Intrinsic value of Luxoft Holding - LXFT

Previous Close

$33.30

  Intrinsic Value

$15.32

stock screener

  Rating & Target

str. sell

-54%

Previous close

$33.30

 
Intrinsic value

$15.32

 
Up/down potential

-54%

 
Rating

str. sell

We calculate the intrinsic value of LXFT 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 0.8

 

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, %
  15.40
  14.36
  13.42
  12.58
  11.82
  11.14
  10.53
  9.97
  9.48
  9.03
  8.63
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
  5.92
  5.83
  5.75
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  1,046
  1,197
  1,357
  1,528
  1,709
  1,899
  2,099
  2,308
  2,527
  2,755
  2,993
  3,240
  3,498
  3,765
  4,043
  4,331
  4,631
  4,943
  5,268
  5,605
  5,956
  6,322
  6,703
  7,100
  7,513
  7,945
  8,396
  8,866
  9,358
  9,872
Variable operating expenses, $m
  968
  1,104
  1,250
  1,405
  1,568
  1,741
  1,922
  2,112
  2,310
  2,517
  2,713
  2,937
  3,170
  3,413
  3,665
  3,926
  4,198
  4,481
  4,775
  5,081
  5,399
  5,731
  6,076
  6,436
  6,811
  7,202
  7,611
  8,037
  8,483
  8,948
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
  968
  1,104
  1,250
  1,405
  1,568
  1,741
  1,922
  2,112
  2,310
  2,517
  2,713
  2,937
  3,170
  3,413
  3,665
  3,926
  4,198
  4,481
  4,775
  5,081
  5,399
  5,731
  6,076
  6,436
  6,811
  7,202
  7,611
  8,037
  8,483
  8,948
Operating income, $m
  78
  92
  107
  123
  140
  158
  177
  196
  217
  238
  280
  303
  327
  352
  378
  405
  433
  462
  493
  524
  557
  591
  627
  664
  703
  743
  785
  829
  875
  923
EBITDA, $m
  128
  146
  166
  186
  208
  232
  256
  282
  308
  336
  365
  395
  427
  459
  493
  528
  565
  603
  643
  684
  727
  771
  818
  866
  917
  969
  1,024
  1,082
  1,142
  1,204
Interest expense (income), $m
  0
  0
  1
  2
  4
  5
  6
  8
  10
  11
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  38
  40
  43
  46
  49
  53
  56
  60
  64
  68
Earnings before tax, $m
  78
  91
  105
  120
  135
  152
  169
  187
  206
  225
  265
  286
  308
  331
  355
  380
  406
  433
  460
  489
  520
  551
  584
  618
  653
  690
  729
  770
  812
  856
Tax expense, $m
  21
  25
  28
  32
  37
  41
  46
  50
  56
  61
  72
  77
  83
  89
  96
  103
  110
  117
  124
  132
  140
  149
  158
  167
  176
  186
  197
  208
  219
  231
Net income, $m
  57
  67
  77
  87
  99
  111
  123
  136
  150
  164
  194
  209
  225
  242
  259
  277
  296
  316
  336
  357
  379
  402
  426
  451
  477
  504
  532
  562
  593
  625

