Intrinsic value of Ubiquiti Networks, Inc. - UBNT

Previous Close

$128.24

  Intrinsic Value

$78.44

stock screener

  Rating & Target

sell

-39%

Previous close

$128.24

 
Intrinsic value

$78.44

 
Up/down potential

-39%

 
Rating

sell

We calculate the intrinsic value of UBNT 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 9.0

 

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, %
  22.50
  20.75
  19.18
  17.76
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
Revenue, $m
  1,246
  1,504
  1,793
  2,111
  2,459
  2,836
  3,242
  3,675
  4,136
  4,623
  5,136
  5,675
  6,239
  6,829
  7,444
  8,084
  8,750
  9,443
  10,164
  10,912
  11,690
  12,498
  13,338
  14,212
  15,121
  16,067
  17,052
  18,078
  19,148
  20,263
Variable operating expenses, $m
  828
  1,000
  1,192
  1,404
  1,635
  1,886
  2,156
  2,444
  2,750
  3,074
  3,416
  3,774
  4,149
  4,541
  4,950
  5,376
  5,819
  6,280
  6,759
  7,256
  7,774
  8,311
  8,870
  9,451
  10,056
  10,685
  11,340
  12,022
  12,733
  13,475
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
  828
  1,000
  1,192
  1,404
  1,635
  1,886
  2,156
  2,444
  2,750
  3,074
  3,416
  3,774
  4,149
  4,541
  4,950
  5,376
  5,819
  6,280
  6,759
  7,256
  7,774
  8,311
  8,870
  9,451
  10,056
  10,685
  11,340
  12,022
  12,733
  13,475
Operating income, $m
  417
  504
  601
  707
  824
  950
  1,086
  1,231
  1,385
  1,549
  1,721
  1,901
  2,090
  2,288
  2,494
  2,708
  2,931
  3,164
  3,405
  3,656
  3,916
  4,187
  4,468
  4,761
  5,066
  5,382
  5,712
  6,056
  6,415
  6,788
EBITDA, $m
  421
  508
  605
  713
  830
  957
  1,094
  1,241
  1,396
  1,561
  1,734
  1,916
  2,106
  2,305
  2,513
  2,729
  2,954
  3,188
  3,431
  3,684
  3,946
  4,219
  4,503
  4,798
  5,105
  5,424
  5,757
  6,103
  6,464
  6,841
Interest expense (income), $m
  5
  26
  16
  21
  27
  34
  42
  50
  58
  67
  77
  87
  98
  110
  122
  134
  147
  161
  175
  190
  205
  221
  238
  255
  273
  291
  310
  330
  351
  373
  396
Earnings before tax, $m
  391
  488
  579
  680
  790
  909
  1,036
  1,173
  1,318
  1,472
  1,633
  1,803
  1,980
  2,166
  2,359
  2,561
  2,770
  2,988
  3,215
  3,450
  3,695
  3,949
  4,214
  4,489
  4,774
  5,072
  5,382
  5,705
  6,041
  6,392
Tax expense, $m
  106
  132
  156
  184
  213
  245
  280
  317
  356
  397
  441
  487
  535
  585
  637
  691
  748
  807
  868
  932
  998
  1,066
  1,138
  1,212
  1,289
  1,369
  1,453
  1,540
  1,631
  1,726
Net income, $m
  286
  356
  423
  496
  576
  663
  757
  856
  962
  1,074
  1,192
  1,316
  1,446
  1,581
  1,722
  1,869
  2,022
  2,182
  2,347
  2,519
  2,697
  2,883
  3,076
  3,277
  3,485
  3,703
  3,929
  4,165
  4,410
  4,666

