Intrinsic value of Luxoft Holding - LXFT

Previous Close

$43.45

  Intrinsic Value

$48.22

stock screener

  Rating & Target

hold

+11%

Previous close

$43.45

 
Intrinsic value

$48.22

 
Up/down potential

+11%

 
Rating

hold

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

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Luxoft Holding (LXFT) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  20.74
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.01
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.59
  7.33
  7.09
  6.88
  6.70
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
Revenue, $m
  786
  914
  1,053
  1,202
  1,361
  1,530
  1,708
  1,896
  2,094
  2,300
  2,516
  2,741
  2,975
  3,219
  3,472
  3,736
  4,009
  4,294
  4,589
  4,897
  5,216
  5,549
  5,895
  6,255
  6,630
  7,022
  7,430
  7,855
  8,300
  8,764
  9,249
Variable operating expenses, $m
 
  802
  923
  1,052
  1,191
  1,337
  1,493
  1,656
  1,828
  2,007
  2,195
  2,382
  2,586
  2,798
  3,018
  3,247
  3,485
  3,732
  3,989
  4,256
  4,534
  4,823
  5,124
  5,437
  5,763
  6,103
  6,458
  6,828
  7,214
  7,618
  8,039
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
  719
  802
  923
  1,052
  1,191
  1,337
  1,493
  1,656
  1,828
  2,007
  2,195
  2,382
  2,586
  2,798
  3,018
  3,247
  3,485
  3,732
  3,989
  4,256
  4,534
  4,823
  5,124
  5,437
  5,763
  6,103
  6,458
  6,828
  7,214
  7,618
  8,039
Operating income, $m
  67
  112
  130
  149
  170
  192
  216
  240
  266
  293
  321
  358
  389
  421
  454
  489
  524
  562
  600
  640
  682
  726
  771
  818
  867
  918
  972
  1,027
  1,086
  1,146
  1,210
EBITDA, $m
  102
  149
  171
  195
  221
  249
  278
  308
  340
  374
  409
  445
  484
  523
  564
  607
  652
  698
  746
  796
  848
  902
  958
  1,017
  1,078
  1,141
  1,208
  1,277
  1,349
  1,424
  1,503
Interest expense (income), $m
  0
  0
  1
  2
  3
  4
  5
  7
  8
  9
  11
  12
  14
  16
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
Earnings before tax, $m
  71
  112
  129
  148
  167
  188
  210
  234
  258
  284
  311
  346
  375
  406
  437
  470
  504
  539
  575
  614
  653
  694
  737
  782
  829
  877
  928
  980
  1,036
  1,093
  1,153
Tax expense, $m
  8
  30
  35
  40
  45
  51
  57
  63
  70
  77
  84
  93
  101
  109
  118
  127
  136
  145
  155
  166
  176
  187
  199
  211
  224
  237
  250
  265
  280
  295
  311
Net income, $m
  63
  82
  94
  108
  122
  137
  154
  171
  189
  207
  227
  253
  274
  296
  319
  343
  368
  393
  420
  448
  477
  507
  538
  571
  605
  640
  677
  716
  756
  798
  842

