Intrinsic value of SEI Investments Company - SEIC

Previous Close

$50.36

  Intrinsic Value

$33.97

stock screener

  Rating & Target

sell

-33%

Previous close

$50.36

 
Intrinsic value

$33.97

 
Up/down potential

-33%

 
Rating

sell

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

We calculate the intrinsic value of SEIC 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 7.7

 

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
  1,656
  1,695
  1,738
  1,787
  1,841
  1,901
  1,965
  2,035
  2,111
  2,192
  2,279
  2,371
  2,470
  2,574
  2,685
  2,803
  2,927
  3,059
  3,198
  3,345
  3,500
  3,664
  3,836
  4,018
  4,209
  4,411
  4,623
  4,846
  5,080
  5,327
Variable operating expenses, $m
  892
  912
  934
  959
  987
  1,018
  1,051
  1,087
  1,126
  1,167
  1,171
  1,219
  1,269
  1,323
  1,380
  1,441
  1,505
  1,572
  1,644
  1,720
  1,799
  1,883
  1,972
  2,065
  2,164
  2,267
  2,376
  2,491
  2,611
  2,738
Fixed operating expenses, $m
  320
  327
  334
  341
  349
  357
  365
  373
  381
  389
  398
  406
  415
  424
  434
  443
  453
  463
  473
  484
  494
  505
  516
  528
  539
  551
  563
  576
  588
  601
Total operating expenses, $m
  1,212
  1,239
  1,268
  1,300
  1,336
  1,375
  1,416
  1,460
  1,507
  1,556
  1,569
  1,625
  1,684
  1,747
  1,814
  1,884
  1,958
  2,035
  2,117
  2,204
  2,293
  2,388
  2,488
  2,593
  2,703
  2,818
  2,939
  3,067
  3,199
  3,339
Operating income, $m
  445
  456
  470
  486
  505
  526
  550
  576
  605
  636
  710
  746
  785
  827
  871
  919
  970
  1,024
  1,081
  1,142
  1,207
  1,275
  1,348
  1,425
  1,506
  1,592
  1,683
  1,779
  1,881
  1,988
EBITDA, $m
  536
  548
  564
  581
  602
  625
  650
  679
  709
  743
  779
  818
  860
  905
  953
  1,004
  1,059
  1,117
  1,178
  1,244
  1,313
  1,387
  1,465
  1,547
  1,634
  1,727
  1,824
  1,927
  2,035
  2,150
Interest expense (income), $m
  1
  0
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  41
  44
Earnings before tax, $m
  445
  456
  469
  485
  503
  524
  547
  572
  599
  629
  703
  738
  775
  816
  859
  905
  955
  1,007
  1,063
  1,122
  1,185
  1,252
  1,322
  1,397
  1,476
  1,560
  1,648
  1,742
  1,840
  1,944
Tax expense, $m
  120
  123
  127
  131
  136
  141
  148
  154
  162
  170
  190
  199
  209
  220
  232
  244
  258
  272
  287
  303
  320
  338
  357
  377
  399
  421
  445
  470
  497
  525
Net income, $m
  325
  333
  342
  354
  367
  382
  399
  417
  438
  460
  513
  539
  566
  596
  627
  661
  697
  735
  776
  819
  865
  914
  965
  1,020
  1,078
  1,139
  1,203
  1,271
  1,343
  1,419