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
  544
  657
  783
  922
  1,074
  1,239
  1,416
  1,606
  1,807
  2,020
  2,244
  2,479
  2,726
  2,983
  3,252
  3,532
  3,823
  4,126
  4,440
  4,767
  5,107
  5,460
  5,827
  6,209
  6,606
  7,019
  7,450
  7,898
  8,365
  8,852
Adjusted assets (=assets-cash), $m
  544
  657
  783
  922
  1,074
  1,239
  1,416
  1,606
  1,807
  2,020
  2,244
  2,479
  2,726
  2,983
  3,252
  3,532
  3,823
  4,126
  4,440
  4,767
  5,107
  5,460
  5,827
  6,209
  6,606
  7,019
  7,450
  7,898
  8,365
  8,852
Revenue / Adjusted assets
  2.290
  2.289
  2.290
  2.290
  2.290
  2.289
  2.290
  2.288
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
  2.289
Average production assets, $m
  16
  20
  23
  27
  32
  37
  42
  48
  54
  60
  67
  74
  81
  89
  97
  105
  114
  123
  132
  142
  152
  162
  173
  185
  197
  209
  222
  235
  249
  263
Working capital, $m
  301
  364
  434
  511
  595
  686
  785
  889
  1,001
  1,119
  1,243
  1,373
  1,510
  1,653
  1,801
  1,956
  2,118
  2,285
  2,460
  2,641
  2,829
  3,025
  3,228
  3,439
  3,659
  3,888
  4,127
  4,375
  4,634
  4,904
Total debt, $m
  292
  394
  507
  632
  769
  918
  1,077
  1,247
  1,429
  1,620
  1,822
  2,034
  2,256
  2,487
  2,729
  2,981
  3,243
  3,515
  3,799
  4,093
  4,399
  4,716
  5,047
  5,390
  5,748
  6,120
  6,507
  6,910
  7,331
  7,769
Total liabilities, $m
  490
  591
  705
  830
  967
  1,115
  1,275
  1,445
  1,626
  1,818
  2,019
  2,231
  2,453
  2,685
  2,927
  3,179
  3,441
  3,713
  3,996
  4,290
  4,596
  4,914
  5,244
  5,588
  5,945
  6,317
  6,705
  7,108
  7,529
  7,967
Total equity, $m
  54
  66
  78
  92
  107
  124
  142
  161
  181
  202
  224
  248
  273
  298
  325
  353
  382
  413
  444
  477
  511
  546
  583
  621
  661
  702
  745
  790
  837
  885
Total liabilities and equity, $m
  544
  657
  783
  922
  1,074
  1,239
  1,417
  1,606
  1,807
  2,020
  2,243
  2,479
  2,726
  2,983
  3,252
  3,532
  3,823
  4,126
  4,440
  4,767
  5,107
  5,460
  5,827
  6,209
  6,606
  7,019
  7,450
  7,898
  8,366
  8,852
Debt-to-equity ratio
  5.370
  5.990
  6.480
  6.860
  7.160
  7.410
  7.600
  7.770
  7.910
  8.020
  8.120
  8.200
  8.270
  8.340
  8.390
  8.440
  8.480
  8.520
  8.550
  8.590
  8.610
  8.640
  8.660
  8.680
  8.700
  8.720
  8.730
  8.750
  8.760
  8.780
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
  286
  356
  423
  496
  576
  663
  757
  856
  962
  1,074
  1,192
  1,316
  1,446
  1,581
  1,722
  1,869
  2,022
  2,182
  2,347
  2,519
  2,697
  2,883
  3,076
  3,277
  3,485
  3,703
  3,929
  4,165
  4,410
  4,666
Depreciation, amort., depletion, $m
  3
  4
  5
  5
  6
  7
  8
  10
  11
  12
  13
  15
  16
  18
  19
  21
  23
  25
  26
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
Funds from operations, $m
  289
  360
  428
  502
  583
  671
  765
  866
  973
  1,086
  1,206
  1,331
  1,462
  1,599
  1,742
  1,890
  2,045
  2,206
  2,373
  2,547
  2,728
  2,916
  3,111
  3,314
  3,525
  3,744
  3,973
  4,212
  4,460
  4,719
Change in working capital, $m
  55
  63
  70
  77
  84
  91
  98
  105
  111
  118
  124
  130
  137
  143
  149
  155
  161
  168
  174
  181
  188
  196
  203
  211
  220
  229
  238
  248
  259
  270
Cash from operations, $m
  233
  298
  358
  425
  499
  579
  667
  761
  862
  968
  1,081
  1,200
  1,325
  1,456
  1,593
  1,735
  1,884
  2,038
  2,199
  2,366
  2,540
  2,720
  2,907
  3,102
  3,305
  3,515
  3,735
  3,963
  4,201
  4,449
Maintenance CAPEX, $m
  -3
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -35
  -37
  -39
  -42
  -44
  -47
  -50
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
Cash from investing activities, $m
  -6
  -6
  -8
  -9
  -10
  -11
  -12
  -14
  -16
  -17
  -19
  -20
  -22
  -24
  -26
  -27
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -51
  -55
  -57
  -61
  -64
Free cash flow, $m
  228
  291
  350
  416
  489
  568
  654
  747
  846
  951
  1,063
  1,180
  1,303
  1,432
  1,567
  1,708
  1,854
  2,007
  2,165
  2,330
  2,501
  2,679
  2,864
  3,056
  3,256
  3,464
  3,680
  3,906
  4,140
  4,385
Issuance/(repayment) of debt, $m
  -193
  102
  113
  125
  137
  148
  159
  170
  181
  192
  202
  212
  222
  232
  242
  252
  262
  272
  283
  294
  306
  318
  330
  344
  357
  372
  387
  403
  421
  438
Issuance/(repurchase) of shares, $m
  7
  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  
  -186
  102
  113
  125
  137
  148
  159
  170
  181
  192
  202
  212
  222
  232
  242
  252
  262
  272
  283
  294
  306
  318
  330
  344
  357
  372
  387
  403
  421
  438
Total cash flow (excl. dividends), $m
  42
  393
  464
  541
  625
  716
  814
  917
  1,027
  1,143
  1,264
  1,392
  1,525
  1,664
  1,809
  1,960
  2,116
  2,279
  2,448
  2,624
  2,807
  2,997
  3,194
  3,400
  3,613
  3,836
  4,068
  4,309
  4,561
  4,823
Retained Cash Flow (-), $m
  -292
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
Prev. year cash balance distribution, $m
  554
  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
  304
  381
  451
  527
  610
  700
  796
  898
  1,007
  1,122
  1,242
  1,368
  1,500
  1,638
  1,782
  1,932
  2,087
  2,249
  2,417
  2,591
  2,773
  2,961
  3,158
  3,361
  3,574
  3,795
  4,025
  4,264
  4,514
  4,775
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
  291
  349
  392
  434
  473
  508
  538
  562
  578
  588
  590
  584
  570
  550
  523
  491
  454
  414
  372
  329
  287
  246
  207
  171
  139
  111
  86
  66
  49
  36
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Ubiquiti Networks, Inc. develops performance networking technology for service providers and enterprises. The Company offers a portfolio of networking products and solutions. Its service provider product platforms provide carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing. Its enterprise product platforms provide wireless local area network (WLAN) infrastructure, video surveillance products, switching and routing solutions, and machine-to-machine communication components. Its products and solutions include radios, antennas, software, communications protocols and management tools that are designed to deliver carrier and enterprise class wireless broadband access and other services primarily in the unlicensed radio frequency spectrum. Its service provider and carrier solutions include Base Station/Backhaul/Customer Premise Equipment (CPE)/Bridge-airMAX, Network Routing Platform-EdgeMAX and Point-to-point Wireless Backhaul-airFiber.

