Intrinsic value of Alpha&Omega Semiconductor - AOSL

Previous Close

$18.27

  Intrinsic Value

$77.69

stock screener

  Rating & Target

str. buy

+325%

  Value-price divergence*

+5000%

Previous close

$18.27

 
Intrinsic value

$77.69

 
Up/down potential

+325%

 
Rating

str. buy

 
Value-price divergence*

+5000%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AOSL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.44
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
Revenue, $m
  336
  376
  419
  464
  510
  559
  610
  664
  719
  777
  837
  899
  963
  1,031
  1,101
  1,173
  1,249
  1,327
  1,409
  1,495
  1,583
  1,676
  1,773
  1,874
  1,979
  2,089
  2,204
  2,324
  2,450
  2,581
  2,719
Variable operating expenses, $m
 
  94
  105
  116
  128
  140
  153
  166
  180
  194
  209
  225
  241
  258
  275
  293
  312
  332
  352
  374
  396
  419
  443
  468
  495
  522
  551
  581
  612
  645
  680
Fixed operating expenses, $m
 
  262
  269
  276
  283
  290
  297
  304
  312
  320
  328
  336
  344
  353
  362
  371
  380
  390
  399
  409
  419
  430
  441
  452
  463
  475
  486
  499
  511
  524
  537
Total operating expenses, $m
  334
  356
  374
  392
  411
  430
  450
  470
  492
  514
  537
  561
  585
  611
  637
  664
  692
  722
  751
  783
  815
  849
  884
  920
  958
  997
  1,037
  1,080
  1,123
  1,169
  1,217
Operating income, $m
  2
  20
  45
  72
  100
  130
  161
  193
  227
  263
  300
  338
  378
  420
  464
  509
  557
  606
  658
  712
  768
  827
  889
  953
  1,021
  1,092
  1,166
  1,244
  1,326
  1,412
  1,502
EBITDA, $m
  29
  33
  60
  88
  118
  149
  182
  217
  253
  290
  329
  370
  412
  456
  502
  550
  600
  653
  707
  764
  824
  886
  951
  1,019
  1,090
  1,165
  1,244
  1,326
  1,412
  1,502
  1,597
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  1
  20
  45
  71
  99
  128
  159
  191
  225
  260
  296
  334
  374
  415
  458
  503
  550
  599
  650
  703
  759
  817
  878
  942
  1,009
  1,079
  1,153
  1,230
  1,310
  1,395
  1,484
Tax expense, $m
  4
  5
  12
  19
  27
  35
  43
  52
  61
  70
  80
  90
  101
  112
  124
  136
  148
  162
  175
  190
  205
  221
  237
  254
  272
  291
  311
  332
  354
  377
  401
Net income, $m
  -3
  14
  33
  52
  72
  94
  116
  140
  164
  190
  216
  244
  273
  303
  334
  367
  401
  437
  474
  513
  554
  597
  641
  688
  737
  788
  841
  898
  957
  1,019
  1,084

