Intrinsic value of Points International - PCOM

Previous Close

$11.83

  Intrinsic Value

$12.75

stock screener

  Rating & Target

hold

+8%

Previous close

$11.83

 
Intrinsic value

$12.75

 
Up/down potential

+8%

 
Rating

hold

We calculate the intrinsic value of PCOM 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 0.2

 

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, %
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
Revenue, $m
  375
  404
  434
  465
  498
  532
  567
  603
  641
  681
  722
  765
  809
  856
  905
  956
  1,009
  1,064
  1,122
  1,183
  1,246
  1,313
  1,382
  1,455
  1,531
  1,611
  1,695
  1,782
  1,874
  1,971
Variable operating expenses, $m
  369
  397
  426
  457
  489
  521
  556
  591
  628
  667
  705
  747
  790
  836
  883
  933
  985
  1,039
  1,096
  1,155
  1,217
  1,282
  1,350
  1,421
  1,495
  1,573
  1,655
  1,741
  1,830
  1,924
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
  369
  397
  426
  457
  489
  521
  556
  591
  628
  667
  705
  747
  790
  836
  883
  933
  985
  1,039
  1,096
  1,155
  1,217
  1,282
  1,350
  1,421
  1,495
  1,573
  1,655
  1,741
  1,830
  1,924
Operating income, $m
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
EBITDA, $m
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  58
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
Tax expense, $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
Net income, $m
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21

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
  129
  138
  149
  159
  170
  182
  194
  206
  219
  233
  247
  262
  277
  293
  310
  327
  345
  364
  384
  405
  427
  449
  473
  498
  524
  552
  580
  610
  642
  675
Adjusted assets (=assets-cash), $m
  129
  138
  149
  159
  170
  182
  194
  206
  219
  233
  247
  262
  277
  293
  310
  327
  345
  364
  384
  405
  427
  449
  473
  498
  524
  552
  580
  610
  642
  675
Revenue / Adjusted assets
  2.907
  2.928
  2.913
  2.925
  2.929
  2.923
  2.923
  2.927
  2.927
  2.923
  2.923
  2.920
  2.921
  2.922
  2.919
  2.924
  2.925
  2.923
  2.922
  2.921
  2.918
  2.924
  2.922
  2.922
  2.922
  2.918
  2.922
  2.921
  2.919
  2.920
Average production assets, $m
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
  77
Working capital, $m
  -54
  -58
  -63
  -67
  -72
  -77
  -82
  -87
  -92
  -98
  -104
  -110
  -117
  -123
  -130
  -138
  -145
  -153
  -162
  -170
  -179
  -189
  -199
  -210
  -220
  -232
  -244
  -257
  -270
  -284
Total debt, $m
  6
  12
  19
  26
  33
  40
  48
  56
  64
  73
  82
  91
  101
  111
  122
  133
  145
  157
  170
  183
  197
  211
  227
  243
  259
  277
  295
  314
  334
  356
Total liabilities, $m
  82
  89
  95
  102
  109
  116
  124
  132
  140
  149
  158
  168
  177
  188
  198
  209
  221
  233
  246
  259
  273
  288
  303
  319
  335
  353
  371
  391
  411
  432
Total equity, $m
  46
  50
  54
  57
  61
  66
  70
  74
  79
  84
  89
  94
  100
  106
  112
  118
  124
  131
  138
  146
  154
  162
  170
  179
  189
  199
  209
  220
  231
  243
Total liabilities and equity, $m
  128
  139
  149
  159
  170
  182
  194
  206
  219
  233
  247
  262
  277
  294
  310
  327
  345
  364
  384
  405
  427
  450
  473
  498
  524
  552
  580
  611
  642
  675
Debt-to-equity ratio
  0.130
  0.250
  0.350
  0.450
  0.540
  0.610
  0.690
  0.750
  0.810
  0.870
  0.920
  0.970
  1.010
  1.060
  1.090
  1.130
  1.160
  1.200
  1.230
  1.260
  1.280
  1.310
  1.330
  1.350
  1.370
  1.390
  1.410
  1.430
  1.450
  1.460
Adjusted equity ratio
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
Depreciation, amort., depletion, $m
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
Funds from operations, $m
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
Change in working capital, $m
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
Cash from operations, $m
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
Cash from investing activities, $m
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -15
  -16
Free cash flow, $m
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
Issuance/(repayment) of debt, $m
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
Total cash flow (excl. dividends), $m
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
Retained Cash Flow (-), $m
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
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
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
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
  12
  12
  12
  12
  11
  11
  11
  10
  10
  9
  9
  8
  7
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Points International Ltd. (Points) provides a range of e-commerce and technology services to loyalty program operators using a common infrastructure. These services include a range of white label or private branded e-commerce services (Loyalty Currency Services) that enable the sale of loyalty currencies (such as frequent flyer miles, hotel points and credit card points), both retail and wholesale, and support the loyalty program consumer offerings and their back end operations. The Company offers the consumer-focused Points Loyalty Wallet that allows users to track, manage and access multiple loyalty rewards programs through the Points.com Website. It also offers Points Travel, which is private label travel e-commerce platform designed specifically for the loyalty industry. The Company operates the PointsHound.com Website, a hotel booking engine and loyalty currency aggregator built specifically for frequent travelers.

