Intrinsic value of Micron Technology - MU

Previous Close

$35.97

  Intrinsic Value

$1,478

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+1093%

Previous close

$35.97

 
Intrinsic value

$1,478

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+1093%

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

We calculate the intrinsic value of MU 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 40.2

 

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, %
  -23.43
  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
  12,399
  19,838
  30,650
  45,838
  66,508
  93,833
  128,999
  173,154
  227,363
  292,560
  369,528
  458,869
  561,012
  676,208
  804,554
  946,013
  1,100,440
  1,267,614
  1,447,266
  1,639,105
  1,842,840
  2,058,208
  2,284,982
  2,522,991
  2,772,127
  3,032,351
  3,303,699
  3,586,284
  3,880,295
  4,186,001
  4,503,743
Variable operating expenses, $m
 
  5,277
  8,153
  12,193
  17,691
  24,960
  34,314
  46,059
  60,478
  77,821
  98,294
  122,059
  149,229
  179,871
  214,011
  251,639
  292,717
  337,185
  384,973
  436,002
  490,195
  547,483
  607,805
  671,116
  737,386
  806,605
  878,784
  953,951
  1,032,159
  1,113,476
  1,197,996
Fixed operating expenses, $m
 
  9,396
  9,631
  9,872
  10,119
  10,372
  10,631
  10,897
  11,169
  11,448
  11,735
  12,028
  12,329
  12,637
  12,953
  13,277
  13,608
  13,949
  14,297
  14,655
  15,021
  15,397
  15,782
  16,176
  16,581
  16,995
  17,420
  17,855
  18,302
  18,759
  19,228
Total operating expenses, $m
  12,235
  14,673
  17,784
  22,065
  27,810
  35,332
  44,945
  56,956
  71,647
  89,269
  110,029
  134,087
  161,558
  192,508
  226,964
  264,916
  306,325
  351,134
  399,270
  450,657
  505,216
  562,880
  623,587
  687,292
  753,967
  823,600
  896,204
  971,806
  1,050,461
  1,132,235
  1,217,224
Operating income, $m
  164
  5,165
  12,866
  23,773
  38,698
  58,502
  84,054
  116,199
  155,715
  203,291
  259,499
  324,782
  399,454
  483,700
  577,590
  681,097
  794,114
  916,480
  1,047,996
  1,188,448
  1,337,623
  1,495,328
  1,661,395
  1,835,699
  2,018,160
  2,208,750
  2,407,495
  2,614,477
  2,829,835
  3,053,765
  3,286,519
EBITDA, $m
  3,144
  9,351
  19,333
  33,445
  52,731
  78,301
  111,273
  152,734
  203,689
  265,021
  337,469
  421,604
  517,828
  626,380
  747,351
  880,705
  1,026,307
  1,183,947
  1,353,369
  1,534,299
  1,726,463
  1,929,609
  2,143,526
  2,368,050
  2,603,079
  2,848,576
  3,104,575
  3,371,182
  3,648,577
  3,937,012
  4,236,808
Interest expense (income), $m
  267
  320
  628
  1,077
  1,706
  2,563
  3,697
  5,155
  6,986
  9,233
  11,937
  15,128
  18,833
  23,068
  27,844
  33,166
  39,032
  45,435
  52,367
  59,816
  67,770
  76,218
  85,148
  94,551
  104,420
  114,751
  125,541
  136,792
  148,509
  160,700
  173,376
Earnings before tax, $m
  -281
  4,845
  12,238
  22,696
  36,992
  55,938
  80,358
  111,044
  148,730
  194,058
  247,562
  309,654
  380,622
  460,632
  549,746
  647,931
  755,083
  871,045
  995,629
  1,128,632
  1,269,853
  1,419,109
  1,576,247
  1,741,148
  1,913,740
  2,093,999
  2,281,954
  2,477,684
  2,681,326
  2,893,065
  3,113,142
Tax expense, $m
  19
  1,308
  3,304
  6,128
  9,988
  15,103
  21,697
  29,982
  40,157
  52,396
  66,842
  83,607
  102,768
  124,371
  148,431
  174,941
  203,872
  235,182
  268,820
  304,731
  342,860
  383,160
  425,587
  470,110
  516,710
  565,380
  616,128
  668,975
  723,958
  781,128
  840,548
Net income, $m
  -276
  3,537
  8,934
  16,568
  27,004
  40,835
  58,661
  81,062
  108,573
  141,662
  180,720
  226,048
  277,854
  336,261
  401,314
  472,989
  551,210
  635,863
  726,809
  823,901
  926,993
  1,035,950
  1,150,660
  1,271,038
  1,397,030
  1,528,620
  1,665,826
  1,808,710
  1,957,368
  2,111,937
  2,272,594

