Intrinsic value of Wireless Telecom Group - WTT

Previous Close

$2.22

  Intrinsic Value

$0.35

stock screener

  Rating & Target

str. sell

-84%

Previous close

$2.22

 
Intrinsic value

$0.35

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of WTT 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -6.06
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  31
  50
  77
  115
  166
  235
  323
  433
  568
  731
  924
  1,147
  1,403
  1,691
  2,012
  2,365
  2,751
  3,169
  3,618
  4,098
  4,607
  5,146
  5,713
  6,308
  6,931
  7,581
  8,260
  8,966
  9,702
  10,466
  11,260
Variable operating expenses, $m
 
  48
  74
  111
  161
  226
  311
  418
  549
  706
  891
  1,107
  1,353
  1,631
  1,941
  2,282
  2,654
  3,058
  3,491
  3,954
  4,445
  4,965
  5,512
  6,086
  6,687
  7,314
  7,969
  8,651
  9,360
  10,097
  10,864
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
  34
  48
  74
  111
  161
  226
  311
  418
  549
  706
  891
  1,107
  1,353
  1,631
  1,941
  2,282
  2,654
  3,058
  3,491
  3,954
  4,445
  4,965
  5,512
  6,086
  6,687
  7,314
  7,969
  8,651
  9,360
  10,097
  10,864
Operating income, $m
  -3
  2
  3
  4
  6
  8
  11
  15
  20
  26
  32
  40
  49
  60
  71
  83
  97
  112
  127
  144
  162
  181
  201
  222
  244
  267
  291
  316
  342
  369
  397
EBITDA, $m
  -2
  2
  3
  4
  6
  8
  11
  15
  20
  26
  33
  40
  49
  60
  71
  83
  97
  112
  127
  144
  162
  181
  201
  222
  244
  267
  291
  316
  342
  369
  397
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  28
  30
  33
  35
Earnings before tax, $m
  -2
  2
  3
  4
  5
  8
  11
  14
  19
  24
  30
  37
  46
  55
  65
  77
  89
  102
  117
  132
  149
  166
  184
  203
  223
  244
  265
  288
  312
  336
  361
Tax expense, $m
  0
  0
  1
  1
  1
  2
  3
  4
  5
  6
  8
  10
  12
  15
  18
  21
  24
  28
  32
  36
  40
  45
  50
  55
  60
  66
  72
  78
  84
  91
  98
Net income, $m
  -2
  1
  2
  3
  4
  6
  8
  10
  14
  17
  22
  27
  33
  40
  48
  56
  65
  75
  85
  97
  108
  121
  134
  148
  163
  178
  194
  210
  227
  245
  264

