Zscaler (ZS:NAS) Fundamental Valuation Report

Fundamental Valuation Report



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

Close Price/Date
$38.96 (USD) 01/11/2018

Weighted Valuation
$40.54 (USD)

Overall Rating
Fairly valued to slightly Undervalued by 4.1%

Valuation Models Analyst Consensus: $44.00 (USD)
(in order of importance) Comparables: $36.27 (USD)
Adjusted Book Value: $38.71 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Fairly valued on an Asset Valuation

Company Overview (ZS:NAS USD)

Price 38.96
Range 35.25 – 39.37
52 week 24.95 – 47.26
Open 36.30
Vol / Avg. 2.49M/1.29M
Mkt cap 4.67B
P/E 0.00
Div/yield 0.00/0.00
EPS -0.63
Shares 119.77M
Beta 0.00

Company Description

Zscaler, Inc. develops and markets cloud-based security products for enterprise clients. The company offers a software-as-a-service, or SaaS, based security platform that allows users to access services and applications. Zscaler primarily offers two products, Zscaler Internet Access, or ZIA, and Zscaler Private Access, or ZPA. ZIA allows users to access externally managed applications, with access control features, such as cloud firewall, url filtering, bandwidth control, and DNS filtering, in addition to threat protection, cloud sandboxing, and data protection. ZPA provides secure application access, application segmentation, and application protection.

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 ZS:NAS

Using a discounted cash flow model we generated an intrinsic value of $2.49 (USD) for ZS:NAS

Sensitivity Analysis

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

ZS:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $2.49 1% 5% 1% 5%
WACC (or Ke) 11.81 $2.87 $2.18
Terminal Growth Rate 3.00 $2.22 $2.82
Tax Rate 0.04 $2.60 $2.37
Cash Flow 38,522,000 $2.35 $2.62
Capital Expenditures -8,419,500 $2.46 $2.51
Long Term Debt 0 $2.49 $2.49

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $16.76 (USD) for ZS:NAS. We also generated a valuation of $36.27 (USD) using other metrics and comparables.
The comparable companies were Fair Isaac (FICO:NYS), Guidewire Software (GWRE:NYS), j2 Global (JCOM:NAS), Q2 Holdings (QTWO:NYS) and 2U (TWOU:NAS).

Company ZS:NAS End Date Value
Earnings/Share ($0.63) (USD)
Book Value/Share $2.01 (USD)
Sales/Share $2.98 (USD)
Cash Flow/Share $0.27 (USD)
EBITDA/Share ($0.42) (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) 0.0
$18.94 (USD) 0.0
$23.47 (USD) 0.0
$7.86 (USD) 0.0
$0.00 (USD) 0.0
0.00 PE Ratio 36.95 46.10 0.00 27.80 0.00 0.00
18.09 PB Ratio 9.44 19.06 5.04 3.48 14.42 5.21
12.19 PS Ratio 7.89 6.03 10.46 3.06 10.39 9.48
133.95 PCF Ratio 29.01 27.93 49.22 9.88 0.00 0.00
0.00 EV to EBITDA 63.13 27.20 152.35 9.84 0.00 0.00


Using a multiples approach we generated a valuation of  $49.44 (USD) for ZS:NAS

Company ZS:NAS End Date Value
Earnings/Share ($0.63) (USD)
Book Value/Share $2.01 (USD)
Sales/Share $2.98 (USD)
Cash Flow/Share $0.27 (USD)
EBITDA/Share ($0.42) (USD)
Price Based on Comps Adjustment Factor
$0.00 (USD) 0
$39.85 (USD) 0
$71.18 (USD) 0
$37.29 (USD) 0
$0.00 (USD) 0
Ratios Ratio Average
PE Ratio 0.00
PB Ratio 19.87
PS Ratio 23.91
PCF Ratio 137.66
EV to EBITDA 0.00

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  ZS:NAS for the last 0 years was  19.30

We ran the Adjusted Book Value for  ZS:NAS and generated a book value of  $2.01 (USD)
By multiplying these we get an adjusted valuation of  $38.71 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for ZS:NAS. The 4 analysts have a concensus valuation for ZS:NAS for 2019 of $44.00 (USD).

ZS:NAS Zscaler

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
2 2 0 3.6000 Outperform 2018-10-31

Current Price: 38.96 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS -0.12 0.00 0.07
# EPS Analysts 5 5 2
Mean Revenue 268.50 350.10 444.10
# Revenue Analysts 5 5 2
Mean Target Price 44.00
Mean Cash Flow 0.19 0.37 0.47
Mean EBITDA -12.10 2.50 37.40
Mean Net Income -15.60 0.20 11.60
Mean Debt Outstanding -310.90 -342.30 -438.00
Mean Tax Rate 14.90
Mean Growth Rate
Mean Capital Expenditure 17.20 22.60 27.00

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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