. . World News – AU – Undervalued Investors American Software, Inc. . (NASDAQ: AMSW. A) By 24%?

Corresponds to the December stock price for American Software, Inc. . (NASDAQ: AMSW. A) reflect on what it is really worth? Today we’re going to estimate the intrinsic value of the stock by calculating the company’s forecast future cash flows back to today’s value. Our analysis will use the discounted cash flow (DCF) model. It may sound complicated, but it’s actually very simple!

We generally believe that a company’s value is the present value of all the cash it will generate in the future. However, a DCF is just one rating metric among many and not without its flaws. If you want to find out more about the intrinsic value, you should read the Simply Wall St analysis model.

We use the two-tier growth model, which simply means that we consider two phases in the company’s growth. In the initial phase, the company can have a higher growth rate, and in the second phase, a stable growth rate is usually assumed. First, we need to estimate the cash flows for the next ten years. As we have no analysts’ estimates of free cash flow, we extrapolated the previous free cash flow (FCF) from the company’s last reported value. We assume that companies with shrinking free cash flow will slow their rate of contraction and that companies with increasing free cash flow will slow their growth rate over this period. We do this to reflect that growth tends to slow down more in the first few years than in later years.

A DCF is all about the idea that a dollar in the future is worth less than a dollar today. Therefore, the sum of these future cash flows is discounted to today’s value:

(« Est » = FCF growth rate estimated by Simply Wall St) Present value of 10-year cash flow (PVCF) = 258 million. USD

We now need to calculate the final value that takes into account all future cash flows after this ten year period. A very conservative growth rate is used that cannot exceed that of any country’s GDP growth for a number of reasons. In this case, we used the 5-year average 10-year government bond yield (2nd. 0%) to estimate future growth. Similar to the 10-year growth period, we discount future cash flows with a cost of equity rate of 7 to today’s value. 1%.

Connection value (TV) = FCF2030 × (1 g) ÷ (r – g) = US $ 45 million. × (1 2. 0%) ÷ (7. 1% – 2. 0%) = 912 million. U.S. dollar

Present value of the terminal value (PVTV) = TV / (1 r) 10 = 912 million. USD ÷ (1 7. 1%) 10 = 459 million. U.S. dollar

The total value is the sum of the cash flows for the next ten years plus the discounted final value, which leads to the total capital value, which in this case is 717 million. USD is. In the final step, we divide the equity value by the number of shares issued. Compared to the current share price of $ 16. 7, the company seems a touch undervalued with a discount of 24% on the current share price. The assumptions in any calculation have a huge impact on the valuation, so it is better to think of this as a rough estimate that is not accurate to the last cent.

The above calculation depends heavily on two assumptions. The first is the discount rate and the other is the cash flows. Part of the investment is making your own assessment of a company’s future performance. So try the calculation yourself and check your own assumptions. The DCF also does not take into account the possible cyclical nature of an industry or the future capital requirements of a company, so it does not give a complete picture of a company’s potential performance. Given that we view American Software as a potential shareholder, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) responsible for debt. In this calculation we used 7. 1% based on a leverage beta of 0. 970. Beta is a measure of the volatility of a stock compared to the overall market. We get our beta from the industry-standard average beta of comparable companies worldwide with an imposed limit between 0. 8 and 2. 0, which is a reasonable range for a stable business.

Assessment is only one side of the coin in creating your investment thesis and ideally it won’t be the only analysis you consider for a company. The DCF model is not a perfect tool for stock valuation. Instead, the best use for a DCF model is to test certain assumptions and theories to determine whether they would result in the company becoming undervalued or overvalued. For example, changes in the company’s cost of equity or the risk-free rate can significantly affect the valuation. What is the reason that the share price is below the intrinsic value? For American Software, we’ve put together three relevant aspects that you should investigate further:

Risks: Take Risks, for example – American Software has 1 warning sign that we believe you should be aware of.

Future outcome: How does AMSW work?. A’s growth rate compared to its competitors and the broader market? Learn more about analyst consensus number for the years to come by interacting with our free analyst growth expectation chart.

Other high quality alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of ​​what else you might be missing!

PS. Simply Wall St updates its DCF calculation for every American share daily. So if you want to find out the intrinsic value of any other stock, just search here.

This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned. Do you have any feedback on this article? Concerned about the content? Contact us. Alternatively, send an email to the editorial team @ simplywallst. com.

