Intrinsic value of Casa Systems - CASA

Previous Close

$12.48

  Intrinsic Value

$42.93

stock screener

  Rating & Target

str. buy

+244%

Previous close

$12.48

 
Intrinsic value

$42.93

 
Up/down potential

+244%

 
Rating

str. buy

We calculate the intrinsic value of CASA 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 2017), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.45
  5.40
  5.36
  5.32
  5.29
Revenue, $m
  391
  433
  476
  522
  569
  618
  669
  723
  778
  836
  896
  958
  1,022
  1,090
  1,160
  1,232
  1,308
  1,387
  1,469
  1,555
  1,645
  1,738
  1,836
  1,937
  2,044
  2,155
  2,272
  2,393
  2,521
  2,654
Variable operating expenses, $m
  155
  171
  188
  206
  225
  244
  264
  285
  307
  330
  354
  378
  404
  430
  458
  487
  517
  548
  580
  614
  650
  687
  725
  765
  807
  851
  897
  945
  996
  1,048
Fixed operating expenses, $m
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  104
  106
  108
  110
  113
  115
  118
  121
  123
  126
  129
  131
  134
  137
  140
  143
  147
  150
Total operating expenses, $m
  235
  252
  271
  291
  312
  333
  355
  378
  402
  427
  453
  479
  508
  536
  566
  597
  630
  663
  698
  735
  773
  813
  854
  896
  941
  988
  1,037
  1,088
  1,143
  1,198
Operating income, $m
  157
  180
  205
  230
  257
  285
  314
  344
  376
  409
  443
  478
  515
  553
  593
  635
  679
  724
  771
  820
  872
  926
  982
  1,041
  1,102
  1,167
  1,234
  1,304
  1,378
  1,456
EBITDA, $m
  160
  184
  209
  235
  262
  290
  319
  350
  382
  415
  450
  486
  523
  562
  603
  645
  689
  735
  782
  832
  885
  939
  996
  1,056
  1,118
  1,183
  1,252
  1,323
  1,398
  1,477
Interest expense (income), $m
  0
  17
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  43
  46
  50
  53
  57
  60
  64
  68
  73
  77
  82
  87
  92
  97
  103
  109
Earnings before tax, $m
  140
  169
  192
  216
  240
  266
  293
  321
  350
  380
  411
  444
  478
  514
  550
  589
  629
  671
  714
  760
  807
  857
  909
  963
  1,020
  1,080
  1,142
  1,207
  1,276
  1,347
Tax expense, $m
  38
  46
  52
  58
  65
  72
  79
  87
  94
  103
  111
  120
  129
  139
  149
  159
  170
  181
  193
  205
  218
  231
  245
  260
  275
  292
  308
  326
  344
  364
Net income, $m
  102
  124
  140
  157
  175
  194
  214
  234
  255
  277
  300
  324
  349
  375
  402
  430
  459
  490
  521
  555
  589
  626
  664
  703
  745
  788
  834
  881
  931
  983

