Intrinsic value of Ixia - XXIA

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$19.50

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of XXIA 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 ), $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 1.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
(a)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -100.00
  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
  0
  495
  506
  519
  534
  550
  568
  587
  608
  630
  655
  680
  708
  738
  769
  802
  837
  874
  914
  955
  999
  1,045
  1,094
  1,146
  1,200
  1,257
  1,317
  1,381
  1,447
  1,517
  1,591
Variable operating expenses, $m
 
  432
  441
  451
  463
  476
  490
  506
  523
  541
  560
  547
  569
  593
  618
  645
  673
  703
  735
  768
  803
  841
  880
  921
  965
  1,011
  1,059
  1,110
  1,164
  1,220
  1,279
Fixed operating expenses, $m
 
  44
  45
  46
  47
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
  69
  70
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
Total operating expenses, $m
  0
  476
  486
  497
  510
  525
  540
  557
  575
  595
  615
  603
  627
  652
  679
  707
  737
  768
  802
  837
  873
  913
  954
  997
  1,043
  1,091
  1,141
  1,194
  1,250
  1,308
  1,369
Operating income, $m
  0
  19
  20
  21
  23
  25
  27
  30
  33
  36
  39
  77
  81
  85
  90
  95
  100
  106
  112
  118
  125
  133
  140
  149
  157
  167
  176
  187
  198
  209
  221
EBITDA, $m
  0
  67
  68
  70
  72
  75
  77
  80
  84
  88
  92
  96
  101
  106
  112
  117
  124
  131
  138
  145
  153
  162
  171
  181
  191
  202
  214
  226
  239
  252
  266
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  16
  17
  18
Earnings before tax, $m
  0
  19
  20
  21
  23
  24
  26
  29
  31
  34
  37
  74
  77
  81
  85
  90
  95
  100
  105
  111
  117
  124
  131
  138
  146
  154
  163
  172
  182
  193
  204
Tax expense, $m
  0
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
Net income, $m
  0
  14
  15
  15
  16
  18
  19
  21
  23
  25
  27
  54
  57
  59
  62
  66
  69
  73
  77
  81
  85
  90
  95
  101
  106
  113
  119
  126
  133
  141
  149

