Intrinsic value of IPG Photonics - IPGP

Previous Close

$153.92

  Intrinsic Value

$288.08

stock screener

  Rating & Target

str. buy

+87%

  Value-price divergence*

-47%

Previous close

$153.92

 
Intrinsic value

$288.08

 
Up/down potential

+87%

 
Rating

str. buy

 
Value-price divergence*

-47%

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

We calculate the intrinsic value of IPGP 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 8.0

 

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, %
  11.65
  38.20
  34.88
  31.89
  29.20
  26.78
  24.60
  22.64
  20.88
  19.29
  17.86
  16.58
  15.42
  14.38
  13.44
  12.60
  11.84
  11.15
  10.54
  9.98
  9.48
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
Revenue, $m
  1,006
  1,390
  1,875
  2,473
  3,196
  4,051
  5,048
  6,191
  7,484
  8,928
  10,523
  12,267
  14,158
  16,194
  18,370
  20,683
  23,131
  25,711
  28,420
  31,257
  34,222
  37,315
  40,536
  43,888
  47,374
  50,997
  54,762
  58,675
  62,742
  66,969
  71,365
Variable operating expenses, $m
 
  861
  1,161
  1,531
  1,977
  2,506
  3,122
  3,828
  4,627
  5,519
  6,505
  7,581
  8,750
  10,008
  11,353
  12,783
  14,296
  15,890
  17,564
  19,317
  21,150
  23,061
  25,052
  27,123
  29,278
  31,517
  33,844
  36,262
  38,775
  41,388
  44,104
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
  642
  861
  1,161
  1,531
  1,977
  2,506
  3,122
  3,828
  4,627
  5,519
  6,505
  7,581
  8,750
  10,008
  11,353
  12,783
  14,296
  15,890
  17,564
  19,317
  21,150
  23,061
  25,052
  27,123
  29,278
  31,517
  33,844
  36,262
  38,775
  41,388
  44,104
Operating income, $m
  364
  529
  714
  943
  1,219
  1,546
  1,926
  2,363
  2,857
  3,408
  4,017
  4,686
  5,408
  6,186
  7,017
  7,901
  8,836
  9,821
  10,856
  11,940
  13,072
  14,254
  15,484
  16,765
  18,096
  19,480
  20,919
  22,413
  23,967
  25,581
  27,260
EBITDA, $m
  415
  580
  782
  1,032
  1,333
  1,690
  2,106
  2,583
  3,122
  3,725
  4,390
  5,118
  5,907
  6,756
  7,664
  8,629
  9,650
  10,726
  11,857
  13,040
  14,277
  15,567
  16,911
  18,310
  19,764
  21,275
  22,846
  24,479
  26,175
  27,939
  29,772
Interest expense (income), $m
  1
  1
  4
  8
  13
  19
  26
  34
  43
  53
  65
  77
  91
  106
  122
  140
  158
  178
  198
  220
  243
  266
  291
  317
  343
  371
  400
  430
  461
  494
  527
Earnings before tax, $m
  367
  528
  710
  934
  1,206
  1,527
  1,901
  2,329
  2,814
  3,355
  3,953
  4,609
  5,317
  6,080
  6,895
  7,761
  8,678
  9,644
  10,658
  11,720
  12,830
  13,988
  15,193
  16,448
  17,753
  19,109
  20,519
  21,983
  23,505
  25,088
  26,733
Tax expense, $m
  106
  142
  192
  252
  326
  412
  513
  629
  760
  906
  1,067
  1,244
  1,436
  1,641
  1,862
  2,095
  2,343
  2,604
  2,878
  3,164
  3,464
  3,777
  4,102
  4,441
  4,793
  5,159
  5,540
  5,935
  6,346
  6,774
  7,218
Net income, $m
  261
  385
  518
  682
  880
  1,115
  1,388
  1,700
  2,054
  2,449
  2,886
  3,364
  3,881
  4,438
  5,033
  5,666
  6,335
  7,040
  7,780
  8,556
  9,366
  10,211
  11,091
  12,007
  12,960
  13,950
  14,979
  16,048
  17,159
  18,314
  19,515