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  35
  42
  64
  96
  139
  197
  271
  363
  477
  614
  775
  962
  1,177
  1,418
  1,688
  1,984
  2,308
  2,659
  3,036
  3,438
  3,865
  4,317
  4,793
  5,292
  5,814
  6,360
  6,929
  7,522
  8,139
  8,780
  9,447
Adjusted assets (=assets-cash), $m
  26
  42
  64
  96
  139
  197
  271
  363
  477
  614
  775
  962
  1,177
  1,418
  1,688
  1,984
  2,308
  2,659
  3,036
  3,438
  3,865
  4,317
  4,793
  5,292
  5,814
  6,360
  6,929
  7,522
  8,139
  8,780
  9,447
Revenue / Adjusted assets
  1.192
  1.190
  1.203
  1.198
  1.194
  1.193
  1.192
  1.193
  1.191
  1.191
  1.192
  1.192
  1.192
  1.193
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
Average production assets, $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
Working capital, $m
  20
  18
  27
  41
  59
  83
  114
  154
  202
  260
  328
  407
  498
  600
  714
  840
  977
  1,125
  1,285
  1,455
  1,636
  1,827
  2,028
  2,239
  2,460
  2,691
  2,932
  3,183
  3,444
  3,715
  3,997
Total debt, $m
  0
  2
  4
  8
  13
  20
  28
  39
  52
  68
  86
  108
  132
  160
  191
  225
  262
  303
  346
  392
  442
  493
  548
  606
  666
  728
  794
  862
  933
  1,007
  1,083
Total liabilities, $m
  4
  5
  7
  11
  16
  23
  31
  42
  55
  71
  89
  111
  135
  163
  194
  228
  265
  306
  349
  395
  445
  496
  551
  609
  669
  731
  797
  865
  936
  1,010
  1,086
Total equity, $m
  32
  37
  57
  85
  123
  174
  239
  321
  422
  543
  686
  852
  1,041
  1,255
  1,493
  1,756
  2,043
  2,353
  2,687
  3,043
  3,421
  3,821
  4,242
  4,683
  5,146
  5,629
  6,133
  6,657
  7,203
  7,770
  8,360
Total liabilities and equity, $m
  36
  42
  64
  96
  139
  197
  270
  363
  477
  614
  775
  963
  1,176
  1,418
  1,687
  1,984
  2,308
  2,659
  3,036
  3,438
  3,866
  4,317
  4,793
  5,292
  5,815
  6,360
  6,930
  7,522
  8,139
  8,780
  9,446
Debt-to-equity ratio
  0.000
  0.050
  0.080
  0.090
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
Adjusted equity ratio
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  1
  2
  3
  4
  6
  8
  10
  14
  17
  22
  27
  33
  40
  48
  56
  65
  75
  85
  97
  108
  121
  134
  148
  163
  178
  194
  210
  227
  245
  264
Depreciation, amort., depletion, $m
  1
  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
Funds from operations, $m
  2
  1
  2
  3
  4
  6
  8
  10
  14
  18
  22
  27
  33
  40
  48
  56
  65
  75
  85
  97
  108
  121
  134
  148
  163
  178
  194
  210
  227
  245
  264
Change in working capital, $m
  1
  7
  10
  13
  18
  24
  31
  39
  48
  58
  68
  79
  91
  102
  114
  126
  137
  148
  159
  170
  181
  191
  201
  211
  221
  231
  241
  251
  261
  271
  282
Cash from operations, $m
  1
  -5
  -8
  -11
  -14
  -19
  -23
  -29
  -34
  -40
  -46
  -52
  -57
  -62
  -66
  -70
  -72
  -74
  -74
  -74
  -72
  -70
  -67
  -63
  -58
  -53
  -47
  -41
  -34
  -26
  -18
Maintenance CAPEX, $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
New CAPEX, $m
  -1
  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 from investing activities, $m
  -1
  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
Free cash flow, $m
  0
  -5
  -8
  -11
  -14
  -19
  -23
  -29
  -34
  -40
  -46
  -52
  -57
  -62
  -66
  -70
  -72
  -74
  -74
  -74
  -72
  -70
  -67
  -63
  -58
  -53
  -47
  -41
  -34
  -26
  -18
Issuance/(repayment) of debt, $m
  0
  2
  3
  4
  5
  7
  8
  11
  13
  16
  19
  22
  25
  28
  31
  34
  37
  40
  43
  46
  49
  52
  55
  57
  60
  63
  65
  68
  71
  74
  77
Issuance/(repurchase) of shares, $m
  0
  13
  18
  25
  34
  45
  58
  72
  87
  104
  121
  139
  156
  174
  191
  207
  222
  236
  248
  260
  270
  279
  287
  294
  300
  305
  310
  314
  318
  322
  326
Cash from financing (excl. dividends), $m  
  0
  15
  21
  29
  39
  52
  66
  83
  100
  120
  140
  161
  181
  202
  222
  241
  259
  276
  291
  306
  319
  331
  342
  351
  360
  368
  375
  382
  389
  396
  403
Total cash flow (excl. dividends), $m
  0
  9
  13
  18
  25
  33
  43
  54
  66
  79
  93
  108
  124
  139
  155
  171
  187
  202
  217
  232
  247
  261
  274
  288
  301
  315
  328
  342
  356
  370
  384
Retained Cash Flow (-), $m
  1
  -14
  -20
  -28
  -38
  -51
  -65
  -82
  -101
  -121
  -143
  -166
  -190
  -214
  -238
  -263
  -287
  -310
  -333
  -356
  -378
  -400
  -421
  -442
  -462
  -483
  -504
  -525
  -546
  -567
  -590
Prev. year cash balance distribution, $m
 
