Intrinsic value of Gilat Satellite Networks - GILT

Previous Close

$6.88

  Intrinsic Value

$1.65

stock screener

  Rating & Target

str. sell

-76%

  Value-price divergence*

+146%

Previous close

$6.88

 
Intrinsic value

$1.65

 
Up/down potential

-76%

 
Rating

str. sell

 
Value-price divergence*

+146%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of GILT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  41.41
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  280
  286
  292
  300
  308
  317
  328
  339
  351
  364
  378
  393
  409
  426
  444
  463
  483
  505
  527
  551
  577
  604
  632
  661
  693
  726
  760
  797
  835
  876
  918
Variable operating expenses, $m
 
  132
  135
  139
  143
  147
  151
  156
  162
  168
  174
  176
  183
  191
  199
  208
  217
  226
  237
  247
  259
  271
  283
  297
  311
  326
  341
  358
  375
  393
  412
Fixed operating expenses, $m
 
  157
  161
  165
  169
  173
  177
  182
  186
  191
  196
  201
  206
  211
  216
  222
  227
  233
  239
  245
  251
  257
  263
  270
  277
  284
  291
  298
  305
  313
  321
Total operating expenses, $m
  279
  289
  296
  304
  312
  320
  328
  338
  348
  359
  370
  377
  389
  402
  415
  430
  444
  459
  476
  492
  510
  528
  546
  567
  588
  610
  632
  656
  680
  706
  733
Operating income, $m
  1
  -4
  -4
  -4
  -3
  -2
  -1
  1
  3
  5
  8
  16
  20
  24
  29
  34
  39
  45
  52
  59
  67
  76
  85
  95
  105
  116
  129
  141
  155
  170
  185
EBITDA, $m
  14
  10
  10
  10
  11
  12
  14
  16
  18
  21
  25
  28
  33
  37
  43
  48
  55
  62
  69
  77
  86
  95
  105
  116
  127
  140
  153
  167
  182
  198
  215
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
Earnings before tax, $m
  -4
  -4
  -5
  -5
  -4
  -4
  -2
  -1
  1
  3
  6
  13
  17
  20
  25
  30
  35
  40
  47
  53
  61
  69
  77
  86
  96
  107
  118
  130
  143
  157
  172
Tax expense, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  4
  6
  7
  8
  9
  11
  13
  14
  16
  19
  21
  23
  26
  29
  32
  35
  39
  42
  46
Net income, $m
  -5
  -4
  -5
  -5
  -4
  -4
  -2
  -1
  1
  2
  4
  10
  12
  15
  18
  22
  25
  30
  34
  39
  44
  50
  56
  63
  70
  78
  86
  95
  105
  115
  126

