Intrinsic value of F5 Networks, Inc. - FFIV

Previous Close

$136.93

  Intrinsic Value

$126.02

stock screener

  Rating & Target

hold

-8%

Previous close

$136.93

 
Intrinsic value

$126.02

 
Up/down potential

-8%

 
Rating

hold

We calculate the intrinsic value of FFIV 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 8.1

 

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, %
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  2,245
  2,335
  2,431
  2,533
  2,642
  2,757
  2,878
  3,007
  3,143
  3,287
  3,439
  3,599
  3,768
  3,945
  4,133
  4,330
  4,538
  4,756
  4,986
  5,228
  5,483
  5,750
  6,031
  6,327
  6,638
  6,965
  7,308
  7,669
  8,048
  8,446
Variable operating expenses, $m
  1,405
  1,461
  1,520
  1,583
  1,650
  1,722
  1,797
  1,877
  1,961
  2,050
  2,130
  2,229
  2,333
  2,443
  2,559
  2,682
  2,810
  2,946
  3,088
  3,238
  3,395
  3,561
  3,735
  3,918
  4,111
  4,313
  4,526
  4,749
  4,984
  5,230
Fixed operating expenses, $m
  228
  233
  238
  243
  249
  254
  260
  265
  271
  277
  283
  290
  296
  302
  309
  316
  323
  330
  337
  345
  352
  360
  368
  376
  384
  393
  401
  410
  419
  428
Total operating expenses, $m
  1,633
  1,694
  1,758
  1,826
  1,899
  1,976
  2,057
  2,142
  2,232
  2,327
  2,413
  2,519
  2,629
  2,745
  2,868
  2,998
  3,133
  3,276
  3,425
  3,583
  3,747
  3,921
  4,103
  4,294
  4,495
  4,706
  4,927
  5,159
  5,403
  5,658
Operating income, $m
  612
  642
  673
  707
  743
  781
  822
  865
  911
  960
  1,026
  1,081
  1,138
  1,200
  1,264
  1,333
  1,405
  1,481
  1,561
  1,646
  1,735
  1,829
  1,928
  2,033
  2,143
  2,259
  2,381
  2,509
  2,645
  2,787
EBITDA, $m
  664
  695
  728
  763
  801
  841
  884
  929
  977
  1,028
  1,082
  1,140
  1,200
  1,265
  1,332
  1,404
  1,479
  1,559
  1,643
  1,732
  1,825
  1,924
  2,028
  2,137
  2,252
  2,373
  2,501
  2,636
  2,777
  2,926
Interest expense (income), $m
  0
  0
  3
  6
  9
  12
  16
  20
  24
  28
  33
  37
  42
  48
  53
  59
  65
  72
  79
  86
  93
  101
  110
  119
  128
  138
  148
  159
  170
  182
  194
Earnings before tax, $m
  612
  639
  667
  698
  730
  765
  802
  841
  883
  927
  989
  1,038
  1,091
  1,147
  1,205
  1,267
  1,333
  1,402
  1,475
  1,552
  1,634
  1,719
  1,810
  1,905
  2,005
  2,111
  2,222
  2,339
  2,463
  2,593
Tax expense, $m
  165
  172
  180
  188
  197
  207
  217
  227
  238
  250
  267
  280
  295
  310
  325
  342
  360
  379
  398
  419
  441
  464
  489
  514
  541
  570
  600
  632
  665
  700
Net income, $m
  447
  466
  487
  509
  533
  558
  585
  614
  645
  677
  722
  758
  796
  837
  880
  925
  973
  1,024
  1,077
  1,133
  1,193
  1,255
  1,321
  1,391
  1,464
  1,541
  1,622
  1,708
  1,798
  1,893

