Intrinsic value of ePlus inc. - PLUS

Previous Close

$89.35

  Intrinsic Value

$11.25

stock screener

  Rating & Target

str. sell

-87%

Previous close

$89.35

 
Intrinsic value

$11.25

 
Up/down potential

-87%

 
Rating

str. sell

We calculate the intrinsic value of PLUS 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 1.2

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,439
  1,472
  1,510
  1,553
  1,600
  1,651
  1,708
  1,768
  1,834
  1,904
  1,980
  2,060
  2,146
  2,237
  2,333
  2,435
  2,544
  2,658
  2,779
  2,907
  3,041
  3,183
  3,333
  3,491
  3,657
  3,832
  4,016
  4,210
  4,414
  4,628
Variable operating expenses, $m
  1,344
  1,375
  1,410
  1,450
  1,494
  1,542
  1,594
  1,651
  1,712
  1,778
  1,846
  1,921
  2,001
  2,086
  2,176
  2,271
  2,372
  2,479
  2,592
  2,711
  2,836
  2,969
  3,109
  3,256
  3,411
  3,574
  3,746
  3,927
  4,117
  4,317
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
  1,344
  1,375
  1,410
  1,450
  1,494
  1,542
  1,594
  1,651
  1,712
  1,778
  1,846
  1,921
  2,001
  2,086
  2,176
  2,271
  2,372
  2,479
  2,592
  2,711
  2,836
  2,969
  3,109
  3,256
  3,411
  3,574
  3,746
  3,927
  4,117
  4,317
Operating income, $m
  95
  97
  100
  103
  106
  109
  113
  117
  122
  126
  133
  139
  145
  151
  157
  164
  171
  179
  187
  196
  205
  214
  224
  235
  246
  258
  270
  284
  297
  312
EBITDA, $m
  106
  109
  112
  115
  118
  122
  126
  131
  136
  141
  146
  152
  159
  165
  172
  180
  188
  196
  205
  215
  225
  235
  246
  258
  270
  283
  297
  311
  326
  342
Interest expense (income), $m
  0
  1
  10
  19
  30
  42
  56
  71
  87
  105
  123
  144
  165
  189
  213
  239
  267
  297
  328
  361
  396
  433
  471
  512
  556
  601
  649
  699
  752
  808
  867
Earnings before tax, $m
  94
  88
  81
  73
  63
  53
  42
  30
  17
  3
  -10
  -27
  -44
  -63
  -82
  -103
  -125
  -149
  -174
  -200
  -228
  -257
  -288
  -320
  -355
  -391
  -429
  -469
  -511
  -555
Tax expense, $m
  25
  24
  22
  20
  17
  14
  11
  8
  5
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  68
  64
  59
  53
  46
  39
  31
  22
  12
  2
  -10
  -27
  -44
  -63
  -82
  -103
  -125
  -149
  -174
  -200
  -228
  -257
  -288
  -320
  -355
  -391
  -429
  -469
  -511
  -555

