Intrinsic value of Lightpath Technologies Cl A - LPTH

Previous Close

$2.57

  Intrinsic Value

$3.27

stock screener

  Rating & Target

buy

+27%

Previous close

$2.57

 
Intrinsic value

$3.27

 
Up/down potential

+27%

 
Rating

buy

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 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 0.1

 

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, %
  64.71
  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
  28
  45
  69
  104
  150
  212
  291
  391
  513
  661
  834
  1,036
  1,267
  1,527
  1,817
  2,136
  2,485
  2,863
  3,268
  3,702
  4,162
  4,648
  5,160
  5,698
  6,260
  6,848
  7,461
  8,099
  8,763
  9,453
  10,171
Variable operating expenses, $m
 
  36
  56
  83
  121
  170
  234
  313
  411
  529
  668
  829
  1,013
  1,221
  1,453
  1,708
  1,987
  2,289
  2,613
  2,960
  3,327
  3,716
  4,126
  4,556
  5,005
  5,475
  5,965
  6,475
  7,006
  7,558
  8,132
Fixed operating expenses, $m
 
  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
  2
  2
  2
  2
Total operating expenses, $m
  24
  37
  57
  84
  122
  171
  235
  314
  412
  530
  669
  830
  1,014
  1,222
  1,454
  1,709
  1,988
  2,291
  2,615
  2,962
  3,329
  3,718
  4,128
  4,558
  5,007
  5,477
  5,967
  6,477
  7,008
  7,560
  8,134
Operating income, $m
  4
  7
  12
  19
  28
  41
  57
  77
  101
  131
  165
  206
  253
  305
  363
  427
  497
  572
  653
  740
  832
  930
  1,033
  1,140
  1,253
  1,371
  1,493
  1,621
  1,754
  1,893
  2,036
EBITDA, $m
  6
  11
  17
  26
  38
  53
  74
  100
  131
  169
  214
  266
  325
  392
  467
  549
  639
  736
  840
  952
  1,071
  1,196
  1,328
  1,466
  1,611
  1,762
  1,920
  2,085
  2,256
  2,433
  2,618
Interest expense (income), $m
  0
  0
  0
  1
  2
  2
  4
  5
  7
  10
  13
  16
  20
  25
  30
  36
  42
  49
  57
  65
  73
  83
  92
  103
  113
  125
  136
  149
  161
  175
  188
Earnings before tax, $m
  3
  7
  12
  18
  27
  38
  53
  71
  94
  121
  153
  190
  232
  280
  333
  391
  454
  523
  597
  676
  759
  847
  940
  1,038
  1,140
  1,246
  1,357
  1,473
  1,593
  1,718
  1,848
Tax expense, $m
  -5
  2
  3
  5
  7
  10
  14
  19
  25
  33
  41
  51
  63
  76
  90
  106
  123
  141
  161
  182
  205
  229
  254
  280
  308
  336
  366
  398
  430
  464
  499
Net income, $m
  8
  5
  9
  13
  20
  28
  39
  52
  68
  88
  111
  139
  170
  204
  243
  285
  332
  382
  436
  493
  554
  619
  686
  757
  832
  910
  991
  1,075
  1,163
  1,254
  1,349

