Intrinsic value of Aviat Networks, Inc. - AVNW

Previous Close

$12.92

  Intrinsic Value

$5.06

stock screener

  Rating & Target

str. sell

-61%

Previous close

$12.92

 
Intrinsic value

$5.06

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of AVNW 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 0.1

 

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, %
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
Revenue, $m
  256
  270
  285
  300
  316
  333
  351
  369
  388
  408
  429
  452
  475
  499
  525
  551
  579
  609
  640
  672
  706
  742
  779
  819
  860
  903
  949
  997
  1,047
  1,099
Variable operating expenses, $m
  257
  271
  286
  301
  317
  334
  351
  369
  389
  409
  428
  450
  473
  498
  523
  550
  578
  607
  638
  670
  704
  740
  777
  816
  857
  901
  946
  994
  1,043
  1,096
Fixed operating expenses, $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 operating expenses, $m
  257
  271
  286
  301
  317
  334
  351
  369
  389
  409
  428
  450
  473
  498
  523
  550
  578
  607
  638
  670
  704
  740
  777
  816
  857
  901
  946
  994
  1,043
  1,096
Operating income, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
EBITDA, $m
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
Interest expense (income), $m
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
Tax expense, $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
Net income, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15

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
  165
  174
  183
  193
  203
  214
  225
  237
  249
  262
  276
  290
  305
  321
  337
  354
  372
  391
  411
  432
  454
  477
  501
  526
  552
  580
  609
  640
  672
  706
Adjusted assets (=assets-cash), $m
  165
  174
  183
  193
  203
  214
  225
  237
  249
  262
  276
  290
  305
  321
  337
  354
  372
  391
  411
  432
  454
  477
  501
  526
  552
  580
  609
  640
  672
  706
Revenue / Adjusted assets
  1.552
  1.552
  1.557
  1.554
  1.557
  1.556
  1.560
  1.557
  1.558
  1.557
  1.554
  1.559
  1.557
  1.555
  1.558
  1.556
  1.556
  1.558
  1.557
  1.556
  1.555
  1.556
  1.555
  1.557
  1.558
  1.557
  1.558
  1.558
  1.558
  1.557
Average production assets, $m
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
  69
  72
  76
Working capital, $m
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
Total debt, $m
  14
  20
  26
  32
  39
  45
  53
  60
  68
  76
  84
  93
  103
  113
  123
  134
  145
  157
  170
  183
  197
  211
  226
  242
  259
  277
  295
  314
  335
  356
Total liabilities, $m
  104
  110
  115
  122
  128
  135
  142
  149
  157
  165
  174
  183
  192
  202
  213
  223
  235
  247
  259
  272
  286
  301
  316
  332
  349
  366
  385
  404
  424
  445
Total equity, $m
  61
  64
  68
  71
  75
  79
  83
  87
  92
  97
  102
  107
  113
  118
  124
  131
  137
  144
  152
  159
  167
  176
  185
  194
  204
  214
  225
  236
  248
  260
Total liabilities and equity, $m
  165
  174
  183
  193
  203
  214
  225
  236
  249
  262
  276
  290
  305
  320
  337
  354
  372
  391
  411
  431
  453
  477
  501
  526
  553
  580
  610
  640
  672
  705
Debt-to-equity ratio
  0.240
  0.310
  0.380
  0.450
  0.520
  0.580
  0.630
  0.690
  0.740
  0.780
  0.830
  0.870
  0.910
  0.950
  0.990
  1.020
  1.060
  1.090
  1.120
  1.150
  1.180
  1.200
  1.230
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.370
Adjusted equity ratio
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
Depreciation, amort., depletion, $m
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Funds from operations, $m
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
Change in working capital, $m
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
Cash from operations, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  -1
  -1
  -1
  -1
Maintenance CAPEX, $m
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Cash from investing activities, $m
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
Free cash flow, $m
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
Issuance/(repayment) of debt, $m
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
Issuance/(repurchase) of shares, $m
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
Cash from financing (excl. dividends), $m  
  10
  11
  11
  12
  12
  14
  14
  15
  16
  17
  17
  17
  18
  20
  21
  22
  23
  25
  27
  28
  30
  31
  33
  35
  37
  40
  41
  43
  46
  48
Total cash flow (excl. dividends), $m
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
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
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
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
  4
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  93.7
  87.8
  82.1
  76.6
  71.4
  66.4
  61.7
  57.3
  53.1
  49.2
  46.1
  43.1
  40.3
  37.6
  35.0
  32.5
  30.2
  28.0
  25.9
  24.0
  22.2
  20.5
  18.9
  17.4
  16.0
  14.7
  13.5
  12.4
  11.4
  10.4

Aviat Networks, Inc., together with its subsidiaries, is a supplier of microwave networking solutions. The Company's product categories include point-to-point microwave and millimeter wave radios that are licensed (subject to local frequency regulatory requirements), lightly-licensed and license-exempt (operating in license-exempt frequencies), and element and network management software. In addition, it provides a range of professional services enabling it to deliver turnkey networks, including design, deployment, maintenance and managed services. It designs, manufactures and sells a range of wireless networking products, solutions and services to mobile and fixed public network operators, private network operators, Federal, State and Local government agencies, transportation, energy and utility companies, public safety agencies and broadcast network operators around the world. The Company sells products and services directly to its customers and also use agents and resellers.

FINANCIAL RATIOS  of  Aviat Networks, Inc. (AVNW)

Valuation Ratios
P/E Ratio -68.7
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow 13.7
Growth Rates
Sales Growth Rate -10%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate -15%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 16.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. -8.8%
Return On Total Capital -1.6%
Ret/ On T. Cap. - 3 Yr. Avg. -21.3%
Return On Equity -1.9%
Return On Equity - 3 Yr. Avg. -23.7%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 31%
Gross Margin - 3 Yr. Avg. 26%
EBITDA Margin 2.1%
EBITDA Margin - 3 Yr. Avg. -3.9%
Operating Margin -0.4%
Oper. Margin - 3 Yr. Avg. -6.1%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. -6.3%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. -6.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0.1%
Payout Ratio 0%

AVNW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVNW stock intrinsic value calculation we used $243 million for the last fiscal year's total revenue generated by Aviat Networks, Inc.. The default revenue input number comes from 0001 income statement of Aviat Networks, 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 AVNW stock valuation model: a) initial revenue growth rate of 5.5% 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 AVNW is calculated based on our internal credit rating of Aviat Networks, 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 Aviat Networks, 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 AVNW stock the variable cost ratio is equal to 100.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AVNW 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 Aviat Networks, Inc..

Corporate tax rate of 27% is the nominal tax rate for Aviat Networks, 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 AVNW 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 AVNW are equal to 6.9%.

Life of production assets of 3.2 years is the average useful life of capital assets used in Aviat Networks, 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 AVNW is equal to 3.5%. 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 - $57.516 million for Aviat Networks, 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 5.380 million for Aviat Networks, 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 Aviat Networks, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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