Intrinsic value of A10 Networks - ATEN

Previous Close

$5.97

  Intrinsic Value

$13.78

stock screener

  Rating & Target

str. buy

+131%

Previous close

$5.97

 
Intrinsic value

$13.78

 
Up/down potential

+131%

 
Rating

str. buy

We calculate the intrinsic value of ATEN 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 0.4

 

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, %
  11.50
  10.85
  10.27
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.20
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
Revenue, $m
  256
  284
  313
  344
  376
  409
  444
  480
  517
  556
  596
  638
  682
  727
  774
  824
  875
  928
  983
  1,041
  1,101
  1,164
  1,230
  1,299
  1,370
  1,445
  1,523
  1,605
  1,691
  1,781
Variable operating expenses, $m
  97
  107
  118
  130
  142
  154
  167
  180
  194
  209
  223
  239
  255
  272
  290
  308
  328
  348
  368
  390
  413
  436
  461
  486
  513
  541
  571
  601
  633
  667
Fixed operating expenses, $m
  170
  173
  177
  181
  185
  189
  193
  198
  202
  206
  211
  216
  220
  225
  230
  235
  240
  246
  251
  257
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
Total operating expenses, $m
  267
  280
  295
  311
  327
  343
  360
  378
  396
  415
  434
  455
  475
  497
  520
  543
  568
  594
  619
  647
  675
  704
  735
  766
  799
  833
  870
  906
  945
  986
Operating income, $m
  -10
  4
  18
  33
  49
  66
  83
  102
  121
  141
  162
  184
  206
  230
  254
  280
  307
  335
  364
  395
  427
  460
  495
  532
  571
  612
  654
  699
  746
  795
EBITDA, $m
  -7
  7
  22
  37
  53
  70
  88
  107
  126
  146
  168
  190
  213
  236
  261
  288
  315
  343
  373
  404
  437
  471
  507
  544
  584
  625
  668
  714
  761
  811
Interest expense (income), $m
  0
  0
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
Earnings before tax, $m
  -10
  3
  16
  31
  46
  61
  78
  95
  113
  131
  152
  172
  193
  215
  239
  263
  288
  314
  342
  371
  401
  433
  466
  501
  537
  575
  616
  658
  702
  749
Tax expense, $m
  0
  1
  4
  8
  12
  17
  21
  26
  30
  35
  41
  46
  52
  58
  64
  71
  78
  85
  92
  100
  108
  117
  126
  135
  145
  155
  166
  178
  190
  202
Net income, $m
  -10
  2
  12
  22
  33
  45
  57
  69
  82
  96
  111
  126
  141
  157
  174
  192
  210
  229
  250
  271
  293
  316
  340
  365
  392
  420
  449
  480
  512
  546

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
  234
  259
  286
  314
  343
  373
  404
  437
  471
  507
  544
  582
  622
  663
  706
  751
  797
  846
  896
  949
  1,004
  1,061
  1,121
  1,184
  1,249
  1,317
  1,389
  1,463
  1,542
  1,623
Adjusted assets (=assets-cash), $m
  234
  259
  286
  314
  343
  373
  404
  437
  471
  507
  544
  582
  622
  663
  706
  751
  797
  846
  896
  949
  1,004
  1,061
  1,121
  1,184
  1,249
  1,317
  1,389
  1,463
  1,542
  1,623
Revenue / Adjusted assets
  1.094
  1.097
  1.094
  1.096
  1.096
  1.097
  1.099
  1.098
  1.098
  1.097
  1.096
  1.096
  1.096
  1.097
  1.096
  1.097
  1.098
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.096
  1.097
  1.097
  1.097
Average production assets, $m
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  27
  29
  31
  33
  36
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  66
  70
  74
  78
  82
Working capital, $m
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -43
  -46
  -49
  -53
  -56
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
Total debt, $m
  16
  32
  49
  67
  86
  105
  126
  147
  169
  192
  215
  240
  266
  292
  320
  349
  379
  410
  443
  477
  512
  549
  588
  628
  670
  714
  760
  809
  859
  912
Total liabilities, $m
  151
  167
  184
  202
  221
  241
  261
  282
  304
  327
  351
  375
  401
  428
  455
  484
  514
  546
  578
  612
  648
  685
  723
  763
  806
  850
  896
  944
  994
  1,047
Total equity, $m
  83
  92
  101
  111
  122
  132
  144
  155
  167
  180
  193
  207
  221
  235
  251
  267
  283
  300
  318
  337
  356
  377
  398
  420
  443
  468
  493
  520
  547
  576
Total liabilities and equity, $m
  234
  259
  285
  313
  343
  373
  405
  437
  471
  507
  544
  582
  622
  663
  706
  751
  797
  846
  896
  949
  1,004
  1,062
  1,121
  1,183
  1,249
  1,318
  1,389
  1,464
  1,541
  1,623
Debt-to-equity ratio
  0.190
  0.350
  0.480
  0.600
  0.700
  0.800
  0.870
  0.950
  1.010
  1.060
  1.120
  1.160
  1.200
  1.240
  1.280
  1.310
  1.340
  1.370
  1.390
  1.420
  1.440
  1.460
  1.480
  1.490
  1.510
  1.530
  1.540
  1.560
  1.570
  1.580
Adjusted equity ratio
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -10
  2
  12
  22
  33
  45
  57
  69
  82
  96
  111
  126
  141
  157
  174
  192
  210
  229
  250
  271
  293
  316
  340
  365
  392
  420
  449
  480
  512
  546
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
Funds from operations, $m
  -7
  5
  16
  26
  38
  49
  62
  74
  88
  102
  116
  131
  147
  164
  181
  199
  218
  238
  259
  280
  303
  327
  351
  377
  405
  433
  463
  495
  528
  563
Change in working capital, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Cash from operations, $m
  -5
  7
  18
  28
  40
  52
  64
  77
  90
  104
  119
  134
  150
  167
  184
  203
  222
  242
  262
  284
  307
  331
  356
  382
  410
  438
  469
  500
  534
  569
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -3
  -3
  -4
  -4
  -4
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
Free cash flow, $m
  -8
  4
  14
  24
  35
  47
  59
  71
  84
  98
  112
  127
  142
  159
  176
  193
  212
  231
  251
  272
  295
  318
  342
  368
  394
  422
  452
  483
  515
  549
Issuance/(repayment) of debt, $m
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
  50
  53
Issuance/(repurchase) of shares, $m
  19
  7
  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  
  35
  23
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
  50
  53
Total cash flow (excl. dividends), $m
  25
  27
  31
  42
  54
  66
  79
  92
  106
  121
  136
  152
  168
  185
  203
  222
  242
  262
  284
  306
  330
  355
  381
  408
  436
  466
  498
  531
  566
  602
Retained Cash Flow (-), $m
  -19
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
Prev. year cash balance distribution, $m
  12
  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
  19
  18
  21
  32
  43
  55
  68
  81
  94
  108
  123
  138
  154
  171
  188
  206
  225
  245
  266
  288
  311
  334
  359
  386
  413
  442
  472
  504
  538
  573
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
  18
  16
  19
  26
  34
  40
  46
  50
  54
  57
  58
  59
  59
  57
  55
  52
  49
  45
  41
  37
  32
  28
  24
  20
  16
  13
  10
  8
  6
  4
Current shareholders' claim on cash, %
  95.2
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6

