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Science Group

AIM:SAG
Snowflake Description

Excellent balance sheet with acceptable track record.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
SAG
AIM
£85M
Market Cap
  1. Home
  2. GB
  3. Commercial Services
2017/12/16
Company description

Science Group plc, a technology consulting company, together with its subsidiaries, provides outsourced research and development consultancy services in the United Kingdom, other European countries, North America, and internationally. More info.


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  • Science Group is covered by less than 3 analysts.
SHARE PRICE
3 Month History
SAG
Industry
5yr Volatility vs Market
Competitors

Sorry, no analysis for Science Group's competitors could be found in our database.

Value

 Is Science Group undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Science Group to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

Current Discount
Amount off the current price Science Group is available for.
Intrinsic value
7%
Share price is £2.16 vs Future cash flow value of £2.33
Current Discount Checks
For Science Group to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
  • Science Group's share price is below the future cash flow value, but not at a moderate discount (< 20%).
  • Science Group's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Science Group's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Science Group's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Science Group is overvalued based on earnings compared to the GB Professional Services industry average.
  • Science Group is overvalued based on earnings compared to the GB market.
Price based on expected Growth
Does Science Group's expected growth come at a high price?
  • Unable to calculate PEG ratio for Science Group, we can't assess if it's growth is good value.
Price based on value of assets
What value do investors place on Science Group's assets?
  • Science Group is overvalued based on assets compared to the GB Professional Services industry average.
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Value checks
We assess Science Group's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Professional Services industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Professional Services industry average (and greater than 0)? (1 check)
  5. Science Group has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (0%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Science Group is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
£23

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = £7 × (1 + 1.49%) ÷ (8.3% – 1.49%)

Terminal value based on the Perpetuity Method where growth (g) = 1.49%:
£103

Present value of terminal value:
£69

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
£92 = £23 + £69

Value = Total value / Shares Outstanding (£92 / 39)

Discount to Share Price

Value per share:
£2.33

Current discount (share price of £2.16): 7.13%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.3% = 1.49% + (0.8 * 8.51%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value (£85,426,667).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.441 = 0.389 (1 + (1- 19%) (16.59%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 1.49% is from the 10 year government bond rate in GBP.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (8.51%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Science Group expected to perform in the next 1 to 3 years based on estimates from 1 analyst?

  • Science Group is covered by less than 3 analysts.
The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
16.5%
Expected annual growth in revenue.
Earnings growth vs Low Risk Savings
Is Science Group expected to grow at an attractive rate?
  • Unable to compare Science Group's earnings growth to the low risk savings rate as no estimate data is available.
Growth vs Market Checks
  • Unable to compare Science Group's earnings growth to the GB market average as no estimate data is available.
  • Science Group's revenue growth is expected to exceed the GB market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Unable to determine if Science Group is high growth as no earnings estimate data is available.
  • Science Group's revenue is expected to grow by 16.5% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • No +3 year Return on Equity (ROE) data.

