Intrinsic value of Micron Technology - MU

Previous Close

$46.16

  Intrinsic Value

$2,718

stock screener

  Rating & Target

str. buy

+999%

Previous close

$46.16

 
Intrinsic value

$2,718

 
Up/down potential

+999%

 
Rating

str. buy

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 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 52.6

 

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, %
  63.90
  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
  20,322
  32,515
  50,236
  75,128
  109,007
  153,793
  211,430
  283,801
  372,648
  479,508
  605,657
  752,089
  919,500
  1,108,307
  1,318,667
  1,550,518
  1,803,624
  2,077,624
  2,372,074
  2,686,498
  3,020,421
  3,373,409
  3,745,092
  4,135,190
  4,543,524
  4,970,032
  5,414,772
  5,877,930
  6,359,817
  6,860,869
  7,381,648
Variable operating expenses, $m
 
  8,974
  13,865
  20,735
  30,086
  42,447
  58,355
  78,329
  102,851
  132,344
  167,161
  207,576
  253,782
  305,893
  363,952
  427,943
  497,800
  573,424
  654,692
  741,473
  833,636
  931,061
  1,033,646
  1,141,312
  1,254,013
  1,371,729
  1,494,477
  1,622,309
  1,755,309
  1,893,600
  2,037,335
Fixed operating expenses, $m
 
  9,254
  9,485
  9,722
  9,965
  10,214
  10,470
  10,731
  11,000
  11,275
  11,557
  11,846
  12,142
  12,445
  12,756
  13,075
  13,402
  13,737
  14,081
  14,433
  14,793
  15,163
  15,542
  15,931
  16,329
  16,737
  17,156
  17,585
  18,024
  18,475
  18,937
Total operating expenses, $m
  14,425
  18,228
  23,350
  30,457
  40,051
  52,661
  68,825
  89,060
  113,851
  143,619
  178,718
  219,422
  265,924
  318,338
  376,708
  441,018
  511,202
  587,161
  668,773
  755,906
  848,429
  946,224
  1,049,188
  1,157,243
  1,270,342
  1,388,466
  1,511,633
  1,639,894
  1,773,333
  1,912,075
  2,056,272
Operating income, $m
  5,897
  14,287
  26,886
  44,670
  68,956
  101,132
  142,605
  194,740
  258,797
  335,889
  426,939
  532,667
  653,577
  789,969
  941,958
  1,109,500
  1,292,422
  1,490,463
  1,703,301
  1,930,592
  2,171,991
  2,427,185
  2,695,905
  2,977,947
  3,273,182
  3,581,566
  3,903,139
  4,238,037
  4,586,483
  4,948,794
  5,325,376
EBITDA, $m
  8,877
  18,469
  33,346
  54,332
  82,974
  120,909
  169,795
  231,237
  306,720
  397,553
  504,827
  629,385
  771,824
  932,497
  1,111,539
  1,308,896
  1,524,368
  1,757,645
  2,008,350
  2,276,075
  2,560,417
  2,861,005
  3,177,523
  3,509,732
  3,857,480
  4,220,712
  4,599,479
  4,993,938
  5,404,355
  5,831,102
  6,274,656
Interest expense (income), $m
  267
  320
  629
  1,077
  1,707
  2,565
  3,699
  5,158
  6,990
  9,239
  11,944
  15,137
  18,844
  23,081
  27,861
  33,185
  39,054
  45,461
  52,397
  59,851
  67,810
  76,262
  85,198
  94,606
  104,481
  114,817
  125,613
  136,871
  148,595
  160,793
  173,476
Earnings before tax, $m
  5,196
  13,967
  26,257
  43,593
  67,248
  98,567
  138,907
  189,582
  251,808
  326,650
  414,995
  517,530
  634,733
  766,888
  914,098
  1,076,314
  1,253,368
  1,445,001
  1,650,904
  1,870,741
  2,104,182
  2,350,922
  2,610,707
  2,883,341
  3,168,702
  3,466,749
  3,777,526
  4,101,166
  4,437,888
  4,788,001
  5,151,900
Tax expense, $m
  114
  3,771
  7,089
  11,770
  18,157
  26,613
  37,505
  51,187
  67,988
  88,196
  112,049
  139,733
  171,378
  207,060
  246,806
  290,605
  338,409
  390,150
  445,744
  505,100
  568,129
  634,749
  704,891
  778,502
  855,549
  936,022
  1,019,932
  1,107,315
  1,198,230
  1,292,760
  1,391,013
Net income, $m
  5,089
  10,196
  19,168
  31,823
  49,091
  71,954
  101,402
  138,395
  183,820
  238,455
  302,947
  377,797
  463,355
  559,828
  667,291
  785,709
  914,958
  1,054,851
  1,205,160
  1,365,641
  1,536,053
  1,716,173
  1,905,816
  2,104,839
  2,313,152
  2,530,727
  2,757,594
  2,993,851
  3,239,658
  3,495,241
  3,760,887

