Intrinsic value of Sykes Enterprises - SYKE

Previous Close

$25.67

  Intrinsic Value

$28.65

stock screener

  Rating & Target

hold

+12%

Previous close

$25.67

 
Intrinsic value

$28.65

 
Up/down potential

+12%

 
Rating

hold

We calculate the intrinsic value of SYKE 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 1.1

 

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, %
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.11
  5.09
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
Revenue, $m
  1,676
  1,771
  1,869
  1,972
  2,080
  2,193
  2,310
  2,434
  2,563
  2,698
  2,839
  2,987
  3,143
  3,305
  3,476
  3,655
  3,842
  4,039
  4,245
  4,461
  4,688
  4,926
  5,176
  5,438
  5,713
  6,001
  6,304
  6,622
  6,956
  7,306
Variable operating expenses, $m
  1,568
  1,654
  1,744
  1,838
  1,936
  2,039
  2,146
  2,258
  2,376
  2,499
  2,587
  2,722
  2,864
  3,012
  3,167
  3,330
  3,501
  3,680
  3,868
  4,065
  4,272
  4,489
  4,716
  4,955
  5,206
  5,468
  5,744
  6,034
  6,338
  6,657
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
  1,568
  1,654
  1,744
  1,838
  1,936
  2,039
  2,146
  2,258
  2,376
  2,499
  2,587
  2,722
  2,864
  3,012
  3,167
  3,330
  3,501
  3,680
  3,868
  4,065
  4,272
  4,489
  4,716
  4,955
  5,206
  5,468
  5,744
  6,034
  6,338
  6,657
Operating income, $m
  108
  116
  125
  134
  144
  154
  164
  175
  187
  199
  252
  265
  279
  294
  309
  325
  341
  359
  377
  396
  416
  438
  460
  483
  507
  533
  560
  588
  618
  649
EBITDA, $m
  201
  212
  224
  236
  249
  263
  277
  292
  307
  323
  340
  358
  377
  396
  417
  438
  461
  484
  509
  535
  562
  591
  621
  652
  685
  720
  756
  794
  834
  876
Interest expense (income), $m
  4
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  75
  80
  84
  89
  95
  100
  106
  112
Earnings before tax, $m
  93
  100
  107
  114
  122
  130
  138
  147
  157
  166
  217
  228
  239
  251
  263
  276
  289
  303
  318
  333
  350
  367
  385
  403
  423
  444
  465
  488
  512
  537
Tax expense, $m
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
  104
  109
  114
  120
  126
  132
  138
  145
Net income, $m
  68
  73
  78
  83
  89
  95
  101
  108
  114
  121
  159
  166
  174
  183
  192
  201
  211
  221
  232
  243
  255
  268
  281
  294
  309
  324
  340
  356
  374
  392

