Intrinsic value of Ciena Corporation - CIEN

Previous Close

$43.52

  Intrinsic Value

$20.60

stock screener

  Rating & Target

str. sell

-53%

Previous close

$43.52

 
Intrinsic value

$20.60

 
Up/down potential

-53%

 
Rating

str. sell

We calculate the intrinsic value of CIEN 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 6.8

 

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, %
  20.50
  18.95
  17.56
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.01
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
  6.70
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
Revenue, $m
  3,728
  4,435
  5,213
  6,063
  6,983
  7,971
  9,026
  10,147
  11,331
  12,578
  13,887
  15,256
  16,687
  18,179
  19,732
  21,349
  23,029
  24,776
  26,591
  28,478
  30,438
  32,477
  34,596
  36,801
  39,096
  41,486
  43,976
  46,571
  49,277
  52,101
Variable operating expenses, $m
  3,432
  4,074
  4,781
  5,553
  6,389
  7,287
  8,246
  9,264
  10,340
  11,473
  12,617
  13,862
  15,162
  16,517
  17,929
  19,397
  20,924
  22,511
  24,161
  25,875
  27,656
  29,508
  31,433
  33,437
  35,522
  37,694
  39,956
  42,314
  44,773
  47,338
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
  3,432
  4,074
  4,781
  5,553
  6,389
  7,287
  8,246
  9,264
  10,340
  11,473
  12,617
  13,862
  15,162
  16,517
  17,929
  19,397
  20,924
  22,511
  24,161
  25,875
  27,656
  29,508
  31,433
  33,437
  35,522
  37,694
  39,956
  42,314
  44,773
  47,338
Operating income, $m
  296
  361
  432
  510
  594
  684
  781
  883
  991
  1,105
  1,269
  1,395
  1,525
  1,662
  1,804
  1,952
  2,105
  2,265
  2,431
  2,603
  2,783
  2,969
  3,163
  3,364
  3,574
  3,792
  4,020
  4,257
  4,505
  4,763
EBITDA, $m
  436
  518
  609
  709
  816
  932
  1,055
  1,186
  1,324
  1,470
  1,623
  1,783
  1,950
  2,125
  2,306
  2,495
  2,692
  2,896
  3,108
  3,329
  3,558
  3,796
  4,044
  4,301
  4,570
  4,849
  5,140
  5,443
  5,760
  6,090
Interest expense (income), $m
  47
  53
  75
  99
  126
  156
  188
  222
  258
  297
  338
  381
  426
  473
  523
  574
  628
  684
  742
  802
  865
  930
  998
  1,068
  1,142
  1,218
  1,297
  1,380
  1,466
  1,555
  1,649
Earnings before tax, $m
  243
  286
  333
  383
  438
  497
  559
  625
  694
  767
  889
  969
  1,052
  1,139
  1,230
  1,324
  1,421
  1,523
  1,629
  1,738
  1,852
  1,971
  2,094
  2,223
  2,356
  2,495
  2,640
  2,792
  2,949
  3,114
Tax expense, $m
  66
  77
  90
  103
  118
  134
  151
  169
  187
  207
  240
  262
  284
  308
  332
  357
  384
  411
  440
  469
  500
  532
  565
  600
  636
  674
  713
  754
  796
  841
Net income, $m
  177
  209
  243
  280
  320
  362
  408
  456
  507
  560
  649
  707
  768
  831
  898
  966
  1,038
  1,112
  1,189
  1,269
  1,352
  1,439
  1,529
  1,623
  1,720
  1,822
  1,928
  2,038
  2,153
  2,273

