Intrinsic value of Casa Systems - CASA

Previous Close

$14.96

  Intrinsic Value

$17.86

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  Rating & Target

hold

+19%

Previous close

$14.96

 
Intrinsic value

$17.86

 
Up/down potential

+19%

 
Rating

hold

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 1.2

 

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, %
  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
  432
  476
  521
  568
  617
  669
  722
  777
  835
  894
  957
  1,021
  1,088
  1,158
  1,231
  1,307
  1,385
  1,468
  1,553
  1,643
  1,736
  1,833
  1,935
  2,041
  2,153
  2,269
  2,390
  2,518
  2,651
Variable operating expenses, $m
  152
  168
  185
  203
  221
  240
  260
  281
  302
  325
  348
  372
  397
  423
  451
  479
  508
  539
  571
  604
  639
  675
  713
  753
  794
  837
  883
  930
  979
  1,031
Fixed operating expenses, $m
  82
  84
  85
  87
  89
  91
  93
  95
  97
  99
  102
  104
  106
  108
  111
  113
  116
  118
  121
  124
  126
  129
  132
  135
  138
  141
  144
  147
  150
  154
Total operating expenses, $m
  234
  252
  270
  290
  310
  331
  353
  376
  399
  424
  450
  476
  503
  531
  562
  592
  624
  657
  692
  728
  765
  804
  845
  888
  932
  978
  1,027
  1,077
  1,129
  1,185
Operating income, $m
  157
  181
  205
  231
  258
  286
  315
  346
  378
  411
  445
  481
  518
  556
  597
  639
  683
  728
  776
  825
  877
  932
  988
  1,047
  1,109
  1,174
  1,242
  1,313
  1,388
  1,466
EBITDA, $m
  163
  187
  213
  239
  267
  296
  326
  357
  390
  424
  459
  496
  534
  573
  615
  658
  703
  750
  799
  850
  903
  959
  1,017
  1,078
  1,141
  1,208
  1,278
  1,351
  1,427
  1,507
Interest expense (income), $m
  0
  17
  11
  13
  15
  17
  19
  21
  24
  26
  28
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  102
  108
Earnings before tax, $m
  140
  170
  192
  216
  241
  267
  294
  322
  352
  382
  414
  447
  481
  517
  554
  593
  633
  676
  720
  765
  813
  864
  916
  971
  1,028
  1,088
  1,151
  1,217
  1,286
  1,358
Tax expense, $m
  38
  46
  52
  58
  65
  72
  79
  87
  95
  103
  112
  121
  130
  140
  150
  160
  171
  182
  194
  207
  220
  233
  247
  262
  278
  294
  311
  329
  347
  367
Net income, $m
  102
  124
  140
  158
  176
  195
  215
  235
  257
  279
  302
  326
  351
  377
  405
  433
  462
  493
  525
  559
  594
  630
  669
  709
  751
  794
  840
  888
  939
  991

