Intrinsic value of Comtech Telecommunications Corp. - CMTL

Previous Close

$26.91

  Intrinsic Value

$4.94

stock screener

  Rating & Target

str. sell

-82%

Previous close

$26.91

 
Intrinsic value

$4.94

 
Up/down potential

-82%

 
Rating

str. sell

We calculate the intrinsic value of CMTL 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 0.6

 

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, %
  22.70
  20.93
  19.34
  17.90
  16.61
  15.45
  14.41
  13.47
  12.62
  11.86
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
Revenue, $m
  701
  847
  1,011
  1,192
  1,390
  1,605
  1,836
  2,083
  2,346
  2,625
  2,918
  3,226
  3,548
  3,885
  4,237
  4,603
  4,984
  5,381
  5,793
  6,221
  6,666
  7,128
  7,609
  8,108
  8,628
  9,169
  9,733
  10,320
  10,931
  11,569
Variable operating expenses, $m
  653
  789
  941
  1,109
  1,293
  1,492
  1,707
  1,936
  2,180
  2,438
  2,707
  2,993
  3,293
  3,605
  3,932
  4,271
  4,625
  4,993
  5,375
  5,772
  6,185
  6,614
  7,060
  7,524
  8,006
  8,508
  9,031
  9,576
  10,143
  10,735
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
  653
  789
  941
  1,109
  1,293
  1,492
  1,707
  1,936
  2,180
  2,438
  2,707
  2,993
  3,293
  3,605
  3,932
  4,271
  4,625
  4,993
  5,375
  5,772
  6,185
  6,614
  7,060
  7,524
  8,006
  8,508
  9,031
  9,576
  10,143
  10,735
Operating income, $m
  48
  58
  70
  83
  97
  113
  129
  147
  166
  186
  210
  233
  256
  280
  305
  332
  359
  388
  418
  448
  480
  514
  548
  584
  622
  661
  702
  744
  788
  834
EBITDA, $m
  63
  76
  91
  107
  125
  144
  165
  187
  210
  235
  262
  289
  318
  349
  380
  413
  447
  483
  520
  558
  598
  639
  683
  727
  774
  823
  873
  926
  981
  1,038
Interest expense (income), $m
  10
  9
  14
  19
  24
  30
  37
  44
  52
  60
  69
  78
  88
  98
  109
  120
  131
  144
  156
  170
  183
  198
  212
  228
  244
  260
  278
  296
  315
  334
  354
Earnings before tax, $m
  38
  44
  51
  59
  67
  76
  86
  96
  106
  118
  133
  145
  158
  171
  186
  200
  216
  231
  248
  265
  283
  301
  321
  341
  362
  383
  406
  429
  454
  479
Tax expense, $m
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  36
  39
  43
  46
  50
  54
  58
  62
  67
  72
  76
  81
  87
  92
  98
  103
  110
  116
  123
  129
Net income, $m
  28
  32
  38
  43
  49
  56
  62
  70
  78
  86
  97
  106
  115
  125
  135
  146
  157
  169
  181
  194
  207
  220
  234
  249
  264
  280
  296
  313
  331
  350