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,398
  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
  27,540
  37,012
  57,183
  85,518
  124,082
  175,062
  240,670
  323,049
  424,184
  545,822
  689,417
  856,100
  1,046,664
  1,261,582
  1,501,034
  1,764,949
  2,053,059
  2,364,952
  2,700,124
  3,058,031
  3,438,135
  3,839,940
  4,263,026
  4,707,073
  5,171,878
  5,657,370
  6,163,617
  6,690,827
  7,239,357
  7,809,704
  8,402,505
Adjusted assets (=assets-cash), $m
  23,142
  37,012
  57,183
  85,518
  124,082
  175,062
  240,670
  323,049
  424,184
  545,822
  689,417
  856,100
  1,046,664
  1,261,582
  1,501,034
  1,764,949
  2,053,059
  2,364,952
  2,700,124
  3,058,031
  3,438,135
  3,839,940
  4,263,026
  4,707,073
  5,171,878
  5,657,370
  6,163,617
  6,690,827
  7,239,357
  7,809,704
  8,402,505
Revenue / Adjusted assets
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
  0.536
Average production assets, $m
  13,077
  20,930
  32,336
  48,359
  70,166
  98,994
  136,094
  182,678
  239,868
  308,651
  389,852
  484,107
  591,868
  713,399
  848,805
  998,043
  1,160,964
  1,337,333
  1,526,866
  1,729,255
  1,944,196
  2,171,409
  2,410,656
  2,661,756
  2,924,594
  3,199,130
  3,485,402
  3,783,529
  4,093,712
  4,416,231
  4,751,448
Working capital, $m
  4,660
  1,627
  2,513
  3,759
  5,454
  7,694
  10,578
  14,199
  18,644
  23,990
  30,301
  37,627
  46,003
  55,449
  65,973
  77,573
  90,236
  103,944
  118,676
  134,407
  151,113
  168,773
  187,369
  206,885
  227,314
  248,653
  270,903
  294,075
  318,184
  343,252
  369,307
Total debt, $m
  9,910
  17,953
  30,761
  48,754
  73,242
  105,614
  147,275
  199,586
  263,807
  341,047
  432,230
  538,073
  659,082
  795,555
  947,606
  1,115,193
  1,298,143
  1,496,195
  1,709,029
  1,936,300
  2,177,665
  2,432,812
  2,701,471
  2,983,441
  3,278,593
  3,586,880
  3,908,347
  4,243,125
  4,591,442
  4,953,612
  5,330,041
Total liabilities, $m
  15,460
  23,503
  36,311
  54,304
  78,792
  111,164
  152,825
  205,136
  269,357
  346,597
  437,780
  543,623
  664,632
  801,105
  953,156
  1,120,743
  1,303,693
  1,501,745
  1,714,579
  1,941,850
  2,183,215
  2,438,362
  2,707,021
  2,988,991
  3,284,143
  3,592,430
  3,913,897
  4,248,675
  4,596,992
  4,959,162
  5,335,591
Total equity, $m
  12,080
  13,509
  20,872
  31,214
  45,290
  63,898
  87,844
  117,913
  154,827
  199,225
  251,637
  312,476
  382,032
  460,477
  547,877
  644,206
  749,367
  863,208
  985,545
  1,116,181
  1,254,919
  1,401,578
  1,556,004
  1,718,082
  1,887,736
  2,064,940
  2,249,720
  2,442,152
  2,642,365
  2,850,542
  3,066,914
Total liabilities and equity, $m
  27,540
  37,012
  57,183
  85,518
  124,082
  175,062
  240,669
  323,049
  424,184
  545,822
  689,417
  856,099
  1,046,664
  1,261,582
  1,501,033
  1,764,949
  2,053,060
  2,364,953
  2,700,124
  3,058,031
  3,438,134
  3,839,940
  4,263,025
  4,707,073
  5,171,879
  5,657,370
  6,163,617
  6,690,827
  7,239,357
  7,809,704
  8,402,505
Debt-to-equity ratio
  0.820
  1.330
  1.470
  1.560
  1.620
  1.650
  1.680
  1.690
  1.700
  1.710
  1.720
  1.720
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
Adjusted equity ratio
  0.332
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -276
  3,537
  8,934
  16,568
  27,004
  40,835
  58,661
  81,062
  108,573
  141,662
  180,720
  226,048
  277,854
  336,261
  401,314
  472,989
  551,210
  635,863
  726,809
  823,901
  926,993
  1,035,950
  1,150,660
  1,271,038
  1,397,030
  1,528,620
  1,665,826
  1,808,710
  1,957,368
  2,111,937
  2,272,594
Depreciation, amort., depletion, $m
  2,980
  4,186
  6,467
  9,672
  14,033
  19,799
  27,219
  36,536
  47,974
  61,730
  77,970
  96,821
  118,374
  142,680
  169,761
  199,609
  232,193
  267,467
  305,373
  345,851
  388,839
  434,282
  482,131
  532,351
  584,919
  639,826
  697,080
  756,706
