  60
  66
  72
  78
  85
  92
  99
  106
  114
  122
Earnings before tax, $m
  3
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
Tax expense, $m
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
Net income, $m
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51

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
  79
  110
  147
  194
  250
  317
  394
  482
  582
  694
  817
  951
  1,097
  1,253
  1,421
  1,598
  1,786
  1,984
  2,192
  2,410
  2,638
  2,875
  3,122
  3,379
  3,646
  3,924
  4,213
  4,513
  4,825
  5,149
Adjusted assets (=assets-cash), $m
  79
  110
  147
  194
  250
  317
  394
  482
  582
  694
  817
  951
  1,097
  1,253
  1,421
  1,598
  1,786
  1,984
  2,192
  2,410
  2,638
  2,875
  3,122
  3,379
  3,646
  3,924
  4,213
  4,513
  4,825
  5,149
Revenue / Adjusted assets
  1.266
  1.255
  1.265
  1.263
  1.264
  1.262
  1.264
  1.266
  1.265
  1.264
  1.263
  1.264
  1.263
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
Average production assets, $m
  8
  11
  15
  20
  26
  33
  41
  50
  60
  72
  85
  99
  114
  130
  147
  166
  185
  206
  227
  250
  273
  298
  324
  350
  378
  407
  437
  468
  500
  534
Working capital, $m
  -12
  -16
  -22
  -29
  -38
  -48
  -59
  -73
  -88
  -104
  -123
  -143
  -165
  -189
  -214
  -240
  -269
  -298
  -330
  -363
  -397
  -432
  -470
  -508
  -548
  -590
  -634
  -679
  -726
  -774
Total debt, $m
  11
  25
  43
  65
  92
  123
  159
  201
  248
  301
  359
  422
  491
  565
  644
  728
  817
  910
  1,008
  1,111
  1,218
  1,330
  1,447
  1,568
  1,695
  1,826
  1,962
  2,104
  2,251
  2,404
Total liabilities, $m
  38
  52
  70
  92
  118
  149
  186
  228
  275
  327
  385
  449
  518
  592
  671
  754
  843
  937
  1,035
  1,138
  1,245
  1,357
  1,473
  1,595
  1,721
  1,852
  1,988
  2,130
  2,277
  2,430
Total equity, $m
  42
  58
  78
  102
  132
  167
  208
  255
  307
  366
  431
  502
  579
  662
  750
  844
  943
  1,048
  1,158
  1,273
  1,393
  1,518
  1,648
  1,784
  1,925
  2,072
  2,224
  2,383
  2,547
  2,719
Total liabilities and equity, $m
  80
  110
  148
  194
  250
  316
  394
  483
  582
  693
  816
  951
  1,097
  1,254
  1,421
  1,598
  1,786
  1,985
  2,193
  2,411
  2,638
  2,875
  3,121
  3,379
  3,646
  3,924
  4,212
  4,513
  4,824
  5,149
Debt-to-equity ratio
  0.260
  0.440
  0.550
  0.640
  0.690
  0.740
  0.770
  0.790
  0.810
  0.820
  0.830
  0.840
  0.850
  0.850
  0.860
  0.860
  0.870
  0.870
  0.870
  0.870
  0.870
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
Adjusted equity ratio
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
Funds from operations, $m
  3
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  19
  22
  25
  28
  31
  34
  37
  41
  45
  49
  53
  57
  62
  66
  71
  76
  81
  86
  92
Change in working capital, $m
  -4
  -5
  -6
  -7
  -8
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
Cash from operations, $m
  6
  8
  10
  12
  15
  18
  21
  24
  28
  31
  35
  39
  44
  48
  53
  57
  62
  67
  72
  78
  83
  89
  94
  100
  106
  113
  119
  126
  133
  141
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -38
New CAPEX, $m
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
Cash from investing activities, $m
  -2
  -4
  -5
  -6
  -8
  -9
  -11
  -12
  -14
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
Free cash flow, $m
  3
  4
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  32
  35
  38
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
Issuance/(repayment) of debt, $m
  11
  14
  18
  22
  27
  31
  36
  42
  47
  53
  58
  63
  69
  74
  79
  84
  89
  93
  98
  103
  107
  112
  117
  121
  126
  131
  136
  142
  147
  153
Issuance/(repurchase) of shares, $m
  10
  13
  17
  21
  26
  30
  35
  40
  45
  50
  55
  59
  64
  68
  72
  76
  79
  83
  86
  89
  92
  95
  98
  101
  104
  107
  110
  113
  117
  120
Cash from financing (excl. dividends), $m  
  21
  27
  35
  43
  53
  61
  71
  82
  92
  103
  113
  122
  133
  142
  151
  160
  168
  176
  184
  192
  199
  207
  215
  222
  230
  238
  246
  255
  264
  273
Total cash flow (excl. dividends), $m
  25
  32
  40
  49
  59
  70
  82
  93
  105
  118
  130
  142
  154
  165
  176
  188
  198
  209
  219
  230
  240
  250
  261
  271
  282
  293
  305
  316
  329
  342
Retained Cash Flow (-), $m
  -12
  -16
  -20
  -25
  -30
  -35
  -41
  -47
  -53
  -59
  -65
  -71
  -77
  -83
  -88
  -94
  -99
  -105
  -110
  -115
  -120
  -125
  -130
  -136
  -141
  -147
  -152
  -158
  -165
  -171
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
  12
  16
  20
  25
  30
  35
  41
  47
  53
  59
  65
  71
  77
  82
  88
  94
  99
  104
  110
  115
  120
  125
  130
  135
  141
  146
  152
  158
  164
  171
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
  12
  15
  17
  20
  23
  25
  28
  29
  30
  31
  31
  30
  29
  28
  26
  24
  22
  19
  17
  15
  12
  10
  9
  7
  5
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  82.7
  69.2
  58.7
  50.4
  43.8
  38.4
  34.1
  30.5
  27.6
  25.1
  23.0
  21.2
  19.7
  18.4
  17.2
  16.2
  15.4
  14.6
  13.9
  13.3
  12.7
  12.2
  11.7
  11.3
  10.9
  10.6
  10.2
  9.9
  9.6
  9.4

