Intrinsic value of Acacia Communications, Inc. - ACIA

Previous Close

$55.93

  Intrinsic Value

$151.00

stock screener

  Rating & Target

str. buy

+170%

Previous close

$55.93

 
Intrinsic value

$151.00

 
Up/down potential

+170%

 
Rating

str. buy

We calculate the intrinsic value of ACIA 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 0001), $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 2.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  23.70
  21.83
  20.15
  18.63
  17.27
  16.04
  14.94
  13.94
  13.05
  12.24
  11.52
  10.87
  10.28
  9.75
  9.28
  8.85
  8.47
  8.12
  7.81
  7.53
  7.27
  7.05
  6.84
  6.66
  6.49
  6.34
  6.21
  6.09
  5.98
  5.88
Revenue, $m
  421
  512
  616
  730
  856
  994
  1,142
  1,302
  1,471
  1,652
  1,842
  2,042
  2,252
  2,472
  2,701
  2,940
  3,189
  3,448
  3,717
  3,997
  4,287
  4,590
  4,903
  5,230
  5,569
  5,923
  6,290
  6,673
  7,072
  7,488
Variable operating expenses, $m
  75
  90
  108
  128
  149
  173
  198
  225
  254
  285
  315
  349
  385
  423
  462
  503
  545
  590
  636
  684
  733
  785
  839
  895
  953
  1,013
  1,076
  1,142
  1,210
  1,281
Fixed operating expenses, $m
  290
  297
  303
  310
  317
  324
  331
  338
  345
  353
  361
  369
  377
  385
  394
  402
  411
  420
  429
  439
  449
  458
  468
  479
  489
  500
  511
  522
  534
  546
Total operating expenses, $m
  365
  387
  411
  438
  466
  497
  529
  563
  599
  638
  676
  718
  762
  808
  856
  905
  956
  1,010
  1,065
  1,123
  1,182
  1,243
  1,307
  1,374
  1,442
  1,513
  1,587
  1,664
  1,744
  1,827
Operating income, $m
  56
  125
  204
  293
  391
  498
  613
  738
  872
  1,013
  1,166
  1,324
  1,490
  1,664
  1,845
  2,035
  2,232
  2,438
  2,652
  2,874
  3,105
  3,346
  3,596
  3,857
  4,127
  4,409
  4,703
  5,009
  5,329
  5,662
EBITDA, $m
  65
  136
  217
  307
  407
  516
  635
  762
  898
  1,043
  1,196
  1,357
  1,526
  1,704
  1,889
  2,082
  2,284
  2,494
  2,712
  2,939
  3,175
  3,420
  3,676
  3,941
  4,218
  4,505
  4,805
  5,118
  5,443
  5,783
Interest expense (income), $m
  0
  0
  1
  3
  4
  6
  8
  10
  13
  15
  18
  21
  24
  27
  30
  34
  37
  41
  45
  49
  53
  58
  62
  67
  72
  77
  82
  88
  94
  100
  106
Earnings before tax, $m
  56
  124
  202
  289
  384
  489
  603
  726
  856
  996
  1,145
  1,300
  1,463
  1,634
  1,812
  1,998
  2,191
  2,393
  2,603
  2,821
  3,048
  3,284
  3,529
  3,785
  4,051
  4,327
  4,615
  4,916
  5,229
  5,556
Tax expense, $m
  15
  34
  54
  78
  104
  132
  163
  196
  231
  269
  309
  351
  395
  441
  489
  539
  592
  646
  703
  762
  823
  887
  953
  1,022
  1,094
  1,168
  1,246
  1,327
  1,412
  1,500
Net income, $m
  41
  91
  147
  211
  281
  357
  440
  530
  625
  727
  836
  949
  1,068
  1,193
  1,323
  1,458
  1,600
  1,747
  1,900
  2,059
  2,225
  2,397
  2,576
  2,763
  2,957
  3,159
  3,369
  3,589
  3,817
  4,056

