Intrinsic value of Cirrus Logic - CRUS

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$64.99

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$64.99

 
Intrinsic value

$480.38

 
Up/down potential

+639%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of CRUS 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 4.1

 

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, %
  27.48
  50.30
  45.77
  41.69
  38.02
  34.72
  31.75
  29.07
  26.67
  24.50
  22.55
  20.80
  19.22
  17.79
  16.51
  15.36
  14.33
  13.39
  12.55
  11.80
  11.12
  10.51
  9.96
  9.46
  9.01
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
Revenue, $m
  1,169
  1,757
  2,561
  3,629
  5,009
  6,748
  8,891
  11,475
  14,536
  18,097
  22,178
  26,789
  31,937
  37,620
  43,833
  50,567
  57,812
  65,555
  73,786
  82,492
  91,664
  101,296
  111,381
  121,919
  132,910
  144,358
  156,271
  168,658
  181,534
  194,914
  208,819
Variable operating expenses, $m
 
  1,249
  1,807
  2,549
  3,507
  4,714
  6,202
  7,997
  10,122
  12,595
  15,428
  18,602
  22,176
  26,122
  30,436
  35,112
  40,142
  45,519
  51,234
  57,279
  63,648
  70,336
  77,339
  84,656
  92,288
  100,237
  108,509
  117,110
  126,051
  135,341
  144,996
Fixed operating expenses, $m
 
  157
  161
  165
  169
  173
  177
  182
  186
  191
  196
  201
  206
  211
  216
  222
  227
  233
  239
  245
  251
  257
  263
  270
  277
  284
  291
  298
  305
  313
  321
Total operating expenses, $m
  989
  1,406
  1,968
  2,714
  3,676
  4,887
  6,379
  8,179
  10,308
  12,786
  15,624
  18,803
  22,382
  26,333
  30,652
  35,334
  40,369
  45,752
  51,473
  57,524
  63,899
  70,593
  77,602
  84,926
  92,565
  100,521
  108,800
  117,408
  126,356
  135,654
  145,317
Operating income, $m
  180
  351
  593
  916
  1,333
  1,861
  2,511
  3,297
  4,227
  5,311
  6,554
  7,987
  9,555
  11,287
  13,181
  15,234
  17,442
  19,803
  22,313
  24,968
  27,765
  30,703
  33,779
  36,993
  40,345
  43,838
  47,471
  51,250
  55,178
  59,260
  63,502
EBITDA, $m
  238
  427
  691
  1,042
  1,496
  2,070
  2,778
  3,633
  4,646
  5,825
  7,177
  8,705
  10,411
  12,295
  14,355
  16,589
  18,991
  21,560
  24,290
  27,178
  30,221
  33,417
  36,763
  40,260
  43,907
  47,706
  51,659
  55,769
  60,042
  64,483
  69,097
Interest expense (income), $m
  3
  6
  11
  19
  29
  43
  60
  80
  105
  135
  169
  209
  253
  303
  358
  418
  483
  553
  628
  708
  792
  881
  974
  1,071
  1,173
  1,280
  1,390
  1,505
  1,625
  1,750
  1,879
Earnings before tax, $m
  176
  346
  582
  897
  1,304
  1,818
  2,451
  3,216
  4,122
  5,176
  6,384
  7,778
  9,302
  10,984
  12,823
  14,815
  16,959
  19,250
  21,685
  24,260
  26,973
  29,822
  32,805
  35,922
  39,172
  42,558
  46,081
  49,745
  53,553
  57,510
  61,623
Tax expense, $m
  52
  93
  157
  242
  352
  491
  662
  868
  1,113
  1,398
  1,724
  2,100
  2,512
  2,966
  3,462
  4,000
  4,579
  5,197
  5,855
  6,550
  7,283
  8,052
  8,857
  9,699
  10,577
  11,491
  12,442
  13,431
  14,459
  15,528
  16,638
Net income, $m
  124
  252
  425
  654
  952
  1,327
  1,790
  2,348
  3,009
  3,779
  4,661
  5,678
  6,791
  8,018
  9,361
  10,815
  12,380
  14,052
  15,830
  17,710
  19,690
  21,770
  23,948
  26,223
  28,596
  31,067
  33,639
  36,314
  39,093
  41,982
  44,985

