Intrinsic value of Micron Technology - MU

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$31.66

  Intrinsic Value

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  Value-price divergence*

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$31.66

 
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*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 34.4

 

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, %
  -23.43
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  12,399
  14,693
  17,213
  19,955
  22,917
  26,093
  29,478
  33,066
  36,855
  40,839
  45,017
  49,387
  53,949
  58,703
  63,652
  68,801
  74,153
  79,716
  85,496
  91,504
  97,748
  104,239
  110,991
  118,016
  125,329
  132,945
  140,881
  149,154
  157,782
  166,786
  176,186
Variable operating expenses, $m
 
  3,908
  4,579
  5,308
  6,096
  6,941
  7,841
  8,796
  9,803
  10,863
  11,975
  13,137
  14,350
  15,615
  16,932
  18,301
  19,725
  21,204
  22,742
  24,340
  26,001
  27,728
  29,524
  31,392
  33,338
  35,363
  37,474
  39,675
  41,970
  44,365
  46,865
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
  13,304
  14,210
  15,180
  16,215
  17,313
  18,472
  19,693
  20,972
  22,311
  23,710
  25,165
  26,679
  28,252
  29,885
  31,578
  33,333
  35,153
  37,039
  38,995
  41,022
  43,125
  45,306
  47,568
  49,919
  52,358
  54,894
  57,530
  60,272
  63,124
  66,093
Operating income, $m
  164
  1,388
  3,003
  4,775
  6,703
  8,781
  11,006
  13,374
  15,882
  18,528
  21,308
  24,222
  27,270
  30,451
  33,768
  37,223
  40,820
  44,563
  48,457
  52,509
  56,726
  61,115
  65,686
  70,448
  75,411
  80,587
  85,986
  91,623
  97,510
  103,662
  110,092
EBITDA, $m
  3,144
  4,489
  6,635
  8,986
  11,538
  14,286
  17,225
  20,351
  23,659
  27,145
  30,807
  34,643
  38,653
  42,837
  47,199
  51,740
  56,466
  61,383
  66,497
  71,816
  77,350
  83,109
  89,105
  95,349
  101,855
  108,638
  115,712
  123,095
  130,802
  138,853
  147,267
Interest expense (income), $m
  267
  320
  415
  519
  633
  756
  888
  1,028
  1,177
  1,334
  1,499
  1,672
  1,854
  2,043
  2,240
  2,445
  2,659
  2,880
  3,111
  3,351
  3,600
  3,859
  4,128
  4,408
  4,699
  5,002
  5,318
  5,647
  5,990
  6,348
  6,721
Earnings before tax, $m
  -281
  1,068
  2,588
  4,256
  6,069
  8,025
  10,118
  12,346
  14,705
  17,194
  19,809
  22,550
  25,416
  28,408
  31,528
  34,778
  38,161
  41,682
  45,346
  49,158
  53,126
  57,256
  61,558
  66,040
  70,712
  75,584
  80,668
  85,976
  91,520
  97,313
  103,371
Tax expense, $m
  19
  288
  699
  1,149
  1,639
  2,167
  2,732
  3,333
  3,970
  4,642
  5,348
  6,088
  6,862
  7,670
  8,513
  9,390
  10,304
  11,254
  12,243
  13,273
  14,344
  15,459
  16,621
  17,831
  19,092
  20,408
  21,780
  23,214
  24,710
  26,275
  27,910
Net income, $m
  -276
  780
  1,889
  3,107
  4,431
  5,858
  7,386
  9,013
  10,735
  12,551
  14,460
  16,461
  18,554
  20,738
  23,016
  25,388
  27,858
  30,428
  33,102
  35,885
  38,782
  41,797
  44,937
  48,209
  51,620
  55,176
  58,888
  62,762
  66,810
  71,039
  75,461

