Intrinsic value of KEYW Holding - KEYW

Previous Close

$9.41

  Intrinsic Value

$7.12

stock screener

  Rating & Target

sell

-24%

Previous close

$9.41

 
Intrinsic value

$7.12

 
Up/down potential

-24%

 
Rating

sell

We calculate the intrinsic value of KEYW 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 0.5

 

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, %
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
Revenue, $m
  456
  472
  489
  507
  527
  548
  571
  595
  620
  647
  675
  706
  737
  771
  807
  844
  884
  925
  969
  1,016
  1,064
  1,116
  1,169
  1,226
  1,286
  1,349
  1,414
  1,484
  1,557
  1,633
Variable operating expenses, $m
  433
  446
  460
  475
  492
  510
  528
  548
  570
  592
  565
  590
  617
  645
  674
  706
  739
  774
  810
  849
  890
  933
  978
  1,025
  1,075
  1,127
  1,183
  1,240
  1,301
  1,365
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
  433
  446
  460
  475
  492
  510
  528
  548
  570
  592
  565
  590
  617
  645
  674
  706
  739
  774
  810
  849
  890
  933
  978
  1,025
  1,075
  1,127
  1,183
  1,240
  1,301
  1,365
Operating income, $m
  24
  26
  29
  32
  35
  39
  42
  46
  50
  55
  111
  116
  121
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
  201
  211
  221
  232
  243
  255
  268
EBITDA, $m
  86
  89
  92
  96
  100
  104
  108
  112
  117
  122
  128
  133
  139
  146
  152
  160
  167
  175
  183
  192
  201
  211
  221
  232
  243
  255
  267
  280
  294
  309
Interest expense (income), $m
  4
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  50
  52
  55
  58
  62
  65
  69
  72
  76
  81
  85
  90
  94
  100
  105
Earnings before tax, $m
  1
  3
  4
  6
  8
  10
  12
  14
  17
  19
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  114
  119
  125
  130
  136
  142
  149
  156
  163
Tax expense, $m
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
Net income, $m
  1
  2
  3
  4
  6
  7
  9
  10
  12
  14
  53
  55
  58
  60
  62
  65
  68
  70
  73
  77
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119

