Valuation Scorecard: Stock Rating F-Lowest (3/12/24)-A10 Networks Inc (ATEN).

At the current price of $14, what is the market’s view of A10 Networks’ future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, A10 Networks shares will need to reach $23. Upper quartile performance will require a $27 A10 Networks stock price by 2029.

Executive Summary

• A10 Networks’ important characteristics: high financial strength, very high profitability, stability, and above average expected growth. A big positive influence on A10 Networks’ valuation is its superior Profitability.
• Very high valuation, below market shareholder returns. Current valuation levels are very high relative to the A10 Networks Peer Group. Recent market returns have underperformed the A10 Networks Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, A10 Networks shares should reach a level of $13 by 2029 — an 1.0% per year total shareholder return. A 2029 stock price of $23 would reflect median performance and a price of $27 would be required to reach upper quartile performance.
• A10 Networks’ historical growth is modestly above average. Historical growth has been high relative to the A10 Networks Peer Group and forecasted growth is relatively average. Equity Growth has been superior. EPS Growth has lagged. A10 Networks’ historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth and return on equity has been stable. A10 Networks’ consensus growth expectations are lower than historical growth.
• Profitability has been A10 Networks’ biggest valuation strength. Pretax ROA, Pretax Margin, and Return on Equity are group leading. These factors have strengthened market perceptions of A10 Networks. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• A10 Networks’ risk profile is very favorable. Overall variability has been above average with above average revenue variability, only average E.P.S. variability, and relatively low stock price volatility. Financial Strength is relatively very high and earnings’ expectations are below average. The debt/capital ratio has declined very significantly.

Click to read the full Scorecard report