Intrinsic value of NetApp, Inc. - NTAP

Previous Close

$66.91

  Intrinsic Value

$49.71

stock screener

  Rating & Target

sell

-26%

Previous close

$66.91

 
Intrinsic value

$49.71

 
Up/down potential

-26%

 
Rating

sell

We calculate the intrinsic value of NTAP 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 16.5

 

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, %
  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
  6,029
  6,168
  6,326
  6,504
  6,702
  6,918
  7,154
  7,409
  7,683
  7,978
  8,294
  8,630
  8,989
  9,370
  9,774
  10,202
  10,655
  11,135
  11,641
  12,176
  12,741
  13,336
  13,963
  14,624
  15,321
  16,054
  16,825
  17,637
  18,491
  19,390
Variable operating expenses, $m
  5,302
  5,420
  5,554
  5,705
  5,873
  6,057
  6,257
  6,473
  6,706
  6,957
  7,041
  7,327
  7,631
  7,955
  8,298
  8,661
  9,046
  9,453
  9,883
  10,338
  10,817
  11,322
  11,855
  12,416
  13,007
  13,629
  14,284
  14,974
  15,699
  16,462
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
  5,302
  5,420
  5,554
  5,705
  5,873
  6,057
  6,257
  6,473
  6,706
  6,957
  7,041
  7,327
  7,631
  7,955
  8,298
  8,661
  9,046
  9,453
  9,883
  10,338
  10,817
  11,322
  11,855
  12,416
  13,007
  13,629
  14,284
  14,974
  15,699
  16,462
Operating income, $m
  727
  748
  772
  799
  829
  861
  897
  935
  977
  1,021
  1,252
  1,303
  1,357
  1,415
  1,476
  1,541
  1,609
  1,681
  1,758
  1,839
  1,924
  2,014
  2,109
  2,208
  2,314
  2,424
  2,541
  2,663
  2,792
  2,928
EBITDA, $m
  1,042
  1,066
  1,093
  1,124
  1,158
  1,196
  1,236
  1,281
  1,328
  1,379
  1,433
  1,492
  1,554
  1,619
  1,689
  1,763
  1,842
  1,925
  2,012
  2,105
  2,202
  2,305
  2,413
  2,528
  2,648
  2,775
  2,908
  3,048
  3,196
  3,351
Interest expense (income), $m
  102
  104
  92
  101
  111
  122
  135
  149
  164
  180
  198
  216
  236
  258
  281
  305
  331
  358
  387
  417
  450
  484
  520
  558
  598
  640
  684
  731
  780
  832
  886
Earnings before tax, $m
  623
  656
  671
  688
  706
  726
  748
  772
  797
  824
  1,036
  1,067
  1,099
  1,134
  1,171
  1,210
  1,251
  1,295
  1,341
  1,389
  1,440
  1,494
  1,551
  1,611
  1,674
  1,740
  1,810
  1,884
  1,961
  2,042
Tax expense, $m
  168
  177
  181
  186
  191
  196
  202
  208
  215
  222
  280
  288
  297
  306
  316
  327
  338
  350
  362
  375
  389
  403
  419
  435
  452
  470
  489
  509
  529
  551
Net income, $m
  455
  479
  490
  502
  516
  530
  546
  563
  582
  601
  756
  779
  803
  828
  855
  883
  913
  945
  979
  1,014
  1,051
  1,091
  1,132
  1,176
  1,222
  1,270
  1,321
  1,375
  1,431
  1,491