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  88
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  319
  259
  288
  319
  351
  384
  420
  456
  494
  534
  575
  618
  662
  708
  756
  806
  858
  912
  969
  1,027
  1,088
  1,152
  1,218
  1,288
  1,360
  1,436
  1,515
  1,597
  1,684
  1,774
  1,869
Adjusted assets (=assets-cash), $m
  231
  259
  288
  319
  351
  384
  420
  456
  494
  534
  575
  618
  662
  708
  756
  806
  858
  912
  969
  1,027
  1,088
  1,152
  1,218
  1,288
  1,360
  1,436
  1,515
  1,597
  1,684
  1,774
  1,869
Revenue / Adjusted assets
  1.455
  1.452
  1.455
  1.455
  1.453
  1.456
  1.452
  1.456
  1.455
  1.455
  1.456
  1.455
  1.455
  1.456
  1.456
  1.455
  1.456
  1.455
  1.454
  1.456
  1.455
  1.455
  1.456
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
Average production assets, $m
  118
  132
  147
  162
  179
  196
  214
  232
  252
  272
  293
  315
  337
  361
  385
  411
  437
  465
  493
  523
  554
  587
  620
  656
  693
  731
  771
  813
  857
  903
  952
Working capital, $m
  119
  36
  40
  44
  48
  53
  58
  63
  68
  74
  79
  85
  92
  98
  105
  111
  119
  126
  134
  142
  150
  159
  168
  178
  188
  198
  209
  221
  233
  245
  258
Total debt, $m
  1
  9
  19
  29
  39
  50
  62
  74
  87
  100
  113
  127
  142
  157
  173
  189
  206
  224
  243
  262
  282
  303
  325
  348
  371
  396
  422
  449
  478
  508
  539
Total liabilities, $m
  76
  85
  95
  105
  115
  126
  138
  150
  163
  176
  189
  203
  218
  233
  249
  265
  282
  300
  319
  338
  358
  379
  401
  424
  447
  472
  498
  525
  554
  584
  615
Total equity, $m
  242
  174
  193
  214
  235
  258
  282
  306
  332
  358
  386
  414
  444
  475
  508
  541
  576
  612
  650
  689
  730
  773
  818
  864
  913
  963
  1,016
  1,072
  1,130
  1,190
  1,254
Total liabilities and equity, $m
  318
  259
  288
  319
  350
  384
  420
  456
  495
  534
  575
  617
  662
  708
  757
  806
  858
  912
  969
  1,027
  1,088
  1,152
  1,219
  1,288
  1,360
  1,435
  1,514
  1,597
  1,684
  1,774
  1,869
Debt-to-equity ratio
  0.004
  0.050
  0.100
  0.130
  0.170
  0.200
  0.220
  0.240
  0.260
  0.280
  0.290
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.420
  0.430
  0.430
Adjusted equity ratio
  0.667
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3
  14
  33
  52
  72
  94
  116
  140
  164
  190
  216
  244
  273
  303
  334
  367
  401
  437
  474
  513
  554
  597
  641
  688
  737
  788
  841
  898
  957
  1,019
  1,084
Depreciation, amort., depletion, $m
  27
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  46
  49
  52
  55
  59
  62
  66
  69
  73
  77
  81
  86
  90
  95
Funds from operations, $m
  50
  28
  47
  68
  90
  113
  138
  163
  189
  217
  246
  275
  307
  339
  373
  408
  445
  484
  524
  566
  609
  655
  703
  753
  806
  861
  918
  979
  1,042
  1,109
  1,179
Change in working capital, $m
  10
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
Cash from operations, $m
  40
  24
  43
  64
  86
  109
  133
  158
  184
  211
  240
  270
  300
  333
  366
  401
  438
  476
  516
  558
  601
  646
  694
  744
  796
  850
  908
  968
  1,030
  1,096
  1,166
Maintenance CAPEX, $m
  0
  -12
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -86
  -90
New CAPEX, $m
  -22
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
Cash from investing activities, $m
  -22
  -26
  -28
  -31
  -32
  -35
  -38
  -40
  -42
  -45
  -48
  -51
  -54
  -58
  -60
  -64
  -67
  -72
  -75
  -79
  -83
  -87
  -93
  -97
  -103
  -107
  -113
  -119
  -125
  -132
  -138
Free cash flow, $m
  18
  -2
  15
  34
  53
  74
  95
  118
  141
  166
  192
  218
  246
  276
  306
  337
  370
  405
  441
  478
  518
  559
  601
  646
  693
  743
  794
  848
  905
  965
  1,027
Issuance/(repayment) of debt, $m
  -1
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
Issuance/(repurchase) of shares, $m
  -35
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -37
  13
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
Total cash flow (excl. dividends), $m
  -18
  11
  25
  44
  64
  85
  107
  130
  154
  179
  205
  233
  261
  291
  322
  354
  388
  423
  459
  498
  538
  580
  623
  669
  717
  767
  820
  875
  933
  994
  1,058
Retained Cash Flow (-), $m
  35
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -63
Prev. year cash balance distribution, $m
 
