Intrinsic value of UTStarcom Holdings - UTSI

Previous Close

$3.51

  Intrinsic Value

$12.75

stock screener

  Rating & Target

str. buy

+263%

Previous close

$3.51

 
Intrinsic value

$12.75

 
Up/down potential

+263%

 
Rating

str. buy

We calculate the intrinsic value of UTSI 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 0.1

 

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, %
  13.60
  12.74
  11.97
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
Revenue, $m
  112
  126
  141
  157
  174
  191
  209
  228
  248
  269
  290
  313
  336
  360
  385
  411
  438
  467
  496
  527
  558
  592
  626
  662
  700
  739
  780
  823
  868
  915
Variable operating expenses, $m
  67
  76
  85
  94
  104
  115
  126
  137
  149
  162
  175
  188
  202
  217
  232
  248
  264
  281
  299
  317
  336
  356
  377
  399
  421
  445
  470
  496
  523
  551
Fixed operating expenses, $m
  34
  34
  35
  36
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
Total operating expenses, $m
  101
  110
  120
  130
  141
  153
  164
  176
  189
  203
  217
  231
  246
  262
  278
  295
  312
  330
  349
  368
  388
  409
  431
  455
  478
  503
  529
  557
  585
  614
Operating income, $m
  11
  16
  21
  26
  32
  38
  45
  52
  59
  66
  74
  82
  90
  99
  108
  117
  127
  137
  148
  159
  170
  182
  195
  208
  222
  236
  251
  267
  283
  301
EBITDA, $m
  11
  16
  21
  27
  33
  39
  46
  52
  60
  67
  75
  83
  91
  100
  109
  118
  128
  139
  149
  160
  172
  184
  197
  210
  224
  239
  254
  270
  286
  304
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
Earnings before tax, $m
  11
  15
  19
  24
  29
  34
  40
  46
  52
  58
  65
  71
  79
  86
  94
  102
  110
  119
  128
  137
  147
  158
  169
  180
  192
  204
  217
  231
  245
  260
Tax expense, $m
  3
  4
  5
  7
  8
  9
  11
  12
  14
  16
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  59
  62
  66
  70
Net income, $m
  8
  11
  14
  18
  21
  25
  29
  33
  38
  42
  47
  52
  57
  63
  68
  74
  80
  87
  93
  100
  108
  115
  123
  131
  140
  149
  159
  168
  179
  190

