Intrinsic value of Jack Henry & Associates, Inc. - JKHY

Previous Close

$143.50

  Intrinsic Value

$55.97

stock screener

  Rating & Target

str. sell

-61%

Previous close

$143.50

 
Intrinsic value

$55.97

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of JKHY 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 11.1

 

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, %
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
Revenue, $m
  1,661
  1,791
  1,925
  2,065
  2,210
  2,361
  2,518
  2,682
  2,852
  3,028
  3,213
  3,404
  3,604
  3,813
  4,031
  4,258
  4,495
  4,743
  5,003
  5,274
  5,557
  5,854
  6,165
  6,490
  6,830
  7,187
  7,561
  7,953
  8,363
  8,793
Variable operating expenses, $m
  1,237
  1,331
  1,429
  1,531
  1,636
  1,746
  1,860
  1,979
  2,103
  2,231
  2,337
  2,476
  2,622
  2,773
  2,932
  3,097
  3,270
  3,450
  3,639
  3,836
  4,042
  4,258
  4,484
  4,720
  4,968
  5,227
  5,499
  5,784
  6,083
  6,396
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
  1,237
  1,331
  1,429
  1,531
  1,636
  1,746
  1,860
  1,979
  2,103
  2,231
  2,337
  2,476
  2,622
  2,773
  2,932
  3,097
  3,270
  3,450
  3,639
  3,836
  4,042
  4,258
  4,484
  4,720
  4,968
  5,227
  5,499
  5,784
  6,083
  6,396
Operating income, $m
  424
  460
  496
  534
  574
  615
  658
  703
  749
  797
  876
  928
  983
  1,040
  1,099
  1,161
  1,226
  1,293
  1,364
  1,438
  1,515
  1,596
  1,681
  1,770
  1,862
  1,960
  2,062
  2,168
  2,280
  2,398
EBITDA, $m
  554
  597
  641
  688
  736
  787
  839
  893
  950
  1,009
  1,070
  1,134
  1,201
  1,270
  1,343
  1,419
  1,498
  1,580
  1,667
  1,757
  1,851
  1,950
  2,054
  2,162
  2,275
  2,394
  2,519
  2,649
  2,786
  2,929
Interest expense (income), $m
  1
  0
  5
  9
  14
  19
  24
  30
  35
  41
  47
  54
  60
  67
  74
  82
  89
  98
  106
  115
  124
  134
  144
  155
  166
  178
  190
  203
  216
  230
  245
Earnings before tax, $m
  424
  455
  487
  520
  555
  591
  628
  667
  708
  750
  822
  868
  916
  966
  1,017
  1,072
  1,128
  1,187
  1,249
  1,314
  1,381
  1,452
  1,526
  1,604
  1,685
  1,770
  1,859
  1,952
  2,050
  2,153
Tax expense, $m
  115
  123
  132
  141
  150
  160
  170
  180
  191
  202
  222
  234
  247
  261
  275
  289
  305
  321
  337
  355
  373
  392
  412
  433
  455
  478
  502
  527
  554
  581
Net income, $m
  310
  332
  356
  380
  405
  431
  459
  487
  517
  547
  600
  634
  669
  705
  743
  782
  824
  867
  912
  959
  1,008
  1,060
  1,114
  1,171
  1,230
  1,292
  1,357
  1,425
  1,497
  1,572

