Intrinsic value of Verint Systems Inc. - VRNT

Previous Close

$62.24

  Intrinsic Value

$65.51

stock screener

  Rating & Target

hold

+5%

Previous close

$62.24

 
Intrinsic value

$65.51

 
Up/down potential

+5%

 
Rating

hold

We calculate the intrinsic value of VRNT 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 4.1

 

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, %
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
Revenue, $m
  1,229
  1,327
  1,429
  1,535
  1,645
  1,759
  1,878
  2,001
  2,130
  2,264
  2,403
  2,548
  2,699
  2,857
  3,021
  3,193
  3,372
  3,559
  3,755
  3,959
  4,173
  4,397
  4,631
  4,876
  5,132
  5,401
  5,683
  5,978
  6,287
  6,611
Variable operating expenses, $m
  692
  734
  778
  824
  871
  920
  972
  1,025
  1,080
  1,138
  1,035
  1,098
  1,163
  1,231
  1,302
  1,376
  1,453
  1,534
  1,618
  1,706
  1,798
  1,895
  1,995
  2,101
  2,212
  2,327
  2,449
  2,576
  2,709
  2,849
Fixed operating expenses, $m
  455
  465
  475
  485
  496
  507
  518
  530
  541
  553
  565
  578
  591
  603
  617
  630
  644
  658
  673
  688
  703
  718
  734
  750
  767
  784
  801
  818
  836
  855
Total operating expenses, $m
  1,147
  1,199
  1,253
  1,309
  1,367
  1,427
  1,490
  1,555
  1,621
  1,691
  1,600
  1,676
  1,754
  1,834
  1,919
  2,006
  2,097
  2,192
  2,291
  2,394
  2,501
  2,613
  2,729
  2,851
  2,979
  3,111
  3,250
  3,394
  3,545
  3,704
Operating income, $m
  82
  128
  176
  226
  277
  332
  388
  447
  508
  573
  802
  872
  945
  1,022
  1,102
  1,187
  1,275
  1,367
  1,464
  1,565
  1,672
  1,784
  1,901
  2,024
  2,154
  2,290
  2,433
  2,583
  2,741
  2,907
EBITDA, $m
  305
  355
  408
  463
  520
  580
  642
  707
  775
  846
  920
  997
  1,078
  1,162
  1,250
  1,343
  1,440
  1,541
  1,648
  1,759
  1,876
  1,999
  2,128
  2,263
  2,405
  2,555
  2,711
  2,876
  3,049
  3,231
Interest expense (income), $m
  22
  41
  48
  55
  62
  69
  77
  85
  93
  102
  111
  120
  130
  140
  150
  161
  173
  184
  197
  210
  223
  238
  253
  268
  284
  301
  319
  338
  357
  378
  399
Earnings before tax, $m
  41
  80
  121
  164
  208
  255
  303
  354
  407
  462
  682
  743
  806
  872
  941
  1,014
  1,090
  1,170
  1,254
  1,342
  1,434
  1,531
  1,633
  1,740
  1,853
  1,971
  2,095
  2,226
  2,363
  2,508
Tax expense, $m
  11
  22
  33
  44
  56
  69
  82
  96
  110
  125
  184
  201
  218
  235
  254
  274
  294
  316
  339
  362
  387
  413
  441
  470
  500
  532
  566
  601
  638
  677
Net income, $m
  30
  58
  88
  119
  152
  186
  221
  258
  297
  337
  498
  542
  588
  637
  687
  740
  796
  854
  915
  980
  1,047
  1,118
  1,192
  1,270
  1,352
  1,439
  1,530
  1,625
  1,725
  1,831