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
  1,254
  1,324
  1,398
  1,475
  1,556
  1,640
  1,728
  1,820
  1,917
  2,018
  2,124
  2,234
  2,351
  2,472
  2,600
  2,734
  2,874
  3,021
  3,175
  3,337
  3,507
  3,685
  3,871
  4,067
  4,273
  4,489
  4,715
  4,953
  5,202
  5,464
Adjusted assets (=assets-cash), $m
  1,254
  1,324
  1,398
  1,475
  1,556
  1,640
  1,728
  1,820
  1,917
  2,018
  2,124
  2,234
  2,351
  2,472
  2,600
  2,734
  2,874
  3,021
  3,175
  3,337
  3,507
  3,685
  3,871
  4,067
  4,273
  4,489
  4,715
  4,953
  5,202
  5,464
Revenue / Adjusted assets
  1.337
  1.338
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
Average production assets, $m
  386
  407
  430
  454
  478
  504
  531
  560
  589
  620
  653
  687
  723
  760
  799
  841
  884
  929
  976
  1,026
  1,078
  1,133
  1,190
  1,251
  1,314
  1,380
  1,450
  1,523
  1,600
  1,680
Working capital, $m
  191
  202
  213
  225
  237
  250
  263
  277
  292
  308
  324
  341
  358
  377
  396
  417
  438
  460
  484
  509
  534
  562
  590
  620
  651
  684
  719
  755
  793
  833
Total debt, $m
  305
  336
  369
  404
  440
  477
  517
  558
  601
  646
  694
  743
  795
  850
  907
  966
  1,029
  1,095
  1,164
  1,236
  1,312
  1,391
  1,475
  1,562
  1,654
  1,751
  1,852
  1,958
  2,070
  2,187
Total liabilities, $m
  560
  592
  625
  659
  695
  733
  772
  814
  857
  902
  949
  999
  1,051
  1,105
  1,162
  1,222
  1,285
  1,350
  1,419
  1,492
  1,567
  1,647
  1,731
  1,818
  1,910
  2,006
  2,108
  2,214
  2,325
  2,443
Total equity, $m
  693
  732
  773
  816
  860
  907
  956
  1,007
  1,060
  1,116
  1,174
  1,236
  1,300
  1,367
  1,438
  1,512
  1,589
  1,671
  1,756
  1,845
  1,939
  2,038
  2,141
  2,249
  2,363
  2,482
  2,608
  2,739
  2,877
  3,022
Total liabilities and equity, $m
  1,253
  1,324
  1,398
  1,475
  1,555
  1,640
  1,728
  1,821
  1,917
  2,018
  2,123
  2,235
  2,351
  2,472
  2,600
  2,734
  2,874
  3,021
  3,175
  3,337
  3,506
  3,685
  3,872
  4,067
  4,273
  4,488
  4,716
  4,953
  5,202
  5,465
Debt-to-equity ratio
  0.440
  0.460
  0.480
  0.490
  0.510
  0.530
  0.540
  0.550
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.680
  0.690
  0.690
  0.700
  0.710
  0.710
  0.710
  0.720
  0.720
Adjusted equity ratio
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  68
  73
  78
  83
  89
  95
  101
  108
  114
  121
  159
  166
  174
  183
  192
  201
  211
  221
  232
  243
  255
  268
  281
  294
  309
  324
  340
  356
  374
  392
Depreciation, amort., depletion, $m
  93
  96
  99
  102
  106
  109
  113
  117
  121
  125
  88
  93
  98
  103
  108
  114
  119
  126
  132
  139
  146
  153
  161
  169
  178
  187
  196
  206
  216
  227
Funds from operations, $m
  161
  169
  177
  186
  195
  204
  214
  224
  235
  246
  247
  259
  272
  286
  300
  315
  330
  347
  364
  382
  401
  421
  442
  463
  486
  510
  536
  562
  590
  619
Change in working capital, $m
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
Cash from operations, $m
  151
  158
  166
  174
  182
  191
  200
  210
  220
  231
  231
  242
  254
  267
  280
  294
  309
  324
  341
  357
  375
  394
  413
  434
  455
  478
  501
  526
  552
  579
Maintenance CAPEX, $m
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -119
  -126
  -132
  -139
  -146
  -153
  -161
  -169
  -178
  -187
  -196
  -206
  -216
New CAPEX, $m
  -20
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
Cash from investing activities, $m
  -69
  -74
  -78
  -82
  -86
  -91
  -95
  -100
  -106
  -111
  -117
  -122
  -129
  -135
  -142
  -149
  -157
  -164
  -173
  -182
  -191
  -201
  -210
  -221
  -232
  -244
  -257
  -269
  -283
  -297
Free cash flow, $m
  81
  84
  88
  92
  96
  101
  105
  110
  115
  120
  114
  120
  126
  132
  139
  145
  152
  160
  168
  176
  184
  193
  203
  212
  223
  234
  245
  257
  269
  283
Issuance/(repayment) of debt, $m
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
  72
  76
  80
  83
  88
  92
  96
  101
  106
  112
  117
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  
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
  72
  76
  80
  83
  88
  92
  96
  101
  106
  112
  117
Total cash flow (excl. dividends), $m
  112
  116
  121
  127
  132
  138
  145
  151
  158
  165
  162
  170
  178
  186
  196
  205
  215
  226
  237
  248
  260
  273
  286
  300
  315
  330
  346
  363
  381
  400
Retained Cash Flow (-), $m
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -59
  -61
  -64
  -67
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -114
  -119
  -125
  -131
  -138
  -145
Prev. year cash balance distribution, $m
  140
  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
  214
  77
  80
  84
  88
  92
  96
  100
  105
  109
  103
  108
  114
  119
  125
  131
  138
  144
  151
  159
  166
  174
  183
  192
  201
  211
  221
  232
  243
  255
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
  205
  70
  70
  69
  68
  67
  65
  63
  60
  57
  49
  46
  43
  40
  37
  33
  30
  27
  23
  20
  17
  14
  12
  10
  8
  6
  5
  4
  3
  2
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

