Akamai Technologies (AKAM:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Akamai Technologies(AKAM:NAS)

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
$71.09 (USD) 01/03/2019

Weighted Valuation
$76.19 (USD)

Overall Rating
Undervalued by 7.2%

Valuation Models Analyst Consensus: $84.00 (USD)
(in order of importance) Adjusted Book Value: $67.04 (USD)
Multiples: $71.06 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (AKAM:NAS USD)

Price 71.09
Range 69.74 – 71.49
52 week 57.70 – 82.58
Open 70.06
Vol / Avg. 1.62M/1.47M
Mkt cap 11.6B
P/E 40.39
Div/yield 0.00/0.00
EPS 1.76
Shares 163.21M
Beta 0.69

Company Description

Akamai operates a content delivery network, or CDN, which entails locating servers at the edges of networks so its customers, which store content on Akamai servers, can reach their own customers faster, more securely, and with better quality. Akamai has over 200,000 servers distributed over thousands of points of presence within over 1,700 networks across 130 countries. Its customers generally include media companies, which stream video content or make video games available for download, and other enterprises that run interactive or high-traffic websites, such as e-commerce firms and financial institutions. Akamai also has a significant security business, which is integrated with its core web and media businesses to protect its customers from cyber threats.

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 AKAM:NAS

Using a discounted cash flow model we generated an intrinsic value of $119.97 (USD) for AKAM:NAS

Sensitivity Analysis

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

AKAM:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $119.97 1% 5% 1% 5%
WACC (or Ke) 5.59 $151.64 $98.91
Terminal Growth Rate 0.60 $100.74 $148.86
Tax Rate 0.13 $127.34 $112.61
Cash Flow 1,420,805,856 $112.61 $127.34
Capital Expenditures -234,033,600 $118.88 $121.07
Long Term Debt 634,504,000 $120.17 $119.78

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $102.77 (USD) for AKAM:NAS. We also generated a valuation of $130.91 (USD) using other metrics and comparables.
The comparable companies were Ansys (ANSS:NAS), Aspen Technology (AZPN:NAS), CDK Global (CDK:NAS), Cadence Design Systems (CDNS:NAS) and Tableau Software (DATA:NYS).

Company AKAM:NAS End Date Value
Earnings/Share $1.76 (USD)
Book Value/Share $19.56 (USD)
Sales/Share $16.04 (USD)
Cash Flow/Share $5.96 (USD)
EBITDA/Share $4.85 (USD)
Price Based on Comps Adjustment Factor (%)
$87.65 (USD) -46.8
$222.43 (USD) -48.0
$147.51 (USD) 39.3
$201.83 (USD) -66.1
$123.06 (USD) -34.5
AKAM:NAS Ratios Used Average Values ANSS:NAS AZPN:NAS CDK:NAS CDNS:NAS DATA:NYS
39.58 PE Ratio 49.80 36.32 95.91 20.43 46.54 0.00
3.56 PB Ratio 11.37 5.60 16.23 0.00 12.46 11.20
4.34 PS Ratio 9.19 11.77 13.91 3.33 7.53 9.43
11.69 PCF Ratio 35.41 31.31 33.73 14.96 26.62 70.46
13.45 EV to EBITDA 25.36 26.26 30.73 13.66 30.80 0.00

Multiples

Using a multiples approach we generated a valuation of  $71.06 (USD) for AKAM:NAS

Company AKAM:NAS End Date Value
Earnings/Share $1.76 (USD)
Book Value/Share $19.56 (USD)
Sales/Share $16.04 (USD)
Cash Flow/Share $5.96 (USD)
EBITDA/Share $4.85 (USD)
Price Based on Comps Adjustment Factor
$62.23 (USD) 0
$67.45 (USD) 0
$75.24 (USD) 0
$81.15 (USD) 0
$69.21 (USD) 0
Ratios Ratio Average
PE Ratio 35.36
PB Ratio 3.45
PS Ratio 4.69
PCF Ratio 13.62
EV to EBITDA 14.27

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  AKAM:NAS for the last 10 years was  3.42

We ran the Adjusted Book Value for  AKAM:NAS and generated a book value of  $19.59 (USD)
By multiplying these we get an adjusted valuation of  $67.04 (USD)

Analyst Data

In the Stockcalc database there are 5 analysts that provide a valuation for AKAM:NAS. The 5 analysts have a concensus valuation for AKAM:NAS for 2019 of $84.00 (USD).

AKAM:NAS Akamai Technologies

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 2 0 3.8333 Outperform 2019-2-28

Current Price: 71.09 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 4.18 4.71 5.35
# EPS Analysts 6 5 2
Mean Revenue 2,861.30 3,068.00 3,357.90
# Revenue Analysts 6 5 2
Mean Target Price 84.00
Mean Cash Flow 6.69 7.39
Mean EBITDA 1,148.40 1,290.40
Mean Net Income 674.90 754.10 836.40
Mean Debt Outstanding -730.00 -1,003.20 -3,291.00
Mean Tax Rate 18.67 18.67 18.00
Mean Growth Rate 16.57
Mean Capital Expenditure 506.50 488.90

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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