Intrinsic value of Alpha&Omega Semiconductor - AOSL

Previous Close

$15.70

  Intrinsic Value

$6.95

stock screener

  Rating & Target

str. sell

-56%

  Value-price divergence*

-70%

Previous close

$15.70

 
Intrinsic value

$6.95

 
Up/down potential

-56%

 
Rating

str. sell

 
Value-price divergence*

-70%

*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
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  336
  344
  353
  363
  375
  387
  400
  415
  431
  447
  465
  484
  504
  526
  549
  573
  599
  626
  654
  684
  716
  750
  785
  822
  861
  903
  946
  992
  1,040
  1,091
  1,144
Variable operating expenses, $m
 
  86
  88
  91
  94
  97
  100
  104
  108
  112
  116
  121
  126
  131
  137
  143
  150
  156
  164
  171
  179
  187
  196
  206
  215
  226
  237
  248
  260
  273
  286
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
  348
  357
  367
  377
  387
  397
  408
  420
  432
  444
  457
  470
  484
  499
  514
  530
  546
  563
  580
  598
  617
  637
  658
  678
  701
  723
  747
  771
  797
  823
Operating income, $m
  2
  -4
  -4
  -3
  -2
  1
  3
  7
  11
  16
  21
  27
  34
  42
  50
  59
  69
  80
  91
  104
  118
  132
  148
  165
  183
  202
  223
  245
  269
  294
  321
EBITDA, $m
  29
  20
  21
  22
  25
  28
  32
  36
  41
  47
  54
  61
  69
  78
  88
  99
  111
  123
  137
  152
  168
  185
  203
  222
  243
  266
  289
  315
  342
  370
  401
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
Earnings before tax, $m
  1
  -4
  -4
  -3
  -2
  0
  3
  6
  10
  15
  20
  26
  33
  40
  48
  57
  67
  78
  89
  101
  115
  129
  145
  161
  179
  198
  219
  240
  264
  288
  315
Tax expense, $m
  4
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  7
  9
  11
  13
  15
  18
  21
  24
  27
  31
  35
  39
  44
  48
  54
  59
  65
  71
  78
  85
Net income, $m
  -3
  -4
  -4
  -3
  -2
  0
  2
  5
  8
  11
  15
  19
  24
  29
  35
  42
  49
  57
  65
  74
  84
  94
  106
  118
  131
  145
  160
  176
  192
  211
  230

