Intrinsic value of Adesto Technologies - IOTS

Previous Close

$5.70

  Intrinsic Value

$36.99

stock screener

  Rating & Target

str. buy

+549%

Previous close

$5.70

 
Intrinsic value

$36.99

 
Up/down potential

+549%

 
Rating

str. buy

We calculate the intrinsic value of IOTS 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 2017), $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 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  27.60
  25.34
  23.31
  21.48
  19.83
  18.35
  17.01
  15.81
  14.73
  13.76
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.23
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
Revenue, $m
  71
  90
  110
  134
  161
  190
  223
  258
  296
  336
  380
  426
  474
  525
  579
  634
  693
  753
  817
  882
  951
  1,022
  1,096
  1,172
  1,252
  1,335
  1,421
  1,511
  1,604
  1,702
Variable operating expenses, $m
  39
  49
  60
  73
  87
  103
  121
  140
  160
  182
  205
  230
  256
  283
  312
  342
  374
  406
  441
  476
  513
  551
  591
  632
  676
  720
  767
  815
  866
  918
Fixed operating expenses, $m
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  60
Total operating expenses, $m
  71
  81
  93
  107
  122
  138
  157
  177
  198
  221
  244
  270
  297
  325
  355
  386
  419
  452
  488
  524
  562
  601
  642
  684
  729
  775
  823
  872
  924
  978
Operating income, $m
  1
  8
  17
  27
  39
  52
  66
  81
  98
  116
  136
  156
  177
  200
  223
  248
  274
  301
  329
  358
  389
  420
  453
  488
  523
  560
  599
  639
  681
  724
EBITDA, $m
  3
  11
  21
  31
  44
  57
  72
  88
  106
  125
  145
  167
  189
  213
  238
  264
  292
  320
  350
  381
  413
  447
  481
  517
  555
  594
  635
  677
  721
  767
Interest expense (income), $m
  1
  1
  1
  1
  2
  3
  3
  4
  5
  6
  6
  7
  9
  10
  11
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
Earnings before tax, $m
  0
  7
  16
  25
  36
  48
  62
  76
  92
  109
  128
  147
  168
  189
  211
  235
  259
  285
  312
  339
  368
  398
  429
  462
  495
  530
  567
  605
  644
  686
Tax expense, $m
  0
  2
  4
  7
  10
  13
  17
  21
  25
  29
  35
  40
  45
  51
  57
  63
  70
  77
  84
  92
  99
  107
  116
  125
  134
  143
  153
  163
  174
  185
Net income, $m
  0
  5
  11
  18
  26
  35
  45
  56
  67
  80
  93
  108
  122
  138
  154
  171
  189
  208
  227
  248
  269
  291
  313
  337
  362
  387
  414
  441
  470
  500

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
  58
  72
  89
  108
  130
  153
  179
  208
  238
  271
  306
  343
  382
  423
  466
  511
  558
  607
  658
  711
  766
  823
  883
  945
  1,009
  1,076
  1,145
  1,218
  1,293
  1,371
Adjusted assets (=assets-cash), $m
  58
  72
  89
  108
  130
  153
  179
  208
  238
  271
  306
  343
  382
  423
  466
  511
  558
  607
  658
  711
  766
  823
  883
  945
  1,009
  1,076
  1,145
  1,218
  1,293
  1,371
Revenue / Adjusted assets
  1.224
  1.250
  1.236
  1.241
  1.238
  1.242
  1.246
  1.240
  1.244
  1.240
  1.242
  1.242
  1.241
  1.241
  1.242
  1.241
  1.242
  1.241
  1.242
  1.241
  1.242
  1.242
  1.241
  1.240
  1.241
  1.241
  1.241
  1.241
  1.241
  1.241
Average production assets, $m
  18
  23
  28
  34
  41
  49
  57
  66
  75
  86
  97
  109
  121
  134
  148
  162
  177
  192
  208
  225
  242
  261
  279
  299
  319
  340
  362
  385
  409
  434
Working capital, $m
  -2
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
Total debt, $m
  18
  26
  36
  46
  58
  72
  87
  102
  120
  138
  158
  179
  201
  224
  248
  273
  300
  327
  356
  386
  417
  449
  483
  517
  554
  591
  630
  671
  713
  758
Total liabilities, $m
  32
  41
  50
  61
  73
  86
  101
  117
  134
  153
  172
  193
  215
  238
  262
  288
  314
  342
  370
  400
  431
  464
  497
  532
  568
  606
  645
  685
  728
  772
Total equity, $m
  25
  32
  39
  47
  57
  67
  78
  91
  104
  118
  134
  150
  167
  185
  204
  223
  244
  265
  288
  311
  335
  360
  386
  413
  441
  470
  500
  532
  565
  599
Total liabilities and equity, $m
  57
  73
  89
  108
  130
  153
  179
  208
  238
  271
  306
  343
  382
  423
  466
  511
  558
  607
  658
  711
  766
  824
  883
  945
  1,009
  1,076
  1,145
  1,217
  1,293
  1,371
Debt-to-equity ratio
  0.710
  0.830
  0.920
  0.980
  1.030
  1.070
  1.100
  1.130
  1.150
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.220
  1.230
  1.230
  1.240
  1.240
  1.250
  1.250
  1.250
  1.250
  1.260
  1.260
  1.260
  1.260
  1.260
  1.260
Adjusted equity ratio
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  5
  11
  18
  26
  35
  45
  56
  67
  80
  93
  108
  122
  138
  154
  171
  189
  208
  227
  248
  269
  291
  313
  337
  362
  387
  414
  441
  470
  500
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
  43
Funds from operations, $m
  2
  8
  15
  23
  31
  41
  52
  63
  76
  89
  103
  118
  134
  151
  169
  188
  207
  227
  248
  270
  293
  317
  341
  367
  393
  421
  450
  480
  511
  544
Change in working capital, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  3
  9
  15
  23
  32
  42
  52
  64
  76
  90
  104
  119
  135
  152
  170
  189
  208
  229
  250
  272
  294
  318
  343
  369
  395
  423
  452
  482
  513
  546
Maintenance CAPEX, $m
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -5
  -7
  -7
  -9
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -59
  -63
  -66
Free cash flow, $m
  -3
  2
  8
  14
  22
  30
  39
  49
  60
  72
  84
  98
  112
  127
  143
  160
  177
  195
  214
  234
  254
  276
  298
  321
  345
  370
  396
  423
  451
  480
Issuance/(repayment) of debt, $m
  7
  8
  9
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
Issuance/(repurchase) of shares, $m
  5
  1
  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  
  12
  9
  9
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
Total cash flow (excl. dividends), $m
  10
  12
  17
  25
  34
  43
  54
  65
  77
  90
  104
  119
  134
  150
  167
  185
  204
  223
  243
  264
  285
  308
  331
  356
  381
  408
  435
  464
  493
  524
Retained Cash Flow (-), $m
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
Prev. year cash balance distribution, $m
  13
  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
  3
  4
  6
  7
  8
  10
  12
  14
  16
  18
  21
  24
  26
  29
  33
  36
  39
  43
  47
  51
  55
  59
  63
  68
  73
  78
  83
  88
  94
  99
Cash available for distribution, $m
  18
  5
  10
  17
  24
  33
  42
  53
  64
  76
  89
  103
  117
  133
  149
  166
  183
  202
  221
  241
  261
  283
  305
  329
  353
  378
  405
  432
  460
  490
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
  17
  5
  9
  14
  19
  24
  29
  33
  37
  40
  42
  44
  45
  44
  44
  42
  40
  37
  34
  31
  27
  23
  20
  17
  14
  11
  9
  7
  5
  4
Current shareholders' claim on cash, %
  92.3
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1
  91.1