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
  1,509
  1,543
  1,583
  1,628
  1,677
  1,731
  1,790
  1,854
  1,923
  1,996
  2,075
  2,159
  2,249
  2,344
  2,446
  2,553
  2,666
  2,786
  2,913
  3,047
  3,188
  3,337
  3,494
  3,659
  3,834
  4,017
  4,210
  4,413
  4,627
  4,852
Adjusted assets (=assets-cash), $m
  1,509
  1,543
  1,583
  1,628
  1,677
  1,731
  1,790
  1,854
  1,923
  1,996
  2,075
  2,159
  2,249
  2,344
  2,446
  2,553
  2,666
  2,786
  2,913
  3,047
  3,188
  3,337
  3,494
  3,659
  3,834
  4,017
  4,210
  4,413
  4,627
  4,852
Revenue / Adjusted assets
  1.097
  1.099
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
Average production assets, $m
  353
  361
  370
  381
  392
  405
  419
  434
  450
  467
  485
  505
  526
  548
  572
  597
  624
  652
  681
  713
  746
  780
  817
  856
  897
  939
  985
  1,032
  1,082
  1,135
Working capital, $m
  108
  110
  113
  116
  120
  124
  128
  132
  137
  142
  148
  154
  161
  167
  175
  182
  190
  199
  208
  217
  228
  238
  249
  261
  274
  287
  300
  315
  330
  346
Total debt, $m
  8
  17
  27
  38
  51
  65
  80
  96
  114
  133
  153
  174
  197
  222
  248
  275
  304
  335
  367
  401
  438
  476
  516
  558
  603
  650
  699
  751
  806
  864
Total liabilities, $m
  386
  395
  405
  417
  429
  443
  458
  475
  492
  511
  531
  553
  576
  600
  626
  654
  683
  713
  746
  780
  816
  854
  894
  937
  981
  1,028
  1,078
  1,130
  1,184
  1,242
Total equity, $m
  1,122
  1,148
  1,178
  1,211
  1,248
  1,288
  1,332
  1,379
  1,430
  1,485
  1,544
  1,607
  1,673
  1,744
  1,820
  1,899
  1,984
  2,073
  2,167
  2,267
  2,372
  2,483
  2,599
  2,723
  2,852
  2,989
  3,132
  3,283
  3,442
  3,610
Total liabilities and equity, $m
  1,508
  1,543
  1,583
  1,628
  1,677
  1,731
  1,790
  1,854
  1,922
  1,996
  2,075
  2,160
  2,249
  2,344
  2,446
  2,553
  2,667
  2,786
  2,913
  3,047
  3,188
  3,337
  3,493
  3,660
  3,833
  4,017
  4,210
  4,413
  4,626
  4,852
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
Adjusted equity ratio
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  325
  333
  342
  354
  367
  382
  399
  417
  438
  460
  513
  539
  566
  596
  627
  661
  697
  735
  776
  819
  865
  914
  965
  1,020
  1,078
  1,139
  1,203
  1,271
  1,343
  1,419
Depreciation, amort., depletion, $m
  91
  92
  93
  95
  97
  98
  100
  103
  105
  107
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  107
  111
  117
  122
  128
  134
  141
  147
  155
  162
Funds from operations, $m
  416
  425
  436
  449
  464
  481
  499
  520
  542
  567
  582
  611
  641
  674
  709
  746
  786
  828
  873
  921
  972
  1,025
  1,082
  1,142
  1,206
  1,273
  1,344
  1,419
  1,498
  1,581
Change in working capital, $m
  2
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
Cash from operations, $m
  413
  422
  433
  446
  460
  477
  495
  515
  537
  562
  577
  605
  635
  667
  702
  739
  778
  820
  864
  912
  962
  1,015
  1,071
  1,130
  1,193
  1,260
  1,330
  1,404
  1,483
  1,565
Maintenance CAPEX, $m
  -49
  -50
  -52
  -53
  -54
  -56
  -58
  -60
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -97
  -102
  -107
  -111
  -117
  -122
  -128
  -134
  -141
  -147
  -155
New CAPEX, $m
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
Cash from investing activities, $m
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -128
  -135
  -142
  -148
  -156
  -163
  -171
  -179
  -189
  -197
  -208
Free cash flow, $m
  357
  364
  372
  383
  395
  408
  424
  441
  459
  480
  491
  516
  542
  570
  600
  632
  666
  703
  742
  783
  827
  873
  923
  975
  1,030
  1,089
  1,151
  1,216
  1,285
  1,358
Issuance/(repayment) of debt, $m
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
  58
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  
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
  58
Total cash flow (excl. dividends), $m
  365
  373
  382
  394
  407
  422
  439
  457
  477
  499
  512
  537
  565
  594
  626
  659
  695
  733
  774
  817
  863
  911
  963
  1,017
  1,075
  1,136
  1,200
  1,268
  1,340
  1,416
Retained Cash Flow (-), $m
  -22
  -26
  -30
  -33
  -37
  -40
  -44
  -47
  -51
  -55
  -59
  -63
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -100
  -105
  -111
  -117
  -123
  -130
  -136
  -144
  -151
  -159
  -167
Prev. year cash balance distribution, $m
  493
  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
  835
  347
  353
  361
  370
  382
  395
  410
  426
  444
  453
  475
  498
  523
  550
  580
  611
  644
  680
  718
  758
  801
  846
  894
  945
  999
  1,057
  1,117
  1,181
  1,248
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
  801
  318
  307
  297
  287
  277
  267
  256
  245
  233
  215
  202
  189
  176
  162
  147
  133
  119
  105
  91
  78
  66
  55
  46
  37
  29
  23
  17
  13
  9
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

