Is Logility Supply Chain Solutions, Inc. (NASDAQ:LGTY) Trading At A 48% Discount?

In This Article:

Key Insights

  • Logility Supply Chain Solutions' estimated fair value is US$21.98 based on 2 Stage Free Cash Flow to Equity

  • Current share price of US$11.47 suggests Logility Supply Chain Solutions is potentially 48% undervalued

  • Analyst price target for LGTY is US$16.00 which is 27% below our fair value estimate

Does the November share price for Logility Supply Chain Solutions, Inc. (NASDAQ:LGTY) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the forecast future cash flows of the company and discounting them back to today's value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. There's really not all that much to it, even though it might appear quite complex.

Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.

See our latest analysis for Logility Supply Chain Solutions

Step By Step Through The Calculation

We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) forecast

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

Levered FCF ($, Millions)

US$14.0m

US$19.5m

US$23.8m

US$27.6m

US$31.0m

US$33.8m

US$36.3m

US$38.4m

US$40.3m

US$42.0m

Growth Rate Estimate Source

Analyst x1

Analyst x1

Est @ 21.95%

Est @ 16.15%

Est @ 12.09%

Est @ 9.25%

Est @ 7.26%

Est @ 5.87%

Est @ 4.89%

Est @ 4.21%

Present Value ($, Millions) Discounted @ 6.8%

US$13.1

US$17.1

US$19.5

US$21.2

US$22.3

US$22.8

US$22.9

US$22.7

US$22.3

US$21.7

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$206m

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