Intrinsic value of AeroVironment, Inc. - AVAV

Previous Close

$55.85

  Intrinsic Value

$103.96

stock screener

  Rating & Target

str. buy

+86%

Previous close

$55.85

 
Intrinsic value

$103.96

 
Up/down potential

+86%

 
Rating

str. buy

We calculate the intrinsic value of AVAV 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 1.3

 

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, %
  37.90
  34.61
  31.65
  28.98
  26.59
  24.43
  22.48
  20.74
  19.16
  17.75
  16.47
  15.32
  14.29
  13.36
  12.53
  11.77
  11.10
  10.49
  9.94
  9.44
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
Revenue, $m
  374
  503
  662
  854
  1,081
  1,345
  1,648
  1,990
  2,371
  2,792
  3,252
  3,750
  4,286
  4,858
  5,467
  6,111
  6,789
  7,501
  8,246
  9,025
  9,837
  10,683
  11,563
  12,479
  13,430
  14,419
  15,446
  16,514
  17,624
  18,778
Variable operating expenses, $m
  261
  351
  462
  595
  752
  936
  1,146
  1,383
  1,647
  1,939
  2,257
  2,602
  2,974
  3,372
  3,794
  4,241
  4,711
  5,205
  5,723
  6,263
  6,827
  7,414
  8,025
  8,660
  9,320
  10,007
  10,720
  11,461
  12,231
  13,032
Fixed operating expenses, $m
  51
  52
  53
  55
  56
  57
  58
  60
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  82
  84
  86
  88
  90
  92
  94
  96
Total operating expenses, $m
  312
  403
  515
  650
  808
  993
  1,204
  1,443
  1,708
  2,001
  2,321
  2,667
  3,040
  3,440
  3,863
  4,312
  4,783
  5,279
  5,799
  6,340
  6,906
  7,495
  8,107
  8,744
  9,406
  10,095
  10,810
  11,553
  12,325
  13,128
Operating income, $m
  61
  100
  147
  205
  273
  353
  444
  547
  663
  790
  931
  1,083
  1,245
  1,419
  1,604
  1,799
  2,005
  2,221
  2,448
  2,684
  2,931
  3,188
  3,456
  3,734
  4,024
  4,324
  4,637
  4,962
  5,299
  5,650
EBITDA, $m
  68
  108
  158
  218
  289
  372
  467
  575
  696
  828
  974
  1,131
  1,301
  1,482
  1,675
  1,879
  2,093
  2,319
  2,555
  2,802
  3,059
  3,327
  3,606
  3,897
  4,198
  4,512
  4,838
  5,176
  5,528
  5,894
Interest expense (income), $m
  0
  0
  1
  3
  5
  7
  10
  14
  18
  22
  27
  32
  38
  45
  51
  59
  67
  75
  83
  93
  102
  112
  123
  133
  145
  156
  169
  181
  194
  208
  222
Earnings before tax, $m
  61
  99
  144
  200
  266
  342
  430
  530
  641
  763
  899
  1,044
  1,201
  1,368
  1,545
  1,733
  1,930
  2,138
  2,355
  2,582
  2,819
  3,066
  3,323
  3,590
  3,867
  4,156
  4,456
  4,767
  5,091
  5,428
Tax expense, $m
  17
  27
  39
  54
  72
  92
  116
  143
  173
  206
  243
  282
  324
  369
  417
  468
  521
  577
  636
  697
  761
  828
  897
  969
  1,044
  1,122
  1,203
  1,287
  1,375
  1,466
Net income, $m
  45
  72
  105
  146
  194
  250
  314
  387
  468
  557
  656
  762
  876
  998
  1,128
  1,265
  1,409
  1,561
  1,719
  1,885
  2,058
  2,238
  2,426
  2,620
  2,823
  3,034
  3,253
  3,480
  3,717
  3,963

