Intrinsic value of Startek - SRT

Previous Close

$6.35

  Intrinsic Value

$0.79

stock screener

  Rating & Target

str. sell

-88%

Previous close

$6.35

 
Intrinsic value

$0.79

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of SRT 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, %
  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
  298
  305
  313
  322
  332
  342
  354
  367
  380
  395
  411
  427
  445
  464
  484
  505
  527
  551
  576
  603
  631
  660
  691
  724
  758
  795
  833
  873
  915
  960
Variable operating expenses, $m
  231
  237
  243
  249
  257
  265
  274
  284
  294
  306
  316
  329
  343
  357
  373
  389
  406
  424
  444
  464
  486
  508
  532
  557
  584
  612
  641
  672
  705
  739
Fixed operating expenses, $m
  68
  70
  72
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  104
  106
  108
  111
  113
  115
  118
  121
  123
  126
  129
Total operating expenses, $m
  299
  307
  315
  322
  332
  341
  352
  364
  375
  389
  401
  416
  432
  448
  466
  484
  503
  523
  545
  568
  592
  616
  643
  670
  699
  730
  762
  795
  831
  868
Operating income, $m
  -1
  -1
  -1
  -1
  0
  1
  2
  3
  5
  6
  9
  11
  13
  16
  18
  21
  24
  28
  31
  35
  39
  44
  48
  54
  59
  65
  71
  78
  85
  92
EBITDA, $m
  6
  6
  7
  7
  8
  9
  11
  12
  14
  15
  18
  20
  22
  25
  28
  31
  35
  39
  43
  47
  52
  57
  62
  68
  74
  81
  88
  95
  103
  111
Interest expense (income), $m
  2
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
Earnings before tax, $m
  -3
  -3
  -2
  -2
  -1
  -1
  0
  1
  3
  4
  7
  9
  11
  13
  16
  18
  21
  24
  28
  31
  35
  39
  44
  49
  54
  59
  65
  71
  78
  85
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  11
  12
  13
  15
  16
  18
  19
  21
  23
Net income, $m
  -3
  -3
  -2
  -2
  -1
  -1
  0
  1
  2
  3
  5
  6
  8
  10
  11
  13
  15
  18
  20
  23
  26
  29
  32
  35
  39
  43
  48
  52
  57
  62

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
  98
  100
  103
  105
  109
  112
  116
  120
  125
  129
  135
  140
  146
  152
  159
  165
  173
  181
  189
  197
  207
  216
  226
  237
  248
  260
  273
  286
  300
  314
Adjusted assets (=assets-cash), $m
  98
  100
  103
  105
  109
  112
  116
  120
  125
  129
  135
  140
  146
  152
  159
  165
  173
  181
  189
  197
  207
  216
  226
  237
  248
  260
  273
  286
  300
  314
Revenue / Adjusted assets
  3.041
  3.050
  3.039
  3.067
  3.046
  3.054
  3.052
  3.058
  3.040
  3.062
  3.044
  3.050
  3.048
  3.053
  3.044
  3.061
  3.046
  3.044
  3.048
  3.061
  3.048
  3.056
  3.058
  3.055
  3.056
  3.058
  3.051
  3.052
  3.050
  3.057
Average production assets, $m
  30
  31
  31
  32
  33
  34
  35
  37
  38
  39
  41
  43
  44
  46
  48
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
  92
  96
Working capital, $m
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  86
  91
  95
  100
  104
  109
Total debt, $m
  26
  27
  28
  30
  31
  33
  35
  37
  40
  42
  45
  47
  50
  54
  57
  60
  64
  68
  72
  77
  81
  86
  92
  97
  103
  109
  115
  122
  129
  137
Total liabilities, $m
  50
  51
  52
  54
  56
  57
  59
  61
  64
  66
  69
  72
  74
  78
  81
  85
  88
  92
  96
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  161
Total equity, $m
  48
  49
  50
  52
  53
  55
  57
  59
  61
  63
  66
  68
  71
  74
  78
  81
  85
  88
  92
  97
  101
  106
  111
  116
  122
  127
  133
  140
  147
  154
Total liabilities and equity, $m
  98
  100
  102
  106
  109
  112
  116
  120
  125
  129
  135
  140
  145
  152
  159
  166
  173
  180
  188
  198
  207
  217
  227
  237
  249
  260
  272
  286
  300
  315
Debt-to-equity ratio
  0.540
  0.550
  0.560
  0.580
  0.590
  0.610
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.710
  0.720
  0.730
  0.750
  0.760
  0.770
  0.780
  0.800
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.860
  0.870
  0.880
  0.890
Adjusted equity ratio
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3
  -3
  -2
  -2
  -1
  -1
  0
  1
  2
  3
  5
  6
  8
  10
  11
  13
  15
  18
  20
  23
  26
  29
  32
  35
  39
  43
  48
  52
  57
  62
Depreciation, amort., depletion, $m
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
Funds from operations, $m
  5
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  17
  19
  21
  23
  26
  29
  32
  35
  38
  42
  46
  50
  54
  59
  64
  70
  75
  81
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  4
  4
  4
  5
  6
  6
  7
  8
  9
  11
  12
  13
  15
  17
  19
  21
  23
  26
  29
  32
  35
  39
  42
  46
  50
  55
  60
  65
  70
  76
Maintenance CAPEX, $m
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -17
  -19
  -20
  -21
  -21
  -22
Free cash flow, $m
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  2
  2
  3
  4
  6
  7
  9
  11
  13
  15
  18
  20
  23
  26
  29
  33
  36
  40
  44
  49
  53
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Issuance/(repurchase) of shares, $m
  4
  4
  4
  3
  3
  2
  2
  1
  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  
  5
  5
  5
  4
  5
  4
  4
  3
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Total cash flow (excl. dividends), $m
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  5
  6
  7
  9
  11
  13
  15
  17
  19
  22
  25
  28
  31
  35
  38
  42
  47
  51
  56
  61
Retained Cash Flow (-), $m
  -4
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
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
  -1
  -1
  -1
  -1
  0
  0
  1
  1
  1
  2
  2
  3
  5
  6
  8
  9
  11
  13
  15
  18
  20
  23
  26
  29
  33
  36
  40
  45
  49
  54
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
  -1
  -1
  -1
  -1
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  98.5
  97.0
  95.6
  94.3
  93.2
  92.3
  91.8
  91.4
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3

