Intrinsic value of Sierra Wireless, Inc. - SWIR

Previous Close

$12.64

  Intrinsic Value

$4.42

stock screener

  Rating & Target

str. sell

-65%

Previous close

$12.64

 
Intrinsic value

$4.42

 
Up/down potential

-65%

 
Rating

str. sell

We calculate the intrinsic value of SWIR 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, %
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
Revenue, $m
  912
  1,039
  1,175
  1,318
  1,470
  1,629
  1,796
  1,971
  2,153
  2,344
  2,542
  2,748
  2,962
  3,185
  3,416
  3,656
  3,906
  4,166
  4,436
  4,718
  5,010
  5,315
  5,633
  5,964
  6,309
  6,669
  7,045
  7,438
  7,849
  8,278
Variable operating expenses, $m
  908
  1,030
  1,160
  1,298
  1,444
  1,598
  1,759
  1,927
  2,103
  2,286
  2,447
  2,645
  2,852
  3,066
  3,289
  3,520
  3,761
  4,011
  4,271
  4,542
  4,823
  5,117
  5,423
  5,741
  6,074
  6,421
  6,783
  7,161
  7,556
  7,969
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
  908
  1,030
  1,160
  1,298
  1,444
  1,598
  1,759
  1,927
  2,103
  2,286
  2,447
  2,645
  2,852
  3,066
  3,289
  3,520
  3,761
  4,011
  4,271
  4,542
  4,823
  5,117
  5,423
  5,741
  6,074
  6,421
  6,783
  7,161
  7,556
  7,969
Operating income, $m
  4
  9
  14
  20
  25
  31
  37
  44
  51
  58
  95
  102
  110
  119
  127
  136
  146
  155
  165
  176
  187
  198
  210
  222
  235
  249
  263
  277
  293
  309
EBITDA, $m
  59
  67
  76
  85
  95
  106
  116
  128
  140
  152
  165
  178
  192
  206
  221
  237
  253
  270
  288
  306
  325
  345
  365
  387
  409
  432
  457
  482
  509
  537
Interest expense (income), $m
  0
  2
  4
  6
  9
  11
  13
  16
  19
  22
  25
  28
  31
  34
  38
  41
  45
  49
  53
  57
  62
  66
  71
  76
  81
  87
  92
  98
  104
  111
  118
Earnings before tax, $m
  2
  5
  8
  11
  14
  18
  21
  25
  29
  33
  67
  72
  76
  81
  86
  91
  97
  102
  108
  114
  120
  127
  134
  141
  148
  156
  164
  173
  182
  191
Tax expense, $m
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
Net income, $m
  2
  4
  6
  8
  10
  13
  16
  18
  21
  24
  49
  52
  56
  59
  63
  67
  70
  75
  79
  83
  88
  93
  98
  103
  108
  114
  120
  126
  133
  139

