Intrinsic value of Sykes Enterprises, Incorporated - SYKE

Previous Close

$27.07

  Intrinsic Value

$22.24

stock screener

  Rating & Target

hold

-18%

Previous close

$27.07

 
Intrinsic value

$22.24

 
Up/down potential

-18%

 
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 1.2

 

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
  1,659
  1,697
  1,740
  1,789
  1,843
  1,903
  1,968
  2,038
  2,114
  2,195
  2,281
  2,374
  2,473
  2,577
  2,689
  2,806
  2,931
  3,063
  3,202
  3,349
  3,505
  3,668
  3,841
  4,023
  4,214
  4,416
  4,628
  4,852
  5,087
  5,334
Variable operating expenses, $m
  1,566
  1,601
  1,641
  1,686
  1,736
  1,790
  1,850
  1,914
  1,983
  2,057
  2,089
  2,174
  2,264
  2,360
  2,462
  2,570
  2,684
  2,805
  2,932
  3,067
  3,209
  3,359
  3,517
  3,684
  3,859
  4,044
  4,238
  4,442
  4,658
  4,884
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
  1,566
  1,601
  1,641
  1,686
  1,736
  1,790
  1,850
  1,914
  1,983
  2,057
  2,089
  2,174
  2,264
  2,360
  2,462
  2,570
  2,684
  2,805
  2,932
  3,067
  3,209
  3,359
  3,517
  3,684
  3,859
  4,044
  4,238
  4,442
  4,658
  4,884
Operating income, $m
  92
  95
  99
  103
  108
  113
  118
  124
  131
  137
  192
  200
  209
  217
  227
  237
  247
  258
  270
  282
  296
  309
  324
  339
  355
  372
  390
  409
  429
  450
EBITDA, $m
  186
  191
  196
  201
  207
  214
  221
  229
  237
  247
  256
  267
  278
  290
  302
  315
  329
  344
  360
  376
  394
  412
  432
  452
  474
  496
  520
  545
  572
  599
Interest expense (income), $m
  4
  6
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  38
  40
  43
  45
Earnings before tax, $m
  87
  89
  93
  96
  100
  105
  110
  115
  120
  126
  180
  187
  194
  202
  210
  219
  228
  238
  248
  259
  270
  282
  295
  308
  322
  337
  353
  369
  386
  405
Tax expense, $m
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  49
  51
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
Net income, $m
  63
  65
  68
  70
  73
  76
  80
  84
  88
  92
  132
  137
  142
  148
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  258
  269
  282
  295

