Intrinsic value of Cypress Semiconductor - CY

Previous Close

$15.70

  Intrinsic Value

$0.34

stock screener

  Rating & Target

str. sell

-98%

Previous close

$15.70

 
Intrinsic value

$0.34

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of CY 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 2017), $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 5.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.59
  32.00
  29.30
  26.87
  24.68
  22.71
  20.94
  19.35
  17.91
  16.62
  15.46
  14.41
  13.47
  12.63
  11.86
  11.18
  10.56
  10.00
  9.50
  9.05
  8.65
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
Revenue, $m
  1,923
  2,538
  3,282
  4,164
  5,192
  6,371
  7,705
  9,196
  10,844
  12,646
  14,601
  16,706
  18,957
  21,350
  23,883
  26,553
  29,356
  32,293
  35,361
  38,563
  41,897
  45,367
  48,976
  52,727
  56,625
  60,676
  64,886
  69,262
  73,813
  78,546
  83,473
Variable operating expenses, $m
 
  3,025
  3,870
  4,871
  6,037
  7,376
  8,891
  10,583
  12,453
  14,500
  16,719
  18,964
  21,519
  24,236
  27,111
  30,142
  33,324
  36,658
  40,141
  43,775
  47,560
  51,500
  55,596
  59,854
  64,279
  68,878
  73,656
  78,624
  83,790
  89,163
  94,755
Fixed operating expenses, $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
Total operating expenses, $m
  2,535
  3,025
  3,870
  4,871
  6,037
  7,376
  8,891
  10,583
  12,453
  14,500
  16,719
  18,964
  21,519
  24,236
  27,111
  30,142
  33,324
  36,658
  40,141
  43,775
  47,560
  51,500
  55,596
  59,854
  64,279
  68,878
  73,656
  78,624
  83,790
  89,163
  94,755
Operating income, $m
  -612
  -487
  -588
  -707
  -846
  -1,005
  -1,185
  -1,387
  -1,610
  -1,853
  -2,118
  -2,258
  -2,562
  -2,886
  -3,228
  -3,589
  -3,968
  -4,365
  -4,780
  -5,212
  -5,663
  -6,132
  -6,620
  -7,127
  -7,654
  -8,202
  -8,771
  -9,362
  -9,977
  -10,617
  -11,283
EBITDA, $m
  -346
  -191
  -247
  -314
  -391
  -480
  -581
  -693
  -817
  -953
  -1,100
  -1,259
  -1,429
  -1,609
  -1,800
  -2,001
  -2,212
  -2,434
  -2,665
  -2,906
  -3,157
  -3,419
  -3,691
  -3,973
  -4,267
  -4,573
  -4,890
  -5,220
  -5,562
  -5,919
  -6,290
Interest expense (income), $m
  33
  42
  64
  90
  121
  158
  200
  247
  300
  358
  422
  492
  566
  646
  731
  821
  916
  1,015
  1,119
  1,228
  1,342
  1,460
  1,583
  1,711
  1,844
  1,983
  2,126
  2,276
  2,431
  2,592
  2,760
Earnings before tax, $m
  -667
  -529
  -651
  -797
  -967
  -1,163
  -1,385
  -1,634
  -1,909
  -2,212
  -2,540
  -2,750
  -3,129
  -3,532
  -3,959
  -4,410
  -4,884
  -5,380
  -5,899
  -6,441
  -7,005
  -7,592
  -8,203
  -8,838
  -9,498
  -10,184
  -10,897
  -11,638
  -12,408
  -13,209
  -14,043
Tax expense, $m
  2
  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
Net income, $m
  -686
  -529
  -651
  -797
  -967
  -1,163
  -1,385
  -1,634
  -1,909
  -2,212
  -2,540
  -2,750
  -3,129
  -3,532
  -3,959
  -4,410
  -4,884
  -5,380
  -5,899
  -6,441
  -7,005
  -7,592
  -8,203
  -8,838
  -9,498
  -10,184
  -10,897
  -11,638
  -12,408
  -13,209
  -14,043