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
  2,204
  2,375
  2,554
  2,739
  2,932
  3,132
  3,340
  3,557
  3,782
  4,016
  4,261
  4,515
  4,780
  5,057
  5,346
  5,647
  5,962
  6,291
  6,635
  6,994
  7,371
  7,764
  8,176
  8,607
  9,059
  9,532
  10,028
  10,547
  11,092
  11,662
Adjusted assets (=assets-cash), $m
  2,204
  2,375
  2,554
  2,739
  2,932
  3,132
  3,340
  3,557
  3,782
  4,016
  4,261
  4,515
  4,780
  5,057
  5,346
  5,647
  5,962
  6,291
  6,635
  6,994
  7,371
  7,764
  8,176
  8,607
  9,059
  9,532
  10,028
  10,547
  11,092
  11,662
Revenue / Adjusted assets
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
Average production assets, $m
  854
  921
  990
  1,062
  1,136
  1,214
  1,294
  1,378
  1,466
  1,557
  1,651
  1,750
  1,853
  1,960
  2,072
  2,189
  2,311
  2,438
  2,571
  2,711
  2,856
  3,009
  3,169
  3,336
  3,511
  3,694
  3,886
  4,088
  4,299
  4,520
Working capital, $m
  -37
  -39
  -42
  -45
  -49
  -52
  -55
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -129
  -136
  -143
  -150
  -158
  -166
  -175
  -184
  -193
Total debt, $m
  59
  119
  182
  247
  315
  385
  458
  534
  613
  695
  781
  870
  964
  1,061
  1,162
  1,268
  1,378
  1,494
  1,614
  1,741
  1,873
  2,011
  2,155
  2,307
  2,465
  2,631
  2,805
  2,988
  3,179
  3,379
Total liabilities, $m
  773
  834
  896
  961
  1,029
  1,099
  1,172
  1,248
  1,327
  1,410
  1,496
  1,585
  1,678
  1,775
  1,876
  1,982
  2,093
  2,208
  2,329
  2,455
  2,587
  2,725
  2,870
  3,021
  3,180
  3,346
  3,520
  3,702
  3,893
  4,093
Total equity, $m
  1,430
  1,542
  1,657
  1,778
  1,903
  2,033
  2,168
  2,308
  2,454
  2,607
  2,765
  2,930
  3,103
  3,282
  3,470
  3,665
  3,869
  4,083
  4,306
  4,539
  4,783
  5,039
  5,306
  5,586
  5,879
  6,186
  6,508
  6,845
  7,198
  7,569
Total liabilities and equity, $m
  2,203
  2,376
  2,553
  2,739
  2,932
  3,132
  3,340
  3,556
  3,781
  4,017
  4,261
  4,515
  4,781
  5,057
  5,346
  5,647
  5,962
  6,291
  6,635
  6,994
  7,370
  7,764
  8,176
  8,607
  9,059
  9,532
  10,028
  10,547
  11,091
  11,662
Debt-to-equity ratio
  0.040
  0.080
  0.110
  0.140
  0.170
  0.190
  0.210
  0.230
  0.250
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.400
  0.410
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
Adjusted equity ratio
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  310
  332
  356
  380
  405
  431
  459
  487
  517
  547
  600
  634
  669
  705
  743
  782
  824
  867
  912
  959
  1,008
  1,060
  1,114
  1,171
  1,230
  1,292
  1,357
  1,425
  1,497
  1,572
Depreciation, amort., depletion, $m
  129
  137
  145
  154
  162
  172
  181
  191
  201
  212
  194
  206
  218
  231
  244
  257
  272
  287
  303
  319
  336
  354
  373
  392
  413
  435
  457
  481
  506
  532
Funds from operations, $m
  439
  469
  501
  533
  568
  603
  640
  678
  718
  759
  795
  840
  887
  935
  986
  1,040
  1,095
  1,154
  1,214
  1,278
  1,344
  1,414
  1,487
  1,563
  1,643
  1,727
  1,814
  1,906
  2,002
  2,103
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
Cash from operations, $m
  442
  472
  504
  537
  571
  606
  643
  682
  722
  763
  799
  844
  891
  940
  991
  1,045
  1,101
  1,159
  1,220
  1,284
  1,351
  1,421
  1,494
  1,570
  1,650
  1,734
  1,823
  1,915
  2,011
  2,113
Maintenance CAPEX, $m
  -93
  -100
  -108
  -116
  -125
  -134
  -143
  -152
  -162
  -172
  -183
  -194
  -206
  -218
  -231
  -244
  -257
  -272
  -287
  -303
  -319
  -336
  -354
  -373
  -392
  -413
  -435
  -457
  -481
  -506
New CAPEX, $m
  -65
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -127
  -133
  -139
  -146
  -153
  -160
  -167
  -175
  -183
  -192
  -201
  -211
  -221
Cash from investing activities, $m
  -158
  -167
  -177
  -188
  -200
  -212
  -224
  -236
  -249
  -263
  -278
  -293
  -309
  -325
  -343
  -361
  -379
  -399
  -420
  -442
  -465
  -489
  -514
  -540
  -567
  -596
  -627
  -658
  -692
  -727
Free cash flow, $m
  284
  305
  326
  348
  371
  395
  420
  445
  472
  500
  521
  551
  582
  615
  649
  684
  721
  760
  800
  842
  886
  932
  980
  1,030
  1,083
  1,138
  1,196
  1,256
  1,320
  1,386
Issuance/(repayment) of debt, $m
  59
  60
  63
  65
  68
  70
  73
  76
  79
  82
  86
  89
  93
  97
  101
  106
  110
  115
  121
  126
  132
  138
  145
  151
  159
  166
  174
  182
  191
  200
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  
  59
  60
  63
  65
  68
  70
  73
  76
  79
  82
  86
  89
  93
  97
  101
  106
  110
  115
  121
  126
  132
  138
  145
  151
  159
  166
  174
  182
  191
  200
Total cash flow (excl. dividends), $m
  343
  365
  389
  413
  439
  465
  493
  521
  551
  582
  607
  640
  675
  712
  750
  790
  832
  875
  921
  968
  1,018
  1,070
  1,125
  1,182
  1,242
  1,304
  1,370
  1,439
  1,511
  1,586
Retained Cash Flow (-), $m
  -107
  -111
  -116
  -120
  -125
  -130
  -135
  -141
  -146
  -152
  -159
  -165
  -172
  -180
  -187
  -196
  -204
  -213
  -223
  -233
  -244
  -255
  -267
  -280
  -293
  -307
  -322
  -337
  -353
  -370
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
  236
  254
  273
  293
  314
  335
  358
  381
  405
  430
  448
  475
  503
  532
  563
  594
  627
  662
  697
  735
  774
  815
  857
  902
  948
  997
  1,048
  1,101
  1,157
  1,216
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
  226
  232
  238
  241
  243
  243
  242
  238
  233
  225
  213
  203
  191
  179
  165
  151
  136
  122
  107
  93
  80
  68
  56
  46
  37
  29
  22
  17
  13
  9
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

