Intrinsic value of Akamai Technologies, Inc. - AKAM

Previous Close

$82.46

  Intrinsic Value

$26.76

stock screener

  Rating & Target

str. sell

-68%

Previous close

$82.46

 
Intrinsic value

$26.76

 
Up/down potential

-68%

 
Rating

str. sell

We calculate the intrinsic value of AKAM 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 13.5

 

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, %
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
Revenue, $m
  2,939
  3,174
  3,417
  3,670
  3,933
  4,206
  4,490
  4,786
  5,093
  5,413
  5,746
  6,093
  6,454
  6,831
  7,224
  7,634
  8,063
  8,510
  8,978
  9,467
  9,978
  10,513
  11,073
  11,659
  12,272
  12,915
  13,588
  14,294
  15,033
  15,808
Variable operating expenses, $m
  2,309
  2,485
  2,669
  2,860
  3,058
  3,265
  3,479
  3,702
  3,934
  4,175
  4,335
  4,596
  4,869
  5,153
  5,450
  5,760
  6,083
  6,420
  6,773
  7,142
  7,528
  7,931
  8,354
  8,796
  9,259
  9,744
  10,252
  10,784
  11,342
  11,926
Fixed operating expenses, $m
  224
  229
  234
  239
  244
  250
  255
  261
  266
  272
  278
  284
  291
  297
  304
  310
  317
  324
  331
  338
  346
  353
  361
  369
  377
  386
  394
  403
  412
  421
Total operating expenses, $m
  2,533
  2,714
  2,903
  3,099
  3,302
  3,515
  3,734
  3,963
  4,200
  4,447
  4,613
  4,880
  5,160
  5,450
  5,754
  6,070
  6,400
  6,744
  7,104
  7,480
  7,874
  8,284
  8,715
  9,165
  9,636
  10,130
  10,646
  11,187
  11,754
  12,347
Operating income, $m
  407
  459
  514
  571
  631
  692
  757
  823
  893
  966
  1,133
  1,212
  1,294
  1,380
  1,470
  1,564
  1,663
  1,766
  1,874
  1,986
  2,104
  2,228
  2,358
  2,494
  2,636
  2,786
  2,943
  3,107
  3,280
  3,461
EBITDA, $m
  815
  893
  974
  1,058
  1,146
  1,237
  1,332
  1,430
  1,533
  1,640
  1,752
  1,869
  1,990
  2,117
  2,249
  2,387
  2,532
  2,683
  2,841
  3,007
  3,180
  3,361
  3,551
  3,751
  3,959
  4,178
  4,408
  4,648
  4,901
  5,165
Interest expense (income), $m
  0
  84
  91
  99
  106
  114
  123
  131
  140
  150
  159
  169
  180
  191
  202
  214
  226
  239
  253
  267
  282
  297
  313
  330
  348
  366
  386
  406
  427
  449
  473
Earnings before tax, $m
  323
  368
  415
  465
  516
  570
  625
  683
  744
  807
  963
  1,032
  1,103
  1,178
  1,256
  1,338
  1,423
  1,513
  1,606
  1,705
  1,807
  1,915
  2,028
  2,146
  2,270
  2,400
  2,537
  2,680
  2,831
  2,989
Tax expense, $m
  87
  99
  112
  125
  139
  154
  169
  184
  201
  218
  260
  279
  298
  318
  339
  361
  384
  408
  434
  460
  488
  517
  547
  579
  613
  648
  685
  724
  764
  807
Net income, $m
  235
  269
  303
  339
  377
  416
  456
  499
  543
  589
  703
  753
  806
  860
  917
  977
  1,039
  1,104
  1,173
  1,244
  1,319
  1,398
  1,480
  1,567
  1,657
  1,752
  1,852
  1,957
  2,066
  2,182