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  120
  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
  3,872
  4,948
  6,398
  8,117
  10,120
  12,419
  15,020
  17,927
  21,138
  24,652
  28,463
  32,566
  36,953
  41,619
  46,556
  51,759
  57,225
  62,949
  68,931
  75,171
  81,671
  88,435
  95,470
  102,782
  110,380
  118,277
  126,483
  135,014
  143,884
  153,112
  162,714
Adjusted assets (=assets-cash), $m
  3,752
  4,948
  6,398
  8,117
  10,120
  12,419
  15,020
  17,927
  21,138
  24,652
  28,463
  32,566
  36,953
  41,619
  46,556
  51,759
  57,225
  62,949
  68,931
  75,171
  81,671
  88,435
  95,470
  102,782
  110,380
  118,277
  126,483
  135,014
  143,884
  153,112
  162,714
Revenue / Adjusted assets
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
Average production assets, $m
  1,209
  1,594
  2,061
  2,615
  3,260
  4,001
  4,839
  5,775
  6,810
  7,942
  9,170
  10,491
  11,905
  13,408
  14,999
  16,675
  18,436
  20,280
  22,207
  24,217
  26,311
  28,491
  30,757
  33,113
  35,561
  38,105
  40,748
  43,497
  46,354
  49,327
  52,421
Working capital, $m
  192
  135
  174
  221
  275
  338
  408
  487
  575
  670
  774
  885
  1,005
  1,132
  1,266
  1,407
  1,556
  1,712
  1,874
  2,044
  2,221
  2,404
  2,596
  2,795
  3,001
  3,216
  3,439
  3,671
  3,912
  4,163
  4,424
Total debt, $m
  1,225
  1,818
  2,572
  3,466
  4,508
  5,703
  7,056
  8,567
  10,237
  12,064
  14,046
  16,179
  18,461
  20,887
  23,454
  26,160
  29,002
  31,978
  35,089
  38,334
  41,714
  45,231
  48,889
  52,692
  56,643
  60,749
  65,016
  69,452
  74,065
  78,863
  83,857
Total liabilities, $m
  1,980
  2,573
  3,327
  4,221
  5,263
  6,458
  7,811
  9,322
  10,992
  12,819
  14,801
  16,934
  19,216
  21,642
  24,209
  26,915
  29,757
  32,733
  35,844
  39,089
  42,469
  45,986
  49,644
  53,447
  57,398
  61,504
  65,771
  70,207
  74,820
  79,618
  84,612
Total equity, $m
  1,892
  2,375
  3,071
  3,896
  4,858
  5,961
  7,210
  8,605
  10,146
  11,833
  13,662
  15,631
  17,737
  19,977
  22,347
  24,844
  27,468
  30,215
  33,087
  36,082
  39,202
  42,449
  45,826
  49,335
  52,983
  56,773
  60,712
  64,807
  69,064
  73,494
  78,103
Total liabilities and equity, $m
  3,872
  4,948
  6,398
  8,117
  10,121
  12,419
  15,021
  17,927
  21,138
  24,652
  28,463
  32,565
  36,953
  41,619
  46,556
  51,759
  57,225
  62,948
  68,931
  75,171
  81,671
  88,435
  95,470
  102,782
  110,381
  118,277
  126,483
  135,014
  143,884
  153,112
  162,715
Debt-to-equity ratio
  0.647
  0.770
  0.840
  0.890
  0.930
  0.960
  0.980
  1.000
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
Adjusted equity ratio
  0.472
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -686
  -529
  -651
  -797
  -967
  -1,163
  -1,385
  -1,634
  -1,909
  -2,212
  -2,540
  -2,750
  -3,129
  -3,532
  -3,959
  -4,410
  -4,884
  -5,380
  -5,899
  -6,441
  -7,005
  -7,592
  -8,203
  -8,838
  -9,498
  -10,184
  -10,897
  -11,638
  -12,408
  -13,209
  -14,043
Depreciation, amort., depletion, $m
  266
  296
  340
  393
  454
  525
  605
  694
  792
  900
  1,017
  999
  1,134
  1,277
  1,428
  1,588
  1,756
  1,931
  2,115
  2,306
  2,506
  2,713
  2,929
  3,154
  3,387
  3,629
  3,881
  4,143
  4,415
  4,698
  4,992
Funds from operations, $m
  237
  -233
  -311
  -404
  -513
  -638
  -780
  -940
