Intrinsic value of Ixia - XXIA

Previous Close

$19.65

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$19.65

 
Intrinsic value

$7.62

 
Up/down potential

-61%

 
Rating

str. sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*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 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 1.6

 

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, %
  -6.19
  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
  485
  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
  466
  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
  18
  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
  75
  68
  70
  71
  74
  76
  79
  82
  86
  89
  93
  98
  103
  108
  114
  120
  126
  133
  140
  148
  156
  165
  174
  184
  194
  205
  217
  229
  242
  256
  271
Interest expense (income), $m
  1
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  17
  19
  20
  21
  23
  24
  26
  29
  31
  34
  37
  74
  77
  81
  85
  90
  95
  100
  105
  111
  117
  123
  130
  138
  146
  154
  163
  172
  182
  192
  203
Tax expense, $m
  51
  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
  46
  49
  52
  55
Net income, $m
  -34
  14
  15
  15
  16
  18
  19
  21
  23
  25
  27
  54
  57
  59
  62
  66
  69
  73
  77
  81
  85
  90
  95
  101
  106
  112
  119
  126
  133
  140
  148

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  758
  627
  641
  658
  676
  697
  719
  744
  770
  799
  830
  862
  897
  935
  974
  1,016
  1,061
  1,108
  1,158
  1,211
  1,266
  1,325
  1,387
  1,452
  1,521
  1,593
  1,669
  1,750
  1,834
  1,923
  2,016
Adjusted assets (=assets-cash), $m
  615
  627
  641
  658
  676
  697
  719
  744
  770
  799
  830
  862
  897
  935
  974
  1,016
  1,061
  1,108
  1,158
  1,211
  1,266
  1,325
  1,387
  1,452
  1,521
  1,593
  1,669
  1,750
  1,834
  1,923
  2,016
Revenue / Adjusted assets
  0.789
  0.789
  0.789
  0.789
  0.790
  0.789
  0.790
  0.789
  0.790
  0.788
  0.789
  0.789
  0.789
  0.789
  0.790
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
Average production assets, $m
  122
  124
  127
  130
  134
  138
  142
  147
  153
  158
  164
  171
  178
  185
  193
  201
  210
  219
  229
  240
  251
  262
  275
  288
  301
  316
  331
  347
  363
  381
  399
Working capital, $m
  135
  -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
  25
  33
  42
  52
  62
  74
  86
  99
  113
  128
  144
  161
  178
  197
  217
  238
  261
  284
  309
  335
  362
  391
  422
  454
  488
  523
  561
Total liabilities, $m
  246
  251
  257
  263
  271
  279
  288
  298
  308
  320
  332
  345
  359
  374
  390
  407
  424
  443
  463
  484
  507
  530
  555
  581
  608
  637
  668
  700
  734
  769
  807
Total equity, $m
  512
  376
  385
  395
  406
  418
  432
  446
  462
  479
  498
  517
  538
  561
  585
  610
  637
  665
  695
  726
  760
  795
  832
  871
  913
  956
  1,002
  1,050
  1,100
  1,154
  1,210
Total liabilities and equity, $m
  758
  627
  642
  658
  677
  697
  720
  744
  770
  799
  830
  862
  897
  935
  975
  1,017
  1,061
  1,108
  1,158
  1,210
  1,267
  1,325
  1,387
  1,452
  1,521
  1,593
  1,670
  1,750
  1,834
  1,923
  2,017
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.040
  0.060
  0.080
  0.100
  0.120
  0.130
  0.150
  0.170
  0.190
  0.210
  0.230
  0.250
  0.260
  0.280
  0.300
  0.310
  0.330
  0.340
  0.360
  0.370
  0.380
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
Adjusted equity ratio
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -34
  14
  15
  15
  16
  18
  19
  21
  23
  25
  27
  54
  57
  59
  62
  66
  69
  73
  77
  81
  85
  90
  95
  101
  106
  112
  119
  126
  133
  140
  148
Depreciation, amort., depletion, $m
  57
  49
  50
  50
  50
  51
  51
  52
  53
  53
  54
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
Funds from operations, $m
  83
  63
  64
  65
  67
  69
  71
  73
  75
  78
  81
  75
  78
  82
  86
  90
  95
  100
  105
  110
  116
  123
  129
  136
  143
  151
  160
  168
  178
  187
  198
Change in working capital, $m
  2
  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
  81
  45
  64
  66
  67
  69
  71
  73
  76
  78
  81
  75
  79
  83
  87
  91
  96
  100
  106
  111
  117
  123
  130
  137
  144
  152
  160
  169
  179
  188
  199
Maintenance CAPEX, $m
  0
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -10
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
Cash from investing activities, $m
  -67
  -18
  -18
  -19
  -20
  -21
  -21
  -23
  -23
  -25
  -26
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -41
  -43
  -44
  -47
  -50
  -51
  -54
  -57
  -60
  -63
  -66
Free cash flow, $m
  14
  27
  46
  47
  47
  48
  49
  51
  52
  54
  56
  49
  51
  53
  56
  59
  62
  65
  69
  72
  76
  81
  85
  90
  95
  101
  106
  113
  119
  126
  133
Issuance/(repayment) of debt, $m
  -4
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  5
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
Total cash flow (excl. dividends), $m
  19
  32
  52
  53
  55
  57
  58
  61
  63
  65
  68
  62
  65
  68
  72
  76
  80
  84
  89
  93
  99
  104
  110
  116
  123
  130
  137
  145
  153
  162
  171
Retained Cash Flow (-), $m
  7
  -7
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
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
 