  9
  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
 
  4
  -7
  -10
  -13
  -18
  -23
  -28
  -35
  -42
  -50
  -58
  -66
  -74
  -83
  -91
  -100
  -108
  -116
  -124
  -132
  -139
  -147
  -154
  -161
  -168
  -175
  -183
  -190
  -198
  -205
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
 
  4
  -6
  -8
  -11
  -14
  -16
  -19
  -22
  -24
  -26
  -27
  -28
  -28
  -28
  -27
  -25
  -24
  -21
  -19
  -17
  -14
  -12
  -10
  -8
  -7
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  100
  73.8
  56.0
  43.4
  34.4
  27.9
  23.0
  19.2
  16.4
  14.1
  12.4
  10.9
  9.8
  8.8
  8.0
  7.4
  6.8
  6.3
  5.9
  5.6
  5.3
  5.0
  4.8
  4.6
  4.4
  4.2
  4.1
  4.0
  3.8
  3.7
  3.6

Wireless Telecom Group, Inc. designs and manufactures radio frequency and microwave-based products for wireless and communications industries. It markets its products and services under the brand names, Boonton, Microlab and Noisecom. It serves commercial and government markets with solutions in distributed antenna systems (DAS), cellular/mobile, wireless fidelity, worldwide interoperability for microwave access (WiMAX), private mobile radio, satellite, cable, radar, avionics, medical and computing applications. It operates through two segments: network solutions, which includes the operations of its subsidiary, Microlab/FXR (Microlab) and test and measurement, which consists of the operations of Boonton Electronics Corporation (Boonton) and Noise Com, Inc. (Noisecom). Its suite of instruments and components includes peak power meters and signal analyzers. It offers long-term evolution software and embedded hardware, and customized fourth generation/fifth generation solutions.


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FINANCIAL RATIOS  of  Wireless Telecom Group (WTT)

Valuation Ratios
P/E Ratio -20.8
Price to Sales 1.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 41.6
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -5.7%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital -6.2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.2%
Return On Equity -6.2%
Return On Equity - 3 Yr. Avg. -0.2%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 41.9%
Gross Margin - 3 Yr. Avg. 45%
EBITDA Margin -3.2%
EBITDA Margin - 3 Yr. Avg. 4.1%
Operating Margin -9.7%
Oper. Margin - 3 Yr. Avg. 1.1%
Pre-Tax Margin -6.5%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin -6.5%
Net Profit Margin - 3 Yr. Avg. -0.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 53.3%
Payout Ratio 0%

WTT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WTT stock intrinsic value calculation we used $31 million for the last fiscal year's total revenue generated by Wireless Telecom Group. The default revenue input number comes from 2016 income statement of Wireless Telecom Group. 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 WTT stock valuation model: a) initial revenue growth rate of 60% 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 WTT is calculated based on our internal credit rating of Wireless Telecom Group, 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 Wireless Telecom Group.
    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 WTT stock the variable cost ratio is equal to 96.8%.

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 WTT 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 3.5% for Wireless Telecom Group.

Corporate tax rate of 27% is the nominal tax rate for Wireless Telecom Group. 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 WTT 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 WTT are equal to 0%.

Life of production assets of 1 years is the average useful life of capital assets used in Wireless Telecom Group 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 WTT is equal to 35.5%. 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 - $32 million for Wireless Telecom Group - 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 22.321 million for Wireless Telecom Group 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 Wireless Telecom Group at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ CommAgility LTE software licensed by EUCAST for small cells   [Nov-15-17 08:30AM  Business Wire]
▶ CommAgility provides Harris with LTE software and expertise   [Apr-11-17 08:00AM  Business Wire]
▶ Microlab Introduces New Small Cell Twin Diplexer   [Mar-29-17 10:00AM  Business Wire]
▶ Microlab Introduces New Salt/Fog Passive Components   [Jan-16-17 01:21PM  Business Wire]
▶ 10-Q for Wireless Telecom Group, Inc.   [Aug-14  08:10PM  at Company Spotlight]
▶ 10-Q for Wireless Telecom Group, Inc.   [May-15  08:09PM  at Company Spotlight]
Financial statements of WTT
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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