Intrinsic value of Nuance Communications, Inc. - NUAN

Previous Close

$16.79

  Intrinsic Value

$14.34

stock screener

  Rating & Target

hold

-15%

Previous close

$16.79

 
Intrinsic value

$14.34

 
Up/down potential

-15%

 
Rating

hold

We calculate the intrinsic value of NUAN 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 4.8

 

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, %
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
Revenue, $m
  2,265
  2,489
  2,722
  2,965
  3,219
  3,482
  3,756
  4,041
  4,337
  4,645
  4,964
  5,297
  5,642
  6,002
  6,376
  6,766
  7,172
  7,595
  8,036
  8,497
  8,977
  9,479
  10,004
  10,552
  11,125
  11,724
  12,351
  13,008
  13,695
  14,414
Variable operating expenses, $m
  2,166
  2,343
  2,528
  2,721
  2,922
  3,131
  3,348
  3,574
  3,808
  4,052
  3,936
  4,199
  4,473
  4,759
  5,055
  5,364
  5,686
  6,022
  6,371
  6,737
  7,118
  7,515
  7,931
  8,366
  8,820
  9,295
  9,792
  10,313
  10,858
  11,428
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
  2,166
  2,343
  2,528
  2,721
  2,922
  3,131
  3,348
  3,574
  3,808
  4,052
  3,936
  4,199
  4,473
  4,759
  5,055
  5,364
  5,686
  6,022
  6,371
  6,737
  7,118
  7,515
  7,931
  8,366
  8,820
  9,295
  9,792
  10,313
  10,858
  11,428
Operating income, $m
  100
  146
  194
  245
  297
  352
  408
  467
  529
  593
  1,028
  1,097
  1,169
  1,243
  1,321
  1,402
  1,486
  1,573
  1,665
  1,760
  1,860
  1,964
  2,072
  2,186
  2,305
  2,429
  2,559
  2,695
  2,837
  2,986
EBITDA, $m
  590
  648
  709
  772
  838
  907
  978
  1,052
  1,129
  1,210
  1,293
  1,379
  1,469
  1,563
  1,660
  1,762
  1,868
  1,978
  2,093
  2,213
  2,338
  2,469
  2,605
  2,748
  2,897
  3,053
  3,216
  3,387
  3,566
  3,754
Interest expense (income), $m
  92
  125
  146
  168
  191
  215
  241
  267
  294
  323
  352
  383
  415
  448
  482
  518
  555
  594
  634
  676
  720
  766
  814
  864
  916
  971
  1,028
  1,088
  1,150
  1,215
  1,284
Earnings before tax, $m
  -25
  0
  26
  53
  82
  111
  142
  173
  206
  240
  646
  683
  721
  761
  803
  847
  892
  939
  988
  1,040
  1,094
  1,150
  1,208
  1,270
  1,334
  1,401
  1,471
  1,545
  1,622
  1,702
Tax expense, $m
  0
  0
  7
  14
  22
  30
  38
  47
  56
  65
  174
  184
  195
  206
  217
  229
  241
  254
  267
  281
  295
  310
  326
  343
  360
  378
  397
  417
  438
  460
Net income, $m
  -25
  0
  19
  39
  60
  81
  103
  126
  151
  176
  471
  498
  527
  556
  586
  618
  651
  686
  722
  759
  798
  839
  882
  927
  974
  1,023
  1,074
  1,128
  1,184
  1,243