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
  7,902
  8,084
  8,291
  8,525
  8,783
  9,067
  9,376
  9,710
  10,070
  10,456
  10,870
  11,311
  11,781
  12,280
  12,810
  13,371
  13,965
  14,593
  15,257
  15,959
  16,698
  17,478
  18,301
  19,167
  20,079
  21,040
  22,051
  23,116
  24,235
  25,412
Adjusted assets (=assets-cash), $m
  7,902
  8,084
  8,291
  8,525
  8,783
  9,067
  9,376
  9,710
  10,070
  10,456
  10,870
  11,311
  11,781
  12,280
  12,810
  13,371
  13,965
  14,593
  15,257
  15,959
  16,698
  17,478
  18,301
  19,167
  20,079
  21,040
  22,051
  23,116
  24,235
  25,412
Revenue / Adjusted assets
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
Average production assets, $m
  1,724
  1,764
  1,809
  1,860
  1,917
  1,979
  2,046
  2,119
  2,197
  2,282
  2,372
  2,468
  2,571
  2,680
  2,795
  2,918
  3,047
  3,185
  3,329
  3,482
  3,644
  3,814
  3,994
  4,183
  4,382
  4,591
  4,812
  5,044
  5,289
  5,545
Working capital, $m
  -1,616
  -1,653
  -1,695
  -1,743
  -1,796
  -1,854
  -1,917
  -1,985
  -2,059
  -2,138
  -2,223
  -2,313
  -2,409
  -2,511
  -2,619
  -2,734
  -2,856
  -2,984
  -3,120
  -3,263
  -3,415
  -3,574
  -3,742
  -3,919
  -4,106
  -4,302
  -4,509
  -4,727
  -4,956
  -5,196
Total debt, $m
  1,708
  1,871
  2,058
  2,268
  2,501
  2,756
  3,034
  3,335
  3,659
  4,007
  4,379
  4,776
  5,199
  5,648
  6,125
  6,630
  7,165
  7,730
  8,328
  8,959
  9,624
  10,326
  11,067
  11,846
  12,668
  13,532
  14,442
  15,400
  16,407
  17,467
Total liabilities, $m
  7,112
  7,275
  7,462
  7,672
  7,905
  8,160
  8,438
  8,739
  9,063
  9,411
  9,783
  10,180
  10,603
  11,052
  11,529
  12,034
  12,569
  13,134
  13,732
  14,363
  15,028
  15,730
  16,471
  17,250
  18,072
  18,936
  19,846
  20,804
  21,811
  22,871
Total equity, $m
  790
  808
  829
  852
  878
  907
  938
  971
  1,007
  1,046
  1,087
  1,131
  1,178
  1,228
  1,281
  1,337
  1,397
  1,459
  1,526
  1,596
  1,670
  1,748
  1,830
  1,917
  2,008
  2,104
  2,205
  2,312
  2,423
  2,541
Total liabilities and equity, $m
  7,902
  8,083
  8,291
  8,524
  8,783
  9,067
  9,376
  9,710
  10,070
  10,457
  10,870
  11,311
  11,781
  12,280
  12,810
  13,371
  13,966
  14,593
  15,258
  15,959
  16,698
  17,478
  18,301
  19,167
  20,080
  21,040
  22,051
  23,116
  24,234
  25,412
Debt-to-equity ratio
  2.160
  2.310
  2.480
  2.660
  2.850
  3.040
  3.240
  3.430
  3.630
  3.830
  4.030
  4.220
  4.410
  4.600
  4.780
  4.960
  5.130
  5.300
  5.460
  5.610
  5.760
  5.910
  6.050
  6.180
  6.310
  6.430
  6.550
  6.660
  6.770
  6.870
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  455
  479
  490
  502
  516
  530
  546
  563
  582
  601
  756
  779
  803
  828
  855
  883
  913
  945
  979
  1,014
  1,051
  1,091
  1,132
  1,176
  1,222
  1,270
  1,321
  1,375
  1,431
  1,491
Depreciation, amort., depletion, $m
  315
  318
  321
  325
  330
  334
  339
  345
  351
  357
  181
  188
  196
  205
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  385
  404
  423
Funds from operations, $m
  770
  797
  811
  827
  845
  865
  886
  908
  933
  959
  937
  967
  999
  1,032
  1,068
  1,106
  1,146
  1,188
  1,233
  1,280
  1,330
  1,382
  1,437
  1,495
  1,556
  1,621
  1,689
  1,760
  1,835
  1,914
Change in working capital, $m
  -32
  -37
  -42
  -48
  -53
  -58
  -63
  -68
  -74
  -79
  -85
  -90
  -96
  -102
  -108
  -115
  -122
  -128
  -136
  -143
  -151
  -160
  -168
  -177
  -187
  -196
  -207
  -218
  -229
  -241
Cash from operations, $m
  802
  834
  854
  875
  898
  923
  949
  977
  1,006
  1,038
  1,022
  1,057
  1,095
  1,135
  1,176
  1,221
  1,267
  1,317
  1,369
  1,423
  1,481
  1,541
  1,605
  1,672
  1,743
  1,817
  1,895
  1,978
  2,064
  2,155
Maintenance CAPEX, $m
  -129
  -132
  -135
  -138
  -142
  -146
  -151
  -156
  -162
  -168
  -174
  -181
  -188
  -196
  -205
  -213
  -223
  -233
  -243
  -254
  -266
  -278
  -291
  -305
  -319
  -334
  -350
  -367
  -385
  -404
New CAPEX, $m
  -35
  -40
  -45
  -51
  -56
  -62
  -67
  -73
  -79
  -84
  -90
  -96
  -102
  -109
  -116
  -122
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -189
  -199
  -210
  -221
  -232
  -244
  -257
Cash from investing activities, $m
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -229
  -241
  -252
  -264
  -277
  -290
  -305
  -321
  -335
  -353
  -370
  -388
  -407
  -427
  -448
  -470
  -494
  -518
  -544
  -571
  -599
  -629
  -661
Free cash flow, $m
  638
  663
  674
  686
  700
  714
  730
  748
  766
  786
  758
  780
  804
  829
  856
  885
  915
  947
  981
  1,016
  1,054
  1,093
  1,135
  1,178
  1,225
  1,273
  1,324
  1,378
  1,435
  1,494
Issuance/(repayment) of debt, $m
  -218
  164
  187
  210
  233
  255
  278
  301
  324
  348
  372
  397
  423
  449
  477
  505
  535
  566
  598
  631
  666
  702
  740
  780
  821
  865
  910
  958
  1,008
  1,060
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  
  -218
  164
  187
  210
  233
  255
  278
  301
  324
  348
  372
  397
  423
  449
  477
  505
  535
  566
  598
  631
  666
  702
  740
  780
  821
  865
  910
  958
  1,008
  1,060
Total cash flow (excl. dividends), $m
  419
  826
  861
  896
  932
  970
  1,008
  1,048
  1,090
  1,134
  1,130
  1,177
  1,227
  1,279
  1,333
  1,390
  1,450
  1,512
  1,578
  1,647
  1,719
  1,795
  1,875
  1,958
  2,046
  2,138
  2,234
  2,336
  2,442
  2,554
Retained Cash Flow (-), $m
  -374
  -18
  -21
  -23
  -26
  -28
  -31
  -33
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
  -112
  -118
Prev. year cash balance distribution, $m
  1,860
  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
  1,905
  808
  840
  873
  906
  941
  977
  1,015
  1,054
  1,095
  1,088
  1,133
  1,180
  1,229
  1,280
  1,334
  1,390
  1,450
  1,512
  1,577
  1,645
  1,717
  1,792
  1,872
  1,955
  2,042
  2,133
  2,229
  2,330
  2,436
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
  1,827
  740
  731
  719
  703
  683
  660
  634
  606
  574
  517
  483
  449
  413
  376
  339
  303
  267
  233
  200
  170
  142
  117
  95
  76
  60
  46
  34
  25
  18
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

