Intrinsic value of Adesto Technologies - IOTS

Previous Close

$6.65

  Intrinsic Value

$0.19

stock screener

  Rating & Target

str. sell

-97%

Previous close

$6.65

 
Intrinsic value

$0.19

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of IOTS 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 0.1

 

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, %
  2.33
  30.00
  27.50
  25.25
  23.23
  21.40
  19.76
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
Revenue, $m
  44
  57
  73
  91
  113
  137
  164
  194
  226
  262
  301
  342
  386
  432
  481
  533
  587
  644
  703
  764
  828
  895
  964
  1,036
  1,110
  1,188
  1,269
  1,353
  1,440
  1,531
  1,626
Variable operating expenses, $m
 
  66
  85
  106
  130
  158
  190
  224
  262
  304
  348
  396
  447
  501
  558
  618
  680
  746
  814
  886
  960
  1,037
  1,117
  1,200
  1,287
  1,377
  1,471
  1,568
  1,669
  1,774
  1,884
Fixed operating expenses, $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
Total operating expenses, $m
  54
  66
  85
  106
  130
  158
  190
  224
  262
  304
  348
  396
  447
  501
  558
  618
  680
  746
  814
  886
  960
  1,037
  1,117
  1,200
  1,287
  1,377
  1,471
  1,568
  1,669
  1,774
  1,884
Operating income, $m
  -10
  -9
  -12
  -15
  -18
  -22
  -26
  -31
  -36
  -42
  -48
  -54
  -61
  -69
  -77
  -85
  -93
  -102
  -112
  -121
  -132
  -142
  -153
  -165
  -177
  -189
  -202
  -215
  -229
  -243
  -258
EBITDA, $m
  -8
  -7
  -8
  -10
  -13
  -16
  -19
  -22
  -26
  -30
  -34
  -39
  -44
  -49
  -55
  -61
  -67
  -73
  -80
  -87
  -94
  -102
  -110
  -118
  -127
  -135
  -145
  -154
  -164
  -174
  -185
Interest expense (income), $m
  1
  1
  1
  2
  2
  3
  4
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  21
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
Earnings before tax, $m
  -12
  -10
  -13
  -16
  -20
  -25
  -30
  -36
  -42
  -49
  -56
  -64
  -72
  -81
  -91
  -101
  -111
  -122
  -133
  -145
  -157
  -170
  -183
  -197
  -212
  -227
  -242
  -258
  -275
  -292
  -311
Tax expense, $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
  0
Net income, $m
  -12
  -10
  -13
  -16
  -20
  -25
  -30
  -36
  -42
  -49
  -56
  -64
  -72
  -81
  -91
  -101
  -111
  -122
  -133
  -145
  -157
  -170
  -183
  -197
  -212
  -227
  -242
  -258
  -275
  -292
  -311