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
  5,854
  6,431
  7,034
  7,662
  8,317
  8,998
  9,706
  10,442
  11,207
  12,002
  12,828
  13,687
  14,580
  15,509
  16,476
  17,483
  18,532
  19,625
  20,766
  21,955
  23,197
  24,494
  25,849
  27,265
  28,746
  30,295
  31,915
  33,611
  35,387
  37,246
Adjusted assets (=assets-cash), $m
  5,854
  6,431
  7,034
  7,662
  8,317
  8,998
  9,706
  10,442
  11,207
  12,002
  12,828
  13,687
  14,580
  15,509
  16,476
  17,483
  18,532
  19,625
  20,766
  21,955
  23,197
  24,494
  25,849
  27,265
  28,746
  30,295
  31,915
  33,611
  35,387
  37,246
Revenue / Adjusted assets
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
Average production assets, $m
  2,376
  2,611
  2,855
  3,111
  3,376
  3,653
  3,940
  4,239
  4,550
  4,872
  5,208
  5,556
  5,919
  6,296
  6,689
  7,097
  7,523
  7,967
  8,430
  8,913
  9,417
  9,944
  10,494
  11,069
  11,670
  12,299
  12,956
  13,645
  14,366
  15,121
Working capital, $m
  -317
  -348
  -381
  -415
  -451
  -488
  -526
  -566
  -607
  -650
  -695
  -742
  -790
  -840
  -893
  -947
  -1,004
  -1,063
  -1,125
  -1,190
  -1,257
  -1,327
  -1,401
  -1,477
  -1,557
  -1,641
  -1,729
  -1,821
  -1,917
  -2,018
Total debt, $m
  2,558
  2,948
  3,355
  3,780
  4,223
  4,683
  5,162
  5,659
  6,176
  6,714
  7,272
  7,853
  8,456
  9,084
  9,738
  10,419
  11,128
  11,867
  12,638
  13,442
  14,282
  15,159
  16,075
  17,032
  18,033
  19,080
  20,175
  21,322
  22,522
  23,779
Total liabilities, $m
  3,957
  4,347
  4,755
  5,180
  5,622
  6,083
  6,561
  7,059
  7,576
  8,113
  8,672
  9,252
  9,856
  10,484
  11,138
  11,818
  12,528
  13,267
  14,038
  14,842
  15,681
  16,558
  17,474
  18,431
  19,432
  20,479
  21,575
  22,721
  23,922
  25,178
Total equity, $m
  1,897
  2,084
  2,279
  2,483
  2,695
  2,915
  3,145
  3,383
  3,631
  3,889
  4,156
  4,434
  4,724
  5,025
  5,338
  5,664
  6,004
  6,359
  6,728
  7,114
  7,516
  7,936
  8,375
  8,834
  9,314
  9,816
  10,341
  10,890
  11,465
  12,068
Total liabilities and equity, $m
  5,854
  6,431
  7,034
  7,663
  8,317
  8,998
  9,706
  10,442
  11,207
  12,002
  12,828
  13,686
  14,580
  15,509
  16,476
  17,482
  18,532
  19,626
  20,766
  21,956
  23,197
  24,494
  25,849
  27,265
  28,746
  30,295
  31,916
  33,611
  35,387
  37,246
Debt-to-equity ratio
  1.350
  1.410
  1.470
  1.520
  1.570
  1.610
  1.640
  1.670
  1.700
  1.730
  1.750
  1.770
  1.790
  1.810
  1.820
  1.840
  1.850
  1.870
  1.880
  1.890
  1.900
  1.910
  1.920
  1.930
  1.940
  1.940
  1.950
  1.960
  1.960
  1.970
Adjusted equity ratio
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -25
  0
  19
  39
  60
  81
  103
  126
  151
  176
  471
  498
  527
  556
  586
  618
  651
  686
  722
  759
  798
  839
  882
  927
  974
  1,023
  1,074
  1,128
  1,184
  1,243
Depreciation, amort., depletion, $m
  490
  502
  515
  528
  541
  555
  570
  585
  601
  617
  264
  282
  300
  320
  340
  360
  382
  404
  428
  452
  478
  505
  533
  562
  592
  624
  658
  693
  729
  768
Funds from operations, $m
  465
  502
  534
  567
  601
  636
  673
  711
  751
  793
  736
  780
  827
  875
  926
  978
  1,033
  1,090
  1,149
  1,212
  1,276
  1,344
  1,415
  1,489
  1,566
  1,647
  1,732
  1,820
  1,913
  2,010
Change in working capital, $m
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
Cash from operations, $m
  495
  534
  566
  601
  636
  673
  711
  751
  793
  836
  781
  827
  875
  926
  978
  1,033
  1,090
  1,149
  1,211
  1,276
  1,344
  1,414
  1,488
  1,565
  1,646
  1,731
  1,819
  1,912
  2,009
  2,111
Maintenance CAPEX, $m
  -109
  -121
  -133
  -145
  -158
  -171
  -185
  -200
  -215
  -231
  -247
  -264
  -282
  -300
  -320
  -340
  -360
  -382
  -404
  -428
  -452
  -478
  -505
  -533
  -562
  -592
  -624
  -658
  -693
  -729
New CAPEX, $m
  -223
  -234
  -245
  -255
  -266
  -276
  -287
  -299
  -310
  -323
  -335
  -349
  -363
  -377
  -393
  -409
  -426
  -444
  -463
  -483
  -504
  -527
  -550
  -575
  -601
  -629
  -658
  -689
  -721
  -755
Cash from investing activities, $m
  -332
  -355
  -378
  -400
  -424
  -447
  -472
  -499
  -525
  -554
  -582
  -613
  -645
  -677
  -713
  -749
  -786
  -826
  -867
  -911
  -956
  -1,005
  -1,055
  -1,108
  -1,163
  -1,221
  -1,282
  -1,347
  -1,414
  -1,484
Free cash flow, $m
  163
  179
  189
  200
  212
  225
  239
  252
  267
  282
  198
  214
  231
  248
  266
  285
  304
  323
  344
  365
  387
  410
  433
  458
  483
  510
  537
  566
  596
  627
Issuance/(repayment) of debt, $m
  372
  390
  408
  425
  443
  460
  479
  498
  517
  537
  558
  581
  604
  628
  654
  681
  709
  739
  771
  804
  840
  877
  916
  957
  1,001
  1,047
  1,095
  1,146
  1,200
  1,257
Issuance/(repurchase) of shares, $m
  204
  187
  176
  165
  153
  140
  126
  112
  97
  82
  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  
  576
  577
  584
  590
  596
  600
  605
  610
  614
  619
  558
  581
  604
  628
  654
  681
  709
  739
  771
  804
  840
  877
  916
  957
  1,001
  1,047
  1,095
  1,146
  1,200
  1,257
Total cash flow (excl. dividends), $m
  739
  756
  773
  790
  808
  825
  843
  862
  881
  901
  756
  795
  834
  876
  920
  965
  1,013
  1,063
  1,115
  1,169
  1,227
  1,287
  1,349
  1,415
  1,484
  1,557
  1,633
  1,712
  1,796
  1,884
Retained Cash Flow (-), $m
  -204
  -187
  -195
  -204
  -212
  -221
  -229
  -238
  -248
  -258
  -268
  -278
  -289
  -301
  -313
  -326
  -340
  -354
  -369
  -385
  -402
  -420
  -439
  -459
  -480
  -502
  -525
  -549
  -575
  -602
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
  535
  569
  578
  586
  595
  605
  614
  623
  633
  644
  489
  516
  545
  575
  606
  639
  673
  708
  745
  784
  824
  866
  910
  956
  1,005
  1,055
  1,108
  1,163
  1,221
  1,281
Discount rate, %
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
  501
  495
  465
  433
  400
  367
  333
  300
  268
  236
  154
  138
  122
  106
  91
  77
  64
  52
  42
  33
  25
  19
  14
  10
  7
  5
  3
  2
  1
  1
Current shareholders' claim on cash, %
  95.9
  92.6
  89.9
  87.7
  85.8
  84.2
  82.9
  81.9
  81.0
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4
  80.4