  -1,117
  -1,311
  -1,523
  -1,751
  -1,995
  -2,255
  -2,531
  -2,822
  -3,128
  -3,449
  -3,784
  -4,134
  -4,499
  -4,879
  -5,274
  -5,685
  -6,111
  -6,555
  -7,016
  -7,495
  -7,993
  -8,511
  -9,051
Change in working capital, $m
  20
  33
  39
  47
  54
  63
  71
  79
  87
  96
  104
  112
  119
  127
  134
  141
  149
  156
  163
  170
  177
  184
  191
  199
  207
  215
  223
  232
  241
  251
  261
Cash from operations, $m
  217
  -266
  -350
  -451
  -567
  -700
  -851
  -1,019
  -1,204
  -1,407
  -1,626
  -1,862
  -2,114
  -2,382
  -2,665
  -2,963
  -3,276
  -3,604
  -3,947
  -4,304
  -4,676
  -5,063
  -5,465
  -5,883
  -6,318
  -6,770
  -7,239
  -7,727
  -8,234
  -8,762
  -9,312
Maintenance CAPEX, $m
  0
  -115
  -152
  -196
  -249
  -311
  -381
  -461
  -550
  -649
  -756
  -873
  -999
  -1,134
  -1,277
  -1,428
  -1,588
  -1,756
  -1,931
  -2,115
  -2,306
  -2,506
  -2,713
  -2,929
  -3,154
  -3,387
  -3,629
  -3,881
  -4,143
  -4,415
  -4,698
New CAPEX, $m
  -57
  -386
  -467
  -554
  -645
  -741
  -838
  -936
  -1,035
  -1,132
  -1,228
  -1,322
  -1,414
  -1,503
  -1,591
  -1,676
  -1,761
  -1,844
  -1,927
  -2,010
  -2,094
  -2,179
  -2,266
  -2,356
  -2,448
  -2,544
  -2,644
  -2,748
  -2,858
  -2,973
  -3,094
Cash from investing activities, $m
  -613
  -501
  -619
  -750
  -894
  -1,052
  -1,219
  -1,397
  -1,585
  -1,781
  -1,984
  -2,195
  -2,413
  -2,637
  -2,868
  -3,104
  -3,349
  -3,600
  -3,858
  -4,125
  -4,400
  -4,685
  -4,979
  -5,285
  -5,602
  -5,931
  -6,273
  -6,629
  -7,001
  -7,388
  -7,792
Free cash flow, $m
  -396
  -766
  -969
  -1,201
  -1,462
  -1,752
  -2,070
  -2,416
  -2,789
  -3,187
  -3,610
  -4,057
  -4,527
  -5,019
  -5,533
  -6,068
  -6,625
  -7,204
  -7,805
  -8,429
  -9,076
  -9,748
  -10,445
  -11,168
  -11,920
  -12,700
  -13,512
  -14,356
  -15,235
  -16,150
  -17,103
Issuance/(repayment) of debt, $m
  599
  623
  754
  894
  1,042
  1,195
  1,353
  1,511
  1,670
  1,827
  1,982
  2,133
  2,282
  2,426
  2,567
  2,706
  2,842
  2,977
  3,111
  3,245
  3,380
  3,518
  3,658
  3,802
  3,951
  4,106
  4,267
  4,436
  4,613
  4,798
  4,993
Issuance/(repurchase) of shares, $m
  -132
  1,102
  1,347
  1,622
  1,929
  2,266
  2,634
  3,029
  3,451
  3,898
  4,369
  4,719
  5,235
  5,771
  6,329
  6,908
  7,507
  8,128
  8,770
  9,436
  10,125
  10,839
  11,580
  12,348
  13,146
  13,974
  14,836
  15,732
  16,666
  17,638
  18,652
Cash from financing (excl. dividends), $m  
  431
  1,725
  2,101
  2,516
  2,971
  3,461
  3,987
  4,540
  5,121
  5,725
  6,351
  6,852
  7,517
  8,197
  8,896
  9,614
  10,349
  11,105
  11,881
  12,681
  13,505
  14,357
  15,238
  16,150
  17,097
  18,080
  19,103
  20,168
  21,279
  22,436
  23,645
Total cash flow (excl. dividends), $m
  34
  958
  1,132
  1,315
  1,509
  1,710
  1,916
  2,124
  2,332
  2,538
  2,741
  2,795
  2,989
  3,179
  3,364
  3,545
  3,724
  3,900
  4,076
  4,251
  4,429
  4,609
  4,793
  4,982
  5,177
  5,380
  5,591
  5,812
  6,044
  6,287
  6,543
Retained Cash Flow (-), $m
  829
  -1,102
  -1,347
  -1,622
  -1,929
  -2,266
  -2,634
  -3,029
  -3,451
  -3,898
  -4,369
  -4,719
  -5,235
  -5,771
  -6,329
  -6,908
  -7,507
  -8,128
  -8,770
  -9,436
  -10,125
  -10,839
  -11,580
  -12,348
  -13,146
  -13,974
  -14,836
  -15,732
  -16,666
  -17,638
  -18,652
Prev. year cash balance distribution, $m
 