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  229
  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
  1,182
  1,432
  2,087
  2,958
  4,082
  5,500
  7,246
  9,352
  11,846
  14,749
  18,075
  21,833
  26,029
  30,660
  35,724
  41,212
  47,116
  53,427
  60,135
  67,230
  74,706
  82,556
  90,775
  99,364
  108,321
  117,651
  127,360
  137,456
  147,949
  158,854
  170,187
Adjusted assets (=assets-cash), $m
  953
  1,432
  2,087
  2,958
  4,082
  5,500
  7,246
  9,352
  11,846
  14,749
  18,075
  21,833
  26,029
  30,660
  35,724
  41,212
  47,116
  53,427
  60,135
  67,230
  74,706
  82,556
  90,775
  99,364
  108,321
  117,651
  127,360
  137,456
  147,949
  158,854
  170,187
Revenue / Adjusted assets
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
  1.227
Average production assets, $m
  323
  485
  707
  1,002
  1,382
  1,862
  2,454
  3,167
  4,012
  4,995
  6,121
  7,394
  8,815
  10,383
  12,098
  13,957
  15,956
  18,093
  20,365
  22,768
  25,299
  27,958
  30,741
  33,650
  36,683
  39,843
  43,131
  46,550
  50,103
  53,796
  57,634
Working capital, $m
  378
  223
  325
  461
  636
  857
  1,129
  1,457
  1,846
  2,298
  2,817
  3,402
  4,056
  4,778
  5,567
  6,422
  7,342
  8,326
  9,371
  10,476
  11,641
  12,865
  14,145
  15,484
  16,880
  18,334
  19,846
  21,420
  23,055
  24,754
  26,520
Total debt, $m
  160
  322
  545
  840
  1,221
  1,701
  2,293
  3,007
  3,853
  4,837
  5,964
  7,238
  8,661
  10,231
  11,947
  13,808
  15,809
  17,949
  20,223
  22,628
  25,162
  27,823
  30,610
  33,521
  36,558
  39,721
  43,012
  46,435
  49,992
  53,689
  57,530
Total liabilities, $m
  322
  485
  708
  1,003
  1,384
  1,864
  2,456
  3,170
  4,016
  5,000
  6,127
  7,401
  8,824
  10,394
  12,110
  13,971
  15,972
  18,112
  20,386
  22,791
  25,325
  27,986
  30,773
  33,684
  36,721
  39,884
  43,175
  46,598
  50,155
  53,852
  57,693
Total equity, $m
  859
  947
  1,380
  1,955
  2,698
  3,635
  4,789
  6,182
  7,830
  9,749
  11,947
  14,432
  17,205
  20,266
  23,613
  27,241
  31,144
  35,315
  39,749
  44,439
  49,381
  54,569
  60,003
  65,679
  71,600
  77,768
  84,185
  90,858
  97,795
  105,003
  112,493
Total liabilities and equity, $m
  1,181
  1,432
  2,088
  2,958
  4,082
  5,499
  7,245
  9,352
  11,846
  14,749
  18,074
  21,833
  26,029
  30,660
  35,723
  41,212
  47,116
  53,427
  60,135
  67,230
  74,706
  82,555
  90,776
  99,363
  108,321
  117,652
  127,360
  137,456
  147,950
  158,855
  170,186
Debt-to-equity ratio
  0.186
  0.340
  0.390
  0.430
  0.450
  0.470
  0.480
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
Adjusted equity ratio
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  124
  252
  425
  654
  952
  1,327
  1,790
  2,348
  3,009
  3,779
  4,661
  5,678
  6,791
  8,018
  9,361
  10,815
  12,380
  14,052
  15,830
  17,710
  19,690
  21,770
  23,948
  26,223
  28,596
  31,067
  33,639
  36,314
  39,093
  41,982
  44,985
Depreciation, amort., depletion, $m
  58
  76
  97
  126
  163
  210
  267
  336
  418
  514
  623
  718
  856
  1,008
  1,175
  1,355
  1,549
  1,757
  1,977
  2,210
  2,456
  2,714
  2,985
  3,267
  3,561
  3,868
