Intrinsic value of Lightpath Technologies Cl A - LPTH

Previous Close

$2.70

  Intrinsic Value

$99.40

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+5000%

Previous close

$2.70

 
Intrinsic value

$99.40

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

We calculate the intrinsic value of LPTH 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 0.1

 

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, %
  21.43
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  17
  27
  42
  63
  91
  129
  177
  237
  312
  401
  507
  629
  769
  927
  1,103
  1,297
  1,509
  1,738
  1,984
  2,247
  2,527
  2,822
  3,133
  3,459
  3,801
  4,158
  4,530
  4,917
  5,320
  5,739
  6,175
Variable operating expenses, $m
 
  10
  15
  22
  32
  45
  62
  84
  110
  142
  179
  222
  272
  327
  389
  458
  533
  614
  700
  793
  892
  996
  1,106
  1,221
  1,342
  1,468
  1,599
  1,736
  1,878
  2,026
  2,180
Fixed operating expenses, $m
 
  9
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  18
  19
Total operating expenses, $m
  15
  19
  24
  32
  42
  55
  72
  95
  121
  153
  191
  234
  284
  339
  402
  471
  546
  628
  714
  807
  907
  1,011
  1,121
  1,237
  1,358
  1,485
  1,616
  1,754
  1,896
  2,044
  2,199
Operating income, $m
  2
  8
  18
  31
  49
  73
  104
  143
  191
  248
  316
  395
  486
  587
  701
  826
  963
  1,111
  1,270
  1,440
  1,620
  1,811
  2,011
  2,222
  2,443
  2,673
  2,914
  3,164
  3,424
  3,695
  3,976
EBITDA, $m
  3
  9
  19
  32
  51
  76
  108
  148
  198
  258
  328
  410
  504
  609
  727
  857
  998
  1,152
  1,316
  1,492
  1,679
  1,877
  2,085
  2,304
  2,532
  2,771
  3,020
  3,279
  3,549
  3,830
  4,121
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  18
  20
  23
  26
  29
  32
  35
  39
  43
  46
  50
  55
  59
Earnings before tax, $m
  2
  8
  18
  31
  49
  72
  103
  141
  188
  245
  312
  390
  479
  580
  692
  815
  950
  1,095
  1,252
  1,419
  1,597
  1,785
  1,983
  2,190
  2,407
  2,634
  2,871
  3,117
  3,374
  3,640
  3,917
Tax expense, $m
  1
  2
  5
  8
  13
  20
  28
  38
  51
  66
  84
  105
  129
  157
  187
  220
  256
  296
  338
  383
  431
  482
  535
  591
  650
  711
  775
  842
  911
  983
  1,058
Net income, $m
  1
  6
  13
  22
  35
  53
  75
  103
  138
  179
  228
  285
  350
  423
  505
  595
  693
  800
  914
  1,036
  1,166
  1,303
  1,447
  1,599
  1,757
  1,923
  2,096
  2,276
  2,463
  2,657
  2,860