  168
  43
  43
  44
  44
  45
  46
  47
  48
  50
  42
  44
  46
  48
  50
  53
  56
  59
  62
  65
  69
  73
  77
  81
  86
  91
  97
  102
  108
  115
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
 
  161
  40
  38
  36
  34
  33
  31
  29
  28
  26
  20
  19
  17
  16
  15
  13
  12
  11
  10
  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 -47.7
Price to Sales 3.3
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 20
Price to Free Cash Flow 22.9
Growth Rates
Sales Growth Rate -6.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.1%
Cap. Spend. - 3 Yr. Gr. Rate -5.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 18
Management Effectiveness
Return On Assets -4.7%
Ret/ On Assets - 3 Yr. Avg. -2.6%
Return On Total Capital -6.6%
Ret/ On T. Cap. - 3 Yr. Avg. -3.9%
Return On Equity -6.6%
Return On Equity - 3 Yr. Avg. -4.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 78.6%
Gross Margin - 3 Yr. Avg. 77.2%
EBITDA Margin 15.5%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 3.9%
Oper. Margin - 3 Yr. Avg. -0.4%
Pre-Tax Margin 3.5%
Pre-Tax Margin - 3 Yr. Avg. -1.7%
Net Profit Margin -7%
Net Profit Margin - 3 Yr. Avg. -5%
Effective Tax Rate 300%
Eff/ Tax Rate - 3 Yr. Avg. 126%
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 2016 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 25.1%.

Life of production assets of 8.1 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 - $512 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 82.952 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.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
VIAV Viavi Solution 9.90 0.78  str.sell
KEYS Keysight Techn 35.88 32.01  hold
JNPR Juniper Networ 27.78 49.57  str.buy
CSCO Cisco Systems 32.82 42.04  buy
HPE Hewlett Packar 18.14 35.74  str.buy
FTV Fortive 60.01 45.32  sell
IBM International 160.38 171.52  hold

COMPANY NEWS

▶ Ixia Announces Collaboration with the CORD Project   [Apr-19-17 07:30AM  Business Wire]
▶ Ixia Delivers End-to-End Visibility for Public Cloud   [Apr-04-17 07:30AM  Business Wire]
▶ Ixia Releases First Annual Security Report   [Mar-20-17 07:30AM  Business Wire]
▶ Ixia Helps Partners Achieve Greater Profitability   [Jan-17-17 03:04PM  Business Wire]
▶ Why Ixia Stock Jumped 18% on Friday   [Dec-02-16 06:22PM  at Motley Fool]
▶ Is Ixia (XXIA) Going to Burn These Hedge Funds?   [02:21PM  at Insider Monkey]
Stock chart of XXIA Financial statements of XXIA
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.