Palo Alto Networks (PANW:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Palo Alto Networks(PANW:NYS)

Technology:Software-Application

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$188.76 (USD) 01/11/2018

Weighted Valuation
$225.55 (USD)

Overall Rating
Undervalued by 19.5%

Valuation Models Analyst Consensus: $250.78 (USD)
(in order of importance) Comparables: $195.02 (USD)
Adjusted Book Value: $210.93 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Fairly valued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (PANW:NYS USD)

Price 188.76
Range 182.83 – 189.44
52 week 138.21 – 236.23
Open 184.50
Vol / Avg. 1.67M/1.57M
Mkt cap 17.8B
P/E 0.00
Div/yield 0.00/0.00
EPS -1.61
Shares 94.31M
Beta 0.87

Company Description

Palo Alto Networks develops and sells network security solutions, such as next-generation firewall technology, largely to enterprise customers. The company works to secure the networks of enterprise and government customers by preventing breaches that stem from targeted cyberattacks. The firm has expanded into sandboxing, mobile, endpoint security, and cloud security, among other products. Palo Alto reports revenue in two categories, products and subscription and support, which composed the majority of sales. Product revenue is composed of firewall appliances and software. Software revenue is composed of URL filtering, threat prevention, WildFire, VM-series, AutoFocus, and Aperture.

Valuation Details

 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 PANW:NYS

Using a discounted cash flow model we generated an intrinsic value of $166.10 (USD) for PANW:NYS

Sensitivity Analysis

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

PANW:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $166.10 1% 5% 1% 5%
WACC (or Ke) 9.97 $195.74 $143.91
Terminal Growth Rate 3.00 $146.88 $191.75
Tax Rate 0.14 $173.27 $158.93
Cash Flow 1,139,180,000 $159.56 $172.63
Capital Expenditures -83,567,000 $165.67 $166.53
Long Term Debt 508,200,000 $166.37 $165.83

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $139.12 (USD) for PANW:NYS. We also generated a valuation of $195.02 (USD) using other metrics and comparables.
The comparable companies were Akamai Technologies (AKAM:NAS), CDK Global (CDK:NAS), Fortinet (FTNT:NAS), Symantec (SYMC:NAS) and Twilio (TWLO:NYS).

Company PANW:NYS End Date Value
Earnings/Share ($1.61) (USD)
Book Value/Share $10.25 (USD)
Sales/Share $24.79 (USD)
Cash Flow/Share $11.31 (USD)
EBITDA/Share ($0.05) (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) 0.0
$104.66 (USD) 0.0
$167.83 (USD) 0.0
$172.07 (USD) -24.9
$0.00 (USD) 0.0
PANW:NYS Ratios Used Average Values AKAM:NAS CDK:NAS FTNT:NAS SYMC:NAS TWLO:NYS
0.00 PE Ratio 64.22 67.52 20.59 158.04 10.74 0.00
17.86 PB Ratio 10.21 3.44 0.00 17.82 2.31 17.29
7.38 PS Ratio 6.77 4.72 3.44 8.81 2.51 14.37
16.19 PCF Ratio 84.40 14.67 16.96 23.88 12.76 353.74
0.00 EV to EBITDA 24.90 17.06 13.39 58.30 10.85 0.00

Multiples

Using a multiples approach we generated a valuation of  $225.59 (USD) for PANW:NYS

Company PANW:NYS End Date Value
Earnings/Share ($1.61) (USD)
Book Value/Share $10.25 (USD)
Sales/Share $24.79 (USD)
Cash Flow/Share $11.31 (USD)
EBITDA/Share ($0.05) (USD)
Price Based on Comps Adjustment Factor
$0.00 (USD) 0
$211.41 (USD) 0
$234.52 (USD) 0
$230.82 (USD) 0
$0.00 (USD) 0
Ratios Ratio Average
PE Ratio 0.00
PB Ratio 20.63
PS Ratio 9.46
PCF Ratio 20.41
EV to EBITDA 0.00

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  PANW:NYS for the last 6 years was  20.43

We ran the Adjusted Book Value for  PANW:NYS and generated a book value of  $10.32 (USD)
By multiplying these we get an adjusted valuation of  $210.93 (USD)

Analyst Data

In the Stockcalc database there are 9 analysts that provide a valuation for PANW:NYS. The 9 analysts have a concensus valuation for PANW:NYS for 2019 of $250.78 (USD).

PANW:NYS Palo Alto Networks

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
7 3 1 4.0833 Outperform 2018-10-31

Current Price: 188.76 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 5.00 5.99 6.65
# EPS Analysts 10 10 4
Mean Revenue 2,787.40 3,272.00 3,787.80
# Revenue Analysts 10 10 4
Mean Target Price 250.78
Mean Cash Flow 10.53 11.92 11.63
Mean EBITDA 583.90 753.80 1,106.00
Mean Net Income 496.20 615.70 761.10
Mean Debt Outstanding -3,877.10 -4,941.20 -7,514.00
Mean Tax Rate 22.00 22.00 22.00
Mean Growth Rate 19.75
Mean Capital Expenditure 137.40 148.60 189.50

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.

Notice to User


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