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
Total assets, $m
  446
  543
  652
  774
  907
  1,053
  1,210
  1,379
  1,559
  1,750
  1,951
  2,163
  2,386
  2,618
  2,861
  3,114
  3,378
  3,652
  3,937
  4,234
  4,542
  4,862
  5,194
  5,540
  5,900
  6,274
  6,664
  7,069
  7,492
  7,932
Adjusted assets (=assets-cash), $m
  446
  543
  652
  774
  907
  1,053
  1,210
  1,379
  1,559
  1,750
  1,951
  2,163
  2,386
  2,618
  2,861
  3,114
  3,378
  3,652
  3,937
  4,234
  4,542
  4,862
  5,194
  5,540
  5,900
  6,274
  6,664
  7,069
  7,492
  7,932
Revenue / Adjusted assets
  0.944
  0.943
  0.945
  0.943
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
  0.944
Average production assets, $m
  34
  42
  50
  59
  69
  81
  93
  105
  119
  134
  149
  165
  182
  200
  219
  238
  258
  279
  301
  324
  347
  372
  397
  424
  451
  480
  510
  541
  573
  607
Working capital, $m
  56
  68
  82
  97
  114
  132
  152
  173
  196
  220
  245
  272
  300
  329
  359
  391
  424
  459
  494
  532
  570
  610
  652
  696
  741
  788
  837
  888
  941
  996
Total debt, $m
  23
  50
  80
  114
  150
  190
  234
  280
  330
  382
  437
  496
  557
  621
  688
  757
  830
  905
  984
  1,065
  1,150
  1,238
  1,329
  1,424
  1,523
  1,626
  1,733
  1,845
  1,961
  2,082
Total liabilities, $m
  123
  149
  179
  213
  249
  290
  333
  379
  429
  481
  537
  595
  656
  720
  787
  856
  929
  1,004
  1,083
  1,164
  1,249
  1,337
  1,428
  1,524
  1,622
  1,725
  1,832
  1,944
  2,060
  2,181
Total equity, $m
  323
  394
  473
  561
  658
  763
  877
  1,000
  1,130
  1,268
  1,415
  1,568
  1,730
  1,898
  2,074
  2,258
  2,449
  2,648
  2,855
  3,070
  3,293
  3,525
  3,766
  4,017
  4,277
  4,549
  4,831
  5,125
  5,432
  5,751
Total liabilities and equity, $m
  446
  543
  652
  774
  907
  1,053
  1,210
  1,379
  1,559
  1,749
  1,952
  2,163
  2,386
  2,618
  2,861
  3,114
  3,378
  3,652
  3,938
  4,234
  4,542
  4,862
  5,194
  5,541
  5,899
  6,274
  6,663
  7,069
  7,492
  7,932
Debt-to-equity ratio
  0.070
  0.130
  0.170
  0.200
  0.230
  0.250
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
Adjusted equity ratio
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  41
  91
  147
  211
  281
  357
  440
  530
  625
  727
  836
  949
  1,068
  1,193
  1,323
  1,458
  1,600
  1,747
  1,900
  2,059
  2,225
  2,397
  2,576
  2,763
  2,957
  3,159
  3,369
  3,589
  3,817
  4,056
Depreciation, amort., depletion, $m
  10
  11
  13
  15
  17
  19
  21
  24
  27
  29
  30
  33
  36
  40
  44
  48
  52
  56
  60
  65
  69
  74
  79
  85
  90
  96
  102
  108
  115
  121
Funds from operations, $m
  50
  102
  160
  225
  297
  376
  462
  553
  652
  756
  866
  982
  1,105
  1,233
  1,366
  1,506
  1,651
  1,803
  1,960
  2,124
  2,294
  2,472
  2,656
  2,848
  3,047
  3,255
  3,471
  3,697
  3,932
  4,177
Change in working capital, $m
  11
  12
  14
  15
  17
  18
  20
  21
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
Cash from operations, $m
  39
  89
  146
  210
  280
  358
  442
  532
  629
  732
  841
  956
  1,077
  1,203
  1,336
  1,474
  1,618
  1,768
  1,924
  2,087
  2,256
  2,431
  2,614
  2,804
  3,002
  3,208
  3,422
  3,646
  3,879
  4,122
Maintenance CAPEX, $m
  -5
  -7
  -8
  -10
  -12
  -14
  -16
  -19
  -21
  -24
  -27
  -30
  -33
  -36
  -40
  -44
  -48
  -52
  -56
  -60
  -65
  -69
  -74
  -79
  -85
  -90
  -96
  -102
  -108
  -115
New CAPEX, $m
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -34
Cash from investing activities, $m
  -12
  -14
  -16
  -19
  -22
  -25
  -28
  -32
  -35
  -39
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -78
  -83
  -89
  -93
  -99
  -105
  -113
  -119
  -126
  -133
  -140
  -149
Free cash flow, $m
  27
  75
  130
  191
  258
  333
  414
  501
  594
  694
  798
  910
  1,027
  1,149
  1,277
  1,411
  1,550
  1,696
  1,847
  2,004
  2,168
  2,338
  2,514
  2,698
  2,890
  3,089
  3,297
  3,513
  3,738
  3,973
Issuance/(repayment) of debt, $m
  23
  27
  30
  33
  37
  40
  43
  46
  49
  52
  55
  58
  61
  64
  67
  70
  73
  75
  78
  81
  85
  88
  91
  95
  99
  103
  107
  112
  116
  121
Issuance/(repurchase) of shares, $m
  21
  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  
  44
  27
  30
  33
  37
  40
  43
  46
  49
  52
  55
  58
  61
  64
  67
  70
  73
  75
  78
  81
  85
  88
  91
  95
  99
  103
  107
  112
  116
  121
Total cash flow (excl. dividends), $m
  71
  102
  160
  224
  295
  373
  457
  547
  644
  746
  854
  968
  1,088
  1,213
  1,344
  1,481
  1,623
  1,771
  1,925
  2,086
  2,252
  2,426
  2,606
  2,793
  2,989
  3,192
  3,404
  3,624
  3,855
  4,095
Retained Cash Flow (-), $m
  -62
  -71
  -79
  -88
  -97
  -106
  -114
  -122
  -130
  -138
  -146
  -154
  -161
  -169
  -176
  -184
  -191
  -199
  -207
  -215
  -223
  -232
  -241
  -251
  -261
  -271
  -282
  -294
  -306
  -319
Prev. year cash balance distribution, $m
  242
  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
  252
  31
  80
  136
  198
  267
  343
  425
  513
  608
  708
  814
  926
  1,044
  1,168
  1,297
  1,432
  1,572
  1,719
  1,871
  2,029
  2,194
  2,365
  2,543
  2,728
  2,921
  3,121
  3,330
  3,548
  3,775
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
  241
  29
  70
  112
  154
  194
  232
  266
  295
  319
  336
  347
  352
  351
  343
  330
  312
  290
  265
  238
  210
  182
  155
  130
  106
  85
  67
  52
  39
  28
Current shareholders' claim on cash, %
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2

