Intrinsic value of Aspen Technology - AZPN

Previous Close

$80.84

  Intrinsic Value

$15.63

stock screener

  Rating & Target

str. sell

-81%

Previous close

$80.84

 
Intrinsic value

$15.63

 
Up/down potential

-81%

 
Rating

str. sell

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 5.7

 

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
  510
  521
  535
  550
  566
  585
  605
  626
  649
  674
  701
  729
  760
  792
  826
  862
  900
  941
  984
  1,029
  1,077
  1,127
  1,180
  1,236
  1,295
  1,357
  1,422
  1,490
  1,563
  1,639
Variable operating expenses, $m
  285
  291
  299
  307
  316
  325
  336
  348
  360
  374
  377
  392
  409
  426
  444
  464
  484
  506
  529
  553
  579
  606
  635
  665
  696
  730
  765
  802
  840
  881
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
  285
  291
  299
  307
  316
  325
  336
  348
  360
  374
  377
  392
  409
  426
  444
  464
  484
  506
  529
  553
  579
  606
  635
  665
  696
  730
  765
  802
  840
  881
Operating income, $m
  224
  230
  236
  243
  251
  259
  268
  278
  289
  301
  324
  337
  351
  366
  382
  398
  416
  435
  455
  476
  498
  521
  545
  571
  598
  627
  657
  689
  722
  757
EBITDA, $m
  239
  245
  251
  258
  266
  274
  284
  294
  305
  317
  329
  342
  357
  372
  388
  405
  423
  442
  462
  483
  505
  529
  554
  580
  608
  637
  668
  700
  734
  769
Interest expense (income), $m
  3
  9
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -2
  -2
  -1
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  20
Earnings before tax, $m
  215
  237
  243
  250
  257
  265
  274
  283
  293
  304
  327
  340
  353
  367
  382
  398
  414
  432
  451
  471
  492
  514
  537
  561
  587
  614
  643
  673
  704
  738
Tax expense, $m
  58
  64
  66
  67
  69
  72
  74
  76
  79
  82
  88
  92
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  190
  199
Net income, $m
  157
  173
  177
  182
  188
  193
  200
  207
  214
  222
  239
  248
  258
  268
  279
  290
  303
  315
  329
  344
  359
  375
  392
  410
  429
  448
  469
  491
  514
  538

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
  270
  276
  283
  291
  300
  310
  320
  332
  344
  357
  371
  386
  403
  420
  438
  457
  477
  499
  521
  545
  571
  597
  625
  655
  686
  719
  753
  790
  828
  868
Adjusted assets (=assets-cash), $m
  270
  276
  283
  291
  300
  310
  320
  332
  344
  357
  371
  386
  403
  420
  438
  457
  477
  499
  521
  545
  571
  597
  625
  655
  686
  719
  753
  790
  828
  868
Revenue / Adjusted assets
  1.889
  1.888
  1.890
  1.890
  1.887
  1.887
  1.891
  1.886
  1.887
  1.888
  1.889
  1.889
  1.886
  1.886
  1.886
  1.886
  1.887
  1.886
  1.889
  1.888
  1.886
  1.888
  1.888
  1.887
  1.888
  1.887
  1.888
  1.886
  1.888
  1.888
Average production assets, $m
  59
  60
  62
  64
  66
  68
  70
  73
  75
  78
  81
  85
  88
  92
  96
  100
  104
  109
  114
  119
  125
  131
  137
  143
  150
  157
  165
  173
  181
  190
Working capital, $m
  -303
  -310
  -318
  -327
  -337
  -348
  -360
  -373
  -386
  -401
  -417
  -434
  -452
  -471
  -491
  -513
  -536
  -560
  -585
  -612
  -641
  -671
  -702
  -735
  -770
  -807
  -846
  -887
  -930
  -975
Total debt, $m
  -136
  -130
  -124
  -117
  -109
  -100
  -91
  -80
  -69
  -57
  -45
  -31
  -17
  -1
  15
  32
  50
  70
  90
  112
  134
  158
  184
  210
  238
  268
  299
  332
  366
  402
Total liabilities, $m
  243
  249
  255
  262
  270
  279
  288
  299
  310
  322
  334
  348
  362
  378
  394
  411
  429
  449
  469
  491
  514
  538
  563
  589
  617
  647
  678
  711
  745
  782
Total equity, $m
  27
  28
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  65
  69
  72
  75
  79
  83
  87
Total liabilities and equity, $m
  270
  277
  283
  291
  300
  310
  320
  332
  344
  358
  371
  387
  402
  420
  438
  457
  477
  499
  521
  546
  571
  598
  626
  654
  686
  719
  753
  790
  828
  869
Debt-to-equity ratio
  -5.040
  -4.720
  -4.380
  -4.010
  -3.630
  -3.230
  -2.830
  -2.420
  -2.020
  -1.610
  -1.210
  -0.810
  -0.420
  -0.030
  0.340
  0.700
  1.060
  1.400
  1.730
  2.050
  2.360
  2.650
  2.940
  3.210
  3.480
  3.730
  3.970
  4.200
  4.420
  4.630
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
  157
  173
  177
  182
  188
  193
  200
  207
  214
  222
  239
  248
  258
  268
  279
  290
  303
  315
  329
  344
  359
  375
  392
  410
  429
  448
  469
  491
  514
  538
Depreciation, amort., depletion, $m
  15
  15
  15
  15
  15
  15
  16
  16
  16
  16
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Funds from operations, $m
  172
  188
  192
  197
  203
  209
  215
  222
  230
  238
  244
  253
  263
  274
  285
  297
  309
  322
  336
  351
  367
  383
  400
  419
  438
  458
  480
  502
  526
  550
Change in working capital, $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
Cash from operations, $m
  178
  195
  200
  206
  213
  220
  227
  235
  244
  253
  260
  270
  281
  293
  305
  318
  332
  346
  362
  378
  395
  413
  432
  452
  473
  495
  518
  543
  569
  596
Maintenance CAPEX, $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
  -9
  -10
  -10
  -11
  -11
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
Cash from investing activities, $m
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -10
  -12
  -12
  -12
  -14
  -14
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -20
Free cash flow, $m
  173
  190
  195
  201
  207
  213
  221
  228
  237
  245
  252
  262
  272
  283
  295
  308
  321
  335
  350
  366
  382
  399
  418
  437
  457
  478
  501
  524
  549
  575
Issuance/(repayment) of debt, $m
  -306
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
Issuance/(repurchase) of shares, $m
  154
  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  
  -152
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
Total cash flow (excl. dividends), $m
  21
  196
  201
  208
  215
  222
  230
  239
  248
  257
  264
  275
  287
  299
  312
  325
  339
  355
  370
  387
  405
  423
  443
  464
  485
  508
  532
  557
  584
  612
Retained Cash Flow (-), $m
  -311
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -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
  -290
  195
  201
  207
  214
  221
  229
  237
  246
  256
  263
  274
  285
  297
  310
  323
  337
  352
  368
  385
  402
  421
  440
  461
  482
  505
  529
  554
  580
  608
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
  -278
  178
  175
  170
  166
  161
  155
  148
  142
  134
  125
  117
  108
  100
  91
  82
  73
  65
  57
  49
  42
  35
  29
  23
  19
  15
  11
  9
  6
  5
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