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  110
  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
  547
  508
  585
  668
  756
  850
  950
  1,054
  1,164
  1,279
  1,399
  1,524
  1,654
  1,789
  1,930
  2,076
  2,229
  2,387
  2,551
  2,722
  2,899
  3,084
  3,277
  3,477
  3,686
  3,903
  4,130
  4,367
  4,614
  4,872
  5,141
Adjusted assets (=assets-cash), $m
  437
  508
  585
  668
  756
  850
  950
  1,054
  1,164
  1,279
  1,399
  1,524
  1,654
  1,789
  1,930
  2,076
  2,229
  2,387
  2,551
  2,722
  2,899
  3,084
  3,277
  3,477
  3,686
  3,903
  4,130
  4,367
  4,614
  4,872
  5,141
Revenue / Adjusted assets
  1.799
  1.799
  1.800
  1.799
  1.800
  1.800
  1.798
  1.799
  1.799
  1.798
  1.798
  1.799
  1.799
  1.799
  1.799
  1.800
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
  1.799
Average production assets, $m
  130
  151
  174
  198
  225
  252
  282
  313
  345
  380
  415
  452
  491
  531
  573
  616
  662
  708
  757
  808
  861
  916
  973
  1,032
  1,094
  1,159
  1,226
  1,296
  1,369
  1,446
  1,526
Working capital, $m
  177
  80
  92
  105
  118
  133
  149
  165
  182
  200
  219
  238
  259
  280
  302
  325
  349
  374
  399
  426
  454
  483
  513
  544
  577
  611
  646
  683
  722
  762
  805
Total debt, $m
  1
  26
  54
  84
  116
  151
  187
  225
  265
  306
  350
  396
  443
  492
  544
  597
  652
  710
  770
  832
  896
  964
  1,034
  1,107
  1,183
  1,262
  1,344
  1,430
  1,520
  1,614
  1,712
Total liabilities, $m
  160
  185
  213
  243
  275
  310
  346
  384
  424
  465
  509
  555
  602
  651
  703
  756
  811
  869
  929
  991
  1,055
  1,123
  1,193
  1,266
  1,342
  1,421
  1,503
  1,589
  1,679
  1,773
  1,871
Total equity, $m
  387
  323
  372
  425
  481
  541
  604
  670
  740
  813
  889
  969
  1,052
  1,138
  1,228
  1,321
  1,417
  1,518
  1,622
  1,731
  1,844
  1,962
  2,084
  2,211
  2,344
  2,482
  2,627
  2,777
  2,934
  3,098
  3,270
Total liabilities and equity, $m
  547
  508
  585
  668
  756
  851
  950
  1,054
  1,164
  1,278
  1,398
  1,524
  1,654
  1,789
  1,931
  2,077
  2,228
  2,387
  2,551
  2,722
  2,899
  3,085
  3,277
  3,477
  3,686
  3,903
  4,130
  4,366
  4,613
  4,871
  5,141
Debt-to-equity ratio
  0.003
  0.080
  0.150
  0.200
  0.240
  0.280
  0.310
  0.340
  0.360
  0.380
  0.390
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.470
  0.480
  0.490
  0.490
  0.500
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
  0.520
  0.520
Adjusted equity ratio
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  63
  82
  94
  108
  122
  137
  154
  171
  189
  207
  227
  253
  274
  296
  319
  343
  368
  393
  420
  448
  477
  507
  538
  571
  605
  640
  677
  716
  756
  798
  842
Depreciation, amort., depletion, $m
  35
  37
  41
  46
  51
  56
  62
  68
  74
  81
  88
  87
  94
  102
  110
  119
  127
  136
  146
  155
  166
  176
  187
  198
  210
  223
  236
  249
  263
  278
  293
Funds from operations, $m
  124
  118
  135
  154
  173
  194
  216
  239
  263
  288
  314
  340
  368
  398
  429
  461
  495
  530
  566
  603
  642
  683
  725
  769
  815
  863
  913
  965
  1,019
  1,076
  1,135
Change in working capital, $m
  2
  11
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
Cash from operations, $m
  122
  107
  123
  141
  159
  179
  200
  222
  246
  270
  296
  320
  348
  377
  407
  438
  471
  505
  540
  577
  615
  654
  695
  738
  783
  829
  877
  928
  981
  1,036
  1,093
Maintenance CAPEX, $m
  0
  -25
  -29
  -33
  -38
  -43
  -49
  -54
  -60
  -66
  -73
  -80
  -87
  -94
  -102
  -110
  -119
  -127
  -136
  -146
  -155
  -166
  -176
  -187
  -198
  -210
  -223
  -236
  -249
  -263
  -278
New CAPEX, $m
  -24
  -21
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -73
  -77
  -80
Cash from investing activities, $m
  -106
  -46
  -52
  -58
  -64
  -71
  -78
  -85
  -93
  -100
  -109
  -117
  -126
  -134
  -144
  -153
  -164
  -174
  -185
  -197
  -208
  -221
  -233
  -246
  -260
  -275
  -290
  -306
  -322
  -340
  -358
Free cash flow, $m
  16
  61
  71
  83
  95
  108
  122
  137
  153
  169
  187
  203
  222
  242
  263
  285
  307
  331
  355
  380
  406
  434
  462
  491
  522
  554
  587
  622
  658
  696
  735
Issuance/(repayment) of debt, $m
  -6
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  86
  90
  94
  98
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -14
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  86
  90
  94
  98
Total cash flow (excl. dividends), $m
  1
  87
  99
  113
  127
  142
  158
  175
  193
  211
  231
  249
  270
  292
  314
  338
  363
  388
  415
  442
  471
  501
  532
  564
  598
  633
  670
  708
  748
  790
  833
Retained Cash Flow (-), $m
  -85
  -45
  -49
  -53
  -56
  -60
  -63
  -66
  -70
  -73
  -76
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -113
  -118
  -122
  -127
  -133
  -138
  -144
  -151
  -157
  -164
  -171
Prev. year cash balance distribution, $m
 
  109
  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
 
  151
  50
  60
  71
  82
  95
  109
  123
  138
  154
  169
  187
  205
  225
  245
  266
  288
  310
  334
  358
  383
  410
  437
  465
  495
  526
  558
  591
  626
  662
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
 
  145
  46
  52
  58
  64
  69
  73
  77
  79
  81
  80
  80
  78
  75
  72
  68
  63
  57
  51
  46
  40
  34
  29
  24
  19
  15
  12
  9
  7
  5
Current shareholders' claim on cash, %
  100
  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

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 23.1
Price to Sales 1.8
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 11.9
Price to Free Cash Flow 14.8
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 $786 million for the last fiscal year's total revenue generated by Luxoft Holding. The default revenue input number comes from 2017 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 16.3% 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 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 87.9%.

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 3.5% 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 5.2 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 8.7%. 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 - $387 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 33.573 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 $1.5 billion.

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COMPANY NEWS

▶ 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]
▶ Luxoft misses Street 1Q forecasts   [Aug-11-17 08:08PM  Associated Press]
▶ Luxoft Recognized as Global Leader in ADM Services by ISG   [Jul-28-17 08:24AM  Business Wire]
▶ New Strong Sell Stocks for June 14th   [Jun-14-17 10:17AM  Zacks]
▶ New Strong Sell Stocks for June 6th   [Jun-06-17 10:46AM  Zacks]
▶ Luxoft Holding Delivers a Quarterly Win   [May-23-17 06:49PM  Motley Fool]
▶ Luxoft misses 4Q profit forecasts   [May-22-17 06:16PM  Associated Press]
Financial statements of LXFT
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