Intrinsic value of Wayside Technology Group - WSTG

Previous Close

$11.95

  Intrinsic Value

$29.78

stock screener

  Rating & Target

str. buy

+149%

Previous close

$11.95

 
Intrinsic value

$29.78

 
Up/down potential

+149%

 
Rating

str. buy

We calculate the intrinsic value of WSTG 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 0.1

 

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, %
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
Revenue, $m
  506
  565
  628
  693
  762
  834
  909
  987
  1,068
  1,152
  1,240
  1,331
  1,426
  1,525
  1,627
  1,734
  1,844
  1,960
  2,080
  2,205
  2,335
  2,471
  2,613
  2,761
  2,915
  3,077
  3,245
  3,422
  3,606
  3,799
Variable operating expenses, $m
  495
  554
  615
  679
  747
  817
  891
  967
  1,047
  1,129
  1,215
  1,305
  1,398
  1,494
  1,594
  1,699
  1,807
  1,920
  2,038
  2,161
  2,288
  2,421
  2,560
  2,705
  2,857
  3,015
  3,181
  3,353
  3,534
  3,723
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
  495
  554
  615
  679
  747
  817
  891
  967
  1,047
  1,129
  1,215
  1,305
  1,398
  1,494
  1,594
  1,699
  1,807
  1,920
  2,038
  2,161
  2,288
  2,421
  2,560
  2,705
  2,857
  3,015
  3,181
  3,353
  3,534
  3,723
Operating income, $m
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  30
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  62
  65
  68
  72
  76
EBITDA, $m
  11
  12
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
  51
  54
  57
  61
  64
  68
  71
  75
  79
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
Earnings before tax, $m
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
Tax expense, $m
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
Net income, $m
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38

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
  115
  129
  143
  158
  174
  190
  207
  225
  243
  263
  282
  303
  325
  347
  371
  395
  420
  446
  474
  502
  532
  563
  595
  629
  664
  701
  739
  779
  821
  865
Adjusted assets (=assets-cash), $m
  115
  129
  143
  158
  174
  190
  207
  225
  243
  263
  282
  303
  325
  347
  371
  395
  420
  446
  474
  502
  532
  563
  595
  629
  664
  701
  739
  779
  821
  865
Revenue / Adjusted assets
  4.400
  4.380
  4.392
  4.386
  4.379
  4.389
  4.391
  4.387
  4.395
  4.380
  4.397
  4.393
  4.388
  4.395
  4.385
  4.390
  4.390
  4.395
  4.388
  4.392
  4.389
  4.389
  4.392
  4.390
  4.390
  4.389
  4.391
  4.393
  4.392
  4.392
Average production assets, $m
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
Working capital, $m
  27
  31
  34
  37
  41
  45
  49
  53
  58
  62
  67
  72
  77
  82
  88
  94
  100
  106
  112
  119
  126
  133
  141
  149
  157
  166
  175
  185
  195
  205
Total debt, $m
  8
  16
  25
  35
  44
  55
  65
  76
  88
  100
  112
  125
  138
  152
  167
  182
  198
  214
  231
  249
  267
  287
  307
  328
  349
  372
  396
  421
  447
  475
Total liabilities, $m
  72
  80
  89
  98
  108
  118
  129
  140
  151
  163
  176
  189
  202
  216
  231
  246
  261
  278
  295
  312
  331
  350
  370
  391
  413
  436
  460
  485
  511
  538
Total equity, $m
  44
  49
  54
  60
  66
  72
  78
  85
  92
  99
  107
  115
  123
  131
  140
  149
  159
  169
  179
  190
  201
  213
  225
  238
  251
  265
  279
  295
  311
  327
Total liabilities and equity, $m
  116
  129
  143
  158
  174
  190
  207
  225
  243
  262
  283
  304
  325
  347
  371
  395
  420
  447
  474
  502
  532
  563
  595
  629
  664
  701
  739
  780
  822
  865
Debt-to-equity ratio
  0.190
  0.340
  0.470
  0.580
  0.680
  0.760
  0.830
  0.900
  0.950
  1.000
  1.050
  1.090
  1.130
  1.160
  1.190
  1.220
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.360
  1.380
  1.390
  1.410
  1.420
  1.430
  1.440
  1.450
Adjusted equity ratio
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
Depreciation, amort., depletion, $m
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
Funds from operations, $m
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
Change in working capital, $m
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
Cash from operations, $m
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  30
Maintenance CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Free cash flow, $m
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Issuance/(repayment) of debt, $m
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
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  
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
Total cash flow (excl. dividends), $m
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
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
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
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
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
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