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
  37,033
  57,216
  85,567
  124,154
  175,163
  240,808
  323,235
  424,428
  546,136
  689,814
  856,593
  1,047,267
  1,262,309
  1,501,898
  1,765,966
  2,054,242
  2,366,314
  2,701,679
  3,059,792
  3,440,115
  3,842,151
  4,265,481
  4,709,784
  5,174,857
  5,660,629
  6,167,167
  6,694,681
  7,243,527
  7,814,202
  8,407,344
Adjusted assets (=assets-cash), $m
  23,142
  37,033
  57,216
  85,567
  124,154
  175,163
  240,808
  323,235
  424,428
  546,136
  689,814
  856,593
  1,047,267
  1,262,309
  1,501,898
  1,765,966
  2,054,242
  2,366,314
  2,701,679
  3,059,792
  3,440,115
  3,842,151
  4,265,481
  4,709,784
  5,174,857
  5,660,629
  6,167,167
  6,694,681
  7,243,527
  7,814,202
  8,407,344
Revenue / Adjusted assets
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
  0.878
Average production assets, $m
  13,077
  20,907
  32,302
  48,307
  70,091
  98,889
  135,949
  182,484
  239,613
  308,323
  389,437
  483,593
  591,239
  712,641
  847,903
  996,983
  1,159,731
  1,335,912
  1,525,244
  1,727,418
  1,942,131
  2,169,102
  2,408,094
  2,658,927
  2,921,486
  3,195,731
  3,481,699
  3,779,509
  4,089,362
  4,411,539
  4,746,400
Working capital, $m
  4,660
  1,626
  2,512
  3,756
  5,450
  7,690
  10,571
  14,190
  18,632
  23,975
  30,283
  37,604
  45,975
  55,415
  65,933
  77,526
  90,181
  103,881
  118,604
  134,325
  151,021
  168,670
  187,255
  206,760
  227,176
  248,502
  270,739
  293,896
  317,991
  343,043
  369,082
Total debt, $m
  9,910
  17,966
  30,782
  48,785
  73,288
  105,678
  147,363
  199,704
  263,962
  341,246
  432,482
  538,386
  659,464
  796,016
  948,155
  1,115,838
  1,298,894
  1,497,060
  1,710,016
  1,937,418
  2,178,923
  2,434,216
  2,703,030
  2,985,163
  3,280,484
  3,588,949
  3,910,601
  4,245,572
  4,594,090
  4,956,468
  5,333,114
Total liabilities, $m
  15,460
  23,516
  36,332
  54,335
  78,838
  111,228
  152,913
  205,254
  269,512
  346,796
  438,032
  543,936
  665,014
  801,566
  953,705
  1,121,388
  1,304,444
  1,502,610
  1,715,566
  1,942,968
  2,184,473
  2,439,766
  2,708,580
  2,990,713
  3,286,034
  3,594,499
  3,916,151
  4,251,122
  4,599,640
  4,962,018
  5,338,664
Total equity, $m
  12,080
  13,517
  20,884
  31,232
  45,316
  63,934
  87,895
  117,981
  154,916
  199,340
  251,782
  312,656
  382,252
  460,743
  548,193
  644,577
  749,798
  863,705
  986,113
  1,116,824
  1,255,642
  1,402,385
  1,556,901
  1,719,071
  1,888,823
  2,066,129
