Intrinsic value of A10 Networks - ATEN

Previous Close

$6.82

  Intrinsic Value

$24.17

stock screener

  Rating & Target

str. buy

+254%

Previous close

$6.82

 
Intrinsic value

$24.17

 
Up/down potential

+254%

 
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 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 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  15.60
  14.54
  13.59
  12.73
  11.95
  11.26
  10.63
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.69
  7.42
  7.18
  6.96
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.68
  5.62
  5.55
  5.50
Revenue, $m
  266
  305
  346
  390
  437
  486
  537
  591
  648
  707
  769
  833
  899
  968
  1,040
  1,115
  1,192
  1,273
  1,357
  1,444
  1,535
  1,630
  1,728
  1,831
  1,938
  2,050
  2,166
  2,288
  2,415
  2,548
Variable operating expenses, $m
  100
  115
  130
  147
  164
  183
  202
  222
  244
  266
  288
  312
  337
  363
  390
  418
  447
  477
  508
  541
  575
  610
  647
  686
  726
  768
  811
  857
  904
  954
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
  270
  288
  307
  328
  349
  372
  395
  420
  446
  472
  499
  528
  557
  588
  620
  653
  687
  723
  759
  798
  837
  878
  921
  966
  1,012
  1,060
  1,110
  1,162
  1,216
  1,273
Operating income, $m
  -4
  16
  38
  62
  87
  114
  142
  172
  203
  235
  270
  305
  342
  380
  421
  462
  506
  551
  598
  647
  698
  751
  807
  865
  926
  990
  1,056
  1,126
  1,198
  1,275
EBITDA, $m
  -2
  19
  41
  65
  90
  117
  146
  176
  207
  240
  274
  310
  347
  386
  426
  468
  512
  558
  605
  655
  706
  760
  817
  875
  937
  1,001
  1,068
  1,138
  1,211
  1,288
Interest expense (income), $m
  0
  0
  1
  2
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  41
  44
  48
  51
  54
  58
  61
  65
  69
Earnings before tax, $m
  -4
  15
  36
  58
  82
  107
  134
  162
  191
  222
  255
  288
  323
  359
  397
  436
  477
  520
  565
  611
  660
  710
  763
  818
  875
  935
  998
  1,064
  1,133
  1,205
Tax expense, $m
  0
  4
  10
  16
  22
  29
  36
  44
  52
  60
  69
  78
  87
  97
  107
  118
  129
  140
  152
  165
  178
  192
  206
  221
  236
  253
  270
  287
  306
  325
Net income, $m
  -4
  11
  26
  43
  60
  78
  98
  118
  140
  162
  186
  210
  236
  262
  290
  319
  349
  380
  412
  446
  481
  518
  557
  597
  639
  683
  729
  777
  827
  880

