Intrinsic value of CPI Card Group - PMTS

Previous Close

$2.99

  Intrinsic Value

$7.85

stock screener

  Rating & Target

str. buy

+162%

Previous close

$2.99

 
Intrinsic value

$7.85

 
Up/down potential

+162%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as PMTS.

We calculate the intrinsic value of PMTS 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, %
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.80
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
Revenue, $m
  286
  318
  352
  388
  426
  465
  506
  548
  592
  638
  686
  736
  787
  841
  896
  954
  1,015
  1,077
  1,143
  1,211
  1,282
  1,356
  1,433
  1,514
  1,598
  1,686
  1,778
  1,874
  1,975
  2,080
Variable operating expenses, $m
  50
  55
  60
  65
  71
  77
  82
  89
  95
  102
  100
  107
  115
  123
  131
  139
  148
  157
  167
  176
  187
  198
  209
  221
  233
  246
  259
  273
  288
  303
Fixed operating expenses, $m
  234
  239
  244
  250
  255
  261
  267
  273
  279
  285
  291
  297
  304
  311
  317
  324
  332
  339
  346
  354
  362
  370
  378
  386
  395
  403
  412
  421
  430
  440
Total operating expenses, $m
  284
  294
  304
  315
  326
  338
  349
  362
  374
  387
  391
  404
  419
  434
  448
  463
  480
  496
  513
  530
  549
  568
  587
  607
  628
  649
  671
  694
  718
  743
Operating income, $m
  1
  24
  48
  73
  100
  128
  157
  187
  219
  252
  295
  331
  369
  408
  448
  491
  535
  581
  630
  680
  733
  789
  846
  907
  971
  1,037
  1,107
  1,180
  1,257
  1,337
EBITDA, $m
  23
  48
  73
  100
  128
  158
  189
  221
  255
  290
  327
  365
  405
  447
  490
  535
  583
  632
  683
  737
  793
  852
  913
  978
  1,045
  1,116
  1,190
  1,268
  1,349
  1,435
Interest expense (income), $m
  15
  21
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
  38
  41
  44
  48
  51
  54
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
Earnings before tax, $m
  -20
  11
  33
  57
  81
  107
  134
  162
  191
  222
  262
  295
  330
  366
  404
  443
  484
  527
  572
  619
  668
  719
  773
  829
  888
  949
  1,014
  1,082
  1,153
  1,228
Tax expense, $m
  0
  3
  9
  15
  22
  29
  36
  44
  52
  60
  71
  80
  89
  99
  109
  120
  131
  142
  154
  167
  180
  194
  209
  224
  240
  256
  274
  292
  311
  332
Net income, $m
  -20
  8
  24
  41
  59
  78
  98
  118
  139
  162
  191
  216
  241
  267
  295
  324
  353
  385
  417
  452
  487
  525
  564
  605
  648
  693
  740
  790
  842
  897