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
  1,196
  1,223
  1,255
  1,290
  1,329
  1,372
  1,419
  1,469
  1,524
  1,582
  1,645
  1,712
  1,783
  1,858
  1,938
  2,023
  2,113
  2,208
  2,309
  2,415
  2,527
  2,645
  2,769
  2,900
  3,039
  3,184
  3,337
  3,498
  3,667
  3,846
Adjusted assets (=assets-cash), $m
  1,196
  1,223
  1,255
  1,290
  1,329
  1,372
  1,419
  1,469
  1,524
  1,582
  1,645
  1,712
  1,783
  1,858
  1,938
  2,023
  2,113
  2,208
  2,309
  2,415
  2,527
  2,645
  2,769
  2,900
  3,039
  3,184
  3,337
  3,498
  3,667
  3,846
Revenue / Adjusted assets
  1.387
  1.388
  1.386
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.388
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
Average production assets, $m
  376
  385
  395
  406
  418
  432
  447
  463
  480
  498
  518
  539
  561
  585
  610
  637
  665
  695
  727
  760
  796
  833
  872
  913
  957
  1,002
  1,051
  1,101
  1,155
  1,211
Working capital, $m
  206
  210
  216
  222
  229
  236
  244
  253
  262
  272
  283
  294
  307
  320
  333
  348
  363
  380
  397
  415
  435
  455
  476
  499
  523
  548
  574
  602
  631
  661
Total debt, $m
  109
  118
  127
  137
  149
  161
  175
  190
  206
  223
  242
  262
  283
  305
  328
  354
  380
  408
  438
  469
  502
  537
  574
  612
  653
  696
  741
  789
  839
  891
Total liabilities, $m
  353
  361
  370
  381
  392
  405
  419
  433
  450
  467
  485
  505
  526
  548
  572
  597
  623
  651
  681
  712
  745
  780
  817
  856
  896
  939
  984
  1,032
  1,082
  1,134
Total equity, $m
  843
  862
  885
  909
  937
  967
  1,000
  1,036
  1,074
  1,116
  1,160
  1,207
  1,257
  1,310
  1,367
  1,426
  1,490
  1,557
  1,628
  1,703
  1,781
  1,865
  1,952
  2,045
  2,142
  2,245
  2,353
  2,466
  2,585
  2,711
Total liabilities and equity, $m
  1,196
  1,223
  1,255
  1,290
  1,329
  1,372
  1,419
  1,469
  1,524
  1,583
  1,645
  1,712
  1,783
  1,858
  1,939
  2,023
  2,113
  2,208
  2,309
  2,415
  2,526
  2,645
  2,769
  2,901
  3,038
  3,184
  3,337
  3,498
  3,667
  3,845
Debt-to-equity ratio
  0.130
  0.140
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.210
  0.220
  0.220
  0.230
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
Adjusted equity ratio
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  63
  65
  68
  70
  73
  76
  80
  84
  88
  92
  132
  137
  142
  148
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  258
  269
  282
  295
Depreciation, amort., depletion, $m
  94
  95
  96
  98
  99
  101
  103
  105
  107
  109
  64
  67
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  149
Funds from operations, $m
  157
  161
  164
  168
  173
  178
  183
  189
  195
  201
  196
  203
  211
  220
  229
  238
  249
  259
  271
  283
  295
  309
  323
  338
  353
  370
  387
  405
  425
  445
Change in working capital, $m
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
Cash from operations, $m
  153
  156
  159
  162
  166
  170
  175
  180
  185
  191
  185
  192
  199
  207
  215
  224
  233
  243
  254
  265
  276
  289
  302
  315
  330
  345
  361
  378
  395
  414
Maintenance CAPEX, $m
  -46
  -46
  -48
  -49
  -50
  -52
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -143
New CAPEX, $m
  -7
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
Cash from investing activities, $m
  -53
  -55
  -58
  -60
  -62
  -66
  -68
  -71
  -74
  -77
  -82
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -118
  -123
  -129
  -135
  -142
  -149
  -156
  -164
  -172
  -181
  -189
  -199
Free cash flow, $m
  101
  101
  101
  102
  103
  105
  107
  109
  111
  114
  104
  107
  110
  114
  118
  122
  126
  131
  136
  141
  147
  153
  160
  166
  173
  181
  189
  197
  206
  215
Issuance/(repayment) of debt, $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
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  
  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
Total cash flow (excl. dividends), $m
  108
  109
  111
  113
  115
  118
  121
  124
  127
  131
  122
  126
  131
  136
  141
  147
  153
  159
  166
  173
  180
  188
  196
  205
  214
  224
  234
  245
  256
  268
Retained Cash Flow (-), $m
  -16
  -19
  -22
  -25
  -28
  -30
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -108
  -114
  -119
  -126
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
  92
  89
  88
  88
  87
  87
  88
  88
  89
  90
  78
  79
  81
  83
  85
  87
  89
  92
  95
  98
  101
  105
  109
  113
  117
  121
  126
  131
  137
  142
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
  88
  82
  77
  72
  68
  63
  59
  55
  51
  47
  37
  34
  31
  28
  25
  22
  19
  17
  15
  12
  10
  9
  7
  6
  5
  4
  3
  2
  1
  1
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, Incorporated (SYKE)

Valuation Ratios
P/E Ratio 18.6
Price to Sales 0.8
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 21.7
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 $1626 million for the last fiscal year's total revenue generated by Sykes Enterprises, Incorporated. The default revenue input number comes from 0001 income statement of Sykes Enterprises, Incorporated. 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 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 SYKE is calculated based on our internal credit rating of Sykes Enterprises, Incorporated, 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, Incorporated.
    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 94.5%.

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 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, Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Sykes Enterprises, Incorporated. 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 22.7%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Sykes Enterprises, Incorporated 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 12.4%. 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 - $826.609 million for Sykes Enterprises, Incorporated - 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 42.807 million for Sykes Enterprises, Incorporated 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, Incorporated at the current share price and the inputted number of shares is $1.2 billion.

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