Intrinsic value of AeroVironment - AVAV

Previous Close

$102.42

  Intrinsic Value

$18.06

stock screener

  Rating & Target

str. sell

-82%

Previous close

$102.42

 
Intrinsic value

$18.06

 
Up/down potential

-82%

 
Rating

str. sell

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 2.4

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  276
  283
  290
  298
  307
  317
  328
  340
  352
  366
  380
  396
  412
  430
  448
  468
  489
  511
  534
  558
  584
  612
  640
  671
  703
  736
  772
  809
  848
  889
Variable operating expenses, $m
  194
  198
  203
  209
  215
  222
  230
  238
  247
  256
  267
  277
  289
  301
  314
  328
  343
  358
  374
  391
  410
  429
  449
  470
  492
  516
  541
  567
  594
  623
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
  245
  250
  256
  264
  271
  279
  288
  298
  308
  318
  331
  342
  355
  369
  383
  399
  415
  432
  450
  468
  489
  510
  531
  554
  578
  604
  631
  659
  688
  719
Operating income, $m
  32
  32
  33
  35
  36
  38
  40
  42
  45
  47
  50
  53
  57
  61
  65
  69
  74
  79
  84
  90
  96
  102
  109
  116
  124
  132
  141
  150
  160
  170
EBITDA, $m
  35
  36
  37
  39
  40
  42
  44
  46
  49
  52
  55
  59
  62
  66
  71
  75
  80
  85
  91
  97
  103
  110
  117
  125
  133
  142
  151
  160
  171
  181
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
Earnings before tax, $m
  32
  32
  33
  34
  36
  37
  39
  41
  44
  46
  49
  52
  55
  59
  63
  67
  71
  76
  81
  86
  92
  98
  105
  112
  119
  127
  135
  144
  153
  163
Tax expense, $m
  9
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  39
  41
  44
Net income, $m
  23
  24
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  43
  46
  49
  52
  55
  59
  63
  67
  72
  76
  81
  87
  92
  98
  105
  112
  119

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
  282
  288
  296
  304
  313
  323
  334
  346
  359
  373
  388
  403
  420
  438
  457
  477
  498
  520
  544
  569
  596
  623
  653
  684
  716
  750
  786
  824
  864
  906
Adjusted assets (=assets-cash), $m
  282
  288
  296
  304
  313
  323
  334
  346
  359
  373
  388
  403
  420
  438
  457
  477
  498
  520
  544
  569
  596
  623
  653
  684
  716
  750
  786
  824
  864
  906
Revenue / Adjusted assets
  0.979
  0.983
  0.980
  0.980
  0.981
  0.981
  0.982
  0.983
  0.981
  0.981
  0.979
  0.983
  0.981
  0.982
  0.980
  0.981
  0.982
  0.983
  0.982
  0.981
  0.980
  0.982
  0.980
  0.981
  0.982
  0.981
  0.982
  0.982
  0.981
  0.981
Average production assets, $m
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
Working capital, $m
  83
  85
  87
  90
  92
  95
  99
  102
  106
  110
  114
  119
  124
  129
  135
  141
  147
  154
  161
  168
  176
  184
  193
  202
  211
  222
  232
  243
  255
  268
Total debt, $m
  1
  3
  4
  6
  8
  11
  13
  16
  19
  22
  25
  29
  33
  37
  41
  45
  50
  55
  61
  66
  72
  79
  85
  92
  100
  108
  116
  124
  133
  143
Total liabilities, $m
  64
  65
  67
  69
  71
  73
  76
  79
  82
  85
  88
  92
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142
  148
  155
  163
  170
  179
  187
  196
  206
Total equity, $m
  218
  223
  229
  235
  242
  250
  258
  268
  278
  288
  300
  312
  325
  339
  353
  369
  385
  402
  421
  440
  460
  482
  505
  528
  554
  580
  608
  637
  668
  701
Total liabilities and equity, $m
  282
  288
  296
  304
  313
  323
  334
  347
  360
  373
  388
  404
  420
  438
  457
  477
  498
  520
  545
  569
  595
  624
  653
  683
  717
  750
  787
  824
  864
  907
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.080
  0.090
  0.100
  0.110
  0.120
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.200
Adjusted equity ratio
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  23
  24
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  43
  46
  49
  52
  55
  59
  63
  67
  72
  76
  81
  87
  92
  98
  105
  112
  119
Depreciation, amort., depletion, $m
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Funds from operations, $m
  27
  27
  28
  29
  30
  31
  33
  35
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  66
  70
  75
  80
  85
  90
  96
  102
  109
  115
  123
  130
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Cash from operations, $m
  25
  25
  26
  27
  27
  28
  30
  31
  33
  34
  36
  38
  41
  43
  46
  49
  52
  55
  59
  63
  67
  71
  76
  81
  86
  92
  98
  104
  111
  118
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
New CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Cash from investing activities, $m
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -14
  -14
Free cash flow, $m
  21
  21
  22
  22
  23
  24
  25
  26
  27
  29
  31
  33
  35
  37
  39
  42
  45
  48
  51
  54
  58
  62
  66
  71
  76
  81
  86
  92
  98
  104
Issuance/(repayment) of debt, $m
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
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  
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Total cash flow (excl. dividends), $m
  22
  23
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  41
  44
  46
  49
  53
  56
  60
  64
  68
  73
  78
  83
  88
  94
  100
  107
  114
Retained Cash Flow (-), $m
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
Prev. year cash balance distribution, $m
  197
  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
  215
  18
  18
  18
  18
  18
  19
  20
  20
  21
  23
  24
  25
  27
  29
  31
  33
  35
  38
  41
  44
  47
  50
  54
  58
  62
  66
  71
  76
  81
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
  206
  16
  15
  15
  14
  13
  13
  12
  12
  11
  11
  10
  10
  9
  8
  8
  7
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
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