  4,187
  4,519
  4,864
  5,223
  5,596
Funds from operations, $m
  53
  328
  522
  781
  1,115
  1,537
  2,057
  2,684
  3,427
  4,292
  5,284
  6,396
  7,646
  9,026
  10,535
  12,170
  13,929
  15,809
  17,807
  19,920
  22,147
  24,484
  26,932
  29,490
  32,157
  34,936
  37,827
  40,833
  43,958
  47,205
  50,580
Change in working capital, $m
  -102
  75
  102
  136
  175
  221
  272
  328
  389
  452
  518
  586
  654
  722
  789
  855
  920
  983
  1,045
  1,106
  1,165
  1,223
  1,281
  1,338
  1,396
  1,454
  1,513
  1,573
  1,635
  1,699
  1,766
Cash from operations, $m
  155
  256
  420
  645
  940
  1,316
  1,785
  2,356
  3,039
  3,840
  4,765
  5,810
  6,993
  8,305
  9,746
  11,315
  13,009
  14,826
  16,762
  18,815
  20,982
  23,261
  25,651
  28,151
  30,761
  33,482
  36,314
  39,260
  42,323
  45,506
  48,814
Maintenance CAPEX, $m
  0
  -31
  -47
  -69
  -97
  -134
  -181
  -238
  -307
  -389
  -485
  -594
  -718
  -856
  -1,008
  -1,175
  -1,355
  -1,549
  -1,757
  -1,977
  -2,210
  -2,456
  -2,714
  -2,985
  -3,267
  -3,561
  -3,868
  -4,187
  -4,519
  -4,864
  -5,223
New CAPEX, $m
  -46
  -162
  -222
  -295
  -381
  -480
  -591
  -713
  -845
  -983
  -1,126
  -1,273
  -1,421
  -1,568
  -1,715
  -1,859
  -2,000
  -2,137
  -2,272
  -2,403
  -2,532
  -2,658
  -2,784
  -2,908
  -3,033
  -3,160
  -3,288
  -3,419
  -3,554
  -3,693
  -3,838
Cash from investing activities, $m
  14
  -193
  -269
  -364
  -478
  -614
  -772
  -951
  -1,152
  -1,372
  -1,611
  -1,867
  -2,139
  -2,424
  -2,723
  -3,034
  -3,355
  -3,686
  -4,029
  -4,380
  -4,742
  -5,114
  -5,498
  -5,893
  -6,300
  -6,721
  -7,156
  -7,606
  -8,073
  -8,557
  -9,061
Free cash flow, $m
  169
  62
  151
  282
  461
  702
  1,012
  1,404
  1,887
  2,468
  3,154
  3,943
  4,854
  5,880
  7,023
  8,282
  9,655
  11,139
  12,734
  14,435
  16,240
  18,147
  20,153
  22,258
  24,461
  26,761
  29,158
  31,653
  34,250
  36,949
  39,754
Issuance/(repayment) of debt, $m
  -20
  162
  222
  295
  381
  481
  592
  714
  845
  984
  1,127
  1,274
  1,422
  1,570
  1,717
  1,861
  2,002
  2,139
  2,274
  2,405
  2,534
  2,661
  2,787
  2,911
  3,037
  3,163
  3,291
  3,422
  3,557
  3,697
  3,842
Issuance/(repurchase) of shares, $m
  -61
  0
  60
  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  
  -77
  162
  282
  295
  381
  481
  592
  714
  845
  984
  1,127
  1,274
  1,422
  1,570
  1,717
  1,861
  2,002
  2,139
  2,274
  2,405
  2,534
  2,661
  2,787
  2,911
  3,037
  3,163
  3,291
  3,422
  3,557
  3,697
  3,842
Total cash flow (excl. dividends), $m
  92
  225
  373
  577
  843
  1,182
  1,604
  2,118
  2,732
  3,452
  4,282
  5,217
  6,276
  7,451
  8,740
  10,142
  11,656
  13,279
  15,007
  16,840
  18,774
  20,808
  22,940
  25,170
  27,498
  29,923
  32,449
  35,076
  37,807
  40,645
  43,595
Retained Cash Flow (-), $m
  -102
  -317
  -433
  -575
  -743
  -937
  -1,154
  -1,392
  -1,649
  -1,918
  -2,198
  -2,484
  -2,773
  -3,061
  -3,347
  -3,628
  -3,903
  -4,171
  -4,434
  -4,690
  -4,941
  -5,189
  -5,433
  -5,677
  -5,921
  -6,167
  -6,417
  -6,673
  -6,936
  -7,208
  -7,491
Prev. year cash balance distribution, $m
 