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
  786
  895
  1,012
  1,135
  1,266
  1,403
  1,547
  1,698
  1,855
  2,019
  2,189
  2,367
  2,551
  2,743
  2,942
  3,149
  3,365
  3,588
  3,821
  4,063
  4,315
  4,578
  4,851
  5,137
  5,434
  5,744
  6,068
  6,407
  6,760
  7,130
Adjusted assets (=assets-cash), $m
  786
  895
  1,012
  1,135
  1,266
  1,403
  1,547
  1,698
  1,855
  2,019
  2,189
  2,367
  2,551
  2,743
  2,942
  3,149
  3,365
  3,588
  3,821
  4,063
  4,315
  4,578
  4,851
  5,137
  5,434
  5,744
  6,068
  6,407
  6,760
  7,130
Revenue / Adjusted assets
  1.160
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
  1.161
Average production assets, $m
  226
  258
  291
  327
  364
  404
  445
  489
  534
  581
  630
  681
  735
  790
  847
  907
  969
  1,033
  1,100
  1,170
  1,243
  1,318
  1,397
  1,479
  1,565
  1,654
  1,747
  1,845
  1,946
  2,053
Working capital, $m
  50
  57
  65
  72
  81
  90
  99
  108
  118
  129
  140
  151
  163
  175
  188
  201
  215
  229
  244
  259
  276
  292
  310
  328
  347
  367
  387
  409
  432
  455
Total debt, $m
  79
  118
  159
  202
  248
  296
  346
  399
  454
  512
  572
  634
  699
  766
  836
  909
  984
  1,063
  1,145
  1,230
  1,318
  1,410
  1,506
  1,606
  1,711
  1,820
  1,933
  2,052
  2,176
  2,306
Total liabilities, $m
  276
  314
  355
  398
  444
  492
  543
  596
  651
  709
  768
  831
  895
  963
  1,033
  1,105
  1,181
  1,260
  1,341
  1,426
  1,515
  1,607
  1,703
  1,803
  1,907
  2,016
  2,130
  2,249
  2,373
  2,503
Total equity, $m
  510
  581
  657
  737
  821
  911
  1,004
  1,102
  1,204
  1,310
  1,421
  1,536
  1,656
  1,780
  1,910
  2,044
  2,184
  2,329
  2,480
  2,637
  2,801
  2,971
  3,149
  3,334
  3,527
  3,728
  3,938
  4,158
  4,387
  4,627
Total liabilities and equity, $m
  786
  895
  1,012
  1,135
  1,265
  1,403
  1,547
  1,698
  1,855
  2,019
  2,189
  2,367
  2,551
  2,743
  2,943
  3,149
  3,365
  3,589
  3,821
  4,063
  4,316
  4,578
  4,852
  5,137
  5,434
  5,744
  6,068
  6,407
  6,760
  7,130
Debt-to-equity ratio
  0.160
  0.200
  0.240
  0.270
  0.300
  0.320
  0.350
  0.360
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.460
  0.460
  0.470
  0.470
  0.470
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.500
  0.500
Adjusted equity ratio
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  4
  6
  8
  10
  13
  16
  18
  21
  24
  49
  52
  56
  59
  63
  67
  70
  75
  79
  83
  88
  93
  98
  103
  108
  114
  120
  126
  133
  139
Depreciation, amort., depletion, $m
  55
  58
  62
  66
  70
  74
  79
  84
  89
  94
  70
  76
  82
  88
  94
  101
  108
  115
  122
  130
  138
  146
  155
  164
  174
  184
  194
  205
  216
  228
Funds from operations, $m
  56
  62
  68
  74
  81
  87
  95
  102
  110
  118
  119
  128
  137
  147
  157
  167
  178
  189
  201
  213
  226
  239
  253
  267
  282
  298
  314
  331
  349
  368
Change in working capital, $m
  7
  7
  7
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  50
  55
  60
  66
  72
  79
  86
  93
  100
  108
  108
  117
  125
  135
  144
  154
  164
  175
  186
  198
  210
  222
  235
  249
  263
  278
  293
  310
  326
  344
Maintenance CAPEX, $m
  -22
  -25
  -29
  -32
  -36
  -40
  -45
  -49
  -54
  -59
  -65
  -70
  -76
  -82
  -88
  -94
  -101
  -108
  -115
  -122
  -130
  -138
  -146
  -155
  -164
  -174
  -184
  -194
  -205
  -216
New CAPEX, $m
  -29
  -31
  -34
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -102
  -106
Cash from investing activities, $m
  -51
  -56
  -63
  -68
  -74
  -80
  -86
  -92
  -99
  -106
  -114
  -121
  -129
  -137
  -145
  -154
  -163
  -172
  -182
  -192
  -203
  -214
  -225
  -237
  -250
  -263
  -277
  -291
  -307
  -322
Free cash flow, $m
  -1
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  1
  -6
  -5
  -3
  -2
  -1
  0
  2
  3
  4
  6
  7
  9
  10
  12
  13
  15
  16
  18
  20
  21
Issuance/(repayment) of debt, $m
  36
  38
  41
  43
  46
  48
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  88
  92
  96
  100
  104
  109
  114
  119
  124
  130
Issuance/(repurchase) of shares, $m
  64
  67
  70
  72
  74
  76
  78
  79
  81
  82
  62
  63
  64
  65
  67
  68
  69
  71
  72
  74
  76
  78
  80
  82
  85
  87
  90
  93
  97
  100
Cash from financing (excl. dividends), $m  
  100
  105
  111
  115
  120
  124
  129
  132
  136
  140
  122
  125
  129
  132
  137
  141
  145
  150
  154
  159
  164
  170
  176
  182
  189
  196
  204
  212
  221
  230
Total cash flow (excl. dividends), $m
  99
  104
  109
  114
  118
  123
  128
  132
  137
  141
  116
  121
  126
  130
  136
  141
  146
  152
  158
  165
  171
  179
  186
  194
  202
  211
  220
  230
  240
  251
Retained Cash Flow (-), $m
  -66
  -71
  -76
  -80
  -85
  -89
  -93
  -98
  -102
  -106
  -111
  -115
  -120
  -124
  -129
  -134
  -140
  -145
  -151
  -157
  -164
  -170
  -178
  -185
  -193
  -201
  -210
  -220
  -229
  -240
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
  33
  33
  33
  33
  34
  34
  34
  34
  35
  35
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
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
  32
  30
  29
  28
  26
  25
  23
  21
  20
  18
  3
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  87.6
  77.6
  69.5
  62.8
  57.2
  52.4
  48.4
  44.9
  41.9
  39.3
  37.6
  36.0
  34.6
  33.4
  32.2
  31.1
  30.1
  29.2
  28.3
  27.5
  26.8
  26.1
  25.4
  24.8
  24.2
  23.6
  23.1
  22.6
  22.1
  21.6

