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Cognyte Software (STU:81M) Earnings Power Value (EPV) : €0.71 (As of Oct24)


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What is Cognyte Software Earnings Power Value (EPV)?

As of Oct24, Cognyte Software's earnings power value is €0.71. *

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

Margin of Safety is -977.55

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future. Assumption: Current profitability is sustainable.


Cognyte Software Earnings Power Value (EPV) Historical Data

The historical data trend for Cognyte Software's Earnings Power Value (EPV) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Cognyte Software Earnings Power Value (EPV) Chart

Cognyte Software Annual Data
Trend Jan19 Jan20 Jan21 Jan22 Jan23 Jan24
Earnings Power Value (EPV)
Get a 7-Day Free Trial - - - - -

Cognyte Software Quarterly Data
Jan20 Apr20 Jul20 Oct20 Jan21 Apr21 Jul21 Oct21 Jan22 Apr22 Jul22 Oct22 Jan23 Apr23 Jul23 Oct23 Jan24 Apr24 Jul24 Oct24
Earnings Power Value (EPV) Get a 7-Day Free Trial Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only - - 0.67 0.61 0.74

Competitive Comparison of Cognyte Software's Earnings Power Value (EPV)

For the Software - Infrastructure subindustry, Cognyte Software's Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


Cognyte Software's Earnings Power Value (EPV) Distribution in the Software Industry

For the Software industry and Technology sector, Cognyte Software's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where Cognyte Software's Earnings Power Value (EPV) falls into.



Cognyte Software Earnings Power Value (EPV) Calculation

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.

Cognyte Software's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 322.9
DDA 15.5
Operating Margin % -6.85
SGA * 25% 33.1
Tax Rate % 19.92
Maintenance Capex 11.6
Cash and Cash Equivalents 93.4
Short-Term Debt 0.0
Long-Term Debt 28.3
Shares Outstanding (Diluted) 71.9

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.

2. Look at average margins over a business/Industry cycle: Average Operating Margin = -6.85%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = €322.9 Mil, Average Operating Margin = -6.85%, Average Adjusted SGA = 33.1,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 322.9 * -6.85% +33.1 = €10.929298736 Mil.

4. Multiply by one minus Average Tax Rate (NOPAT):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = 19.92%, and "Normalized" EBIT = €10.929298736 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = 10.929298736 * ( 1 - 19.92% ) = €8.7525103067509 Mil.

5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 15.5 * 0.5 * 19.92% = €1.538608167 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = 8.7525103067509 + 1.538608167 = €10.291118473751 Mil.

6. Adjusted for Maintenance Capital Expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
Cognyte Software's Average Maintenance CAPEX = €11.6 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. Cognyte Software's current cash and cash equivalent = €93.4 Mil.
Cognyte Software's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 28.3 + 0.0 = €28.289 Mil.
Cognyte Software's current Shares Outstanding (Diluted Average) = 71.9 Mil.

Cognyte Software's Earnings Power Value (EPV) for Oct24 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( 10.291118473751 - 11.6)/ 9%+93.4-28.289 )/71.9
=0.71

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( 0.7099450404522-7.65 )/0.7099450404522
= -977.55%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.


Cognyte Software  (STU:81M) Earnings Power Value (EPV) Explanation

Assumption: Current profitability is sustainable.

Earnings power value (EPV) uses a very basic equation which assumes no growth, although it does rely on an assumption about the cost of capital as well as the fact that current earnings are sustainable. It also involves several adjustments to clean up the underlying Earnings figures.


Be Aware

Though using today's earnings in calculating Earnings Power Value, GuruFocus is normalizing these earnings to the business cycle. This eliminates the effects on profitability of valuing the firm at different points in the business cycle. This means that we are considering the average earnings over 5 years.


Cognyte Software Earnings Power Value (EPV) Related Terms

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Cognyte Software Business Description

Traded in Other Exchanges
Address
33 Maskit, Herzliya, Pituach, ISR, 4673333
Cognyte Software Ltd provides security analytics software that empowers governments and enterprises with Actionable Intelligence. Its interface software is designed to help customers accelerate and improve the effectiveness of investigations and decision-making.

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