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
  206
  232
  260
  289
  320
  352
  385
  421
  457
  495
  535
  576
  619
  663
  710
  758
  808
  859
  914
  970
  1,028
  1,090
  1,153
  1,220
  1,289
  1,361
  1,437
  1,516
  1,599
  1,685
Adjusted assets (=assets-cash), $m
  206
  232
  260
  289
  320
  352
  385
  421
  457
  495
  535
  576
  619
  663
  710
  758
  808
  859
  914
  970
  1,028
  1,090
  1,153
  1,220
  1,289
  1,361
  1,437
  1,516
  1,599
  1,685
Revenue / Adjusted assets
  0.544
  0.543
  0.542
  0.543
  0.544
  0.543
  0.543
  0.542
  0.543
  0.543
  0.542
  0.543
  0.543
  0.543
  0.542
  0.542
  0.542
  0.544
  0.543
  0.543
  0.543
  0.543
  0.543
  0.543
  0.543
  0.543
  0.543
  0.543
  0.543
  0.543
Average production assets, $m
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
Working capital, $m
  -19
  -21
  -24
  -26
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -53
  -56
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -94
  -99
  -105
  -111
  -118
  -124
  -131
  -138
  -146
  -154
Total debt, $m
  14
  28
  42
  58
  74
  91
  109
  128
  148
  168
  189
  211
  234
  257
  282
  308
  334
  362
  391
  421
  452
  485
  519
  554
  591
  630
  670
  712
  756
  802
Total liabilities, $m
  110
  124
  138
  154
  170
  187
  205
  224
  244
  264
  285
  307
  330
  354
  378
  404
  430
  458
  487
  517
  548
  581
  615
  650
  687
  726
  766
  808
  852
  898
Total equity, $m
  96
  108
  121
  135
  149
  164
  180
  196
  213
  231
  250
  269
  289
  310
  331
  354
  377
  401
  427
  453
  480
  509
  539
  570
  602
  636
  671
  708
  747
  787
Total liabilities and equity, $m
  206
  232
  259
  289
  319
  351
  385
  420
  457
  495
  535
  576
  619
  664
  709
  758
  807
  859
  914
  970
  1,028
  1,090
  1,154
  1,220
  1,289
  1,362
  1,437
  1,516
  1,599
  1,685
Debt-to-equity ratio
  0.140
  0.250
  0.350
  0.430
  0.500
  0.560
  0.610
  0.650
  0.690
  0.730
  0.760
  0.780
  0.810
  0.830
  0.850
  0.870
  0.890
  0.900
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.010
  1.020
Adjusted equity ratio
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  11
  14
  18
  21
  25
  29
  33
  38
  42
  47
  52
  57
  63
  68
  74
  80
  87
  93
  100
  108
  115
  123
  131
  140
  149
  159
  168
  179
  190
Depreciation, amort., depletion, $m
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Funds from operations, $m
  8
  11
  15
  18
  22
  26
  30
  34
  39
  43
  48
  53
  58
  64
  70
  76
  82
  88
  95
  102
  110
  117
  125
  134
  142
  152
  161
  171
  182
  193
Change in working capital, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Cash from operations, $m
  10
  14
  17
  21
  25
  29
  33
  37
  42
  47
  52
  57
  62
  68
  74
  80
  86
  93
  100
  107
  115
  123
  131
  140
  149
  158
  168
  178
  189
  201
Maintenance CAPEX, $m
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Free cash flow, $m
  10
  13
  16
  20
  24
  28
  32
  36
  41
  46
  50
  56
  61
  66
  72
  78
  85
  91
  98
  105
  113
  120
  128
  137
  146
  155
  165
  175
  186
  197
Issuance/(repayment) of debt, $m
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
Issuance/(repurchase) of shares, $m
  4
  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  
  18
  15
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
Total cash flow (excl. dividends), $m
  27
  28
  31
  36
  40
  45
  50
  55
  60
  66
  72
  78
  84
  90
  97
  104
  111
  119
  127
  135
  144
  153
  162
  172
  183
  194
  205
  217
  230
  243
Retained Cash Flow (-), $m
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
Prev. year cash balance distribution, $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 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
  22
  16
  18
  22
  26
  30
  34
  39
  43
  48
  53
  58
  64
  69
  75
  81
  88
  95
  102
  109
  116
  124
  133
  141
  150
  160
  170
  180
  191
  203
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
  21
  15
  16
  18
  20
  22
  23
  24
  25
  25
  25
  25
  24
  23
  22
  21
  19
  17
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  96.7
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8
  95.8

UTStarcom Holdings Corp. provides broadband products, solution and services. The Company delivers broadband transport and access (both wireless fidelity (Wi-Fi) and fixed line) products and solutions, optimized for mobile backhaul, metro aggregation, broadband access and Wi-Fi data offloading. Its segments include Equipment, which is focused on its equipment sales, including network infrastructure and application products, and Services, which is engaged in providing services and support of its equipment products and also the new operational support segment. The broadband product lines include family of packet transport network (PTN) products based on multi-protocol label switch transport profile (MPLS-TP) and carrier Ethernet (CE) technologies enhanced through in-house software-defined networking (SDN) platform to support the network evolution, and multi services access network (MSAN) platform. Wireless broadband access is represented by end-to-end Carrier Wi-Fi solution.