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
  4,402
  5,236
  6,155
  7,158
  8,244
  9,411
  10,657
  11,980
  13,378
  14,850
  16,395
  18,012
  19,701
  21,463
  23,297
  25,205
  27,189
  29,252
  31,395
  33,622
  35,937
  38,343
  40,845
  43,449
  46,158
  48,980
  51,919
  54,983
  58,179
  61,512
Adjusted assets (=assets-cash), $m
  4,402
  5,236
  6,155
  7,158
  8,244
  9,411
  10,657
  11,980
  13,378
  14,850
  16,395
  18,012
  19,701
  21,463
  23,297
  25,205
  27,189
  29,252
  31,395
  33,622
  35,937
  38,343
  40,845
  43,449
  46,158
  48,980
  51,919
  54,983
  58,179
  61,512
Revenue / Adjusted assets
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
Average production assets, $m
  608
  723
  850
  988
  1,138
  1,299
  1,471
  1,654
  1,847
  2,050
  2,264
  2,487
  2,720
  2,963
  3,216
  3,480
  3,754
  4,039
  4,334
  4,642
  4,961
  5,294
  5,639
  5,999
  6,373
  6,762
  7,168
  7,591
  8,032
  8,492
Working capital, $m
  552
  656
  772
  897
  1,033
  1,180
  1,336
  1,502
  1,677
  1,862
  2,055
  2,258
  2,470
  2,690
  2,920
  3,160
  3,408
  3,667
  3,936
  4,215
  4,505
  4,807
  5,120
  5,447
  5,786
  6,140
  6,508
  6,893
  7,293
  7,711
Total debt, $m
  1,211
  1,604
  2,038
  2,512
  3,024
  3,575
  4,163
  4,787
  5,447
  6,142
  6,872
  7,635
  8,432
  9,264
  10,129
  11,030
  11,967
  12,940
  13,951
  15,003
  16,095
  17,231
  18,412
  19,641
  20,920
  22,252
  23,639
  25,085
  26,593
  28,167
Total liabilities, $m
  2,078
  2,471
  2,905
  3,379
  3,891
  4,442
  5,030
  5,654
  6,314
  7,009
  7,738
  8,502
  9,299
  10,130
  10,996
  11,897
  12,833
  13,807
  14,818
  15,870
  16,962
  18,098
  19,279
  20,508
  21,787
  23,119
  24,506
  25,952
  27,460
  29,034
Total equity, $m
  2,324
  2,765
  3,250
  3,780
  4,353
  4,969
  5,627
  6,325
  7,063
  7,841
  8,657
  9,511
  10,402
  11,332
  12,301
  13,308
  14,356
  15,445
  16,576
  17,752
  18,975
  20,245
  21,566
  22,941
  24,372
  25,861
  27,413
  29,031
  30,718
  32,478
Total liabilities and equity, $m
  4,402
  5,236
  6,155
  7,159
  8,244
  9,411
  10,657
  11,979
  13,377
  14,850
  16,395
  18,013
  19,701
  21,462
  23,297
  25,205
  27,189
  29,252
  31,394
  33,622
  35,937
  38,343
  40,845
  43,449
  46,159
  48,980
  51,919
  54,983
  58,178
  61,512
Debt-to-equity ratio
  0.520
  0.580
  0.630
  0.660
  0.690
  0.720
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.820
  0.830
  0.830
  0.840
  0.840
  0.850
  0.850
  0.850
  0.850
  0.860
  0.860
  0.860
  0.860
  0.860
  0.870
  0.870
Adjusted equity ratio
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  177
  209
  243
  280
  320
  362
  408
  456
  507
  560
  649
  707
  768
  831
  898
  966
  1,038
  1,112
  1,189
  1,269
  1,352
  1,439
  1,529
  1,623
  1,720
  1,822
  1,928
  2,038
  2,153
  2,273
Depreciation, amort., depletion, $m
  140
  158
  177
  199
  222
  248
  274
  303
  333
  365
  354
  389
  425
  463
  503
  544
  587
  631
  677
  725
  775
  827
  881
  937
  996
  1,057
  1,120
  1,186
  1,255
  1,327
Funds from operations, $m
  317
  366
  420
  479
  542
  610
  682
  759
  840
  925
  1,002
  1,096
  1,193
  1,294
  1,400
  1,510
  1,624
  1,743
  1,866
  1,994
  2,127
  2,266
  2,410
  2,560
  2,716
  2,878
  3,048
  3,224
  3,408
  3,600
Change in working capital, $m
  94
  105
  115
  126
  136
  146
  156
  166
  175
  185
  194
  203
  212
  221
  230
  239
  249
  259
  269
  279
  290
  302
  314
  326
  340
  354
  368
  384
  401
  418
Cash from operations, $m
  223
  262
  305
  353
  406
  464
  526
  593
  665
  741
  809
  893
  981
  1,074
  1,170
  1,271
  1,375
  1,484
  1,597
  1,715
  1,837
  1,964
  2,096
  2,233
  2,376
  2,525
  2,679
  2,840
  3,008
  3,182
Maintenance CAPEX, $m
  -79
  -95
  -113
  -133
  -154
  -178
  -203
  -230
  -258
  -289
  -320
  -354
  -389
  -425
  -463
  -503
  -544
  -587
  -631
  -677
  -725
  -775
  -827
  -881
  -937
  -996
  -1,057
  -1,120
  -1,186
  -1,255
New CAPEX, $m
  -104
  -115
  -127
  -139
  -150
  -161
  -172
  -183
  -193
  -203
  -213
  -223
  -233
  -243
  -253
  -263
  -274
  -285
  -296
  -307
  -320
  -332
  -345
  -359
  -374
  -390
  -406
  -423
  -441
  -460
Cash from investing activities, $m
  -183
  -210
  -240
  -272
  -304
  -339
  -375
  -413
  -451
  -492
  -533
  -577
  -622
  -668
  -716
  -766
  -818
  -872
  -927
  -984
  -1,045
  -1,107
  -1,172
  -1,240
  -1,311
  -1,386
  -1,463
  -1,543
  -1,627
  -1,715
Free cash flow, $m
  41
  51
  65
  82
  102
  125
  151
  181
  213
  249
  275
  316
  360
  406
  454
  505
  558
  613
  671
  730
  792
  857
  924
  993
  1,065
  1,139
  1,217
  1,297
  1,380
  1,467
Issuance/(repayment) of debt, $m
  353
  394
  434
  474
  513
  551
  588
  624
  660
  695
  729
  763
  797
  831
  866
  901
  937
  973
  1,012
  1,051
  1,093
  1,136
  1,181
  1,229
  1,279
  1,332
  1,387
  1,446
  1,508
  1,573
Issuance/(repurchase) of shares, $m
  217
  232
  243
  250
  254
  254
  250
  242
  231
  217
  167
  147
  124
  98
  71
  41
  10
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  570
  626
  677
  724
  767
  805
  838
  866
  891
  912
  896
  910
  921
  929
  937
  942
  947
  973
  1,012
  1,051
  1,093
  1,136
  1,181
  1,229
  1,279
  1,332
  1,387
  1,446
  1,508
  1,573
Total cash flow (excl. dividends), $m
  611
  677
  741
  805
  868
  929
  989
  1,048
  1,105
  1,161
  1,171
  1,226
  1,281
  1,335
  1,391
  1,447
  1,504
  1,586
  1,682
  1,782
  1,885
  1,993
  2,105
  2,222
  2,344
  2,471
  2,604
  2,743
  2,888
  3,040
Retained Cash Flow (-), $m
  -395
  -440
  -485
  -530
  -573
  -616
  -658
  -698
  -738
  -777
  -816
  -854
  -892
  -930
  -968
  -1,008
  -1,048
  -1,089
  -1,132
  -1,176
  -1,222
  -1,271
  -1,321
  -1,375
  -1,431
  -1,490
  -1,552
  -1,618
  -1,687
  -1,760
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
  216
  237
  256
  276
  295
  313
  331
  349
  366
  383
  356
  372
  389
  405
  422
  439
  457
  498
  551
  606
  663
  722
  783
  847
  913
  981
  1,052
  1,125
  1,201
  1,280
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
  207
  217
  223
  227
  228
  227
  224
  218
  210
  201
  169
  159
  148
  136
  124
  112
  99
  92
  85
  77
  69
  60
  51
  43
  36
  29
  23
  17
  13
  10
Current shareholders' claim on cash, %
  96.9
  94.2
  91.9
  90.0
  88.3
  86.8
  85.6
  84.6
  83.7
  83.0
  82.5
  82.1
  81.8
  81.6
  81.4
  81.4
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3
  81.3