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
  242
  278
  315
  355
  398
  443
  490
  539
  591
  645
  701
  759
  820
  883
  948
  1,016
  1,087
  1,161
  1,237
  1,317
  1,399
  1,486
  1,575
  1,669
  1,767
  1,868
  1,975
  2,086
  2,201
  2,322
Adjusted assets (=assets-cash), $m
  242
  278
  315
  355
  398
  443
  490
  539
  591
  645
  701
  759
  820
  883
  948
  1,016
  1,087
  1,161
  1,237
  1,317
  1,399
  1,486
  1,575
  1,669
  1,767
  1,868
  1,975
  2,086
  2,201
  2,322
Revenue / Adjusted assets
  1.099
  1.097
  1.098
  1.099
  1.098
  1.097
  1.096
  1.096
  1.096
  1.096
  1.097
  1.097
  1.096
  1.096
  1.097
  1.097
  1.097
  1.096
  1.097
  1.096
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
Average production assets, $m
  14
  16
  19
  21
  24
  26
  29
  32
  35
  38
  42
  45
  49
  52
  56
  60
  64
  69
  73
  78
  83
  88
  93
  99
  105
  111
  117
  124
  130
  138
Working capital, $m
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
Total debt, $m
  21
  44
  68
  94
  121
  150
  181
  212
  246
  280
  317
  354
  393
  434
  476
  520
  566
  613
  663
  714
  767
  823
  881
  941
  1,004
  1,070
  1,138
  1,210
  1,285
  1,363
Total liabilities, $m
  156
  179
  203
  229
  257
  286
  316
  348
  381
  416
  452
  489
  529
  569
  612
  655
  701
  749
  798
  849
  903
  958
  1,016
  1,077
  1,139
  1,205
  1,274
  1,345
  1,420
  1,498
Total equity, $m
  86
  99
  112
  126
  141
  157
  174
  191
  210
  229
  249
  269
  291
  313
  337
  361
  386
  412
  439
  467
  497
  527
  559
  593
  627
  663
  701
  740
  781
  824
Total liabilities and equity, $m
  242
  278
  315
  355
  398
  443
  490
  539
  591
  645
  701
  758
  820
  882
  949
  1,016
  1,087
  1,161
  1,237
  1,316
  1,400
  1,485
  1,575
  1,670
  1,766
  1,868
  1,975
  2,085
  2,201
  2,322
Debt-to-equity ratio
  0.240
  0.440
  0.610
  0.740
  0.860
  0.960
  1.040
  1.110
  1.170
  1.230
  1.270
  1.310
  1.350
  1.380
  1.410
  1.440
  1.470
  1.490
  1.510
  1.530
  1.540
  1.560
  1.570
  1.590
  1.600
  1.610
  1.620
  1.630
  1.640
  1.650
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
  -4
  11
  26
  43
  60
  78
  98
  118
  140
  162
  186
  210
  236
  262
  290
  319
  349
  380
  412
  446
  481
  518
  557
  597
  639
  683
  729
  777
  827
  880
Depreciation, amort., depletion, $m
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
Funds from operations, $m
  -2
  14
  29
  45
  63
  82
  101
  122
  144
  167
  190
  215
  241
  267
  295
  325
  355
  387
  420
  454
  490
  527
  566
  607
  649
  694
  741
  789
  840
  894
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Cash from operations, $m
  -3
  13
  28
  44
  62
  81
  100
  121
  143
  165
  189
  213
  239
  266
  294
  323
  353
  385
  418
  452
  488
  525
  564
  605
  647
  691
  738
  786
  837
  891
Maintenance CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
Cash from investing activities, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -19
  -19
  -20
Free cash flow, $m
  -6
  9
  24
  40
  57
  76
  95
  115
  136
  159
  181
  206
  231
  257
  285
  313
  343
  374
  406
  440
  475
  512
  550
  590
  631
  675
  720
  768
  818
  870
Issuance/(repayment) of debt, $m
  21
  23
  24
  26
  27
  29
  30
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  78
Issuance/(repurchase) of shares, $m
  16
  1
  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  
  37
  24
  24
  26
  27
  29
  30
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  78
Total cash flow (excl. dividends), $m
  31
  33
  48
  66
  85
  105
  125
  147
  170
  193
  218
  243
  270
  298
  327
  357
  389
  421
  456
  491
  528
  567
  608
  650
  694
  741
  789
  840
  893
  948
Retained Cash Flow (-), $m
  -16
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
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
  17
  20
  23
  26
  29
  32
  36
  40
  44
  48
  52
  57
  62
  67
  72
  77
  82
  88
  94
  100
  107
  114
  121
  128
  135
  143
  152
  160
  169
  179
Cash available for distribution, $m
  27
  21
  35
  52
  70
  89
  108
  129
  151
  174
  198
  223
  249
  276
  304
  333
  364
  395
  428
  463
  499
  537
  576
  617
  660
  704
  751
  800
  852
  905
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
  26
  19
  31
  43
  54
  64
  73
  81
  87
  91
  94
  95
  95
  93
  89
  85
  79
  73
  66
  59
  52
  45
  38
  31
  26
  21
  16
  12
  9
  7
Current shareholders' claim on cash, %
  96.1
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8

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 -22
Price to Sales 2
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 24.4
Price to Free Cash Flow 35.6
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 million for the last fiscal year's total revenue generated by A10 Networks. The default revenue input number comes from 2016 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 15.6% 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 7.4%.

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 5.4%.

Life of production assets of 10 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 2.3%. 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 - $86 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 66 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 $0.5 billion.

RELATED COMPANIES Price Int.Val. Rating
FFIV F5 Networks 180.68 112.30  sell
RDWR Radware 26.99 7.89  str.sell
CSCO Cisco Systems 45.87 37.63  hold
MSFT Microsoft 107.58 60.61  sell
FTNT Fortinet 76.50 57.32  hold
JNPR Juniper Networ 27.74 32.29  buy
CTXS Citrix Systems 110.86 56.00  sell
PANW Palo Alto Netw 213.09 36.06  str.sell

COMPANY NEWS

▶ 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]
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

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

Copyright © X-FIN.com 2005-2018. All rigths reserved.