Sykes Enterprises, Incorporated is engaged in providing outsourced customer contact management solutions and services in the business process outsourcing (BPO) arena on a global basis. The Company has operations in two segments: the Americas, which includes the United States, Canada, Latin America, Australia and the Asia Pacific Rim, and EMEA, which includes Europe, the Middle East and Africa. The Company provides its service to clients from its locations in the United States, Canada, Latin America, Australia, the Asia Pacific Rim, Europe and Africa. It serves a range of clients, including medium-sized businesses and public institutions, which span the communications, financial services, technology/consumer, transportation and leisure, healthcare and other industries. Its Americas and EMEA groups primarily provide customer engagement services. The Company's outsourced customer contact management services include customer care, technical support and customer acquisition.

FINANCIAL RATIOS  of  Sykes Enterprises (SYKE)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 0.7
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 20.6
Growth Rates
Sales Growth Rate 13.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 56%
Cap. Spend. - 3 Yr. Gr. Rate 5.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 36.8%
Total Debt to Equity 36.8%
Interest Coverage 23
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.1%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 34.3%
EBITDA Margin 11.1%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. 6.5%
Pre-Tax Margin 6.1%
Pre-Tax Margin - 3 Yr. Avg. 6.3%
Net Profit Margin 4.2%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 30.3%
Eff/ Tax Rate - 3 Yr. Avg. 26.1%
Payout Ratio 0%

SYKE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SYKE stock intrinsic value calculation we used $1586.008 million for the last fiscal year's total revenue generated by Sykes Enterprises. The default revenue input number comes from 0001 income statement of Sykes Enterprises. 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 SYKE stock valuation model: a) initial revenue growth rate of 5.7% 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 SYKE is calculated based on our internal credit rating of Sykes Enterprises, 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 Sykes Enterprises.
    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 SYKE stock the variable cost ratio is equal to 93.7%.

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 SYKE 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 Sykes Enterprises.

Corporate tax rate of 27% is the nominal tax rate for Sykes Enterprises. 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 SYKE 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 SYKE are equal to 23%.

Life of production assets of 7.4 years is the average useful life of capital assets used in Sykes Enterprises 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 SYKE 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 - $796.479 million for Sykes Enterprises - 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 42.821 million for Sykes Enterprises 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 Sykes Enterprises at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ Tampa Bay Rays 2020 set to provide an update on progress this week   [06:52AM  American City Business Journals]
▶ Sykes: 3Q Earnings Snapshot   [07:24PM  Associated Press]
▶ Lightning, Rays and Buccaneers throw their weight behind transportation referendum   [Oct-05-18 03:02PM  American City Business Journals]
▶ Sykes: 2Q Earnings Snapshot   [06:42PM  Associated Press]
▶ Sykes Enterprises laying off hundreds in North Carolina   [May-30-18 02:13PM  American City Business Journals]
▶ Sykes: 1Q Earnings Snapshot   [May-07-18 04:43PM  Associated Press]
▶ Sykes CEO got a pay hike in 2017   [Apr-23-18 06:37AM  American City Business Journals]
▶ Sykes Enterprises, Incorporated to Host Earnings Call   [Feb-27-18 08:45AM  ACCESSWIRE]
▶ Sykes reports 4Q loss   [05:01AM  Associated Press]
▶ Sykes tops Street 3Q forecasts   [Nov-06-17 06:49PM  Associated Press]
▶ Sykes tops 2Q profit forecasts   [Aug-07-17 10:47PM  Associated Press]
▶ Sykes tops Street 1Q forecasts   [May-08-17 05:52PM  Associated Press]
▶ Sykes CEO pay squeezed in 2016   [Apr-21-17 03:01PM  American City Business Journals]

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