Intrinsic value of Harmonic Inc. - HLIT

Previous Close

$5.66

  Intrinsic Value

$0.58

stock screener

  Rating & Target

str. sell

-90%

Previous close

$5.66

 
Intrinsic value

$0.58

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of HLIT 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 0.5

 

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, %
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
Revenue, $m
  455
  509
  566
  625
  688
  753
  821
  892
  965
  1,042
  1,122
  1,205
  1,291
  1,380
  1,473
  1,570
  1,671
  1,775
  1,884
  1,998
  2,116
  2,240
  2,369
  2,503
  2,643
  2,790
  2,943
  3,103
  3,271
  3,446
Variable operating expenses, $m
  545
  609
  677
  748
  822
  900
  981
  1,066
  1,154
  1,245
  1,338
  1,437
  1,539
  1,646
  1,757
  1,872
  1,992
  2,117
  2,247
  2,383
  2,524
  2,671
  2,825
  2,985
  3,152
  3,327
  3,510
  3,701
  3,900
  4,109
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
  545
  609
  677
  748
  822
  900
  981
  1,066
  1,154
  1,245
  1,338
  1,437
  1,539
  1,646
  1,757
  1,872
  1,992
  2,117
  2,247
  2,383
  2,524
  2,671
  2,825
  2,985
  3,152
  3,327
  3,510
  3,701
  3,900
  4,109
Operating income, $m
  -90
  -100
  -111
  -123
  -135
  -147
  -160
  -174
  -188
  -203
  -216
  -232
  -249
  -266
  -284
  -302
  -322
  -342
  -363
  -385
  -408
  -431
  -456
  -482
  -509
  -537
  -567
  -598
  -630
  -664
EBITDA, $m
  -74
  -83
  -93
  -102
  -113
  -123
  -134
  -146
  -158
  -171
  -184
  -197
  -211
  -226
  -241
  -257
  -273
  -291
  -308
  -327
  -346
  -367
  -388
  -410
  -433
  -457
  -482
  -508
  -535
  -564
Interest expense (income), $m
  5
  12
  15
  18
  21
  25
  29
  33
  37
  41
  45
  50
  55
  60
  65
  70
  76
  82
  88
  94
  101
  107
  115
  122
  130
  138
  146
  155
  164
  174
  184
Earnings before tax, $m
  -101
  -115
  -129
  -144
  -159
  -176
  -193
  -211
  -229
  -248
  -266
  -287
  -308
  -331
  -354
  -378
  -403
  -430
  -457
  -485
  -515
  -546
  -578
  -612
  -647
  -683
  -722
  -762
  -804
  -847
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
  -101
  -115
  -129
  -144
  -159
  -176
  -193
  -211
  -229
  -248
  -266
  -287
  -308
  -331
  -354
  -378
  -403
  -430
  -457
  -485
  -515
  -546
  -578
  -612
  -647
  -683
  -722
  -762
  -804
  -847