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3
  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
  16
  21
  32
  48
  70
  98
  135
  182
  238
  307
  387
  481
  588
  709
  843
  992
  1,154
  1,329
  1,517
  1,718
  1,932
  2,157
  2,395
  2,645
  2,906
  3,179
  3,463
  3,759
  4,067
  4,388
  4,721
Adjusted assets (=assets-cash), $m
  13
  21
  32
  48
  70
  98
  135
  182
  238
  307
  387
  481
  588
  709
  843
  992
  1,154
  1,329
  1,517
  1,718
  1,932
  2,157
  2,395
  2,645
  2,906
  3,179
  3,463
  3,759
  4,067
  4,388
  4,721
Revenue / Adjusted assets
  1.308
  1.286
  1.313
  1.313
  1.300
  1.316
  1.311
  1.302
  1.311
  1.306
  1.310
  1.308
  1.308
  1.307
  1.308
  1.307
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
  1.308
Average production assets, $m
  4
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  259
  305
  355
  408
  466
  528
  594
  663
  736
  813
  893
  977
  1,064
  1,156
  1,250
  1,349
  1,451
Working capital, $m
  8
  8
  12
  18
  27
  38
  52
  70
  92
  118
  149
  185
  226
  273
  324
  381
  444
  511
  583
  661
  743
  830
  921
  1,017
  1,117
  1,222
  1,332
  1,446
  1,564
  1,687
  1,815
Total debt, $m
  0
  3
  7
  13
  22
  33
  47
  65
  87
  113
  144
  180
  221
  268
  320
  377
  439
  507
  579
  656
  739
  826
  917
  1,013
  1,114
  1,219
  1,328
  1,442
  1,561
  1,684
  1,813
Total liabilities, $m
  5
  8
  12
  18
  27
  38
  52
  70
  92
  118
  149
  185
  226
  273
  325
  382
  444
  512
  584
  661
  744
  831
  922
  1,018
  1,119
  1,224
  1,333
  1,447
  1,566
  1,689
  1,818
Total equity, $m
  11
  13
  20
  30
  43
  60
  83
  112
  147
  189
  238
  296
  362
  436
  519
  610
  709
  817
  933
  1,057
  1,188
  1,327
  1,473
  1,626
  1,787
  1,955
  2,130
  2,312
  2,501
  2,699
  2,903
Total liabilities and equity, $m
  16
  21
  32
  48
  70
  98
  135
  182
  239
  307
  387
  481
  588
  709
  844
  992
  1,153
  1,329
  1,517
  1,718
  1,932
  2,158
  2,395
  2,644
  2,906
  3,179
  3,463
  3,759
  4,067
  4,388
  4,721
Debt-to-equity ratio
  0.000
  0.240
  0.370
  0.460
  0.510
  0.540
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
Adjusted equity ratio
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  6
  13
  22
  35
  53
  75
  103
  138
  179
  228
  285
  350
  423
  505
  595
  693
  800
  914
  1,036
  1,166
  1,303
  1,447
  1,599
  1,757
  1,923
  2,096
  2,276
  2,463
  2,657
  2,860
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  2
  3
  4
  6
  7
  9
  12
  15
  18
  22
  26
  30
  35
  41
  47
  53
  59
  66
  74
  81
  89
  98
  106
  116
  125
  135
  145
Funds from operations, $m
  1
  7
  14
  24
  38
  56
  79
  109
  145
  188
  240
  300
  368
  445
  531
  625
  729
  841
  961
  1,089
  1,225
  1,369
  1,521
  1,680
  1,847
  2,021
  2,202
  2,391
  2,588
  2,792
  3,005
Change in working capital, $m
  -1
  3
  4
  6
  8
  11
  14
  18
  22
  26
  31
  36
  41
  46
  52
  57
  62
  67
  72
  77
  82
  87
  91
  96
  100
  105
  109
  114
  119
  123
  128
Cash from operations, $m
  2
  4
  9
  18
  29
  45
  65
  91
  123
  162
  209
  264
  327
  399
  479
  568
  666
  773
  888
  1,012
  1,143
  1,282
  1,430
  1,584
  1,746
  1,916
  2,093
  2,277
  2,469
  2,669
  2,877
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -2
  -3
  -4
  -6
  -7
  -9
  -12
  -15
  -18
  -22
  -26
  -30
  -35
  -41
  -47
  -53
  -59
  -66
  -74
  -81
  -89
  -98
  -106
  -116
  -125
  -135
New CAPEX, $m
  -1
  -2
  -3
  -5
  -7
  -9
  -11
  -14
  -17
  -21
  -25
  -29
  -33
  -37
  -41
  -46
  -50
  -54
  -58
  -62
  -66
  -69
  -73
  -77
  -80
  -84
  -87
  -91
  -95
  -98
  -102
Cash from investing activities, $m
  -1
  -2
  -4
  -6
  -8
  -11
  -14
  -18
  -23
  -28
  -34
  -41
  -48
  -55
  -63
  -72
  -80
  -89
  -99
  -109
  -119
  -128
  -139
  -151
  -161
  -173
  -185
  -197
  -211
  -223
  -237
Free cash flow, $m
  1
  1
  5
  12
  21
  34
  51
  73
  100
  134
  175
  223
  279
  343
  416
  497
  586
  684
  790
  903
  1,025
  1,154
  1,290
  1,434
  1,585
  1,743
  1,908
  2,080
  2,259
  2,446
  2,639
Issuance/(repayment) of debt, $m
  0
  3
  4
  6
  8
  11
  14
  18
  22
  26
  31
  36
  41
  46
  52
  57
  62
  67
  73
  77
  82
  87
  92
  96
  101
  105
  110
  114
  119
  123
  128
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  0
  3
  4
  6
  8
  11
  14
  18
  22
  26
  31
  36
  41
  46
  52
  57
  62
  67
  73
  77
  82
  87
  92
  96
  101
  105
  110
  114
  119
  123
  128
Total cash flow (excl. dividends), $m
  1
  4
  10
  18
  29
  45
  65
  90
  122
  160
  206
  259
  320
  390
  468
  554
  649
  751
  862
  981
  1,107
  1,241
  1,382
  1,530
  1,685
  1,848
  2,017
  2,194
  2,378
  2,569
  2,768
Retained Cash Flow (-), $m
  -3
  -5
  -7
  -10
  -13
  -18
  -23
  -28
  -35
  -42
  -50
  -58
  -66
  -74
  -83
  -91
  -100
  -108
  -116
  -124
  -131
  -139
  -146
  -153
  -161
  -168
  -175
  -182
  -190
  -197
  -205
Prev. year cash balance distribution, $m
 