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  40
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  383
  350
  358
  367
  378
  389
  402
  415
  430
  446
  463
  481
  501
  522
  544
  567
  592
  619
  646
  676
  707
  740
  774
  811
  849
  889
  932
  977
  1,024
  1,073
  1,126
Adjusted assets (=assets-cash), $m
  343
  350
  358
  367
  378
  389
  402
  415
  430
  446
  463
  481
  501
  522
  544
  567
  592
  619
  646
  676
  707
  740
  774
  811
  849
  889
  932
  977
  1,024
  1,073
  1,126
Revenue / Adjusted assets
  0.816
  0.817
  0.816
  0.817
  0.815
  0.815
  0.816
  0.817
  0.816
  0.816
  0.816
  0.817
  0.816
  0.816
  0.816
  0.817
  0.816
  0.816
  0.816
  0.815
  0.816
  0.816
  0.817
  0.815
  0.816
  0.817
  0.815
  0.816
  0.815
  0.816
  0.815
Average production assets, $m
  95
  97
  99
  102
  104
  108
  111
  115
  119
  123
  128
  133
  139
  144
  150
  157
  164
  171
  179
  187
  196
  205
  214
  224
  235
  246
  258
  270
  283
  297
  311
Working capital, $m
  92
  58
  60
  61
  63
  65
  67
  69
  72
  74
  77
  80
  83
  87
  91
  94
  99
  103
  108
  112
  118
  123
  129
  135
  141
  148
  155
  163
  170
  179
  187
Total debt, $m
  22
  21
  24
  29
  34
  40
  46
  52
  60
  68
  76
  85
  94
  105
  116
  127
  139
  152
  166
  180
  195
  211
  228
  246
  265
  285
  306
  328
  351
  375
  401
Total liabilities, $m
  173
  172
  175
  180
  185
  191
  197
  203
  211
  219
  227
  236
  245
  256
  267
  278
  290
  303
  317
  331
  346
  362
  379
  397
  416
  436
  457
  479
  502
  526
  552
Total equity, $m
  210
  179
  183
  187
  193
  198
  205
  212
  219
  227
  236
  246
  256
  266
  277
  289
  302
  315
  330
  345
  360
  377
  395
  413
  433
  454
  475
  498
  522
  547
  574
Total liabilities and equity, $m
  383
  351
  358
  367
  378
  389
  402
  415
  430
  446
  463
  482
  501
  522
  544
  567
  592
  618
  647
  676
  706
  739
  774
  810
  849
  890
  932
  977
  1,024
  1,073
  1,126
Debt-to-equity ratio
  0.105
  0.110
  0.130
  0.150
  0.180
  0.200
  0.220
  0.250
  0.270
  0.300
  0.320
  0.350
  0.370
  0.390
  0.420
  0.440
  0.460
  0.480
  0.500
  0.520
  0.540
  0.560
  0.580
  0.600
  0.610
  0.630
  0.640
  0.660
  0.670
  0.680
  0.700
Adjusted equity ratio
  0.496
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  -4
  -5
  -5
  -4
  -4
  -2
  -1
  1
  2
  4
  10
  12
  15
  18
  22
  25
  30
  34
  39
  44
  50
  56
  63
  70
  78
  86
  95
  105
  115
  126
Depreciation, amort., depletion, $m
  13
  13
  14
  14
  14
  14
  15
  15
  16
  16
  16
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Funds from operations, $m
  14
  9
  9
  9
  10
  11
  12
  14
  16
  18
  21
  22
  25
  29
  32
  36
  41
  46
  51
  57
  63
  69
  77
  84
  92
  101
  111
  121
  131
  143
  155
Change in working capital, $m
  3
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
Cash from operations, $m
  11
  8
  8
  8
  8
  9
  10
  12
  14
  16
  18
  19
  22
  25
  29
  32
  37
  41
  46
  52
  58
  64
  71
  78
  86
  95
  104
  113
  124
  135
  146
Maintenance CAPEX, $m
  0
  -9
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
New CAPEX, $m
  -4
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from investing activities, $m
  -14
  -11
  -11
  -12
  -13
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -20
  -22
  -22
  -24
  -25
  -27
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -41
  -42
Free cash flow, $m
  -3
  -3
  -4
  -4
  -4
  -4
  -3
  -2
  -1
  0
  1
  2
  4
  6
  9
  12
  15
  19
  22
  27
  31
  37
  42
  48
  54
  61
  69
  77
  85
  94
  104
Issuance/(repayment) of debt, $m
  -12
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
Issuance/(repurchase) of shares, $m
  36
  8
  9
  9
  10
  9
  9
  8
  7
  6
  5
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  24
  12
  13
  14
  15
  15
  15
  15
  14
  14
  13
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
Total cash flow (excl. dividends), $m
  22
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  11
  14
  16
  20
  23
  27
  31
  36
  41
  47
  53
  59
  66
  73
  81
  89
  98
  108
  118
  129
Retained Cash Flow (-), $m
  -32
  -8
  -9
  -9
  -10
  -9
  -9
  -8
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Prev. year cash balance distribution, $m
 
  35
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  36
  0
  0
  1
  2
  3
  4
  5
  5
  6
  2
  4
  6
  8
  11
  15
  18
  22
  26
  31
  36
  41
  47
  54
  60
  68
  76
  84
  93
  103
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  34
  0
  0
  1
  1
  2
  3
  3
  3
  3
  1
  2
  2
  3
  3
  4
  4
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  97.6
  95.0
  92.3
  89.8
  87.4
  85.2
  83.4
  81.9
  80.7
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9
  79.9

Gilat Satellite Networks Ltd. is a provider of satellite-based broadband communications. The Company operates through three segments: Commercial, Mobility and Services divisions. The Company designs and manufactures satellite ground segment and networking communications equipment, which it sells to its customers either as network components (modems, Block Up converters (BUCs), antennas) or as complete network solutions (which include hubs and related terminals and services) or turnkey projects. The equipment that the Company develops includes commercial Very Small Aperture Terminals (VSAT) systems, defense and homeland security satellite communications systems, solid-state power amplifiers (SSPAs), BUCs, low-profile antennas, on-the-Move/on-the-Pause terminals and modems. The Company's equipment is used by satellite operators, service providers, telecommunications operators, system integrators, government and defense organizations, large corporations and enterprises.