Improvement & Relative to industry
  • No +3 year Return on Equity (ROE) or industry average data.
  • No +3 year Return on Equity (ROE) data.
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Future performance checks
We assess Science Group's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the GB market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the GB market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Science Group has a total score of 1/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Science Group performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Science Group's growth in the last year to its industry (Professional Services).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Science Group's year on year growth rate is negative over the past 5 years, however the most recent earnings are above average.
  • Science Group's 1 year earnings growth exceeds its 5 year annual average (64.5% vs -0.8%)
  • Science Group's earnings growth has exceeded the GB Professional Services industry average in the past year (64.5% vs 3.5%).
Earnings and Revenue History
Science Group's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Poor return on shareholders funds (ROE < 20%) last year.
  • Science Group performed worse than the GB Professional Services industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) is broadly the same over 3 years.
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Past performance checks
We assess Science Group's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Professional Services industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Science Group has a total score of 3/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Science Group's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Science Group's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Science Group is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Science Group's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Science Group's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • High level of stock/ inventory/ unsold assets.
  • Total debt is covered by total short term assets, assets are 2.3x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Science Group's level of debt (38.6% of total debt) compared to net worth is satisfactory (less than 40%).
  • The level of debt compared to net worth has increased over the past 5 years (25.5% vs 38.6% today).
  • Total debt is well covered by annual operating cash flow (63.4%, greater than 20% of total debt).
  • Interest on debt is well covered by earnings (EBIT is 12.9x coverage).
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Financial health checks
We assess Science Group's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Science Group has a total score of 5/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Science Group's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
1.94%
Current annual income from Science Group dividends. Estimated to be 2.13% next year.
If you bought £2,000 of Science Group shares you are expected to receive £39 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Paying below low risk savings rate (2.3%).
  • Paying below markets top dividend payers (3.98%).
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Whilst dividend payments have been stable, Science Group has been paying a dividend for less than 10 years.
  • Dividend payments have increased, but Science Group only paid a dividend in the past 5 years.
Current Payout to shareholders
What portion of Science Group's earnings are paid to the shareholders as a dividend.
  • Dividends paid are well covered by net profit (2.3x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be well covered by net profit (3.2x coverage).
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Income/ dividend checks
We assess Science Group's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Science Group afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Science Group has a total score of 2/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Science Group's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
  • Science Group has no CEO, or we have no data on them.
Management Team Tenure

Average tenure of the Science Group management team in years:

3.4
Average Tenure
  • The tenure for the Science Group management team is about average.
Management Team

Martyn Ratcliffe

TITLE
Executive Chairman
COMPENSATION
£385K
AGE
56

Rebecca Hemsted

TITLE
Finance Director & Director
COMPENSATION
£189K
AGE
36
TENURE
3.9 yrs

Andrew Diston

TITLE
Group Science & Technology Director and Member of the Group Executive Board
TENURE
1.4 yrs

Tamara Kahn

TITLE
Corporate Services & Corporate Development Director

Michael Withers

TITLE
Managing Director of Product Development Division

Dan Edwards

TITLE
Managing Director of Advisory Division

Sarah Cole

TITLE
Company Secretary
TENURE
4.8 yrs

Sarah Hinton

TITLE
Executive Officer
Board of Directors Tenure

Average tenure and age of the Science Group board of directors in years:

5.6
Average Tenure
51.3
Average Age
  • The tenure for the Science Group board of directors is about average.
Board of Directors

Martyn Ratcliffe

TITLE
Executive Chairman
COMPENSATION
£385K
AGE
56
TENURE
7.7 yrs

Rebecca Hemsted

TITLE
Finance Director & Director
COMPENSATION
£189K
AGE
36
TENURE
3.9 yrs

David Courtley

TITLE
Senior Independent Director
COMPENSATION
£35K
AGE
59

Mike Lacey-Solymar

TITLE
Non-Executive Director
COMPENSATION
£35K
AGE
54
TENURE
5.2 yrs
Recent Insider Trading
  • No 3 month insider trading information.
Who owns this company?
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Management checks
We assess Science Group's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Science Group has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

Science Group plc, a technology consulting company, together with its subsidiaries, provides outsourced research and development consultancy services in the United Kingdom, other European countries, North America, and internationally. It offers outsourced research, development, and technology advisory services; and IT consultancy services. The company was formerly known as Sagentia Group plc and changed its name to Science Group plc in July 2015. Science Group plc was incorporated in 2008 and is based in Cambridge, the United Kingdom.

Details
Name: Science Group plc
Ticker: SAG
Exchange: AIM
Founded: 2008
Market Cap: £85,426,667
Shares outstanding: 39,367,128
Website: http://www.sciencegroup.com
Address: Science Group plc
Harston Mill,
Harston,
Cambridge,
Cambridgeshire, CB22 7GG,
United Kingdom
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
AIM SAG Ordinary Shares London Stock Exchange AIM Market GB GBP 08. Jul 2008
Number of employees
Current staff
Staff numbers
303
Science Group employees.
Industry
Industry: Research and Consulting Services
Sector: Commercial Services