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
  384
  516
  680
  877
  1,110
  1,381
  1,692
  2,043
  2,434
  2,866
  3,338
  3,850
  4,400
  4,988
  5,613
  6,274
  6,970
  7,701
  8,466
  9,266
  10,100
  10,968
  11,872
  12,812
  13,789
  14,804
  15,859
  16,955
  18,095
  19,280
Adjusted assets (=assets-cash), $m
  384
  516
  680
  877
  1,110
  1,381
  1,692
  2,043
  2,434
  2,866
  3,338
  3,850
  4,400
  4,988
  5,613
  6,274
  6,970
  7,701
  8,466
  9,266
  10,100
  10,968
  11,872
  12,812
  13,789
  14,804
  15,859
  16,955
  18,095
  19,280
Revenue / Adjusted assets
  0.974
  0.975
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
Average production assets, $m
  24
  33
  43
  56
  70
  87
  107
  129
  154
  181
  211
  244
  279
  316
  355
  397
  441
  488
  536
  587
  639
  694
  752
  811
  873
  937
  1,004
  1,073
  1,146
  1,221
Working capital, $m
  110
  148
  195
  251
  318
  396
  484
  585
  697
  821
  956
  1,102
  1,260
  1,428
  1,607
  1,797
  1,996
  2,205
  2,424
  2,653
  2,892
  3,141
  3,400
  3,669
  3,948
  4,239
  4,541
  4,855
  5,181
  5,521
Total debt, $m
  24
  55
  93
  138
  192
  255
  326
  407
  498
  598
  707
  825
  952
  1,088
  1,232
  1,385
  1,546
  1,715
  1,891
  2,076
  2,269
  2,469
  2,678
  2,895
  3,121
  3,355
  3,599
  3,852
  4,115
  4,389
Total liabilities, $m
  89
  119
  157
  203
  256
  319
  391
  472
  562
  662
  771
  889
  1,016
  1,152
  1,297
  1,449
  1,610
  1,779
  1,956
  2,140
  2,333
  2,534
  2,742
  2,960
  3,185
  3,420
  3,663
  3,917
  4,180
  4,454
Total equity, $m
  295
  397
  523
  674
  854
  1,062
  1,301
  1,571
  1,872
  2,204
  2,567
  2,961
  3,384
  3,836
  4,316
  4,825
  5,360
  5,922
  6,511
  7,125
  7,767
  8,435
  9,130
  9,852
  10,603
  11,384
  12,195
  13,038
  13,915
  14,826
Total liabilities and equity, $m
  384
  516
  680
  877
  1,110
  1,381
  1,692
  2,043
  2,434
  2,866
  3,338
  3,850
  4,400
  4,988
  5,613
  6,274
  6,970
  7,701
  8,467
  9,265
  10,100
  10,969
  11,872
  12,812
  13,788
  14,804
  15,858
  16,955
  18,095
  19,280
Debt-to-equity ratio
  0.080
  0.140
  0.180
  0.200
  0.220
  0.240
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  45
  72
  105
  146
  194
  250
  314
  387
  468
  557
  656
  762
  876
  998
  1,128
  1,265
  1,409
  1,561
  1,719
  1,885
  2,058
  2,238
  2,426
  2,620
  2,823
  3,034
  3,253
  3,480
  3,717
  3,963
Depreciation, amort., depletion, $m
  7
  8
  11
  13
  16
  19
  23
  28
  33
  38
  42
  49
  56
  63
  71
  79
  88
  98
  107
  117
  128
  139
  150
  162
  175
  187
  201
  215
  229
  244
Funds from operations, $m
  52
  80
  116
  159
  210
  269
  338
  415
  501
  595
  699
  811
  932
  1,061
  1,199
  1,344
  1,497
  1,658
  1,827
  2,002
  2,186
  2,377
  2,576
  2,783
  2,998
  3,221
  3,453
  3,695
  3,946
  4,207
Change in working capital, $m
  30
  38
  47
  56
  67
  78
  89
  100
  112
  124
  135
  146
  158
  168
  179
  189
  199
  209
  219
  229
  239
  249
  259
  269
  280
  291
  302
  314
  326
  339
Cash from operations, $m
  21
  42
  69
  103
  143
  192
  249
  314
  388
  472
  563
  665
  775
  893
  1,020
  1,155
  1,298
  1,449
  1,607
  1,773
  1,947
  2,128
  2,317
  2,514
  2,718
  2,930
  3,151
  3,381
  3,619
  3,867
Maintenance CAPEX, $m
  -4
  -5
  -7
  -9
  -11
  -14
  -17
  -21
  -26
  -31
  -36
  -42
  -49
  -56
  -63
  -71
  -79
  -88
  -98
  -107
  -117
  -128
  -139
  -150
  -162
  -175
  -187
  -201
  -215
  -229
New CAPEX, $m
  -7
  -8
  -10
  -12
  -15
  -17
  -20
  -22
  -25
  -27
  -30
  -32
  -35
  -37
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
Cash from investing activities, $m
  -11
  -13
  -17
  -21
  -26
  -31
  -37
  -43
  -51
  -58
  -66
  -74
  -84
  -93
  -103
  -113
  -123
  -134
  -146
  -158
  -170
  -183
  -196
  -209
  -224
  -239
  -254
  -270
  -287
  -304
Free cash flow, $m
  11
  29
  52
  81
  117
  161
  211
  270
  338
  414
  497
  590
  691
  800
  917
  1,042
  1,174
  1,314
  1,461
  1,616
  1,777
  1,945
  2,121
  2,304
  2,494
  2,692
  2,897
  3,111
  3,332
  3,563
Issuance/(repayment) of debt, $m
  24
  31
  38
  46
  54
  63
  72
  81
  90
  100
  109
  118
  127
  136
  144
  153
  161
  169
  177
  185
  193
  201
  209
  217
  226
  234
  244
  253
  263
  274
Issuance/(repurchase) of shares, $m
  36
  30
  20
  6
  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  
  60
  61
  58
  52
  54
  63
  72
  81
  90
  100
  109
  118
  127
  136
  144
  153
  161
  169
  177
  185
  193
  201
  209
  217
  226
  234
  244
  253
  263
  274
Total cash flow (excl. dividends), $m
  72
  90
  110
  133
  171
  223
  283
  351
  428
  513
  606
  708
  818
  936
  1,062
  1,195
  1,335
  1,483
  1,638
  1,800
  1,970
  2,146
  2,330
  2,521
  2,720
  2,926
  3,141
  3,364
  3,596
  3,837
Retained Cash Flow (-), $m
  -81
  -102
  -126
  -152
  -179
  -209
  -239
  -270
  -301
  -332
  -363
  -393
  -423
  -452
  -480
  -508
  -535
  -562
  -589
  -615
  -641
  -668
  -695
  -723
  -751
  -781
  -811
  -843
  -876
  -911
Prev. year cash balance distribution, $m
  195
  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
  186
  -12
  -15
  -19
  -8
  15
  44
  82
  127
  181
  243
  315
  395
  484
  581
  687
  800
  921
  1,050
  1,185
  1,328
  1,478
  1,635
  1,798
  1,968
  2,145
  2,330
  2,521
  2,719
  2,926
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
  178
  -11
  -13
  -16
  -6
  11
  30
  51
  73
  95
  116
  134
  150
  162
  171
  174
  174
  170
  162
  151
  137
  123
  107
  92
  77
  63
  50
  39
  30
  22
Current shareholders' claim on cash, %
  95.1
  92.2
  90.8
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5