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
  341
  378
  415
  455
  496
  539
  584
  630
  679
  729
  781
  835
  892
  951
  1,012
  1,075
  1,141
  1,210
  1,282
  1,357
  1,435
  1,516
  1,601
  1,690
  1,783
  1,880
  1,981
  2,088
  2,199
  2,315
Adjusted assets (=assets-cash), $m
  341
  378
  415
  455
  496
  539
  584
  630
  679
  729
  781
  835
  892
  951
  1,012
  1,075
  1,141
  1,210
  1,282
  1,357
  1,435
  1,516
  1,601
  1,690
  1,783
  1,880
  1,981
  2,088
  2,199
  2,315
Revenue / Adjusted assets
  1.147
  1.143
  1.147
  1.145
  1.145
  1.145
  1.146
  1.146
  1.144
  1.145
  1.145
  1.146
  1.145
  1.144
  1.144
  1.145
  1.145
  1.145
  1.145
  1.144
  1.145
  1.145
  1.145
  1.145
  1.145
  1.145
  1.145
  1.145
  1.145
  1.145
Average production assets, $m
  30
  34
  37
  41
  44
  48
  52
  56
  61
  65
  70
  75
  80
  85
  90
  96
  102
  108
  114
  121
  128
  135
  143
  151
  159
  168
  177
  186
  196
  207
Working capital, $m
  73
  81
  89
  98
  107
  116
  126
  136
  146
  157
  168
  180
  192
  205
  218
  231
  246
  260
  276
  292
  309
  326
  345
  364
  384
  405
  427
  449
  473
  498
Total debt, $m
  188
  220
  254
  290
  327
  365
  406
  448
  491
  536
  583
  632
  683
  736
  791
  848
  907
  969
  1,034
  1,101
  1,171
  1,245
  1,321
  1,401
  1,485
  1,572
  1,664
  1,759
  1,859
  1,964
Total liabilities, $m
  307
  340
  374
  409
  447
  485
  526
  567
  611
  656
  703
  752
  803
  855
  910
  968
  1,027
  1,089
  1,154
  1,221
  1,291
  1,364
  1,441
  1,521
  1,605
  1,692
  1,783
  1,879
  1,979
  2,084
Total equity, $m
  34
  38
  42
  45
  50
  54
  58
  63
  68
  73
  78
  84
  89
  95
  101
  108
  114
  121
  128
  136
  143
  152
  160
  169
  178
  188
  198
  209
  220
  232
Total liabilities and equity, $m
  341
  378
  416
  454
  497
  539
  584
  630
  679
  729
  781
  836
  892
  950
  1,011
  1,076
  1,141
  1,210
  1,282
  1,357
  1,434
  1,516
  1,601
  1,690
  1,783
  1,880
  1,981
  2,088
  2,199
  2,316
Debt-to-equity ratio
  5.490
  5.830
  6.120
  6.370
  6.590
  6.780
  6.950
  7.100
  7.240
  7.360
  7.470
  7.570
  7.660
  7.740
  7.820
  7.890
  7.950
  8.010
  8.070
  8.120
  8.170
  8.210
  8.250
  8.290
  8.330
  8.360
  8.400
  8.430
  8.460
  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
  158
  176
  195
  215
  235
  257
  279
  302
  326
  351
  377
  405
  433
  462
  493
  525
  559
  594
  630
  669
  709
  751
  794
  840
  888
  939
  991
Depreciation, amort., depletion, $m
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
Funds from operations, $m
  108
  131
  148
  166
  185
  205
  225
  247
  269
  292
  316
  341
  367
  394
  423
  452
  483
  515
  548
  583
  619
  657
  697
  739
  782
  828
  876
  926
  978
  1,033
Change in working capital, $m
  7
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  101
  123
  140
  157
  176
  195
  216
  237
  258
  281
  305
  329
  355
  382
  409
  438
  468
  500
  533
  567
  603
  640
  679
  720
  762
  807
  854
  903
  954
  1,008
Maintenance CAPEX, $m
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
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
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -41
  -43
  -44
  -47
  -49
Free cash flow, $m
  92
  114
  130
  147
  164
  183
  202
  222
  243
  265
  287
  311
  335
  361
  387
  415
  443
  473
  505
  537
  571
  607
  644
  683
  724
  767
  811
  858
  907
  958
Issuance/(repayment) of debt, $m
  -110
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
Issuance/(repurchase) of shares, $m
  42
  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  
  -68
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
Total cash flow (excl. dividends), $m
  25
  146
  164
  182
  201
  221
  242
  264
  286
  310
  334
  359
  386
  413
  442
  472
  503
  535
  569
  605
  642
  680
  721
  763
  808
  854
  903
  953
  1,007
  1,063
Retained Cash Flow (-), $m
  -144
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Prev. year cash balance distribution, $m
  160
  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
  40
  142
  160
  178
  197
  217
  238
  259
  281
  305
  329
  354
  380
  407
  436
  465
  496
  528
  562
  597
  634
  672
  712
  754
  798
  844
  892
  943
  996
  1,051
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
  39
  130
  139
  147
  153
  158
  161
  162
  162
  160
  156
  151
  145
  137
  128
  118
  108
  97
  87
  76
  66
  56
  47
  38
  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
  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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  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 (CASA)

Valuation Ratios
P/E Ratio 13.5
Price to Sales 3.8
Price to Book 46.1
Price to Tangible Book
Price to Cash Flow 10.8
Price to Free Cash Flow 11.5
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 $351.575 million for the last fiscal year's total revenue generated by Casa Systems. The default revenue input number comes from 0001 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 38.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $80 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 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 7.8%.

Life of production assets of 3.6 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 18.8%. 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 - $50.156 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 82.374 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 $1.2 billion.

COMPANY NEWS

▶ Casa Systems To Present at December Conferences   [Nov-27-18 07:00AM  GlobeNewswire]
▶ Casa Systems: 3Q Earnings Snapshot   [Nov-07-18 07:32PM  Associated Press]
▶ 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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