Intrinsic value of Integrated Device Technology - IDTI

Previous Close

$33.89

  Intrinsic Value

$21.23

stock screener

  Rating & Target

sell

-37%

Previous close

$33.89

 
Intrinsic value

$21.23

 
Up/down potential

-37%

 
Rating

sell

We calculate the intrinsic value of IDTI 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  4.45
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
Revenue, $m
  728
  807
  891
  978
  1,069
  1,163
  1,262
  1,365
  1,472
  1,582
  1,698
  1,818
  1,942
  2,072
  2,206
  2,346
  2,492
  2,644
  2,802
  2,967
  3,139
  3,319
  3,506
  3,702
  3,906
  4,120
  4,343
  4,577
  4,822
  5,078
  5,345
Variable operating expenses, $m
 
  647
  710
  777
  846
  918
  993
  1,072
  1,153
  1,238
  1,326
  1,387
  1,482
  1,580
  1,683
  1,790
  1,901
  2,017
  2,138
  2,263
  2,395
  2,532
  2,674
  2,824
  2,980
  3,143
  3,313
  3,491
  3,678
  3,873
  4,078
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
  618
  647
  710
  777
  846
  918
  993
  1,072
  1,153
  1,238
  1,326
  1,387
  1,482
  1,580
  1,683
  1,790
  1,901
  2,017
  2,138
  2,263
  2,395
  2,532
  2,674
  2,824
  2,980
  3,143
  3,313
  3,491
  3,678
  3,873
  4,078
Operating income, $m
  110
  161
  181
  201
  223
  245
  269
  293
  318
  345
  372
  431
  461
  491
  523
  556
  591
  627
  665
  704
  745
  787
  832
  878
  926
  977
  1,030
  1,086
  1,144
  1,204
  1,268
EBITDA, $m
  155
  211
  233
  255
  279
  304
  330
  356
  384
  413
  443
  475
  507
  541
  576
  613
  651
  691
  732
  775
  820
  867
  916
  967
  1,020
  1,076
  1,134
  1,195
  1,259
  1,326
  1,396
Interest expense (income), $m
  3
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  96
Earnings before tax, $m
  99
  151
  169
  188
  208
  229
  250
  272
  296
  320
  345
  402
  429
  457
  487
  517
  549
  582
  617
  653
  690
  730
  770
  813
  858
  904
  953
  1,004
  1,058
  1,114
  1,172
Tax expense, $m
  -10
  41
  46
  51
  56
  62
  68
  74
  80
  86
  93
  109
  116
  123
  131
  140
  148
  157
  167
  176
  186
  197
  208
  220
  232
  244
  257
  271
  286
  301
  316
Net income, $m
  110
  110
  123
  137
  152
  167
  183
  199
  216
  234
  252
  293
  313
  334
  355
  378
  401
  425
  450
  477
  504
  533
  562
  594
  626
  660
  696
  733
  772
  813
  856