  3
  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
 
  2
  3
  8
  16
  27
  42
  62
  87
  118
  156
  201
  254
  316
  385
  463
  549
  643
  746
  857
  976
  1,102
  1,235
  1,376
  1,525
  1,680
  1,842
  2,012
  2,188
  2,372
  2,563
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
 
  2
  3
  7
  13
  21
  31
  42
  54
  68
  82
  96
  109
  120
  129
  136
  140
  140
  137
  132
  124
  114
  103
  90
  78
  65
  54
  43
  34
  26
  19
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

LightPath Technologies, Inc. designs, develops, manufactures, and distributes optical components and assemblies. The company offers precision molded glass aspheric optics, infrared aspheric lenses, GRADIUM glass lenses, and other optical materials used to produce products that manipulate light. Its products are used in various industries, including defense products, medical devices, laser aided industrial tools, automotive safety applications, barcode scanners, optical data storage, hybrid fiber coax datacom, telecommunications, machine vision and sensors, and other industries. The company sells its products directly to customers in North America and China, as well as through distributors and channel partners in Europe, the United States, and internationally. LightPath Technologies, Inc. was founded in 1985 and is headquartered in Orlando, Florida.


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FINANCIAL RATIOS  of  Lightpath Technologies Cl A (LPTH)

Valuation Ratios
P/E Ratio 42.1
Price to Sales 2.5
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 21
Price to Free Cash Flow 42.1
Growth Rates
Sales Growth Rate 21.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
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 6.9%
Ret/ On Assets - 3 Yr. Avg. -0.5%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. -0.8%
Return On Equity 10.5%
Return On Equity - 3 Yr. Avg. -0.9%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 52.9%
Gross Margin - 3 Yr. Avg. 45.8%
EBITDA Margin 17.6%
EBITDA Margin - 3 Yr. Avg. 8.7%
Operating Margin 11.8%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 11.8%
Pre-Tax Margin - 3 Yr. Avg. 1.5%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. -0.4%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

LPTH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LPTH stock intrinsic value calculation we used $17 million for the last fiscal year's total revenue generated by Lightpath Technologies Cl A. The default revenue input number comes from 2016 income statement of Lightpath Technologies Cl A. 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 LPTH stock valuation model: a) initial revenue growth rate of 60% 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 LPTH is calculated based on our internal credit rating of Lightpath Technologies Cl A, 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 Lightpath Technologies Cl A.
    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 LPTH stock the variable cost ratio is equal to 35.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9 million in the base year in the intrinsic value calculation for LPTH 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 Lightpath Technologies Cl A.

Corporate tax rate of 27% is the nominal tax rate for Lightpath Technologies Cl A. 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 LPTH 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 LPTH are equal to 23.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Lightpath Technologies Cl A 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 LPTH is equal to 29.4%. 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 - $11 million for Lightpath Technologies Cl A - 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 22.665 million for Lightpath Technologies Cl A 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 Lightpath Technologies Cl A at the current share price and the inputted number of shares is $0.1 billion.

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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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