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
  4,433
  4,787
  5,154
  5,536
  5,932
  6,344
  6,773
  7,218
  7,682
  8,164
  8,666
  9,189
  9,735
  10,303
  10,896
  11,515
  12,161
  12,836
  13,541
  14,279
  15,050
  15,857
  16,701
  17,585
  18,510
  19,480
  20,495
  21,559
  22,675
  23,844
Adjusted assets (=assets-cash), $m
  4,433
  4,787
  5,154
  5,536
  5,932
  6,344
  6,773
  7,218
  7,682
  8,164
  8,666
  9,189
  9,735
  10,303
  10,896
  11,515
  12,161
  12,836
  13,541
  14,279
  15,050
  15,857
  16,701
  17,585
  18,510
  19,480
  20,495
  21,559
  22,675
  23,844
Revenue / Adjusted assets
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
Average production assets, $m
  1,869
  2,018
  2,173
  2,334
  2,501
  2,675
  2,856
  3,044
  3,239
  3,443
  3,654
  3,875
  4,105
  4,344
  4,594
  4,855
  5,128
  5,412
  5,710
  6,021
  6,346
  6,686
  7,042
  7,415
  7,805
  8,214
  8,642
  9,091
  9,561
  10,054
Working capital, $m
  129
  140
  150
  161
  173
  185
  198
  211
  224
  238
  253
  268
  284
  301
  318
  336
  355
  374
  395
  417
  439
  463
  487
  513
  540
  568
  598
  629
  661
  696
Total debt, $m
  1,693
  1,830
  1,972
  2,120
  2,273
  2,433
  2,598
  2,771
  2,950
  3,137
  3,331
  3,534
  3,745
  3,965
  4,194
  4,433
  4,684
  4,945
  5,218
  5,503
  5,802
  6,114
  6,441
  6,783
  7,141
  7,516
  7,909
  8,321
  8,752
  9,205
Total liabilities, $m
  1,716
  1,852
  1,995
  2,142
  2,296
  2,455
  2,621
  2,794
  2,973
  3,160
  3,354
  3,556
  3,767
  3,987
  4,217
  4,456
  4,706
  4,967
  5,240
  5,526
  5,824
  6,137
  6,463
  6,805
  7,164
  7,539
  7,932
  8,343
  8,775
  9,227
Total equity, $m
  2,718
  2,934
  3,159
  3,393
  3,636
  3,889
  4,152
  4,425
  4,709
  5,005
  5,312
  5,633
  5,967
  6,316
  6,679
  7,058
  7,455
  7,868
  8,301
  8,753
  9,226
  9,720
  10,238
  10,780
  11,347
  11,941
  12,564
  13,216
  13,900
  14,616
Total liabilities and equity, $m
  4,434
  4,786
  5,154
  5,535
  5,932
  6,344
  6,773
  7,219
  7,682
  8,165
  8,666
  9,189
  9,734
  10,303
  10,896
  11,514
  12,161
  12,835
  13,541
  14,279
  15,050
  15,857
  16,701
  17,585
  18,511
  19,480
  20,496
  21,559
  22,675
  23,843
Debt-to-equity ratio
  0.620
  0.620
  0.620
  0.620
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
Adjusted equity ratio
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  235
  269
  303
  339
  377
  416
  456
  499
  543
  589
  703
  753
  806
  860
  917
  977
  1,039
  1,104
  1,173
  1,244
  1,319
  1,398
  1,480
  1,567
  1,657
  1,752
  1,852
  1,957
  2,066
  2,182
Depreciation, amort., depletion, $m
  408
  433
  459
  487
  515
  545
  575
  607
  640
  675
  619
  657
  696
  736
  779
  823
  869
  917
  968
  1,020
  1,076
  1,133
  1,194
  1,257
  1,323
  1,392
  1,465
  1,541
  1,621
  1,704
Funds from operations, $m
  643
  702
  763
  826
  892
  960
  1,032
  1,106
  1,183
  1,263
  1,323
  1,410
  1,501
  1,596
  1,696
  1,800
  1,908
  2,022
  2,141
  2,265
  2,395
  2,531
  2,674
  2,823
  2,980
  3,144
  3,317
  3,497
  3,687
  3,886
Change in working capital, $m
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  22
  24
  25
  26
  27
  28
  30
  31
  33
  34
Cash from operations, $m
  634
  692
  752
  815
  880
  948
  1,019
  1,093
  1,169
  1,249
  1,308
  1,395
  1,485
  1,580
  1,679
  1,782
  1,889
  2,002
  2,120
  2,243
  2,372
  2,508
  2,649
  2,798
  2,953
  3,116
  3,287
  3,466
  3,654
  3,852
Maintenance CAPEX, $m
  -292
  -317
  -342
  -368
  -396
  -424
  -453
  -484
  -516
  -549
  -583
  -619
  -657
  -696
  -736
  -779
  -823
  -869
  -917
  -968
  -1,020
  -1,076
  -1,133
  -1,194
  -1,257
  -1,323
  -1,392
  -1,465
  -1,541
  -1,621
New CAPEX, $m
  -144
  -149
  -155
  -161
  -167
  -174
  -181
  -188
  -195
  -203
  -212
  -221
  -230
  -240
  -250
  -261
  -272
  -285
  -297
  -311
  -325
  -340
  -356
  -373
  -390
  -409
  -428
  -449
  -470
  -493
Cash from investing activities, $m
  -436
  -466
  -497
  -529
  -563
  -598
  -634
  -672
  -711
  -752
  -795
  -840
  -887
  -936
  -986
  -1,040
  -1,095
  -1,154
  -1,214
  -1,279
  -1,345
  -1,416
  -1,489
  -1,567
  -1,647
  -1,732
  -1,820
  -1,914
  -2,011
  -2,114
Free cash flow, $m
  197
  226
  255
  286
  317
  350
  385
  421
  458
  497
  513
  555
  599
  644
  692
  742
  794
  848
  905
  965
  1,027
  1,092
  1,160
  1,231
  1,306
  1,384
  1,467
  1,553
  1,643
  1,738
Issuance/(repayment) of debt, $m
  132
  137
  142
  148
  153
  160
  166
  172
  179
  187
  194
  202
  211
  220
  229
  239
  250
  261
  273
  285
  298
  312
  327
  342
  358
  375
  393
  412
  432
  452
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
Cash from financing (excl. dividends), $m  
  132
  137
  142
  148
  153
  160
  166
  172
  179
  187
  194
  202
  211
  220
  229
  239
  250
  261
  273
  285
  298
  312
  327
  342
  358
  375
  393
  412
  432
  452
Total cash flow (excl. dividends), $m
  330
  362
  397
  433
  471
  510
  551
  593
  637
  684
  707
  757
  810
  864
  922
  981
  1,044
  1,110
  1,178
  1,250
  1,325
  1,404
  1,487
  1,573
  1,664
  1,760
  1,860
  1,965
  2,075
  2,191
Retained Cash Flow (-), $m
  -207
  -217
  -225
  -234
  -243
  -253
  -263
  -273
  -284
  -296
  -308
  -321
  -334
  -348
  -363
  -379
  -396
  -414
  -432
  -452
  -473
  -495
  -518
  -542
  -567
  -594
  -623
  -652
  -684
  -717
Prev. year cash balance distribution, $m
  681
  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
  804
  146
  172
  199
  228
  257
  288
  320
  353
  388
  399
  437
  476
  516
  558
  602
  648
  696
  746
  798
  852
  909
  969
  1,032
  1,097
  1,165
  1,237
  1,312
  1,391
  1,474
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
  771
  134
  150
  164
  177
  187
  195
  200
  203
  203
  190
  186
  181
  173
  164
  153
  141
  128
  115
  101
  88
  75
  64
  53
  43
  34
  27
  20
  15
  11
Current shareholders' claim on cash, %
  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