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
  2,620
  2,725
  2,837
  2,956
  3,083
  3,217
  3,359
  3,509
  3,668
  3,836
  4,013
  4,199
  4,396
  4,604
  4,822
  5,053
  5,295
  5,550
  5,818
  6,101
  6,397
  6,710
  7,038
  7,383
  7,746
  8,127
  8,527
  8,948
  9,390
  9,855
Adjusted assets (=assets-cash), $m
  2,620
  2,725
  2,837
  2,956
  3,083
  3,217
  3,359
  3,509
  3,668
  3,836
  4,013
  4,199
  4,396
  4,604
  4,822
  5,053
  5,295
  5,550
  5,818
  6,101
  6,397
  6,710
  7,038
  7,383
  7,746
  8,127
  8,527
  8,948
  9,390
  9,855
Revenue / Adjusted assets
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
  0.857
Average production assets, $m
  429
  446
  464
  484
  505
  527
  550
  574
  600
  628
  657
  687
  720
  754
  789
  827
  867
  908
  952
  999
  1,047
  1,098
  1,152
  1,208
  1,268
  1,330
  1,396
  1,465
  1,537
  1,613
Working capital, $m
  -599
  -624
  -649
  -676
  -705
  -736
  -769
  -803
  -839
  -878
  -918
  -961
  -1,006
  -1,053
  -1,103
  -1,156
  -1,212
  -1,270
  -1,331
  -1,396
  -1,464
  -1,535
  -1,610
  -1,689
  -1,772
  -1,860
  -1,951
  -2,048
  -2,149
  -2,255
Total debt, $m
  53
  108
  167
  229
  295
  366
  440
  519
  602
  690
  783
  880
  984
  1,092
  1,207
  1,328
  1,455
  1,588
  1,729
  1,877
  2,032
  2,196
  2,368
  2,549
  2,739
  2,938
  3,148
  3,369
  3,601
  3,844
Total liabilities, $m
  1,373
  1,428
  1,487
  1,549
  1,615
  1,686
  1,760
  1,839
  1,922
  2,010
  2,103
  2,200
  2,304
  2,412
  2,527
  2,648
  2,775
  2,908
  3,049
  3,197
  3,352
  3,516
  3,688
  3,869
  4,059
  4,258
  4,468
  4,689
  4,921
  5,164
Total equity, $m
  1,247
  1,297
  1,350
  1,407
  1,467
  1,531
  1,599
  1,670
  1,746
  1,826
  1,910
  1,999
  2,093
  2,191
  2,295
  2,405
  2,520
  2,642
  2,770
  2,904
  3,045
  3,194
  3,350
  3,514
  3,687
  3,868
  4,059
  4,259
  4,470
  4,691
Total liabilities and equity, $m
  2,620
  2,725
  2,837
  2,956
  3,082
  3,217
  3,359
  3,509
  3,668
  3,836
  4,013
  4,199
  4,397
  4,603
  4,822
  5,053
  5,295
  5,550
  5,819
  6,101
  6,397
  6,710
  7,038
  7,383
  7,746
  8,126
  8,527
  8,948
  9,391
  9,855
Debt-to-equity ratio
  0.040
  0.080
  0.120
  0.160
  0.200
  0.240
  0.280
  0.310
  0.340
  0.380
  0.410
  0.440
  0.470
  0.500
  0.530
  0.550
  0.580
  0.600
  0.620
  0.650
  0.670
  0.690
  0.710
  0.730
  0.740
  0.760
  0.780
  0.790
  0.810
  0.820
Adjusted equity ratio
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  447
  466
  487
  509
  533
  558
  585
  614
  645
  677
  722
  758
  796
  837
  880
  925
  973
  1,024
  1,077
  1,133
  1,193
  1,255
  1,321
  1,391
  1,464
  1,541
  1,622
  1,708
  1,798
  1,893
Depreciation, amort., depletion, $m
  51
  53
  55
  56
  58
  60
  62
  64
  66
  69
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
  104
  109
  115
  120
  126
  133
  139
Funds from operations, $m
  499
  519
  542
  566
  591
  618
  647
  678
  711
  745
  778
  817
  858
  902
  948
  997
  1,048
  1,102
  1,159
  1,219
  1,283
  1,350
  1,420
  1,495
  1,573
  1,656
  1,743
  1,834
  1,930
  2,032
Change in working capital, $m
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
Cash from operations, $m
  521
  543
  567
  593
  620
  649
  680
  712
  747
  784
  819
  860
  903
  949
  998
  1,049
  1,103
  1,160
  1,221
  1,284
  1,351
  1,421
  1,496
  1,574
  1,656
  1,743
  1,834
  1,930
  2,031
  2,138
Maintenance CAPEX, $m
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -95
  -99
  -104
  -109
  -115
  -120
  -126
  -133
New CAPEX, $m
  -17
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -66
  -69
  -72
  -76
Cash from investing activities, $m
  -52
  -54
  -56
  -59
  -63
  -65
  -68
  -72
  -76
  -79
  -83
  -88
  -91
  -96
  -101
  -106
  -111
  -117
  -122
  -128
  -135
  -141
  -149
  -155
  -163
  -171
  -181
  -189
  -198
  -209
Free cash flow, $m
  468
  489
  510
  533
  558
  584
  611
  640
  672
  705
  736
  773
  812
  853
  897
  943
  992
  1,044
  1,098
  1,156
  1,216
  1,280
  1,347
  1,418
  1,493
  1,571
  1,654
  1,741
  1,833
  1,929
Issuance/(repayment) of debt, $m
  53
  55
  59
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
  221
  232
  243
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  53
  55
  59
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
  221
  232
  243
Total cash flow (excl. dividends), $m
  521
  544
  569
  596
  624
  654
  686
  719
  755
  793
  828
  871
  915
  962
  1,012
  1,064
  1,119
  1,178
  1,239
  1,304
  1,372
  1,444
  1,519
  1,599
  1,683
  1,771
  1,864
  1,962
  2,065
  2,173
Retained Cash Flow (-), $m
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -94
  -99
  -104
  -110
  -115
  -121
  -128
  -134
  -141
  -149
  -156
  -164
  -173
  -181
  -191
  -200
  -211
  -221
Prev. year cash balance distribution, $m
  85
  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
  560
  494
  516
  539
  564
  590
  618
  648
  679
  713
  744
  782
  821
  863
  908
  955
  1,004
  1,056
  1,111
  1,169
  1,230
  1,295
  1,363
  1,435
  1,510
  1,589
  1,673
  1,761
  1,854
  1,952
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
  537
  452
  449
  444
  437
  428
  417
  405
  390
  374
  353
  334
  312
  290
  266
  243
  218
  194
  171
  149
  127
  107
  89
  73
  59
  46
  36
  27
  20
  15
Current shareholders' claim on cash, %
  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
  100.0