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
  575
  643
  715
  790
  869
  952
  1,038
  1,127
  1,221
  1,318
  1,418
  1,523
  1,632
  1,745
  1,863
  1,985
  2,112
  2,244
  2,382
  2,526
  2,676
  2,832
  2,994
  3,164
  3,342
  3,527
  3,721
  3,923
  4,135
  4,356
Adjusted assets (=assets-cash), $m
  575
  643
  715
  790
  869
  952
  1,038
  1,127
  1,221
  1,318
  1,418
  1,523
  1,632
  1,745
  1,863
  1,985
  2,112
  2,244
  2,382
  2,526
  2,676
  2,832
  2,994
  3,164
  3,342
  3,527
  3,721
  3,923
  4,135
  4,356
Revenue / Adjusted assets
  0.791
  0.792
  0.792
  0.791
  0.792
  0.791
  0.791
  0.791
  0.790
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
Average production assets, $m
  175
  195
  217
  240
  264
  289
  315
  342
  371
  400
  431
  463
  496
  530
  566
  603
  642
  682
  724
  767
  813
  860
  910
  961
  1,015
  1,071
  1,130
  1,192
  1,256
  1,323
Working capital, $m
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
Total debt, $m
  170
  208
  247
  289
  333
  378
  426
  475
  527
  581
  636
  694
  755
  817
  882
  950
  1,020
  1,093
  1,170
  1,249
  1,332
  1,418
  1,508
  1,602
  1,700
  1,802
  1,910
  2,022
  2,139
  2,261
Total liabilities, $m
  318
  356
  395
  437
  481
  526
  574
  623
  675
  729
  784
  842
  902
  965
  1,030
  1,098
  1,168
  1,241
  1,317
  1,397
  1,480
  1,566
  1,656
  1,750
  1,848
  1,950
  2,057
  2,169
  2,287
  2,409
Total equity, $m
  257
  288
  320
  353
  389
  425
  464
  504
  546
  589
  634
  681
  729
  780
  833
  887
  944
  1,003
  1,065
  1,129
  1,196
  1,266
  1,338
  1,414
  1,494
  1,577
  1,663
  1,754
  1,848
  1,947
Total liabilities and equity, $m
  575
  644
  715
  790
  870
  951
  1,038
  1,127
  1,221
  1,318
  1,418
  1,523
  1,631
  1,745
  1,863
  1,985
  2,112
  2,244
  2,382
  2,526
  2,676
  2,832
  2,994
  3,164
  3,342
  3,527
  3,720
  3,923
  4,135
  4,356
Debt-to-equity ratio
  0.660
  0.720
  0.770
  0.820
  0.860
  0.890
  0.920
  0.940
  0.970
  0.990
  1.000
  1.020
  1.030
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.110
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
Adjusted equity ratio
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -101
  -115
  -129
  -144
  -159
  -176
  -193
  -211
  -229
  -248
  -266
  -287
  -308
  -331
  -354
  -378
  -403
  -430
  -457
  -485
  -515
  -546
  -578
  -612
  -647
  -683
  -722
  -762
  -804
  -847
Depreciation, amort., depletion, $m
  15
  17
  19
  20
  22
  24
  26
  28
  30
  32
  32
  35
  37
  40
  43
  45
  48
  51
  54
  58
  61
  65
  68
  72
  76
  81
  85
  90
  94
  99
Funds from operations, $m
  -86
  -98
  -110
  -124
  -137
  -152
  -167
  -183
  -199
  -216
  -234
  -252
  -271
  -291
  -311
  -333
  -355
  -378
  -402
  -428
  -454
  -481
  -510
  -539
  -570
  -603
  -637
  -672
  -709
  -748
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  -86
  -98
  -111
  -124
  -138
  -152
  -167
  -183
  -199
  -216
  -234
  -252
  -271
  -291
  -312
  -333
  -356
  -379
  -403
  -428
  -454
  -482
  -510
  -540
  -571
  -603
  -637
  -673
  -710
  -749
Maintenance CAPEX, $m
  -12
  -13
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -43
  -45
  -48
  -51
  -54
  -58
  -61
  -65
  -68
  -72
  -76
  -81
  -85
  -90
  -94
New CAPEX, $m
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -67
Cash from investing activities, $m
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -71
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
  -126
  -132
  -140
  -146
  -154
  -161
Free cash flow, $m
  -117
  -132
  -147
  -163
  -180
  -197
  -215
  -234
  -253
  -274
  -295
  -316
  -339
  -363
  -387
  -413
  -440
  -467
  -496
  -526
  -557
  -590
  -624
  -660
  -697
  -736
  -777
  -819
  -864
  -910
Issuance/(repayment) of debt, $m
  35
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  94
  98
  102
  107
  112
  117
  123
Issuance/(repurchase) of shares, $m
  130
  145
  161
  178
  195
  213
  231
  251
  271
  292
  311
  334
  357
  381
  407
  433
  460
  489
  518
  549
  582
  616
  651
  688
  726
  766
  808
  852
  898
  946
Cash from financing (excl. dividends), $m  
  165
  183
  201
  220
  239
  259
  279
  301
  323
  346
  367
  392
  417
  444
  472
  501
  530
  562
  594
  628
  665
  702
  741
  782
  824
  868
  915
  964
  1,015
  1,069
Total cash flow (excl. dividends), $m
  48
  51
  54
  56
  59
  61
  64
  66
  69
  72
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
Retained Cash Flow (-), $m
  -130
  -145
  -161
  -178
  -195
  -213
  -231
  -251
  -271
  -292
  -311
  -334
  -357
  -381
  -407
  -433
  -460
  -489
  -518
  -549
  -582
  -616
  -651
  -688
  -726
  -766
  -808
  -852
  -898
  -946
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
  -82
  -94
  -107
  -121
  -136
  -151
  -167
  -184
  -202
  -220
  -239
  -259
  -279
  -300
  -322
  -345
  -369
  -394
  -420
  -447
  -475
  -504
  -534
  -566
  -599
  -634
  -670
  -707
  -747
  -788
Discount rate, %
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
  -78
  -84
  -90
  -94
  -97
  -99
  -100
  -99
  -97
  -94
  -90
  -85
  -79
  -72
  -65
  -58
  -50
  -43
  -37
  -30
  -25
  -20
  -15
  -12
  -9
  -6
  -5
  -3
  -2
  -1
Current shareholders' claim on cash, %
  79.4
  63.2
  50.3
  40.2
  32.1
  25.7
  20.6
  16.6
  13.3
  10.7
  8.6
  7.0
  5.6
  4.5
  3.7
  3.0
  2.4
  1.9
  1.6
  1.3
  1.0
  0.8
  0.7
  0.6
  0.4
  0.4
  0.3
  0.2
  0.2
  0.2