SEI Investments Company provides investment processing, investment management and investment operations solutions. The Company provides its solutions to financial institutions, financial advisors, institutional investors, investment managers and ultra-high-net-worth families in the United States, Canada, the United Kingdom, continental Europe and various other locations around the world. The Company's segments are Private Banks, Investment Advisors, Institutional Investors, Investment Managers and Investments in New Businesses. The Company's investment management business solutions include investment processing outsourcing solutions for providers of institutional and private-client wealth management services, including banks, trust companies, independent wealth advisors and other financial services firms, and investment management solutions for institutional investors, including retirement plan sponsors, not-for-profit organizations and individual investors.

FINANCIAL RATIOS  of  SEI Investments Company (SEIC)

Valuation Ratios
P/E Ratio 24
Price to Sales 5.7
Price to Book 6.1
Price to Tangible Book
Price to Cash Flow 18.8
Price to Free Cash Flow 23.3
Growth Rates
Sales Growth Rate 5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.8%
Cap. Spend. - 3 Yr. Gr. Rate 7.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 509
Management Effectiveness
Return On Assets 20.7%
Ret/ On Assets - 3 Yr. Avg. 21.1%
Return On Total Capital 25.8%
Ret/ On T. Cap. - 3 Yr. Avg. 26.2%
Return On Equity 25.8%
Return On Equity - 3 Yr. Avg. 26.2%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 79.2%
Gross Margin - 3 Yr. Avg. 78.6%
EBITDA Margin 41.4%
EBITDA Margin - 3 Yr. Avg. 42.5%
Operating Margin 27%
Oper. Margin - 3 Yr. Avg. 27.5%
Pre-Tax Margin 36.2%
Pre-Tax Margin - 3 Yr. Avg. 37.5%
Net Profit Margin 23.8%
Net Profit Margin - 3 Yr. Avg. 24.6%
Effective Tax Rate 34.3%
Eff/ Tax Rate - 3 Yr. Avg. 34.2%
Payout Ratio 25.4%

SEIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SEIC stock intrinsic value calculation we used $1624 million for the last fiscal year's total revenue generated by SEI Investments Company. The default revenue input number comes from 0001 income statement of SEI Investments Company. 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 SEIC 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 SEIC is calculated based on our internal credit rating of SEI Investments Company, 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 SEI Investments Company.
    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 SEIC stock the variable cost ratio is equal to 53.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $313 million in the base year in the intrinsic value calculation for SEIC 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 SEI Investments Company.

Corporate tax rate of 27% is the nominal tax rate for SEI Investments Company. 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 SEIC 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 SEIC are equal to 21.3%.

Life of production assets of 7 years is the average useful life of capital assets used in SEI Investments Company 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 SEIC is equal to 6.5%. 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 - $1593.147 million for SEI Investments Company - 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 153.655 million for SEI Investments Company 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 SEI Investments Company at the current share price and the inputted number of shares is $7.7 billion.

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