AeroVironment, Inc. designs, develops, produces, supports and operates a portfolio of products and services for government agencies, businesses and consumers. The Company operates through two segments: Unmanned Aircraft Systems (UAS), which focuses primarily on the design, development, production, support and operation of UAS and tactical missile systems that provide situational awareness, multi-band communications, force protection and other mission effects, and Efficient Energy Systems (EES), which focuses primarily on the design, development, production, marketing, support and operation of electric energy systems. The Company supplies UAS, tactical missile systems and related services primarily to organizations within the United States Department of Defense (DoD). The Company also supplies charging systems and services for electric vehicles (EVs), and power cycling and test systems to commercial, consumer and government customers.

FINANCIAL RATIOS  of  AeroVironment, Inc. (AVAV)

Valuation Ratios
P/E Ratio 110
Price to Sales 5
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow -120
Price to Free Cash Flow -62.8
Growth Rates
Sales Growth Rate 0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 42.9%
Cap. Spend. - 3 Yr. Gr. Rate 4.6%
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 2.8%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 3.2%
Return On Equity - 3 Yr. Avg. 2.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 38.5%
Gross Margin - 3 Yr. Avg. 40.4%
EBITDA Margin 7.9%
EBITDA Margin - 3 Yr. Avg. 5.7%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 3.2%
Pre-Tax Margin 5.3%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. -16.1%
Payout Ratio 0%

AVAV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVAV stock intrinsic value calculation we used $271 million for the last fiscal year's total revenue generated by AeroVironment, Inc.. The default revenue input number comes from 0001 income statement of AeroVironment, 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 AVAV stock valuation model: a) initial revenue growth rate of 37.9% 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 AVAV is calculated based on our internal credit rating of AeroVironment, 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 AeroVironment, 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 AVAV stock the variable cost ratio is equal to 70.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $50 million in the base year in the intrinsic value calculation for AVAV 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 AeroVironment, Inc..

Corporate tax rate of 27% is the nominal tax rate for AeroVironment, 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 AVAV 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 AVAV are equal to 6.5%.

Life of production assets of 2.9 years is the average useful life of capital assets used in AeroVironment, 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 AVAV is equal to 29.4%. 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 - $409.033 million for AeroVironment, 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 23.930 million for AeroVironment, 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 AeroVironment, Inc. at the current share price and the inputted number of shares is $1.3 billion.

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