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  20
  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
  46
  34
  43
  54
  67
  81
  97
  114
  134
  155
  178
  202
  228
  255
  284
  315
  347
  380
  415
  452
  489
  529
  570
  612
  656
  702
  750
  800
  851
  905
  961
Adjusted assets (=assets-cash), $m
  26
  34
  43
  54
  67
  81
  97
  114
  134
  155
  178
  202
  228
  255
  284
  315
  347
  380
  415
  452
  489
  529
  570
  612
  656
  702
  750
  800
  851
  905
  961
Revenue / Adjusted assets
  1.692
  1.676
  1.698
  1.685
  1.687
  1.691
  1.691
  1.702
  1.687
  1.690
  1.691
  1.693
  1.693
  1.694
  1.694
  1.692
  1.692
  1.695
  1.694
  1.690
  1.693
  1.692
  1.691
  1.693
  1.692
  1.692
  1.692
  1.691
  1.692
  1.692
  1.692
Average production assets, $m
  13
  16
  21
  26
  32
  39
  46
  55
  64
  74
  85
  97
  110
  123
  137
  151
  167
  183
  200
  217
  235
  254
  274
  294
  315
  337
  360
  384
  409
  435
  462
Working capital, $m
  17
  4
  5
  6
  8
  9
  11
  13
  15
  18
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  56
  61
  66
  70
  76
  81
  86
  92
  98
  104
  111
Total debt, $m
  18
  18
  27
  37
  48
  61
  75
  91
  108
  127
  148
  170
  193
  218
  244
  271
  300
  330
  362
  394
  428
  464
  501
  539
  579
  620
  663
  708
  754
  802
  853
Total liabilities, $m
  30
  30
  39
  49
  60
  73
  87
  103
  120
  139
  160
  182
  205
  230
  256
  283
  312
  342
  374
  406
  440
  476
  513
  551
  591
  632
  675
  720
  766
  814
  865
Total equity, $m
  16
  3
  4
  5
  7
  8
  10
  11
  13
  15
  18
  20
  23
  26
  28
  31
  35
  38
  42
  45
  49
  53
  57
  61
  66
  70
  75
  80
  85
  90
  96
Total liabilities and equity, $m
  46
  33
  43
  54
  67
  81
  97
  114
  133
  154
  178
  202
  228
  256
  284
  314
  347
  380
  416
  451
  489
  529
  570
  612
  657
  702
  750
  800
  851
  904
  961
Debt-to-equity ratio
  1.125
  5.450
  6.220
  6.780
  7.200
  7.510
  7.760
  7.950
  8.100
  8.230
  8.320
  8.410
  8.470
  8.530
  8.580
  8.620
  8.650
  8.680
  8.710
  8.730
  8.750
  8.770
  8.790
  8.800
  8.820
  8.830
  8.840
  8.850
  8.860
  8.870
  8.880
Adjusted equity ratio
  -0.154
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -12
  -10
  -13
  -16
  -20
  -25
  -30
  -36
  -42
  -49
  -56
  -64
  -72
  -81
  -91
  -101
  -111
  -122
  -133
  -145
  -157
  -170
  -183
  -197
  -212
  -227
  -242
  -258
  -275
  -292
  -311
Depreciation, amort., depletion, $m
  2
  3
  3
  4
  5
  6
  7
  9
  10
  12
  14
  15
  17
  19
  22
  24
  26
  29
  32
  34
  37
  40
  43
  47
  50
  54
  57
  61
  65
  69
  73
Funds from operations, $m
  -3
  -7
  -10
  -12
  -15
  -19
  -23
  -27
  -32
  -37
  -43
  -49
  -55
  -62
  -69
  -77
  -85
  -93
  -102
  -111
  -120
  -130
  -140
  -151
  -162
  -173
  -185
  -197
  -210
  -223
  -237
Change in working capital, $m
  2
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
Cash from operations, $m
  -5
  -8
  -11
  -13
  -17
  -20
  -24
  -29
  -34
  -39
  -45
  -51
  -58
  -65
  -72
  -80
  -88
  -97
  -106
  -115
  -124
  -134
  -145
  -155
  -167
  -178
  -190
  -203
  -216
  -230
  -244
Maintenance CAPEX, $m
  0
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -14
  -15
  -17
  -19
  -22
  -24
  -26
  -29
  -32
  -34
  -37
  -40
  -43
  -47
  -50
  -54
  -57
  -61
  -65
  -69
New CAPEX, $m
  -2
  -4
  -4
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
Cash from investing activities, $m
  -2
  -6
  -7
  -8
  -10
  -12
  -14
  -15
  -18
  -20
  -23
  -26
  -27
  -30
  -33
  -37
  -39
  -42
  -46
  -49
  -52
  -56
  -60
  -63
  -68
  -72
  -77
  -81
  -86
  -91
  -96
Free cash flow, $m
  -7
  -14
  -18
  -22
  -27
  -32
  -38
  -45
  -52
  -60
  -68
  -77
  -86
  -96
  -106
  -116
  -128
  -139
  -151
  -164
  -177
  -191
  -205
  -219
  -235
  -250
  -267
  -284
  -302
  -320
  -340
Issuance/(repayment) of debt, $m
  4
  6
  8
  10
  11
  13
  14
  16
  17
  19
  20
  22
  23
  25
  26
  27
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
Issuance/(repurchase) of shares, $m
  0
  11
  14
  17
  22
  26
  32
  37
  44
  51
  58
  66
  75
  84
  94
  104
  114
  125
  137
  149
  161
  174
  187
  201
  216
  231
  247
  263
  280
  298
  316
Cash from financing (excl. dividends), $m  
  4
  17
  22
  27
  33
  39
  46
  53
  61
  70
  78
  88
  98
  109
  120
  131
  143
  155
  168
  182
  195
  209
  224
  239
  256
  272
  290
  308
  326
  346
  366
Total cash flow (excl. dividends), $m
  -3
  4
  4
  5
  6
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
Retained Cash Flow (-), $m
  8
  -11
  -14
  -17
  -22
  -26
  -32
  -37
  -44
  -51
  -58
  -66
  -75
  -84
  -94
  -104
  -114
  -125
  -137
  -149
  -161
  -174
  -187
  -201
  -216
  -231
  -247
  -263
  -280
  -298
  -316
Prev. year cash balance distribution, $m
 
