Intrinsic value of National Instruments - NATI

Previous Close

$46.57

  Intrinsic Value

$12.32

stock screener

  Rating & Target

str. sell

-74%

Previous close

$46.57

 
Intrinsic value

$12.32

 
Up/down potential

-74%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of NATI 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.24
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  5.00
Revenue, $m
  1,228
  1,288
  1,351
  1,418
  1,488
  1,561
  1,638
  1,719
  1,804
  1,894
  1,988
  2,087
  2,190
  2,299
  2,414
  2,534
  2,660
  2,792
  2,931
  3,078
  3,231
  3,392
  3,562
  3,739
  3,926
  4,122
  4,328
  4,544
  4,771
  5,009
  5,259
Variable operating expenses, $m
 
  1,140
  1,195
  1,252
  1,313
  1,376
  1,443
  1,513
  1,587
  1,664
  1,746
  1,806
  1,895
  1,990
  2,089
  2,193
  2,302
  2,416
  2,537
  2,663
  2,796
  2,936
  3,082
  3,236
  3,397
  3,567
  3,745
  3,932
  4,129
  4,335
  4,551
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
  1,106
  1,140
  1,195
  1,252
  1,313
  1,376
  1,443
  1,513
  1,587
  1,664
  1,746
  1,806
  1,895
  1,990
  2,089
  2,193
  2,302
  2,416
  2,537
  2,663
  2,796
  2,936
  3,082
  3,236
  3,397
  3,567
  3,745
  3,932
  4,129
  4,335
  4,551
Operating income, $m
  122
  148
  157
  166
  175
  185
  195
  206
  218
  230
  242
  281
  295
  309
  325
  341
  358
  376
  395
  414
  435
  457
  479
  503
  528
  555
  583
  612
  642
  674
  708
EBITDA, $m
  195
  219
  230
  241
  253
  265
  278
  292
  307
  322
  338
  355
  372
  391
  410
  430
  452
  474
  498
  523
  549
  576
  605
  635
  667
  700
  735
  772
  811
  851
  894
Interest expense (income), $m
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  35
  37
  40
  42
Earnings before tax, $m
  115
  147
  155
  163
  172
  181
  191
  201
  211
  222
  234
  272
  285
  298
  312
  327
  343
  359
  377
  395
  414
  434
  455
  477
  500
  525
  550
  577
  605
  635
  666
Tax expense, $m
  32
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  73
  77
  80
  84
  88
  93
  97
  102
  107
  112
  117
  123
  129
  135
  142
  149
  156
  163
  171
  180
Net income, $m
  83
  107
  113
  119
  126
  132
  139
  147
  154
  162
  171
  198
  208
  218
  228
  239
  250
  262
  275
  288
  302
  317
  332
  348
  365
  383
  402
  421
  442
  463
  486

