A10 Networks, Inc. (ATEN) Stock Analysis and Metrics

Sector: Technology Industry: Software - Infrastructure CIK: 0001580808

P/B 6.32

P/E 25.76

P/S 4.58

Market Cap 1.30 Bn

ROIC (Qtr) 10.39

Div Yield % 1.66

Rev 1y % (Qtr) 11.93

Total Debt (Qtr) 218.45 Mn

Debt/Equity (Qtr) 1.06

About

A10 Networks, Inc. (A10), a prominent player in the networking solutions industry, offers a diverse range of products and services that cater to various industries such as telecommunications, technology, industrial, government, retail, financial, gaming, and education. The company's solutions are designed to operate in cloud, on-premise, or hybrid environments, providing customers with rapid return on investment and protection for their technology investments. A10's primary business activities revolve around the provision of advanced networking...

A10 Networks, Inc. (A10), a prominent player in the networking solutions industry, offers a diverse range of products and services that cater to various industries such as telecommunications, technology, industrial, government, retail, financial, gaming, and education. The company's solutions are designed to operate in cloud, on-premise, or hybrid environments, providing customers with rapid return on investment and protection for their technology investments.

A10's primary business activities revolve around the provision of advanced networking solutions that address market trends and drivers such as the increasing adoption of cloud applications, network complexity, automation, and orchestration, the rise of DDoS attacks, and the need for multi-cloud secure application service solutions. The company's product portfolio includes the Thunder Application Delivery Controller (ADC), Thunder Carrier Grade Networking (CGN), Thunder SSL Insight (SSLi), Thunder Convergent Firewall (CFW), Harmony Controller, and A10 Defend Suite of Products, which encompass A10 Defend Threat Control, A10 Defend Orchestrator, A10 Defend Detector, and A10 Defend Mitigator. These offerings are designed to provide centralized management, automation, and analytics for secure application delivery in multi-cloud environments.

A10 Networks has established a strong competitive position within the industry, boasting the ability to innovate and respond swiftly to customer needs, prepare for, detect, and mitigate large-scale cyber security threats, scale to accommodate high-speed network traffic, address on-premise and cloud application environments in a secure and centrally managed manner, and accommodate any IT delivery model or combination of models. The company's competitors hail from various categories, including those that sell network security solutions and services, network security products, Gi/SGi firewall and CGN products, and traditional application delivery market products.

The company's customer base encompasses leading service providers, government organizations, and enterprises, with notable clients including the top two United States wireless carriers, four of the top 10 United States cable providers, and the top four service providers in Japan. In 2023, one distribution channel partner accounted for 19% of A10's total revenue, while in 2022, two distribution channel partners accounted for 15% and 13% of its total revenue.

A10 Networks' product and service offerings include:

1. Thunder Application Delivery Controller (ADC): A high-performance, scalable, and secure application delivery solution designed to optimize the delivery of applications in various industries.
2. Thunder Carrier Grade Networking (CGN): A high-performance, carrier-grade networking solution that provides scalability, reliability, and security for routing, switching, and security services.
3. Thunder SSL Insight (SSLi): A secure, high-performance SSL/TLS encryption solution that offers scalability, reliability, and security for critical SSL/TLS encryption services.
4. Thunder Convergent Firewall (CFW): A high-performance, convergent firewall solution that provides scalability, reliability, and security for critical firewall services.
5. Harmony Controller: A high-performance, scalable, and secure network management solution that offers real-time visibility, control, and automation.
6. A10 Defend Suite of Products: A high-performance, scalable, and secure threat defense solution that provides real-time visibility, control, and automation for threat defense services.

Stock Price Chart

Analysis

Pros

Strong operating cash flow of 87.90M provides robust 0.40x coverage of total debt 218.45M, indicating excellent debt servicing capability and financial flexibility.
Strong tangible asset base of 598.36M provides 2.74x coverage of total debt 218.45M, indicating robust asset backing and low credit risk.
Robust free cash flow of 72.05M exceeds capital expenditure of 15.85M by 4.55x, indicating strong organic growth funding capability.
Short-term investments of 284.30M provide solid 2.42x coverage of other current liabilities 117.51M, indicating strong liquidity.
Tangible assets of 598.36M provide robust 5.09x coverage of other current liabilities 117.51M, indicating strong asset backing.

