Intrinsic value of Avid Technology - AVID

Previous Close

$5.80

  Intrinsic Value

$0.48

stock screener

  Rating & Target

str. sell

-92%

Previous close

$5.80

 
Intrinsic value

$0.48

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of AVID 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 0.2

 

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
  427
  437
  448
  461
  475
  490
  507
  525
  545
  566
  588
  612
  637
  664
  693
  723
  755
  789
  825
  863
  903
  945
  990
  1,037
  1,086
  1,138
  1,193
  1,250
  1,311
  1,374
Variable operating expenses, $m
  157
  161
  165
  169
  174
  180
  186
  192
  199
  206
  210
  218
  227
  237
  247
  258
  270
  282
  295
  308
  322
  337
  353
  370
  388
  406
  426
  446
  468
  491
Fixed operating expenses, $m
  272
  278
  284
  290
  297
  303
  310
  317
  324
  331
  338
  345
  353
  361
  369
  377
  385
  394
  402
  411
  420
  429
  439
  448
  458
  468
  479
  489
  500
  511
Total operating expenses, $m
  429
  439
  449
  459
  471
  483
  496
  509
  523
  537
  548
  563
  580
  598
  616
  635
  655
  676
  697
  719
  742
  766
  792
  818
  846
  874
  905
  935
  968
  1,002
Operating income, $m
  -2
  -1
  0
  2
  4
  8
  12
  16
  22
  28
  40
  48
  57
  66
  77
  88
  101
  114
  128
  144
  161
  179
  198
  218
  240
  263
  288
  315
  343
  373
EBITDA, $m
  13
  14
  15
  18
  21
  24
  29
  34
  40
  47
  55
  63
  72
  83
  94
  106
  119
  133
  149
  165
  183
  202
  222
  244
  267
  291
  318
  345
  375
  407
Interest expense (income), $m
  9
  21
  -8
  -7
  -7
  -6
  -5
  -5
  -4
  -3
  -2
  -1
  0
  2
  3
  4
  6
  7
  9
  10
  12
  14
  16
  18
  20
  23
  25
  28
  31
  33
  36
Earnings before tax, $m
  -22
  6
  7
  8
  10
  13
  16
  20
  25
  30
  41
  48
  55
  64
  73
  83
  94
  105
  118
  132
  147
  162
  180
  198
  217
  238
  260
  284
  309
  336
Tax expense, $m
  0
  2
  2
  2
  3
  3
  4
  5
  7
  8
  11
  13
  15
  17
  20
  22
  25
  28
  32
  36
  40
  44
  48
  53
  59
  64
  70
  77
  84
  91
Net income, $m
  -22
  5
  5
  6
  7
  9
  12
  15
  18
  22
  30
  35
  40
  46
  53
  60
  68
  77
  86
  96
  107
  119
  131
  144
  159
  174
  190
  207
  226
  246

