Intrinsic value of Lightpath Technologies Cl A - LPTH

Previous Close

$2.56

  Intrinsic Value

$2.54

stock screener

  Rating & Target

hold

-1%

Previous close

$2.56

 
Intrinsic value

$2.54

 
Up/down potential

-1%

 
Rating

hold

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

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, %
  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
 
  35
  54
  80
  115
  161
  221
  296
  389
  500
  631
  781
  955
  1,151
  1,370
  1,610
  1,873
  2,158
  2,464
  2,790
  3,137
  3,504
  3,890
  4,295
  4,719
  5,162
  5,624
  6,105
  6,606
  7,126
  7,667
Fixed operating expenses, $m
 
  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
  2
  2
Total operating expenses, $m
  24
  36
  55
  81
  116
  162
  222
  297
  390
  501
  632
  782
  956
  1,152
  1,371
  1,611
  1,874
  2,159
  2,465
  2,792
  3,139
  3,506
  3,892
  4,297
  4,721
  5,164
  5,626
  6,107
  6,608
  7,128
  7,669
Operating income, $m
  4
  8
  14
  23
  34
  49
  69
  93
  124
  160
  203
  254
  311
  375
  446
  524
  610
  703
  803
  910
  1,023
  1,142
  1,268
  1,401
  1,539
  1,684
  1,835
  1,992
  2,155
  2,325
  2,501
EBITDA, $m
  6
  12
  20
  30
  44
  63
  86
  116
  153
  197
  250
  310
  380
  458
  545
  641
  746
  859
  981
  1,111
  1,250
  1,396
  1,550
  1,711
  1,880
  2,057
  2,241
  2,433
  2,633
  2,840
  3,056
Interest expense (income), $m
  0
  1
  1
  2
  4
  5
  8
  11
  15
  19
  25
  32
  40
  48
  58
  70
  82
  95
  110
  125
  142
  160
  179
  198
  219
  241
  263
  287
  311
  337
  364
Earnings before tax, $m
  3
  8
  13
  21
  31
  44
  61
  83
  109
  140
  177
  222
  271
  326
  387
  455
  528
  608
  693
  784
  881
  983
  1,090
  1,202
  1,320
  1,443
  1,571
  1,705
  1,844
  1,988
  2,138
Tax expense, $m
  -5
  2
  4
  6
  8
  12
  17
  22
  29
  38
  48
  60
  73
  88
  105
  123
  143
  164
  187
  212
  238
  265
  294
  325
  356
  390
  424
  460
  498
  537
  577
Net income, $m
  8
  6
  10
  15
  22
  32
  45
  60
  79
  102
  130
  162
  198
  238
  283
  332
  386
  444
  506
  572
  643
  717
  796
  878
  964
  1,054
  1,147
  1,244
  1,346
  1,451
  1,561