NetApp, Inc. (NetApp) provides software, systems and services to manage and store customer data. The Company enables enterprises, service providers, governmental organizations, and partners to envision, deploy and evolve their information technology (IT) environments. The Company offers a portfolio of products and services that satisfy a range of customer workloads across different data types and deployment models. Its data management and storage offerings help manage business productivity, performance and profitability, while providing investment protection and asset utilization. The Company's FlexPod portfolio includes FlexPod Datacenter for core enterprise data centers and service providers, FlexPod Express for medium-sized businesses and branch offices, and FlexPod Select for data-intensive workloads. The portfolio is validated with hypervisors, operating systems, systems management tools and cloud management platforms.

FINANCIAL RATIOS  of  NetApp, Inc. (NTAP)

Valuation Ratios
P/E Ratio 35.4
Price to Sales 3.3
Price to Book 6.5
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 22.2
Growth Rates
Sales Growth Rate -0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.4%
Cap. Spend. - 3 Yr. Gr. Rate -4.6%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 26.8%
Total Debt to Equity 71.7%
Interest Coverage 8
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 18%
Return On Equity - 3 Yr. Avg. 13.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 61.4%
Gross Margin - 3 Yr. Avg. 61.6%
EBITDA Margin 18%
EBITDA Margin - 3 Yr. Avg. 15.7%
Operating Margin 12%
Oper. Margin - 3 Yr. Avg. 10%
Pre-Tax Margin 12%
Pre-Tax Margin - 3 Yr. Avg. 10%
Net Profit Margin 9.2%
Net Profit Margin - 3 Yr. Avg. 7.5%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. 26.2%
Payout Ratio 40.9%

NTAP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NTAP stock intrinsic value calculation we used $5911 million for the last fiscal year's total revenue generated by NetApp, Inc.. The default revenue input number comes from 0001 income statement of NetApp, 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 NTAP 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 NTAP is calculated based on our internal credit rating of NetApp, 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 NetApp, 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 NTAP stock the variable cost ratio is equal to 88%.

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 NTAP 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 NetApp, Inc..

Corporate tax rate of 27% is the nominal tax rate for NetApp, 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 NTAP 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 NTAP are equal to 28.6%.

Life of production assets of 13.1 years is the average useful life of capital assets used in NetApp, 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 NTAP is equal to -26.8%. 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 - $2276 million for NetApp, 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 246.988 million for NetApp, 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 NetApp, Inc. at the current share price and the inputted number of shares is $16.5 billion.

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