Intrinsic value of Intelligent Systems - INS

Previous Close

$3.90

  Intrinsic Value

$0.63

stock screener

  Rating & Target

str. sell

-84%

Previous close

$3.90

 
Intrinsic value

$0.63

 
Up/down potential

-84%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of INS 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 2016), $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
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
Revenue, $m
  8
  12
  17
  25
  34
  46
  60
  78
  98
  122
  150
  181
  215
  253
  295
  340
  388
  440
  495
  553
  615
  679
  747
  817
  890
  967
  1,046
  1,129
  1,215
  1,305
  1,397
Variable operating expenses, $m
 
  15
  22
  31
  43
  57
  75
  97
  123
  153
  187
  226
  269
  316
  369
  425
  485
  550
  619
  692
  768
  849
  933
  1,021
  1,113
  1,209
  1,308
  1,411
  1,519
  1,631
  1,747
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
  10
  15
  22
  31
  43
  57
  75
  97
  123
  153
  187
  226
  269
  316
  369
  425
  485
  550
  619
  692
  768
  849
  933
  1,021
  1,113
  1,209
  1,308
  1,411
  1,519
  1,631
  1,747
Operating income, $m
  -1
  -3
  -4
  -6
  -9
  -11
  -15
  -19
  -25
  -31
  -37
  -45
  -54
  -63
  -74
  -85
  -97
  -110
  -124
  -138
  -154
  -170
  -187
  -204
  -223
  -242
  -262
  -282
  -304
  -326
  -349
EBITDA, $m
  -1
  -3
  -4
  -6
  -9
  -11
  -15
  -19
  -25
  -31
  -37
  -45
  -54
  -63
  -74
  -85
  -97
  -110
  -124
  -138
  -154
  -170
  -187
  -204
  -223
  -242
  -262
  -282
  -304
  -326
  -349
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
Earnings before tax, $m
  -1
  -3
  -4
  -6
  -9
  -12
  -15
  -20
  -25
  -31
  -38
  -46
  -55
  -64
  -75
  -86
  -99
  -112
  -126
  -140
  -156
  -172
  -190
  -207
  -226
  -246
  -266
  -287
  -309
  -331
  -355
Tax expense, $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
  0
Net income, $m
  -1
  -3
  -4
  -6
  -9
  -12
  -15
  -20
  -25
  -31
  -38
  -46
  -55
  -64
  -75
  -86
  -99
  -112
  -126
  -140
  -156
  -172
  -190
  -207
  -226
  -246
  -266
  -287
  -309
  -331
  -355