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
  1,036
  1,253
  1,496
  1,763
  2,056
  2,374
  2,716
  3,082
  3,471
  3,882
  4,316
  4,772
  5,249
  5,747
  6,268
  6,809
  7,373
  7,959
  8,569
  9,202
  9,860
  10,544
  11,255
  11,995
  12,764
  13,564
  14,398
  15,266
  16,170
  17,114
Adjusted assets (=assets-cash), $m
  1,036
  1,253
  1,496
  1,763
  2,056
  2,374
  2,716
  3,082
  3,471
  3,882
  4,316
  4,772
  5,249
  5,747
  6,268
  6,809
  7,373
  7,959
  8,569
  9,202
  9,860
  10,544
  11,255
  11,995
  12,764
  13,564
  14,398
  15,266
  16,170
  17,114
Revenue / Adjusted assets
  0.677
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
Average production assets, $m
  371
  448
  535
  631
  735
  849
  971
  1,102
  1,241
  1,388
  1,543
  1,706
  1,877
  2,055
  2,241
  2,435
  2,637
  2,846
  3,064
  3,291
  3,526
  3,771
  4,025
  4,289
  4,564
  4,851
  5,149
  5,459
  5,783
  6,120
Working capital, $m
  111
  134
  160
  188
  220
  254
  290
  329
  371
  415
  461
  510
  561
  614
  669
  727
  788
  850
  915
  983
  1,053
  1,126
  1,202
  1,281
  1,363
  1,449
  1,538
  1,630
  1,727
  1,828
Total debt, $m
  245
  332
  430
  537
  655
  783
  920
  1,067
  1,224
  1,389
  1,564
  1,747
  1,938
  2,139
  2,348
  2,566
  2,792
  3,028
  3,273
  3,528
  3,792
  4,067
  4,353
  4,650
  4,959
  5,281
  5,616
  5,965
  6,329
  6,708
Total liabilities, $m
  417
  504
  601
  709
  827
  954
  1,092
  1,239
  1,395
  1,561
  1,735
  1,918
  2,110
  2,310
  2,520
  2,737
  2,964
  3,200
  3,445
  3,699
  3,964
  4,239
  4,525
  4,822
  5,131
  5,453
  5,788
  6,137
  6,500
  6,880
Total equity, $m
  620
  749
  894
  1,055
  1,230
  1,420
  1,624
  1,843
  2,076
  2,322
  2,581
  2,854
  3,139
  3,437
  3,748
  4,072
  4,409
  4,760
  5,124
  5,503
  5,897
  6,306
  6,731
  7,173
  7,633
  8,111
  8,610
  9,129
  9,670
  10,234
Total liabilities and equity, $m
  1,037
  1,253
  1,495
  1,764
  2,057
  2,374
  2,716
  3,082
  3,471
  3,883
  4,316
  4,772
  5,249
  5,747
  6,268
  6,809
  7,373
  7,960
  8,569
  9,202
  9,861
  10,545
  11,256
  11,995
  12,764
  13,564
  14,398
  15,266
  16,170
  17,114
Debt-to-equity ratio
  0.400
  0.440
  0.480
  0.510
  0.530
  0.550
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.620
  0.630
  0.630
  0.630
  0.640
  0.640
  0.640
  0.640
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.660
Adjusted equity ratio
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  32
  38
  43
  49
  56
  62
  70
  78
  86
  97
  106
  115
  125
  135
  146
  157
  169
  181
  194
  207
  220
  234
  249
  264
  280
  296
  313
  331
  350
Depreciation, amort., depletion, $m
  15
  18
  21
  24
  27
  31
  35
  40
  44
  49
  51
  57
  63
  69
  75
  81
  88
  95
  102
  110
  118
  126
  134
  143
  152
  162
  172
  182
  193
  204
Funds from operations, $m
  43
  50
  58
  67
  76
  87
  98
  110
  122
  135
  148
  163
  178
  194
  210
  227
  245
  264
  283
  303
  324
  346
  368
  392
  416
  441
  468
  495
  524
  554
Change in working capital, $m
  20
  23
  26
  29
  31
  34
  37
  39
  42
  44
  46
  49
  51
  53
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
Cash from operations, $m
  23
  27
  32
  38
  45
  53
  61
  70
  80
  91
  102
  114
  127
  140
  155
  170
  185
  201
  218
  236
  254
  273
  292
  313
  334
  356
  379
  403
  427
  453
Maintenance CAPEX, $m
  -10
  -12
  -15
  -18
  -21
  -25
  -28
  -32
  -37
  -41
  -46
  -51
  -57
  -63
  -69
  -75
  -81
  -88
  -95
  -102
  -110
  -118
  -126
  -134
  -143
  -152
  -162
  -172
  -182
  -193
New CAPEX, $m
  -69
  -78
  -87
  -96
  -105
  -114
  -122
  -131
  -139
  -147
  -155
  -163
  -171
  -178
  -186
  -194
  -202
  -210
  -218
  -226
  -235
  -245
  -254
  -264
  -275
  -286
  -298
  -310
  -324
  -337
Cash from investing activities, $m
  -79
  -90
  -102
  -114
  -126
  -139
  -150
  -163
  -176
  -188
  -201
  -214
  -228
  -241
  -255
  -269
  -283
  -298
  -313
  -328
  -345
  -363
  -380
  -398
  -418
  -438
  -460
  -482
  -506
  -530
Free cash flow, $m
  -56
  -63
  -69
  -75
  -81
  -85
  -89
  -93
  -95
  -97
  -100
  -100
  -101
  -100
  -100
  -99
  -98
  -96
  -95
  -93
  -91
  -89
  -88
  -86
  -84
  -82
  -81
  -79
  -78
  -77
Issuance/(repayment) of debt, $m
  77
  87
  97
  108
  118
  128
  137
  147
  156
  165
  174
  183
  192
  200
  209
  218
  227
  236
  245
  255
  265
  275
  286
  297
  309
  322
  335
  349
  364
  379
Issuance/(repurchase) of shares, $m
  86
  97
  107
  117
  126
  134
  142
  149
  155
  160
  163
  167
  170
  173
  176
  178
  180
  182
  183
  185
  187
  189
  191
  193
  196
  199
  202
  206
  210
  214
Cash from financing (excl. dividends), $m  
  163
  184
  204
  225
  244
  262
  279
  296
  311
  325
  337
  350
  362
  373
  385
  396
  407
  418
  428
  440
  452
  464
  477
  490
  505
  521
  537
  555
  574
  593
Total cash flow (excl. dividends), $m
  107
  122
  136
  150
  163
  177
  190
  203
  216
  228
  237
  249
  261
  273
  285
  297
  309
  321
  334
  347
  360
  374
  389
  405
  421
  438
  456
  475
  495
  516
Retained Cash Flow (-), $m
  -114
  -130
  -145
  -160
  -175
  -190
  -205
  -219
  -233
  -246
  -259
  -272
  -285
  -298
  -311
  -324
  -337
  -351
  -364
  -379
  -394
  -409
  -425
  -442
  -460
  -479
  -498
  -519
  -541
  -564
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
  -7
  -8
  -9
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
Discount rate, %
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -9
  -9
  -10
  -9
  -9
  -8
  -7
  -7
  -6
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  88.3
  78.7
  70.8
  64.2
  58.7
  54.1
  50.2
  46.9
  44.0
  41.5
  39.4
  37.5
  35.8
  34.3
  33.0
  31.8
  30.8
  29.8
  29.0
  28.2
  27.4
  26.8
  26.2
  25.6
  25.0
  24.5
  24.1
  23.6
  23.2
  22.8