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
  345
  381
  419
  459
  501
  544
  589
  636
  685
  736
  788
  843
  900
  959
  1,021
  1,085
  1,152
  1,221
  1,293
  1,369
  1,448
  1,530
  1,616
  1,705
  1,799
  1,897
  2,000
  2,107
  2,219
  2,336
Adjusted assets (=assets-cash), $m
  345
  381
  419
  459
  501
  544
  589
  636
  685
  736
  788
  843
  900
  959
  1,021
  1,085
  1,152
  1,221
  1,293
  1,369
  1,448
  1,530
  1,616
  1,705
  1,799
  1,897
  2,000
  2,107
  2,219
  2,336
Revenue / Adjusted assets
  1.133
  1.136
  1.136
  1.137
  1.136
  1.136
  1.136
  1.137
  1.136
  1.136
  1.137
  1.136
  1.136
  1.137
  1.136
  1.135
  1.135
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
  1.136
Average production assets, $m
  31
  34
  37
  41
  44
  48
  52
  56
  61
  65
  70
  75
  80
  85
  90
  96
  102
  108
  115
  121
  128
  136
  143
  151
  159
  168
  177
  187
  197
  207
Working capital, $m
  23
  25
  28
  30
  33
  36
  39
  42
  45
  48
  52
  56
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  106
  112
  119
  125
  132
  139
  146
  154
Total debt, $m
  188
  221
  255
  291
  329
  368
  408
  450
  494
  540
  587
  637
  688
  741
  797
  854
  914
  977
  1,042
  1,110
  1,181
  1,255
  1,332
  1,413
  1,497
  1,585
  1,678
  1,774
  1,875
  1,981
Total liabilities, $m
  310
  343
  377
  413
  451
  490
  530
  573
  616
  662
  710
  759
  810
  863
  919
  976
  1,036
  1,099
  1,164
  1,232
  1,303
  1,377
  1,454
  1,535
  1,619
  1,707
  1,800
  1,896
  1,997
  2,103
Total equity, $m
  34
  38
  42
  46
  50
  54
  59
  64
  68
  74
  79
  84
  90
  96
  102
  108
  115
  122
  129
  137
  145
  153
  162
  171
  180
  190
  200
  211
  222
  234
Total liabilities and equity, $m
  344
  381
  419
  459
  501
  544
  589
  637
  684
  736
  789
  843
  900
  959
  1,021
  1,084
  1,151
  1,221
  1,293
  1,369
  1,448
  1,530
  1,616
  1,706
  1,799
  1,897
  2,000
  2,107
  2,219
  2,337
Debt-to-equity ratio
  5.460
  5.800
  6.090
  6.340
  6.560
  6.760
  6.930
  7.080
  7.220
  7.340
  7.450
  7.550
  7.640
  7.730
  7.800
  7.870
  7.940
  8.000
  8.060
  8.110
  8.160
  8.200
  8.240
  8.280
  8.320
  8.360
  8.390
  8.420
  8.450
  8.480
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
  102
  124
  140
  157
  175
  194
  214
  234
  255
  277
  300
  324
  349
  375
  402
  430
  459
  490
  521
  555
  589
  626
  664
  703
  745
  788
  834
  881
  931
  983
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
Funds from operations, $m
  105
  127
  144
  161
  180
  199
  219
  240
  261
  284
  307
  332
  357
  383
  411
  440
  469
  500
  533
  567
  602
  639
  678
  718
  761
  805
  851
  900
  951
  1,004
Change in working capital, $m
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  103
  125
  141
  159
  177
  196
  216
  237
  258
  281
  304
  328
  353
  380
  407
  435
  465
  496
  528
  562
  597
  634
  672
  712
  755
  799
  845
  893
  943
  996
Maintenance CAPEX, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
New CAPEX, $m
  -3
  -3
  -3
  -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
Cash from investing activities, $m
  -6
  -6
  -6
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -22
  -22
  -23
  -25
  -26
  -27
  -29
  -30
Free cash flow, $m
  97
  118
  135
  152
  169
  188
  207
  227
  248
  270
  293
  316
  341
  366
  393
  421
  449
  480
  511
  544
  578
  614
  651
  690
  731
  774
  819
  866
  915
  966
Issuance/(repayment) of debt, $m
  -107
  33
  34
  36
  37
  39
  41
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
Issuance/(repurchase) of shares, $m
  40
  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  
  -67
  33
  34
  36
  37
  39
  41
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
Total cash flow (excl. dividends), $m
  30
  151
  169
  188
  207
  227
  248
  270
  292
  316
  340
  366
  392
  420
  448
  478
  509
  542
  576
  612
  649
  688
  728
  771
  815
  862
  911
  962
  1,016
  1,072
Retained Cash Flow (-), $m
  -143
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Prev. year cash balance distribution, $m
  158
  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
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  66
Cash available for distribution, $m
  46
  148
  165
  184
  203
  223
  243
  265
  287
  311
  335
  360
  386
  414
  442
  472
  503
  535
  569
  604
  641
  679
  720
  762
  806
  852
  901
  951
  1,005
  1,060
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
  44
  135
  144
  151
  157
  162
  164
  166
  165
  163
  159
  154
  147
  139
  130
  120
  109
  99
  88
  77
  66
  56
  47
  39
  31
  25
  19
  15
  11
  8
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
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Casa Systems, Inc. is provides a software-centric infrastructure solutions. In addition, the Company offers solutions for next-generation distributed and virtualized architectures in cable operator, fixed telecom and wireless networks. Its products include axyom software platform, delivery platforms, multi-service applications, capacity expansion products. The Company offers a range of solutions including addition of critical bandwidth capacity, flexibility to add new and expand existing services, ability to upgrade networks remotely, reduced network complexity, ability to densify networks, and common platform capabilities to address the needs of both fixed and wireless networks.