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  358
  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
  1,497
  1,195
  1,254
  1,315
  1,380
  1,448
  1,520
  1,595
  1,674
  1,757
  1,844
  1,936
  2,032
  2,133
  2,239
  2,350
  2,467
  2,590
  2,719
  2,855
  2,997
  3,147
  3,304
  3,469
  3,642
  3,824
  4,014
  4,215
  4,425
  4,647
  4,879
Adjusted assets (=assets-cash), $m
  1,139
  1,195
  1,254
  1,315
  1,380
  1,448
  1,520
  1,595
  1,674
  1,757
  1,844
  1,936
  2,032
  2,133
  2,239
  2,350
  2,467
  2,590
  2,719
  2,855
  2,997
  3,147
  3,304
  3,469
  3,642
  3,824
  4,014
  4,215
  4,425
  4,647
  4,879
Revenue / Adjusted assets
  1.078
  1.078
  1.077
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
Average production assets, $m
  368
  386
  405
  425
  446
  468
  491
  516
  541
  568
  596
  626
  657
  690
  724
  760
  798
  838
  879
  923
  969
  1,018
  1,068
  1,122
  1,178
  1,237
  1,298
  1,363
  1,431
  1,503
  1,578
Working capital, $m
  575
  228
  239
  251
  263
  276
  290
  304
  319
  335
  352
  369
  388
  407
  427
  448
  471
  494
  519
  545
  572
  600
  630
  662
  695
  730
  766
  804
  844
  887
  931
Total debt, $m
  25
  44
  63
  84
  106
  129
  153
  178
  204
  232
  262
  292
  325
  359
  394
  432
  471
  512
  556
  601
  649
  699
  752
  807
  866
  927
  991
  1,058
  1,129
  1,203
  1,281
Total liabilities, $m
  382
  402
  421
  442
  464
  487
  511
  536
  562
  590
  620
  650
  683
  717
  752
  790
  829
  870
  914
  959
  1,007
  1,057
  1,110
  1,165
  1,224
  1,285
  1,349
  1,416
  1,487
  1,561
  1,639
Total equity, $m
  1,114
  793
  832
  873
  916
  962
  1,009
  1,059
  1,111
  1,167
  1,224
  1,285
  1,349
  1,416
  1,487
  1,561
  1,638
  1,720
  1,806
  1,896
  1,990
  2,089
  2,194
  2,303
  2,418
  2,539
  2,666
  2,799
  2,939
  3,085
  3,239
Total liabilities and equity, $m
  1,496
  1,195
  1,253
  1,315
  1,380
  1,449
  1,520
  1,595
  1,673
  1,757
  1,844
  1,935
  2,032
  2,133
  2,239
  2,351
  2,467
  2,590
  2,720
  2,855
  2,997
  3,146
  3,304
  3,468
  3,642
  3,824
  4,015
  4,215
  4,426
  4,646
  4,878
Debt-to-equity ratio
  0.022
  0.050
  0.080
  0.100
  0.120
  0.130
  0.150
  0.170
  0.180
  0.200
  0.210
  0.230
  0.240
  0.250
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.350
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.400
Adjusted equity ratio
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  83
  107
  113
  119
  126
  132
  139
  147
  154
  162
  171
  198
  208
  218
  228
  239
  250
  262
  275
  288
  302
  317
  332
  348
  365
  383
  402
  421
  442
  463
  486
Depreciation, amort., depletion, $m
  73
  71
  73
  75
  78
  80
  83
  86
  89
  92
  95
  74
  77
  81
  85
  89
  94
  99
  103
  109
  114
  120
  126
  132
  139
  145
  153
  160
  168
  177
  186
Funds from operations, $m
  214
  178
  186
  195
  203
  213
  222
  233
  243
  255
  266
  272
  285
  299
  313
  328
  344
  361
  378
  397
  416
  436
  458
  480
  504
  528
  554
  582
  610
  640
  672
Change in working capital, $m
  18
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
Cash from operations, $m
  196
  168
  175
  183
  191
  200
  209
  218
  228
  239
  250
  255
  267
  279
  293
  307
  322
  337
  354
  371
  389
  408
  428
  449
  471
  494
  518
  543
  570
  598
  627
Maintenance CAPEX, $m
  0
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
  -99
  -103
  -109
  -114
  -120
  -126
  -132
  -139
  -145
  -153
  -160
  -168
  -177
New CAPEX, $m
  -79
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
Cash from investing activities, $m
  -71
  -61
  -64
  -68
  -71
  -75
  -78
  -82
  -87
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -134
  -141
  -147
  -155
  -162
  -171
  -179
  -188
  -198
  -207
  -218
  -228
  -239
  -252
Free cash flow, $m
  125
  106
  111
  115
  120
  125
  130
  136
  142
  148
  155
  155
  162
  170
  177
  186
  195
  204
  213
  224
  234
  246
  257
  270
  283
  296
  311
  326
  341
  358
  376
Issuance/(repayment) of debt, $m
  -12
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
Issuance/(repurchase) of shares, $m
  23
  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  
  12
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
Total cash flow (excl. dividends), $m
  137
  124
  130
  136
  142
  148
  154
  161
  169
  176
  184
  186
  194
  203
  213
  223
  234
  245
  257
  269
  282
  296
  310
  325
  341
  357
  375
  393
  412
  432
  453
Retained Cash Flow (-), $m
  -32
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -95
  -99
  -104
  -109
  -115
  -121
  -127
  -133
  -140
  -147
  -154
Prev. year cash balance distribution, $m
 
  358
  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
 
  445
  91
  95
  99
  103
  107
  111
  116
  121
  126
  125
  130
  136
  143
  149
  156
  163
  171
  179
  188
  197
  206
  216
  226
  237
  248
  260
  272
  286
  299
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
 