  87
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  79
  5
  23
  42
  62
  83
  105
  128
  152
  178
  204
  231
  260
  289
  320
  353
  386
  422
  458
  497
  537
  579
  623
  669
  717
  767
  820
  876
  934
  995
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  76
  5
  20
  35
  48
  60
  71
  80
  88
  93
  97
  99
  99
  97
  94
  90
  84
  78
  71
  63
  56
  48
  41
  34
  28
  22
  18
  14
  10
  7
Current shareholders' claim on cash, %
  100
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5

Alpha and Omega Semiconductor Limited, together with its subsidiaries, designs, develops, and supplies a portfolio of power semiconductors for consumer, computing, communications, and industrial markets primarily in the United States, Hong Kong, Macau, China, Taiwan, South Korea, and Japan. It offers various power discrete products, including low, medium, and high voltage power metal-oxide-semiconductor field-effect transistors (MOSFETs); and SRFETs, XSFET, electrostatic discharges, protected MOSFETs, and insulated gate bipolar transistors, which are used for routing current and switching voltages in power control circuits. The company also provides power IC products comprising devices that are used for power management and power delivery; and analog power devices that are used for circuit protection and signal switching. Its power discrete products are used in applications, such as notebooks, ultrabooks, desktop and tablet PC's, servers, flat panel displays, TVs, graphics cards, game boxes, chargers, battery packs, AC adapters, power supplies, e-bikes, motor control, smart phones and other portable devices, white goods and industrial motor drives, UPS systems, wind turbines, solar inverters, and industrial welding; and power ICs have applications in flat panel displays, TVs, notebooks, ultrabooks, servers, DVD/Blu-Ray players, set-top boxes, and networking equipment, as well as desktop PCs, tablets, smartphones, and portable electronic devices. The company markets its products directly, as well as through distributors and original design manufacturers to original equipment manufacturers. Alpha and Omega Semiconductor Limited was incorporated 2000 and is headquartered in Sunnyvale, California.


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FINANCIAL RATIOS  of  Alpha&Omega Semiconductor (AOSL)

Valuation Ratios
P/E Ratio -138.5
Price to Sales 1.2
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 23.1
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.8%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio 88
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.9%
Ret/ On Assets - 3 Yr. Avg. -1.3%
Return On Total Capital -1.2%
Ret/ On T. Cap. - 3 Yr. Avg. -1.6%
Return On Equity -1.2%
Return On Equity - 3 Yr. Avg. -1.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 19.6%
Gross Margin - 3 Yr. Avg. 18.8%
EBITDA Margin 8.3%
EBITDA Margin - 3 Yr. Avg. 8.2%
Operating Margin 0.6%
Oper. Margin - 3 Yr. Avg. -0.2%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. -0.3%
Net Profit Margin -0.9%
Net Profit Margin - 3 Yr. Avg. -1.4%
Effective Tax Rate 400%
Eff/ Tax Rate - 3 Yr. Avg. 100%
Payout Ratio 0%

AOSL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AOSL stock intrinsic value calculation we used $336 million for the last fiscal year's total revenue generated by Alpha&Omega Semiconductor. The default revenue input number comes from 2016 income statement of Alpha&Omega Semiconductor. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AOSL stock valuation model: a) initial revenue growth rate of 12% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AOSL is calculated based on our internal credit rating of Alpha&Omega Semiconductor, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Alpha&Omega Semiconductor.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AOSL stock the variable cost ratio is equal to 25%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $256 million in the base year in the intrinsic value calculation for AOSL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Alpha&Omega Semiconductor.

Corporate tax rate of 27% is the nominal tax rate for Alpha&Omega Semiconductor. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AOSL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AOSL are equal to 35%.

Life of production assets of 10 years is the average useful life of capital assets used in Alpha&Omega Semiconductor operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AOSL is equal to 9.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $242 million for Alpha&Omega Semiconductor - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 22.059 million for Alpha&Omega Semiconductor is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Alpha&Omega Semiconductor at the current share price and the inputted number of shares is $0.4 billion.

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Stock chart of AOSL Financial statements of AOSL Annual reports of AOSL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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