GSE Systems, Inc. (GSE) is a performance improvement company. The Company operates through two segments: Performance Improvement Solutions, and Nuclear Industry Training and Consulting. The Performance Improvement Solutions segment provides simulation, training and engineering products and services to the industries, including nuclear and fossil fuel power industry, and chemical and petrochemical industries. The Performance Improvement Solutions segment consists of its power plant and process simulation solutions, as well as engineering solutions. The Nuclear Industry Training and Consulting segment provides specialized workforce solutions primarily to the nuclear industry, working at client's facilities. The EnVision product line consists of computer-based tutorials and related simulation models primarily for the petrochemical, and oil and gas refining industries.

FINANCIAL RATIOS  of  GSE Systems, Inc. (GVP)

Valuation Ratios
P/E Ratio 46.3
Price to Sales 0.9
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 4.6
Price to Free Cash Flow 4.6
Growth Rates
Sales Growth Rate -7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. -8.1%
Return On Total Capital 5.1%
Ret/ On T. Cap. - 3 Yr. Avg. -15.2%
Return On Equity 5.1%
Return On Equity - 3 Yr. Avg. -15.2%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 28.3%
Gross Margin - 3 Yr. Avg. 27.3%
EBITDA Margin 5.7%
EBITDA Margin - 3 Yr. Avg. -5.1%
Operating Margin 1.9%
Oper. Margin - 3 Yr. Avg. -7.9%
Pre-Tax Margin 3.8%
Pre-Tax Margin - 3 Yr. Avg. -7.2%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. -8.4%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 8.3%
Payout Ratio 0%

GVP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GVP stock intrinsic value calculation we used $71 million for the last fiscal year's total revenue generated by GSE Systems, Inc.. The default revenue input number comes from 0001 income statement of GSE Systems, 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 GVP stock valuation model: a) initial revenue growth rate of 41.5% 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 GVP is calculated based on our internal credit rating of GSE Systems, 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 GSE Systems, 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 GVP stock the variable cost ratio is equal to 97.2%.

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 GVP 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 GSE Systems, Inc..

Corporate tax rate of 27% is the nominal tax rate for GSE Systems, 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 GVP 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 GVP are equal to 8.2%.

Life of production assets of 13 years is the average useful life of capital assets used in GSE Systems, 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 GVP is equal to -11.9%. 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 - $29.672 million for GSE Systems, 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 19.833 million for GSE Systems, 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 GSE Systems, Inc. at the current share price and the inputted number of shares is $0.0 billion.

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