Intrinsic value of Cray Inc - CRAY

Previous Close

$25.80

  Intrinsic Value

$1.88

stock screener

  Rating & Target

str. sell

-93%

Previous close

$25.80

 
Intrinsic value

$1.88

 
Up/down potential

-93%

 
Rating

str. sell

We calculate the intrinsic value of CRAY 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 1.1

 

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
  465
  476
  488
  502
  517
  534
  552
  572
  593
  615
  640
  666
  693
  723
  754
  787
  822
  859
  898
  939
  983
  1,029
  1,077
  1,128
  1,182
  1,238
  1,298
  1,361
  1,426
  1,496
Variable operating expenses, $m
  527
  539
  553
  569
  586
  605
  625
  647
  671
  697
  720
  750
  781
  814
  849
  886
  926
  967
  1,011
  1,058
  1,107
  1,159
  1,213
  1,270
  1,331
  1,395
  1,462
  1,532
  1,606
  1,684
Fixed operating expenses, $m
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  18
  19
  19
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
Total operating expenses, $m
  540
  553
  567
  583
  600
  620
  640
  662
  687
  713
  737
  767
  798
  832
  867
  904
  945
  986
  1,031
  1,078
  1,128
  1,180
  1,234
  1,292
  1,353
  1,418
  1,485
  1,556
  1,630
  1,709
Operating income, $m
  -76
  -77
  -79
  -81
  -83
  -86
  -88
  -91
  -94
  -97
  -97
  -101
  -105
  -109
  -113
  -118
  -122
  -128
  -133
  -139
  -144
  -151
  -157
  -164
  -171
  -179
  -187
  -195
  -204
  -214
EBITDA, $m
  -63
  -64
  -66
  -68
  -69
  -72
  -74
  -76
  -79
  -82
  -85
  -88
  -91
  -94
  -98
  -102
  -106
  -111
  -115
  -120
  -125
  -130
  -136
  -142
  -148
  -155
  -161
  -169
  -176
  -184
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
Earnings before tax, $m
  -76
  -77
  -79
  -82
  -84
  -87
  -90
  -93
  -97
  -100
  -100
  -105
  -109
  -114
  -119
  -124
  -129
  -135
  -141
  -148
  -154
  -162
  -169
  -177
  -185
  -194
  -203
  -213
  -223
  -234
Tax expense, $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
Net income, $m
  -76
  -77
  -79
  -82
  -84
  -87
  -90
  -93
  -97
  -100
  -100
  -105
  -109
  -114
  -119
  -124
  -129
  -135
  -141
  -148
  -154
  -162
  -169
  -177
  -185
  -194
  -203
  -213
  -223
  -234