StarTek, Inc. is a customer engagement business process outsourcing (BPO) services provider, delivering customer care solutions. The Company operates through three segments: Domestic, Nearshore and Offshore. As of December 31, 2016, its Domestic segment included the operations of 13 facilities in the United States and one facility in Canada; its Offshore segment included the operations of four facilities in the Philippines, and its Nearshore segment included the operations of two facilities in Honduras and one facility in Jamaica. The Company's service offerings include customer care, sales support, inbound sales, complex order processing, accounts receivable management, technical and product support, up-sell and cross-sell opportunities, customer intelligence analytics and other industry-specific processes. Its suite of order processing services ranges from enterprise level project management to direct-to-consumer order processing.

FINANCIAL RATIOS  of  Startek (SRT)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow 14.3
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -15%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 11.1%
Total Debt to Equity 75.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -5.9%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -9.6%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -13.9%
Asset Turnover 2.8
Profitability Ratios
Gross Margin 11.7%
Gross Margin - 3 Yr. Avg. 10.7%
EBITDA Margin 4.9%
EBITDA Margin - 3 Yr. Avg. 2.4%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. -2%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. -2.3%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -2.6%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 31.1%
Payout Ratio 0%

SRT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRT stock intrinsic value calculation we used $292.604 million for the last fiscal year's total revenue generated by Startek. The default revenue input number comes from 0001 income statement of Startek. 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 SRT 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 SRT is calculated based on our internal credit rating of Startek, 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 Startek.
    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 SRT stock the variable cost ratio is equal to 77.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $67 million in the base year in the intrinsic value calculation for SRT 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 Startek.

Corporate tax rate of 27% is the nominal tax rate for Startek. 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 SRT 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 SRT are equal to 10%.

Life of production assets of 3.3 years is the average useful life of capital assets used in Startek 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 SRT is equal to 11.4%. 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 - $46.939 million for Startek - 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 36.993 million for Startek 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 Startek at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ StarTek: 3Q Earnings Snapshot   [05:02PM  Associated Press]
▶ STARTEK Reports Quarterly Financial Results   [04:05PM  Business Wire]
▶ Colorado call center company to lay off 186, close office   [Aug-20-18 10:00AM  American City Business Journals]
▶ StarTek: 2Q Earnings Snapshot   [Aug-07-18 07:50PM  Associated Press]
▶ STARTEK Reports Second Quarter 2018 Results   [04:16PM  Business Wire]
▶ StarTek, Inc. to Host Earnings Call   [02:30PM  ACCESSWIRE]
▶ New Strong Sell Stocks for May 30th   [May-30-18 08:31AM  Zacks]
▶ StarTek: 1Q Earnings Snapshot   [May-08-18 06:40PM  Associated Press]
▶ STARTEK Reports First Quarter 2018 Results   [04:05PM  Business Wire]
▶ How Financially Strong Is StarTek Inc (NYSE:SRT)?   [Apr-11-18 09:27PM  Simply Wall St.]
▶ Is It The Right Time To Buy StarTek Inc (NYSE:SRT)?   [Mar-21-18 05:10PM  Simply Wall St.]
▶ Colorado call center company buys stake in Singapore firm   [09:37AM  American City Business Journals]
▶ StarTek reports 4Q loss   [07:15AM  Associated Press]
▶ Call center operator StarTek is laying off hundreds in Colorado   [Feb-08-18 01:15PM  American City Business Journals]
▶ Amazon in deal to acquire big stake in Colorado company for up to $600M   [Jan-25-18 09:15AM  American City Business Journals]
▶ ETFs with exposure to Startek, Inc. : November 20, 2017   [Nov-20-17 01:20PM  Capital Cube]
▶ ETFs with exposure to Startek, Inc. : November 9, 2017   [Nov-09-17 01:14PM  Capital Cube]
▶ StarTek reports 3Q loss   [Nov-08-17 05:18PM  Associated Press]
▶ STARTEK Reports Third Quarter 2017 Results   [04:05PM  Business Wire]
▶ StarTek, Inc. to Host Earnings Call   [11:00AM  ACCESSWIRE]
▶ ETFs with exposure to Startek, Inc. : August 24, 2017   [Aug-24-17 04:09PM  Capital Cube]
▶ StarTek posts 2Q profit   [Aug-09-17 05:06PM  Associated Press]
▶ STARTEK Reports Second Quarter 2017 Results   [04:05PM  Business Wire]
▶ STARTEK Announces Partnership with TriageLogic   [Jul-19-17 04:05PM  Business Wire]
▶ STARTEK Joins Russell 2000 Index   [Jun-27-17 04:05PM  Business Wire]
▶ ETFs with exposure to Startek, Inc. : June 8, 2017   [Jun-08-17 01:57PM  Capital Cube]
▶ Startek, Inc.: Strong price momentum but will it sustain?   [May-12-17 02:32PM  Capital Cube]
▶ StarTek posts 1Q profit   [May-10-17 04:58PM  Associated Press]
▶ STARTEK Reports First Quarter 2017 Results   [04:05PM  Business Wire]
▶ StarTek posts 4Q profit   [04:26PM  Associated Press]

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