  427
  84
  83
  81
  80
  78
  75
  73
  69
  66
  59
  56
  52
  48
  44
  40
  36
  32
  28
  24
  20
  17
  14
  12
  9
  7
  6
  4
  3
  2
Current shareholders' claim on cash, %
  100
  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

National Instruments Corporation (NI) designs, manufactures and sells systems to engineers and scientists. The Company offers a line of measurement, automation and control products. It offers products, technology and services, which include system design software, programming tools, application software, modular hardware products and related driver software, production test systems, NI education platform, software products for teaching and hardware products for teaching. It also offers NI Services, including hardware services and maintenance, software maintenance services, and training and certification. Its products are used across various industries in a range of applications, including research and development, simulation and modeling, prototype and validation, production testing and industrial control and field and factory service and repair. It serves various industries and applications, such as consumer electronics, commercial aerospace, telecommunications and others.

FINANCIAL RATIOS  of  National Instruments (NATI)

Valuation Ratios
P/E Ratio 72.5
Price to Sales 4.9
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 30.7
Price to Free Cash Flow 51.4
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.2%
Cap. Spend. - 3 Yr. Gr. Rate 3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 2.2%
Total Debt to Equity 2.2%
Interest Coverage 116
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 7.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.2%
Return On Equity 7.6%
Return On Equity - 3 Yr. Avg. 9.3%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 74.5%
Gross Margin - 3 Yr. Avg. 74.4%
EBITDA Margin 15.4%
EBITDA Margin - 3 Yr. Avg. 16.4%
Operating Margin 9.9%
Oper. Margin - 3 Yr. Avg. 11%
Pre-Tax Margin 9.4%
Pre-Tax Margin - 3 Yr. Avg. 10.5%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 8.2%
Effective Tax Rate 27.8%
Eff/ Tax Rate - 3 Yr. Avg. 22.6%
Payout Ratio 124.1%

NATI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NATI stock intrinsic value calculation we used $1228 million for the last fiscal year's total revenue generated by National Instruments. The default revenue input number comes from 2016 income statement of National Instruments. 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 NATI stock valuation model: a) initial revenue growth rate of 4.9% 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 NATI is calculated based on our internal credit rating of National Instruments, 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 National Instruments.
    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 NATI stock the variable cost ratio is equal to 88.6%.

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 NATI 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 3.5% for National Instruments.

Corporate tax rate of 27% is the nominal tax rate for National Instruments. 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 NATI 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 NATI are equal to 30%.

Life of production assets of 8.5 years is the average useful life of capital assets used in National Instruments 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 NATI is equal to 17.7%. 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 - $1114 million for National Instruments - 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 132.356 million for National Instruments 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 National Instruments at the current share price and the inputted number of shares is $6.2 billion.

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COMPANY NEWS

▶ Why National Instruments Corporation (NATI) Could Be A Buy   [Dec-05-17 05:35PM  Simply Wall St.]
▶ Record Revenue, Profit Lift National Instruments   [Oct-27-17 09:32AM  Motley Fool]
▶ National Instruments tops Street 3Q forecasts   [Oct-26-17 05:19PM  Associated Press]
▶ NI Declares Quarterly Dividend   [04:06PM  Business Wire]
▶ National Instruments meets 2Q profit forecasts   [Jul-28-17 12:14AM  Associated Press]
▶ The Future Looks Brighter for National Instruments   [Jul-27-17 10:27PM  Motley Fool]
▶ NI Declares Quarterly Dividend   [04:06PM  Business Wire]
▶ NI Unveils the Next Generation of LabVIEW   [10:00AM  Business Wire]
▶ National Instruments Finds New Growth   [Apr-27-17 10:45PM  Motley Fool]
▶ National Instruments posts 1Q profit   [04:52PM  Associated Press]
▶ NI Declares Quarterly Dividend   [04:06PM  Business Wire]
▶ Scientific instruments producer hires Austin chipmaker exec as CFO   [Mar-28-17 07:59AM  at bizjournals.com]
▶ Scientific instruments producer hires Austin chipmaker exec as CFO   [07:59AM  American City Business Journals]
▶ NI Releases NI-RFmx 2.2 Measurement Software for 4.5G Test   [Feb-27-17 01:00AM  Business Wire]
Financial statements of NATI
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