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
  705
  730
  756
  784
  815
  847
  882
  919
  958
  1,000
  1,044
  1,091
  1,140
  1,192
  1,247
  1,305
  1,366
  1,430
  1,498
  1,570
  1,645
  1,724
  1,808
  1,895
  1,987
  2,084
  2,186
  2,293
  2,406
  2,524
Adjusted assets (=assets-cash), $m
  705
  730
  756
  784
  815
  847
  882
  919
  958
  1,000
  1,044
  1,091
  1,140
  1,192
  1,247
  1,305
  1,366
  1,430
  1,498
  1,570
  1,645
  1,724
  1,808
  1,895
  1,987
  2,084
  2,186
  2,293
  2,406
  2,524
Revenue / Adjusted assets
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.646
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
Average production assets, $m
  249
  257
  267
  277
  287
  299
  311
  324
  338
  353
  368
  385
  402
  420
  440
  460
  482
  504
  528
  554
  580
  608
  637
  668
  701
  735
  771
  809
  848
  890
Working capital, $m
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
  106
Total debt, $m
  271
  285
  299
  315
  332
  350
  369
  389
  411
  433
  458
  483
  510
  539
  569
  601
  635
  670
  708
  747
  788
  832
  878
  926
  977
  1,030
  1,086
  1,145
  1,207
  1,272
Total liabilities, $m
  388
  401
  416
  431
  448
  466
  485
  505
  527
  550
  574
  600
  627
  656
  686
  718
  751
  787
  824
  863
  905
  948
  994
  1,042
  1,093
  1,146
  1,202
  1,261
  1,323
  1,388
Total equity, $m
  317
  328
  340
  353
  367
  381
  397
  414
  431
  450
  470
  491
  513
  536
  561
  587
  615
  644
  674
  706
  740
  776
  813
  853
  894
  938
  984
  1,032
  1,083
  1,136
Total liabilities and equity, $m
  705
  729
  756
  784
  815
  847
  882
  919
  958
  1,000
  1,044
  1,091
  1,140
  1,192
  1,247
  1,305
  1,366
  1,431
  1,498
  1,569
  1,645
  1,724
  1,807
  1,895
  1,987
  2,084
  2,186
  2,293
  2,406
  2,524
Debt-to-equity ratio
  0.860
  0.870
  0.880
  0.890
  0.900
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  1.000
  1.010
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.060
  1.070
  1.080
  1.090
  1.090
  1.100
  1.100
  1.110
  1.110
  1.120
Adjusted equity ratio
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  2
  3
  4
  6
  7
  9
  10
  12
  14
  53
  55
  58
  60
  62
  65
  68
  70
  73
  77
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119
Depreciation, amort., depletion, $m
  63
  63
  63
  64
  64
  65
  65
  66
  67
  67
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
Funds from operations, $m
  63
  65
  67
  68
  70
  72
  74
  76
  79
  81
  70
  73
  76
  79
  83
  86
  90
  94
  98
  102
  107
  111
  116
  122
  127
  133
  139
  146
  153
  160
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  62
  64
  65
  67
  69
  71
  73
  75
  77
  80
  68
  71
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  141
  148
  155
Maintenance CAPEX, $m
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
New CAPEX, $m
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
Cash from investing activities, $m
  -19
  -20
  -21
  -22
  -24
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -64
  -66
  -70
  -73
  -77
  -81
Free cash flow, $m
  44
  44
  44
  45
  45
  46
  47
  48
  49
  49
  37
  38
  39
  40
  42
  43
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
Issuance/(repayment) of debt, $m
  12
  13
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
Issuance/(repurchase) of shares, $m
  9
  9
  9
  8
  8
  7
  7
  6
  6
  5
  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  
  21
  22
  24
  24
  25
  25
  26
  26
  28
  28
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
Total cash flow (excl. dividends), $m
  65
  66
  68
  69
  70
  71
  73
  74
  76
  77
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
Retained Cash Flow (-), $m
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -53
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
  55
  55
  56
  56
  56
  57
  57
  58
  58
  58
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  61
  64
  67
  69
  72
  76
  79
  82
  86
Discount rate, %
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
  51
  47
  43
  39
  35
  31
  27
  24
  20
  17
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.1
  96.3
  94.6
  93.1
  91.7
  90.5
  89.4
  88.5
  87.7
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
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The KeyW Holding Corporation is a holding company. The Company is a provider of engineering and technology solutions to support the collection, processing, analysis and dissemination of information across the full spectrum of the Intelligence, cyber and counterterrorism communities missions. It operates through Government Solutions segment. Its solutions are designed to meet the needs of agile intelligence and the United States government national security priorities through a range of cyber operations and training, geospatial intelligence, cloud and data analytics, engineering, and intelligence analysis and operations offerings. Its Intelligence Surveillance and Reconnaissance solution suite is deployed from a sensor delivery platform. It includes products, including electro-optical, hyperspectral and synthetic aperture radar sensors, and other products that it manufactures and integrates with hardware and software to meet evolving intelligence mission requirements.

FINANCIAL RATIOS  of  KEYW Holding (KEYW)

Valuation Ratios
P/E Ratio -14.8
Price to Sales 1.3
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 16.8
Price to Free Cash Flow 77.1
Growth Rates
Sales Growth Rate -3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.6%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 56.7%
Total Debt to Equity 56.7%
Interest Coverage 2
Management Effectiveness
Return On Assets -5.3%
Ret/ On Assets - 3 Yr. Avg. -8.4%
Return On Total Capital -7%
Ret/ On T. Cap. - 3 Yr. Avg. -8.4%
Return On Equity -10.7%
Return On Equity - 3 Yr. Avg. -12.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 31.6%
Gross Margin - 3 Yr. Avg. 30.9%
EBITDA Margin 7.6%
EBITDA Margin - 3 Yr. Avg. 9.7%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 5.6%
Pre-Tax Margin 1.4%
Pre-Tax Margin - 3 Yr. Avg. 2.3%
Net Profit Margin -9%
Net Profit Margin - 3 Yr. Avg. -11.3%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 226.7%
Payout Ratio 0%