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
  70
  108
  162
  235
  331
  455
  611
  802
  1,032
  1,304
  1,619
  1,980
  2,386
  2,839
  3,338
  3,883
  4,473
  5,107
  5,784
  6,502
  7,262
  8,063
  8,902
  9,781
  10,700
  11,657
  12,654
  13,692
  14,770
  15,892
Adjusted assets (=assets-cash), $m
  39
  70
  108
  162
  235
  331
  455
  611
  802
  1,032
  1,304
  1,619
  1,980
  2,386
  2,839
  3,338
  3,883
  4,473
  5,107
  5,784
  6,502
  7,262
  8,063
  8,902
  9,781
  10,700
  11,657
  12,654
  13,692
  14,770
  15,892
Revenue / Adjusted assets
  0.718
  0.643
  0.639
  0.642
  0.638
  0.640
  0.640
  0.640
  0.640
  0.641
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
Average production assets, $m
  12
  24
  38
  56
  82
  115
  159
  213
  280
  360
  455
  565
  690
  832
  990
  1,164
  1,354
  1,560
  1,781
  2,017
  2,268
  2,533
  2,812
  3,105
  3,412
  3,732
  4,066
  4,414
  4,776
  5,152
  5,543
Working capital, $m
  14
  6
  9
  13
  19
  26
  36
  49
  64
  83
  104
  130
  158
  191
  227
  267
  311
  358
  409
  463
  520
  581
  645
  712
  783
  856
  933
  1,012
  1,095
  1,182
  1,271
Total debt, $m
  1
  19
  33
  52
  77
  111
  155
  210
  277
  358
  454
  565
  692
  835
  994
  1,170
  1,362
  1,569
  1,792
  2,031
  2,284
  2,551
  2,833
  3,128
  3,438
  3,761
  4,098
  4,449
  4,814
  5,194
  5,589
Total liabilities, $m
  17
  25
  38
  57
  83
  117
  160
  215
  282
  363
  459
  570
  697
  840
  999
  1,175
  1,367
  1,574
  1,798
  2,036
  2,289
  2,556
  2,838
  3,134
  3,443
  3,766
  4,103
  4,454
  4,819
  5,199
  5,594
Total equity, $m
  30
  45
  70
  105
  152
  215
  295
  396
  520
  669
  845
  1,049
  1,283
  1,546
  1,840
  2,163
  2,516
  2,898
  3,309
  3,748
  4,214
  4,706
  5,225
  5,769
  6,338
  6,933
  7,554
  8,200
  8,872
  9,571
  10,298
Total liabilities and equity, $m
  47
  70
  108
  162
  235
  332
  455
  611
  802
  1,032
  1,304
  1,619
  1,980
  2,386
  2,839
  3,338
  3,883
  4,472
  5,107
  5,784
  6,503
  7,262
  8,063
  8,903
  9,781
  10,699
  11,657
  12,654
  13,691
  14,770
  15,892
Debt-to-equity ratio
  0.033
  0.430
  0.470
  0.490
  0.510
  0.520
  0.530
  0.530
  0.530
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
Adjusted equity ratio
  0.564
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  6
  10
  15
  22
  32
  45
  60
  79
  102
  130
  162
  198
  238
  283
  332
  386
  444
  506
  572
  643
  717
  796
  878
  964
  1,054
  1,147
  1,244
  1,346
  1,451
  1,561
Depreciation, amort., depletion, $m
  2
  4
  5
  7
  10
  13
  17
  23
  30
  38
  47
  56
  69
  83
  99
  116
  135
  156
  178
  202
  227
  253
  281
  311
  341
  373
  407
  441
  478
  515
  554
Funds from operations, $m
  5
  10
  15
  22
  32
  45
  62
  83
  109
  140
  177
  219
  267
  321
  382
  448
  521
  600
  684
  774
  870
  971
  1,077
  1,188
  1,305
  1,427
  1,554
  1,686
  1,823
  1,966
  2,115
Change in working capital, $m
  0
  2
  3
  4
  6
  8
  10
  12
  15
  18
  22
  25
  29
  33
  36
  40
  44
  47
  51
  54
  58
  61
  64
  67
  70
  73
  77
  80
  83
  86
  90
Cash from operations, $m
  5
  8
  12
  18
  26
  38
  52
  71
  94
  122
  155
  193
  238
  289
  346
  409
  478
  553
  633
  720
  812
  910
  1,013
  1,121
  1,235
  1,353
  1,477
  1,606
  1,740
  1,880
  2,025
Maintenance CAPEX, $m
  0
  -2
  -2
  -4
  -6
  -8
  -12
  -16
  -21
  -28
  -36
  -45
  -56
  -69
  -83
  -99
  -116
  -135
  -156
  -178
  -202
  -227
  -253
  -281
  -311
  -341
  -373
  -407
  -441
  -478
  -515
New CAPEX, $m
  -2
  -9
  -13
  -19
  -25
  -34
  -43
  -54
  -67
  -80
  -95
  -110
  -126
  -142
  -158
  -174
  -190
  -206
  -221
  -236
  -251
  -265
  -279
  -293
  -307
  -320
  -334
  -348
  -362
  -376
  -391
Cash from investing activities, $m
  -14
  -11
  -15
  -23
  -31
  -42
  -55
  -70
  -88
  -108
  -131
  -155
  -182
  -211
  -241
  -273
  -306
  -341
  -377
  -414
  -453
  -492
  -532
  -574
  -618
  -661
  -707
  -755
  -803
  -854
  -906
Free cash flow, $m
  -9
  -3
  -4
  -5
  -5
  -4
  -3
  1
  6
  13
  24
  38
  56
  78
  104
  135
  171
  211
  256
  306
  360
  418
  480
  547
  617
  692
  770
  852
  937
  1,026
  1,119
Issuance/(repayment) of debt, $m
  5
  9
  13
  19
  26
  34
  44
  55
  67
  81
  96
  111
  127
  143
  159
  176
  192
  208
  223
  238
  253
  267
  282
  296
  309
  323
  337
  351
  365
  380
  395
Issuance/(repurchase) of shares, $m
  9
  11
  15
  20
  25
  30
  36
  41
  44
  47
  46
  42
  36
  25
  11
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  14
  20
  28
  39
  51
  64
  80
  96
  111
  128
  142
  153
  163
  168
  170
  176
  192
  208
  223
  238
  253
  267
  282
  296
  309
  323
  337
  351
  365
  380
  395
Total cash flow (excl. dividends), $m
  5
  17
  25
  34
  46
  60
  77
  96
  118
  141
  166
  191
  218
  246
  274
  311
  363
  419
  479
  544
  613
  685
  762
  843
  927
  1,015
  1,107
  1,203
  1,302
  1,406
  1,514
Retained Cash Flow (-), $m
  -19
  -16
  -25
  -35
  -47
  -62
  -80
  -101
  -124
  -149
  -176
  -204
  -234
  -263
  -293
  -323
  -353
  -382
  -411
  -439
  -466
  -492
  -519
  -544
  -570
  -595
  -620
  -646
  -672
  -699
  -727
Prev. year cash balance distribution, $m
 
  1
  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
  1
  1
  1
  2
  3
  4
  5
  7
  9
  12
  15
  18
  21
  25
  30
  35
  40
  46
  52
  58
  65
  72
  80
  88
  96
  104
  113
  123
  132
Cash available for distribution, $m
 
  2
  0
  -1
  -1
  -2
  -4
  -5
  -6
  -8
  -10
  -13
  -15
  -17
  -19
  -12
  10
  37
  69
  105
  147
  193
  244
  298
  357
  420
  487
  557
  630
  707
  787
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
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -4
  2
  8
  13
  16
  19
  20
  20
  20
  18
  16
  14
  12
  10
  8
  6
Current shareholders' claim on cash, %
  100
  82.2
  68.7
  59.0
  51.8
  46.4
  42.2
  39.1
  36.7
  34.8
  33.5
  32.5
  31.9
  31.5
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4

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 81.1%.

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 7% 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 1.4%.

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 54.5%.

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 12.5%. 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 20 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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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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