FINANCIAL RATIOS  of  Points International (PCOM)

Valuation Ratios
P/E Ratio -88
Price to Sales 0.5
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow 25.1
Growth Rates
Sales Growth Rate 8.8%
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 NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -2%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.9%
Return On Equity -4.9%
Return On Equity - 3 Yr. Avg. 6.9%
Asset Turnover 3.2
Profitability Ratios
Gross Margin 13.4%
Gross Margin - 3 Yr. Avg. 14.5%
EBITDA Margin 1.2%
EBITDA Margin - 3 Yr. Avg. 2.9%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 1.7%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin -0.6%
Net Profit Margin - 3 Yr. Avg. 1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 22%
Payout Ratio 0%

PCOM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCOM stock intrinsic value calculation we used $347.546 million for the last fiscal year's total revenue generated by Points International. The default revenue input number comes from 0001 income statement of Points International. 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 PCOM stock valuation model: a) initial revenue growth rate of 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 PCOM is calculated based on our internal credit rating of Points International, 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 Points International.
    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 PCOM stock the variable cost ratio is equal to 98.3%.

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 PCOM 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 Points International.

Corporate tax rate of 27% is the nominal tax rate for Points International. 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 PCOM 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 PCOM are equal to 3.9%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Points International 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 PCOM is equal to -14.4%. 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 - $42.947 million for Points International - 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 14.438 million for Points International 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 Points International at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Points International: 3Q Earnings Snapshot   [Nov-13-18 04:59PM  Associated Press]
▶ Points International Poised for 72% Reward   [Oct-16-18 04:31PM  Barrons.com]
▶ Points International: 2Q Earnings Snapshot   [Aug-09-18 05:04AM  Associated Press]
▶ May Undervalued Stock Picks   [May-24-18 10:02AM  Simply Wall St.]
▶ May Top Growth Stocks   [May-17-18 12:02PM  Simply Wall St.]
▶ Points International: 1Q Earnings Snapshot   [May-10-18 07:06PM  Associated Press]
▶ Points International posts 4Q profit   [Mar-08-18 07:07PM  Associated Press]
▶ Points Named As One of Greater Torontos Top 2018 Employers   [Dec-08-17 08:36AM  GlobeNewswire]
▶ Points International posts 3Q profit   [Nov-08-17 04:49PM  Associated Press]
▶ Points International posts 2Q profit   [Aug-10-17 12:03AM  Associated Press]
▶ Points Named One of Canada's Top Technology Companies   [May-31-17 04:32PM  GlobeNewswire]
▶ Points International posts 1Q profit   [May-04-17 05:03AM  Associated Press]
▶ Points Again Named One of Canadas Best Workplaces   [Apr-27-17 08:56AM  GlobeNewswire]
▶ Points International reports 4Q loss   [Mar-08-17 05:09PM  Associated Press]
▶ Points Named a 2017 Top Workplace for Women in Canada   [Mar-06-17 04:32PM  GlobeNewswire]
▶ Hedge Funds Are Buying Pure Cycle Corporation (PCYO)   [Dec-16-16 07:55AM  at Insider Monkey]
▶ How YuMe Inc (YUME) Stacks Up Against Its Peers   [Dec-12-16 11:17PM  at Insider Monkey]

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