  818,742
  883,246
  950,290
Funds from operations, $m
  3,533
  7,723
  15,401
  26,240
  41,037
  60,634
  85,880
  117,598
  156,546
  203,392
  258,691
  322,869
  396,227
  478,941
  571,075
  672,598
  783,403
  903,330
  1,032,183
  1,169,752
  1,315,832
  1,470,232
  1,632,791
  1,803,389
  1,981,949
  2,168,446
  2,362,907
  2,565,416
  2,776,110
  2,995,184
  3,222,883
Change in working capital, $m
  365
  610
  887
  1,245
  1,695
  2,241
  2,884
  3,621
  4,445
  5,346
  6,311
  7,326
  8,376
  9,446
  10,524
  11,600
  12,663
  13,708
  14,731
  15,731
  16,706
  17,660
  18,595
  19,517
  20,429
  21,338
  22,251
  23,172
  24,109
  25,068
  26,055
Cash from operations, $m
  3,168
  7,113
  14,514
  24,995
  39,342
  58,393
  82,996
  113,977
  152,101
  198,046
  252,379
  315,543
  387,852
  469,495
  560,551
  660,998
  770,740
  889,621
  1,017,451
  1,154,022
  1,299,126
  1,452,572
  1,614,196
  1,783,872
  1,961,520
  2,147,107
  2,340,656
  2,542,244
  2,752,001
  2,970,116
  3,196,829
Maintenance CAPEX, $m
  0
  -2,615
  -4,186
  -6,467
  -9,672
  -14,033
  -19,799
  -27,219
  -36,536
  -47,974
  -61,730
  -77,970
  -96,821
  -118,374
  -142,680
  -169,761
  -199,609
  -232,193
  -267,467
  -305,373
  -345,851
  -388,839
  -434,282
  -482,131
  -532,351
  -584,919
  -639,826
  -697,080
  -756,706
  -818,742
  -883,246
New CAPEX, $m
  -5,817
  -7,853
  -11,407
  -16,023
  -21,807
  -28,828
  -37,100
  -46,584
  -57,190
  -68,784
  -81,200
  -94,256
  -107,760
  -121,532
  -135,405
  -149,239
  -162,921
  -176,369
  -189,533
  -202,389
  -214,941
  -227,213
  -239,247
  -251,100
  -262,838
  -274,536
  -286,272
  -298,127
  -310,183
  -322,519
  -335,217
Cash from investing activities, $m
  -3,068
  -10,468
  -15,593
  -22,490
  -31,479
  -42,861
  -56,899
  -73,803
  -93,726
  -116,758
  -142,930
  -172,226
  -204,581
  -239,906
  -278,085
  -319,000
  -362,530
  -408,562
  -457,000
  -507,762
  -560,792
  -616,052
  -673,529
  -733,231
  -795,189
  -859,455
  -926,098
  -995,207
  -1,066,889
  -1,141,261
  -1,218,463
Free cash flow, $m
  100
  -3,356
  -1,078
  2,505
  7,863
  15,532
  26,098
  40,174
  58,376
  81,289
  109,449
  143,317
  183,270
  229,590
  282,466
  341,999
  408,211
  481,059
  560,452
  646,259
  738,334
  836,520
  940,667
  1,050,641
  1,166,331
  1,287,652
  1,414,558
  1,547,036
  1,685,113
  1,828,854
  1,978,365
Issuance/(repayment) of debt, $m
  1,329
  8,799
  12,809
  17,992
  24,488
  32,372
  41,661
  52,311
  64,221
  77,240
  91,183
  105,843
  121,008
  136,473
  152,052
  167,586
  182,950
  198,052
  212,834
  227,271
  241,366
  255,146
  268,660
  281,970
  295,151
  308,288
  321,466
  334,779
  348,316
  362,170
  376,429
Issuance/(repurchase) of shares, $m
  -99
  1,535
  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  
  1,745
  10,334
  12,809
  17,992
  24,488
  32,372
  41,661
  52,311
  64,221
  77,240
  91,183
  105,843
  121,008
  136,473
  152,052
  167,586
  182,950
  198,052
  212,834
  227,271
  241,366
  255,146
  268,660
  281,970
  295,151
  308,288
  321,466
  334,779
  348,316
  362,170
  376,429
Total cash flow (excl. dividends), $m
  1,853
  6,977
  11,731
  20,497
  32,352
  47,904
  67,759
  92,485
  122,596
  158,529
  200,632
  249,160
  304,278
  366,063
  434,518
  509,585
  591,161
  679,111
  773,286
  873,530
  979,699
  1,091,666
  1,209,327
  1,332,611
  1,461,482
  1,595,940
  1,736,025
  1,881,815
  2,033,429
  2,191,024
  2,354,794
Retained Cash Flow (-), $m
  222
  -5,071
  -7,363
  -10,342
  -14,076
  -18,608
  -23,947
  -30,069
  -36,914
  -44,398
  -52,412
  -60,839
  -69,556
  -78,445
  -87,400
  -96,329
  -105,160
  -113,841
  -122,338
  -130,636
  -138,738
  -146,659
  -154,426
  -162,077
  -169,654
  -177,205
  -184,780
  -192,432
  -200,213
  -208,176
  -216,372
Prev. year cash balance distribution, $m
 