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In a recent interview, Goldman’s chief equity strategist said of these points, “That’s the story, it’s about an economy getting better, getting out of the pandemic and getting better in general, and the Fed on hold. All of this is positive and I think the market is recognizing this and will continue to do so. Goldman Sachs analysts, following Kostin’s lead, point to three stocks that they believe will benefit from the broader market advance. We took the trio through the TipRanks database to see what other Wall Street analysts have to say about them. Lordstown Motors (RIDE) Goldman’s first choice is Lordstown Motors. The Ohio-based company, closely associated with the General Motors Big 3 standard, is an electric vehicle manufacturer. The company operates in GM’s old Lordstown, Ohio assembly plant that it bought last year. Lordstown has more than 6. 2 million square meters of production area and a capacity of 600. 000 vehicles per year. The company’s flagship is the Allurance Endurance Pickup. The vehicle is based on a unique design in which individual electric motors are used on each wheel hub. Delivery of the Endurance is planned for autumn 2021. Lordstown Motors was founded in 2018 and went public earlier this year through a merger with a blank check company. These transactions are designed to provide capital for companies wishing to enter the public market. As part of the preparations for the release of its endurance truck, Lordstown has signed an agreement with Camping World Holdings (CWH), the manufacturer of RVs. Camping World will train its mechanics on the new truck and provide garage space for Lordstown customers. The agreement includes expansion potential such as the sharing of sales, space and the provision of electric drive systems for motor homes. Mark Delaney, Analyst for Goldman Sachs, said of the stock: “We believe this collaboration is a first step to improve Lordstown’s service footprint and charging infrastructure and we see Lordstown’s decision to maintain an existing service footprint use as a cost-effective strategy. We believe the broader customer experience, including service and fees, plays an important role in product differentiation and can help EV startups succeed. In our view, easy and reliable maintenance and recharging is particularly important to Lordstown’s fleet / commercial customer base, which is focused on vehicle availability. Consistent with these comments, Delaney rates RIDE stock for a buy along with a price target of $ 31 for the next 12 months. At the current level, this means an upside potential of 67%. (To see Delaney’s track record, click here. Overall, RIDE stocks are getting a hold on analyst consensus, reflecting Wall Street’s caution towards a new – and highly speculative – venture. The rating was derived from 4 current ratings that are evenly split between 2 purchases and 2 sales. However, those are $ 27. The average target price of 50 suggests that RIDE will see an upward trend of 48% for the coming year. (See RIDE stock analysis on TipRanks) Liberty Global (LBTYA) Next up is Liberty Global, a holding company in the telecommunications sector. Liberty is represented in seven European countries worldwide: Great Britain, the Netherlands, Ireland, Belgium, Poland, Slovakia and Switzerland. The company has annual sales of over $ 11 billion. Through its subsidiaries, Liberty serves over 11 million customers with a total of 25 million subscriptions for broadband Internet, TV and telephone services. The company also claims to have 6 million cellular and WiFi subscribers. Liberty is a leading investor in European digital and online infrastructure projects. One of the company’s most recent moves was last month’s acquisition of Swiss telecommunications provider Sunrise Communications. Upon completion of the transactions, Liberty Global now owns over 98% of Sunrise’s total share capital. The Swiss company is now a wholly-owned subsidiary of the Liberty Global Group. Andrew Lee, an analyst at Goldman Sachs, points out the takeover of Switzerland as a key factor for the future of the company in a comprehensive overview of Liberty’s current business and market position. He writes: “We regard Sunrise as a quality product with sustained market share potential. We assume that this will benefit LBTYA directly, as Sunrise continues to gain shares in Swisscom, but also helps stabilize UPC’s assets. Lee gives LBTYA shares a buy rating along with a price target of $ 33. This number implies an upward movement of ~ 36% within a year from the current level. (To see Lee’s track record, click here. As with RIDE above, Liberty has an even split among recent valuations – 3 buy and 2 hold in this case – making the analyst consensus a moderate buy. The shares are priced at $ 24. 32 and the average target price of $ 30. 12 indicates room for ~ 24% growth from that level. (See LBTYA stock analysis on TipRanks) Lufax Holding (LU) Fintech is a fast growing niche, and Lufax operates a personal financial services platform for the Chinese market. The company provides wealth management services to China’s rapidly growing middle class, a population that is growing not only in size but also in wealth. Lufax offers this population financing solutions for personal and business loans that are not always well served by the established Chinese banking sector. The company’s customer base includes small business owners and white-collar workers. Revenue for the third quarter reported earlier this month was $ 2 billion in US currency. Earnings per share of 24 cents beat estimates by 10 cents, or 71%. However, these numbers were down year-on-year. The greatest uncertainty Lufax is currently facing is government regulation. China’s government, while allowing a market-driven economy, has a tight grip on economic activity in general, and modern, cutting-edge companies like Lufax can get in the way of regulators who are sometimes uncomfortable with the digital world. The prospect of tighter regulation as government officials seek to control fintech has worried some investors. After an extensive review of the Chinese regulatory technical landscape, Goldman’s Elsie Cheng, who works with Lufax, stated, “We remain constructive about Lufax’s ability to navigate the evolving regulatory landscape and unite its consumer / financial partners to offer consistent added value. With this in mind, Cheng values ​​LU a Buy along with a price target of USD 20, which means an upward trend of 34% for the coming year. (To see Cheng’s track record, click here. ) Overall, the Moderate Buy analysts’ consensus rating for Lufax is based on 7 ratings, including 4 purchases and 3 holds. Average target price of $ 17. 70 means a potential plus of 15% in the next year. (See LU stock analysis on TipRanks. ) To find great ideas for trading stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.

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