Harmonic Inc. (Harmonic) designs, manufactures and sells video infrastructure products, and system solutions. The Company has two segments: Video and Cable Edge. Harmonic provides technical support and professional services to its customers around the world. The Video segment sells video processing and production, and playout solutions and services to broadcast and media companies, streaming media companies, cable operators, and satellite and telecommunications (telco), and pay television (TV) service providers. Its Cable Edge business sells cable edge solutions and related services to cable operators around the world. The Video segment offers a range of products and solutions, as well as software-based media processing platforms. The Company's Narrowcast Services Gateway (NSG) products are integrated edge gateway products that integrate routing, multiplexing, scrambling and modulation into a single package for the delivery of narrowcast services to subscribers over cable networks.

FINANCIAL RATIOS  of  Harmonic Inc. (HLIT)

Valuation Ratios
P/E Ratio -6.2
Price to Sales 1.1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -29.6
Growth Rates
Sales Growth Rate 7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.1%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 9
Current Ratio 0.1
LT Debt to Equity 43.2%
Total Debt to Equity 45.8%
Interest Coverage -15
Management Effectiveness
Return On Assets -12.5%
Ret/ On Assets - 3 Yr. Avg. -8.1%
Return On Total Capital -17.5%
Ret/ On T. Cap. - 3 Yr. Avg. -10.7%
Return On Equity -24%
Return On Equity - 3 Yr. Avg. -13.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 50.2%
Gross Margin - 3 Yr. Avg. 51.1%
EBITDA Margin -10.1%
EBITDA Margin - 3 Yr. Avg. -1.9%
Operating Margin -17.2%
Oper. Margin - 3 Yr. Avg. -8.7%
Pre-Tax Margin -19.7%
Pre-Tax Margin - 3 Yr. Avg. -9.7%
Net Profit Margin -17.7%
Net Profit Margin - 3 Yr. Avg. -10.9%
Effective Tax Rate 10%
Eff/ Tax Rate - 3 Yr. Avg. -33%
Payout Ratio 0%

HLIT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HLIT stock intrinsic value calculation we used $404 million for the last fiscal year's total revenue generated by Harmonic Inc.. The default revenue input number comes from 0001 income statement of Harmonic 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 HLIT stock valuation model: a) initial revenue growth rate of 12.6% 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 5.7%, whose default value for HLIT is calculated based on our internal credit rating of Harmonic 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 Harmonic 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 HLIT stock the variable cost ratio is equal to 119.8%.

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 HLIT 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 8.6% for Harmonic Inc..

Corporate tax rate of 27% is the nominal tax rate for Harmonic 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 HLIT 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 HLIT are equal to 38.4%.

Life of production assets of 13.3 years is the average useful life of capital assets used in Harmonic 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 HLIT is equal to 0.4%. 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 - $228.25 million for Harmonic 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 88.679 million for Harmonic 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 Harmonic Inc. at the current share price and the inputted number of shares is $0.5 billion.

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