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
  262
  292
  323
  356
  391
  427
  464
  503
  543
  586
  629
  675
  722
  771
  822
  876
  931
  988
  1,048
  1,111
  1,176
  1,244
  1,315
  1,389
  1,466
  1,547
  1,631
  1,720
  1,812
  1,909
Adjusted assets (=assets-cash), $m
  262
  292
  323
  356
  391
  427
  464
  503
  543
  586
  629
  675
  722
  771
  822
  876
  931
  988
  1,048
  1,111
  1,176
  1,244
  1,315
  1,389
  1,466
  1,547
  1,631
  1,720
  1,812
  1,909
Revenue / Adjusted assets
  1.092
  1.089
  1.090
  1.090
  1.090
  1.089
  1.091
  1.089
  1.090
  1.089
  1.091
  1.090
  1.090
  1.091
  1.090
  1.089
  1.090
  1.090
  1.091
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
Average production assets, $m
  112
  125
  139
  153
  167
  183
  199
  215
  233
  251
  270
  289
  309
  330
  352
  375
  399
  423
  449
  476
  504
  533
  563
  595
  628
  663
  699
  737
  776
  818
Working capital, $m
  49
  55
  61
  67
  73
  80
  87
  94
  102
  110
  118
  127
  135
  145
  154
  164
  175
  185
  197
  208
  220
  233
  246
  260
  275
  290
  306
  322
  340
  358
Total debt, $m
  186
  213
  241
  271
  302
  334
  368
  403
  439
  477
  517
  558
  600
  644
  690
  738
  788
  840
  894
  950
  1,009
  1,070
  1,134
  1,200
  1,270
  1,342
  1,418
  1,498
  1,581
  1,668
Total liabilities, $m
  236
  263
  291
  321
  352
  384
  418
  453
  489
  527
  566
  607
  650
  694
  740
  788
  838
  890
  943
  1,000
  1,058
  1,119
  1,183
  1,250
  1,319
  1,392
  1,468
  1,548
  1,631
  1,718
Total equity, $m
  26
  29
  32
  36
  39
  43
  46
  50
  54
  59
  63
  67
  72
  77
  82
  88
  93
  99
  105
  111
  118
  124
  131
  139
  147
  155
  163
  172
  181
  191
Total liabilities and equity, $m
  262
  292
  323
  357
  391
  427
  464
  503
  543
  586
  629
  674
  722
  771
  822
  876
  931
  989
  1,048
  1,111
  1,176
  1,243
  1,314
  1,389
  1,466
  1,547
  1,631
  1,720
  1,812
  1,909
Debt-to-equity ratio
  7.100
  7.300
  7.460
  7.600
  7.730
  7.830
  7.930
  8.010
  8.090
  8.150
  8.210
  8.260
  8.310
  8.360
  8.400
  8.430
  8.470
  8.500
  8.530
  8.550
  8.580
  8.600
  8.620
  8.640
  8.660
  8.680
  8.700
  8.710
  8.730
  8.740
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -20
  8
  24
  41
  59
  78
  98
  118
  139
  162
  191
  216
  241
  267
  295
  324
  353
  385
  417
  452
  487
  525
  564
  605
  648
  693
  740
  790
  842
  897
Depreciation, amort., depletion, $m
  22
  24
  25
  27
  29
  30
  32
  34
  36
  39
  32
  34
  37
  39
  42
  45
  47
  50
  53
  57
  60
  63
  67
  71
  75
  79
  83
  88
  92
  97
Funds from operations, $m
  2
  32
  49
  68
  88
  108
  130
  152
  176
  200
  223
  250
  278
  307
  337
  368
  401
  435
  471
  508
  547
  588
  631
  676
  723
  772
  824
  878
  934
  994
Change in working capital, $m
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
Cash from operations, $m
  -3
  26
  44
  62
  81
  102
  123
  145
  168
  192
  215
  242
  269
  297
  327
  358
  391
  424
  460
  497
  535
  576
  618
  662
  708
  757
  808
  861
  917
  976
Maintenance CAPEX, $m
  -12
  -13
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -88
  -92
New CAPEX, $m
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
Cash from investing activities, $m
  -24
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -43
  -46
  -49
  -51
  -54
  -58
  -61
  -65
  -69
  -72
  -76
  -80
  -85
  -89
  -93
  -99
  -104
  -110
  -115
  -121
  -128
  -133
Free cash flow, $m
  -27
  0
  15
  31
  48
  66
  85
  105
  125
  147
  167
  190
  214
  240
  266
  294
  322
  352
  384
  416
  451
  486
  524
  563
  604
  647
  693
  740
  790
  842
Issuance/(repayment) of debt, $m
  -118
  27
  28
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
Issuance/(repurchase) of shares, $m
  165
  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  
  47
  27
  28
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
Total cash flow (excl. dividends), $m
  21
  27
  43
  61
  79
  99
  119
  140
  162
  185
  206
  231
  257
  284
  312
  341
  372
  404
  438
  473
  509
  548
  588
  630
  674
  720
  769
  820
  873
  929
Retained Cash Flow (-), $m
  -165
  -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
  -10
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
  -144
  24
  40
  58
  76
  95
  115
  136
  158
  180
  202
  226
  252
  279
  307
  336
  367
  398
  432
  466
  503
  541
  581
  622
  666
  712
  760
  811
  864
  919
Discount rate, %
  15.70
  16.49
  17.31
  18.17
  19.08
  20.04
  21.04
  22.09
  23.20
  24.36
  25.57
  26.85
  28.19
  29.60
  31.08
  32.64
  34.27
  35.98
  37.78
  39.67
  41.66
  43.74
  45.93
  48.22
  50.63
  53.17
  55.82
  58.62
  61.55
  64.62
PV of cash for distribution, $m
  -125
  18
  25
  30
  32
  32
  30
  28
  24
  20
  16
  13
  10
  7
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

CPI Card Group Inc., formerly CPI Holdings I, Inc., provides Financial Payment Card solutions in North America. The Company is engaged in the design, production, data personalization, packaging and fulfillment of Financial Payment Cards, which it defines as credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands in the United States, Europe and Canada. It is also engaged in the design, production, data personalization, packaging and fulfillment of retail gift and loyalty cards. Its segments include U.S. Debit and Credit, which produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States; U.S. Prepaid Debit, which provides integrated card services to Prepaid Debit Card issuers in the United States; U.K. Limited, which produces retail cards for customers in the United Kingdom and continental Europe, and Other, which has operations in Ontario, Canada and Petersfield, United Kingdom.