F5 Networks, Inc. is a developer and provider of software defined application services. The Company is engaged in the development, marketing and sale of application delivery networking products that optimize the security, performance and availability of network applications, servers and storage systems. The Company's geographical segments include the Americas (primarily the United States); Europe, the Middle East, and Africa (EMEA); Japan, and the Asia Pacific region (APAC). The Company's Traffic Management Operating System (TMOS) based offerings include software products for local and global traffic management, network and application security, access management, Web acceleration and various network and application services. These products are available as modules that can run individually or as part of an integrated solution on the Company's purpose-built BIG-IP appliances and VIPRION chassis-based hardware, or as software-only Virtual Editions.

FINANCIAL RATIOS  of  F5 Networks, Inc. (FFIV)

Valuation Ratios
P/E Ratio 20.4
Price to Sales 4.1
Price to Book 7
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 12.3
Growth Rates
Sales Growth Rate 4.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.8%
Cap. Spend. - 3 Yr. Gr. Rate 13.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 17.6%
Ret/ On Assets - 3 Yr. Avg. 16.6%
Return On Total Capital 34.9%
Ret/ On T. Cap. - 3 Yr. Avg. 30.4%
Return On Equity 34.9%
Return On Equity - 3 Yr. Avg. 30.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 83.1%
Gross Margin - 3 Yr. Avg. 83%
EBITDA Margin 30.5%
EBITDA Margin - 3 Yr. Avg. 31%
Operating Margin 27%
Oper. Margin - 3 Yr. Avg. 27.7%
Pre-Tax Margin 27.6%
Pre-Tax Margin - 3 Yr. Avg. 28.1%
Net Profit Margin 20.1%
Net Profit Margin - 3 Yr. Avg. 19.2%
Effective Tax Rate 26.9%
Eff/ Tax Rate - 3 Yr. Avg. 31.8%
Payout Ratio 0%

FFIV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FFIV stock intrinsic value calculation we used $2161 million for the last fiscal year's total revenue generated by F5 Networks, Inc.. The default revenue input number comes from 0001 income statement of F5 Networks, 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 FFIV stock valuation model: a) initial revenue growth rate of 3.9% 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 FFIV is calculated based on our internal credit rating of F5 Networks, 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 F5 Networks, 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 FFIV stock the variable cost ratio is equal to 62.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $223 million in the base year in the intrinsic value calculation for FFIV 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 F5 Networks, Inc..

Corporate tax rate of 27% is the nominal tax rate for F5 Networks, 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 FFIV 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 FFIV are equal to 19.1%.

Life of production assets of 11.6 years is the average useful life of capital assets used in F5 Networks, 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 FFIV is equal to -26.7%. 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 - $1285.492 million for F5 Networks, 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 59.470 million for F5 Networks, 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 F5 Networks, Inc. at the current share price and the inputted number of shares is $8.1 billion.

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