Intrinsic value of Sapiens International - SPNS

Previous Close

$10.95

  Intrinsic Value

$23.40

stock screener

  Rating & Target

str. buy

+114%

Previous close

$10.95

 
Intrinsic value

$23.40

 
Up/down potential

+114%

 
Rating

str. buy

We calculate the intrinsic value of SPNS 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 0.5

 

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, %
  24.50
  22.55
  20.80
  19.22
  17.79
  16.51
  15.36
  14.33
  13.39
  12.55
  11.80
  11.12
  10.51
  9.96
  9.46
  9.01
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
Revenue, $m
  335
  411
  496
  591
  697
  812
  936
  1,071
  1,214
  1,366
  1,528
  1,698
  1,876
  2,063
  2,258
  2,461
  2,673
  2,894
  3,123
  3,362
  3,610
  3,867
  4,135
  4,413
  4,702
  5,003
  5,316
  5,643
  5,982
  6,336
Variable operating expenses, $m
  291
  352
  420
  497
  581
  673
  773
  881
  996
  1,118
  1,225
  1,361
  1,504
  1,654
  1,811
  1,974
  2,144
  2,321
  2,505
  2,696
  2,895
  3,101
  3,316
  3,539
  3,771
  4,012
  4,263
  4,525
  4,797
  5,081
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
  291
  352
  420
  497
  581
  673
  773
  881
  996
  1,118
  1,225
  1,361
  1,504
  1,654
  1,811
  1,974
  2,144
  2,321
  2,505
  2,696
  2,895
  3,101
  3,316
  3,539
  3,771
  4,012
  4,263
  4,525
  4,797
  5,081
Operating income, $m
  44
  59
  76
  95
  116
  138
  163
  190
  218
  248
  303
  336
  372
  409
  447
  488
  530
  573
  619
  666
  715
  766
  819
  874
  932
  991
  1,053
  1,118
  1,185
  1,255
EBITDA, $m
  77
  94
  114
  136
  160
  186
  215
  246
  278
  313
  350
  389
  430
  473
  518
  565
  613
  664
  717
  771
  828
  887
  949
  1,012
  1,079
  1,148
  1,220
  1,294
  1,372
  1,454
Interest expense (income), $m
  0
  4
  7
  9
  12
  15
  19
  23
  27
  32
  37
  42
  48
  54
  60
  67
  74
  81
  88
  96
  104
  112
  121
  130
  139
  149
  159
  169
  180
  192
  203
Earnings before tax, $m
  40
  52
  67
  83
  100
  119
  140
  162
  186
  211
  260
  288
  318
  348
  381
  414
  449
  485
  523
  562
  603
  645
  690
  735
  783
  832
  884
  938
  994
  1,052
Tax expense, $m
  11
  14
  18
  22
  27
  32
  38
  44
  50
  57
  70
  78
  86
  94
  103
  112
  121
  131
  141
  152
  163
  174
  186
  199
  211
  225
  239
  253
  268
  284
Net income, $m
  29
  38
  49
  60
  73
  87
  102
  118
  136
  154
  190
  210
  232
  254
  278
  302
  328
  354
  382
  410
  440
  471
  503
  537
  572
  608
  645
  685
  725
  768

