Intrinsic value of GSI Technology - GSIT

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$7.86

  Intrinsic Value

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  Value-price divergence*

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$7.86

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

We calculate the intrinsic value of GSIT 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 0.2

 

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, %
  -9.43
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  48
  54
  55
  57
  58
  60
  62
  64
  66
  69
  72
  74
  77
  81
  84
  88
  91
  96
  100
  104
  109
  114
  120
  125
  131
  137
  144
  151
  158
  166
  174
Variable operating expenses, $m
 
  60
  62
  63
  65
  67
  69
  71
  74
  76
  79
  82
  85
  88
  92
  96
  100
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
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
  49
  60
  62
  63
  65
  67
  69
  71
  74
  76
  79
  82
  85
  88
  92
  96
  100
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
Operating income, $m
  -1
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
EBITDA, $m
  0
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Earnings before tax, $m
  0
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
Tax expense, $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
  0
Net income, $m
  0
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  55
  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
  107
  53
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Adjusted assets (=assets-cash), $m
  52
  53
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Revenue / Adjusted assets
  0.923
  1.019
  1.019
  1.018
  1.018
  1.017
  1.016
  1.016
  1.015
  1.015
  1.029
  1.014
  1.013
  1.025
  1.024
  1.023
  1.011
  1.021
  1.020
  1.020
  1.019
  1.018
  1.026
  1.016
  1.016
  1.015
  1.021
  1.020
  1.019
  1.018
  1.018
Average production assets, $m
  11
  11
  12
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
Working capital, $m
  63
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Total debt, $m
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
Total liabilities, $m
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Total equity, $m
  90
  36
  37
  37
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  104
  110
  115
Total liabilities and equity, $m
  107
  53
  55
  55
  58
  59
  61
  63
  65
  67
  70
  73
  76
  79
  82
  86
  89
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.030
  0.040
  0.060
  0.070
  0.080
  0.100
  0.110
  0.130
  0.140
  0.150
  0.170
  0.180
  0.190
  0.200
  0.220
  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
Adjusted equity ratio
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
Depreciation, amort., depletion, $m
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Funds from operations, $m
  -2
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Change in working capital, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  0
  -3
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
New CAPEX, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
Cash from investing activities, $m
  1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Free cash flow, $m
  1
  -4
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
Issuance/(repayment) of debt, $m
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Issuance/(repurchase) of shares, $m
  -6
  0
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Cash from financing (excl. dividends), $m  
  -6
  0
  6
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Total cash flow (excl. dividends), $m
  -5
  -3
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
Retained Cash Flow (-), $m
  6
  -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
  -5
Prev. year cash balance distribution, $m
 
  55
  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
 
  51
  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
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
 
  49
  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
Current shareholders' claim on cash, %
  100
  100.0
  91.0
  82.6
  74.9
  67.8
  61.2
  55.3
  49.8
  44.9
  40.4
  36.3
  32.6
  29.2
  26.2
  23.5
  21.0
  18.8
  16.8
  15.0
  13.4
  12.0
  10.7
  9.6
  8.5
  7.6
  6.8
  6.0
  5.4
  4.8
  4.3

GSI Technology, Inc., a fabless semiconductor company, designs, develops, and markets memory products primarily for the networking and telecommunications markets in the United States, China, Malaysia, Singapore, and internationally. It offers synchronous static random access memory (SRAM) products, such as BurstRAMs for microprocessor cache applications; No Bus Turnaround SRAMs to address the needs of moderate performance networking applications; and SigmaQuad and SigmaDDR products that are double data rate and quad data rate synchronous SRAMs. The company also provides low latency dynamic random access memory products; and bandwidth engine products. Its products are incorporated in a range of networking and telecommunications equipment, including core routers, multi-service access routers, universal gateways, enterprise edge routers, service provider edge routers, optical edge routers, fast Ethernet switches, wireless base stations, and network access equipment. The company markets its products through a network of sales representatives and distributors to original equipment manufacturers, as well as to military, industrial, test and measurement equipment, automotive, and medical markets. GSI Technology, Inc. was founded in 1995 and is headquartered in Sunnyvale, California.

FINANCIAL RATIOS  of  GSI Technology (GSIT)

Valuation Ratios
P/E Ratio 0
Price to Sales 3.6
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -170.7
Growth Rates
Sales Growth Rate -9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -1.7%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -1.9%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -1.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 54.2%
Gross Margin - 3 Yr. Avg. 50.5%
EBITDA Margin 2.1%
EBITDA Margin - 3 Yr. Avg. -2.4%
Operating Margin -2.1%
Oper. Margin - 3 Yr. Avg. -6.3%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. -5.6%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -4.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

GSIT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GSIT stock intrinsic value calculation we used $53 million for the last fiscal year's total revenue generated by GSI Technology. The default revenue input number comes from 2017 income statement of GSI Technology. 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 GSIT stock valuation model: a) initial revenue growth rate of 2% 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 GSIT is calculated based on our internal credit rating of GSI Technology, 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 GSI Technology.
    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 GSIT stock the variable cost ratio is equal to 111.3%.

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 GSIT 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 GSI Technology.

Corporate tax rate of 27% is the nominal tax rate for GSI Technology. 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 GSIT 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 GSIT are equal to 20.8%.

Life of production assets of 15 years is the average useful life of capital assets used in GSI Technology 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 GSIT is equal to 15.1%. 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 - $90 million for GSI Technology - 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 20.268 million for GSI Technology 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 GSI Technology at the current share price and the inputted number of shares is $0.2 billion.


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COMPANY NEWS

▶ GSI Technology reports 4Q loss   [May-04-17 06:28PM  Associated Press]
▶ GSI Technology posts 3Q profit   [Jan-26-17 04:51PM  Associated Press]
▶ GSI Technology posts 1Q profit   [Jul-28-16 06:14PM  AP]
▶ Should You Avoid GSI Technology, Inc. (GSIT)?   [Dec-09  02:19AM  at Insider Monkey]
▶ GSI Technology Acquires MikaMonu   [Nov-23  04:30PM  Marketwired]
▶ GSI Technology reports 2Q loss   [Oct-29  05:41PM  AP]
▶ 10-Q for GSI Technology, Inc.   [Aug-08  08:10PM  at Company Spotlight]
Stock chart of GSIT Financial statements of GSIT Annual reports of GSIT
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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