Intrinsic value of Aspen Technology, Inc. - AZPN

Previous Close

$120.81

  Intrinsic Value

$125.05

stock screener

  Rating & Target

hold

+4%

Previous close

$120.81

 
Intrinsic value

$125.05

 
Up/down potential

+4%

 
Rating

hold

We calculate the intrinsic value of AZPN 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 8.4

 

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, %
  33.10
  30.29
  27.76
  25.48
  23.44
  21.59
  19.93
  18.44
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.07
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
Revenue, $m
  666
  867
  1,108
  1,390
  1,716
  2,086
  2,502
  2,964
  3,470
  4,022
  4,617
  5,255
  5,935
  6,655
  7,416
  8,216
  9,054
  9,931
  10,847
  11,801
  12,794
  13,827
  14,901
  16,017
  17,177
  18,382
  19,635
  20,938
  22,293
  23,702
Variable operating expenses, $m
  372
  485
  619
  777
  958
  1,165
  1,397
  1,655
  1,937
  2,245
  2,576
  2,932
  3,312
  3,714
  4,138
  4,584
  5,052
  5,542
  6,052
  6,585
  7,139
  7,715
  8,315
  8,938
  9,585
  10,257
  10,956
  11,683
  12,439
  13,226
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
  372
  485
  619
  777
  958
  1,165
  1,397
  1,655
  1,937
  2,245
  2,576
  2,932
  3,312
  3,714
  4,138
  4,584
  5,052
  5,542
  6,052
  6,585
  7,139
  7,715
  8,315
  8,938
  9,585
  10,257
  10,956
  11,683
  12,439
  13,226
Operating income, $m
  293
  382
  489
  613
  757
  921
  1,105
  1,309
  1,533
  1,777
  2,041
  2,323
  2,623
  2,942
  3,278
  3,631
  4,002
  4,390
  4,794
  5,216
  5,655
  6,112
  6,586
  7,080
  7,592
  8,125
  8,679
  9,255
  9,853
  10,476
EBITDA, $m
  299
  390
  498
  625
  771
  937
  1,124
  1,332
  1,559
  1,807
  2,074
  2,361
  2,666
  2,990
  3,332
  3,691
  4,068
  4,462
  4,873
  5,302
  5,748
  6,212
  6,695
  7,196
  7,718
  8,259
  8,822
  9,407
  10,016
  10,649
Interest expense (income), $m
  3
  9
  17
  26
  38
  51
  67
  84
  104
  126
  150
  176
  204
  234
  266
  300
  336
  374
  414
  455
  498
  544
  590
  639
  690
  743
  798
  855
  914
  976
  1,040
Earnings before tax, $m
  284
  365
  462
  576
  706
  855
  1,021
  1,205
  1,407
  1,627
  1,865
  2,119
  2,389
  2,675
  2,978
  3,295
  3,628
  3,976
  4,339
  4,718
  5,111
  5,521
  5,947
  6,389
  6,849
  7,327
  7,824
  8,341
  8,878
  9,437
Tax expense, $m
  77
  99
  125
  155
  191
  231
  276
  325
  380
  439
  504
  572
  645
  722
  804
  890
  980
  1,074
  1,172
  1,274
  1,380
  1,491
  1,606
  1,725
  1,849
  1,978
  2,112
  2,252
  2,397
  2,548
Net income, $m
  207
  267
  337
  420
  516
  624
  745
  880
  1,027
  1,188
  1,361
  1,547
  1,744
  1,953
  2,174
  2,405
  2,648
  2,902
  3,168
  3,444
  3,731
  4,030
  4,341
  4,664
  5,000
  5,349
  5,712
  6,089
  6,481
  6,889