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
  464
  569
  687
  819
  965
  1,124
  1,297
  1,483
  1,682
  1,893
  2,116
  2,351
  2,598
  2,857
  3,127
  3,409
  3,703
  4,008
  4,326
  4,656
  5,000
  5,356
  5,727
  6,112
  6,513
  6,930
  7,364
  7,815
  8,286
  8,776
Adjusted assets (=assets-cash), $m
  464
  569
  687
  819
  965
  1,124
  1,297
  1,483
  1,682
  1,893
  2,116
  2,351
  2,598
  2,857
  3,127
  3,409
  3,703
  4,008
  4,326
  4,656
  5,000
  5,356
  5,727
  6,112
  6,513
  6,930
  7,364
  7,815
  8,286
  8,776
Revenue / Adjusted assets
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
Average production assets, $m
  114
  140
  169
  202
  238
  277
  319
  365
  414
  466
  521
  579
  640
  703
  770
  839
  912
  987
  1,065
  1,146
  1,231
  1,319
  1,410
  1,505
  1,603
  1,706
  1,813
  1,924
  2,040
  2,161
Working capital, $m
  -13
  -16
  -20
  -24
  -28
  -32
  -37
  -43
  -49
  -55
  -61
  -68
  -75
  -83
  -90
  -98
  -107
  -116
  -125
  -134
  -144
  -155
  -165
  -177
  -188
  -200
  -213
  -226
  -239
  -253
Total debt, $m
  121
  170
  225
  286
  354
  429
  509
  596
  688
  787
  891
  1,000
  1,115
  1,236
  1,362
  1,493
  1,630
  1,773
  1,921
  2,075
  2,235
  2,401
  2,573
  2,753
  2,940
  3,134
  3,336
  3,547
  3,766
  3,994
Total liabilities, $m
  216
  265
  320
  382
  450
  524
  604
  691
  784
  882
  986
  1,096
  1,211
  1,331
  1,457
  1,589
  1,726
  1,868
  2,016
  2,170
  2,330
  2,496
  2,669
  2,848
  3,035
  3,229
  3,431
  3,642
  3,861
  4,090
Total equity, $m
  248
  304
  367
  437
  515
  600
  693
  792
  898
  1,011
  1,130
  1,256
  1,387
  1,526
  1,670
  1,821
  1,977
  2,140
  2,310
  2,487
  2,670
  2,860
  3,058
  3,264
  3,478
  3,700
  3,932
  4,173
  4,425
  4,686
Total liabilities and equity, $m
  464
  569
  687
  819
  965
  1,124
  1,297
  1,483
  1,682
  1,893
  2,116
  2,352
  2,598
  2,857
  3,127
  3,410
  3,703
  4,008
  4,326
  4,657
  5,000
  5,356
  5,727
  6,112
  6,513
  6,929
  7,363
  7,815
  8,286
  8,776
Debt-to-equity ratio
  0.490
  0.560
  0.610
  0.650
  0.690
  0.710
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.820
  0.820
  0.820
  0.830
  0.830
  0.830
  0.840
  0.840
  0.840
  0.840
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
Adjusted equity ratio
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  29
  38
  49
  60
  73
  87
  102
  118
  136
  154
  190
  210
  232
  254
  278
  302
  328
  354
  382
  410
  440
  471
  503
  537
  572
  608
  645
  685
  725
  768
Depreciation, amort., depletion, $m
  33
  35
  38
  41
  44
  48
  52
  56
  60
  65
  48
  53
  59
  65
  71
  77
  84
  91
  98
  105
  113
  121
  129
  138
  147
  157
  166
  177
  187
  198
Funds from operations, $m
  62
  74
  87
  101
  117
  135
  154
  174
  196
  219
  238
  264
  291
  319
  348
  379
  411
  445
  480
  516
  553
  592
  633
  675
  719
  764
  812
  861
  913
  966
Change in working capital, $m
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
Cash from operations, $m
  65
  77
  90
  105
  122
  139
  159
  180
  202
  225
  244
  270
  298
  326
  356
  387
  420
  454
  489
  525
  563
  602
  643
  686
  730
  776
  824
  874
  926
  980
Maintenance CAPEX, $m
  -8
  -10
  -13
  -16
  -19
  -22
  -25
  -29
  -33
  -38
  -43
  -48
  -53
  -59
  -65
  -71
  -77
  -84
  -91
  -98
  -105
  -113
  -121
  -129
  -138
  -147
  -157
  -166
  -177
  -187
New CAPEX, $m
  -23
  -26
  -29
  -33
  -36
  -39
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -121
Cash from investing activities, $m
  -31
  -36
  -42
  -49
  -55
  -61
  -68
  -75
  -82
  -90
  -98
  -106
  -114
  -123
  -132
  -140
  -149
  -159
  -169
  -179
  -189
  -201
  -212
  -224
  -237
  -250
  -264
  -277
  -293
  -308
Free cash flow, $m
  34
  40
  48
  57
  67
  78
  91
  105
  119
  135
  146
  165
  184
  204
  225
  247
  271
  295
  320
  346
  373
  402
  431
  462
  494
  527
  561
  597
  634
  672
Issuance/(repayment) of debt, $m
  43
  49
  55
  62
  68
  74
  80
  87
  93
  98
  104
  110
  115
  121
  126
  131
  137
  142
  148
  154
  160
  166
  173
  180
  187
  194
  202
  210
  219
  229
Issuance/(repurchase) of shares, $m
  20
  18
  14
  10
  5
  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  
  63
  67
  69
  72
  73
  74
  80
  87
  93
  98
  104
  110
  115
  121
  126
  131
  137
  142
  148
  154
  160
  166
  173
  180
  187
  194
  202
  210
  219
  229
Total cash flow (excl. dividends), $m
  97
  107
  118
  129
  140
  153
  171
  191
  212
  234
  251
  274
  299
  325
  351
  379
  407
  437
  468
  500
  533
  568
  604
  641
  680
  721
  763
  807
  853
  901
Retained Cash Flow (-), $m
  -49
  -56
  -63
  -71
  -78
  -85
  -92
  -99
  -106
  -113
  -119
  -126
  -132
  -138
  -144
  -151
  -157
  -163
  -170
  -176
  -183
  -190
  -198
  -206
  -214
  -223
  -232
  -241
  -251
  -262
Prev. year cash balance distribution, $m
  1
  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
  49
  51
  54
  58
  62
  68
  79
  92
  106
  121
  131
  149
  167
  186
  207
  228
  251
  274
  298
  324
  350
  377
  406
  436
  466
  498
  531
  566
  602
  639
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
  47
  46
  47
  48
  48
  49
  54
  57
  61
  63
  62
  63
  63
  63
  61
  58
  55
  50
  46
  41
  36
  31
  27
  22
  18
  15
  11
  9
  7
  5
Current shareholders' claim on cash, %
  96.4
  94.0
  92.4
  91.4
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1