Wayside Technology Group, Inc. is an information technology (IT) channel company. The Company distributes software and hardware developed by others through resellers indirectly to customers across the world. The Company operates through two segments: Lifeboat Distribution and TechXtend. The Lifeboat Distribution segment distributes technical software and hardware to corporate resellers, value added resellers (VARs), consultants and systems integrators across the world. The TechXtend segment is a value-added reseller of software, hardware and services for corporations, government organizations and academic institutions in the United States and Canada. The Company offers a line of products from publishers of software and tools for virtualization/cloud computing, security, networking, storage and infrastructure management, application lifecycle management and other technical domains, as well as computer hardware.

FINANCIAL RATIOS  of  Wayside Technology Group (WSTG)

Valuation Ratios
P/E Ratio 9.1
Price to Sales 0.1
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow -54.5
Price to Free Cash Flow -27.2
Growth Rates
Sales Growth Rate 9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 6.1%
Return On Total Capital 15.6%
Ret/ On T. Cap. - 3 Yr. Avg. 15.6%
Return On Equity 15.6%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 4
Profitability Ratios
Gross Margin 6.5%
Gross Margin - 3 Yr. Avg. 7%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 2.4%
Operating Margin 1.9%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin 2.2%
Pre-Tax Margin - 3 Yr. Avg. 2.4%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 33.3%
Payout Ratio 50%

WSTG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WSTG stock intrinsic value calculation we used $449.379 million for the last fiscal year's total revenue generated by Wayside Technology Group. The default revenue input number comes from 0001 income statement of Wayside Technology Group. 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 WSTG stock valuation model: a) initial revenue growth rate of 12.5% 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 WSTG is calculated based on our internal credit rating of Wayside Technology Group, 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 Wayside Technology Group.
    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 WSTG stock the variable cost ratio is equal to 98%.

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 WSTG 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 Wayside Technology Group.

Corporate tax rate of 27% is the nominal tax rate for Wayside Technology Group. 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 WSTG 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 WSTG are equal to 0.4%.

Life of production assets of 3.9 years is the average useful life of capital assets used in Wayside Technology Group 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 WSTG is equal to 5.4%. 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 - $38.712 million for Wayside Technology Group - 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 4.498 million for Wayside Technology Group 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 Wayside Technology Group at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Wayside Technology: 3Q Earnings Snapshot   [Nov-05-18 07:13PM  Associated Press]
▶ Lifeboat to Distribute Datadobi Software   [Sep-27-18 07:05AM  GlobeNewswire]
▶ Lifeboat to Distribute Promise Technology   [Aug-07-18 10:54AM  GlobeNewswire]
▶ Wayside Technology: 2Q Earnings Snapshot   [Aug-06-18 05:53PM  Associated Press]
▶ Lifeboat Distribution Partners with Allot Communications   [Jul-25-18 07:06AM  GlobeNewswire]
▶ Top Rated NasdaqGM Dividend Stocks   [09:02AM  Simply Wall St.]
▶ Best Rated NasdaqGM Tech Dividend Stocks   [Jun-06-18 05:02PM  Simply Wall St.]
▶ Best Dividend Stock Picks   [May-24-18 09:02AM  Simply Wall St.]
▶ Wayside Technology: 1Q Earnings Snapshot   [May-04-18 05:11AM  Associated Press]
▶ Wayside Technology posts 4Q profit   [Feb-28-18 03:49PM  Associated Press]
▶ OTCPK Favorite Tech Dividend Stocks   [Feb-07-18 04:02PM  Simply Wall St.]
▶ Dale Foster and Charles Bass Join Wayside Technology Group   [Jan-04-18 01:19PM  GlobeNewswire]
▶ Wayside Technology posts 3Q profit   [Oct-26-17 05:08PM  Associated Press]
▶ Wayside Technology posts 1Q profit   [Apr-27-17 05:21PM  Associated Press]
▶ Wayside Technology posts 4Q profit   [Feb-02-17 06:15PM  Associated Press]

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