NetApp (NTAP:NAS) Fundamental Valuation Report

Fundamental Valuation Report


Technology:Data Storage

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Close Price/Date
$61.45 (USD) 18/06/2019

Weighted Valuation
$66.07 (USD)

Overall Rating
Undervalued by 7.5%

Valuation Models Analyst Consensus: $75.33 (USD)
(in order of importance) Comparables: $56.86 (USD)
Multiples: $56.69 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (NTAP:NAS USD)

Price 61.45
Range 60.61 – 62.11
52 week 54.82 – 87.92
Open 60.70
Vol / Avg. 2.22M/3.35M
Mkt cap 15.18B
P/E 13.63
Div/yield 1.60/0.03
EPS 4.51
Shares 246.97M
Beta 1.50

Company Description

NetApp is a leading provider of enterprise data management and storage solutions. The company’s three operating business units are products, software maintenance, and hardware maintenance. NetApp transitioned from a data center storage firm to a company with software data management solutions for multicloud environments. The California-headquartered company sells globally and has approximately 10,000 employees.

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 NTAP:NAS

Using a discounted cash flow model we generated an intrinsic value of $105.91 (USD) for NTAP:NAS

Sensitivity Analysis

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

NTAP:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $105.91 1% 5% 1% 5%
WACC (or Ke) 9.98 $125.04 $91.58
Terminal Growth Rate 3.00 $93.38 $122.62
Tax Rate 0.08 $111.30 $100.52
Cash Flow 2,156,408,000 $100.77 $111.04
Capital Expenditures -103,260,000 $105.70 $106.12
Long Term Debt 1,491,000,000 $106.21 $105.61

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $56.86 (USD) for NTAP:NAS. We also generated a valuation of $26.15 (USD) using other metrics and comparables.
The comparable companies were Western Digital (WDC:NAS), Pure Storage (PSTG:NYS) and Teradata (TDC:NYS).

Company NTAP:NAS End Date Value
Earnings/Share $4.51 (USD)
Book Value/Share $4.41 (USD)
Sales/Share $23.73 (USD)
Cash Flow/Share $5.18 (USD)
EBITDA/Share $5.88 (USD)
Price Based on Comps Adjustment Factor (%)
$299.75 (USD) 12.7
$22.18 (USD) 24.3
$41.11 (USD) 34.4
$75.48 (USD) -34.8
$77.61 (USD) 28.6
NTAP:NAS Ratios Used Average Values WDC:NAS PSTG:NYS TDC:NYS
13.13 PE Ratio 111.28 66.46 0.00 156.09
13.41 PB Ratio 5.02 1.07 5.40 8.61
2.49 PS Ratio 1.73 0.63 2.63 1.94
11.43 PCF Ratio 15.92 5.04 24.70 18.01
9.07 EV to EBITDA 13.20 5.45 0.00 20.95


Using a multiples approach we generated a valuation of  $56.69 (USD) for NTAP:NAS

Company NTAP:NAS End Date Value
Earnings/Share $4.51 (USD)
Book Value/Share $4.41 (USD)
Sales/Share $23.73 (USD)
Cash Flow/Share $5.18 (USD)
EBITDA/Share $5.88 (USD)
Price Based on Comps Adjustment Factor
$109.12 (USD) 0
$16.83 (USD) 0
$50.57 (USD) 0
$56.35 (USD) 0
$50.59 (USD) 0
Ratios Ratio Average
PE Ratio 24.20
PB Ratio 3.81
PS Ratio 2.13
PCF Ratio 10.88
EV to EBITDA 8.60

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  NTAP:NAS for the last 10 years was  3.83

We ran the Adjusted Book Value for  NTAP:NAS and generated a book value of  $4.54 (USD)
By multiplying these we get an adjusted valuation of  $17.39 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for NTAP:NAS. The 3 analysts have a concensus valuation for NTAP:NAS for 2020 of $75.33 (USD).


Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 1 0 4.1667 Outperform 2019-6-17

Current Price: 61.45 USD

Analyst Consensus
USD Millions 2020 2021 2022
Mean EPS 5.00 5.53 6.61
# EPS Analysts 5 5 1
Mean Revenue 6,316.80 6,558.30 6,959.70
# Revenue Analysts 4 4 1
Mean Target Price 75.33
Mean Cash Flow 6.46 6.34 7.98
Mean EBITDA 1,527.30 1,629.50 2,093.60
Mean Net Income 1,218.40 1,310.30 1,600.20
Mean Debt Outstanding -260.20 -68.60 -68.10
Mean Tax Rate 19.50 19.50
Mean Growth Rate 7.70
Mean Capital Expenditure 175.10 180.40 226.20

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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