What is AGYS's Intrinsic value?

Agilysys Inc (AGYS) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Agilysys Inc's estimated intrinsic value ranges from $10.81 to $69.99 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $69.99 -30.1%
Discounted Cash Flow (5Y) $46.42 -53.7%
Dividend Discount Model (Multi-Stage) $24.71 -75.3%
Dividend Discount Model (Stable) $12.01 -88.0%
Earnings Power Value $10.81 -89.2%

Is Agilysys Inc (AGYS) undervalued or overvalued?

With the current market price at $100.19, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Agilysys Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.14 1.18
Cost of equity 9.1% 11.5%
Cost of debt 4.5% 4.5%
Tax rate 0.8% 3.6%
Debt/Equity ratio 1 1
After-tax WACC 6.8% 7.9%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $237 (FY03-2024) to $660 (FY03-2034)
  • Net profit margin expansion from 36% to 19%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $46 $1,275M 88.3%
10-Year Growth $70 $1,934M 78.8%
5-Year EBITDA $23 $628M 76.3%
10-Year EBITDA $37 $1,015M 59.6%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.3%
  • Long-term growth rate: 4.0%
  • Fair value: $24.71 (-75.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.5% (Low) to 9.1% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $7 to $17
  • Selected fair value: $12.01 (-88.0% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $20M
Discount Rate (WACC) 7.9% - 6.8%
Enterprise Value $258M - $301M
Net Debt $(23)M
Equity Value $281M - $324M
Outstanding Shares 28M
Fair Value $10 - $12
Selected Fair Value $10.81

Key Financial Metrics

Metric Value
Market Capitalization $2801M
Enterprise Value $2779M
Trailing P/E 125.84
Forward P/E 97.12
Trailing EV/EBITDA 10.20
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -11.99%
Debt-to-Equity Ratio 0.02

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $21.00
Discounted Cash Flow (5Y) 25% $11.60
Dividend Discount Model (Multi-Stage) 20% $4.94
Dividend Discount Model (Stable) 15% $1.80
Earnings Power Value 10% $1.08
Weighted Average 100% $40.43

Investment Conclusion

Based on our comprehensive valuation analysis, Agilysys Inc's weighted average intrinsic value is $40.43, which is approximately 59.7% below the current market price of $100.19.

Key investment considerations:

  • Strong projected earnings growth (36% to 19% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.02)

Given these factors, we believe Agilysys Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.