Intrinsic value of Casa Systems, Inc. - CASA

Previous Close

$8.90

  Intrinsic Value

$6.99

stock screener

  Rating & Target

sell

-21%

Previous close

$8.90

 
Intrinsic value

$6.99

 
Up/down potential

-21%

 
Rating

sell

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 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 0.7

 

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
  303
  310
  318
  327
  337
  348
  359
  372
  386
  401
  417
  434
  452
  471
  491
  513
  535
  559
  585
  612
  640
  670
  702
  735
  770
  807
  845
  886
  929
  974
Variable operating expenses, $m
  186
  190
  195
  200
  206
  213
  220
  227
  236
  245
  251
  261
  272
  284
  296
  309
  323
  337
  353
  369
  386
  404
  423
  443
  464
  486
  510
  534
  560
  587
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
  186
  190
  195
  200
  206
  213
  220
  227
  236
  245
  251
  261
  272
  284
  296
  309
  323
  337
  353
  369
  386
  404
  423
  443
  464
  486
  510
  534
  560
  587
Operating income, $m
  117
  120
  123
  127
  131
  135
  140
  145
  150
  156
  165
  172
  179
  187
  195
  204
  213
  222
  232
  243
  254
  266
  279
  292
  306
  320
  336
  352
  369
  387
EBITDA, $m
  126
  129
  133
  136
  140
  145
  150
  155
  161
  167
  174
  181
  188
  196
  205
  214
  223
  233
  244
  255
  267
  279
  293
  306
  321
  336
  353
  370
  388
  406
Interest expense (income), $m
  0
  20
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
Earnings before tax, $m
  98
  110
  112
  115
  119
  123
  127
  131
  136
  141
  149
  155
  161
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  283
  297
  311
  325
  341
Tax expense, $m
  26
  30
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  44
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
Net income, $m
  71
  80
  82
  84
  87
  90
  93
  96
  99
  103
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  180
  189
  198
  207
  216
  227
  237
  249

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
  287
  293
  301
  309
  319
  329
  340
  352
  365
  379
  394
  410
  427
  445
  465
  485
  507
  529
  553
  579
  606
  634
  664
  695
  728
  763
  800
  838
  879
  922
Adjusted assets (=assets-cash), $m
  287
  293
  301
  309
  319
  329
  340
  352
  365
  379
  394
  410
  427
  445
  465
  485
  507
  529
  553
  579
  606
  634
  664
  695
  728
  763
  800
  838
  879
  922
Revenue / Adjusted assets
  1.056
  1.058
  1.056
  1.058
  1.056
  1.058
  1.056
  1.057
  1.058
  1.058
  1.058
  1.059
  1.059
  1.058
  1.056
  1.058
  1.055
  1.057
  1.058
  1.057
  1.056
  1.057
  1.057
  1.058
  1.058
  1.058
  1.056
  1.057
  1.057
  1.056
Average production assets, $m
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
  93
  97
Working capital, $m
  51
  52
  53
  55
  57
  58
  60
  63
  65
  67
  70
  73
  76
  79
  83
  86
  90
  94
  98
  103
  108
  113
  118
  123
  129
  136
  142
  149
  156
  164
Total debt, $m
  156
  162
  169
  176
  185
  194
  204
  215
  227
  239
  253
  267
  282
  299
  316
  334
  354
  374
  396
  419
  443
  468
  495
  524
  553
  585
  618
  652
  689
  727
Total liabilities, $m
  258
  264
  271
  278
  287
  296
  306
  317
  329
  341
  355
  369
  385
  401
  418
  436
  456
  476
  498
  521
  545
  571
  597
  626
  655
  687
  720
  755
  791
  830
Total equity, $m
  29
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  41
  43
  45
  46
  48
  51
  53
  55
  58
  61
  63
  66
  70
  73
  76
  80
  84
  88
  92
Total liabilities and equity, $m
  287
  293
  301
  309
  319
  329
  340
  352
  366
  379
  394
  410
  428
  446
  464
  484
  507
  529
  553
  579
  606
  634
  663
  696
  728
  763
  800
  839
  879
  922
Debt-to-equity ratio
  5.440
  5.520
  5.600
  5.700
  5.790
  5.890
  6.000
  6.100
  6.200
  6.310
  6.410
  6.510
  6.610
  6.710
  6.800
  6.890
  6.980
  7.070
  7.150
  7.240
  7.310
  7.390
  7.460
  7.530
  7.600
  7.660
  7.720
  7.780
  7.840
  7.890
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
  71
  80
  82
  84
  87
  90
  93
  96
  99
  103
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  180
  189
  198
  207
  216
  227
  237
  249
Depreciation, amort., depletion, $m
  9
  9
  9
  10
  10
  10
  10
  10
  11
  11
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
Funds from operations, $m
  80
  89
  91
  94
  97
  99
  103
  106
  110
  114
  117
  122
  127
  132
  138
  143
  150
  156
  163
  170
  178
  186
  195
  203
  213
  223
  233
  244
  256
  268
Change in working capital, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  79
  88
  90
  92
  95
  98
  101
  104
  108
  111
  115
  119
  124
  129
  134
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  217
  227
  238
  249
  261
Maintenance CAPEX, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
Cash from investing activities, $m
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
Free cash flow, $m
  73
  81
  83
  85
  87
  90
  93
  96
  99
  102
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  181
  189
  198
  207
  217
  227
  238
Issuance/(repayment) of debt, $m
  -140
  6
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
Issuance/(repurchase) of shares, $m
  74
  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  
  -66
  6
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
Total cash flow (excl. dividends), $m
  8
  87
  90
  93
  96
  99
  103
  106
  111
  115
  119
  124
  129
  134
  140
  146
  153
  159
  167
  174
  182
  191
  199
  209
  219
  229
  240
  251
  263
  276
Retained Cash Flow (-), $m
  -145
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Prev. year cash balance distribution, $m
  191
  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
  53
  87
  89
  92
  95
  98
  102
  105
  109
  113
  117
  122
  127
  132
  138
  144
  150
  157
  164
  172
  180
  188
  197
  206
  215
  226
  236
  247
  259
  272
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
  51
  79
  78
  76
  74
  71
  69
  66
  63
  59
  56
  52
  48
  44
  41
  37
  33
  29
  25
  22
  19
  16
  13
  10
  8
  7
  5
  4
  3
  2
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

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, Inc. (CASA)

Valuation Ratios
P/E Ratio 8
Price to Sales 2.3
Price to Book 27.4
Price to Tangible Book
Price to Cash Flow 6.4
Price to Free Cash Flow 6.9
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 $297 million for the last fiscal year's total revenue generated by Casa Systems, Inc.. The default revenue input number comes from 0001 income statement of Casa Systems, 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 CASA 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 CASA is calculated based on our internal credit rating of Casa Systems, 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 Casa Systems, 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 CASA stock the variable cost ratio is equal to 61.3%.

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 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 6.7% for Casa Systems, Inc..

Corporate tax rate of 27% is the nominal tax rate for Casa Systems, 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 CASA 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 CASA are equal to 10%.

Life of production assets of 3.1 years is the average useful life of capital assets used in Casa Systems, 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 CASA is equal to 16.8%. 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 - $74.856 million for Casa Systems, 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 83.128 million for Casa Systems, 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 Casa Systems, Inc. at the current share price and the inputted number of shares is $0.7 billion.

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