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  831
  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
  1,790
  1,325
  1,788
  2,358
  3,046
  3,862
  4,812
  5,902
  7,134
  8,511
  10,031
  11,694
  13,497
  15,437
  17,512
  19,717
  22,051
  24,510
  27,093
  29,797
  32,624
  35,572
  38,642
  41,838
  45,161
  48,615
  52,204
  55,934
  59,811
  63,841
  68,031
Adjusted assets (=assets-cash), $m
  959
  1,325
  1,788
  2,358
  3,046
  3,862
  4,812
  5,902
  7,134
  8,511
  10,031
  11,694
  13,497
  15,437
  17,512
  19,717
  22,051
  24,510
  27,093
  29,797
  32,624
  35,572
  38,642
  41,838
  45,161
  48,615
  52,204
  55,934
  59,811
  63,841
  68,031
Revenue / Adjusted assets
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
  1.049
Average production assets, $m
  355
  489
  660
  871
  1,125
  1,426
  1,777
  2,179
  2,634
  3,143
  3,704
  4,318
  4,984
  5,700
  6,466
  7,281
  8,142
  9,050
  10,004
  11,003
  12,046
  13,135
  14,269
  15,449
  16,676
  17,951
  19,276
  20,654
  22,085
  23,573
  25,120
Working capital, $m
  1,143
  435
  587
  774
  1,000
  1,268
  1,580
  1,938
  2,342
  2,794
  3,294
  3,839
  4,431
  5,069
  5,750
  6,474
  7,240
  8,048
  8,896
  9,784
  10,712
  11,679
  12,688
  13,737
  14,828
  15,962
  17,141
  18,365
  19,638
  20,961
  22,337
Total debt, $m
  41
  126
  236
  373
  537
  732
  959
  1,220
  1,514
  1,843
  2,206
  2,604
  3,035
  3,498
  3,994
  4,521
  5,079
  5,667
  6,284
  6,931
  7,606
  8,311
  9,045
  9,808
  10,602
  11,428
  12,286
  13,177
  14,104
  15,067
  16,068
Total liabilities, $m
  232
  317
  427
  564
  728
  923
  1,150
  1,411
  1,705
  2,034
  2,397
  2,795
  3,226
  3,689
  4,185
  4,712
  5,270
  5,858
  6,475
  7,122
  7,797
  8,502
  9,236
  9,999
  10,793
  11,619
  12,477
  13,368
  14,295
  15,258
  16,259
Total equity, $m
  1,558
  1,009
  1,360
  1,794
  2,318
  2,939
  3,662
  4,491
  5,429
  6,477
  7,634
  8,899
  10,271
  11,748
  13,326
  15,005
  16,781
  18,652
  20,618
  22,676
  24,827
  27,070
  29,407
  31,839
  34,367
  36,996
  39,728
  42,566
  45,516
  48,583
  51,772
Total liabilities and equity, $m
  1,790
  1,326
  1,787
  2,358
  3,046
  3,862
  4,812
  5,902
  7,134
  8,511
  10,031
  11,694
  13,497
  15,437
  17,511
  19,717
  22,051
  24,510
  27,093
  29,798
  32,624
  35,572
  38,643
  41,838
  45,160
  48,615
  52,205
  55,934
  59,811
  63,841
  68,031
Debt-to-equity ratio
  0.026
  0.120
  0.170
  0.210
  0.230
  0.250
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
Adjusted equity ratio
  0.758
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  261
  385
  518
  682
  880
  1,115
  1,388
  1,700
  2,054
  2,449
  2,886
  3,364
  3,881
  4,438
  5,033
  5,666
  6,335
  7,040
  7,780
  8,556
  9,366
  10,211
  11,091
  12,007
  12,960
  13,950
  14,979
  16,048
  17,159
  18,314
  19,515
Depreciation, amort., depletion, $m
  51
  51
  68
  89
  114
  145
  180
  220
  265
  316
  372
  432
  498
  570
  647
  728
  814
  905
  1,000