  2,251,016
  2,443,559
  2,643,887
  2,852,184
  3,068,681
Total liabilities and equity, $m
  27,540
  37,033
  57,216
  85,567
  124,154
  175,162
  240,808
  323,235
  424,428
  546,136
  689,814
  856,592
  1,047,266
  1,262,309
  1,501,898
  1,765,965
  2,054,242
  2,366,315
  2,701,679
  3,059,792
  3,440,115
  3,842,151
  4,265,481
  4,709,784
  5,174,857
  5,660,628
  6,167,167
  6,694,681
  7,243,527
  7,814,202
  8,407,345
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
  5,089
  10,196
  19,168
  31,823
  49,091
  71,954
  101,402
  138,395
  183,820
  238,455
  302,947
  377,797
  463,355
  559,828
  667,291
  785,709
  914,958
  1,054,851
  1,205,160
  1,365,641
  1,536,053
  1,716,173
  1,905,816
  2,104,839
  2,313,152
  2,530,727
  2,757,594
  2,993,851
  3,239,658
  3,495,241
  3,760,887
Depreciation, amort., depletion, $m
  2,980
  4,181
  6,460
  9,661
  14,018
  19,778
  27,190
  36,497
  47,923
  61,665
  77,887
  96,719
  118,248
  142,528
  169,581
  199,397
  231,946
  267,182
  305,049
  345,484
  388,426
  433,820
  481,619
  531,785
  584,297
  639,146
  696,340
  755,902
  817,872
  882,308
  949,280
Funds from operations, $m
  3,533
  14,377
  25,628
  41,484
  63,110
  91,731
  128,592
  174,892
  231,742
  300,119
  380,834
  474,515
  581,603
  702,356
  836,872
  985,106
  1,146,904
  1,322,033
  1,510,209
  1,711,125
  1,924,479
  2,149,994
  2,387,435
  2,636,624
  2,897,450
  3,169,873
  3,453,934
  3,749,753
  4,057,530
  4,377,549
  4,710,167
Change in working capital, $m
  365
  610
  886
  1,245
  1,694
  2,239
  2,882
  3,619
  4,442
  5,343
  6,307
  7,322
  8,371
  9,440
  10,518
  11,593
  12,655
  13,700
  14,723
  15,721
  16,696
  17,649
  18,584
  19,505
  20,417
  21,325
  22,237
  23,158
  24,094
  25,053
  26,039
Cash from operations, $m
  3,168
  13,768
  24,742
  40,240
  61,416
  89,492
  125,710
  171,273
  227,300
  294,776
  374,527
  467,194
  573,232
  692,916
  826,354
  973,513
  1,134,249
  1,308,333
  1,495,486
  1,695,403
  1,907,782
  2,132,344
  2,368,851
  2,617,119
  2,877,033
  3,148,547
  3,431,697
  3,726,595
  4,033,436
  4,352,496
  4,684,128
Maintenance CAPEX, $m
  0
  -2,615
  -4,181
  -6,460
  -9,661
  -14,018
  -19,778
  -27,190
  -36,497
  -47,923
  -61,665
  -77,887
  -96,719
  -118,248
  -142,528
  -169,581
  -199,397
  -231,946
  -267,182
  -305,049
  -345,484
  -388,426
  -433,820
  -481,619
  -531,785
  -584,297
  -639,146
  -696,340
  -755,902
  -817,872
  -882,308
New CAPEX, $m
  -5,817
  -7,831