Sierra Wireless, Inc. is engaged in building the Internet of Things (IoT) with wireless solutions for organizations. The Company's OEM Solution segment offers cellular embedded wireless modules for IoT connectivity, including an embedded application framework to support customer applications. The Company's Enterprise Solution segment offers intelligent routers and gateways, including management tools and applications that enable cellular connectivity. The Company's Cloud and Connectivity Services segment offers a cloud based platform for deploying and managing IoT applications, Smart SIM supported by mobile core networks, and managed wireless broadband services to enable customer IoT deployments. The Company offers a portfolio of second generation, third generation, and fourth generation cellular embedded wireless modules and gateways, integrated with its secure cloud and connectivity services. The Company offers its products to original equipment manufacturers (OEMs) and enterprises.

FINANCIAL RATIOS  of  Sierra Wireless, Inc. (SWIR)

Valuation Ratios
P/E Ratio 26.5
Price to Sales 0.6
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 13.7
Growth Rates
Sales Growth Rate 1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate 5.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.7%
Ret/ On Assets - 3 Yr. Avg. -0.4%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity 4.2%
Return On Equity - 3 Yr. Avg. -0.5%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 35.4%
Gross Margin - 3 Yr. Avg. 33.3%
EBITDA Margin 7.5%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 3.6%
Oper. Margin - 3 Yr. Avg. 1.4%
Pre-Tax Margin 3.2%
Pre-Tax Margin - 3 Yr. Avg. -0.1%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. -0.4%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. -6.5%
Payout Ratio 0%

SWIR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SWIR stock intrinsic value calculation we used $794 million for the last fiscal year's total revenue generated by Sierra Wireless, Inc.. The default revenue input number comes from 0001 income statement of Sierra Wireless, 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 SWIR stock valuation model: a) initial revenue growth rate of 14.9% 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 SWIR is calculated based on our internal credit rating of Sierra Wireless, 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 Sierra Wireless, 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 SWIR stock the variable cost ratio is equal to 100%.

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 SWIR 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 Sierra Wireless, Inc..

Corporate tax rate of 27% is the nominal tax rate for Sierra Wireless, 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 SWIR 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 SWIR are equal to 24.8%.

Life of production assets of 9 years is the average useful life of capital assets used in Sierra Wireless, 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 SWIR is equal to 5.5%. 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 - $444.13 million for Sierra Wireless, 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 36.073 million for Sierra Wireless, 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 Sierra Wireless, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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