Adesto Technologies Corporation is a provider of application-specific and ultra-low power non-volatile memory products. The Company optimizes its non-volatile memory products for Internet of Things (IoT), applications, including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets. It operates in application-specific and feature-rich, ultra-low power non-volatile memory (NVM) products segment. It combines its non-volatile memory design capabilities with intellectual property and differentiated technology platforms to deliver products that manage the overall energy consumption of its customers' systems and battery life. Its products feature embedded intelligence in a small form factor. It sells its products directly to original equipment manufacturers and original design manufacturers, respectively that manufacture products for its end customers.

FINANCIAL RATIOS  of  Adesto Technologies (IOTS)

Valuation Ratios
P/E Ratio -7.4
Price to Sales 2
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow -17.7
Price to Free Cash Flow -12.6
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 75%
Total Debt to Equity 112.5%
Interest Coverage -11
Management Effectiveness
Return On Assets -22.9%
Ret/ On Assets - 3 Yr. Avg. -20.5%
Return On Total Capital -33.8%
Ret/ On T. Cap. - 3 Yr. Avg. -32.6%
Return On Equity -60%
Return On Equity - 3 Yr. Avg. -60.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 47.7%
Gross Margin - 3 Yr. Avg. 42.9%
EBITDA Margin -20.5%
EBITDA Margin - 3 Yr. Avg. -14.8%
Operating Margin -22.7%
Oper. Margin - 3 Yr. Avg. -20.3%
Pre-Tax Margin -27.3%
Pre-Tax Margin - 3 Yr. Avg. -22.6%
Net Profit Margin -27.3%
Net Profit Margin - 3 Yr. Avg. -22.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

IOTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IOTS stock intrinsic value calculation we used $56 million for the last fiscal year's total revenue generated by Adesto Technologies. The default revenue input number comes from 2017 income statement of Adesto Technologies. 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 IOTS stock valuation model: a) initial revenue growth rate of 27.6% 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 4.3%, whose default value for IOTS is calculated based on our internal credit rating of Adesto Technologies, 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 Adesto Technologies.
    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 IOTS stock the variable cost ratio is equal to 55.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $31 million in the base year in the intrinsic value calculation for IOTS 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 Adesto Technologies.

Corporate tax rate of 27% is the nominal tax rate for Adesto Technologies. 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 IOTS stock is equal to 6.2%.

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 IOTS are equal to 25.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Adesto Technologies 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 IOTS is equal to -2.2%. 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 - $33 million for Adesto Technologies - 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 19 million for Adesto Technologies 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 Adesto Technologies at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Adesto Technologies Corporations (NASDAQ:IOTS) Profit Outlook   [Jun-27-18 12:24PM  Simply Wall St.]
▶ Adesto Tech: 1Q Earnings Snapshot   [May-09-18 04:59PM  Associated Press]
▶ Adesto Technologies Corp Is Set Up to Rally   [Mar-12-18 01:03PM  InvestorPlace]
▶ Adesto Tech reports 4Q loss   [Feb-13-18 06:07PM  Associated Press]
▶ Adesto Tech reports 3Q loss   [Nov-08-17 06:45PM  Associated Press]
▶ 3 Hot Stocks Under $10   [Oct-09-17 12:32PM  Investopedia]
▶ Adesto Tech reports 2Q loss   [Aug-05-17 01:04AM  Associated Press]
▶ Adesto Technologies Announces Barry L. Cox Scholarships   [Jul-27-17 09:00AM  GlobeNewswire]
▶ 5 Stocks to Buy on New Analyst Coverage   [May-15-17 09:41AM  Zacks]
▶ Adesto Tech reports 1Q loss   [May-10-17 05:10PM  Associated Press]
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