Intrinsic value of MKS Instruments - MKSI

Previous Close

$83.15

  Intrinsic Value

$601.53

stock screener

  Rating & Target

str. buy

+623%

  Value-price divergence*

+828%

Previous close

$83.15

 
Intrinsic value

$601.53

 
Up/down potential

+623%

 
Rating

str. buy

 
Value-price divergence*

+828%

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

We calculate the intrinsic value of MKSI 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 4.4

 

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, %
  59.09
  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
  1,295
  2,072
  3,201
  4,787
  6,946
  9,800
  13,473
  18,085
  23,747
  30,556
  38,595
  47,926
  58,594
  70,626
  84,031
  98,805
  114,934
  132,395
  151,158
  171,194
  192,473
  214,967
  238,652
  263,511
  289,532
  316,711
  345,051
  374,565
  405,273
  437,202
  470,388
Variable operating expenses, $m
 
  1,637
  2,497
  3,705
  5,349
  7,522
  10,319
  13,831
  18,142
  23,328
  29,450
  36,497
  44,621
  53,783
  63,991
  75,242
  87,524
  100,821
  115,110
  130,368
  146,572
  163,701
  181,738
  200,668
  220,483
  241,181
  262,762
  285,238
  308,623
  332,937
  358,209
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
  1,138
  1,637
  2,497
  3,705
  5,349
  7,522
  10,319
  13,831
  18,142
  23,328
  29,450
  36,497
  44,621
  53,783
  63,991
  75,242
  87,524
  100,821
  115,110
  130,368
  146,572
  163,701
  181,738
  200,668
  220,483
  241,181
  262,762
  285,238
  308,623
  332,937
  358,209
Operating income, $m
  157
  435
  705
  1,083
  1,598
  2,278
  3,154
  4,254
  5,604
  7,228
  9,145
  11,430
  13,974
  16,843
  20,040
  23,563
  27,410
  31,574
  36,049
  40,827
  45,902
  51,266
  56,914
  62,843
  69,048
  75,530
  82,289
  89,327
  96,651
  104,265
  112,179
EBITDA, $m
  223
  543
  840
  1,256
  1,822
  2,571
  3,534
  4,743
  6,228
  8,015
  10,123
  12,570
  15,369
  18,524
  22,040
  25,915
  30,146
  34,726
  39,647
  44,902
  50,483
  56,383
  62,596
  69,116
  75,941
  83,069
  90,503
  98,244
  106,298
  114,673
  123,377
Interest expense (income), $m
  21
  41
  81
  139
  220
  330
  476
  664
  900
  1,189
  1,538
  1,949
  2,426
  2,971
  3,586
  4,272
  5,027
  5,852
  6,744
  7,704
  8,728
  9,816
  10,966
  12,177
  13,448
  14,779
  16,168
  17,617
  19,126
  20,696
  22,329
Earnings before tax, $m
  128
  394
  623
  944
  1,378
  1,948
  2,678
  3,590
  4,704
  6,039
  7,608
  9,481
  11,548
  13,872
  16,454
  19,292
  22,383
  25,722
  29,304
  33,123
  37,173
  41,450
  45,948
  50,665
  55,600
  60,751
  66,120
  71,710
  77,524
  83,569
  89,851
Tax expense, $m
  23
  106
  168
  255
  372
  526
  723
  969
  1,270
  1,630
  2,054
  2,560
  3,118
  3,745
  4,442
  5,209
  6,043
  6,945
  7,912
  8,943
  10,037
  11,191
  12,406
  13,680
  15,012
  16,403
  17,853
  19,362
  20,932
  22,564
  24,260
Net income, $m
  105
  287
  455
  689
  1,006
  1,422
  1,955
  2,621
  3,434
  4,408
  5,554
  6,921
  8,430
  10,126
  12,011
  14,083
  16,339
  18,777
  21,392
  24,180
  27,137
  30,258
  33,542
  36,986
  40,588
  44,348
  48,268
  52,348
  56,593
  61,005
  65,591

