Intrinsic value of Majesco - MJCO

Previous Close

$8.75

  Intrinsic Value

$1.40

stock screener

  Rating & Target

str. sell

-84%

Previous close

$8.75

 
Intrinsic value

$1.40

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of MJCO 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 0.4

 

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, %
  11.40
  10.76
  10.18
  9.67
  9.20
  8.78
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  137
  152
  167
  183
  200
  218
  236
  255
  275
  296
  317
  339
  362
  386
  411
  437
  464
  492
  522
  552
  584
  617
  652
  689
  727
  766
  808
  851
  896
  944
Variable operating expenses, $m
  137
  151
  166
  181
  198
  215
  233
  251
  270
  290
  307
  328
  351
  374
  398
  423
  449
  477
  505
  535
  566
  598
  632
  667
  703
  742
  782
  824
  868
  914
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
  137
  151
  166
  181
  198
  215
  233
  251
  270
  290
  307
  328
  351
  374
  398
  423
  449
  477
  505
  535
  566
  598
  632
  667
  703
  742
  782
  824
  868
  914
Operating income, $m
  0
  1
  1
  2
  2
  3
  4
  4
  5
  5
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
EBITDA, $m
  7
  8
  9
  10
  11
  12
  12
  13
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
Interest expense (income), $m
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Net income, $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9

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
  108
  119
  131
  144
  157
  171
  185
  200
  216
  232
  249
  266
  284
  303
  323
  343
  364
  386
  409
  433
  459
  485
  512
  540
  570
  601
  634
  668
  704
  741
Adjusted assets (=assets-cash), $m
  108
  119
  131
  144
  157
  171
  185
  200
  216
  232
  249
  266
  284
  303
  323
  343
  364
  386
  409
  433
  459
  485
  512
  540
  570
  601
  634
  668
  704
  741
Revenue / Adjusted assets
  1.269
  1.277
  1.275
  1.271
  1.274
  1.275
  1.276
  1.275
  1.273
  1.276
  1.273
  1.274
  1.275
  1.274
  1.272
  1.274
  1.275
  1.275
  1.276
  1.275
  1.272
  1.272
  1.273
  1.276
  1.275
  1.275
  1.274
  1.274
  1.273
  1.274
Average production assets, $m
  26
  29
  31
  34
  38
  41
  44
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  93
  98
  104
  110
  116
  123
  129
  137
  144
  152
  160
  169
  177
Working capital, $m
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
Total debt, $m
  20
  26
  32
  39
  46
  53
  61
  69
  77
  86
  95
  104
  114
  124
  134
  145
  156
  168
  180
  193
  206
  220
  235
  250
  266
  282
  300
  318
  337
  356
Total liabilities, $m
  57
  63
  70
  77
  84
  91
  99
  107
  115
  123
  132
  142
  151
  161
  172
  183
  194
  206
  218
  231
  244
  258
  272
  288
  303
  320
  337
  355
  374
  394
Total equity, $m
  50
  56
  61
  67
  74
  80
  87
  94
  101
  109
  116
  125
  133
  142
  151
  161
  171
  181
  192
  203
  215
  227
  240
  253
  267
  281
  297
  313
  329
  347
Total liabilities and equity, $m
  107
  119
  131
  144
  158
  171
  186
  201
  216
  232
  248
  267
  284
  303
  323
  344
  365
  387
  410
  434
  459
  485
  512
  541
  570
  601
  634
  668
  703
  741
Debt-to-equity ratio
  0.390
  0.460
  0.520
  0.580
  0.620
  0.670
  0.700
  0.730
  0.760
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.900
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.020
  1.020
  1.030
Adjusted equity ratio
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Depreciation, amort., depletion, $m
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
Funds from operations, $m
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
Maintenance CAPEX, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -20
  -21
  -22
  -22
  -24
  -25
  -27
  -28
Free cash flow, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Issuance/(repayment) of debt, $m
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
Issuance/(repurchase) of shares, $m
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Cash from financing (excl. dividends), $m  
  11
  12
  12
  13
  13
  13
  14
  14
  14
  16
  13
  13
  14
  14
  15
  16
  16
  17
  17
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
Total cash flow (excl. dividends), $m
  12
  13
  13
  14
  14
  15
  15
  15
  16
  16
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
Retained Cash Flow (-), $m
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
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
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  7
  6
  6
  6
  6
  5
  5
  4
  4
  4
  2
  2
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.6
  97.3
  96.1
  95.0
  94.0
  93.1
  92.2
  91.4
  90.7
  90.0
  89.6
  89.2
  88.8
  88.5
  88.1
  87.8
  87.5
  87.2
  86.9
  86.6
  86.3
  86.0
  85.7
  85.4
  85.1
  84.8
  84.6
  84.3
  84.0
  83.7

Majesco is a provider of insurance software, consulting and services for insurance industry. The Company operates through the software solutions provider for the insurance industry segment. The Company offers insurance software solutions for Property and Casualty or General Insurance (P&C), Life, Annuities (L&A), and Pensions and Group or Employee Benefits providers, allowing them to manage policy management, claims management and billing functions. In addition, the Company offers a range of other technology-based solutions for distribution management, digital, data and cloud that enable organizations to automate business processes across the end-to-end insurance value chain and comply with policies and regulations across their organizations. The Company's offering consists of software solutions for all lines of business in insurance industry; services, including project delivery and implementation of its solutions, and consulting and services.

FINANCIAL RATIOS  of  Majesco (MJCO)

Valuation Ratios
P/E Ratio -319.5
Price to Sales 2.6
Price to Book 6.9
Price to Tangible Book
Price to Cash Flow 31.9
Price to Free Cash Flow 45.6
Growth Rates
Sales Growth Rate 8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 21.7%
Total Debt to Equity 28.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -2.2%
Return On Total Capital -1.7%
Ret/ On T. Cap. - 3 Yr. Avg. -5.2%
Return On Equity -2.2%
Return On Equity - 3 Yr. Avg. -6.3%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 47.5%
Gross Margin - 3 Yr. Avg. 43.7%
EBITDA Margin 4.1%
EBITDA Margin - 3 Yr. Avg. 1.8%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. -2.3%
Pre-Tax Margin -0.8%
Pre-Tax Margin - 3 Yr. Avg. -2.2%
Net Profit Margin -0.8%
Net Profit Margin - 3 Yr. Avg. -1.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 6.7%
Payout Ratio 0%

MJCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MJCO stock intrinsic value calculation we used $123 million for the last fiscal year's total revenue generated by Majesco. The default revenue input number comes from 0001 income statement of Majesco. 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 MJCO stock valuation model: a) initial revenue growth rate of 11.4% 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 6%, whose default value for MJCO is calculated based on our internal credit rating of Majesco, 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 Majesco.
    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 MJCO stock the variable cost ratio is equal to 100%.

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 MJCO 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 Majesco.

Corporate tax rate of 27% is the nominal tax rate for Majesco. 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 MJCO 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 MJCO are equal to 18.8%.

Life of production assets of 8.9 years is the average useful life of capital assets used in Majesco 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 MJCO is equal to 1.5%. 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 - $45.173 million for Majesco - 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 42.798 million for Majesco 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 Majesco at the current share price and the inputted number of shares is $0.4 billion.

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