Virtusa (VRTU:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Virtusa(VRTU:NAS)

Technology:Information Technology Services

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$50.42 (USD) 09/10/2020

Weighted Valuation
$51.06 (USD)

Overall Rating
Fairly valued to slightly Undervalued by 1.3%

Valuation Models Adjusted Book Value: $51.06 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Fairly valued on an Asset Valuation
According to Analyst consensus at $48.00 this stock is Fairly valued

Company Overview (VRTU:NAS USD)

Price 50.42
Range 50.00 – 50.50
52 week 20.83 – 50.42
Open 50.48
Vol / Avg. 5.59M/437395
Mkt cap 1.53B
P/E 40.02
Div/yield 0.00/0.00
EPS 1.42
Shares 30.25M
Beta 1.53

Company Description

Virtusa Corp provides a range of information technology, or IT, services. The company organizes its services into three categories: business and IT consulting, technology implementation, and application outsourcing. The business and IT consulting services include IT assessment and planning, network architecture and design, and governance-related services. Technology implementation services include application development, legacy asset management, information management, and testing. Application outsourcing services include application and platform management, infrastructure management, and software quality assurance management. The company generates the majority of revenue from North America.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for VRTU:NAS

Using a discounted cash flow model we generated an intrinsic value of $21.76 (USD) for VRTU:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

VRTU:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $21.76 1% 5% 1% 5%
WACC (or Ke) 8.88 $27.40 $17.76
Terminal Growth Rate 3.00 $18.05 $27.00
Tax Rate 0.01 $23.96 $19.65
Cash Flow 92,812,301 $19.35 $24.18
Capital Expenditures -17,790,000 $21.38 $22.15
Long Term Debt 190,027,000 $22.08 $21.45

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $33.15 (USD) for VRTU:NAS. We also generated a valuation of $37.78 (USD) using other metrics and comparables.
The comparable companies were LiveRamp Holdings (RAMP:NYS), Xerox Holdings (XRX:NYS), The Hackett Group (HCKT:NAS), DXC Technology (DXC:NYS) and Insight Enterprises (NSIT:NAS).

Company VRTU:NAS End Date Value
Earnings/Share $1.26 (USD)
Book Value/Share $13.33 (USD)
Sales/Share $42.49 (USD)
Cash Flow/Share $4.39 (USD)
EBITDA/Share $3.30 (USD)
Price Based on Comps Adjustment Factor (%)
$24.07 (USD) -16.4
$24.43 (USD) -40.3
$93.92 (USD) -8.3
$2.70 (USD) 34.2
$31.57 (USD) 26.3
VRTU:NAS Ratios Used Average Values RAMP:NYS XRX:NYS HCKT:NAS DXC:NYS NSIT:NAS
40.02 PE Ratio 19.10 0.00 9.70 34.09 0.00 13.51
3.78 PB Ratio 1.83 3.19 0.72 2.50 1.08 1.66
1.19 PS Ratio 2.21 8.62 0.53 1.40 0.26 0.24
11.49 PCF Ratio 4.73 0.00 4.20 8.13 1.97 4.60
19.93 EV to EBITDA 9.58 0.00 5.54 15.65 0.00 7.55

Multiples

Using a multiples approach we generated a valuation of  $61.00 (USD) for VRTU:NAS

Company VRTU:NAS End Date Value
Earnings/Share $1.26 (USD)
Book Value/Share $13.33 (USD)
Sales/Share $42.49 (USD)
Cash Flow/Share $4.39 (USD)
EBITDA/Share $3.30 (USD)
Price Based on Comps Adjustment Factor
$49.55 (USD) 0
$39.81 (USD) 0
$52.54 (USD) 0
$103.67 (USD) 0
$59.44 (USD) 0
Ratios Ratio Average
PE Ratio 39.33
PB Ratio 2.99
PS Ratio 1.24
PCF Ratio 23.62
EV to EBITDA 18.04

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  VRTU:NAS for the last 10 years was  3.01

We ran the Adjusted Book Value for  VRTU:NAS and generated a book value of  $16.95 (USD)
By multiplying these we get an adjusted valuation of  $51.06 (USD)

Analyst Data

In the Stockcalc database there are 1 analysts that provide a valuation for VRTU:NAS. The 1 analysts have a concensus valuation for VRTU:NAS for 2021 of $48.00 (USD).

VRTU:NAS Virtusa

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 0 0 5.0000 Buy 2020-9-9

Current Price: 50.42 USD

Analyst Consensus
USD Millions 2021 2022
Mean EPS 2.40 2.40
# EPS Analysts 1 1
Mean Revenue 1,260.30 1,354.90
# Revenue Analysts 1 1
Mean Target Price 48.00
Mean Cash Flow
Mean EBITDA
Mean Net Income
Mean Debt Outstanding
Mean Tax Rate 37.70 38.00
Mean Growth Rate 14.00
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

Notice to User


The contents of this report and the Stockcalc website are provided on an ‘‘as is’’ or ‘‘as available’’ basis with all faults and may not be current in all cases. The information in this report or on the website is subject to continuous change and Patchell Brook Equity Analytics Inc. assumes no responsibility to update or amend such information or that the information will be current. Patchell Brook Equity Analytics Inc. does not claim that all information, calculations or opinions presented in this report or on its website are true, reliable, or complete. Accordingly, you should not rely on any of the information as authoritative or as a substitute for the exercise of your own skill and judgment in making an investment or other decision. Any information, data, opinions, calculations or recommendations provided by third parties through links to other websites or otherwise made available through this report or website are solely those of the third party and not of Patchell Brook Equity Analytics Inc. Please refer to the Terms of Use on stockcalc.com for further information.
To access all of the tools on Stockcalc, including more detailed valuation reports and the models used to generate these valuations, please subscribe for a free 30 day trial of Stockcalc here.


Tagged with: , , , , , , , , , , , , , , , , , , ,