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  418
  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
  2,212
  2,870
  4,434
  6,631
  9,621
  13,574
  18,661
  25,048
  32,890
  42,322
  53,456
  66,380
  81,156
  97,820
  116,386
  136,849
  159,189
  183,372
  209,360
  237,111
  266,584
  297,739
  330,544
  364,974
  401,013
  438,657
  477,910
  518,789
  561,320
  605,543
  651,508
Adjusted assets (=assets-cash), $m
  1,794
  2,870
  4,434
  6,631
  9,621
  13,574
  18,661
  25,048
  32,890
  42,322
  53,456
  66,380
  81,156
  97,820
  116,386
  136,849
  159,189
  183,372
  209,360
  237,111
  266,584
  297,739
  330,544
  364,974
  401,013
  438,657
  477,910
  518,789
  561,320
  605,543
  651,508
Revenue / Adjusted assets
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
Average production assets, $m
  348
  557
  861
  1,288
  1,869
  2,636
  3,624
  4,865
  6,388
  8,220
  10,382
  12,892
  15,762
  18,998
  22,604
  26,579
  30,917
  35,614
  40,662
  46,051
  51,775
  57,826
  64,198
  70,884
  77,884
  85,195
  92,819
  100,758
  109,018
  117,607
  126,534
Working capital, $m
  762
  568
  877
  1,312
  1,903
  2,685
  3,692
  4,955
  6,507
  8,372
  10,575
  13,132
  16,055
  19,351
  23,024
  27,073
  31,492
  36,276
  41,417
  46,907
  52,738
  58,901
  65,391
  72,202
  79,332
  86,779
  94,544
  102,631
  111,045
  119,793
  128,886
Total debt, $m
  612
  1,177
  2,014
  3,189
  4,789
  6,904
  9,626
  13,043
  17,238
  22,284
  28,241
  35,155
  43,060
  51,976
  61,909
  72,856
  84,808
  97,746
  111,650
  126,497
  142,264
  158,932
  176,483
  194,903
  214,184
  234,324
  255,324
  277,194
  299,948
  323,608
  348,199
Total liabilities, $m
  970
  1,535
  2,372
  3,547
  5,147
  7,262
  9,984
  13,401
  17,596
  22,642
  28,599
  35,513
  43,418
  52,334
  62,267
  73,214
  85,166
  98,104
  112,008
  126,855
  142,622
  159,290
  176,841
  195,261
  214,542
  234,682
  255,682
  277,552
  300,306
  323,966
  348,557
Total equity, $m
  1,242
  1,334
  2,062
  3,083
  4,474
  6,312
  8,677
  11,647
  15,294
  19,680
  24,857
  30,867
  37,737
  45,486
  54,120
  63,635
  74,023
  85,268
  97,353
  110,257
  123,961
  138,448
  153,703
  169,713
  186,471
  203,976
  222,228
  241,237
  261,014
  281,578
  302,951
Total liabilities and equity, $m
  2,212
  2,869
  4,434
  6,630
  9,621
  13,574
  18,661
  25,048
  32,890
  42,322
  53,456
  66,380
  81,155
  97,820
  116,387
  136,849
  159,189
  183,372
  209,361
  237,112
  266,583
  297,738
  330,544
  364,974
  401,013
  438,658
  477,910
  518,789
  561,320
  605,544
  651,508
Debt-to-equity ratio
  0.493
  0.880
  0.980
  1.030
  1.070
  1.090
  1.110
  1.120
  1.130
  1.130
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
Adjusted equity ratio
  0.462
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  105
  287
  455
  689
  1,006
  1,422
  1,955
  2,621
  3,434
  4,408
  5,554
  6,921
  8,430
  10,126
  12,011
  14,083
  16,339
  18,777
  21,392
  24,180
  27,137
  30,258
  33,542
  36,986
  40,588
  44,348
  48,268
  52,348
  56,593
  61,005
  65,591
Depreciation, amort., depletion, $m
  66
  108
  135
  173
  224
  292
  380
  489
  624
  786
  978
  1,141
  1,395
  1,681
  2,000
  2,352
  2,736
  3,152
  3,598
  4,075
  4,582
  5,117
  5,681
  6,273
  6,892
  7,539