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  47
  62
  96
  144
  209
  295
  406
  545
  715
  920
  1,162
  1,443
  1,764
  2,127
  2,530
  2,975
  3,461
  3,987
  4,552
  5,155
  5,796
  6,473
  7,187
  7,935
  8,719
  9,537
  10,391
  11,280
  12,204
  13,166
  14,165
Adjusted assets (=assets-cash), $m
  39
  62
  96
  144
  209
  295
  406
  545
  715
  920
  1,162
  1,443
  1,764
  2,127
  2,530
  2,975
  3,461
  3,987
  4,552
  5,155
  5,796
  6,473
  7,187
  7,935
  8,719
  9,537
  10,391
  11,280
  12,204
  13,166
  14,165
Revenue / Adjusted assets
  0.718
  0.726
  0.719
  0.722
  0.718
  0.719
  0.717
  0.717
  0.717
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
Average production assets, $m
  12
  19
  30
  44
  64
  91
  125
  168
  220
  283
  358
  445
  544
  655
  779
  916
  1,066
  1,228
  1,402
  1,588
  1,785
  1,994
  2,214
  2,444
  2,686
  2,938
  3,201
  3,474
  3,759
  4,055
  4,363
Working capital, $m
  14
  11
  17
  26
  38
  53
  73
  98
  128
  165
  209
  259
  317
  382
  454
  534
  621
  716
  817
  925
  1,040
  1,162
  1,290
  1,424
  1,565
  1,712
  1,865
  2,025
  2,191
  2,363
  2,543
Total debt, $m
  1
  10
  24
  43
  70
  105
  150
  207
  277
  361
  461
  576
  707
  856
  1,021
  1,204
  1,403
  1,619
  1,850
  2,098
  2,360
  2,638
  2,931
  3,237
  3,559
  3,894
  4,244
  4,609
  4,988
  5,382
  5,792
Total liabilities, $m
  17
  26
  40
  59
  86
  121
  166
  223
  293
  377
  477
  592
  723
  872
  1,037
  1,220
  1,419
  1,635
  1,866
  2,114
  2,376
  2,654
  2,947
  3,253
  3,575
  3,910
  4,260
  4,625
  5,004
  5,398
  5,808
Total equity, $m
  30
  37
  57
  85
  123
  174
  239
  321
  422
  543
  686
  852
  1,041
  1,255
  1,493
  1,755
  2,042
  2,352
  2,686
  3,042
  3,420
  3,819
  4,240
  4,682
  5,144
  5,627
  6,131
  6,655
  7,201
  7,768
  8,357
Total liabilities and equity, $m
  47
  63
  97
  144
  209
  295
  405
  544
  715
  920
  1,163
  1,444
  1,764
  2,127
  2,530
  2,975
  3,461
  3,987
  4,552
  5,156
  5,796
  6,473
  7,187
  7,935
  8,719
  9,537
  10,391
  11,280
  12,205
  13,166
  14,165
Debt-to-equity ratio
  0.033
  0.260
  0.410
  0.510
  0.570
  0.600
  0.630
  0.650
  0.660
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.564
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  5
  9
  13
  20
  28
  39
  52
  68
  88
  111
  139
  170
  204
  243
  285
  332
  382
  436
  493
  554
  619
  686
  757
  832
  910
  991
  1,075
  1,163
  1,254
  1,349
Depreciation, amort., depletion, $m
  2
  3
  5
  7
  9
  13
  17
  23
  30
  38
  48
  59
  72
  87
  104
  122
  142
  164
  187
  212
  238
  266
  295
  326
  358
  392
  427
  463
  501
  541
  582
Funds from operations, $m
  5
  9
  13
  20
  29
  41
  56
  75
  98
  127
  160
  198
  242
  292
  347
  408
  474
  546
  623
  705
  792
  884
  981
  1,083
  1,190
  1,301
  1,417
  1,538
  1,664
  1,795
  1,931
Change in working capital, $m
  0
  4
  6
  9
  12
  15
  20
  25
  31
  37
  43
  50
  58
  65
  72
  80
  87
  94
  101
  108
  115
  122
  128
  134
  141
  147
  153
  160
  166
  173
  179
Cash from operations, $m
  5
  4
  7
  11
  17
  25
  36
  50
  68
  90
  116
  148
  184
  227
  274
  328
  387
  451
  521
  597
  677
  763
  853
  949
  1,049
  1,154
  1,264
  1,379
  1,498
  1,622
  1,751
Maintenance CAPEX, $m
  0
  -2
  -3
  -4
  -6
  -9
  -12
  -17
  -22
  -29
  -38
  -48
  -59
  -72
  -87
  -104
  -122
  -142
  -164
  -187
  -212
  -238
  -266
  -295
  -326
  -358
  -392
  -427
  -463
  -501
  -541
New CAPEX, $m
  -2
  -7
  -10
  -15
  -20
  -26
  -34
  -43
  -53
  -63
  -75
  -87
  -99
  -112
  -124
  -137
  -150
  -162
  -174
  -186
  -197
  -209
  -220
  -231
  -241
  -252
  -263
  -274
  -285
  -296
  -308
Cash from investing activities, $m
  -14
  -9
  -13
  -19
  -26
  -35
  -46
  -60
  -75
  -92
  -113
  -135
  -158
  -184
  -211
  -241
  -272
  -304
  -338
  -373
  -409
  -447
  -486
  -526
  -567
  -610
  -655
  -701
  -748
  -797
  -849
Free cash flow, $m
  -9
  -4
  -6
  -7
  -9
  -10
  -10
  -9
  -7
  -3
  4
  13
  26
  43
  63
  87
  115
  147
  183
  224
  268
  316
  368
  423
  482
  544
  610
  678
  750
  825
  903
Issuance/(repayment) of debt, $m
  5
  10
  14
  20
  27
  35
  45
  57
  70
  84
  99
  115
  132
  149
  166
  182
  199
  216
  232
  247
  263
  278
  292
  307
  321
  336
  350
  364
  379
  394
  410
Issuance/(repurchase) of shares, $m
  9
  8
  11
  15
  19
  23
  27
  30
  32
  33
  31
  27
  20
  9
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  14
  18
  25
  35
  46
  58
  72
  87
  102
  117
  130
  142
  152
  158
  166
  182
  199
  216
  232
  247
  263
  278
  292
  307
  321
  336
  350
  364
  379
  394
  410
Total cash flow (excl. dividends), $m
  5
  14
  19
  27
  37
  48
  62
  77
  95
  114
  135
  156
  178
  201
  228
  269
  314
  363
  415
  471
  531
  594
  660
  730
  803
  880
  960
  1,043
  1,129
  1,219
  1,313
Retained Cash Flow (-), $m
  -19
  -14
  -20
  -28
  -38
  -51
  -65
  -82
  -101
  -121
  -143
  -166
  -190
  -214
  -238
  -262
  -287
  -310
  -333
  -356
  -378
  -400
  -421
  -442
  -462
  -483
  -504
  -524
  -546
  -567
  -590
Prev. year cash balance distribution, $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
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
 