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
  1,217
  1,585
  2,025
  2,541
  3,137
  3,814
  4,575
  5,418
  6,344
  7,352
  8,440
  9,607
  10,849
  12,167
  13,557
  15,020
  16,553
  18,156
  19,829
  21,574
  23,389
  25,278
  27,241
  29,282
  31,402
  33,606
  35,896
  38,278
  40,754
  43,331
Adjusted assets (=assets-cash), $m
  1,217
  1,585
  2,025
  2,541
  3,137
  3,814
  4,575
  5,418
  6,344
  7,352
  8,440
  9,607
  10,849
  12,167
  13,557
  15,020
  16,553
  18,156
  19,829
  21,574
  23,389
  25,278
  27,241
  29,282
  31,402
  33,606
  35,896
  38,278
  40,754
  43,331
Revenue / Adjusted assets
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
Average production assets, $m
  77
  101
  129
  161
  199
  242
  290
  344
  403
  467
  536
  610
  688
  772
  860
  953
  1,050
  1,152
  1,258
  1,369
  1,484
  1,604
  1,729
  1,858
  1,993
  2,132
  2,278
  2,429
  2,586
  2,749
Working capital, $m
  333
  434
  554
  695
  858
  1,043
  1,251
  1,482
  1,735
  2,011
  2,308
  2,627
  2,967
  3,328
  3,708
  4,108
  4,527
  4,966
  5,423
  5,900
  6,397
  6,914
  7,450
  8,009
  8,589
  9,191
  9,818
  10,469
  11,146
  11,851
Total debt, $m
  314
  491
  702
  949
  1,234
  1,558
  1,923
  2,327
  2,770
  3,253
  3,774
  4,333
  4,928
  5,559
  6,225
  6,926
  7,660
  8,428
  9,230
  10,065
  10,935
  11,840
  12,780
  13,757
  14,773
  15,829
  16,926
  18,066
  19,253
  20,487
Total liabilities, $m
  583
  759
  970
  1,217
  1,503
  1,827
  2,191
  2,595
  3,039
  3,522
  4,043
  4,602
  5,197
  5,828
  6,494
  7,194
  7,929
  8,697
  9,498
  10,334
  11,203
  12,108
  13,049
  14,026
  15,042
  16,097
  17,194
  18,335
  19,521
  20,756
Total equity, $m
  634
  826
  1,055
  1,324
  1,634
  1,987
  2,383
  2,823
  3,305
  3,831
  4,397
  5,005
  5,653
  6,339
  7,063
  7,825
  8,624
  9,459
  10,331
  11,240
  12,186
  13,170
  14,193
  15,256
  16,361
  17,509
  18,702
  19,943
  21,233
  22,576
Total liabilities and equity, $m
  1,217
  1,585
  2,025
  2,541
  3,137
  3,814
  4,574
  5,418
  6,344
  7,353
  8,440
  9,607
  10,850
  12,167
  13,557
  15,019
  16,553
  18,156
  19,829
  21,574
  23,389
  25,278
  27,242
  29,282
  31,403
  33,606
  35,896
  38,278
  40,754
  43,332
Debt-to-equity ratio
  0.500
  0.590
  0.660
  0.720
  0.760
  0.780
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.870
  0.880
  0.880
  0.890
  0.890
  0.890
  0.890
  0.900
  0.900
  0.900
  0.900
  0.900
  0.900
  0.900
  0.910
  0.910
  0.910
  0.910
Adjusted equity ratio
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521
  0.521

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  207
  267
  337
  420
  516
  624
  745
  880
  1,027
  1,188
  1,361
  1,547
  1,744
  1,953
  2,174
  2,405
  2,648
  2,902
  3,168
  3,444
  3,731
  4,030
  4,341
  4,664
  5,000
  5,349
  5,712
  6,089
  6,481
  6,889
Depreciation, amort., depletion, $m
  6
  7
  9
  11
  14
  16
  19
  23
  26
  30
  34
  38
  43
  49
  54
  60
  66
  72
  79
  86
  93
  101
  109
  117
  125
  134
  143
  153
  163
  173
Funds from operations, $m
  213
  274
  346
  431
  529
  640
  764
  902
  1,054
  1,218
  1,395
  1,585
  1,787
  2,002
  2,228
  2,465
  2,714
  2,975
  3,247
  3,530
  3,825
  4,131
  4,450
  4,781
  5,125
  5,483
  5,855
  6,241
  6,643
  7,062
Change in working capital, $m
  83
  101
  120
  141
  163
  185
  208
  231
  253
  276
  298
  319
  340
  360
  380
  400
  419
  439
  458
  477
  497
  517
  537
  558
  580
  603
  626
  651
  677
  705
Cash from operations, $m
  130
  173
  226
  290
  366
  455
  557
  672
  800
  942
  1,098
  1,266
  1,447
  1,641
  1,847
  2,065
  2,295
  2,536
  2,789
  3,053
  3,328
  3,615
  3,913
  4,223
  4,545
  4,880
  5,228
  5,590
  5,966
  6,357
Maintenance CAPEX, $m
  -4
  -5
  -6
  -8
  -10
  -13
  -15
  -18
  -22
  -25
  -29
  -34
  -38
  -43
  -49
  -54
  -60
  -66
  -72
  -79
  -86
  -93
  -101
  -109
  -117
  -125
  -134
  -143
  -153
  -163
New CAPEX, $m
  -19
  -23
  -28
  -33
  -38
  -43
  -48
  -54
  -59
  -64
  -69
  -74
  -79
  -84
  -88
  -93
  -97
  -102
  -106
  -111
  -115
  -120
  -125
  -129
  -135
  -140
  -145
  -151
  -157
  -164
Cash from investing activities, $m
  -23
  -28
  -34
  -41
  -48
  -56
  -63
  -72
  -81
  -89
  -98
  -108
  -117
  -127
  -137
  -147
  -157
  -168
  -178
  -190
  -201
  -213
  -226
  -238
  -252
  -265
  -279
  -294
  -310
  -327
Free cash flow, $m
  108
  145
  192
  249
  318
  399
  493
  600
  720
  853
  999
  1,158
  1,330
  1,514
  1,711
  1,919
  2,138
  2,369
  2,610
  2,863
  3,127
  3,402
  3,688
  3,985
  4,294
  4,615
  4,949
  5,296
  5,656
  6,031
Issuance/(repayment) of debt, $m
  144
  177
  211
  247
  285
  324
  364
  404
  444
  483
  521
  559
  595
  631
  666
  700
  734
  768
  802
  835
  870
  905
  940
  977
  1,016
  1,056
  1,097
  1,141
  1,186
  1,234
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  
  144
  177
  211
  247
  285
  324
  364
  404
  444
  483
  521
  559
  595
  631
  666
  700
  734
  768
  802
  835
  870
  905
  940
  977
  1,016
  1,056
  1,097
  1,141
  1,186
  1,234
Total cash flow (excl. dividends), $m
  252
  321
  403
  497
  604
  724
  857
  1,004
  1,164
  1,336
  1,520
  1,717
  1,926
  2,146
  2,377
  2,619
  2,872
  3,137
  3,412
  3,699
  3,996
  4,306
  4,628
  4,962
  5,310
  5,671
  6,046
  6,436
  6,842
  7,265
Retained Cash Flow (-), $m
  -158
  -192
  -229
  -269
  -310
  -353
  -396
  -439
  -483
  -525
  -567
  -608
  -647
  -686
  -724
  -762
  -799
  -835
  -872
  -909
  -946
  -984
  -1,023
  -1,063
  -1,105
  -1,148
  -1,193
  -1,241
  -1,290
  -1,343
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
  94
  129
  173
  228
  293
  371
  461
  564
  681
  811
  953
  1,109
  1,278
  1,459
  1,652
  1,857
  2,074
  2,301
  2,540
  2,790
  3,051
  3,322
  3,605
  3,899
  4,205
  4,523
  4,853
  5,196
  5,552
  5,923
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
  90
  119
  151
  187
  227
  269
  312
  353
  391
  425
  453
  473
  486
  490
  485
  472
  451
  424
  391
  354
  316
  276
  236
  199
  164
  132
  104
  80
  61
  45
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