  -11,394
  -16,006
  -21,784
  -28,797
  -37,061
  -46,534
  -57,129
  -68,711
  -81,114
  -94,156
  -107,646
  -121,403
  -135,261
  -149,080
  -162,748
  -176,182
  -189,331
  -202,174
  -214,713
  -226,971
  -238,993
  -250,833
  -262,559
  -274,244
  -285,968
  -297,810
  -309,853
  -322,177
  -334,861
Cash from investing activities, $m
  -3,068
  -10,446
  -15,575
  -22,466
  -31,445
  -42,815
  -56,839
  -73,724
  -93,626
  -116,634
  -142,779
  -172,043
  -204,365
  -239,651
  -277,789
  -318,661
  -362,145
  -408,128
  -456,513
  -507,223
  -560,197
  -615,397
  -672,813
  -732,452
  -794,344
  -858,541
  -925,114
  -994,150
  -1,065,755
  -1,140,049
  -1,217,169
Free cash flow, $m
  100
  3,322
  9,166
  17,774
  29,970
  46,676
  68,872
  97,549
  133,674
  178,143
  231,748
  295,151
  368,868
  453,266
  548,564
  654,853
  772,105
  900,206
  1,038,972
  1,188,180
  1,347,586
  1,516,947
  1,696,038
  1,884,668
  2,082,688
  2,290,006
  2,506,583
  2,732,445
  2,967,681
  3,212,447
  3,466,959
Issuance/(repayment) of debt, $m
  1,329
  8,812
  12,816
  18,003
  24,502
  32,391
  41,685
  52,341
  64,258
  77,284
  91,236
  105,904
  121,078
  136,552
  152,139
  167,683
  183,056
  198,166
  212,957
  227,402
  241,505
  255,293
  268,815
  282,132
  295,321
  308,465
  321,652
  334,972
  348,517
  362,379
  376,645
Issuance/(repurchase) of shares, $m
  -99
  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  
  1,745
  8,812
  12,816
  18,003
  24,502
  32,391
  41,685
  52,341
  64,258
  77,284
  91,236
  105,904
  121,078
  136,552
  152,139
  167,683
  183,056
  198,166
  212,957
  227,402
  241,505
  255,293
  268,815
  282,132
  295,321
  308,465
  321,652
  334,972
  348,517
  362,379
  376,645
Total cash flow (excl. dividends), $m
  1,853
  12,134
  21,982
  35,777
  54,472
  79,067
  110,557
  149,890
  197,932
  255,428
  322,984
  401,055
  489,946
  589,817
  700,704
  822,535
  955,160
  1,098,372
  1,251,929
  1,415,582
  1,589,091
  1,772,240
  1,964,852
  2,166,800
  2,378,010
  2,598,471
  2,828,234
  3,067,416
  3,316,198
  3,574,825
  3,843,605
Retained Cash Flow (-), $m
  222
  -5,079
  -7,367
  -10,348
  -14,084
  -18,618
  -23,961
  -30,086
  -36,935
  -44,423
  -52,443
  -60,874
  -69,596
  -78,490
  -87,450
  -96,385
  -105,221
  -113,906
  -122,408
  -130,711
  -138,818
  -146,743
  -154,515
  -162,171
  -169,752
  -177,307
  -184,886
  -192,543
  -200,329
  -208,296
  -216,497
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
 