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
  2,794
  3,016
  3,248
  3,488
  3,738
  3,998
  4,268
  4,549
  4,841
  5,145
  5,461
  5,791
  6,134
  6,492
  6,866
  7,256
  7,663
  8,089
  8,533
  8,998
  9,484
  9,992
  10,524
  11,081
  11,664
  12,275
  12,915
  13,586
  14,288
  15,025
Adjusted assets (=assets-cash), $m
  2,794
  3,016
  3,248
  3,488
  3,738
  3,998
  4,268
  4,549
  4,841
  5,145
  5,461
  5,791
  6,134
  6,492
  6,866
  7,256
  7,663
  8,089
  8,533
  8,998
  9,484
  9,992
  10,524
  11,081
  11,664
  12,275
  12,915
  13,586
  14,288
  15,025
Revenue / Adjusted assets
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
Average production assets, $m
  939
  1,014
  1,092
  1,173
  1,257
  1,344
  1,435
  1,529
  1,627
  1,729
  1,836
  1,947
  2,062
  2,182
  2,308
  2,439
  2,576
  2,719
  2,868
  3,025
  3,188
  3,359
  3,538
  3,725
  3,921
  4,126
  4,342
  4,567
  4,803
  5,051
Working capital, $m
  -109
  -118
  -127
  -137
  -146
  -157
  -167
  -178
  -190
  -201
  -214
  -227
  -240
  -254
  -269
  -284
  -300
  -317
  -334
  -352
  -371
  -391
  -412
  -434
  -457
  -481
  -506
  -532
  -560
  -588
Total debt, $m
  890
  1,016
  1,147
  1,283
  1,424
  1,571
  1,724
  1,883
  2,048
  2,220
  2,399
  2,586
  2,780
  2,983
  3,195
  3,415
  3,646
  3,887
  4,138
  4,401
  4,676
  4,964
  5,265
  5,580
  5,911
  6,256
  6,618
  6,998
  7,396
  7,813
Total liabilities, $m
  1,581
  1,707
  1,838
  1,974
  2,116
  2,263
  2,416
  2,575
  2,740
  2,912
  3,091
  3,278
  3,472
  3,675
  3,886
  4,107
  4,337
  4,578
  4,830
  5,093
  5,368
  5,656
  5,957
  6,272
  6,602
  6,948
  7,310
  7,690
  8,087
  8,504
Total equity, $m
  1,212
  1,309
  1,410
  1,514
  1,622
  1,735
  1,852
  1,974
  2,101
  2,233
  2,370
  2,513
  2,662
  2,818
  2,980
  3,149
  3,326
  3,510
  3,703
  3,905
  4,116
  4,337
  4,567
  4,809
  5,062
  5,327
  5,605
  5,896
  6,201
  6,521
Total liabilities and equity, $m
  2,793
  3,016
  3,248
  3,488
  3,738
  3,998
  4,268
  4,549
  4,841
  5,145
  5,461
  5,791
  6,134
  6,493
  6,866
  7,256
  7,663
  8,088
  8,533
  8,998
  9,484
  9,993
  10,524
  11,081
  11,664
  12,275
  12,915
  13,586
  14,288
  15,025
Debt-to-equity ratio
  0.730
  0.780
  0.810
  0.850
  0.880
  0.910
  0.930
  0.950
  0.970
  0.990
  1.010
  1.030
  1.040
  1.060
  1.070
  1.080
  1.100
  1.110
  1.120
  1.130
  1.140
  1.140
  1.150
  1.160
  1.170
  1.170
  1.180
  1.190
  1.190
  1.200
Adjusted equity ratio
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  58
  88
  119
  152
  186
  221
  258
  297
  337
  498
  542
  588
  637
  687
  740
  796
  854
  915
  980
  1,047
  1,118
  1,192
  1,270
  1,352
  1,439
  1,530
  1,625
  1,725
  1,831
Depreciation, amort., depletion, $m
  223
  227
  232
  238
  243
  249
  254
  260
  267
  273
  118
  125
  132
  140
  148
  156
  165
  174
  184
  194
  204
  215
  227
  239
  251
  265
  278
  293
  308
  324
Funds from operations, $m
  252
  286
  321
  357
  395
  434
  476
  519
  564
  611
  616
  667
  720
  776
  835
  897
  961
  1,028
  1,099
  1,173
  1,251
  1,333
  1,419
  1,509
  1,604
  1,703
  1,808
  1,918
  2,033
  2,155
Change in working capital, $m
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
Cash from operations, $m
  261
  295
  330
  366
  405
  445
  486
  530
  575
  622
  628
  680
  734
  791
  850
  912
  977
  1,045
  1,117
  1,192
  1,270
  1,353
  1,440
  1,531
  1,627
  1,727
  1,833
  1,944
  2,061
  2,183
Maintenance CAPEX, $m
  -56
  -60
  -65
  -70
  -75
  -81
  -86
  -92
  -98
  -104
  -111
  -118
  -125
  -132
  -140
  -148
  -156
  -165
  -174
  -184
  -194
  -204
  -215
  -227
  -239
  -251
  -265
  -278
  -293
  -308
New CAPEX, $m
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -111
  -115
  -120
  -126
  -131
  -137
  -143
  -149
  -156
  -163
  -171
  -179
  -187
  -196
  -205
  -215
  -225
  -236
  -248
Cash from investing activities, $m
  -128
  -135
  -143
  -151
  -159
  -168
  -177
  -186
  -196
  -206
  -217
  -229
  -240
  -252
  -266
  -279
  -293
  -308
  -323
  -340
  -357
  -375
  -394
  -414
  -435
  -456
  -480
  -503
  -529
  -556
Free cash flow, $m
  133
  159
  187
  216
  246
  277
  309
  343
  379
  416
  411
  451
  494
  538
  584
  633
  684
  737
  793
  852
  913
  978
  1,046
  1,117
  1,192
  1,271
  1,353
  1,440
  1,532
  1,628
Issuance/(repayment) of debt, $m
  121
  126
  131
  136
  141
  147
  153
  159
  165
  172
  179
  187
  194
  203
  211
  221
  230
  241
  252
  263
  275
  288
  301
  315
  330
  346
  362
  380
  398
  417
Issuance/(repurchase) of shares, $m
  62
  38
  12
  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  
  183
  164
  143
  136
  141
  147
  153
  159
  165
  172
  179
  187
  194
  203
  211
  221
  230
  241
  252
  263
  275
  288
  301
  315
  330
  346
  362
  380
  398
  417
Total cash flow (excl. dividends), $m
  316
  324
  330
  352
  387
  424
  462
  502
  544
  588
  590
  638
  688
  741
  796
  854
  914
  978
  1,044
  1,115
  1,188
  1,266
  1,347
  1,432
  1,522
  1,616
  1,715
  1,820
  1,930
  2,045
Retained Cash Flow (-), $m
  -92
  -97
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -132
  -137
  -143
  -149
  -155
  -162
  -169
  -177
  -185
  -193
  -202
  -211
  -221
  -231
  -242
  -253
  -265
  -278
  -291
  -305
  -320
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
  224
  227
  230
  247
  279
  311
  345
  380
  417
  456
  453
  495
  539
  585
  634
  684
  737
  793
  852
  913
  977
  1,045
  1,116
  1,190
  1,269
  1,351
  1,438
  1,529
  1,625
  1,725
Discount rate, %
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
  215
  207
  199
  203
  215
  224
  231
  235
  237
  236
  211
  207
  201
  192
  181
  169
  155
  141
  126
  111
  96
  82
  69
  57
  46
  37
  28
  22
  16
  12
Current shareholders' claim on cash, %
  98.5
  97.6
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4