FINANCIAL RATIOS  of  Gilat Satellite Networks (GILT)

Valuation Ratios
P/E Ratio -75.1
Price to Sales 1.3
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 34.1
Price to Free Cash Flow 53.7
Growth Rates
Sales Growth Rate 41.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 8
Current Ratio 0.6
LT Debt to Equity 8.1%
Total Debt to Equity 10.5%
Interest Coverage -3
Management Effectiveness
Return On Assets -1%
Ret/ On Assets - 3 Yr. Avg. -5.2%
Return On Total Capital -2.3%
Ret/ On T. Cap. - 3 Yr. Avg. -8.2%
Return On Equity -2.6%
Return On Equity - 3 Yr. Avg. -9.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 26.8%
Gross Margin - 3 Yr. Avg. 29.9%
EBITDA Margin 3.6%
EBITDA Margin - 3 Yr. Avg. -1.8%
Operating Margin 0.4%
Oper. Margin - 3 Yr. Avg. -6.4%
Pre-Tax Margin -1.4%
Pre-Tax Margin - 3 Yr. Avg. -8.9%
Net Profit Margin -1.8%
Net Profit Margin - 3 Yr. Avg. -9.6%
Effective Tax Rate -25%
Eff/ Tax Rate - 3 Yr. Avg. 57.7%
Payout Ratio 0%

GILT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GILT stock intrinsic value calculation we used $280 million for the last fiscal year's total revenue generated by Gilat Satellite Networks. The default revenue input number comes from 2016 income statement of Gilat Satellite Networks. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GILT stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for GILT is calculated based on our internal credit rating of Gilat Satellite Networks, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Gilat Satellite Networks.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GILT stock the variable cost ratio is equal to 46.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $153 million in the base year in the intrinsic value calculation for GILT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.6% for Gilat Satellite Networks.

Corporate tax rate of 27% is the nominal tax rate for Gilat Satellite Networks. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GILT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GILT are equal to 33.9%.

Life of production assets of 10.6 years is the average useful life of capital assets used in Gilat Satellite Networks operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GILT is equal to 20.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $210 million for Gilat Satellite Networks - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 54.763 million for Gilat Satellite Networks is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Gilat Satellite Networks at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
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GD General Dynami 210.39 203.82  hold
SATS EchoStar 54.61 60.29  hold

COMPANY NEWS

▶ Gilat posts 2Q profit   [Aug-08-17 11:59PM  Associated Press]
▶ Gilat to Report Second Quarter 2017 Results on August 8   [Jul-17-17 06:02AM  GlobeNewswire]
▶ Gilat reports 1Q loss   [07:18AM  Associated Press]
▶ Gilat to Report First Quarter 2017 Results on May 16   [Apr-20-17 06:15AM  GlobeNewswire]
▶ Gilat Announces Filing of 2016 Annual Report   [Mar-29-17 03:12PM  GlobeNewswire]
▶ Gilat posts 4Q profit   [Feb-14-17 10:32AM  Associated Press]
▶ Gilat Announces Third Quarter 2016 Results   [06:50AM  GlobeNewswire]
▶ Gilat reports 2Q loss   [Aug-10-16 08:15AM  AP]
▶ Gilat Announces Second Quarter 2016 Results   [08:03AM  GlobeNewswire]
▶ Gilats Second Quarter 2016 Earnings Announcement Schedule   [Jul-14-16 07:34AM  GlobeNewswire]
▶ SES and Gilat to Launch Hybrid Broadband Solution in Asia   [May-30-16 05:44AM  GlobeNewswire]
▶ Gilats First Quarter 2016 Earnings Announcement Schedule   [Apr-19-16 08:26AM  GlobeNewswire]
▶ Gilat Announces Results of Rights Offering   [Mar-24-16 07:05AM  GlobeNewswire]
▶ Gilat Announces Filing of 2015 Annual Report   [Mar-22-16 07:32AM  GlobeNewswire]
▶ Gilat Announces Commencement of Rights Offering   [Feb-18-16 10:40AM  GlobeNewswire]
▶ Gilat reports 4Q loss   [Feb-17-16 07:45AM  AP]
Financial statements of GILT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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