Intrinsic value of Majesco - MJCO

Previous Close

$7.76

  Intrinsic Value

$2.52

stock screener

  Rating & Target

str. sell

-68%

Previous close

$7.76

 
Intrinsic value

$2.52

 
Up/down potential

-68%

 
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 0.3

 

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, %
  20.20
  18.68
  17.31
  16.08
  14.97
  13.98
  13.08
  12.27
  11.54
  10.89
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
  5.72
Revenue, $m
  148
  175
  206
  239
  275
  313
  354
  397
  443
  492
  542
  595
  651
  708
  768
  831
  896
  963
  1,033
  1,106
  1,182
  1,261
  1,342
  1,428
  1,516
  1,609
  1,705
  1,805
  1,910
  2,019
Variable operating expenses, $m
  147
  174
  203
  235
  270
  307
  347
  389
  433
  480
  525
  576
  630
  686
  744
  805
  867
  933
  1,001
  1,071
  1,145
  1,221
  1,300
  1,383
  1,469
  1,558
  1,651
  1,748
  1,850
  1,955
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
  147
  174
  203
  235
  270
  307
  347
  389
  433
  480
  525
  576
  630
  686
  744
  805
  867
  933
  1,001
  1,071
  1,145
  1,221
  1,300
  1,383
  1,469
  1,558
  1,651
  1,748
  1,850
  1,955
Operating income, $m
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  17
  19
  20
  22
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  64
EBITDA, $m
  8
  9
  11
  13
  14
  16
  19
  21
  23
  26
  29
  31
  34
  37
  40
  44
  47
  51
  54
  58
  62
  66
  71
  75
  80
  85
  90
  95
  101
  106
Interest expense (income), $m
  1
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  39
  41
Earnings before tax, $m
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  19
  20
  21
  23
Tax expense, $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
Net income, $m
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  16

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
  116
  138
  162
  188
  216
  246
  278
  312
  348
  386
  426
  467
  511
  556
  603
  652
  703
  756
  811
  868
  928
  989
  1,054
  1,121
  1,190
  1,263
  1,338
  1,417
  1,499
  1,585
Adjusted assets (=assets-cash), $m
  116
  138
  162
  188
  216
  246
  278
  312
  348
  386
  426
  467
  511
  556
  603
  652
  703
  756
  811
  868
  928
  989
  1,054
  1,121
  1,190
  1,263
  1,338
  1,417
  1,499
  1,585
Revenue / Adjusted assets
  1.276
  1.268
  1.272
  1.271
  1.273
  1.272
  1.273
  1.272
  1.273
  1.275
  1.272
  1.274
  1.274
  1.273
  1.274
  1.275
  1.275
  1.274
  1.274
  1.274
  1.274
  1.275
  1.273
  1.274
  1.274
  1.274
  1.274
  1.274
  1.274
  1.274
Average production assets, $m
  28
  33
  39
  45
  52
  59
  67
  75
  83
  92
  102
  112
  122
  133
  144
  156
  168
  181
  194
  208
  222
  237
  252
  268
  285
  302
  321
  339
  359
  380
Working capital, $m
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
Total debt, $m
  24
  36
  48
  62
  77
  93
  110
  128
  148
  168
  189
  211
  234
  258
  283
  309
  336
  365
  394
  424
  456
  489
  523
  559
  596
  634
  674
  716
  760
  806
Total liabilities, $m
  62
  73
  86
  100
  115
  131
  148
  166
  185
  205
  226
  249
  272
  296
  321
  347
  374
  402
  431
  462
  494
  526
  561
  596
  633
  672
  712
  754
  798
  843
Total equity, $m
  54
  64
  76
  88
  101
  115
  130
  146
  163
  181
  199
  219
  239
  260
  282
  305
  329
  354
  380
  406
  434
  463
  493
  524
  557
  591
  626
  663
  702
  742
Total liabilities and equity, $m
  116
  137
  162
  188
  216
  246
  278
  312
  348
  386
  425
  468
  511
  556
  603
  652
  703
  756
  811
  868
  928
  989
  1,054
  1,120
  1,190
  1,263
  1,338
  1,417
  1,500
  1,585
Debt-to-equity ratio
  0.450
  0.550
  0.640
  0.710
  0.760
  0.810
  0.850
  0.880
  0.910
  0.930
  0.950
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.060
  1.060
  1.070
  1.070
  1.070
  1.080
  1.080
  1.080
  1.090
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
  1
  1
  1
  2
  2
  2
  3
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  16
Depreciation, amort., depletion, $m
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  11
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
Funds from operations, $m
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  38
  40
  42
  45
  48
  50
  53
  56
  59
Change in working capital, $m
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
Cash from operations, $m
  7
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
  43
  46
  49
  51
  54
  57
Maintenance CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
New CAPEX, $m
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -8
  -8
  -10
  -10
  -12
  -13
  -15
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -33
  -36
  -37
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
Free cash flow, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Issuance/(repayment) of debt, $m
  10
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
Issuance/(repurchase) of shares, $m
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  13
  13
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
Cash from financing (excl. dividends), $m  
  19
  22
  24
  25
  27
  29
  30
  32
  34
  35
  34
  35
  37
  38
  40
  41
  42
  44
  45
  47
  49
  51
  52
  55
  57
  59
  61
  64
  67
  70
Total cash flow (excl. dividends), $m
  19
  21
  22
  24
  25
  27
  29
  30
  31
  33
  30
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
Retained Cash Flow (-), $m
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
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
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  12
  12
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
Discount rate, %
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
  9
  9
  9
  9
  9
  8
  8
  7
  7
  6
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  96.9
  94.2
  91.8
  89.6
  87.7
  86.0
  84.4
  83.0
  81.7
  80.5
  79.6
  78.8
  78.0
  77.3
  76.6
  75.9
  75.3
  74.8
  74.2
  73.7
  73.2
  72.7
  72.3
  71.8
  71.4
  71.0
  70.6
  70.2
  69.8
  69.4