  8,214
  8,917
  9,648
  10,408
  11,198
Funds from operations, $m
  158
  396
  590
  862
  1,230
  1,714
  2,334
  3,110
  4,058
  5,195
  6,531
  8,062
  9,825
  11,808
  14,011
  16,435
  19,075
  21,929
  24,990
  28,255
  31,718
  35,376
  39,223
  43,259
  47,480
  51,888
  56,482
  61,265
  66,240
  71,413
  76,789
Change in working capital, $m
  -22
  213
  309
  435
  592
  782
  1,006
  1,264
  1,551
  1,866
  2,203
  2,557
  2,923
  3,297
  3,673
  4,048
  4,419
  4,784
  5,141
  5,490
  5,830
  6,163
  6,490
  6,811
  7,130
  7,447
  7,765
  8,087
  8,414
  8,749
  9,093
Cash from operations, $m
  180
  183
  281
  427
  638
  932
  1,328
  1,846
  2,507
  3,329
  4,329
  5,505
  6,902
  8,511
  10,339
  12,387
  14,656
  17,145
  19,849
  22,765
  25,888
  29,212
  32,734
  36,448
  40,351
  44,441
  48,717
  53,178
  57,826
  62,664
  67,696
Maintenance CAPEX, $m
  0
  -31
  -49
  -76
  -114
  -165
  -233
  -321
  -431
  -565
  -727
  -919
  -1,141
  -1,395
  -1,681
  -2,000
  -2,352
  -2,736
  -3,152
  -3,598
  -4,075
  -4,582
  -5,117
  -5,681
  -6,273
  -6,892
  -7,539
  -8,214
  -8,917
  -9,648
  -10,408
New CAPEX, $m
  -19
  -209
  -304
  -427
  -581
  -768
  -988
  -1,241
  -1,523
  -1,832
  -2,162
  -2,510
  -2,870
  -3,236
  -3,606
  -3,974
  -4,339
  -4,697
  -5,047
  -5,390
  -5,724
  -6,051
  -6,371
  -6,687
  -7,000
  -7,311
  -7,624
  -7,939
  -8,260
  -8,589
  -8,927
Cash from investing activities, $m
  -727
  -240
  -353
  -503
  -695
  -933
  -1,221
  -1,562
  -1,954
  -2,397
  -2,889
  -3,429
  -4,011
  -4,631
  -5,287
  -5,974
  -6,691
  -7,433
  -8,199
  -8,988
  -9,799
  -10,633
  -11,488
  -12,368
  -13,273
  -14,203
  -15,163
  -16,153
  -17,177
  -18,237
  -19,335
Free cash flow, $m
  -547
  -57
  -72
  -76
  -56
  -1
  107
  285
  554
  932
  1,439
  2,076
  2,891
  3,880
  5,051
  6,412
  7,965
  9,712
  11,650
  13,777
  16,089
  18,580
  21,245
  24,079
  27,078
  30,237
  33,554
  37,025
  40,649
  44,428
  48,361
Issuance/(repayment) of debt, $m
  598
  576
  837
  1,175
  1,600
  2,115
  2,722
  3,417
  4,195
  5,046
  5,957
  6,914
  7,905
  8,915
  9,933
  10,948
  11,952
  12,938
  13,904
  14,847
  15,768
  16,668
  17,551
  18,420
  19,281
  20,139
  21,000
  21,870
  22,754
  23,659
  24,591
Issuance/(repurchase) of shares, $m
  -3
  212
  272
  333
  385
  416
  411
  350
  212
  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  
  590
  788
  1,109
  1,508
  1,985
  2,531
  3,133
  3,767
  4,407
  5,046
  5,957
  6,914
  7,905
  8,915
  9,933
  10,948
  11,952
  12,938
  13,904
  14,847
  15,768
  16,668
  17,551
  18,420
  19,281
  20,139
  21,000
  21,870
  22,754
  23,659
  24,591
Total cash flow (excl. dividends), $m
  37
  731
  1,037
  1,432
  1,928
  2,530
  3,239
  4,052
  4,961
  5,978
  7,396
  8,991
  10,796
  12,795
  14,984
  17,360
  19,917
  22,650
  25,554
  28,624
  31,856
  35,247
  38,796
  42,500
  46,359
  50,377
  54,554
  58,895
  63,404
  68,087
  72,952
Retained Cash Flow (-), $m
  -81
  -499
  -727
  -1,022
  -1,390
  -1,838
  -2,365
  -2,970
  -3,646
  -4,386
  -5,177
  -6,010
  -6,871
  -7,749
  -8,633
  -9,515
  -10,388
  -11,245
  -12,085
  -12,904
  -13,705
  -14,487
  -15,254
  -16,010
  -16,758
  -17,504
  -18,253
  -19,009
  -19,777
  -20,564
  -21,373
Prev. year cash balance distribution, $m
 