Sapiens International Corporation N.V. (Sapiens) is a provider of software solutions for the insurance industry, with a focus on the financial services sector. The Company operates in provider of software solutions segment. Its software solutions portfolio consists of Life, Pension, Annuity and Retirement Solutions, including software solutions for the management of a range of products for life, pension, annuity and retirement; Property and Casualty/General Insurance Solutions, including a software suite of solutions, supporting a range of business lines, including personal, commercial and specialty lines, as well as a solution for the management of reinsurance contracts; Sapiens DECISION, which is a business decision management solution, and Technology-Based Solutions, such as Sapiens eMerge. Its services include project delivery and implementation, business and technical consulting related to its products, project and program management, training and user acceptance testing.

FINANCIAL RATIOS  of  Sapiens International (SPNS)

Valuation Ratios
P/E Ratio 28.3
Price to Sales 2.5
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 20.7
Price to Free Cash Flow 33.6
Growth Rates
Sales Growth Rate 16.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.1%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 7.7%
Total Debt to Equity 7.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 9.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.1%
Return On Equity 10.1%
Return On Equity - 3 Yr. Avg. 9.8%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 39.8%
Gross Margin - 3 Yr. Avg. 38.8%
EBITDA Margin 16.2%
EBITDA Margin - 3 Yr. Avg. 16.8%
Operating Margin 11.6%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 11.6%
Pre-Tax Margin - 3 Yr. Avg. 11.5%
Net Profit Margin 8.8%
Net Profit Margin - 3 Yr. Avg. 9.5%
Effective Tax Rate 20%
Eff/ Tax Rate - 3 Yr. Avg. 13.3%
Payout Ratio 52.6%

SPNS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPNS stock intrinsic value calculation we used $269.194 million for the last fiscal year's total revenue generated by Sapiens International. The default revenue input number comes from 0001 income statement of Sapiens 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 SPNS stock valuation model: a) initial revenue growth rate of 24.5% 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 SPNS is calculated based on our internal credit rating of Sapiens 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 Sapiens 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 SPNS stock the variable cost ratio is equal to 88.5%.

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 SPNS 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 Sapiens International.

Corporate tax rate of 27% is the nominal tax rate for Sapiens 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 SPNS 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 SPNS are equal to 34.1%.

Life of production assets of 10.9 years is the average useful life of capital assets used in Sapiens 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 SPNS is equal to -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 - $200.043 million for Sapiens 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 49.779 million for Sapiens 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 Sapiens International at the current share price and the inputted number of shares is $0.5 billion.

RELATED COMPANIES Price Int.Val. Rating
GWRE Guidewire Soft 84.44 13.64  str.sell
EBIX Ebix 50.15 229.30  str.buy
MJCO Majesco 7.72 2.53  str.sell
FISV Fiserv 77.75 41.85  sell
TXT Textron 56.01 44.94  sell

COMPANY NEWS

▶ Sapiens: 3Q Earnings Snapshot   [Nov-07-18 10:34AM  Associated Press]
▶ Sapiens Concludes Its Largest To Date U.S. Client Summit   [Oct-11-18 11:42AM  PR Newswire]
▶ Sapiens DECISION Expands Insurance Technology Offering   [Oct-09-18 07:43AM  PR Newswire]
▶ Sapiens: 2Q Earnings Snapshot   [08:10AM  Associated Press]
▶ U.S. Bank Selects Sapiens DECISION for Home Mortgage   [Jun-20-18 08:25AM  PR Newswire]
▶ Sapiens P&C Wins an XCelent Award   [Jun-11-18 04:18AM  PR Newswire]
▶ Sapiens International Corp. NV to Host Earnings Call   [May-07-18 07:30AM  ACCESSWIRE]
▶ Sapiens: 1Q Earnings Snapshot   [06:22AM  Associated Press]
▶ Sapiens misses 4Q profit forecasts   [Mar-08-18 07:10AM  Associated Press]
▶ Sapiens Expands Its Digital Division   [Jan-03-18 07:08AM  PR Newswire]
▶ Sapiens beats 3Q profit forecasts   [05:02AM  Associated Press]
▶ Sapiens Hosts Global Client Conference in Portugal   [Oct-19-17 08:35AM  PR Newswire]
▶ Sapiens reports 2Q loss   [Aug-07-17 10:39PM  Associated Press]
▶ Sapiens Reports Q2 2017 Financial Results   [01:53AM  PR Newswire]
▶ Sapiens Establishes Local Office in South Africa   [Aug-03-17 05:14AM  PR Newswire]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.