  1,100
  1,205
  1,313
  1,427
  1,545
  1,668
  1,795
  1,928
  2,065
  2,209
  2,357
  2,512
Funds from operations, $m
  212
  436
  586
  771
  995
  1,259
  1,567
  1,920
  2,320
  2,766
  3,258
  3,796
  4,380
  5,008
  5,680
  6,394
  7,149
  7,945
  8,781
  9,656
  10,570
  11,524
  12,518
  13,552
  14,627
  15,745
  16,906
  18,113
  19,367
  20,671
  22,027
Change in working capital, $m
  -80
  120
  152
  187
  226
  268
  312
  358
  405
  452
  499
  546
  592
  637
  681
  724
  766
  807
  848
  888
  928
  968
  1,008
  1,049
  1,091
  1,134
  1,179
  1,225
  1,273
  1,323
  1,376
Cash from operations, $m
  292
  316
  434
  584
  769
  991
  1,255
  1,563
  1,915
  2,314
  2,759
  3,250
  3,788
  4,371
  4,999
  5,669
  6,383
  7,137
  7,933
  8,768
  9,642
  10,556
  11,510
  12,503
  13,536
  14,611
  15,728
  16,888
  18,095
  19,348
  20,651
Maintenance CAPEX, $m
  0
  -35
  -49
  -66
  -87
  -112
  -143
  -178
  -218
  -263
  -314
  -370
  -432
  -498
  -570
  -647
  -728
  -814
  -905
  -1,000
  -1,100
  -1,205
  -1,313
  -1,427
  -1,545
  -1,668
  -1,795
  -1,928
  -2,065
  -2,209
  -2,357
New CAPEX, $m
  -127
  -135
  -171
  -211
  -254
  -301
  -351
  -402
  -455
  -508
  -561
  -614
  -666
  -716
  -766
  -814
  -862
  -908
  -954
  -999
  -1,044
  -1,089
  -1,134
  -1,180
  -1,227
  -1,275
  -1,325
  -1,377
  -1,431
  -1,488
  -1,547
Cash from investing activities, $m
  -274
  -170
  -220
  -277
  -341
  -413
  -494
  -580
  -673
  -771
  -875
  -984
  -1,098
  -1,214
  -1,336
  -1,461
  -1,590
  -1,722
  -1,859
  -1,999
  -2,144
  -2,294
  -2,447
  -2,607
  -2,772
  -2,943
  -3,120
  -3,305
  -3,496
  -3,697
  -3,904
Free cash flow, $m
  18
  146
  215
  308
  427
  578
  762
  983
  1,242
  1,542
  1,883
  2,266
  2,690
  3,156
  3,662
  4,208
  4,793
  5,415
  6,074
  6,769
  7,499
  8,263
  9,062
  9,896
  10,764
  11,668
  12,607
  13,583
  14,598
  15,652
  16,747
Issuance/(repayment) of debt, $m
  21
  88
  110
  136
  165
  195
  227
  260
  295
  329
  363
  397
  431
  464
  496
  527
  558
  588
  617
  646
  675
  705
  734
  764
  794
  826
  858
  891
  927
  963
  1,001
Issuance/(repurchase) of shares, $m
  7
  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  
  33
  88
  110
  136
  165
  195
  227
  260
  295
  329
  363
  397
  431
  464
  496
  527
  558
  588
  617
  646
  675
  705
  734
  764
  794
  826
  858
  891
  927
  963
  1,001
Total cash flow (excl. dividends), $m
  41
  233
  325
  444
  592
  773
  989
  1,243
  1,537
  1,871
  2,247
  2,663
  3,121
  3,620
  4,158
  4,736
  5,351
  6,003
  6,691
  7,415
  8,174
  8,968
  9,796
  10,660
  11,558
  12,493
  13,465
  14,475
  15,524
  16,615
  17,748
Retained Cash Flow (-), $m
  -298
  -279
  -352
  -434
  -524
  -621
  -723
  -829
  -938
  -1,047
  -1,157
  -1,265
  -1,372
  -1,477
  -1,579
  -1,678
  -1,776
  -1,871
  -1,965
  -2,058
  -2,151
  -2,243
  -2,337
  -2,432
  -2,529
  -2,629
  -2,732
  -2,839
  -2,950
  -3,067
  -3,189
Prev. year cash balance distribution, $m
 