  90
  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
 
  -53
  -215
  -307
  -420
  -556
  -717
  -905
  -1,119
  -1,360
  -1,629
  -1,924
  -2,245
  -2,593
  -2,965
  -3,362
  -3,783
  -4,228
  -4,695
  -5,184
  -5,696
  -6,230
  -6,787
  -7,366
  -7,968
  -8,594
  -9,245
  -9,920
  -10,622
  -11,352
  -12,110
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  -50
  -187
  -245
  -307
  -370
  -429
  -483
  -528
  -561
  -581
  -587
  -578
  -556
  -523
  -480
  -430
  -377
  -322
  -269
  -219
  -174
  -135
  -101
  -74
  -53
  -37
  -25
  -16
  -10
  -6
Current shareholders' claim on cash, %
  100
  81.9
  67.9
  57.0
  48.3
  41.3
  35.6
  30.9
  27.0
  23.7
  20.9
  18.6
  16.6
  14.8
  13.3
  12.0
  10.8
  9.7
  8.8
  8.0
  7.2
  6.6
  6.0
  5.5
  5.0
  4.5
  4.1
  3.8
  3.5
  3.2
  2.9

Cypress Semiconductor Corporation manufactures embedded system solutions for automotive, industrial, home automation and appliances, consumer electronics and medical products. The Company's segments include Microcontroller and Connectivity Division (MCD), and Memory Products Division (MPD). MCD focuses on microcontroller (MCU), analog and wireless and wired connectivity solutions. MPD focuses on parallel and serial NOR flash memories, NAND flash memories, static random access memory (SRAM), ferroelectric-random access memory (F-RAM) ferroelectric memory devices and other specialty memories. The Company's products include Traveo MCUs and Flexible MCUs; PSoC 1, PSoC 3, PSoC 4 and PSoC 5LP; CapSense, and TrueTouch Analog Power Management integrated circuits (PMICs) and energy harvesting solutions.

FINANCIAL RATIOS  of  Cypress Semiconductor (CY)

Valuation Ratios
P/E Ratio -7.4
Price to Sales 2.6
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 23.4
Price to Free Cash Flow 31.8
Growth Rates
Sales Growth Rate 19.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 21.3%
Cap. Spend. - 3 Yr. Gr. Rate 9%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 63.2%
Total Debt to Equity 64.7%
Interest Coverage -19
Management Effectiveness
Return On Assets -16.6%
Ret/ On Assets - 3 Yr. Avg. -9.9%
Return On Total Capital -21%
Ret/ On T. Cap. - 3 Yr. Avg. -12.2%
Return On Equity -29.7%
Return On Equity - 3 Yr. Avg. -15.4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 35.6%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin -19.1%
EBITDA Margin - 3 Yr. Avg. -5.5%
Operating Margin -31.8%
Oper. Margin - 3 Yr. Avg. -16.5%
Pre-Tax Margin -34.7%
Pre-Tax Margin - 3 Yr. Avg. -18%
Net Profit Margin -35.7%
Net Profit Margin - 3 Yr. Avg. -18.9%
Effective Tax Rate -0.3%
Eff/ Tax Rate - 3 Yr. Avg. -5%
Payout Ratio -20.6%

CY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CY stock intrinsic value calculation we used $1923 million for the last fiscal year's total revenue generated by Cypress Semiconductor. The default revenue input number comes from 2017 income statement of Cypress 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 CY stock valuation model: a) initial revenue growth rate of 32% 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 7%, whose default value for CY is calculated based on our internal credit rating of Cypress 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 Cypress 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 CY stock the variable cost ratio is equal to 121%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CY 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 Cypress Semiconductor.

Corporate tax rate of 27% is the nominal tax rate for Cypress 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 CY 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 CY are equal to 62.8%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Cypress 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 CY is equal to 5.3%. 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 - $1892 million for Cypress 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 332.484 million for Cypress 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 Cypress Semiconductor at the current share price and the inputted number of shares is $5.2 billion.

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▶ Cypress Announces Quarterly Cash Dividend   [08:00AM  Business Wire]
▶ Cypress Semiconductor Shows More Price Strength   [Aug-02-17 12:17PM  TheStreet.com]
▶ What Price Ratios Say about Cypresss Growth Potential   [Jul-31-17 09:05AM  Market Realist]
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▶ Cypress Semiconductor, Intel, Microsemi Touted Post-Earnings   [04:26PM  Investor's Business Daily]
▶ Trade of the Day: Cypress Semiconductor (CY)   [09:24AM  InvestorPlace]
▶ Cypress reports 2Q loss   [12:35AM  Associated Press]
▶ Chip Giant Intel Beats Second-Quarter Sales, Earnings Targets   [Jul-27-17 06:44PM  Investor's Business Daily]
▶ Cypress Reports Second Quarter 2017 Results   [04:05PM  Business Wire]
▶ How Has Cypresss Memory Business Performed?   [09:08AM  Market Realist]
Financial statements of CY
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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