Intrinsic value of On Track Innovations - OTIV

Previous Close

$0.80

  Intrinsic Value

$4.03

stock screener

  Rating & Target

str. buy

+404%

Previous close

$0.80

 
Intrinsic value

$4.03

 
Up/down potential

+404%

 
Rating

str. buy

We calculate the intrinsic value of OTIV 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 0.0

 

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, %
  45.80
  41.72
  38.05
  34.74
  31.77
  29.09
  26.68
  24.51
  22.56
  20.81
  19.23
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.62
  8.25
  7.93
  7.64
  7.37
  7.14
  6.92
Revenue, $m
  33
  46
  64
  86
  113
  146
  185
  231
  283
  342
  407
  480
  559
  645
  738
  837
  942
  1,053
  1,170
  1,293
  1,422
  1,556
  1,697
  1,843
  1,995
  2,153
  2,318
  2,489
  2,666
  2,851
Variable operating expenses, $m
  27
  38
  52
  70
  93
  120
  151
  188
  231
  279
  333
  392
  457
  527
  602
  683
  769
  860
  955
  1,056
  1,161
  1,271
  1,385
  1,505
  1,629
  1,758
  1,892
  2,032
  2,177
  2,328
Fixed operating expenses, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
Total operating expenses, $m
  32
  43
  57
  75
  99
  126
  157
  194
  237
  285
  339
  398
  464
  534
  609
  690
  776
  867
  963
  1,064
  1,169
  1,279
  1,393
  1,513
  1,638
  1,767
  1,901
  2,041
  2,186
  2,338
Operating income, $m
  1
  3
  6
  10
  15
  21
  28
  36
  46
  56
  68
  82
  96
  112
  128
  146
  166
  186
  207
  230
  253
  278
  303
  330
  357
  386
  416
  447
  480
  513
EBITDA, $m
  3
  6
  10
  15
  21
  29
  38
  48
  61
  74
  90
  107
  125
  145
  167
  190
  215
  241
  268
  297
  327
  359
  392
  426
  462
  499
  538
  578
  619
  663
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  7
  9
  11
  13
  16
  19
  22
  25
  29
  33
  37
  41
  46
  51
  56
  62
  67
  73
  79
  85
  92
  99
  106
Earnings before tax, $m
  1
  2
  5
  8
  12
  17
  23
  30
  37
  46
  55
  66
  77
  90
  103
  118
  133
  149
  166
  183
  202
  221
  242
  263
  284
  307
  331
  355
  381
  408
Tax expense, $m
  0
  1
  1
  2
  3
  5
  6
  8
  10
  12
  15
  18
  21
  24
  28
  32
  36
  40
  45
  50
  55
  60
  65
  71
  77
  83
  89
  96
  103
  110
Net income, $m
  0
  2
  4
  6
  9
  13
  17
  22
  27
  33
  40
  48
  57
  66
  75
  86
  97
  109
  121
  134
  147
  162
  176
  192
  208
  224
  242
  260
  278
  298