Acacia Communications, Inc. provides high-speed coherent interconnect products. The Company's products include a series of low-power coherent digital signal processor application-specific integrated circuits (DSP ASICs), and silicon photonic integrated circuits (silicon PICs), which it has integrated into families of optical interconnect modules with transmission speeds ranging from 100 to 400 gigabits per second (Gbps) for use in long-haul, metro and inter-data center markets. The Company is also developing optical interconnect modules that will enable transmission speeds of one terabit (1,000 gigabits) per second and above. The Company's modules perform a majority of the digital signal processing and optical functions in optical interconnects. The Company's coherent DSP ASICs are manufactured using complementary metal oxide semiconductor (CMOS), and its silicon PICs are manufactured using a CMOS-compatible process.

FINANCIAL RATIOS  of  Acacia Communications, Inc. (ACIA)

Valuation Ratios
P/E Ratio 16.1
Price to Sales 4.4
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 21
Price to Free Cash Flow 25.3
Growth Rates
Sales Growth Rate 100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.7%
Cap. Spend. - 3 Yr. Gr. Rate 41.5%
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 40.7%
Ret/ On Assets - 3 Yr. Avg. 35.2%
Return On Total Capital 51.4%
Ret/ On T. Cap. - 3 Yr. Avg. 53.6%
Return On Equity 51.4%
Return On Equity - 3 Yr. Avg. 56.2%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 46.2%
Gross Margin - 3 Yr. Avg. 40.6%
EBITDA Margin 25.9%
EBITDA Margin - 3 Yr. Avg. 19.3%
Operating Margin 24.5%
Oper. Margin - 3 Yr. Avg. 17.9%
Pre-Tax Margin 24.1%
Pre-Tax Margin - 3 Yr. Avg. 17.3%
Net Profit Margin 27.6%
Net Profit Margin - 3 Yr. Avg. 18.1%
Effective Tax Rate -14.8%
Eff/ Tax Rate - 3 Yr. Avg. -1.6%
Payout Ratio 0%

ACIA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACIA stock intrinsic value calculation we used $340 million for the last fiscal year's total revenue generated by Acacia Communications, Inc.. The default revenue input number comes from 0001 income statement of Acacia Communications, Inc.. 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 ACIA stock valuation model: a) initial revenue growth rate of 23.7% 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 ACIA is calculated based on our internal credit rating of Acacia Communications, Inc., 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 Acacia Communications, Inc..
    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 ACIA stock the variable cost ratio is equal to 17.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $284 million in the base year in the intrinsic value calculation for ACIA 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 5.4% for Acacia Communications, Inc..

Corporate tax rate of 27% is the nominal tax rate for Acacia Communications, Inc.. 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 ACIA 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 ACIA are equal to 8.1%.

Life of production assets of 2 years is the average useful life of capital assets used in Acacia Communications, Inc. 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 ACIA is equal to 13.3%. 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 - $502.727 million for Acacia Communications, Inc. - 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 40.244 million for Acacia Communications, Inc. 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 Acacia Communications, Inc. at the current share price and the inputted number of shares is $2.3 billion.

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