  14
  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
 
  7
  -9
  -12
  -16
  -19
  -24
  -29
  -35
  -41
  -47
  -55
  -62
  -71
  -80
  -89
  -99
  -109
  -120
  -131
  -143
  -155
  -168
  -181
  -195
  -209
  -224
  -239
  -255
  -272
  -289
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
 
  6
  -8
  -11
  -13
  -15
  -17
  -20
  -22
  -23
  -25
  -26
  -27
  -27
  -27
  -26
  -25
  -24
  -22
  -20
  -18
  -16
  -14
  -12
  -10
  -8
  -7
  -5
  -4
  -3
  -2
Current shareholders' claim on cash, %
  100
  60.7
  41.4
  28.3
  19.4
  13.4
  9.2
  6.4
  4.4
  3.1
  2.2
  1.5
  1.1
  0.7
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Adesto Technologies Corporation is a provider of application-specific and ultra-low power non-volatile memory products. The Company optimizes its non-volatile memory products for Internet of Things (IoT), applications, including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets. It operates in application-specific and feature-rich, ultra-low power non-volatile memory (NVM) products segment. It combines its non-volatile memory design capabilities with intellectual property and differentiated technology platforms to deliver products that manage the overall energy consumption of its customers' systems and battery life. Its products feature embedded intelligence in a small form factor. It sells its products directly to original equipment manufacturers and original design manufacturers, respectively that manufacture products for its end customers.

FINANCIAL RATIOS  of  Adesto Technologies (IOTS)

Valuation Ratios
P/E Ratio -8.6
Price to Sales 2.3
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow -20.6
Price to Free Cash Flow -14.7
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 75%
Total Debt to Equity 112.5%
Interest Coverage -11
Management Effectiveness
Return On Assets -22.9%
Ret/ On Assets - 3 Yr. Avg. -20.5%
Return On Total Capital -33.8%
Ret/ On T. Cap. - 3 Yr. Avg. -32.6%
Return On Equity -60%
Return On Equity - 3 Yr. Avg. -60.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 47.7%
Gross Margin - 3 Yr. Avg. 42.9%
EBITDA Margin -20.5%
EBITDA Margin - 3 Yr. Avg. -14.8%
Operating Margin -22.7%
Oper. Margin - 3 Yr. Avg. -20.3%
Pre-Tax Margin -27.3%
Pre-Tax Margin - 3 Yr. Avg. -22.6%
Net Profit Margin -27.3%
Net Profit Margin - 3 Yr. Avg. -22.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

IOTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IOTS stock intrinsic value calculation we used $44 million for the last fiscal year's total revenue generated by Adesto Technologies. The default revenue input number comes from 2016 income statement of Adesto Technologies. 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 IOTS stock valuation model: a) initial revenue growth rate of 30% 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 IOTS is calculated based on our internal credit rating of Adesto Technologies, 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 Adesto Technologies.
    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 IOTS stock the variable cost ratio is equal to 115.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for IOTS 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 6.5% for Adesto Technologies.

Corporate tax rate of 27% is the nominal tax rate for Adesto Technologies. 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 IOTS 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 IOTS are equal to 28.4%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Adesto Technologies 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 IOTS is equal to 6.8%. 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 - $16 million for Adesto Technologies - 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 20.944 million for Adesto Technologies 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 Adesto Technologies at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Adesto Tech reports 3Q loss   [Nov-08-17 06:45PM  Associated Press]
▶ 3 Hot Stocks Under $10   [Oct-09-17 12:32PM  Investopedia]
▶ Adesto Tech reports 2Q loss   [Aug-05-17 01:04AM  Associated Press]
▶ Adesto Technologies Announces Barry L. Cox Scholarships   [Jul-27-17 09:00AM  GlobeNewswire]
▶ 5 Stocks to Buy on New Analyst Coverage   [May-15-17 09:41AM  Zacks]
▶ Adesto Tech reports 1Q loss   [May-10-17 05:10PM  Associated Press]
▶ Adesto Tech reports 4Q loss   [Feb-14-17 05:03PM  Associated Press]
Financial statements of IOTS
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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