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
  239
  245
  251
  258
  266
  275
  284
  294
  305
  317
  329
  343
  357
  372
  388
  405
  423
  442
  462
  484
  506
  530
  555
  581
  608
  638
  668
  700
  734
  770
Adjusted assets (=assets-cash), $m
  239
  245
  251
  258
  266
  275
  284
  294
  305
  317
  329
  343
  357
  372
  388
  405
  423
  442
  462
  484
  506
  530
  555
  581
  608
  638
  668
  700
  734
  770
Revenue / Adjusted assets
  1.787
  1.784
  1.785
  1.787
  1.786
  1.782
  1.785
  1.786
  1.787
  1.785
  1.787
  1.784
  1.784
  1.785
  1.786
  1.785
  1.785
  1.785
  1.786
  1.783
  1.785
  1.783
  1.784
  1.785
  1.786
  1.784
  1.786
  1.786
  1.786
  1.784
Average production assets, $m
  53
  54
  55
  57
  58
  60
  62
  65
  67
  70
  72
  75
  78
  82
  85
  89
  93
  97
  102
  106
  111
  116
  122
  128
  134
  140
  147
  154
  161
  169
Working capital, $m
  -115
  -118
  -121
  -124
  -128
  -132
  -137
  -142
  -147
  -153
  -159
  -165
  -172
  -179
  -187
  -195
  -204
  -213
  -223
  -233
  -244
  -255
  -267
  -280
  -293
  -307
  -322
  -338
  -354
  -371
Total debt, $m
  -77
  -72
  -67
  -60
  -53
  -46
  -37
  -28
  -18
  -8
  4
  16
  28
  42
  56
  72
  88
  105
  123
  142
  163
  184
  206
  230
  255
  281
  308
  338
  368
  400
Total liabilities, $m
  215
  220
  226
  232
  240
  247
  256
  265
  275
  285
  296
  308
  321
  335
  349
  365
  381
  398
  416
  435
  455
  477
  499
  523
  548
  574
  601
  630
  661
  693
Total equity, $m
  24
  24
  25
  26
  27
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
Total liabilities and equity, $m
  239
  244
  251
  258
  267
  274
  284
  294
  306
  317
  329
  342
  357
  372
  388
  406
  423
  442
  462
  483
  506
  530
  554
  581
  609
  638
  668
  700
  734
  770
Debt-to-equity ratio
  -3.230
  -2.960
  -2.660
  -2.340
  -2.000
  -1.660
  -1.310
  -0.950
  -0.600
  -0.240
  0.110
  0.460
  0.800
  1.130
  1.450
  1.770
  2.080
  2.380
  2.670
  2.940
  3.210
  3.470
  3.720
  3.960
  4.190
  4.410
  4.620
  4.820
  5.010
  5.200
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -22
  5
  5
  6
  7
  9
  12
  15
  18
  22
  30
  35
  40
  46
  53
  60
  68
  77
  86
  96
  107
  119
  131
  144
  159
  174
  190
  207
  226
  246
Depreciation, amort., depletion, $m
  15
  15
  16
  16
  16
  17
  17
  18
  18
  19
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
Funds from operations, $m
  -7
  20
  21
  22
  24
  26
  29
  32
  36
  41
  44
  50
  56
  63
  70
  78
  87
  96
  106
  117
  129
  142
  155
  170
  185
  202
  219
  238
  258
  279
Change in working capital, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
Cash from operations, $m
  -5
  23
  24
  25
  28
  30
  33
  37
  41
  46
  50
  56
  63
  70
  78
  86
  96
  105
  116
  128
  140
  153
  167
  183
  199
  216
  234
  254
  275
  297
Maintenance CAPEX, $m
  -10
  -11
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
New CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
Cash from investing activities, $m
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -36
  -38
  -40
Free cash flow, $m
  -16
  11
  12
  13
  15
  17
  19
  22
  26
  30
  34
  39
  45
  51
  58
  66
  74
  83
  92
  103
  114
  126
  139
  152
  167
  183
  200
  217
  236
  257
Issuance/(repayment) of debt, $m
  -288
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
Issuance/(repurchase) of shares, $m
  315
  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  
  27
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
Total cash flow (excl. dividends), $m
  11
  16
  17
  19
  22
  24
  28
  32
  36
  41
  45
  51
  57
  65
  72
  81
  90
  100
  110
  122
  134
  147
  161
  176
  192
  209
  227
  246
  267
  289
Retained Cash Flow (-), $m
  -315
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Prev. year cash balance distribution, $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 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
  -304
  15
  17
  18
  21
  24
  27
  31
  35
  40
  44
  50
  56
  63
  71
  79
  88
  98
  108
  120
  132
  145
  159
  173
  189
  206
  224
  243
  263
  285
Discount rate, %
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
  -289
  14
  14
  15
  15
  16
  17
  17
  18
  18
  18
  18
  17
  17
  16
  15
  14
  12
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Avid Technology, Inc. is a provider of an open and integrated technology platform, along with applications and services that enable the creation, distribution and monetization of audio and video content. The Company develops, markets, sells and supports software and hardware for digital media content production, management, secured content storage and distribution. The Company's products are used in production and post-production facilities; film studios; network, affiliate, independent and cable television stations; recording studios; live-sound performance venues; advertising agencies; government and educational institutions; corporate communication departments, and by independent video and audio creative professionals, as well as aspiring professionals and enthusiasts. Projects produced using its products include feature films, television programs, live events, news broadcasts, commercials, music, video and other digital media content.