Akamai Technologies, Inc. is engaged in providing cloud services for delivering, optimizing and securing content and business applications over the Internet. The Company is involved in offering content delivery network (CDN) services. Its services include the delivery of content, applications and software over the Internet, as well as mobile and security solutions. Its solutions include Performance and Security Solutions, Media Delivery Solutions, and Service and Support Solutions. Its Performance and Security Solutions include Web and Mobile Performance Solutions, Cloud Security Solutions, Enterprise Solutions and Network Operator Solutions. The Media Delivery Solutions offerings include Adaptive Delivery solutions, Download Delivery offerings, Infinite Media Acceleration solutions Media Services and Media Analytics. It offers a range of professional services and solutions designed to assist its customers with integrating, configuring, optimizing and managing its core offerings.

FINANCIAL RATIOS  of  Akamai Technologies, Inc. (AKAM)

Valuation Ratios
P/E Ratio 45.2
Price to Sales 6.1
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow 16.5
Price to Free Cash Flow 26
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -29%
Cap. Spend. - 3 Yr. Gr. Rate 4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 19.9%
Total Debt to Equity 19.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.4%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital 8.3%
Ret/ On T. Cap. - 3 Yr. Avg. 9.3%
Return On Equity 10%
Return On Equity - 3 Yr. Avg. 10.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 65.4%
Gross Margin - 3 Yr. Avg. 67.1%
EBITDA Margin 33.9%
EBITDA Margin - 3 Yr. Avg. 35.1%
Operating Margin 19.7%
Oper. Margin - 3 Yr. Avg. 21.9%
Pre-Tax Margin 19.6%
Pre-Tax Margin - 3 Yr. Avg. 21.6%
Net Profit Margin 13.5%
Net Profit Margin - 3 Yr. Avg. 15%
Effective Tax Rate 31.2%
Eff/ Tax Rate - 3 Yr. Avg. 30.4%
Payout Ratio 0%

AKAM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AKAM stock intrinsic value calculation we used $2714 million for the last fiscal year's total revenue generated by Akamai Technologies, Inc.. The default revenue input number comes from 0001 income statement of Akamai Technologies, 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 AKAM stock valuation model: a) initial revenue growth rate of 8.3% 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 AKAM is calculated based on our internal credit rating of Akamai Technologies, 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 Akamai Technologies, 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 AKAM stock the variable cost ratio is equal to 78.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $219 million in the base year in the intrinsic value calculation for AKAM 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 Akamai Technologies, Inc..

Corporate tax rate of 27% is the nominal tax rate for Akamai Technologies, 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 AKAM 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 AKAM are equal to 63.6%.

Life of production assets of 5.9 years is the average useful life of capital assets used in Akamai Technologies, 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 AKAM is equal to 4.4%. 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 - $3191.86 million for Akamai Technologies, 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 163.240 million for Akamai Technologies, 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 Akamai Technologies, Inc. at the current share price and the inputted number of shares is $13.5 billion.

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