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
  39
  55
  76
  102
  135
  174
  221
  275
  337
  407
  485
  571
  666
  768
  878
  996
  1,121
  1,253
  1,393
  1,539
  1,693
  1,853
  2,020
  2,194
  2,375
  2,563
  2,759
  2,963
  3,174
  3,394
Adjusted assets (=assets-cash), $m
  39
  55
  76
  102
  135
  174
  221
  275
  337
  407
  485
  571
  666
  768
  878
  996
  1,121
  1,253
  1,393
  1,539
  1,693
  1,853
  2,020
  2,194
  2,375
  2,563
  2,759
  2,963
  3,174
  3,394
Revenue / Adjusted assets
  0.846
  0.836
  0.842
  0.843
  0.837
  0.839
  0.837
  0.840
  0.840
  0.840
  0.839
  0.841
  0.839
  0.840
  0.841
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
Average production assets, $m
  9
  13
  17
  23
  31
  40
  50
  63
  77
  93
  111
  131
  152
  176
  201
  228
  256
  286
  318
  352
  387
  423
  462
  501
  543
  586
  630
  677
  725
  775
Working capital, $m
  3
  4
  5
  7
  9
  11
  14
  18
  22
  27
  32
  37
  44
  50
  58
  65
  73
  82
  91
  101
  111
  121
  132
  144
  156
  168
  181
  194
  208
  222
Total debt, $m
  12
  20
  31
  45
  62
  83
  107
  135
  168
  204
  245
  291
  340
  394
  452
  513
  579
  648
  721
  798
  878
  962
  1,050
  1,141
  1,236
  1,334
  1,437
  1,544
  1,654
  1,770
Total liabilities, $m
  20
  29
  40
  54
  71
  91
  116
  144
  176
  213
  254
  299
  349
  403
  460
  522
  587
  657
  730
  807
  887
  971
  1,058
  1,150
  1,245
  1,343
  1,446
  1,552
  1,663
  1,778
Total equity, $m
  18
  26
  36
  49
  64
  83
  105
  131
  160
  194
  231
  272
  317
  366
  418
  474
  534
  597
  663
  733
  806
  882
  961
  1,044
  1,131
  1,220
  1,313
  1,410
  1,511
  1,615
Total liabilities and equity, $m
  38
  55
  76
  103
  135
  174
  221
  275
  336
  407
  485
  571
  666
  769
  878
  996
  1,121
  1,254
  1,393
  1,540
  1,693
  1,853
  2,019
  2,194
  2,376
  2,563
  2,759
  2,962
  3,174
  3,393
Debt-to-equity ratio
  0.630
  0.770
  0.860
  0.920
  0.960
  1.000
  1.020
  1.030
  1.050
  1.060
  1.060
  1.070
  1.070
  1.080
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.100
  1.100
Adjusted equity ratio
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  2
  4
  6
  9
  13
  17
  22
  27
  33
  40
  48
  57
  66
  75
  86
  97
  109
  121
  134
  147
  162
  176
  192
  208
  224
  242
  260
  278
  298
Depreciation, amort., depletion, $m
  2
  2
  3
  5
  6
  8
  10
  12
  15
  18
  21
  25
  29
  34
  39
  44
  49
  55
  61
  68
  74
  81
  89
  96
  104
  113
  121
  130
  139
  149
Funds from operations, $m
  2
  4
  7
  11
  15
  20
  26
  34
  42
  51
  62
  73
  86
  99
  114
  130
  146
  164
  182
  202
  222
  243
  265
  288
  312
  337
  363
  390
  418
  447
Change in working capital, $m
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
Cash from operations, $m
  1
  3
  6
  9
  13
  18
  23
  30
  38
  47
  57
  68
  80
  93
  107
  122
  138
  155
  173
  192
  212
  232
  254
  277
  300
  325
  350
  376
  404
  432
Maintenance CAPEX, $m
  -1
  -2
  -2
  -3
  -4
  -6
  -8
  -10
  -12
  -15
  -18
  -21
  -25
  -29
  -34
  -39
  -44
  -49
  -55
  -61
  -68
  -74
  -81
  -89
  -96
  -104
  -113
  -121
  -130
  -139
New CAPEX, $m
  -3
  -4
  -5
  -6
  -7
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
Cash from investing activities, $m
  -4
  -6
  -7
  -9
  -11
  -15
  -19
  -22
  -26
  -31
  -36
  -41
  -47
  -52
  -59
  -66
  -73
  -79
  -87
  -94
  -103
  -111
  -119
  -129
  -137
  -147
  -158
  -167
  -178
  -189
Free cash flow, $m
  -3
  -2
  -2
  -1
  1
  3
  5
  8
  12
  16
  21
  26
  33
  40
  48
  56
  66
  76
  86
  97
  109
  122
  135
  148
  162
  177
  193
  209
  225
  243
Issuance/(repayment) of debt, $m
  7
  8
  11
  14
  17
  21
  24
  28
  32
  37
  41
  45
  49
  54
  58
  62
  66
  69
  73
  77
  80
  84
  88
  91
  95
  99
  103
  107
  111
  115
Issuance/(repurchase) of shares, $m
  6
  6
  6
  7
  6
  6
  5
  4
  2
  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  
  13
  14
  17
  21
  23
  27
  29
  32
  34
  37
  41
  45
  49
  54
  58
  62
  66
  69
  73
  77
  80
  84
  88
  91
  95
  99
  103
  107
  111
  115
Total cash flow (excl. dividends), $m
  10
  12
  16
  20
  24
  29
  35
  41
  47
  53
  62
  72
  82
  94
  106
  118
  131
  145
  159
  174
  189
  205
  222
  239
  257
  276
  295
  315
  336
  358
Retained Cash Flow (-), $m
  -6
  -8
  -10
  -13
  -15
  -19
  -22
  -26
  -30
  -33
  -37
  -41
  -45
  -49
  -52
  -56
  -60
  -63
  -66
  -70
  -73
  -76
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
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
  4
  4
  6
  7
  9
  11
  13
  15
  17
  19
  25
  31
  37
  45
  53
  62
  72
  82
  93
  104
  116
  129
  143
  157
  171
  186
  202
  218
  235
  253
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
  3
  4
  5
  6
  7
  8
  9
  9
  10
  10
  12
  13
  14
  15
  16
  16
  16
  15
  14
  13
  12
  11
  9
  8
  7
  5
  4
  3
  3
  2
Current shareholders' claim on cash, %
  85.3
  76.2
  69.8
  65.4
  62.3
  60.1
  58.6
  57.8
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4
  57.4