Comtech Telecommunications Corp. designs, develops, produces and markets products, systems and services for communications solutions. The Company operates through two segments: Commercial Solutions and Government Solutions. It offers communications solutions, including command and control technologies, safety and security technologies and enterprise technologies. Its Commercial Solutions segment provides satellite communications (such as satellite earth station modems and traveling wave tube amplifiers), public safety systems (such as next generation 911 technologies) and enterprise application technologies (such as messaging and trusted location-based technologies). The Government Solutions segment includes command and control technologies, troposcatter technologies, and radio frequency power and switching technologies. It serves system and network suppliers in the global satellite, defense, broadcast and aerospace industries, and the United States federal government, among others.

FINANCIAL RATIOS  of  Comtech Telecommunications Corp. (CMTL)

Valuation Ratios
P/E Ratio 39.7
Price to Sales 1.2
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 10.8
Growth Rates
Sales Growth Rate 33.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 37.1%
Total Debt to Equity 40.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 3.4%
Return On Equity - 3 Yr. Avg. 2.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 39.6%
Gross Margin - 3 Yr. Avg. 42.2%
EBITDA Margin 13.1%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin 6.7%
Oper. Margin - 3 Yr. Avg. 5.9%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 36%
Eff/ Tax Rate - 3 Yr. Avg. 22.8%
Payout Ratio 118.8%

CMTL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMTL stock intrinsic value calculation we used $571 million for the last fiscal year's total revenue generated by Comtech Telecommunications Corp.. The default revenue input number comes from 0001 income statement of Comtech Telecommunications Corp.. 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 CMTL stock valuation model: a) initial revenue growth rate of 22.7% 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 4.5%, whose default value for CMTL is calculated based on our internal credit rating of Comtech Telecommunications Corp., 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 Comtech Telecommunications Corp..
    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 CMTL stock the variable cost ratio is equal to 93.3%.

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 CMTL 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 5.6% for Comtech Telecommunications Corp..

Corporate tax rate of 27% is the nominal tax rate for Comtech Telecommunications Corp.. 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 CMTL 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 CMTL are equal to 52.9%.

Life of production assets of 42 years is the average useful life of capital assets used in Comtech Telecommunications Corp. 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 CMTL is equal to 15.8%. 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 - $505.684 million for Comtech Telecommunications Corp. - 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 24.126 million for Comtech Telecommunications Corp. 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 Comtech Telecommunications Corp. at the current share price and the inputted number of shares is $0.6 billion.

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