FINANCIAL RATIOS  of  Avid Technology (AVID)

Valuation Ratios
P/E Ratio 4.9
Price to Sales 0.5
Price to Book -0.9
Price to Tangible Book
Price to Cash Flow -4.8
Price to Free Cash Flow -3.9
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.7%
Cap. Spend. - 3 Yr. Gr. Rate -1.7%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity -70%
Total Debt to Equity -71.9%
Interest Coverage 6
Management Effectiveness
Return On Assets 23.1%
Ret/ On Assets - 3 Yr. Avg. 11.5%
Return On Total Capital -31.5%
Ret/ On T. Cap. - 3 Yr. Avg. -12.2%
Return On Equity -16%
Return On Equity - 3 Yr. Avg. -7%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 65%
Gross Margin - 3 Yr. Avg. 62.5%
EBITDA Margin 15.4%
EBITDA Margin - 3 Yr. Avg. 9.1%
Operating Margin 12.5%
Oper. Margin - 3 Yr. Avg. 5.8%
Pre-Tax Margin 8.8%
Pre-Tax Margin - 3 Yr. Avg. 4.1%
Net Profit Margin 9.4%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate -6.7%
Eff/ Tax Rate - 3 Yr. Avg. -31.6%
Payout Ratio 0%

AVID stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVID stock intrinsic value calculation we used $419.003 million for the last fiscal year's total revenue generated by Avid Technology. The default revenue input number comes from 0001 income statement of Avid Technology. 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 AVID 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 5.3%, whose default value for AVID is calculated based on our internal credit rating of Avid Technology, 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 Avid Technology.
    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 AVID stock the variable cost ratio is equal to 36.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $266 million in the base year in the intrinsic value calculation for AVID 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 9.9% for Avid Technology.

Corporate tax rate of 27% is the nominal tax rate for Avid Technology. 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 AVID 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 AVID are equal to 12.3%.

Life of production assets of 3.4 years is the average useful life of capital assets used in Avid Technology 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 AVID is equal to -27%. 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 - $-268.57 million for Avid Technology - 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 41.79 million for Avid Technology 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 Avid Technology at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Avid Technology Issues Full-Year 2019 Guidance   [Nov-14-18 05:20PM  GlobeNewswire]
▶ Avid: 3Q Earnings Snapshot   [05:11AM  Associated Press]
▶ 6 Music Stocks To Watch In 2019   [Nov-01-18 04:26PM  Benzinga]
▶ 3 Tech Stocks Under $10 to Buy Now   [Sep-10-18 03:33PM  Zacks]
▶ Sluggish Start to September   [Sep-05-18 09:15AM  Zacks]
▶ Avid: 2Q Earnings Snapshot   [06:55PM  Associated Press]
▶ Avid Brings 3D Graphics to European Athletics Championships   [Aug-08-18 10:46AM  GlobeNewswire]
▶ Avid Technology names new CFO, shakes up leadership   [May-31-18 03:01PM  American City Business Journals]
▶ Avid NEXIS | E5 NL Nearline Storage Solution Now Available   [May-30-18 10:03AM  GlobeNewswire]
▶ Avid: 1Q Earnings Snapshot   [May-10-18 07:08PM  Associated Press]
▶ Avid Transforms TV News Production for RTS Senegal Africa   [Apr-26-18 08:00AM  GlobeNewswire]
▶ Should You Buy Avid Technology Inc (NASDAQ:AVID)?   [Apr-13-18 06:47PM  Simply Wall St.]
▶ Avid reports 4Q loss   [Mar-15-18 06:39PM  Associated Press]
▶ Earnings Outlook For Avid Technology   [10:40AM  Benzinga]
▶ Avid Upgrades MTV3s News Production Infrastructure   [Mar-09-18 08:00AM  GlobeNewswire]
▶ Avid Customers Take the Night at the 2018 CAS Awards   [Mar-01-18 10:14AM  GlobeNewswire]
▶ Avid Technology fires CEO for 'improper' workplace conduct   [Feb-27-18 11:40AM  American City Business Journals]
▶ Avid Begins #WeR4Music Movement at NAMM 2018   [01:30PM  GlobeNewswire]
▶ Avid Technology to Present at Needham Growth Conference   [Jan-16-18 02:53PM  GlobeNewswire]

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