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  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
  23
  8
  11
  15
  21
  29
  38
  49
  61
  76
  94
  113
  134
  158
  184
  212
  243
  275
  310
  346
  384
  424
  467
  511
  556
  604
  654
  706
  759
  815
  873
Adjusted assets (=assets-cash), $m
  5
  8
  11
  15
  21
  29
  38
  49
  61
  76
  94
  113
  134
  158
  184
  212
  243
  275
  310
  346
  384
  424
  467
  511
  556
  604
  654
  706
  759
  815
  873
Revenue / Adjusted assets
  1.600
  1.500
  1.545
  1.667
  1.619
  1.586
  1.579
  1.592
  1.607
  1.605
  1.596
  1.602
  1.604
  1.601
  1.603
  1.604
  1.597
  1.600
  1.597
  1.598
  1.602
  1.601
  1.600
  1.599
  1.601
  1.601
  1.599
  1.599
  1.601
  1.601
  1.600
Average production assets, $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
  0
Working capital, $m
  17
  -2
  -2
  -3
  -4
  -6
  -8
  -10
  -12
  -15
  -19
  -23
  -27
  -32
  -37
  -42
  -49
  -55
  -62
  -69
  -77
  -85
  -93
  -102
  -111
  -121
  -131
  -141
  -152
  -163
  -175
Total debt, $m
  0
  1
  1
  2
  3
  5
  7
  9
  11
  14
  18
  22
  26
  31
  36
  41
  48
  54
  61
  68
  76
  84
  92
  101
  110
  120
  130
  140
  151
  162
  174
Total liabilities, $m
  1
  2
  2
  3
  4
  6
  8
  10
  12
  15
  19
  23
  27
  32
  37
  42
  49
  55
  62
  69
  77
  85
  93
  102
  111
  121
  131
  141
  152
  163
  175
Total equity, $m
  22
  6
  9
  12
  17
  23
  30
  39
  49
  61
  75
  90
  108
  127
  147
  170
  194
  220
  248
  277
  307
  340
  373
  408
  445
  483
  523
  565
  608
  652
  699
Total liabilities and equity, $m
  23
  8
  11
  15
  21
  29
  38
  49
  61
  76
  94
  113
  135
  159
  184
  212
  243
  275
  310
  346
  384
  425
  466
  510
  556
  604
  654
  706
  760
  815
  874
Debt-to-equity ratio
  0.000
  0.080
  0.140
  0.170
  0.190
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
Adjusted equity ratio
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  -3
  -4
  -6
  -9
  -12
  -15
  -20
  -25
  -31
  -38
  -46
  -55
  -64
  -75
  -86
  -99
  -112
  -126
  -140
  -156
  -172
  -190
  -207
  -226
  -246
  -266
  -287
  -309
  -331
  -355
Depreciation, amort., depletion, $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
  0
Funds from operations, $m
  -2
  -3
  -4
  -6
  -9
  -12
  -15
  -20
  -25
  -31
  -38
  -46
  -55
  -64
  -75
  -86
  -99
  -112
  -126
  -140
  -156
  -172
  -190
  -207
  -226
  -246
  -266
  -287
  -309
  -331
  -355
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
Cash from operations, $m
  -1
  -3
  -4
  -5
  -7
  -10
  -13
  -17
  -22
  -28
  -34
  -42
  -50
  -59
  -70
  -81
  -92
  -105
  -119
  -133
  -148
  -164
  -181
  -199
  -217
  -236
  -256
  -276
  -298
  -320
  -343
Maintenance CAPEX, $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
  0
New CAPEX, $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
  0
Cash from investing activities, $m
  4
  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
Free cash flow, $m
  3
  -3
  -4
  -5
  -7
  -10
  -13
  -17
  -22
  -28
  -34
  -42
  -50
  -59
  -70
  -81
  -92
  -105
  -119
  -133
  -148
  -164
  -181
  -199
  -217
  -236
  -256
  -276
  -298
  -320
  -343
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
Issuance/(repurchase) of shares, $m
  0
  5
  7
  10
  13
  17
  22
  28
  35
  43
  52
  61
  72
  83
  96
  109
  123
  138
  153
  170
  187
  205
  223
  243
  263
  284
  306
  328
  352
  376
  401
Cash from financing (excl. dividends), $m  
  0
  6
  8
  11
  14
  18
  24
  30
  38
  46
  55
  65
  76
  88
  101
  115
  129
  144
  160
  177
  195
  213
  231
  252
  272
  294
  316
  338
  363
  387
  413
Total cash flow (excl. dividends), $m
  3
  3
  4
  5
  7
  9
  11
  13
  15
  18
  21
  23
  26
  29
  31
  34
  36
  39
  41
  44
  46
  48
  51
  53
  55
  57
  60
  62
  65
  67
  70
Retained Cash Flow (-), $m
  4
  -5
  -7
  -10
  -13
  -17
  -22
  -28
  -35
  -43
  -52
  -61
  -72
  -83
  -96
  -109
  -123
  -138
  -153
  -170
  -187
  -205
  -223
  -243
  -263
  -284
  -306
  -328
  -352
  -376
  -401
Prev. year cash balance distribution, $m
 
  18
  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
 
  16
  -3
  -4
  -6
  -9
  -12
  -15
  -20
  -25
  -31
  -38
  -46
  -55
  -64
  -75
  -86
  -99
  -112
  -126
  -141
  -156
  -173
  -190
  -208
  -226
  -246
  -266
  -287
  -309
  -332
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
 
  15
  -3
  -4
  -5
  -7
  -8
  -10
  -12
  -14
  -16
  -18
  -20
  -21
  -22
  -22
  -22
  -21
  -21
  -19
  -18
  -16
  -14
  -12
  -11
  -9
  -7
  -6
  -4
  -3
  -2
Current shareholders' claim on cash, %
  100
  55.5
  31.5
  18.3
  10.8
  6.5
  4.0
  2.5
  1.6
  1.0
  0.7
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  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