On Track Innovations Ltd. is a developer of cashless payment solutions. The Company's segments include Retail and Mass Transit, Petroleum, Parking and Other. The Company offers solutions for banking, mobile network operators, vending, mass transit, petroleum and parking. The Company provides its customers with training and installation support, customer service and technical support. Its PayEnable technology can be implemented into a range of products. Its Retail and Mass Transit products include TRIO mPOS, Pico BT, WAVE, WAVE PKI, oti SATURN 6700 UNO, oti SATURN 6500 TRIO and oti SCI 6000. It also offers otiMetry and oti CONNECT 3000. Its EasyFuel Plus solution is a wireless, cashless, cardless and paperless refueling tracking and payment solution. Its EasyPark set of parking solutions provides parking fee collection, parking payment enforcement and parking management solution. Its MediSmart solution is an information management and claims submission system for the medical sector.

FINANCIAL RATIOS  of  On Track Innovations (OTIV)

Valuation Ratios
P/E Ratio -32.8
Price to Sales 1.6
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow -16.4
Price to Free Cash Flow -16.4
Growth Rates
Sales Growth Rate 16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 16.7%
Total Debt to Equity 50%
Interest Coverage 0
Management Effectiveness
Return On Assets -3.4%
Ret/ On Assets - 3 Yr. Avg. -16.3%
Return On Total Capital -5.1%
Ret/ On T. Cap. - 3 Yr. Avg. -24.5%
Return On Equity -7.4%
Return On Equity - 3 Yr. Avg. -32.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 47.6%
Gross Margin - 3 Yr. Avg. 48.4%
EBITDA Margin -4.8%
EBITDA Margin - 3 Yr. Avg. -27%
Operating Margin -4.8%
Oper. Margin - 3 Yr. Avg. -28.8%
Pre-Tax Margin -9.5%
Pre-Tax Margin - 3 Yr. Avg. -32%
Net Profit Margin -4.8%
Net Profit Margin - 3 Yr. Avg. -30.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

OTIV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OTIV stock intrinsic value calculation we used $22.382 million for the last fiscal year's total revenue generated by On Track Innovations. The default revenue input number comes from 0001 income statement of On Track Innovations. 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 OTIV stock valuation model: a) initial revenue growth rate of 45.8% 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 OTIV is calculated based on our internal credit rating of On Track Innovations, 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 On Track Innovations.
    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 OTIV stock the variable cost ratio is equal to 81.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 million in the base year in the intrinsic value calculation for OTIV 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 6.4% for On Track Innovations.

Corporate tax rate of 27% is the nominal tax rate for On Track Innovations. 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 OTIV 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 OTIV are equal to 27.2%.

Life of production assets of 5.2 years is the average useful life of capital assets used in On Track Innovations 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 OTIV is equal to 7.8%. 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 - $12.451 million for On Track Innovations - 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 41.174 million for On Track Innovations 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 On Track Innovations at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Is On Track Innovations Ltd (NASDAQ:OTIV) Undervalued?   [Jun-27-18 07:49AM  Simply Wall St.]
▶ Are On Track Innovations Ltds (OTIV) Interest Costs Too High?   [Nov-17-17 07:44PM  Simply Wall St.]
▶ On Track Innovations Ltd. to Host Earnings Call   [Nov-08-17 07:00AM  ACCESSWIRE]
▶ OTI Sets Third Quarter 2017 Conference Call   [Oct-23-17 08:31AM  PR Newswire]
▶ OTI Sets Second Quarter 2017 Conference Call   [Jul-10-17 08:31AM  GlobeNewswire]
▶ OTI Sets First Quarter 2017 Conference Call   [Apr-26-17 12:34PM  GlobeNewswire]
▶ OTI Sets Fourth Quarter and Full Year 2016 Conference Call   [Feb-28-17 08:31AM  GlobeNewswire]
▶ OTI Appoints Larry Susman as VP of Sales   [Feb-27-17 08:31AM  GlobeNewswire]

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