NetScout Systems (NTCT:NAS) Fundamental Valuation Report


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NetScout Systems $27.50 (USD) Close Price as of 22/05/2018

Based on the analysis conducted in this report, NetScout Systems, (NTCT:NAS) is found to be  Undervalued.

Company NetScout Systems
Symbol:Exchange NTCT:NAS
Industry Technology:Software-Application
Close Price/Date $27.50 (USD) 22/05/2018
Weighted Average Valuation $30.75 (USD)
Summary NTCT:NAS is found to be  Undervalued by 11.8% using the 2 valuation models shown below.
Valuation Models Used Analyst Consensus: $29.00 (USD)
(in order of importance) Comparables: $33.37 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Undervalued on a Comparable Valuation basis
Asset Basis: Undervalued on an Asset Valuation basis

Valuation Details

NetScout Systems Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for NTCT:NAS

Using a discounted cash flow model we generated an intrinsic value of $11.91 (USD) for NTCT:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

NTCT:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $11.91 1% 5% 1% 5%
WACC (or Ke) 11.63 $13.94 $10.30
Terminal Growth Rate 3.00 $10.55 $13.63
Tax Rate 0.36 $13.08 $10.74
Cash Flow 204,452,859 $11.12 $12.70
Capital Expenditures -18,460,200 $11.84 $11.98
Long Term Debt 300,000,000 $12.08 $11.74

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $33.37 (USD) for NTCT:NAS. We also generated a valuation of $55.66 (USD) using other metrics and comparables.
The comparable companies were Cornerstone OnDemand (CSOD:NAS), Mantech International (MANT:NAS), Allscripts Healthcare (MDRX:NAS), Qualys (QLYS:NAS) and Verint Systems (VRNT:NAS)

Company NTCT:NAS End Date Value
Earnings/Share $0.90 (USD)
Book Value/Share $26.72 (USD)
Sales/Share $11.82 (USD)
Cash Flow/Share $2.71 (USD)
EBITDA/Share $0.00 (USD)
Price Based on Comps Adjustment Factor (%)
$56.92 (USD) -28.9
$92.18 (USD) -62.0
$53.13 (USD) -29.1
$59.39 (USD) -65.9
$0.00 (USD) -30.0
NTCT:NAS Ratios Used Average Values CSOD:NAS MANT:NAS MDRX:NAS QLYS:NAS VRNT:NAS
29.26 PE Ratio 63.24 0.00 17.46 0.00 109.03 0.00
1.03 PB Ratio 19.85 85.45 1.54 2.08 7.77 2.41
2.33 PS Ratio 4.50 5.47 1.17 1.19 12.30 2.35
10.13 PCF Ratio 21.88 39.25 21.15 8.63 25.24 15.13
11.96 EV to EBITDA 29.19 0.00 15.34 42.48 39.47 19.49

Multiples

Using a multiples approach we generated a valuation of  $38.45 (USD) for NTCT:NAS

Company NTCT:NAS End Date Value
Earnings/Share $0.90 (USD)
Book Value/Share $26.72 (USD)
Sales/Share $11.82 (USD)
Cash Flow/Share $2.71 (USD)
EBITDA/Share $2.52 (USD)
Price Based on Comps Adjustment Factor
$32.91 (USD) 0
$47.96 (USD) 0
$32.79 (USD) 0
$41.73 (USD) 0
$36.84 (USD) 0
Ratios Ratio Average
PE Ratio 36.57
PB Ratio 1.80
PS Ratio 2.78
PCF Ratio 15.37
EV to EBITDA 14.63

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  NTCT:NAS for the last 10 years was  1.83

We ran the Adjusted Book Value for  NTCT:NAS and generated a book value of  $25.33 (USD)
By multiplying these we get an adjusted valuation of  $46.46 (USD)

Analyst Data

In the Stockcalc database there are 1 analysts that provide a valuation for NTCT:NAS. The 1 analysts have a concensus valuation for NTCT:NAS for 2019 of $29.00 (USD).

NTCT:NAS NetScout Systems

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 1 0 3.0000 Hold 2018-5-21

Current Price: not available

Analyst Consensus
USD Millions 2018 2019 2020
Mean EPS 1.42 1.34 1.60
# EPS Analysts 1 1 1
Mean Revenue 1,001.60 994.00 1,038.00
# Revenue Analysts 1 1 1
Mean Target Price 29.00
Mean Cash Flow
Mean EBITDA
Mean Net Income
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate
Mean Capital Expenditure

Company Overview (NTCT:NAS USD)

Price 27.50
Range 27.45 – 27.75
52 week 25.50 – 37.70
Open 27.75
Vol / Avg. 744692/306640
Mkt cap 2.4B
P/E 29.26
Div/yield 0.00/0.00
EPS 0.36
Shares 87.27M
Beta 1.04
Summary chart

Detailed Company Description

NetScout Systems Inc offers real-time operational intelligence and performance analytics for service assurance and cyber security solutions used by service provider, enterprise and government networks.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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