Intrinsic value of Comtech Telecommunications - CMTL

Previous Close

$25.63

  Intrinsic Value

$69.92

stock screener

  Rating & Target

str. buy

+173%

Previous close

$25.63

 
Intrinsic value

$69.92

 
Up/down potential

+173%

 
Rating

str. buy

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, %
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
Revenue, $m
  637
  730
  830
  936
  1,048
  1,167
  1,292
  1,422
  1,559
  1,702
  1,850
  2,005
  2,166
  2,333
  2,507
  2,687
  2,875
  3,070
  3,273
  3,484
  3,703
  3,932
  4,170
  4,418
  4,676
  4,946
  5,228
  5,521
  5,828
  6,149
Variable operating expenses, $m
  458
  517
  580
  647
  718
  794
  872
  955
  1,042
  1,132
  1,171
  1,268
  1,370
  1,476
  1,586
  1,700
  1,819
  1,942
  2,070
  2,204
  2,343
  2,487
  2,638
  2,795
  2,958
  3,129
  3,307
  3,493
  3,687
  3,890
Fixed operating expenses, $m
  115
  118
  121
  123
  126
  129
  132
  134
  137
  140
  144
  147
  150
  153
  157
  160
  164
  167
  171
  175
  178
  182
  186
  191
  195
  199
  203
  208
  212
  217
Total operating expenses, $m
  573
  635
  701
  770
  844
  923
  1,004
  1,089
  1,179
  1,272
  1,315
  1,415
  1,520
  1,629
  1,743
  1,860
  1,983
  2,109
  2,241
  2,379
  2,521
  2,669
  2,824
  2,986
  3,153
  3,328
  3,510
  3,701
  3,899
  4,107
Operating income, $m
  63
  95
  129
  165
  204
  245
  288
  333
  380
  429
  536
  590
  646
  704
  764
  827
  893
  961
  1,032
  1,105
  1,182
  1,262
  1,346
  1,433
  1,523
  1,618
  1,717
  1,821
  1,929
  2,042
EBITDA, $m
  131
  164
  200
  239
  279
  322
  368
  415
  465
  517
  572
  628
  687
  749
  812
  879
  948
  1,020
  1,094
  1,172
  1,253
  1,338
  1,426
  1,517
  1,613
  1,713
  1,818
  1,927
  2,041
  2,160
Interest expense (income), $m
  10
  11
  14
  17
  20
  24
  28
  32
  36
  41
  45
  50
  56
  61
  66
  72
  78
  84
  91
  98
  105
  112
  120
  127
  136
  144
  153
  162
  172
  182
  193
Earnings before tax, $m
  53
  81
  112
  145
  180
  217
  256
  297
  339
  384
  486
  534
  585
  637
  692
  749
  808
  870
  934
  1,001
  1,070
  1,143
  1,218
  1,297
  1,379
  1,465
  1,555
  1,648
  1,747
  1,849
Tax expense, $m
  14
  22
  30
  39
  49
  59
  69
  80
  92
  104
  131
  144
  158
  172
  187
  202
  218
  235
  252
  270
  289
  308
  329
  350
  372
  396
  420
  445
  472
  499
Net income, $m
  38
  59
  82
  106
  131
  158
  187
  217
  248
  280
  355
  390
  427
  465
  505
  547
  590
  635
  682
  730
  781
  834
  889
  947
  1,007
  1,069
  1,135
  1,203
  1,275
  1,350