Ciena Corporation is a network strategy and technology company, which provides solutions that enable a range of network operators to adopt communication architectures and deliver an array of services, relied upon by enterprise and consumer end users. It provides equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks. It segments include Networking Platforms; Software and Software-Related Services, and Global Services. The Networking Platforms segment consists of Converged Packet Optical, Packet Networking and Optical Transport product portfolios. The software business is engaged in the development and licensing of element and network management software and software-related services that support its hardware offerings. It offers a suite of consulting and support services that help its customers to design, optimize, deploy and maintain their communications networks.

FINANCIAL RATIOS  of  Ciena Corporation (CIEN)

Valuation Ratios
P/E Ratio 4.9
Price to Sales 2.2
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 26.5
Price to Free Cash Flow 44.5
Growth Rates
Sales Growth Rate 7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.2%
Cap. Spend. - 3 Yr. Gr. Rate 14.6%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 30.8%
Total Debt to Equity 47.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 48.1%
Ret/ On Assets - 3 Yr. Avg. 17.8%
Return On Total Capital 48.8%
Ret/ On T. Cap. - 3 Yr. Avg. 17.8%
Return On Equity 87%
Return On Equity - 3 Yr. Avg. 34%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 44.5%
Gross Margin - 3 Yr. Avg. 44.4%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 10.1%
Operating Margin 7.5%
Oper. Margin - 3 Yr. Avg. 5.9%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 45%
Net Profit Margin - 3 Yr. Avg. 16.1%
Effective Tax Rate -709%
Eff/ Tax Rate - 3 Yr. Avg. -214.3%
Payout Ratio 0%

CIEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CIEN stock intrinsic value calculation we used $3094 million for the last fiscal year's total revenue generated by Ciena Corporation. The default revenue input number comes from 0001 income statement of Ciena Corporation. 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 CIEN stock valuation model: a) initial revenue growth rate of 20.5% 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 CIEN is calculated based on our internal credit rating of Ciena Corporation, 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 Ciena Corporation.
    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 CIEN stock the variable cost ratio is equal to 92.3%.

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 CIEN 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 6.2% for Ciena Corporation.

Corporate tax rate of 27% is the nominal tax rate for Ciena Corporation. 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 CIEN 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 CIEN are equal to 16.3%.

Life of production assets of 6.4 years is the average useful life of capital assets used in Ciena Corporation 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 CIEN is equal to 14.8%. 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 - $1929.334 million for Ciena Corporation - 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 155.973 million for Ciena Corporation 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 Ciena Corporation at the current share price and the inputted number of shares is $6.8 billion.

RELATED COMPANIES Price Int.Val. Rating
ADTN ADTRAN, Inc. 16.06 19.03  buy
NOK Nokia Corporat 5.16 17.60  str.buy
INFN Infinera Corpo 3.09 3.85  hold
CSCO Cisco Systems, 57.03 50.72  hold
JNPR Juniper Networ 26.81 36.56  buy
CALX Calix, Inc 6.57 0.17  str.sell
DZSI DASAN Zhone So 12.70 14.89  buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.