Jack Henry & Associates, Inc. is a provider of information processing solutions for community banks. The Company offers a range of products and services, including processing transactions, automating business processes, and managing information financial institutions and diverse corporate entities. It operates in two segments: bank systems and services (Bank) and credit union systems and services (Credit Union). It provides its products and services through approximately three business brands, which include Jack Henry Banking, Symitar and ProfitStars. The Core software system consists of the integrated applications required to process deposit, loan, and general ledger transactions, and to maintain centralized customer/member information. Jack Henry Banking markets over three software systems to banks and Symitar markets over two software systems to credit unions. Its subsidiaries include Jack Henry Services, Inc., Symitar Systems, Inc. and Bayside Business Solutions, Inc.

FINANCIAL RATIOS  of  Jack Henry & Associates, Inc. (JKHY)

Valuation Ratios
P/E Ratio 45.2
Price to Sales 7.8
Price to Book 10.8
Price to Tangible Book
Price to Cash Flow 31.1
Price to Free Cash Flow 53.2
Growth Rates
Sales Growth Rate 5.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.3%
Cap. Spend. - 3 Yr. Gr. Rate 5.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 4.8%
Total Debt to Equity 4.8%
Interest Coverage 368
Management Effectiveness
Return On Assets 13.2%
Ret/ On Assets - 3 Yr. Avg. 13%
Return On Total Capital 23.7%
Ret/ On T. Cap. - 3 Yr. Avg. 23%
Return On Equity 24.3%
Return On Equity - 3 Yr. Avg. 23.6%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 42.8%
Gross Margin - 3 Yr. Avg. 42.8%
EBITDA Margin 35.5%
EBITDA Margin - 3 Yr. Avg. 35.5%
Operating Margin 25.7%
Oper. Margin - 3 Yr. Avg. 25.9%
Pre-Tax Margin 25.6%
Pre-Tax Margin - 3 Yr. Avg. 25.8%
Net Profit Margin 17.2%
Net Profit Margin - 3 Yr. Avg. 17.5%
Effective Tax Rate 33%
Eff/ Tax Rate - 3 Yr. Avg. 32.4%
Payout Ratio 37.4%

JKHY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the JKHY stock intrinsic value calculation we used $1537 million for the last fiscal year's total revenue generated by Jack Henry & Associates, Inc.. The default revenue input number comes from 0001 income statement of Jack Henry & Associates, 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 JKHY stock valuation model: a) initial revenue growth rate of 8.1% 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 JKHY is calculated based on our internal credit rating of Jack Henry & Associates, 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 Jack Henry & Associates, 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 JKHY stock the variable cost ratio is equal to 74.6%.

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 JKHY 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 7.7% for Jack Henry & Associates, Inc..

Corporate tax rate of 27% is the nominal tax rate for Jack Henry & Associates, 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 JKHY 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 JKHY are equal to 51.4%.

Life of production assets of 8.5 years is the average useful life of capital assets used in Jack Henry & Associates, 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 JKHY is equal to -2.2%. 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 - $1322.844 million for Jack Henry & Associates, 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 77.164 million for Jack Henry & Associates, 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 Jack Henry & Associates, Inc. at the current share price and the inputted number of shares is $11.1 billion.

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