A10 Networks, Inc. is a provider of software and hardware solutions. The Company's solutions enable its customers to secure and optimize the performance of their data center and cloud applications, and secure their users, applications and infrastructure from Internet, Web and network threats at scale. The Company offers a portfolio of hardware, software and cloud offerings. Its customers include cloud providers, Web-scale companies, service providers, government organizations and enterprises. The Company's portfolio consists of six application delivery and security products, including Application Delivery Controllers (ADC), Lightning Application Delivery Service (Lightning ADS), Carrier Grade Network Address Translation (CGN), Threat Protection System (TPS), SSL Insight (SSLi) and Convergent Firewall (CFW). The Company's products are available in a range of form factors, such as optimized hardware appliances, bare metal software, virtual appliances and cloud-native software.

FINANCIAL RATIOS  of  A10 Networks (ATEN)

Valuation Ratios
P/E Ratio -19.3
Price to Sales 1.8
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 21.3
Price to Free Cash Flow 31.2
Growth Rates
Sales Growth Rate 15.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
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 -10.1%
Ret/ On Assets - 3 Yr. Avg. -18.5%
Return On Total Capital -25.3%
Ret/ On T. Cap. - 3 Yr. Avg. -45.1%
Return On Equity -25.3%
Return On Equity - 3 Yr. Avg. -50%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 76.1%
Gross Margin - 3 Yr. Avg. 75.9%
EBITDA Margin -5.2%
EBITDA Margin - 3 Yr. Avg. -10.8%
Operating Margin -8.3%
Oper. Margin - 3 Yr. Avg. -14.7%
Pre-Tax Margin -8.7%
Pre-Tax Margin - 3 Yr. Avg. -15.5%
Net Profit Margin -9.1%
Net Profit Margin - 3 Yr. Avg. -16.2%
Effective Tax Rate -5%
Eff/ Tax Rate - 3 Yr. Avg. -4.5%
Payout Ratio 0%

ATEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATEN stock intrinsic value calculation we used $230.003 million for the last fiscal year's total revenue generated by A10 Networks. The default revenue input number comes from 0001 income statement of A10 Networks. 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 ATEN stock valuation model: a) initial revenue growth rate of 11.5% 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 ATEN is calculated based on our internal credit rating of A10 Networks, 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 A10 Networks.
    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 ATEN stock the variable cost ratio is equal to 37.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $166 million in the base year in the intrinsic value calculation for ATEN 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 A10 Networks.

Corporate tax rate of 27% is the nominal tax rate for A10 Networks. 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 ATEN 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 ATEN are equal to 4.6%.

Life of production assets of 1.5 years is the average useful life of capital assets used in A10 Networks 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 ATEN is equal to -6.8%. 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 - $86.066 million for A10 Networks - 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 70.751 million for A10 Networks 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 A10 Networks at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Should You Get Rid of A10 Networks (ATEN) Now?   [Sep-28-18 08:56AM  Zacks]
▶ A10 Networks: 2Q Earnings Snapshot   [04:21PM  Associated Press]
▶ A10 Networks Names New Vice President of EMEA Sales   [Jun-27-18 08:00AM  Business Wire]
▶ Should You Buy A10 Networks Inc (NYSE:ATEN)?   [Jun-25-18 07:11AM  Simply Wall St.]
▶ 24 HOUR SHAREHOLDER DEADLINE ALERT: A10 Networks, Inc. ATEN   [May-20-18 01:58PM  GlobeNewswire]

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