KEYW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEYW stock intrinsic value calculation we used $441.586 million for the last fiscal year's total revenue generated by KEYW Holding. The default revenue input number comes from 0001 income statement of KEYW Holding. 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 KEYW stock valuation model: a) initial revenue growth rate of 3.3% 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 8.4%, whose default value for KEYW is calculated based on our internal credit rating of KEYW Holding, 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 KEYW Holding.
    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 KEYW stock the variable cost ratio is equal to 95.2%.

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 KEYW 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 8.7% for KEYW Holding.

Corporate tax rate of 27% is the nominal tax rate for KEYW Holding. 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 KEYW 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 KEYW are equal to 54.5%.

Life of production assets of 21.8 years is the average useful life of capital assets used in KEYW Holding 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 KEYW is equal to 6.5%. 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 - $307.518 million for KEYW Holding - 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 49.5 million for KEYW Holding 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 KEYW Holding at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ 5 things to watch from the latest round of government contractor earnings reports   [Nov-06-18 03:06PM  American City Business Journals]
▶ KEYW: 3Q Earnings Snapshot   [07:14AM  Associated Press]
▶ KeyW to Present at the Midwest IDEAS Investor Conference   [Aug-22-18 05:00PM  GlobeNewswire]
▶ Why KeyW Holding Stock Just Dropped 15%   [Aug-01-18 01:17PM  Motley Fool]
▶ KEYW: 2Q Earnings Snapshot   [06:25AM  Associated Press]
▶ New Strong Sell Stocks for July 31st   [Jul-31-18 10:05AM  Zacks]
▶ KeyW Schedules Q2 2018 Financial Results Conference Call   [Jul-17-18 09:15AM  GlobeNewswire]
▶ KeyW Re-Appraised at CMMI Level 3   [Jun-19-18 10:30AM  GlobeNewswire]
▶ 5 Toxic Stocks to Abandon or Sell Short for Profits   [May-08-18 01:00PM  InvestorPlace]
▶ KEYW: 1Q Earnings Snapshot   [06:23AM  Associated Press]
▶ Here's how much more CEOs at Baltimore public companies make than their employees   [May-05-18 08:43AM  American City Business Journals]
▶ Is It Time To Buy The KeyW Holding Corporation (NASDAQ:KEYW)?   [Apr-17-18 01:01PM  Simply Wall St.]
▶ KEYW beats Street 4Q forecasts   [Mar-15-18 05:37PM  Associated Press]
▶ KeyW Announces 2018 Analyst and Investor Day   [Mar-08-18 09:30AM  GlobeNewswire]
▶ KeyW Adds Dave Wallen to Lead Advanced Cyber Business   [Jan-16-18 04:15PM  GlobeNewswire]
▶ Is It Too Late To Buy The KEYW Holding Corporation (KEYW)?   [Dec-07-17 10:43AM  Simply Wall St.]
▶ How Financially Strong Is The KEYW Holding Corporation (KEYW)?   [Nov-27-17 07:58PM  Simply Wall St.]
▶ Why KeyW Shares Got Demolished Today   [Nov-03-17 12:51PM  Motley Fool]
▶ KEYW reports 3Q loss   [Nov-02-17 06:45PM  Associated Press]
▶ KeyW Schedules Q3 2017 Financial Results Conference Call   [Oct-10-17 09:15AM  GlobeNewswire]
▶ KEYW reports 2Q loss   [Aug-09-17 10:39PM  Associated Press]

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