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  406
  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
  1,184
  863
  951
  1,045
  1,142
  1,243
  1,348
  1,458
  1,572
  1,691
  1,814
  1,942
  2,075
  2,213
  2,357
  2,507
  2,663
  2,825
  2,994
  3,170
  3,354
  3,546
  3,746
  3,955
  4,173
  4,402
  4,640
  4,890
  5,151
  5,425
  5,711
Adjusted assets (=assets-cash), $m
  778
  863
  951
  1,045
  1,142
  1,243
  1,348
  1,458
  1,572
  1,691
  1,814
  1,942
  2,075
  2,213
  2,357
  2,507
  2,663
  2,825
  2,994
  3,170
  3,354
  3,546
  3,746
  3,955
  4,173
  4,402
  4,640
  4,890
  5,151
  5,425
  5,711
Revenue / Adjusted assets
  0.936
  0.935
  0.937
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
Average production assets, $m
  196
  217
  240
  263
  287
  313
  340
  367
  396
  426
  457
  489
  522
  557
  593
  631
  670
  711
  754
  798
  844
  893
  943
  996
  1,051
  1,108
  1,168
  1,231
  1,297
  1,366
  1,438
Working capital, $m
  470
  71
  78
  86
  94
  102
  111
  120
  129
  139
  149
  160
  171
  182
  194
  206
  219
  233
  247
  261
  276
  292
  309
  326
  344
  363
  382
  403
  424
  447
  470
Total debt, $m
  286
  331
  377
  426
  478
  531
  587
  644
  705
  767
  832
  899
  969
  1,042
  1,118
  1,197
  1,279
  1,365
  1,454
  1,547
  1,643
  1,745
  1,850
  1,960
  2,075
  2,196
  2,321
  2,453
  2,591
  2,735
  2,886
Total liabilities, $m
  410
  455
  501
  550
  602
  655
  711
  768
  829
  891
  956
  1,023
  1,093
  1,166
  1,242
  1,321
  1,403
  1,489
  1,578
  1,671
  1,767
  1,869
  1,974
  2,084
  2,199
  2,320
  2,445
  2,577
  2,715
  2,859
  3,010
Total equity, $m
  774
  408
  450
  494
  540
  588
  638
  690
  744
  800
  858
  919
  981
  1,047
  1,115
  1,186
  1,259
  1,336
  1,416
  1,499
  1,586
  1,677
  1,772
  1,871
  1,974
  2,082
  2,195
  2,313
  2,437
  2,566
  2,701
Total liabilities and equity, $m
  1,184
  863
  951
  1,044
  1,142
  1,243
  1,349
  1,458
  1,573
  1,691
  1,814
  1,942
  2,074
  2,213
  2,357
  2,507
  2,662
  2,825
  2,994
  3,170
  3,353
  3,546
  3,746
  3,955
  4,173
  4,402
  4,640
  4,890
  5,152
  5,425
  5,711
Debt-to-equity ratio
  0.370
  0.810
  0.840
  0.860
  0.880
  0.900
  0.920
  0.930
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.020
  1.020
  1.030
  1.030
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
Adjusted equity ratio
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  110
  110
  123
  137
  152
  167
  183
  199
  216
  234
  252
  293
  313
  334
  355
  378
  401
  425
  450
  477
  504
  533
  562
  594
  626
  660
  696
  733
  772
  813
  856
Depreciation, amort., depletion, $m
  45
  50
  52
  54
  56
  59
  61
  63
  66
  69
  71
  44
  47
  50
  53
  56
  60
  64
  67
  71
  75
  80
  84
  89
  94
  99
  104
  110
  116
  122
  128
Funds from operations, $m
  139
  160
  175
  191
  208
  225
  244
  262
  282
  302
  323
  337
  360
  384
  408
  434
  461
  489
  518
  548
  579
  612
  647
  683
  720
  759
  800
  843
  888
  935
  984
Change in working capital, $m
  -30
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  169
  153
  168
  184
  200
  217
  235
  253
  273
  293
  313
  327
  349
  372
  396
  422
  448
  475
  504
  533
  564
  596
  630
  665
  702
  740
  781
  822
  866
  912
  960
Maintenance CAPEX, $m
  0
  -18
  -19
  -21
  -23
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -64
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
New CAPEX, $m
  -32
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -53
  -55
  -57
  -60
  -63
  -66
  -69
  -72
Cash from investing activities, $m
  -78
  -39
  -41
  -44
  -47
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -82
  -86
  -91
  -95
  -101
  -107
  -111
  -117
  -123
  -130
  -137
  -144
  -151
  -159
  -167
  -176
  -185
  -194
Free cash flow, $m
  91
  114
  126
  139
  152
  166
  180
  195
  211
  227
  244
  254
  272
  291
  311
  331
  352
  375
  398
  422
  447
  473
  500
  528
  558
  589
  621
  655
  691
  728
  766
Issuance/(repayment) of debt, $m
  -2
  45
  47
  49
  51
  53
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
Issuance/(repurchase) of shares, $m
  -76
  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 from financing (excl. dividends), $m  
  -78
  45
  47
  49
  51
  53
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
Total cash flow (excl. dividends), $m
  11
  159
  173
  188
  203
  219
  236
  253
  271
  290
  309
  321
  342
  364
  386
  410
  434
  460
  487
  515
  544
  574
  606
  639
  673
  709
  747
  787
  828
  872
  917
Retained Cash Flow (-), $m
  -97
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -124
  -129
  -135
Prev. year cash balance distribution, $m
 
  406
  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
 
  525
  131
  144
  157
  171
  186
  201
  217
  234
  251
  260
  279
  298
  318
  339
  361
  383
  407
  431
  457
  483
  511
  540
  570
  601
  634
  669
  705
  742
  782
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
 