Nuance Communications, Inc. is a provider of voice recognition and natural language understanding solutions. The Company's segments include Healthcare, Mobile, Enterprise and Imaging. The Healthcare segment provides clinical speech and clinical language understanding solutions. The solutions for the Healthcare segment include transcription solutions, Dragon Medical, and clinical document improvement (CDI) and coding solutions. Its Mobile segment provides a portfolio of specialized virtual assistants and connected services. The Enterprise segment provides automated customer solutions and services. The solutions for the Enterprise segment include On-Premise solutions and services, and On-Demand multichannel cloud. The Imaging segment provides software solutions that help professionals and organizations to gain control of their document and information processes. Imaging segment include multi-function printer (MFP) scan automation solutions and MFP Print automation solutions.

FINANCIAL RATIOS  of  Nuance Communications, Inc. (NUAN)

Valuation Ratios
P/E Ratio -32.3
Price to Sales 2.5
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 15.4
Growth Rates
Sales Growth Rate -0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12.7%
Cap. Spend. - 3 Yr. Gr. Rate 0.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 116.1%
Total Debt to Equity 135.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. -2.9%
Return On Total Capital -3.4%
Ret/ On T. Cap. - 3 Yr. Avg. -2.1%
Return On Equity -7.8%
Return On Equity - 3 Yr. Avg. -4.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 56%
Gross Margin - 3 Yr. Avg. 56.8%
EBITDA Margin 10.7%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 2.7%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin -6.1%
Pre-Tax Margin - 3 Yr. Avg. -3.4%
Net Profit Margin -7.8%
Net Profit Margin - 3 Yr. Avg. -4.8%
Effective Tax Rate -26.9%
Eff/ Tax Rate - 3 Yr. Avg. 209.8%
Payout Ratio 0%

NUAN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NUAN stock intrinsic value calculation we used $2052 million for the last fiscal year's total revenue generated by Nuance Communications, Inc.. The default revenue input number comes from 0001 income statement of Nuance Communications, Inc.. 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 NUAN stock valuation model: a) initial revenue growth rate of 10.4% 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 6.8%, whose default value for NUAN is calculated based on our internal credit rating of Nuance Communications, Inc., 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 Nuance Communications, Inc..
    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 NUAN stock the variable cost ratio is equal to 97.3%.

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 NUAN 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 5.7% for Nuance Communications, Inc..

Corporate tax rate of 27% is the nominal tax rate for Nuance Communications, Inc.. 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 NUAN 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 NUAN are equal to 104.9%.

Life of production assets of 19.7 years is the average useful life of capital assets used in Nuance Communications, Inc. 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 NUAN 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 - $1717.496 million for Nuance Communications, Inc. - 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 285.629 million for Nuance Communications, Inc. 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 Nuance Communications, Inc. at the current share price and the inputted number of shares is $4.8 billion.

RELATED COMPANIES Price Int.Val. Rating
MSFT Microsoft Corp 117.05 135.87  hold
CSCO Cisco Systems, 52.74 50.72  hold
ADBE Adobe Inc. 259.69 267.94  hold
MCK McKesson Corpo 118.54 400.79  str.buy
HPQ HP Inc. 19.34 17.13  hold
MMM 3M Company 204.66 144.94  sell
CERN Cerner Corpora 56.96 31.19  sell
GOOGL Alphabet Inc. 1,207.65 985.65  hold

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.