Cons

Operating cash flow of 87.90M barely covers its investment activities of (215.22M), with a coverage ratio of -0.41, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Investment activities of (215.22M) provide weak support for R&D spending of 63.73M, which is -3.38x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
Operating cash flow of 87.90M provides thin coverage of dividend payments of (17.50M) with a -5.02 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
Cash reserves of 86.56M provide limited coverage of acquisition spending of (19.10M), which is -4.53x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
Operating cash flow of 87.90M provides insufficient coverage of deferred revenue obligations of 143.49M, which is 0.61x, raising concerns about future service delivery capabilities.

Peer Comparison

Companies in the Software - Infrastructure

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	MSFT	Microsoft Corp	3,542.10 Bn	33.76	12.06	60.56 Bn
2	ORCL	Oracle Corp	533.93 Bn	34.61	8.75	124.39 Bn
3	PLTR	Palantir Technologies Inc.	437.56 Bn	399.47	112.31	0.24 Bn
4	PANW	Palo Alto Networks Inc	125.16 Bn	112.03	13.10	0.35 Bn
5	CRWD	CrowdStrike Holdings, Inc.	120.85 Bn	-384.67	26.47	0.82 Bn
6	SNPS	Synopsys Inc	71.69 Bn	35.89	11.14	15.14 Bn
7	NET	Cloudflare, Inc.	67.84 Bn	-658.43	33.70	3.50 Bn
8	FTNT	Fortinet, Inc.	63.33 Bn	33.80	9.66	1.00 Bn

Industry Comparisons

Current Valuation

Metric	Value	Industry
EV to Assets	2.04	2.56
EV to Cash from Ops.	14.42	38.32
EV to Debt	5.80	-11.37
EV to EBIT	21.89	-12.79
EV to EBITDA	19.69	7.72
EV to Free Cash Flow [EV/FCF]	17.60	24.22
EV to Market Cap	0.97	0.58
EV to Revenue	4.46	-35.00
Price to Book Value [P/B]	6.32	3.74
Price to Earnings [P/E]	25.76	-18.61

Dividend Metrics

Metric	Value	Industry
Dividend Coverage Ratio	2.89	-0.30
Dividend Payout Ratio %	34.30	2.69
Dividend per Basic Share	0.24	0.10
FCF Dividend Payout Ratio %	23.95	1.67
Interest Coverage	0.00	-13.15

Growth Metrics

Metric	Value	Industry
Capex Growth (1y) %	-21.61	-404.11
Cash and Equivalents Growth (1y) %	10.88	226.02
Dividend Growth (1y) %	0.00	-0.27
EBIAT Growth (1y) %	1.64	31.15
EBITDA Growth (1y) %	18.54	49.02
EBIT Growth (1y) %	3.98	25.85
EBT Growth (1y) %	3.98	17.82
EPS Growth (1y) %	4.48	70.69
FCF Growth (1y) %	32.24	295.45
Gross Profit Growth (1y) %	8.87	49.96

Liquidity Ratios

Metric	Value	Industry
Asset Utilization Ratio	0.46	0.68
Cash Payout Ratio	0.17	0.02
Cash Ratio	0.67	1.21
Current Ratio	3.64	2.57
Debt to Equity Ratio	1.06	-0.93
Interest Cover Ratio	0.00	-13.15
Times Interest Earned	0.00	-13.15

Profitability

Metric	Value	Industry
EBITDA Margin %	25.30	-544.82
EBIT Margin %	20.36	-197.78
EBT Margin %	20.36	-602.74
Gross Margin %	79.70	52.06
Net Profit Margin %	17.80	-605.52

A10 Networks, Inc. (NYSE: ATEN)