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
  963
  1,104
  1,255
  1,416
  1,586
  1,766
  1,954
  2,152
  2,359
  2,574
  2,799
  3,033
  3,276
  3,529
  3,792
  4,065
  4,349
  4,644
  4,951
  5,270
  5,602
  5,948
  6,308
  6,683
  7,075
  7,483
  7,909
  8,353
  8,818
  9,303
Adjusted assets (=assets-cash), $m
  963
  1,104
  1,255
  1,416
  1,586
  1,766
  1,954
  2,152
  2,359
  2,574
  2,799
  3,033
  3,276
  3,529
  3,792
  4,065
  4,349
  4,644
  4,951
  5,270
  5,602
  5,948
  6,308
  6,683
  7,075
  7,483
  7,909
  8,353
  8,818
  9,303
Revenue / Adjusted assets
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
Average production assets, $m
  367
  420
  478
  539
  604
  672
  744
  819
  898
  980
  1,066
  1,155
  1,247
  1,344
  1,444
  1,548
  1,656
  1,768
  1,885
  2,007
  2,133
  2,265
  2,402
  2,545
  2,694
  2,849
  3,011
  3,180
  3,357
  3,542
Working capital, $m
  84
  96
  110
  124
  138
  154
  171
  188
  206
  225
  244
  265
  286
  308
  331
  355
  379
  405
  432
  460
  489
  519
  550
  583
  617
  653
  690
  729
  769
  812
Total debt, $m
  251
  311
  375
  443
  515
  591
  671
  754
  842
  933
  1,028
  1,127
  1,230
  1,337
  1,448
  1,564
  1,684
  1,808
  1,938
  2,073
  2,214
  2,360
  2,512
  2,671
  2,836
  3,009
  3,189
  3,377
  3,574
  3,779
Total liabilities, $m
  407
  467
  531
  599
  671
  747
  827
  910
  998
  1,089
  1,184
  1,283
  1,386
  1,493
  1,604
  1,720
  1,840
  1,965
  2,094
  2,229
  2,370
  2,516
  2,668
  2,827
  2,993
  3,165
  3,345
  3,533
  3,730
  3,935
Total equity, $m
  556
  637
  724
  817
  915
  1,019
  1,128
  1,242
  1,361
  1,485
  1,615
  1,750
  1,891
  2,036
  2,188
  2,346
  2,510
  2,680
  2,857
  3,041
  3,233
  3,432
  3,640
  3,856
  4,082
  4,318
  4,563
  4,820
  5,088
  5,368
Total liabilities and equity, $m
  963
  1,104
  1,255
  1,416
  1,586
  1,766
  1,955
  2,152
  2,359
  2,574
  2,799
  3,033
  3,277
  3,529
  3,792
  4,066
  4,350
  4,645
  4,951
  5,270
  5,603
  5,948
  6,308
  6,683
  7,075
  7,483
  7,908
  8,353
  8,818
  9,303
Debt-to-equity ratio
  0.450
  0.490
  0.520
  0.540
  0.560
  0.580
  0.590
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.660
  0.660
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.700
  0.700
  0.700
  0.700
  0.700
Adjusted equity ratio
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  59
  82
  106
  131
  158
  187
  217
  248
  280
  355
  390
  427
  465
  505
  547
  590
  635
  682
  730
  781
  834
  889
  947
  1,007
  1,069
  1,135
  1,203
  1,275
  1,350
Depreciation, amort., depletion, $m
  67
  69
  71
  73
  75
  78
  80
  83
  85
  88
  36
  38
  42
  45
  48
  52
  55
  59
  63
  67
  71
  75
  80
  85
  90
  95
  100
  106
  112
  118
Funds from operations, $m
  106
  129
  153
  179
  207
  236
  267
  299
  333
  368
  390
  429
  469
  510
  553
  598
  645
  694
  745
  797
  852
  910
  969
  1,032
  1,097
  1,164
  1,235
  1,309
  1,387
  1,468
Change in working capital, $m
  11
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
Cash from operations, $m
  94
  116
  140
  165
  192
  220
  250
  282
  315
  349
  371
  408
  447
  488
  530
  575
  620
  668
  718
  769
  823
  879
  938
  999
  1,062
  1,129
  1,198
  1,271
  1,346
  1,426
Maintenance CAPEX, $m
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -30
  -33
  -36
  -38
  -42
  -45
  -48
  -52
  -55
  -59
  -63
  -67
  -71
  -75
  -80
  -85
  -90
  -95
  -100
  -106
  -112
New CAPEX, $m
  -50
  -54
  -57
  -61
  -65
  -68
  -72
  -75
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -126
  -132
  -137
  -143
  -149
  -155
  -162
  -169
  -177
  -185
Cash from investing activities, $m
  -61
  -66
  -71
  -77
  -83
  -88
  -94
  -100
  -106
  -112
  -119
  -125
  -131
  -138
  -145
  -152
  -160
  -167
  -176
  -185
  -193
  -203
  -212
  -223
  -234
  -245
  -257
  -269
  -283
  -297
Free cash flow, $m
  34
  50
  68
  88
  109
  132
  156
  182
  209
  237
  252
  284
  316
  350
  386
  422
  461
  501
  542
  585
  630
  677
  725
  776
  829
  884
  941
  1,001
  1,064
  1,129
Issuance/(repayment) of debt, $m
  56
  60
  64
  68
  72
  76
  80
  84
  87
  91
  95
  99
  103
  107
  111
  116
  120
  125
  130
  135
  140
  146
  152
  159
  165
  173
  180
  188
  196
  205
Issuance/(repurchase) of shares, $m
  37
  22
  5
  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  
  93
  82
  69
  68
  72
  76
  80
  84
  87
  91
  95
  99
  103
  107
  111
  116
  120
  125
  130
  135
  140
  146
  152
  159
  165
  173
  180
  188
  196
  205
Total cash flow (excl. dividends), $m
  127
  132
  137
  156
  181
  208
  236
  265
  296
  329
  347
  383
  419
  457
  497
  538
  581
  625
  672
  720
  770
  823
  878
  935
  994
  1,056
  1,121
  1,189
  1,260
  1,334
Retained Cash Flow (-), $m
  -76
  -81
  -87
  -93
  -98
  -104
  -109
  -114
  -119
  -124
  -130
  -135
  -140
  -146
  -152
  -158
  -164
  -170
  -177
  -184
  -192
  -199
  -208
  -217
  -226
  -235
  -246
  -257
  -268
  -280
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
  51
  51
  50
  63
  83
  104
  127
  151
  177
  204
  218
  248
  279
  311
  345
  380
  417
  455
  495
  536
  579
  623
  670
  718
  768
  821
  875
  932
  992
  1,054
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  49
  46
  43
  51
  63
  74
  84
  92
  98
  102
  98
  100
  99
  97
  93
  88
  82
  75
  67
  59
  52
  44
  37
  30
  24
  19
  15
  11
  8
  6
Current shareholders' claim on cash, %
  94.2
  91.3
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8