FINANCIAL RATIOS  of  CPI Card Group (PMTS)

Valuation Ratios
P/E Ratio 6.6
Price to Sales 0.1
Price to Book -0.3
Price to Tangible Book
Price to Cash Flow 0.6
Price to Free Cash Flow 0.7
Growth Rates
Sales Growth Rate -17.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.3%
Cap. Spend. - 3 Yr. Gr. Rate 9.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity -317.9%
Total Debt to Equity -317.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 9%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity -5.5%
Return On Equity - 3 Yr. Avg. -27.7%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 33%
Gross Margin - 3 Yr. Avg. 33.6%
EBITDA Margin 13.3%
EBITDA Margin - 3 Yr. Avg. 17.3%
Operating Margin 9.4%
Oper. Margin - 3 Yr. Avg. 13.4%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 1.6%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 44.4%
Eff/ Tax Rate - 3 Yr. Avg. 39.9%
Payout Ratio 160%

PMTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PMTS stock intrinsic value calculation we used $254.862 million for the last fiscal year's total revenue generated by CPI Card Group. The default revenue input number comes from 0001 income statement of CPI Card Group. 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 PMTS stock valuation model: a) initial revenue growth rate of 12.1% 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 15.7%, whose default value for PMTS is calculated based on our internal credit rating of CPI Card Group, 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 CPI Card Group.
    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 PMTS stock the variable cost ratio is equal to 18%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $229 million in the base year in the intrinsic value calculation for PMTS 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 6.9% for CPI Card Group.

Corporate tax rate of 27% is the nominal tax rate for CPI Card Group. 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 PMTS 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 PMTS are equal to 39.3%.

Life of production assets of 8.4 years is the average useful life of capital assets used in CPI Card Group 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 PMTS is equal to 17.2%. 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 - $-119.574 million for CPI Card Group - 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 11.16 million for CPI Card Group 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 CPI Card Group at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ CPI Card Group Inc. Reports Third Quarter 2018 Results   [Nov-07-18 07:30AM  Business Wire]
▶ CPI Card Group Renews Agreement with PSCU   [Oct-10-18 09:00AM  Business Wire]
▶ CPI Card Group Inc. Reports Second Quarter 2018 Results   [Aug-09-18 08:00AM  Business Wire]
▶ Company Profile for CPI Card Group   [May-11-18 10:40AM  Business Wire]
▶ CPI Card Group Inc. Reports First Quarter 2018 Results   [May-08-18 04:10PM  Business Wire]
▶ CPI Card Group Announces Transition of CFO   [May-02-18 04:10PM  Business Wire]
▶ CPI Card Groups Barry Mosteller Appointed ICMA President   [Apr-25-18 02:00PM  Business Wire]
▶ A Look At The Fair Value Of CPI Card Group Inc (NASDAQ:PMTS)   [Apr-10-18 06:55PM  Simply Wall St.]
▶ What Is CPI Card Group Incs (NASDAQ:PMTS) Share Price Doing?   [Mar-19-18 11:10AM  Simply Wall St.]
▶ Colorado chip-card maker in reverse stock split to stay on Nasdaq exchange   [Dec-21-17 12:55PM  American City Business Journals]
▶ CPI Card Group Announces Reverse Stock Split   [Dec-19-17 08:00AM  Business Wire]
▶ CPI Card Group Inc. Amended Omnibus Incentive Plan   [Nov-24-17 04:10PM  Business Wire]
▶ CPI Card reports 3Q loss   [Nov-07-17 06:42PM  Associated Press]
▶ CPI Card Group Reaches Settlement in Patent Litigation   [Sep-29-17 04:11PM  Business Wire]
▶ CPI Card reports 2Q loss   [Aug-03-17 05:39PM  Associated Press]
▶ CPI Card reports 2Q loss   [05:05AM  Associated Press]
▶ IIROC Trade Halt - CPI Card Group Inc.   [Aug-02-17 04:26PM  Newsfile]
▶ ETFs with exposure to CPI Card Group, Inc. : May 22, 2017   [May-22-17 02:01PM  Capital Cube]
▶ ETFs with exposure to CPI Card Group, Inc. : May 9, 2017   [May-09-17 04:57PM  Capital Cube]

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