  229
  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
 
  137
  0
  1
  99
  245
  450
  726
  1,084
  1,533
  2,083
  2,733
  3,503
  4,389
  5,393
  6,515
  7,753
  9,107
  10,574
  12,150
  13,833
  15,619
  17,507
  19,493
  21,577
  23,756
  26,031
  28,403
  30,871
  33,437
  36,105
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
 
  132
  0
  1
  82
  190
  327
  490
  677
  881
  1,092
  1,298
  1,495
  1,669
  1,810
  1,913
  1,970
  1,982
  1,947
  1,871
  1,758
  1,616
  1,453
  1,278
  1,099
  924
  759
  610
  478
  365
  272
Current shareholders' claim on cash, %
  100
  100.0
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7

Cirrus Logic, Inc., a fabless semiconductor company, develops, manufactures, and markets analog and mixed-signal integrated circuits (ICs) for a range of consumer and industrial markets. It offers portable audio products, including analog and mixed-signal audio converters, and digital signal processing products for mobile applications; codecs-chips that integrate analog-to-digital converters and digital-to-analog converters into a single IC; smart codecs, a codec with digital signal processer; amplifiers; and micro-electromechanical systems microphones, as well as standalone digital signal processors. The company offers its products for mobile devices, including smartphones, tablets, digital headsets, wearables, smart accessories, and portable media players. Its products are also used in laptops, audio/video receivers, home theater systems, set-up boxes, portable speakers, digital camcorders, musical instruments, and professional audio products applications; and serve the automotive market, which include satellite radio systems, telematics, and multi-speaker car-audio systems. In addition, the company’s products are used in industrial and energy-related applications, including digital utility meters, power supplies, energy control, energy measurement, and energy exploration applications. It markets and sells its products through direct sales force, external sales representatives, and distributors in the United States and internationally. Cirrus Logic, Inc. was founded in 1984 and is headquartered in Austin, Texas.

FINANCIAL RATIOS  of  Cirrus Logic (CRUS)

Valuation Ratios
P/E Ratio 32.8
Price to Sales 3.5
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 26.3
Price to Free Cash Flow 37.3
Growth Rates
Sales Growth Rate 27.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 24.3%
Cap. Spend. - 3 Yr. Gr. Rate -3.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 18.6%
Total Debt to Equity 18.6%
Interest Coverage 60
Management Effectiveness
Return On Assets 10.8%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 12.7%
Ret/ On T. Cap. - 3 Yr. Avg. 12.6%
Return On Equity 15.3%
Return On Equity - 3 Yr. Avg. 13.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 47.5%
Gross Margin - 3 Yr. Avg. 47.9%
EBITDA Margin 20.3%
EBITDA Margin - 3 Yr. Avg. 19.4%
Operating Margin 15.4%
Oper. Margin - 3 Yr. Avg. 16.3%
Pre-Tax Margin 15.1%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 10.6%
Net Profit Margin - 3 Yr. Avg. 10.6%
Effective Tax Rate 29.5%
Eff/ Tax Rate - 3 Yr. Avg. 33.5%
Payout Ratio 0%

CRUS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRUS stock intrinsic value calculation we used $1169 million for the last fiscal year's total revenue generated by Cirrus Logic. The default revenue input number comes from 2016 income statement of Cirrus Logic. 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 CRUS stock valuation model: a) initial revenue growth rate of 50.3% 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 CRUS is calculated based on our internal credit rating of Cirrus Logic, 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 Cirrus Logic.
    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 CRUS stock the variable cost ratio is equal to 71.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $153 million in the base year in the intrinsic value calculation for CRUS 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 Cirrus Logic.

Corporate tax rate of 27% is the nominal tax rate for Cirrus Logic. 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 CRUS 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 CRUS are equal to 27.6%.

Life of production assets of 10.3 years is the average useful life of capital assets used in Cirrus Logic 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 CRUS is equal to 12.7%. 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 - $859 million for Cirrus Logic - 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 63.767 million for Cirrus Logic 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 Cirrus Logic at the current share price and the inputted number of shares is $4.1 billion.


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COMPANY NEWS

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▶ Cirrus Logic Joins Rank Of Stocks With 95-Plus Composite Rating   [Mar-23-17 11:09AM  Investor's Business Daily]
▶ Why Cirrus Logic, Inc. Fell 10% in February   [Mar-08-17 07:18PM  Motley Fool]
▶ Ambarella, Micron, Marvell Upgraded; Intel, Cirrus Logic Downgraded   [Mar-01-17 04:54PM  Investor's Business Daily]
▶ Can Cirrus Logic Inc. Make a Comeback?   [Feb-16-17 02:52PM  at Motley Fool]
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▶ Here's How Cirrus Logic Doubled in 2016   [Jan-07-17 03:00PM  at Motley Fool]
▶ Cirrus Logic to Announce Q3 Results Feb. 1   [Jan-06-17 04:00PM  Business Wire]
▶ Taking Another Bite Out of (the) Apple   [12:03PM  at TheStreet]
Stock chart of CRUS Financial statements of CRUS Annual reports of CRUS
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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