  10,697
  14,615
  25,429
  40,388
  60,449
  86,596
  119,804
  160,996
  211,004
  270,541
  340,181
  420,350
  511,327
  613,254
  726,151
  849,940
  984,465
  1,129,521
  1,284,871
  1,450,273
  1,625,497
  1,810,337
  2,004,629
  2,208,258
  2,421,164
  2,643,348
  2,874,874
  3,115,870
  3,366,529
  3,627,108
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
 
  10,216
  13,273
  21,853
  32,675
  45,788
  61,052
  78,124
  96,454
  115,314
  133,841
  151,112
  166,213
  178,323
  186,785
  191,155
  191,244
  187,123
  179,110
  167,737
  153,695
  137,776
  120,806
  103,577
  86,802
  71,068
  56,812
  44,313
  33,700
  24,967
  18,003
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

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 9.4
Price to Sales 2.4
Price to Book 4
Price to Tangible Book
Price to Cash Flow 15.2
Price to Free Cash Flow -18.1
Growth Rates
Sales Growth Rate 63.9%
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 20
Management Effectiveness
Return On Assets 20.7%
Ret/ On Assets - 3 Yr. Avg. 11.7%
Return On Total Capital 24.4%
Ret/ On T. Cap. - 3 Yr. Avg. 13.6%
Return On Equity 41.7%
Return On Equity - 3 Yr. Avg. 22.8%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 41.5%
Gross Margin - 3 Yr. Avg. 31.3%
EBITDA Margin 41.5%
EBITDA Margin - 3 Yr. Avg. 30.9%
Operating Margin 29%
Oper. Margin - 3 Yr. Avg. 16.2%
Pre-Tax Margin 25.6%
Pre-Tax Margin - 3 Yr. Avg. 13.1%
Net Profit Margin 25%
Net Profit Margin - 3 Yr. Avg. 13.6%
Effective Tax Rate 2.2%
Eff/ Tax Rate - 3 Yr. Avg. 0.5%
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 $20322 million for the last fiscal year's total revenue generated by Micron Technology. The default revenue input number comes from 2017 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 27.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9028 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 64.3%.

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 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 - $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 1138.8 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 $52.6 billion.

RELATED COMPANIES Price Int.Val. Rating
INTC Intel 44.63 40.49  hold
GSIT GSI Technology 8.01 1.21  str.sell
WDC Western Digita 91.30 2,236.29  str.buy
MOSY MoSys 1.30 0.06  str.sell
RMBS Rambus 14.78 20.24  buy
PLAB Photronics 8.75 8.76  hold

COMPANY NEWS

▶ 2 Reasons to Buy Intel Stock   [Nov-17-17 02:02PM  Motley Fool]
▶ How Intel Is Using Its Cash   [09:01AM  Market Realist]
▶ Inside Microns Top-Line Growth   [07:31AM  Market Realist]
▶ Stick With the Trend on Micron Technology   [02:57PM  TheStreet.com]
▶ Could 2017 Be a Record Year for Intel?   [10:31AM  Market Realist]
▶ Behind AMDs Top-Line Growth   [05:26PM  Market Realist]
▶ More bullish bets on a chip name that's been on a tear   [Nov-10-17 01:56PM  CNBC Videos]
▶ CBS leading the IQ100 index   [Nov-07-17 01:03PM  CNBC Videos]
▶ Now Apple must show whats next after iPhone X   [Nov-06-17 04:21PM  MarketWatch]
▶ Are Semiconductor Stocks Top Heavy?   [Nov-04-17 08:50AM  Investopedia]
▶ Najarians' spot bearish unusual activity in a financial   [Nov-03-17 01:46PM  CNBC Videos]
▶ Micron at SuperComputing 2017   [09:00AM  GlobeNewswire]
▶ Micron, Cisco, Twitter, Expedia & L Brands   [Nov-01-17 12:54PM  CNBC Videos]
▶ Sony and Rockwell boosting the CNBC IQ100   [01:35PM  CNBC Videos]
▶ Seagate Introduces AI-Powered Hard Drives   [01:25PM  Investopedia]
▶ Intel Corporation (INTC) Stock a Big Buy Ahead of Earnings   [Oct-26-17 11:59AM  InvestorPlace]
▶ 6 Undervalued Stocks That Top Money Managers Are Buying Today   [Oct-25-17 12:51PM  Harvest Exchange]
▶ 6 Most Undervalued Stocks to Buy Now   [07:16AM  InvestorPlace]
▶ Micron to Become Net Cash Positive by 2018: UBS   [Oct-20-17 02:17PM  Investopedia]
▶ Why Micron Can Still Climb 28%   [Oct-19-17 04:20PM  Barrons.com]
▶ Bright Future for Microns Embedded Business   [07:36AM  Market Realist]
▶ Micron, Abbvie, Sherwin-Williams, Wynn Resorts & Exxon   [Oct-18-17 02:20PM  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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.