  7
  -1
  -1
  -2
  -3
  -3
  -4
  -6
  -7
  -8
  -10
  -12
  -13
  -10
  7
  27
  52
  82
  115
  153
  194
  240
  289
  341
  397
  456
  518
  584
  652
  723
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
 
  6
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -3
  2
  7
  11
  15
  18
  19
  20
  20
  19
  17
  15
  13
  11
  9
  7
  5
Current shareholders' claim on cash, %
  100
  85.0
  74.0
  65.7
  59.4
  54.6
  50.8
  47.9
  45.7
  44.1
  42.9
  42.1
  41.6
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5
  41.5

LightPath Technologies, Inc. is a manufacturer and integrator of families of precision molded aspheric optics, fiber-optic collimator, GRADIUM glass lenses and other optical materials used to produce products that manipulate light. The Company designs, develops, manufactures and distributes optical components and assemblies utilizing the optical processes and manufacturing technologies. The Company also performs research and development for optical solutions for the traditional optics markets and communications markets. The Company's products are incorporated into a range of applications by its customers 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.

FINANCIAL RATIOS  of  Lightpath Technologies Cl A (LPTH)

Valuation Ratios
P/E Ratio 7.8
Price to Sales 2.2
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 12.4
Price to Free Cash Flow 20.7
Growth Rates
Sales Growth Rate 64.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 8
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 3.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 25.4%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 38.1%
Ret/ On T. Cap. - 3 Yr. Avg. 11.9%
Return On Equity 39%
Return On Equity - 3 Yr. Avg. 12.1%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 53.6%
Gross Margin - 3 Yr. Avg. 49.8%
EBITDA Margin 17.9%
EBITDA Margin - 3 Yr. Avg. 11.8%
Operating Margin 14.3%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 10.7%
Pre-Tax Margin - 3 Yr. Avg. 5.1%
Net Profit Margin 28.6%
Net Profit Margin - 3 Yr. Avg. 9.1%
Effective Tax Rate -166.7%
Eff/ Tax Rate - 3 Yr. Avg. -38.9%
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 $28 million for the last fiscal year's total revenue generated by Lightpath Technologies Cl A. The default revenue input number comes from 2017 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 82.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1 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 42.9%.

Life of production assets of 7.5 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 25%. 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 - $30 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 24.247 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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COMPANY NEWS

▶ Penny Stocks to Watch for November 2017   [Oct-31-17 10:12AM  Investopedia]
▶ LightPath Technologies Up on Earnings Beat   [Sep-15-17 07:13PM  GuruFocus.com]
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▶ LightPath Technologies Launches Updated Global Website   [Jun-09-16 09:00AM  Marketwired]
Financial statements of LPTH
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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