FINANCIAL RATIOS  of  Casa Systems (CASA)

Valuation Ratios
P/E Ratio 11.2
Price to Sales 3.2
Price to Book 38.4
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 9.6
Growth Rates
Sales Growth Rate 16.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.3%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 172
Current Ratio 0
LT Debt to Equity 1146.2%
Total Debt to Equity 1153.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 20.6%
Ret/ On Assets - 3 Yr. Avg. 33%
Return On Total Capital 34.6%
Ret/ On T. Cap. - 3 Yr. Avg. 64.7%
Return On Equity 86.4%
Return On Equity - 3 Yr. Avg. 82.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 69%
Gross Margin - 3 Yr. Avg. 69.7%
EBITDA Margin 38.6%
EBITDA Margin - 3 Yr. Avg. 40.2%
Operating Margin 36.4%
Oper. Margin - 3 Yr. Avg. 38.8%
Pre-Tax Margin 36.7%
Pre-Tax Margin - 3 Yr. Avg. 38.3%
Net Profit Margin 28.2%
Net Profit Margin - 3 Yr. Avg. 27.2%
Effective Tax Rate 23.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.9%
Payout Ratio 0%

CASA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CASA stock intrinsic value calculation we used $352 million for the last fiscal year's total revenue generated by Casa Systems. The default revenue input number comes from 2017 income statement of Casa Systems. 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 CASA stock valuation model: a) initial revenue growth rate of 11.2% 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 CASA is calculated based on our internal credit rating of Casa Systems, 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 Casa Systems.
    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 CASA stock the variable cost ratio is equal to 39.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $78 million in the base year in the intrinsic value calculation for CASA 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 5.8% for Casa Systems.

Corporate tax rate of 27% is the nominal tax rate for Casa Systems. 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 CASA stock is equal to 2.6%.

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 CASA are equal to 7.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Casa Systems 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 CASA is equal to 5.8%. 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 - $50 million for Casa Systems - 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 35 million for Casa Systems 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 Casa Systems at the current share price and the inputted number of shares is $0.4 billion.

COMPANY NEWS

▶ Why Casa Systems Stock Plunged Today   [Aug-15-18 12:43PM  Motley Fool]
▶ Casa Systems: 2Q Earnings Snapshot   [Aug-14-18 06:23PM  Associated Press]
▶ Why Casa Systems Stock Plunged Today   [Jul-12-18 03:34PM  Motley Fool]
▶ Casa Systems Announces Departure of Chief Financial Officer   [Jul-11-18 05:04PM  GlobeNewswire]
▶ Why Casa Systems Stock Popped Today   [12:17PM  Motley Fool]
▶ Casa Systems to Present at June Investment Conferences   [May-30-18 04:16PM  GlobeNewswire]
▶ Greylock has a female general partner again with promotion of Sarah Guo   [May-15-18 01:49PM  American City Business Journals]
▶ Why Casa Systems Shares Plunged Today   [May-11-18 04:14PM  Motley Fool]
▶ Casa Systems: 1Q Earnings Snapshot   [May-10-18 05:18PM  Associated Press]
▶ Casa Systems Announces Launch of Proposed Public Offering   [Apr-23-18 05:15PM  GlobeNewswire]
▶ 3 Vigorous Momentum Stocks I Own -- Maybe You Should Too   [Apr-05-18 11:20AM  TheStreet.com]
▶ Casa Systems Rises As Cable TV Industry Spends More On Software   [Mar-09-18 04:28PM  Investor's Business Daily]
▶ New IPO Casa Systems Quarterly Earnings, Revenue Top Estimates   [Mar-06-18 05:08PM  Investor's Business Daily]
▶ There's No Big Rush for the Indices at this Point   [Mar-05-18 10:50AM  TheStreet.com]
▶ Being Patient Until I Can Trust This Market More   [Feb-28-18 11:20AM  TheStreet.com]
▶ Casa Systems Debuts New Axyom 5G Core   [05:01AM  GlobeNewswire]
▶ Nasdaq Leads Stocks Up; Market Finds Bullish Angle In Data   [Jan-05-18 02:25PM  Investor's Business Daily]
▶ Casa Systems Announces Pricing of Initial Public Offering   [Dec-14-17 10:06PM  GlobeNewswire]
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