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 -283.3
Price to Sales 2.3
Price to Book 6.2
Price to Tangible Book
Price to Cash Flow 28.3
Price to Free Cash Flow 40.5
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 $122.985 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 20.2% 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 6.1%, 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 1.6%. 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 36.623 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 $0.3 billion.

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COMPANY NEWS

▶ Majesco: Fiscal 2Q Earnings Snapshot   [Oct-29-18 05:44PM  Associated Press]
▶ Majesco Appoints Adam Elster as CEO   [Sep-25-18 08:45AM  Business Wire]
▶ Majesco to Present at Two Upcoming Investor Conferences   [Sep-05-18 01:45PM  Business Wire]
▶ Rajesh Hukku Appointed to Board of Directors   [Jun-12-18 08:45AM  Business Wire]
▶ Majesco: Fiscal 4Q Earnings Snapshot   [May-09-18 06:14PM  Associated Press]
▶ Majesco Announces the Majesco L&A and Group Core Suite   [May-03-18 08:45AM  Business Wire]
▶ Kookmin Best Insurance Company Selects Majesco CloudInsurer   [Mar-14-18 08:45AM  Business Wire]
▶ Majesco reports 3Q loss   [Jan-30-18 04:25PM  Associated Press]
▶ Majesco to Host Earnings Call   [10:00AM  ACCESSWIRE]
▶ ETFs with exposure to Majesco : December 19, 2017   [Dec-19-17 01:37PM  Capital Cube]
▶ ETFs with exposure to Majesco : December 5, 2017   [Dec-05-17 01:08PM  Capital Cube]
▶ Majesco reports 2Q loss   [Oct-30-17 05:23PM  Associated Press]
▶ Majesco to Host Earnings Call   [10:00AM  ACCESSWIRE]
▶ ETFs with exposure to Majesco : October 12, 2017   [Oct-12-17 10:43AM  Capital Cube]
▶ Majesco Announces Version 10 of Majesco P&C Suite   [Oct-03-17 08:57AM  Business Wire]
▶ ETFs with exposure to Majesco : September 26, 2017   [Sep-26-17 10:57AM  Capital Cube]
▶ Tier One Insurer Expands Strategic Partnership with Majesco   [Aug-16-17 08:45AM  Business Wire]
▶ Majesco reports 1Q loss   [Jul-27-17 12:03AM  Associated Press]
▶ ETFs with exposure to Majesco : July 4, 2017   [Jul-04-17 03:11PM  Capital Cube]
▶ ETFs with exposure to Majesco : June 22, 2017   [Jun-22-17 04:01PM  Capital Cube]
▶ Majesco reports 4Q loss   [May-02-17 05:52PM  Associated Press]
▶ The IMT Group Selects Majesco CloudInsurer Billing   [Apr-12-17 08:45AM  Business Wire]

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