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 (CMTL)

Valuation Ratios
P/E Ratio 37.8
Price to Sales 1.1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 10.2
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 $550.368 million for the last fiscal year's total revenue generated by Comtech Telecommunications. The default revenue input number comes from 0001 income statement of Comtech Telecommunications. 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 15.7% 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 4.6%, whose default value for CMTL is calculated based on our internal credit rating of Comtech Telecommunications, 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.
    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 73.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $113 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 5.4% for Comtech Telecommunications.

Corporate tax rate of 27% is the nominal tax rate for Comtech Telecommunications. 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 57.6%.

Life of production assets of 41.7 years is the average useful life of capital assets used in Comtech Telecommunications 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 13.2%. 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 - $480.15 million for Comtech Telecommunications - 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 23.642 million for Comtech Telecommunications 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 at the current share price and the inputted number of shares is $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
VSAT ViaSat 64.53 7.07  str.sell
HRS Harris Corp. 148.47 107.02  sell
GILT Gilat Satellit 9.44 0.77  str.sell
FEIM Frequency Elec 11.19 1.79  str.sell
LLL L3 Technologie 191.29 259.41  buy
NOC Northrop Grumm 262.71 544.75  str.buy
GD General Dynami 168.97 416.37  str.buy
SATS EchoStar 37.90 161.65  str.buy
TDY Teledyne Techn 205.31 154.53  sell

COMPANY NEWS

▶ Comtech: Fiscal 1Q Earnings Snapshot   [05:39PM  Associated Press]
▶ Bull of the Day: Comtech (CMTL)   [07:01AM  Zacks]
▶ Comtech: Fiscal 4Q Earnings Snapshot   [05:07PM  Associated Press]
▶ Comtech Receives $32.5 Million Order from the U.S. Army   [Aug-13-18 09:00AM  Business Wire]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.