  3,642
  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
 
  5,548
  4,368
  10,155
  18,276
  29,297
  43,812
  62,417
  85,682
  114,131
  148,220
  188,321
  234,722
  287,618
  347,118
  413,256
  486,001
  565,271
  650,948
  742,894
  840,962
  945,007
  1,054,900
  1,170,534
  1,291,828
  1,418,735
  1,551,245
  1,689,383
  1,833,216
  1,982,848
  2,138,422
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  5,299
  3,967
  8,727
  14,785
  22,191
  30,888
  40,702
  51,333
  62,373
  73,327
  83,654
  92,813
  100,305
  105,725
  108,787
  109,355
  107,444
  103,222
  96,983
  89,122
  80,098
  70,395
  60,480
  50,779
  41,644
  33,340
  26,040
  19,827
  14,705
  10,614
Current shareholders' claim on cash, %
  100
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8

Micron Technology, Inc. is engaged in semiconductor systems. The Company's portfolio of memory technologies, including dynamic random-access memory (DRAM), negative-AND (NAND) Flash and NOR Flash are the basis for solid-state drives, modules, multi-chip packages and other system solutions. Its business segments include Compute and Networking Business Unit (CNBU), which includes memory products sold into compute, networking, graphics and cloud server markets; Mobile Business Unit (MBU), which includes memory products sold into smartphone, tablet and other mobile-device markets; Storage Business Unit (SBU), which includes memory products sold into enterprise, client, cloud and removable storage markets, and SBU also includes products sold to Intel through its Intel/Micron Flash Technology (IMFT) joint venture, and Embedded Business Unit (EBU), which includes memory products sold into automotive, industrial, connected home and consumer electronics markets.

FINANCIAL RATIOS  of  Micron Technology (MU)

Valuation Ratios
P/E Ratio -135.5
Price to Sales 3
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 11.8
Price to Free Cash Flow -14.1
Growth Rates
Sales Growth Rate -23.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.7%
Cap. Spend. - 3 Yr. Gr. Rate 32.2%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 75.8%
Total Debt to Equity 82%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital -1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 11%
Return On Equity -2.3%
Return On Equity - 3 Yr. Avg. 17.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 20.2%
Gross Margin - 3 Yr. Avg. 28.5%
EBITDA Margin 23.9%
EBITDA Margin - 3 Yr. Avg. 29.5%
Operating Margin 1.3%
Oper. Margin - 3 Yr. Avg. 12.8%
Pre-Tax Margin -2.3%
Pre-Tax Margin - 3 Yr. Avg. 10.2%
Net Profit Margin -2.2%
Net Profit Margin - 3 Yr. Avg. 11.4%
Effective Tax Rate -6.8%
Eff/ Tax Rate - 3 Yr. Avg. 1.3%
Payout Ratio 0%

