Intrinsic value of Par Technology - PAR

Previous Close

$11.06

  Intrinsic Value

$4.89

stock screener

  Rating & Target

str. sell

-56%

  Value-price divergence*

-151%

Previous close

$11.06

 
Intrinsic value

$4.89

 
Up/down potential

-56%

 
Rating

str. sell

 
Value-price divergence*

-151%

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

We calculate the intrinsic value of PAR 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 2016), $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 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.44
  17.00
  15.80
  14.72
  13.75
  12.87
  12.09
  11.38
  10.74
  10.17
  9.65
  9.18
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  230
  269
  312
  357
  407
  459
  514
  573
  635
  699
  766
  837
  910
  987
  1,066
  1,149
  1,234
  1,324
  1,416
  1,513
  1,613
  1,717
  1,825
  1,938
  2,056
  2,178
  2,306
  2,439
  2,578
  2,723
  2,874
Variable operating expenses, $m
 
  262
  303
  348
  395
  446
  500
  556
  616
  679
  744
  811
  882
  956
  1,033
  1,113
  1,196
  1,283
  1,373
  1,466
  1,563
  1,664
  1,769
  1,878
  1,992
  2,111
  2,235
  2,364
  2,498
  2,639
  2,786
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
  227
  262
  303
  348
  395
  446
  500
  556
  616
  679
  744
  811
  882
  956
  1,033
  1,113
  1,196
  1,283
  1,373
  1,466
  1,563
  1,664
  1,769
  1,878
  1,992
  2,111
  2,235
  2,364
  2,498
  2,639
  2,786
Operating income, $m
  3
  7
  8
  10
  11
  13
  15
  17
  18
  20
  22
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
EBITDA, $m
  8
  12
  13
  15
  17
  20
  22
  25
  27
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  74
  78
  83
  88
  94
  99
  105
  111
  117
  124
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  19
  20
  21
Earnings before tax, $m
  4
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  23
  25
  26
  28
  30
  32
  34
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
Tax expense, $m
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
Net income, $m
  2
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  125
  136
  157
  180
  205
  231
  259
  289
  320
  353
  387
  422
  459
  498
  538
  579
  622
  667
  714
  763
  813
  866
  920
  977
  1,037
  1,098
  1,163
  1,230
  1,300
  1,373
  1,450
Adjusted assets (=assets-cash), $m
  116
  136
  157
  180
  205
  231
  259
  289
  320
  353
  387
  422
  459
  498
  538
  579
  622
  667
  714
  763
  813
  866
  920
  977
  1,037
  1,098
  1,163
  1,230
  1,300
  1,373
  1,450
Revenue / Adjusted assets
  1.983
  1.978
  1.987
  1.983
  1.985
  1.987
  1.985
  1.983
  1.984
  1.980
  1.979
  1.983
  1.983
  1.982
  1.981
  1.984
  1.984
  1.985
  1.983
  1.983
  1.984
  1.983
  1.984
  1.984
  1.983
  1.984
  1.983
  1.983
  1.983
  1.983
  1.982
Average production assets, $m
  14
  16
  19
  22
  25
  28
  31
  35
  39
  43
  47
  51
  56
  60
  65
  70
  75
  81
  86
  92
  98
  105
  111
  118
  125
  133
  141
  149
  157
  166
  175
Working capital, $m
  27
  21
  24
  28
  32
  36
  40
  45
  49
  55
  60
  65
  71
  77
  83
  90
  96
  103
  110
  118
  126
  134
  142
  151
  160
  170
  180
  190
  201
  212
  224
Total debt, $m
  1
  10
  20
  31
  43
  56
  69
  83
  98
  113
  129
  146
  164
  182
  201
  221
  241
  262
  285
  308
  331
  356
  382
  409
  437
  467
  497
  529
  562
  597
  633
Total liabilities, $m
  55
  64
  74
  85
  97
  110
  123
  137
  152
  167
  183
  200
  218
  236
  255
  275
  295
  316
  339
  362
  385
  410
  436
  463
  491
  521
  551
  583
  616
  651
  687
Total equity, $m
  70
  71
  83
  95
  108
  122
  136
  152
  168
  185
  203
  222
  241
  262
  283
  305
  327
  351
  376
  401
  428
  455
  484
  514
  545
  578
  612
  647
  684
  722
  762
Total liabilities and equity, $m
  125
  135
  157
  180
  205
  232
  259
  289
  320
  352
  386
  422
  459
  498
  538
  580
  622
  667
  715
  763
  813
  865
  920
  977
  1,036
  1,099
  1,163
  1,230
  1,300
  1,373
  1,449
Debt-to-equity ratio
  0.014
  0.140
  0.250
  0.330
  0.400
  0.460
  0.510
  0.550
  0.580
  0.610
  0.640
  0.660
  0.680
  0.690
  0.710
  0.720
  0.740
  0.750
  0.760
  0.770
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
Adjusted equity ratio
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
Depreciation, amort., depletion, $m
  5
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
Funds from operations, $m
  14
  10
  11
  12
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
Change in working capital, $m
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
Cash from operations, $m
  11
  7
  8
  9
  10
  11
  12
  14
  15
  17
  19
  20
  22
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  58
  61
  65
  69
  73
Maintenance CAPEX, $m
  0
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
New CAPEX, $m
  -6
  -2
  -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
  -8
  -9
  -9
Cash from investing activities, $m
  -7
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -28
  -29
  -31
  -32
  -35
  -36
  -38
  -40
  -42
Free cash flow, $m
  4
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
Issuance/(repayment) of debt, $m
  0
  9
  10
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
Issuance/(repurchase) of shares, $m
  0
  5
  5
  5
  6
  5
  5
  5
  5
  5
  4
  3
  3
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2
  14
  15
  16
  18
  18
  18
  19
  20
  20
  20
  20
  21
  20
  21
  21
  22
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
Total cash flow (excl. dividends), $m
  1
  16
  17
  18
  20
  21
  22
  23
  24
  25
  27
  27
  28
  29
  30
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  52
  54
  57
  60
  63
  66
Retained Cash Flow (-), $m
  -2
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
Prev. year cash balance distribution, $m
 