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
  697
  797
  904
  1,017
  1,138
  1,264
  1,398
  1,537
  1,683
  1,834
  1,993
  2,157
  2,329
  2,507
  2,692
  2,884
  3,084
  3,291
  3,507
  3,732
  3,966
  4,209
  4,463
  4,727
  5,002
  5,290
  5,590
  5,903
  6,230
  6,572
Adjusted assets (=assets-cash), $m
  697
  797
  904
  1,017
  1,138
  1,264
  1,398
  1,537
  1,683
  1,834
  1,993
  2,157
  2,329
  2,507
  2,692
  2,884
  3,084
  3,291
  3,507
  3,732
  3,966
  4,209
  4,463
  4,727
  5,002
  5,290
  5,590
  5,903
  6,230
  6,572
Revenue / Adjusted assets
  1.501
  1.502
  1.501
  1.502
  1.502
  1.502
  1.501
  1.502
  1.501
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
  1.502
Average production assets, $m
  173
  197
  224
  252
  282
  313
  346
  381
  417
  455
  494
  535
  577
  621
  667
  715
  764
  816
  869
  925
  983
  1,043
  1,106
  1,171
  1,240
  1,311
  1,385
  1,463
  1,544
  1,629
Working capital, $m
  146
  168
  190
  214
  239
  266
  294
  323
  354
  386
  419
  454
  490
  527
  566
  606
  648
  692
  737
  785
  834
  885
  938
  994
  1,052
  1,112
  1,175
  1,241
  1,310
  1,382
Total debt, $m
  22
  44
  68
  93
  120
  148
  177
  208
  240
  274
  309
  346
  384
  423
  464
  507
  552
  598
  646
  695
  747
  801
  858
  916
  977
  1,041
  1,108
  1,177
  1,250
  1,326
Total liabilities, $m
  155
  177
  201
  226
  253
  281
  310
  341
  374
  407
  442
  479
  517
  556
  598
  640
  685
  731
  779
  828
  880
  934
  991
  1,049
  1,111
  1,174
  1,241
  1,310
  1,383
  1,459
Total equity, $m
  542
  620
  703
  792
  885
  984
  1,087
  1,196
  1,309
  1,427
  1,550
  1,678
  1,812
  1,950
  2,094
  2,244
  2,399
  2,561
  2,729
  2,903
  3,085
  3,275
  3,472
  3,677
  3,892
  4,115
  4,349
  4,593
  4,847
  5,113
Total liabilities and equity, $m
  697
  797
  904
  1,018
  1,138
  1,265
  1,397
  1,537
  1,683
  1,834
  1,992
  2,157
  2,329
  2,506
  2,692
  2,884
  3,084
  3,292
  3,508
  3,731
  3,965
  4,209
  4,463
  4,726
  5,003
  5,289
  5,590
  5,903
  6,230
  6,572
Debt-to-equity ratio
  0.040
  0.070
  0.100
  0.120
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
Adjusted equity ratio
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  57
  67
  77
  87
  99
  111
  123
  136
  150
  164
  194
  209
  225
  242
  259
  277
  296
  316
  336
  357
  379
  402
  426
  451
  477
  504
  532
  562
  593
  625
Depreciation, amort., depletion, $m
  49
  54
  58
  63
  68
  74
  79
  85
  91
  98
  85
  92
  100
  107
  115
  123
  132
  141
  150
  159
  169
  180
  191
  202
  214
  226
  239
  252
  266
  281
Funds from operations, $m
  106
  120
  135
  150
  167
  184
  202
  222
  242
  262
  279
  301
  325
  349
  374
  401
  428
  456
  486
  517
  549
  582
  617
  653
  691
  730
  771
  814
  859
  906
Change in working capital, $m
  20
  21
  22
  24
  25
  27
  28
  29
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
Cash from operations, $m
  87
  99
  112
  127
  142
  158
  175
  192
  211
  230
  245
  267
  289
  312
  335
  360
  386
  413
  441
  469
  500
  531
  563
  597
  633
  670
  708
  748
  790
  834
Maintenance CAPEX, $m
  -26
  -30
  -34
  -39
  -43
  -49
  -54
  -60
  -66
  -72
  -78
  -85
  -92
  -100
  -107
  -115
  -123
  -132
  -141
  -150
  -159
  -169
  -180
  -191
  -202
  -214
  -226
  -239
  -252
  -266
New CAPEX, $m
  -23
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -51
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -78
  -81
  -85
Cash from investing activities, $m
  -49
  -55
  -61
  -67
  -73
  -80
  -87
  -95
  -102
  -110
  -117
  -126
  -134
  -144
  -153
  -163
  -173
  -183
  -195
  -206
  -217
  -229
  -243
  -256
  -270
  -285
  -300
  -317
  -333
  -351
Free cash flow, $m
  38
  45
  52
  60
  68
  78
  87
  98
  109
  121
  128
  141
  154
  168
  183
  198
  213
  230
  246
  264
  282
  301
  321
  341
  362
  385
  408
  432
  457
  483
Issuance/(repayment) of debt, $m
  21
  22
  24
  25
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
Issuance/(repurchase) of shares, $m
  15
  11
  7
  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
Cash from financing (excl. dividends), $m  
  36
  33
  31
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
Total cash flow (excl. dividends), $m
  74
  78
  82
  86
  95
  106
  117
  129
  141
  155
  163
  177
  192
  208
  224
  240
  258
  276
  294
  314
  334
  355
  377
  400
  424
  448
  474
  501
  529
  559
Retained Cash Flow (-), $m
  -72
  -78
  -83
  -88
  -94
  -99
  -104
  -108
  -113
  -118
  -123
  -128
  -133
  -138
  -144
  -150
  -155
  -162
  -168
  -175
  -182
  -189
  -197
  -206
  -214
  -224
  -233
  -244
  -255
  -266
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
  1
  0
  -1
  -2
  1
  7
  13
  21
  28
  36
  40
  49
  59
  69
  80
  91
  102
  114
  126
  139
  152
  166
  180
  194
  209
  225
  241
  257
  275
  293
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
  1
  0
  -1
  -2
  1
  5
  9
  13
  16
  19
  19
  21
  22
  23
  23
  23
  22
  21
  19
  18
  16
  14
  12
  10
  8
  7
  5
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  3
  2
Current shareholders' claim on cash, %
  98.0
  96.8
  96.2
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1