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
  236
  243
  250
  258
  266
  275
  285
  296
  307
  320
  333
  347
  361
  377
  394
  411
  430
  450
  470
  492
  515
  539
  565
  592
  620
  650
  682
  715
  750
  786
Adjusted assets (=assets-cash), $m
  231
  236
  243
  250
  258
  266
  275
  285
  296
  307
  320
  333
  347
  361
  377
  394
  411
  430
  450
  470
  492
  515
  539
  565
  592
  620
  650
  682
  715
  750
  786
Revenue / Adjusted assets
  1.455
  1.458
  1.453
  1.452
  1.453
  1.455
  1.455
  1.456
  1.456
  1.456
  1.453
  1.453
  1.452
  1.457
  1.456
  1.454
  1.457
  1.456
  1.453
  1.455
  1.455
  1.456
  1.456
  1.455
  1.454
  1.456
  1.455
  1.455
  1.455
  1.455
  1.455
Average production assets, $m
  118
  120
  124
  127
  131
  135
  140
  145
  151
  157
  163
  169
  177
  184
  192
  201
  209
  219
  229
  239
  251
  262
  275
  288
  301
  316
  331
  347
  364
  382
  400
Working capital, $m
  119
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
Total debt, $m
  1
  2
  4
  6
  9
  12
  15
  18
  21
  25
  29
  33
  38
  43
  48
  54
  59
  65
  72
  79
  86
  94
  101
  110
  119
  128
  138
  148
  159
  171
  183
Total liabilities, $m
  76
  78
  80
  82
  85
  88
  91
  94
  97
  101
  105
  109
  114
  119
  124
  130
  135
  141
  148
  155
  162
  170
  177
  186
  195
  204
  214
  224
  235
  247
  259
Total equity, $m
  242
  159
  163
  168
  173
  179
  185
  191
  199
  206
  214
  223
  233
  243
  253
  264
  276
  288
  302
  316
  330
  346
  362
  379
  397
  416
  436
  457
  480
  503
  527
Total liabilities and equity, $m
  318
  237
  243
  250
  258
  267
  276
  285
  296
  307
  319
  332
  347
  362
  377
  394
  411
  429
  450
  471
  492
  516
  539
  565
  592
  620
  650
  681
  715
  750
  786
Debt-to-equity ratio
  0.004
  0.010
  0.020
  0.040
  0.050
  0.060
  0.080
  0.090
  0.110
  0.120
  0.140
  0.150
  0.160
  0.180
  0.190
  0.200
  0.210
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.320
  0.330
  0.340
  0.350
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
  -4
  -4
  -3
  -2
  0
  2
  5
  8
  11
  15
  19
  24
  29
  35
  42
  49
  57
  65
  74
  84
  94
  106
  118
  131
  145
  160
  176
  192
  211
  230
Depreciation, amort., depletion, $m
  27
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  69
  73
  76
  80
Funds from operations, $m
  50
  20
  21
  22
  24
  27
  30
  34
  38
  42
  47
  53
  59
  66
  74
  82
  91
  100
  111
  122
  134
  147
  161
  175
  191
  208
  226
  245
  265
  287
  310
Change in working capital, $m
  10
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  40
  19
  20
  21
  23
  26
  29
  32
  36
  41
  46
  51
  57
  64
  72
  80
  88
  98
  108
  119
  131
  144
  157
  172
  187
  204
  222
  241
  261
  282
  305
Maintenance CAPEX, $m
  0
  -24
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -58
  -60
  -63
  -66
  -69
  -73
  -76
New CAPEX, $m
  -22
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
Cash from investing activities, $m
  -22
  -27
  -27
  -29
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -40
  -41
  -43
  -45
  -46
  -49
  -51
  -54
  -57
  -59
  -62
  -64
  -68
  -72
  -74
  -78
  -82
  -86
  -91
  -95
Free cash flow, $m
  18
  -7
  -8
  -7
  -6
  -4
  -3
  -1
  2
  5
  8
  12
  16
  21
  27
  33
  39
  46
  54
  63
  72
  82
  92
  104
  116
  129
  143
  158
  174
  192
  210
Issuance/(repayment) of debt, $m
  -1
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Issuance/(repurchase) of shares, $m
  -35
  8
  8
  8
  7
  5
  4
  2
  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
  10
  10
  10
  10
  8
  7
  5
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Total cash flow (excl. dividends), $m
  -18
  2
  3
  3
  4
  4
  4
  5
  5
  8
  12
  16
  21
  26
  32
  38
  45
  53
  61
  70
  79
  89
  100
  112
  125
  139
  153
  169
  185
  203
  222
Retained Cash Flow (-), $m
  35
  -8
  -8
  -8
  -7
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
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
 
  81
  -5
  -5
  -3
  -2
  -2
  -2
  -2
  1
  4
  8
  12
  16
  21
  27
  33
  40
  48
  56
  64
  74
  84
  95
  107
  120
  133
  148
  163
  180
  197
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
 
  78
  -5
  -4
  -3
  -1
  -1
  -1
  -1
  0
  2
  4
  5
  6
  7
  8
  8
  9
  9
  9
  8
  8
  7
  6
  5
  5
  4
  3
  3
  2
  1
Current shareholders' claim on cash, %
  100
  96.7
  93.5
  90.6
  88.2
  86.4
  85.2
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6

Alpha and Omega Semiconductor Limited is a designer, developer and global supplier of power semiconductors. The Company's portfolio of power semiconductors includes approximately 1,600 products, as of June 30, 2016. The Company's product portfolio consists of two categories: power discretes and power integrated circuits (ICs). The Company's portfolio of products focuses high-volume applications, including personal computers, flat panel televisions, light-emitting diode (LED) lighting, smart phones, battery packs, consumer and industrial motor controls and power supplies for television, computers, servers and telecommunications equipment. The Company sells its products primarily to distributors in the Asia Pacific region, who in turn sell these products to end customers. The Company conducts its operations primarily in the United States, Hong Kong, China, Taiwan, Korea and Japan. Its products are applicable in desktop and tablet personal computers, flat panel displays and televisions.

FINANCIAL RATIOS  of  Alpha&Omega Semiconductor (AOSL)

Valuation Ratios
P/E Ratio -119.1
Price to Sales 1.1
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow 19.8
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 2.4% 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 4.4 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 23.484 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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COMPANY NEWS

▶ Alpha and Omega beats Street 4Q forecasts   [Aug-09-17 10:22PM  Associated Press]
▶ New Strong Buy Stocks for May 26th   [May-26-17 11:07AM  Zacks]
▶ New Strong Buy Stocks for May 17th   [May-17-17 10:24AM  Zacks]
▶ Alpha and Omega beats Street 3Q forecasts   [May-03-17 06:39PM  Associated Press]
▶ Alpha and Omega tops Street 2Q forecasts   [Feb-08-17 06:11PM  Associated Press]
▶ 3 Small Cap Tech Stocks That Doubled in 2016   [Dec-18-16 12:35PM  at Motley Fool]
Financial statements 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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