Market Capitalization $1.5 Billion

Transcription

1 BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUY BUY RATING SINCE 02/07/2012 TARGET PRICE $51.84 BUSINESS DESCRIPTION CSG Systems International, Inc. provides business support solutions primarily to the communications industry. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues Net Income EPS RETURN ON EQUITY (%) Ind Avg S&P 500 Q Q Q P/E COMPARISON Sector: Technology Sub-Industry: Data Processing & Outsourced Services Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY Volume in Millions COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $ EPS ANALYSIS¹ ($) Ind Avg S&P 500 RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income. HIGHLIGHTS The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 5.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. Net operating cash flow has significantly increased by % to $38.33 million when compared to the same quarter last year. In addition, has also vastly surpassed the industry average cash flow growth rate of -7.26%. Q Q Q Q Q Q Q NA = not available NM = not meaningful Q Q Q Q Compustat fiscal year convention is used for all fundamental data items. Even though the current debt-to-equity ratio is, it is still below the industry average, suggesting that this level of debt is acceptable within the IT Services industry. Despite the fact that 's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.39 is high and demonstrates liquidity. 's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, increased its bottom line by earning $1.90 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.53 versus $1.90). PAGE 1

2 PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -7.5% 17.5% HAWK SYKE EXLS TTEC UNFAVORABLE 5% WNS MGI EBITDA Margin (TTM) CATM FAVORABLE SYNT EVTC 35% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $739.5 Million and $2.1 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -7.5% 17.5% UNFAVORABLE -20% CATM Earnings Yield (TTM) WNS FAVORABLE HAWK TTEC EXLS SYKE CASS EVTC MGI SYNT 10% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -6.2% and 15.5%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The US IT Services industry includes companies that provide IT-related services, such as consulting, installation, systems integration, software development, and support. It includes providers of commercial electronic data processing and business process outsourcing (BPO) services, including back-office operations. There are about 35,000 such U.S. companies in this space. Major players are Accenture (ACN), Computer Sciences (CSC), and the technology consulting arms of International Business Machines (IBM) and Xerox (XRX). The industry is highly competitive, mature, and characterized by rapid technological changes, evolving industry standards, and changing customer preferences. Companies compete on service quality, product performance, technological innovation, and pricing. Demand is affected by the IT spending budget of clients, which in turn, is affected by the level of economic activity in the industries and markets they serve. IT spending has shifted from hardware to software and services. The emergence of business process outsourcing has altered the competitive landscape within the industry by making high quality services available at reduced costs. The 50 largest companies hold more than 80% of the market. Industry players use outsourcing as a tool to drive revenue growth by expanding service offerings that are costly to develop and deliver internally. Consolidation is on the rise as large companies strive to expand their geographical foot-print and service portfolio. The economic may add to IT spending in the coming quarters and spurring the growth of existing and new business. Another major challenge is anti-outsourcing as part of immigration reform legislation under discussion in Congress, aimed at limiting or restricting outsourcing to address unemployment concerns in the US. Certain instances of theft and misappropriation of sensitive client information have marred growth. The outlook for the IT services industry remains positive as spending on technology products and services is expected to grow, albeit at a slower rate in the immediate future. However, companies sustainability in an intense competitive environment will depend on their ability to fulfill demand in a cost-competitive and efficient manner. PEER GROUP: IT Services Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) , CATM CARDTRONICS PLC NM 1, MGI MONEYGRAM INTERNATIONAL IN , CASS CASS INFORMATION SYSTEMS IN SYNT SYNTEL INC , HAWK BLACKHAWK NETWORK HLDGS IN ,088 NM 2, EXLS EXLSERVICE HOLDINGS INC , WNS WNS (HOLDINGS) LTD -ADR , TTEC TELETECH HOLDINGS INC , , SYKE SYKES ENTERPRISES INC , , EVTC EVERTEC INC , The peer group comparison is based on Major Data Processing & Outsourced Services companies of comparable size. PAGE 2

3 Annual Dividend Rate COMPANY DESCRIPTION CSG Systems International, Inc. provides business support solutions primarily to the communications industry. Its suite of solutions comprises Advanced Convergent Platform, a billing and customer care platform for cable and satellite providers; Total Service Mediation (TSM) framework that supports offline and real-time mediation requirements; Singleview solution to deliver real-time charging services; and Wholesale Business Management Solution (WBMS), a settlements system, which handles voice, data, and content services. The company's solutions also include customer interaction management solutions that process interactive voice, SMS/text, print, , Web, and fax messages on behalf of clients; and managed services. It also licenses software products, such as WBMS, TSM, and Singleview products; and offers professional services to implement, configure, and maintain software products. The company also provides its services to the carriers, media and entertainment, and digital content distribution industries. It operates in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company was founded in 1994 and is headquartered in Englewood, Colorado Maroon Circle Englewood, CO USA Phone: STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 4.5 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 80% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 4.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 80% of the companies we review. Price volatility 3.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor. Solvency 3.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 60% of the companies we analyze. Income 3.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 60% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3

4 Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.65 Q4 FY E 2017(E) 2.66 E 2018(E) INCOME STATEMENT Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil) FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Even though sales increased, the net income has decreased. is extremely liquid. Currently, the Quick Ratio is 2.39 which clearly shows the ability to cover any short-term cash needs. managed to increase the liquidity from the same period a year ago, despite already having very liquidity to begin with. This would indicate improved cash flow. During the same period, stockholders' equity ("net worth") has increased by 15.62% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is very unlikely to face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil) PROFITABILITY Gross Profit Margin 53.30% 53.97% EBITDA Margin 20.09% 24.35% Operating Margin 15.06% 19.23% Sales Turnover Return on Assets 6.74% 8.51% Return on Equity 18.17% 26.30% DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % NA NA Avg Daily Volume 120, ,481 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4

5 RATINGS HISTORY Our rating for has not changed since 2/7/2012. As of 11/22/2017, the stock was trading at a price of which is 12.6% below its 52-week high of $51.34 and 26.5% above its 52-week low of $ Year Chart BUY: $ $60 $50 $40 MOST RECENT RATINGS CHANGES Date Price Action From To 11/20/15 $35.53 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/22/2017) 44.02% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months % Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss % Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY Research Contact: Sales Contact: VALUATION BUY. The current P/E ratio indicates a significant discount compared to an average of for the IT Services industry and a value on par with the S&P 500 average of Conducting a second comparison, its price-to-book ratio of 4.64 indicates a premium versus the S&P 500 average of 3.17 and a significant discount versus the industry average of The price-to-sales ratio is below the S&P 500 average and is well below the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, CSG SYSTEMS INTL INC proves to trade at a discount to investment alternatives within the industry. Price/Earnings Peers Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. Price/Projected Earnings Peers Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. Price/Book 4.64 Peers 9.62 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. Price/Sales 1.93 Peers 6.50 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. industry on this measurement. DISCLAIMER: Price/CashFlow Peers Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. Price to Earnings/Growth 0.76 Peers 2.05 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its Earnings Growth lower higher Peers Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 2.15 Peers Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at PAGE 5