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  0
  664
  679
  697
  716
  738
  762
  788
  816
  846
  879
  913
  950
  990
  1,032
  1,076
  1,124
  1,174
  1,226
  1,282
  1,341
  1,403
  1,469
  1,538
  1,611
  1,687
  1,768
  1,853
  1,942
  2,037
  2,135
Adjusted assets (=assets-cash), $m
  0
  664
  679
  697
  716
  738
  762
  788
  816
  846
  879
  913
  950
  990
  1,032
  1,076
  1,124
  1,174
  1,226
  1,282
  1,341
  1,403
  1,469
  1,538
  1,611
  1,687
  1,768
  1,853
  1,942
  2,037
  2,135
Revenue / Adjusted assets
  0.000
  0.745
  0.745
  0.745
  0.746
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.744
  0.746
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
Average production assets, $m
  0
  105
  107
  110
  113
  117
  120
  124
  129
  134
  139
  144
  150
  156
  163
  170
  177
  185
  194
  202
  212
  222
  232
  243
  254
  266
  279
  293
  307
  322
  337
Working capital, $m
  0
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Total debt, $m
  0
  5
  11
  17
  24
  32
  41
  51
  61
  72
  84
  97
  111
  125
  141
  157
  175
  193
  213
  233
  255
  278
  302
  327
  354
  383
  412
  444
  477
  511
  548
Total liabilities, $m
  0
  245
  251
  257
  264
  272
  281
  291
  301
  312
  324
  337
  351
  365
  381
  397
  415
  433
  453
  473
  495
  518
  542
  567
  594
  623
  652
  684
  717
  751
  788
Total equity, $m
  0
  419
  429
  440
  452
  466
  481
  497
  515
  534
  554
  576
  600
  625
  651
  679
  709
  740
  774
  809
  846
  885
  927
  970
  1,016
  1,065
  1,116
  1,169
  1,226
  1,285
  1,347
Total liabilities and equity, $m
  0
  664
  680
  697
  716
  738
  762
  788
  816
  846
  878
  913
  951
  990
  1,032
  1,076
  1,124
  1,173
  1,227
  1,282
  1,341
  1,403
  1,469
  1,537
  1,610
  1,688
  1,768
  1,853
  1,943
  2,036
  2,135
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.040
  0.050
  0.070
  0.090
  0.100
  0.120
  0.140
  0.150
  0.170
  0.180
  0.200
  0.220
  0.230
  0.250
  0.260
  0.270
  0.290
  0.300
  0.310
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
Adjusted equity ratio
  0.000
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  14
  15
  15
  16
  18
  19
  21
  23
  25
  27
  54
  57
  59
  62
  66
  69
  73
  77
  81
  85
  90
  95
  101
  106
  113
  119
  126
  133
  141
  149
Depreciation, amort., depletion, $m
  0
  48
  48
  49
  49
  49
  50
  50
  51
  52
  52
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
Funds from operations, $m
  0
  62
  63
  64
  65
  67
  69
  71
  74
  76
  79
  73
  77
  80
  84
  88
  93
  98
  103
  108
  114
  120
  126
  133
  140
  148
  156
  165
  174
  183
  194
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  0
  25
  63
  64
  66
  67
  69
  72
  74
  77
  80
  74
  77
  81
  85
  89
  93
  98
  103
  109
  114
  121
  127
  134
  141
  149
  157
  166
  175
  185
  195
Maintenance CAPEX, $m
  0
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
New CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
Cash from investing activities, $m
  0
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -43
  -46
  -49
  -50
  -53
  -56
  -59
Free cash flow, $m
  0
  9
  47
  47
  48
  49
  50
  51
  53
  55
  57
  50
  52
  54
  57
  60
  63
  67
  70
  74
  78
  82
  87
  92
  97
  103
  109
  115
  122
  129
  136
Issuance/(repayment) of debt, $m
  0
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  0
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
Total cash flow (excl. dividends), $m
  0
  14
  52
  54
  55
  57
  59
  61
  63
  66
  69
  62
  66
  69
  73
  76
  81
  85
  90
  95
  100
  105
  111
  118
  124
  131
  139
  146
  155
  164
  173
Retained Cash Flow (-), $m
  0
  -8
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -62
Prev. year cash balance distribution, $m
 
  143
  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
 
  149
  43
  43
  43
  43
  44
  45
  46
  47
  48
  41
  42
  44
  46
  48
  51
  53
  56
  59
  63
  66
  70
  74
  78
  83
  88
  93
  98
  104
  110
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
 
  143
  39
  37
  35
  34
  32
  30
  29
  27
  25
  19
  18
  17
  15
  14
  13
  12
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  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
  100.0

Ixia provides application performance and security resilience solutions to organizations in the United States and internationally. The company offers hardware platforms, such as chassis; interface cards that generate, receive, and analyze various traffic types at multiple network layers; and network visibility solutions, which enable network visibility into physical and virtual networks, and optimizes monitoring tool performance. It also provides a suite of software applications for use in automated and targeted delivery, as well as functionality and performance test for technologies and devices, including storage, video, voice, intelligent networks, applications, routing, switching, WiFi, broadband, wireless, software defined networks, and virtual networks and functions. In addition, Ixia offers technical support, warranty, and software maintenance services, as well as training and professional services. The company offers its products and services through direct sales force, as well as through distributors, value added resellers, system integrators, and other partners. It serves a range of enterprises, service providers, network equipment manufacturers, and governments. Ixia was founded in 1997 and is headquartered in Calabasas, California.

FINANCIAL RATIOS  of  Ixia (XXIA)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

XXIA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XXIA stock intrinsic value calculation we used $485 million for the last fiscal year's total revenue generated by Ixia. The default revenue input number comes from income statement of Ixia. 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 XXIA 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 XXIA is calculated based on our internal credit rating of Ixia, 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 Ixia.
    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 XXIA stock the variable cost ratio is equal to 87.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $43 million in the base year in the intrinsic value calculation for XXIA 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 Ixia.

Corporate tax rate of 27% is the nominal tax rate for Ixia. 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 XXIA 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 XXIA are equal to 21.2%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Ixia 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 XXIA is equal to -1.6%. 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 - $554 million for Ixia - 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 82.143 million for Ixia 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 Ixia at the current share price and the inputted number of shares is $1.6 billion.


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Valuation of Stocks

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