Intelligent Systems Corporation is engaged in the business of providing technology solutions and processing services to the financial technology and services market. The Company's financial transaction solutions and services (FinTech) operations are conducted through its CoreCard Software, Inc. (CoreCard) subsidiary. CoreCard and its affiliate companies in Romania and India, as well as the corporate office provide administrative, human resources and executive management support. The Company also has two subsidiaries, CoreCard SRL in Romania and ISC Software in India, that perform software development and testing, as well as processing operations support for CoreCard. CoreCard designs, develops, and markets a suite of software solutions to accounts receivable businesses, financial institutions, retailers and processors to manage their credit and debit cards, prepaid cards, private label cards, fleet cards, loyalty programs, and accounts receivable and small loan transactions.

FINANCIAL RATIOS  of  Intelligent Systems (INS)

Valuation Ratios
P/E Ratio -34.1
Price to Sales 4.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow -34.1
Price to Free Cash Flow -34.1
Growth Rates
Sales Growth Rate 60%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -4.1%
Ret/ On Assets - 3 Yr. Avg. 32.9%
Return On Total Capital -4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 32.9%
Return On Equity -4.2%
Return On Equity - 3 Yr. Avg. 32.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 46.7%
EBITDA Margin -12.5%
EBITDA Margin - 3 Yr. Avg. -27.5%
Operating Margin -25%
Oper. Margin - 3 Yr. Avg. -31.7%
Pre-Tax Margin -12.5%
Pre-Tax Margin - 3 Yr. Avg. -27.5%
Net Profit Margin -12.5%
Net Profit Margin - 3 Yr. Avg. 115.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -300%

INS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INS stock intrinsic value calculation we used $8 million for the last fiscal year's total revenue generated by Intelligent Systems. The default revenue input number comes from 2016 income statement of Intelligent Systems. 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 INS stock valuation model: a) initial revenue growth rate of 50% 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 INS is calculated based on our internal credit rating of Intelligent Systems, 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 Intelligent Systems.
    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 INS stock the variable cost ratio is equal to 125%.

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 INS 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 3.5% for Intelligent Systems.

Corporate tax rate of 27% is the nominal tax rate for Intelligent Systems. 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 INS 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 INS are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Intelligent Systems 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 INS is equal to -12.5%. 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 - $22 million for Intelligent Systems - 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 8.785 million for Intelligent Systems 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 Intelligent Systems at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
INS Intelligent Sy 3.90 0.63  str.sell
FICO Fair Isaac 146.59 61.50  str.sell
BCOR Blucora 25.05 18.21  sell
ACIW ACI Worldwide 24.20 14.57  sell
SPLP Steel Partners 18.84 111.17  str.buy

COMPANY NEWS

▶ Intelligent Systems Announces First Quarter 2017 Results   [May-09-17 07:15AM  GlobeNewswire]
▶ Intelligent Systems Corp. Earnings Q2, 2015   [Aug-26  10:41AM  Capital Cube]
▶ 10-Q for Intelligent Systems Corp.   [Aug-17  08:13PM  at Company Spotlight]
▶ 10-Q for Intelligent Systems Corp.   [May-18  08:12PM  at Company Spotlight]
▶ 10-K/A for Intelligent Systems Corp.   [May-03  08:13PM  at Company Spotlight]
▶ CRC Industries, Inc. Acquires ChemFree Corporation   [Apr-01  10:06AM  PR Newswire]
▶ 10-K for Intelligent Systems Corp.   [Feb-20  07:07PM  at Company Spotlight]
▶ Intelligent System (INS) Downgraded From Hold to Sell   [Dec-11  08:10AM  TheStreet.com]
▶ 10-Q for Intelligent Systems Corp.   [Nov-17  07:09PM  Company Spotlight]
▶ Intelligent Systems Responds to Unusual Market Activity   [Jun-16  06:00PM  GlobeNewswire]
▶ Intelligent Systems Announces First Quarter 2013 Results   [May-15  08:00AM  GlobeNewswire]
Financial statements of INS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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