  407
  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
 
  639
  309
  411
  538
  692
  874
  1,082
  1,315
  1,592
  2,218
  2,981
  3,926
  5,046
  6,351
  7,844
  9,529
  11,405
  13,469
  15,720
  18,152
  20,760
  23,541
  26,489
  29,601
  32,872
  36,301
  39,886
  43,627
  47,523
  51,578
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
 
  612
  283
  357
  443
  536
  634
  731
  822
  914
  1,163
  1,416
  1,675
  1,919
  2,132
  2,303
  2,422
  2,481
  2,480
  2,420
  2,307
  2,147
  1,953
  1,736
  1,508
  1,279
  1,059
  856
  675
  519
  388
Current shareholders' claim on cash, %
  100
  93.3
  88.2
  84.3
  81.4
  79.3
  77.9
  77.0
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6
  76.6

MKS Instruments, Inc. provides instruments, subsystems, and process control solutions that measure, control, power, monitor, and analyze critical parameters of manufacturing processes in the United States and internationally. The company operates through four segments: Advanced Manufacturing Capital Equipment, Global Service, Asia Region Sales, and Other. It offers pressure measurement and control products used for various pressure ranges and accuracies; materials delivery products, including gas flow measurement products and vacuum valves; automation and control products, such as automation platforms, programmable automation controllers, temperature controllers, and software solutions for use in automation, I/O and distributed programmable I/O, gateways, and connectivity products; and vacuum products comprising vacuum containment components, effluent management subsystems and custom stainless steel chambers, vessels, and pharmaceutical process equipment hardware and housings. The company also provides power delivery and reactive gas generation products that are used in semiconductor and other thin film, as well as medical imaging equipment applications. In addition, it offers gas composition analysis products, such as mass spectrometry- and Fourier transform infra-red based gas composition analysis, and tunable filter spectroscopy products used in the engine development, environmental emissions monitoring, air safety monitoring, and semiconductor industries; information technology products, including software products for analyzing data sets for the pharmaceutical, biotech, and other industries. The company also builds precision machined components and electromechanical assemblies for the analytical instrument, scientific, semiconductor, and medical industries. It serves semiconductor capital equipment manufacturers through direct sales forces, sales representatives, and agents. The company was founded in 1961 and is headquartered in Andover, Massachusetts.

FINANCIAL RATIOS  of  MKS Instruments (MKSI)

Valuation Ratios
P/E Ratio 42.5
Price to Sales 3.4
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 24.8
Price to Free Cash Flow 27.7
Growth Rates
Sales Growth Rate 59.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 58.3%
Cap. Spend. - 3 Yr. Gr. Rate 9.6%
Financial Strength
Quick Ratio 38
Current Ratio 0.2
LT Debt to Equity 48.4%
Total Debt to Equity 49.3%
Interest Coverage 7
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 8.8%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. 10.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 43.7%
Gross Margin - 3 Yr. Avg. 43.9%
EBITDA Margin 16.6%
EBITDA Margin - 3 Yr. Avg. 19.6%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 16.2%
Pre-Tax Margin 9.9%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 8.1%
Net Profit Margin - 3 Yr. Avg. 12.6%
Effective Tax Rate 18%
Eff/ Tax Rate - 3 Yr. Avg. 18.6%
Payout Ratio 34.3%

MKSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MKSI stock intrinsic value calculation we used $1295 million for the last fiscal year's total revenue generated by MKS Instruments. The default revenue input number comes from 2016 income statement of MKS Instruments. 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 MKSI 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 MKSI is calculated based on our internal credit rating of MKS Instruments, 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 MKS Instruments.
    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 MKSI stock the variable cost ratio is equal to 80.7%.

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 MKSI 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 6.9% for MKS Instruments.

Corporate tax rate of 27% is the nominal tax rate for MKS Instruments. 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 MKSI 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 MKSI are equal to 26.9%.

Life of production assets of 11.3 years is the average useful life of capital assets used in MKS Instruments 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 MKSI is equal to 27.4%. 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 - $1242 million for MKS Instruments - 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 52.608 million for MKS Instruments 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 MKS Instruments at the current share price and the inputted number of shares is $4.4 billion.

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COMPANY NEWS

▶ Texas Instruments, AMD Cheered For Earnings, But Stocks Fade   [04:49PM  Investor's Business Daily]
▶ MKS Instruments meets 2Q profit forecasts   [Jul-25-17 10:03PM  Associated Press]
▶ Two Top Chipmakers Top Views, Guide Up, Near Buys   [05:39PM  Investor's Business Daily]
▶ Why MKS Instruments Is One To Keep An Eye On   [Jul-18-17 05:18AM  Investor's Business Daily]
▶ MKS Instruments Initiated At Buy; Chip Gear Mergers Heat Up   [Jul-06-17 04:28PM  Investor's Business Daily]
▶ Top Ranked Growth Stocks to Buy for June 22nd   [Jun-22-17 10:10AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for June 8th   [Jun-08-17 11:02AM  Zacks]
▶ 5 Stocks To Buy At The Top   [Jun-02-17 01:39PM  Zacks]
▶ MKS Instruments Announces Upcoming Investor Events   [May-24-17 04:10PM  GlobeNewswire]
▶ 5 Dividend Growth Stocks for Guaranteed Returns   [May-11-17 09:38AM  Zacks]
▶ MKS Instruments Gets Price-Target Hikes On Beat-And-Raise Q1   [Apr-28-17 04:18PM  Investor's Business Daily]
▶ MKS Instruments beats Street 1Q forecasts   [Apr-26-17 05:46PM  Associated Press]
▶ Give Me Sales Growth! 7 Ideas   [Feb-25-17 02:44PM  Zacks]
▶ MKS Announces Release of MODDE® 12   [Feb-22-17 04:05PM  GlobeNewswire]
▶ MKS Instruments Announces Increased Quarterly Cash Dividend   [Feb-14-17 09:00AM  GlobeNewswire]
Stock chart of MKSI Financial statements of MKSI Annual reports of MKSI
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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