FINANCIAL RATIOS  of  Ubiquiti Networks, Inc. (UBNT)

Valuation Ratios
P/E Ratio 39.9
Price to Sales 11.9
Price to Book 17.1
Price to Tangible Book
Price to Cash Flow 91.9
Price to Free Cash Flow 98
Growth Rates
Sales Growth Rate 29.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate 11.8%
Financial Strength
Quick Ratio 40
Current Ratio 0.6
LT Debt to Equity 40.2%
Total Debt to Equity 42.7%
Interest Coverage 58
Management Effectiveness
Return On Assets 30.5%
Ret/ On Assets - 3 Yr. Avg. 28.9%
Return On Total Capital 34.4%
Ret/ On T. Cap. - 3 Yr. Avg. 33.1%
Return On Equity 49.5%
Return On Equity - 3 Yr. Avg. 44.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 45.8%
Gross Margin - 3 Yr. Avg. 46.2%
EBITDA Margin 34.3%
EBITDA Margin - 3 Yr. Avg. 32.4%
Operating Margin 33.4%
Oper. Margin - 3 Yr. Avg. 31.5%
Pre-Tax Margin 32.9%
Pre-Tax Margin - 3 Yr. Avg. 31.2%
Net Profit Margin 29.8%
Net Profit Margin - 3 Yr. Avg. 27.9%
Effective Tax Rate 9.5%
Eff/ Tax Rate - 3 Yr. Avg. 10.4%
Payout Ratio 0%

UBNT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UBNT stock intrinsic value calculation we used $1017 million for the last fiscal year's total revenue generated by Ubiquiti Networks, Inc.. The default revenue input number comes from 0001 income statement of Ubiquiti Networks, 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 UBNT stock valuation model: a) initial revenue growth rate of 22.5% 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 UBNT is calculated based on our internal credit rating of Ubiquiti Networks, 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 Ubiquiti Networks, 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 UBNT stock the variable cost ratio is equal to 66.5%.

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 UBNT 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 Ubiquiti Networks, Inc..

Corporate tax rate of 27% is the nominal tax rate for Ubiquiti Networks, 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 UBNT 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 UBNT are equal to 1.3%.

Life of production assets of 1.9 years is the average useful life of capital assets used in Ubiquiti Networks, 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 UBNT is equal to 24.2%. 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 - $315.748 million for Ubiquiti Networks, 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 70.536 million for Ubiquiti Networks, 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 Ubiquiti Networks, Inc. at the current share price and the inputted number of shares is $9.0 billion.

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