Aspen Technology, Inc. is a global provider of process optimization software solutions designed to manage and optimize plant and process design, operational performance, and supply chain planning. The Company's aspenONE software and related services have been developed specifically for companies in the process industries, including the energy, chemicals, and engineering and construction industries. It operates through two segments, including subscription and software, which provides licensing of process optimization software solutions and associated support services, and services, which includes professional services and training. It has developed applications to design and optimize processes across the business areas, including engineering, manufacturing and supply chain. Its products include Aspen HYSYS, Aspen Economic Evaluation, Aspen Info Plus.21, Aspen PIMS Advanced Optimization, Aspen Collaborative Demand Manager and Aspen Supply Planner.

FINANCIAL RATIOS  of  Aspen Technology, Inc. (AZPN)

Valuation Ratios
P/E Ratio 54.8
Price to Sales 18.4
Price to Book -34
Price to Tangible Book
Price to Cash Flow 48.7
Price to Free Cash Flow 49.6
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -9.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity -53.6%
Interest Coverage 71
Management Effectiveness
Return On Assets 49.2%
Ret/ On Assets - 3 Yr. Avg. 40%
Return On Total Capital -578.6%
Ret/ On T. Cap. - 3 Yr. Avg. 615.2%
Return On Equity -96.4%
Return On Equity - 3 Yr. Avg. 117.4%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 90.1%
Gross Margin - 3 Yr. Avg. 89.6%
EBITDA Margin 45.3%
EBITDA Margin - 3 Yr. Avg. 44.5%
Operating Margin 43.9%
Oper. Margin - 3 Yr. Avg. 43.1%
Pre-Tax Margin 43.5%
Pre-Tax Margin - 3 Yr. Avg. 43%
Net Profit Margin 33.5%
Net Profit Margin - 3 Yr. Avg. 30%
Effective Tax Rate 22.9%
Eff/ Tax Rate - 3 Yr. Avg. 30.2%
Payout Ratio 0%

AZPN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AZPN stock intrinsic value calculation we used $500 million for the last fiscal year's total revenue generated by Aspen Technology, Inc.. The default revenue input number comes from 0001 income statement of Aspen Technology, 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 AZPN stock valuation model: a) initial revenue growth rate of 33.1% 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 AZPN is calculated based on our internal credit rating of Aspen Technology, 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 Aspen Technology, 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 AZPN stock the variable cost ratio is equal to 56%.

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 AZPN 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 Aspen Technology, Inc..

Corporate tax rate of 27% is the nominal tax rate for Aspen Technology, 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 AZPN 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 AZPN are equal to 11.6%.

Life of production assets of 15.9 years is the average useful life of capital assets used in Aspen Technology, 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 AZPN is equal to 50%. 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 - $476.184 million for Aspen Technology, 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 69.654 million for Aspen Technology, 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 Aspen Technology, Inc. at the current share price and the inputted number of shares is $8.4 billion.

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