  9
  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
 
  14
  6
  6
  7
  7
  7
  8
  8
  8
  9
  8
  8
  9
  9
  9
  10
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
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
 
  14
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  3
  3
  3
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  96.9
  94.2
  92.0
  90.0
  88.3
  86.8
  85.6
  84.6
  83.7
  82.9
  82.5
  82.1
  81.8
  81.6
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4
  81.4

PAR Technology Corporation (PAR) is a provider of systems and service solutions for the hospitality industry. The Company operates through two segments: Hospitality and Government. The solutions for the restaurant industry integrate software applications, hardware platforms, software delivery, and installation and lifecycle support services. PAR's software offerings for the Restaurant market include front-of-store point-of-sale (POS) software applications, and enterprise software applications for content management and business intelligence. PAR's hardware offerings for the restaurant market include POS terminals, kitchen systems utilizing printers and/or video monitors, and a range of food safety monitoring and task management hardware and software solutions. PAR's Government business provides a range of technical services for the Department of Defense (DoD) and federal agencies. The Government segment focuses on serving intelligence, surveillance and reconnaissance (ISR) customers.

FINANCIAL RATIOS  of  Par Technology (PAR)

Valuation Ratios
P/E Ratio 87.2
Price to Sales 0.8
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 15.9
Price to Free Cash Flow 34.9
Growth Rates
Sales Growth Rate 0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 1.4%
Total Debt to Equity 1.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.7%
Ret/ On Assets - 3 Yr. Avg. -0.8%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. -1.4%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 20%
Gross Margin - 3 Yr. Avg. 19.6%
EBITDA Margin 3.9%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin 1.3%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 1.7%
Pre-Tax Margin - 3 Yr. Avg. 2.1%
Net Profit Margin 0.9%
Net Profit Margin - 3 Yr. Avg. -0.5%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 52.8%
Payout Ratio 0%

PAR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PAR stock intrinsic value calculation we used $230 million for the last fiscal year's total revenue generated by Par Technology. The default revenue input number comes from 2016 income statement of Par Technology. 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 PAR stock valuation model: a) initial revenue growth rate of 17% 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 PAR is calculated based on our internal credit rating of Par Technology, 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 Par Technology.
    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 PAR stock the variable cost ratio is equal to 97.4%.

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 PAR 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 Par Technology.

Corporate tax rate of 27% is the nominal tax rate for Par Technology. 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 PAR 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 PAR are equal to 6.1%.

Life of production assets of 5 years is the average useful life of capital assets used in Par Technology 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 PAR 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 - $70 million for Par Technology - 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 16.776 million for Par Technology 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 Par Technology at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ PAR Technology posts 2Q profit   [Aug-15-17 10:36PM  Associated Press]
▶ ETFs with exposure to PAR Technology Corp. : June 9, 2017   [Jun-09-17 01:50PM  Capital Cube]
▶ ETFs with exposure to PAR Technology Corp. : May 26, 2017   [May-26-17 01:21PM  Capital Cube]
▶ PAR Technology & TempAlert Announce IoT Partnership   [May-19-17 07:30AM  Business Wire]
▶ PAR Technology posts 1Q profit   [May-15-17 04:10PM  Associated Press]
▶ ETFs with exposure to PAR Technology Corp. : May 1, 2017   [May-01-17 04:16PM  Capital Cube]
▶ PAR Technology posts 4Q profit   [07:49AM  Associated Press]
▶ CRS Texas becomes PAR PixelPoint® POS Software Reseller   [Feb-09-17 07:30AM  Business Wire]
Financial statements of PAR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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