MU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MU stock intrinsic value calculation we used $12399 million for the last fiscal year's total revenue generated by Micron Technology. The default revenue input number comes from 2016 income statement of Micron Technology. 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 MU 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 4.7%, whose default value for MU is calculated based on our internal credit rating of Micron Technology, 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 Micron Technology.
    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 MU stock the variable cost ratio is equal to 26.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9167 million in the base year in the intrinsic value calculation for MU 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 Micron Technology.

Corporate tax rate of 27% is the nominal tax rate for Micron Technology. 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 MU 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 MU are equal to 105.5%.

Life of production assets of 4.4 years is the average useful life of capital assets used in Micron Technology 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 MU is equal to 8.2%. 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 - $12080 million for Micron Technology - 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 1116.54 million for Micron Technology 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 Micron Technology at the current share price and the inputted number of shares is $40.2 billion.

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COMPANY NEWS

▶ Micron PT Lifted on Favorable Profit Margins   [Sep-20-17 05:38PM  Investopedia]
▶ "Fast Money" final trades: MLCO, CAR and more   [Sep-19-17 05:59PM  CNBC Videos]
▶ Chipmakers Nvidia, Micron Receive Price-Target Hikes   [04:27PM  Investor's Business Daily]
▶ Trading chips: 4 ways to play it   [Sep-18-17 05:00PM  CNBC Videos]
▶ AMD leading IQ100 top gainers   [01:58PM  CNBC Videos]
▶ Time to buy the chip stock surge?   [12:01PM  CNBC Videos]
▶ Your Top 5 Semiconductor Stocks by Revenue   [10:38AM  Market Realist]
▶ MU Belongs in the Top 5 Semiconductor Stocks, and Heres Why   [Sep-15-17 06:06PM  Market Realist]
▶ Hey Micron Technology Bulls, You Were Right   [03:14PM  TheStreet.com]
▶ Whats Making Micron Look so Promising?   [07:39AM  Market Realist]
▶ Micron and UMC's Trade Secrets Debacle is a Red Flag   [Sep-13-17 09:49PM  Motley Fool]
▶ 3 Reasons to Buy Micron Technology Stock   [05:23PM  Motley Fool]
▶ S&P 500 Futures: Apple Leads 5 Stocks Active Overnight   [12:31AM  Investor's Business Daily]
▶ Micron (MU): A Powerful Self-Driving Car Stock   [Sep-12-17 07:09PM  Zacks]
▶ Is Micron Technology Inc (MU) A Buy At Its Current Price?   [Sep-11-17 09:42PM  Simply Wall St.]
▶ Seagate Downgraded On Concerns Of Drive Weakness, Price Wars   [04:17PM  Investor's Business Daily]
▶ Semiconductor Stocks Are Heating Up Again   [03:55PM  The Wall Street Journal]
▶ Micron Maintains the Super Cycle   [Sep-08-17 11:46AM  GuruFocus.com]
▶ Micron Is Eyeing These Memory Industry Trends   [09:06AM  Market Realist]
▶ "Fast Money" final trades: SQ, MU and more   [Sep-07-17 05:59PM  CNBC Videos]
▶ A Look at Microns Upcoming SSD Products   [10:37AM  Market Realist]
▶ Behind Microns Analyst Price Target   [10:36AM  Market Realist]
▶ Why Some Micron Analysts Are so Optimistic   [09:06AM  Market Realist]
▶ 'Fast Money' final trades: INTC, M, and more   [Sep-06-17 05:59PM  CNBC Videos]
▶ Whats Happening in Microns Mobile Business?   [01:35PM  Market Realist]
▶ Micron: 'Momentum' of Pricing May Help Them, Says Cowen   [Sep-05-17 04:59PM  Barrons.com]
▶ Where Microns Profit Growth Stands next to Revenue Growth   [Sep-04-17 10:36AM  Market Realist]
▶ A Deep Dive Into Last Earnings Season   [Aug-31-17 03:58PM  Zacks]
▶ "Fast Money" final trades: XLE, WMT and more   [Aug-29-17 05:59PM  CNBC Videos]
Financial statements of MU
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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