  828
  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
 
  783
  -26
  10
  68
  152
  266
  414
  599
  824
  1,090
  1,398
  1,749
  2,143
  2,580
  3,057
  3,575
  4,131
  4,726
  5,357
  6,023
  6,724
  7,459
  8,228
  9,030
  9,865
  10,733
  11,636
  12,574
  13,548
  14,559
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
 
  750
  -24
  9
  56
  118
  193
  280
  374
  473
  571
  664
  746
  815
  866
  898
  908
  899
  870
  825
  765
  696
  619
  539
  460
  384
  313
  250
  195
  148
  110
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

IPG Photonics Corporation develops and manufactures a range of high-performance fiber lasers, fiber amplifiers, and diode lasers used in various applications, primarily in materials processing worldwide. The company's laser products include low, medium, and high power lasers; fiber pigtailed packaged diodes and fiber coupled direct diode laser systems; high-energy pulsed lasers, multi-wavelength and tunable lasers, and single-polarization and single-frequency lasers; laser diode chips and packaged laser diodes; and high power optical fiber delivery cables, fiber couplers, beam switches, chillers, scanners, and other accessories. It also provides erbium-doped fiber and Raman amplifiers, and integrated communications systems, which are deployed in broadband networks, such as fiber to the home, fiber to the curb, passive optical networks, and dense wavelength division multiplexing networks; ytterbium and thulium specialty fiber amplifiers and broadband light sources; and single-frequency, linearly polarized, and polarization-maintaining versions of its amplifier products. In addition, the company offers integrated laser systems, industrial grade ultra violet excimers, and diode pumped solid state and picosecond laser micromachining systems; specialized fiber laser systems for material processing applications; and welding seam stepper and picker, a fiber laser welding tool for use in automotive assembly, appliances, rail cars, and other sheet metal fabrication. Its lasers and amplifiers are also used in advanced, communications, and medical applications. The company markets its products to original equipment manufacturers, system integrators, and end users through direct sales force, as well as through agreements with independent sales representatives and distributors. IPG Photonics Corporation was founded in 1990 and is headquartered in Oxford, Massachusetts.

FINANCIAL RATIOS  of  IPG Photonics (IPGP)

Valuation Ratios
P/E Ratio 31.4
Price to Sales 8.1
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow 28.1
Price to Free Cash Flow 49.7
Growth Rates
Sales Growth Rate 11.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 81.4%
Cap. Spend. - 3 Yr. Gr. Rate 12.3%
Financial Strength
Quick Ratio 277
Current Ratio 0
LT Debt to Equity 2.4%
Total Debt to Equity 2.6%
Interest Coverage 368
Management Effectiveness
Return On Assets 16.1%
Ret/ On Assets - 3 Yr. Avg. 17.3%
Return On Total Capital 18.1%
Ret/ On T. Cap. - 3 Yr. Avg. 19.4%
Return On Equity 18.5%
Return On Equity - 3 Yr. Avg. 19.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 54.9%
Gross Margin - 3 Yr. Avg. 54.5%
EBITDA Margin 41.7%
EBITDA Margin - 3 Yr. Avg. 42%
Operating Margin 36.2%
Oper. Margin - 3 Yr. Avg. 37%
Pre-Tax Margin 36.5%
Pre-Tax Margin - 3 Yr. Avg. 37.1%
Net Profit Margin 25.9%
Net Profit Margin - 3 Yr. Avg. 26.3%
Effective Tax Rate 28.9%
Eff/ Tax Rate - 3 Yr. Avg. 29.2%
Payout Ratio 0%

IPGP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IPGP stock intrinsic value calculation we used $1006 million for the last fiscal year's total revenue generated by IPG Photonics. The default revenue input number comes from 2016 income statement of IPG Photonics. 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 IPGP stock valuation model: a) initial revenue growth rate of 38.2% 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 IPGP is calculated based on our internal credit rating of IPG Photonics, 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 IPG Photonics.
    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 IPGP stock the variable cost ratio is equal to 62%.

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 IPGP 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 IPG Photonics.

Corporate tax rate of 27% is the nominal tax rate for IPG Photonics. 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 IPGP 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 IPGP are equal to 35.2%.

Life of production assets of 10 years is the average useful life of capital assets used in IPG Photonics 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 IPGP is equal to 31.3%. 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 - $1558 million for IPG Photonics - 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 52.091 million for IPG Photonics 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 IPG Photonics at the current share price and the inputted number of shares is $8.0 billion.

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Stock chart of IPGP Financial statements of IPGP Annual reports of IPGP
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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