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 (AZPN)

Valuation Ratios
P/E Ratio 36.6
Price to Sales 12.3
Price to Book -22.7
Price to Tangible Book
Price to Cash Flow 32.6
Price to Free Cash Flow 33.2
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 $499.514 million for the last fiscal year's total revenue generated by Aspen Technology. The default revenue input number comes from 0001 income statement of Aspen 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 AZPN 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 AZPN is calculated based on our internal credit rating of Aspen 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 Aspen 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 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.

Corporate tax rate of 27% is the nominal tax rate for Aspen 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 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 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 -59.5%. 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 - $-284.115 million for Aspen 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 71.009 million for Aspen 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 Aspen Technology at the current share price and the inputted number of shares is $5.7 billion.

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COMPANY NEWS

▶ A Mid-term Bull & Bear Debate   [Oct-30-18 03:09PM  Zacks]
▶ Aspen Technology: Fiscal 1Q Earnings Snapshot   [04:50PM  Associated Press]
▶ PETRONAS Selects AspenTech Asset Optimization Software   [Aug-20-18 09:00AM  Business Wire]
▶ Aspen Technology: Fiscal 4Q Earnings Snapshot   [04:26PM  Associated Press]
▶ Aspen Technology to Host Investor Day 2018   [Jul-25-18 04:05PM  Business Wire]
▶ 3 Small Cap Stocks That Can Thrive Amid a Trade War   [Jun-21-18 06:00AM  Investopedia]
▶ Investing in AI? 3 Picks Beyond FAANGs   [Jun-11-18 03:26PM  Barrons.com]
▶ AspenTech Transforms IIoT Data into Actionable Insights   [Jun-07-18 09:00AM  Business Wire]
▶ Blog Exposure - Blackbaud Acquired Reeher   [May-03-18 07:30AM  ACCESSWIRE]
▶ Aspen Technology: Fiscal 3Q Earnings Snapshot   [Apr-25-18 04:46PM  Associated Press]
▶ 3 Cloud Stocks to Buy Right Now   [Mar-12-18 06:42PM  Zacks]
▶ 3 Cloud Stocks to Buy Right Now   [Feb-12-18 06:15PM  Zacks]
▶ AspenTech to Attend ARC Industry Forum 2018   [09:00AM  Business Wire]
▶ 3 Buy-Ranked Tech Stocks That Soared This Month   [Jan-30-18 05:41PM  Zacks]
▶ 6 Stocks Outperforming the Market   [Jan-25-18 03:12PM  GuruFocus.com]
▶ Aspen Technology tops Street 2Q forecasts   [Jan-24-18 04:29PM  Associated Press]
▶ Stocks Showing Rising Market Leadership: Aspen Technology Earns 83 RS Rating   [Jan-09-18 03:00AM  Investor's Business Daily]
▶ Stocks Showing Rising Market Leadership: Aspen Technology Earns 80 RS Rating   [Jan-05-18 03:00AM  Investor's Business Daily]
▶ Stocks With Rising Relative Strength: Aspen Technology   [03:00AM  Investor's Business Daily]

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