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 (AVAV)

Valuation Ratios
P/E Ratio 201.7
Price to Sales 9.1
Price to Book 6.3
Price to Tangible Book
Price to Cash Flow -220
Price to Free Cash Flow -115.2
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 $271.052 million for the last fiscal year's total revenue generated by AeroVironment. The default revenue input number comes from 0001 income statement of AeroVironment. 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 2% 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, 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.
    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.

Corporate tax rate of 27% is the nominal tax rate for AeroVironment. 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 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 30.1%. 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 - $410.117 million for AeroVironment - 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 23.907 million for AeroVironment 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 at the current share price and the inputted number of shares is $2.4 billion.

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COMPANY NEWS

▶ AeroVironment gets $3.2M defense deal for unmanned aircraft systems   [Nov-06-18 05:14PM  American City Business Journals]
▶ Why AeroVironment Stock Fell Nearly 20% in October   [Nov-05-18 11:01AM  Motley Fool]
▶ Aerovel partners with AeroVironment to pitch Flexrotor drone for military use   [Oct-18-18 04:55PM  American City Business Journals]
▶ Does AeroVironment Incs (NASDAQ:AVAV) PE Ratio Warrant A Sell?   [Oct-02-18 12:37PM  Simply Wall St.]
▶ AeroVironment Could Pull Back Further in the Next Few Weeks   [Sep-26-18 05:16PM  TheStreet.com]
▶ Anatomy of Success: AeroVironment (AVAV)   [Sep-18-18 12:40PM  Zacks]
▶ G.research Aerospace & Defense Conference   [09:06AM  Business Wire]
▶ Is AeroVironment (AVAV) a Great Growth Stock?   [Sep-11-18 08:36AM  Zacks]
▶ What Happened in the Stock Market Today   [Sep-06-18 04:56PM  Motley Fool]
▶ Why AeroVironment Stock Just Popped 17%   [01:39PM  Motley Fool]
▶ After-hours buzz: DOCU, CLDR & more   [Sep-05-18 05:16PM  CNBC]
▶ AeroVironment: Fiscal 1Q Earnings Snapshot   [04:23PM  Associated Press]
▶ 10 Small-Caps Leading the Market Rebound   [09:19AM  InvestorPlace]
▶ AeroVironment teaming with NASA on Mars drone   [Jul-06-18 03:39PM  American City Business Journals]
▶ After-hours buzz: SONC, AVAV, & more   [Jun-26-18 06:11PM  CNBC]
▶ AeroVironment: Fiscal 4Q Earnings Snapshot   [04:32PM  Associated Press]
▶ Earnings Outlook For AeroVironment   [07:47AM  Benzinga]

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