FINANCIAL RATIOS  of  UTStarcom Holdings (UTSI)

Valuation Ratios
P/E Ratio 0
Price to Sales 1.4
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 20.6
Price to Free Cash Flow 30.9
Growth Rates
Sales Growth Rate -25.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.4
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -6.9%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -16.6%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -16.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 32.2%
Gross Margin - 3 Yr. Avg. 24.4%
EBITDA Margin 2.3%
EBITDA Margin - 3 Yr. Avg. -14.2%
Operating Margin -3.4%
Oper. Margin - 3 Yr. Avg. -11.8%
Pre-Tax Margin 1.1%
Pre-Tax Margin - 3 Yr. Avg. -15.9%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -15.4%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 0%

UTSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UTSI stock intrinsic value calculation we used $98.292 million for the last fiscal year's total revenue generated by UTStarcom Holdings. The default revenue input number comes from 0001 income statement of UTStarcom Holdings. 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 UTSI stock valuation model: a) initial revenue growth rate of 13.6% 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 UTSI is calculated based on our internal credit rating of UTStarcom Holdings, 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 UTStarcom Holdings.
    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 UTSI stock the variable cost ratio is equal to 60.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $33 million in the base year in the intrinsic value calculation for UTSI 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 UTStarcom Holdings.

Corporate tax rate of 27% is the nominal tax rate for UTStarcom Holdings. 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 UTSI 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 UTSI are equal to 1.7%.

Life of production assets of 2.6 years is the average useful life of capital assets used in UTStarcom Holdings 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 UTSI is equal to -16.8%. 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 - $90.992 million for UTStarcom Holdings - 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 35.893 million for UTStarcom Holdings 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 UTStarcom Holdings at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ UTStarcom: 3Q Earnings Snapshot   [06:07AM  Associated Press]
▶ UTStarcom: 2Q Earnings Snapshot   [Aug-03-18 06:11AM  Associated Press]
▶ UTStarcom Unveils New Products in Softbank World 2018   [Jul-19-18 06:00AM  GlobeNewswire]
▶ UTStarcom: 1Q Earnings Snapshot   [May-11-18 06:49AM  Associated Press]
▶ UTStarcom Announces SRv6 Router Product Line   [Apr-19-18 06:47AM  GlobeNewswire]
▶ UTStarcom Files 2017 Form 20-F   [Apr-17-18 05:00AM  GlobeNewswire]
▶ UTStarcom reports 4Q loss   [Mar-09-18 07:41AM  Associated Press]
▶ UTStarcom Wins Major Project in India   [Mar-08-18 07:00AM  GlobeNewswire]
▶ UTStarcom Announces Business Development in India   [Dec-18-17 06:00AM  GlobeNewswire]
▶ What You Must Know About UTStarcom Holdings Corps (UTSI) ROE   [Dec-05-17 01:05PM  Simply Wall St.]
▶ UTStarcom Announces Change to its Board of Directors   [Nov-23-17 06:00AM  GlobeNewswire]
▶ UTStarcom Holdings Corp. to Host Earnings Call   [Nov-20-17 07:00AM  ACCESSWIRE]
▶ UTStarcom posts 3Q profit   [06:29AM  Associated Press]
▶ When Should You Sell UTStarcom Holdings Corp (UTSI)?   [Oct-03-17 12:56PM  Simply Wall St.]
▶ UTStarcom Announces Change of Auditor   [Sep-12-17 07:50AM  GlobeNewswire]
▶ UTStarcom Presents at SoftBank World 2017   [Jul-27-17 06:39AM  GlobeNewswire]
▶ UTStarcom Filed Extension for 2016 Form 20-F   [Jul-26-17 06:00AM  GlobeNewswire]
▶ UTStarcom Provides Update on Form 20-F Filing   [May-24-17 06:30AM  GlobeNewswire]
▶ 5 of the Best Stocks Under $10 for 2017   [May-01-17 02:01PM  Zacks]
▶ UTStarcom reports 4Q loss   [05:10AM  Associated Press]
▶ UTStarcom Announces Board Member Resignation   [Feb-24-17 06:00AM  GlobeNewswire]
▶ UTStarcom Announces Disengagement from its Auditor   [Jan-19-17 04:10AM  GlobeNewswire]
▶ UTStarcom Announces CFO Transition   [04:51AM  GlobeNewswire]
▶ UTSTARCOM HOLDINGS CORP. Financials   [01:04PM  EDGAR Online Financials]
▶ Shah Capital Managements Top Stock Picks For 2016   [Feb-21-16 04:36PM  at Insider Monkey]

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