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
  425
  435
  446
  459
  473
  488
  504
  522
  542
  563
  585
  609
  634
  661
  689
  719
  751
  785
  821
  859
  898
  940
  985
  1,031
  1,080
  1,132
  1,186
  1,244
  1,304
  1,367
Adjusted assets (=assets-cash), $m
  425
  435
  446
  459
  473
  488
  504
  522
  542
  563
  585
  609
  634
  661
  689
  719
  751
  785
  821
  859
  898
  940
  985
  1,031
  1,080
  1,132
  1,186
  1,244
  1,304
  1,367
Revenue / Adjusted assets
  1.094
  1.094
  1.094
  1.094
  1.093
  1.094
  1.095
  1.096
  1.094
  1.092
  1.094
  1.094
  1.093
  1.094
  1.094
  1.095
  1.095
  1.094
  1.094
  1.093
  1.095
  1.095
  1.093
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
Average production assets, $m
  46
  47
  48
  50
  51
  53
  55
  57
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  128
  135
  141
  148
Working capital, $m
  62
  64
  65
  67
  69
  72
  74
  77
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  200
Total debt, $m
  4
  8
  12
  18
  23
  30
  37
  44
  52
  61
  70
  80
  91
  102
  114
  126
  140
  154
  169
  184
  201
  218
  237
  256
  277
  298
  321
  345
  370
  396
Total liabilities, $m
  177
  181
  186
  191
  197
  203
  210
  218
  226
  235
  244
  254
  264
  276
  287
  300
  313
  327
  342
  358
  375
  392
  411
  430
  451
  472
  495
  519
  544
  570
Total equity, $m
  248
  254
  260
  267
  276
  284
  294
  305
  316
  328
  341
  355
  370
  385
  402
  419
  438
  458
  479
  501
  524
  548
  574
  601
  630
  660
  692
  725
  760
  797
Total liabilities and equity, $m
  425
  435
  446
  458
  473
  487
  504
  523
  542
  563
  585
  609
  634
  661
  689
  719
  751
  785
  821
  859
  899
  940
  985
  1,031
  1,081
  1,132
  1,187
  1,244
  1,304
  1,367
Debt-to-equity ratio
  0.010
  0.030
  0.050
  0.070
  0.080
  0.100
  0.120
  0.140
  0.170
  0.190
  0.210
  0.230
  0.250
  0.260
  0.280
  0.300
  0.320
  0.340
  0.350
  0.370
  0.380
  0.400
  0.410
  0.430
  0.440
  0.450
  0.460
  0.480
  0.490
  0.500
Adjusted equity ratio
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -76
  -77
  -79
  -82
  -84
  -87
  -90
  -93
  -97
  -100
  -100
  -105
  -109
  -114
  -119
  -124
  -129
  -135
  -141
  -148
  -154
  -162
  -169
  -177
  -185
  -194
  -203
  -213
  -223
  -234
Depreciation, amort., depletion, $m
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
  26
  27
  28
  30
Funds from operations, $m
  -63
  -64
  -66
  -68
  -70
  -73
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -104
  -108
  -113
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -169
  -177
  -186
  -195
  -204
Change in working capital, $m
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
Cash from operations, $m
  -64
  -66
  -68
  -70
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -123
  -129
  -135
  -141
  -147
  -154
  -161
  -169
  -177
  -185
  -194
  -204
  -213
Maintenance CAPEX, $m
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
New CAPEX, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from investing activities, $m
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -35
Free cash flow, $m
  -74
  -76
  -78
  -81
  -84
  -87
  -90
  -94
  -97
  -101
  -106
  -110
  -115
  -120
  -125
  -131
  -137
  -143
  -150
  -156
  -164
  -171
  -179
  -188
  -197
  -206
  -216
  -226
  -237
  -248
Issuance/(repayment) of debt, $m
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  26
Issuance/(repurchase) of shares, $m
  80
  83
  86
  89
  92
  96
  100
  104
  108
  112
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  271
Cash from financing (excl. dividends), $m  
  84
  87
  91
  94
  98
  102
  107
  111
  116
  121
  122
  128
  135
  140
  147
  154
  161
  169
  177
  186
  195
  204
  213
  223
  234
  246
  258
  270
  283
  297
Total cash flow (excl. dividends), $m
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  17
  18
  19
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
Retained Cash Flow (-), $m
  -80
  -83
  -86
  -89
  -92
  -96
  -100
  -104
  -108
  -112
  -113
  -118
  -124
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -186
  -195
  -204
  -214
  -224
  -235
  -246
  -258
  -271
Prev. year cash balance distribution, $m
  100
  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
  30
  -72
  -74
  -76
  -78
  -81
  -83
  -86
  -89
  -93
  -96
  -100
  -104
  -109
  -113
  -118
  -123
  -129
  -135
  -141
  -147
  -154
  -161
  -168
  -176
  -185
  -193
  -202
  -212
  -222
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
  29
  -66
  -64
  -62
  -61
  -58
  -56
  -54
  -51
  -49
  -46
  -43
  -40
  -37
  -33
  -30
  -27
  -24
  -21
  -18
  -15
  -13
  -11
  -9
  -7
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  90.3
  81.4
  73.3
  66.0
  59.3
  53.3
  47.8
  42.9
  38.5
  34.5
  31.0
  27.9
  25.0
  22.5
  20.2
  18.1
  16.2
  14.6
  13.1
  11.7
  10.5
  9.4
  8.4
  7.6
  6.8
  6.1
  5.4
  4.9
  4.4
  3.9

Cray Inc. is engaged in designing, developing, manufacturing, marketing and servicing the high performance computing (HPC) market, primarily categories of systems known as supercomputers. The Company's segments include Supercomputing, Storage and Data Management, Maintenance and Support, and Engineering Services and Other. The Supercomputing segment includes a suite of supercomputer systems, which are used by engineering centers in universities, government laboratories, and commercial institutions. The Storage and Data Management segment includes Cray Data Warp and Sonexion, as well as other third-party storage products and their ongoing maintenance and system analysts. The Maintenance and Support segment provides ongoing maintenance of Cray supercomputers, big data storage and analytics systems, as well as system analysts. The Engineering Services and Other segment includes the Company's analytics business and Custom Engineering.

FINANCIAL RATIOS  of  Cray Inc (CRAY)

Valuation Ratios
P/E Ratio 95.6
Price to Sales 1.7
Price to Book 2
Price to Tangible Book
Price to Cash Flow -20.2
Price to Free Cash Flow -17.5
Growth Rates
Sales Growth Rate -13.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 14.3%
Cap. Spend. - 3 Yr. Gr. Rate -9.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 2.2%
Return On Equity - 3 Yr. Avg. 7.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 34.9%
Gross Margin - 3 Yr. Avg. 32.9%
EBITDA Margin 4%
EBITDA Margin - 3 Yr. Avg. 5.6%
Operating Margin 1.4%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 1.6%
Pre-Tax Margin - 3 Yr. Avg. 3.1%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 5.5%
Effective Tax Rate -10%
Eff/ Tax Rate - 3 Yr. Avg. -165%
Payout Ratio 0%

CRAY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRAY stock intrinsic value calculation we used $456 million for the last fiscal year's total revenue generated by Cray Inc. The default revenue input number comes from 0001 income statement of Cray 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 CRAY 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 CRAY is calculated based on our internal credit rating of Cray 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 Cray 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 CRAY stock the variable cost ratio is equal to 113.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13 million in the base year in the intrinsic value calculation for CRAY 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 Cray Inc.

Corporate tax rate of 27% is the nominal tax rate for Cray 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 CRAY 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 CRAY are equal to 9.9%.

Life of production assets of 3.4 years is the average useful life of capital assets used in Cray 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 CRAY is equal to 13.4%. 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 - $343.379 million for Cray 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 40.938 million for Cray 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 Cray Inc at the current share price and the inputted number of shares is $1.1 billion.

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