Verint Systems Inc. offers Actionable Intelligence solutions. The Company delivers its Actionable Intelligence solutions through two operating segments: Customer Engagement Solutions and Cyber Intelligence Solutions. It is a provider of customer engagement software and services that can be deployed on-premises or in the cloud. Its Customer Engagement vision is powered by its Actionable Intelligence platform to generate intelligence from structured and unstructured data. It offers solutions that help organizations empower their customers and employees through intelligence that can be shared enterprise-wide. It is a provider of security and intelligence data mining software. Its solutions are used for a range of applications, including predictive intelligence, advanced and complex investigations, security threat analysis, and electronic data and physical assets protection, as well as for generating legal evidence and preventing criminal activity and terrorism.

FINANCIAL RATIOS  of  Verint Systems Inc. (VRNT)

Valuation Ratios
P/E Ratio -134
Price to Sales 3.7
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 22.6
Price to Free Cash Flow 27.4
Growth Rates
Sales Growth Rate -6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 6.4%
Financial Strength
Quick Ratio 62
Current Ratio 0
LT Debt to Equity 73.9%
Total Debt to Equity 74.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.2%
Ret/ On Assets - 3 Yr. Avg. 1.8%
Return On Total Capital -1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity -2.8%
Return On Equity - 3 Yr. Avg. 0.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 60.2%
Gross Margin - 3 Yr. Avg. 61.8%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin 1.6%
Oper. Margin - 3 Yr. Avg. 4.5%
Pre-Tax Margin -2.2%
Pre-Tax Margin - 3 Yr. Avg. 0.6%
Net Profit Margin -2.7%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate -13%
Eff/ Tax Rate - 3 Yr. Avg. -26.7%
Payout Ratio 0%

VRNT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRNT stock intrinsic value calculation we used $1135 million for the last fiscal year's total revenue generated by Verint Systems Inc.. The default revenue input number comes from 0001 income statement of Verint Systems Inc.. 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 VRNT stock valuation model: a) initial revenue growth rate of 8.3% 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 4.4%, whose default value for VRNT is calculated based on our internal credit rating of Verint Systems Inc., 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 Verint Systems Inc..
    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 VRNT stock the variable cost ratio is equal to 57.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $445 million in the base year in the intrinsic value calculation for VRNT 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 Verint Systems Inc..

Corporate tax rate of 27% is the nominal tax rate for Verint Systems Inc.. 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 VRNT 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 VRNT are equal to 76.4%.

Life of production assets of 15.6 years is the average useful life of capital assets used in Verint Systems Inc. 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 VRNT is equal to -8.9%. 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 - $1120.592 million for Verint Systems Inc. - 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 65.209 million for Verint Systems Inc. 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 Verint Systems Inc. at the current share price and the inputted number of shares is $4.1 billion.

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