Is A10 Networks, Inc. (NYSE:ATEN) Trading At A 25% Discount?

Simply Wall St.12-01

Key Insights Using the 2 Stage Free Cash Flow to Equity, A10 Networks fair value estimate is US$22.85 Current share price of US$17.05 suggests A10 Networks is potentially 25% undervalued The US...

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(NYSE:ATEN) Trading At A 25% Discount?","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, A10 Networks fair value estimate is US$22.85 \n Current share price of US$17.05 suggests A10 Networks is potentially 25% undervalued \n  The US...</p>\n\n<a href=\"https://finance.yahoo.com/news/a10-networks-inc-nyse-aten-133422230.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Is A10 Networks, Inc. (NYSE:ATEN) Trading At A 25% Discount?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIs A10 Networks, Inc. (NYSE:ATEN) Trading At A 25% Discount?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-12-01 21:34 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/a10-networks-inc-nyse-aten-133422230.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, A10 Networks fair value estimate is US$22.85 \n Current share price of US$17.05 suggests A10 Networks is potentially 25% undervalued \n  The US...</p>\n\n<a href=\"https://finance.yahoo.com/news/a10-networks-inc-nyse-aten-133422230.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4211","symbol_name":"区域性银行","start_time":0,"source_url":"https://finance.yahoo.com/news/a10-networks-inc-nyse-aten-133422230.html","article_id":"2488695418","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/WqdWK.nWNWL524wke6jUzg--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/36ca5b522ba2e0a30acf16e5282f313b"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2488695418","pubTimestamp":1733060062,"columns":[],"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Using the 2 Stage Free Cash Flow to Equity, A10 Networks fair value estimate is US$22.85. Current share price of US$17.05 suggests A10 Networks is potentially 25% undervalued. The US$20.00 analyst price target for ATEN is 12% less than our estimate of fair value. How far off is A10 Networks, Inc.  from its intrinsic value?Using the most recent financial data, we'll take a look at whether the stock is fairly priced by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow  model for this purpose. There's really not all that much to it, even though it might appear quite complex.We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysi","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4211":"区域性银行","NYSE":"纽交所","TV":"墨西哥电视","BK4097":"系统软件","FCF":"第一联邦金融","ATEN":"A10 Networks Inc","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4100":"有线和卫星"},"translate_title":"A10网络公司（纽约证券交易所代码：ATEN）的交易价格有25%的折扣吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ATEN":1,"DCF":1,"FCF":1,"NYSE":1,"TV":1},"content_text":"Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, A10 Networks fair value estimate is US$22.85 \n Current share price of US$17.05 suggests A10 Networks is potentially 25% undervalued \n  The US$20.00 analyst price target for ATEN is 12% less than our estimate of fair value \n\n How far off is A10 Networks, Inc. (NYSE:ATEN) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. There's really not all that much to it, even though it might appear quite complex. \n We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. \n Check out our latest analysis for A10 Networks \n Crunching The Numbers \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$77.3m\nUS$77.5m\nUS$78.3m\nUS$79.4m\nUS$80.9m\nUS$82.5m\nUS$84.4m\nUS$86.3m\nUS$88.4m\nUS$90.6m\n\n\nGrowth Rate Estimate Source\nAnalyst x2\nAnalyst x1\nEst @ 0.99%\nEst @ 1.48%\nEst @ 1.82%\nEst @ 2.06%\nEst @ 2.23%\nEst @ 2.35%\nEst @ 2.43%\nEst @ 2.49%\n\n\n Present Value ($, Millions) Discounted @ 6.9% \nUS$72.3\nUS$67.8\nUS$64.0\nUS$60.8\nUS$57.9\nUS$55.3\nUS$52.8\nUS$50.6\nUS$48.5\nUS$46.4\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$576m\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.9%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$91m× (1 + 2.6%) ÷ (6.9%– 2.6%) = US$2.2b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$2.2b÷ ( 1 + 6.9%)10= US$1.1b\n The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$1.7b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$17.1, the company appears a touch undervalued at a 25% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. \n\n\n\n  NYSE:ATEN Discounted Cash Flow December 1st 2024\n \n\n The Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at A10 Networks as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.9%, which is based on a levered beta of 1.042. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for A10 Networks\n\n\nStrength\n\nCurrently debt free.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for ATEN.\n\n\n\nWeakness\n\nEarnings growth over the past year underperformed the Software industry.\n\n\nDividend is low compared to the top 25% of dividend payers in the Software market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 3 years.\n\n\nTrading below our estimate of fair value by more than 20%.\n\n\n\nThreat\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for ATEN?\n\n\n\n Looking Ahead: \n Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price sitting below the intrinsic value? For A10 Networks, there are three pertinent elements you should further research: \n\nFinancial Health: Does ATEN have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.\n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for ATEN's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2488695418"}