  503
  120
  125
  130
  133
  135
  136
  136
  134
  132
  124
  119
  113
  107
  100
  92
  83
  75
  66
  58
  50
  42
  35
  29
  23
  19
  14
  11
  8
  6
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Integrated Device Technology, Inc. develops system-level solutions that optimize its customers' applications. The Company operates through two segments: the Communications, and the Computing, Consumer and Industrial. It offers products in radio frequency (RF), timing, wireless power transfer, serial switching, interfaces and sensing solutions. It offers a range of mixed-signal solutions for the communications, computing, consumer, automotive and industrial segments. These products are used for development in areas, such as fourth generation (4G) infrastructure, network communications, cloud datacenters and power management for computing and mobile devices. It offers solutions in designing communications, computing, consumer, automotive and industrial applications. It markets its products to original equipment manufacturers (OEMs) through a range of channels, including direct sales, distributors and electronic manufacturing suppliers (EMSs).

FINANCIAL RATIOS  of  Integrated Device Technology (IDTI)

Valuation Ratios
P/E Ratio 41
Price to Sales 6.2
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 26.7
Price to Free Cash Flow 32.9
Growth Rates
Sales Growth Rate 4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18.5%
Cap. Spend. - 3 Yr. Gr. Rate 13.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 37%
Total Debt to Equity 37%
Interest Coverage 34
Management Effectiveness
Return On Assets 9.9%
Ret/ On Assets - 3 Yr. Avg. 13.4%
Return On Total Capital 11%
Ret/ On T. Cap. - 3 Yr. Avg. 15.3%
Return On Equity 15.2%
Return On Equity - 3 Yr. Avg. 18%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 57.8%
Gross Margin - 3 Yr. Avg. 59.5%
EBITDA Margin 20.2%
EBITDA Margin - 3 Yr. Avg. 23%
Operating Margin 15.1%
Oper. Margin - 3 Yr. Avg. 18%
Pre-Tax Margin 13.6%
Pre-Tax Margin - 3 Yr. Avg. 17.7%
Net Profit Margin 15.1%
Net Profit Margin - 3 Yr. Avg. 19.8%
Effective Tax Rate -10.1%
Eff/ Tax Rate - 3 Yr. Avg. -18.3%
Payout Ratio 0%

IDTI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IDTI stock intrinsic value calculation we used $728 million for the last fiscal year's total revenue generated by Integrated Device Technology. The default revenue input number comes from 2017 income statement of Integrated Device 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 IDTI stock valuation model: a) initial revenue growth rate of 10.9% 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 IDTI is calculated based on our internal credit rating of Integrated Device 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 Integrated Device 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 IDTI stock the variable cost ratio is equal to 80.5%.

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 IDTI 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 Integrated Device Technology.

Corporate tax rate of 27% is the nominal tax rate for Integrated Device 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 IDTI 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 IDTI are equal to 26.9%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Integrated Device 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 IDTI is equal to 8.8%. 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 - $774 million for Integrated Device 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 135.217 million for Integrated Device 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 Integrated Device Technology at the current share price and the inputted number of shares is $4.6 billion.

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COMPANY NEWS

▶ IDT Introduces Timing Solutions for Cavium Processors   [Dec-18-17 03:36PM  PR Newswire]
▶ Qualcomm Slumps On Apple News; IDT Jumps On Earnings Beat   [04:51PM  Investor's Business Daily]
▶ Integrated Device Tech tops Street 2Q forecasts   [Oct-30-17 05:11PM  Associated Press]
▶ Integrated Device Technology Could Rally 25% From Here   [Oct-26-17 02:01PM  TheStreet.com]
▶ IDT Introduces Low Power UWB Motion Sensor   [Oct-25-17 02:44PM  Marketwired]
▶ Integrated Device Technology Sees IBD RS Rating Rise To 71   [03:00AM  Investor's Business Daily]
▶ Integrated Device Technology Earns Relative Strength Rating Upgrade   [Oct-03-17 03:00AM  Investor's Business Daily]
▶ Stocks Flat But Amazon.com, These Chip Stocks Make Interesting Moves   [Sep-13-17 03:04PM  Investor's Business Daily]
▶ Samsung Selects IDT Wireless Power for Galaxy Note8   [Sep-11-17 07:06AM  Marketwired]
▶ Integrated Device Tech beats Street 1Q forecasts   [Jul-31-17 09:51PM  Associated Press]
▶ [$$] Intel Suppliers Boosted by iPhone Uncertainty   [Jul-12-17 03:37PM  Barrons.com]
▶ New Strong Buy Stocks for July 5th   [Jul-05-17 10:07AM  Zacks]
Financial statements of IDTI
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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