Luxoft Holding, Inc., is a provider of software development services and information technology (IT) solutions to a global client base consisting primarily of large multinational corporations. The Company's software development services consist of custom software development and support, product engineering and testing, and technology consulting. The Company’s solutions are based on its proprietary products and platforms that directly impact its clients' business outcomes and efficiently deliver continuous innovation. The Company develops its solutions and delivers its services from 34 cities with delivery centers worldwide. Its products and platforms include Horizon, SuperCloud, Twister, iStockTrack, TEORA, Populus, AllView, CVNAR and Retail Engagement Suite (RES) in Internet of Things (IoT) space.

FINANCIAL RATIOS  of  Luxoft Holding (LXFT)

Valuation Ratios
P/E Ratio 17.7
Price to Sales 1.4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow 11.4
Growth Rates
Sales Growth Rate 20.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.2%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 110
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.4%
Ret/ On Assets - 3 Yr. Avg. 19.2%
Return On Total Capital 18.3%
Ret/ On T. Cap. - 3 Yr. Avg. 25.8%
Return On Equity 18.3%
Return On Equity - 3 Yr. Avg. 26.5%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 39.6%
Gross Margin - 3 Yr. Avg. 41.6%
EBITDA Margin 13.5%
EBITDA Margin - 3 Yr. Avg. 15.7%
Operating Margin 8.5%
Oper. Margin - 3 Yr. Avg. 12%
Pre-Tax Margin 9%
Pre-Tax Margin - 3 Yr. Avg. 11.9%
Net Profit Margin 8%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate 11.3%
Eff/ Tax Rate - 3 Yr. Avg. 13.2%
Payout Ratio 0%

LXFT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LXFT stock intrinsic value calculation we used $906.766 million for the last fiscal year's total revenue generated by Luxoft Holding. The default revenue input number comes from 0001 income statement of Luxoft 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 LXFT stock valuation model: a) initial revenue growth rate of 15.4% 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 LXFT is calculated based on our internal credit rating of Luxoft 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 Luxoft 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 LXFT stock the variable cost ratio is equal to 92.8%.

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 LXFT 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 Luxoft Holding.

Corporate tax rate of 27% is the nominal tax rate for Luxoft 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 LXFT 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 LXFT are equal to 16.5%.

Life of production assets of 5.8 years is the average useful life of capital assets used in Luxoft 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 LXFT is equal to 14%. 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 - $469.917 million for Luxoft 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 22.526 million for Luxoft 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 Luxoft Holding at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Luxoft Drops on Second-Half Headwinds   [Nov-15-18 04:42PM  Motley Fool]
▶ Luxoft: Fiscal 2Q Earnings Snapshot   [07:19AM  Associated Press]
▶ Q2 Earnings Preview For Luxoft Holding   [Nov-14-18 01:07PM  Benzinga]
▶ Is It Too Late To Buy Luxoft Holding Inc (NYSE:LXFT)?   [Sep-04-18 12:51PM  Simply Wall St.]
▶ Luxoft's Growth Decelerates in a Slow Quarter   [Aug-15-18 04:09PM  Motley Fool]
▶ Luxoft: Fiscal 1Q Earnings Snapshot   [09:03AM  Associated Press]
▶ Why Luxoft Holding Inc. Stock Sank Today   [12:21PM  Motley Fool]
▶ Luxoft: Fiscal 4Q Earnings Snapshot   [07:55AM  Associated Press]
▶ New Strong Sell Stocks for March 9th   [Mar-09-18 07:14AM  Zacks]
▶ Amazon Strikes a New Blockchain Partnership   [Mar-05-18 07:56PM  Motley Fool]
▶ Luxoft to Participate in J.P. Morgan Conference in London   [Feb-26-18 06:55AM  Business Wire]
▶ Why Luxoft Holding Stock Dropped Today   [02:27PM  Motley Fool]
▶ Luxoft tops 3Q profit forecasts   [05:01AM  Associated Press]
▶ Luxoft Delivers a Mixed Quarter, Reduces Guidance   [Feb-13-18 09:28PM  Motley Fool]
▶ Luxoft to Exhibit at CES 2018   [Dec-18-17 11:36AM  Business Wire]
▶ Company Profile for Luxoft   [Nov-24-17 10:10AM  Business Wire]
▶ Why Shares of Luxoft Holding Inc. Jumped Today   [Nov-17-17 12:56PM  Motley Fool]
▶ Luxoft beats Street 2Q forecasts   [Nov-16-17 05:49PM  Associated Press]

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