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
  770
  788
  808
  831
  856
  884
  914
  947
  982
  1,020
  1,060
  1,103
  1,149
  1,197
  1,249
  1,304
  1,362
  1,423
  1,488
  1,556
  1,628
  1,704
  1,784
  1,869
  1,958
  2,051
  2,150
  2,254
  2,363
  2,478
Adjusted assets (=assets-cash), $m
  770
  788
  808
  831
  856
  884
  914
  947
  982
  1,020
  1,060
  1,103
  1,149
  1,197
  1,249
  1,304
  1,362
  1,423
  1,488
  1,556
  1,628
  1,704
  1,784
  1,869
  1,958
  2,051
  2,150
  2,254
  2,363
  2,478
Revenue / Adjusted assets
  1.869
  1.868
  1.869
  1.869
  1.869
  1.868
  1.869
  1.867
  1.868
  1.867
  1.868
  1.868
  1.868
  1.869
  1.868
  1.867
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
  1.868
Average production assets, $m
  58
  59
  60
  62
  64
  66
  68
  71
  73
  76
  79
  82
  86
  89
  93
  97
  102
  106
  111
  116
  122
  127
  133
  140
  146
  153
  161
  168
  177
  185
Working capital, $m
  99
  102
  104
  107
  110
  114
  118
  122
  127
  131
  137
  142
  148
  154
  161
  168
  176
  183
  192
  201
  210
  220
  230
  241
  252
  264
  277
  290
  305
  319
Total debt, $m
  9
  18
  28
  40
  53
  67
  82
  98
  116
  135
  156
  178
  201
  226
  252
  279
  309
  340
  373
  407
  444
  482
  523
  566
  611
  659
  709
  761
  816
  875
Total liabilities, $m
  391
  400
  410
  421
  434
  448
  463
  480
  498
  517
  537
  559
  582
  607
  633
  661
  690
  721
  754
  789
  825
  864
  905
  947
  993
  1,040
  1,090
  1,143
  1,198
  1,256
Total equity, $m
  380
  389
  399
  410
  422
  436
  451
  467
  484
  503
  522
  544
  566
  590
  616
  643
  671
  701
  733
  767
  803
  840
  880
  921
  965
  1,011
  1,060
  1,111
  1,165
  1,222
Total liabilities and equity, $m
  771
  789
  809
  831
  856
  884
  914
  947
  982
  1,020
  1,059
  1,103
  1,148
  1,197
  1,249
  1,304
  1,361
  1,422
  1,487
  1,556
  1,628
  1,704
  1,785
  1,868
  1,958
  2,051
  2,150
  2,254
  2,363
  2,478
Debt-to-equity ratio
  0.020
  0.050
  0.070
  0.100
  0.120
  0.150
  0.180
  0.210
  0.240
  0.270
  0.300
  0.330
  0.350
  0.380
  0.410
  0.430
  0.460
  0.480
  0.510
  0.530
  0.550
  0.570
  0.590
  0.610
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
Adjusted equity ratio
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  68
  64
  59
  53
  46
  39
  31
  22
  12
  2
  -10
  -27
  -44
  -63
  -82
  -103
  -125
  -149
  -174
  -200
  -228
  -257
  -288
  -320
  -355
  -391
  -429
  -469
  -511
  -555
Depreciation, amort., depletion, $m
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Funds from operations, $m
  80
  75
  71
  65
  59
  52
  44
  36
  26
  16
  3
  -13
  -30
  -48
  -67
  -87
  -109
  -132
  -156
  -181
  -208
  -236
  -266
  -298
  -331
  -366
  -403
  -441
  -482
  -525
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  78
  73
  68
  62
  55
  48
  40
  31
  22
  12
  -3
  -19
  -36
  -54
  -74
  -94
  -116
  -139
  -164
  -190
  -217
  -246
  -276
  -308
  -342
  -378
  -415
  -455
  -496
  -540
Maintenance CAPEX, $m
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from investing activities, $m
  -10
  -10
  -12
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -38
Free cash flow, $m
  67
  62
  57
  51
  43
  36
  27
  18
  8
  -3
  -18
  -35
  -53
  -72
  -92
  -114
  -137
  -161
  -186
  -213
  -242
  -272
  -303
  -337
  -372
  -409
  -448
  -489
  -532
  -577
Issuance/(repayment) of debt, $m
  8
  9
  10
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  53
  55
  58
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  5
  16
  30
  48
  67
  87
  108
  130
  154
  179
  206
  234
  263
  295
  327
  362
  399
  437
  478
  520
  565
  612
Cash from financing (excl. dividends), $m  
  8
  9
  10
  12
  13
  14
  15
  17
  23
  35
  50
  70
  90
  112
  134
  158
  183
  210
  239
  269
  300
  334
  368
  405
  444
  484
  528
  573
  620
  670
Total cash flow (excl. dividends), $m
  75
  71
  67
  62
  56
  50
  42
  34
  30
  32
  33
  35
  37
  39
  42
  44
  47
  50
  52
  55
  58
  62
  65
  68
  72
  76
  80
  84
  88
  93
Retained Cash Flow (-), $m
  -7
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -17
  -19
  -30
  -48
  -67
  -87
  -108
  -130
  -154
  -179
  -206
  -234
  -263
  -295
  -327
  -362
  -399
  -437
  -478
  -520
  -565
  -612
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
  68
  63
  57
  51
  44
  36
  27
  18
  13
  14
  2
  -13
  -30
  -47
  -66
  -86
  -107
  -130
  -153
  -178
  -205
  -233
  -263
  -294
  -327
  -361
  -398
  -436
  -477
  -519
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
  65
  57
  50
  42
  34
  26
  19
  11
  7
  7
  1
  -6
  -11
  -16
  -19
  -22
  -23
  -24
  -24
  -23
  -21
  -19
  -17
  -15
  -13
  -11
  -9
  -7
  -5
  -4
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.7
  98.7
  96.9
  94.2
  90.8
  86.7
  82.2
  77.2
  71.9
  66.4
  61.0
  55.6
  50.3
  45.2
  40.4
  35.9
  31.7
  27.8
  24.3
  21.1
  18.3
  15.7

ePlus inc. is a holding company. The Company is engaged in the business of selling, leasing, financing and managing information technology. It operates through two segments: technology and financing. The technology segment sells information technology (IT) hardware products, third-party software and maintenance contracts, its own and third-party professional and managed services, and its software. The financing segment operations primarily consist of the financing of information technology equipment, software and related services. Both segments sell to commercial entities, state and local governments, government contractors and educational institutions. The Company is a provider of IT solutions, which enable organizations to optimize their IT environment and supply chain processes. It delivers and integrates IT products and software from various vendors, and provides private, hybrid, and public cloud solutions.

FINANCIAL RATIOS  of  ePlus inc. (PLUS)

Valuation Ratios
P/E Ratio 24.8
Price to Sales 1
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 38.3
Price to Free Cash Flow 90.4
Growth Rates
Sales Growth Rate 10.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.9%
Cap. Spend. - 3 Yr. Gr. Rate 4.8%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 2.9%
Total Debt to Equity 10.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 7.8%
Return On Total Capital 13.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.4%
Return On Equity 15.3%
Return On Equity - 3 Yr. Avg. 15.8%
Asset Turnover 2
Profitability Ratios
Gross Margin 22.6%
Gross Margin - 3 Yr. Avg. 21.9%
EBITDA Margin 7.4%
EBITDA Margin - 3 Yr. Avg. 7.7%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 6.5%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 3.8%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 40.7%
Eff/ Tax Rate - 3 Yr. Avg. 40.8%
Payout Ratio 0%

PLUS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PLUS stock intrinsic value calculation we used $1411 million for the last fiscal year's total revenue generated by ePlus inc.. The default revenue input number comes from 0001 income statement of ePlus 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 PLUS stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for PLUS is calculated based on our internal credit rating of ePlus 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 ePlus 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 PLUS stock the variable cost ratio is equal to 93.4%.

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 PLUS 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 106.2% for ePlus inc..

Corporate tax rate of 27% is the nominal tax rate for ePlus 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 PLUS 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 PLUS are equal to 4%.

Life of production assets of 6.1 years is the average useful life of capital assets used in ePlus 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 PLUS is equal to 6.9%. 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 - $372.603 million for ePlus 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 13.621 million for ePlus 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 ePlus inc. at the current share price and the inputted number of shares is $1.2 billion.

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