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
  27,412
  32,113
  37,230
  42,756
  48,681
  54,995
  61,691
  68,759
  76,192
  83,987
  92,140
  100,650
  109,520
  118,755
  128,360
  138,346
  148,724
  159,508
  170,716
  182,365
  194,476
  207,073
  220,179
  233,823
  248,032
  262,837
  278,272
  294,370
  311,168
  328,705
Adjusted assets (=assets-cash), $m
  23,142
  27,412
  32,113
  37,230
  42,756
  48,681
  54,995
  61,691
  68,759
  76,192
  83,987
  92,140
  100,650
  109,520
  118,755
  128,360
  138,346
  148,724
  159,508
  170,716
  182,365
  194,476
  207,073
  220,179
  233,823
  248,032
  262,837
  278,272
  294,370
  311,168
  328,705
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
  15,501
  18,159
  21,053
  24,178
  27,528
  31,099
  34,885
  38,882
  43,085
  47,493
  52,103
  56,916
  61,932
  67,153
  72,585
  78,232
  84,100
  90,199
  96,536
  103,124
  109,972
  117,096
  124,507
  132,222
  140,257
  148,629
  157,357
  166,460
  175,959
  185,876
Working capital, $m
  4,660
  1,205
  1,411
  1,636
  1,879
  2,140
  2,417
  2,711
  3,022
  3,349
  3,691
  4,050
  4,424
  4,814
  5,220
  5,642
  6,081
  6,537
  7,011
  7,503
  8,015
  8,548
  9,101
  9,677
  10,277
  10,901
  11,552
  12,231
  12,938
  13,676
  14,447
Total debt, $m
  9,910
  11,857
  14,842
  18,091
  21,600
  25,362
  29,372
  33,624
  38,112
  42,832
  47,782
  52,959
  58,363
  63,995
  69,859
  75,959
  82,299
  88,890
  95,738
  102,855
  110,252
  117,942
  125,941
  134,264
  142,927
  151,950
  161,352
  171,153
  181,375
  192,042
  203,178
Total liabilities, $m
  15,460
  17,407
  20,392
  23,641
  27,150
  30,912
  34,922
  39,174
  43,662
  48,382
  53,332
  58,509
  63,913
  69,545
  75,409
  81,509
  87,849
  94,440
  101,288
  108,405
  115,802
  123,492
  131,491
  139,814
  148,477
  157,500
  166,902
  176,703
  186,925
  197,592
  208,728
Total equity, $m
  12,080
  10,005
  11,721
  13,589
  15,606
  17,768
  20,073
  22,517
  25,097
  27,810
  30,655
  33,631
  36,737
  39,975
  43,345
  46,851
  50,496
  54,284
  58,221
  62,311
  66,563
  70,984
  75,582
  80,365
  85,345
  90,532
  95,936
  101,569
  107,445
  113,576
  119,977
Total liabilities and equity, $m
  27,540
  27,412
  32,113
  37,230
  42,756
  48,680
  54,995
  61,691
  68,759
  76,192
  83,987
  92,140
  100,650
  109,520
  118,754
  128,360
  138,345
  148,724
  159,509
  170,716
  182,365
  194,476
  207,073
  220,179
  233,822
  248,032
  262,838
  278,272
  294,370
  311,168
  328,705
Debt-to-equity ratio
  0.820
  1.190
  1.270
  1.330
  1.380
  1.430
  1.460
  1.490
  1.520
  1.540
  1.560
  1.570
  1.590
  1.600
  1.610
  1.620
  1.630
  1.640
  1.640
  1.650
  1.660
  1.660
  1.670
  1.670
  1.670
  1.680
  1.680
  1.690
  1.690
  1.690
  1.690
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
  780
  1,889
  3,107
  4,431
  5,858
  7,386
  9,013
  10,735
  12,551
  14,460
  16,461
  18,554
  20,738
  23,016
  25,388
  27,858
  30,428
  33,102
  35,885
  38,782
  41,797
  44,937
  48,209
  51,620
  55,176
  58,888
  62,762
  66,810
  71,039
  75,461
Depreciation, amort., depletion, $m
  2,980
  3,100
  3,632
  4,211
  4,836
  5,506
  6,220
  6,977
  7,776
  8,617
  9,499
  10,421
  11,383
  12,386
  13,431
  14,517
  15,646
  16,820
  18,040
  19,307
  20,625
  21,994
  23,419
  24,901
  26,444
  28,051
  29,726
  31,471
  33,292
  35,192
  37,175
Funds from operations, $m
  3,533
  3,880
  5,521
  7,317
  9,266
  11,364
  13,606
  15,990
  18,511
  21,168
  23,959
  26,882
  29,937
  33,124
  36,446
  39,905
  43,504
  47,248
  51,142
  55,193
  59,406
  63,791
  68,356
  73,110
  78,064
  83,228
  88,614
  94,234
  100,102
  106,231
  112,636
Change in working capital, $m
  365
  188
  207
  225
  243
  260
  278
  294
  311
  327
  343
  358
  374
  390
  406
  422
  439
  456
  474
  493
  512
  532
  554
  576
  600
  625
  651
  678
  708
  738
  771
Cash from operations, $m
  3,168
  5,765
  5,314
  7,093
  9,023
  11,103
  13,328
  15,695
  18,201
  20,842
  23,616
  26,524
  29,563
  32,735
  36,040
  39,483
  43,065
  46,792
  50,668
  54,700
  58,894
  63,259
  67,803
  72,534
  77,464
  82,603
  87,963
  93,556
  99,394
  105,492
  111,865
Maintenance CAPEX, $m
  0
  -2,615
  -3,100
  -3,632
  -4,211
  -4,836
  -5,506
  -6,220
  -6,977
  -7,776
  -8,617
  -9,499
  -10,421
  -11,383
  -12,386
  -13,431
  -14,517
  -15,646
  -16,820
  -18,040
  -19,307
  -20,625
  -21,994
  -23,419
  -24,901
  -26,444
  -28,051
  -29,726
  -31,471
  -33,292
  -35,192
New CAPEX, $m
  -5,817
  -2,424
  -2,658
  -2,894
  -3,125
  -3,350
  -3,571
  -3,786
  -3,997
  -4,204
  -4,408
  -4,610
  -4,812
  -5,016
  -5,222
  -5,432
  -5,647
  -5,869
  -6,098
  -6,338
  -6,587
  -6,849
  -7,123
  -7,411
  -7,715
  -8,035
  -8,372
  -8,728
  -9,103
  -9,499
  -9,917
Cash from investing activities, $m
  -3,068
  -5,039
  -5,758
  -6,526
  -7,336
  -8,186
  -9,077
  -10,006
  -10,974
  -11,980
  -13,025
  -14,109
  -15,233
  -16,399
  -17,608
  -18,863
  -20,164
  -21,515
  -22,918
  -24,378
  -25,894
  -27,474
  -29,117
  -30,830
  -32,616
  -34,479
  -36,423
  -38,454
  -40,574
  -42,791
  -45,109
Free cash flow, $m
  100
  725
  -444
  567
  1,688
  2,917
  4,252
  5,689
  7,227
  8,862
  10,592
  12,415
  14,330
  16,336
  18,432
  20,621
  22,902
  25,277
  27,750
  30,323
  33,000
  35,786
  38,685
  41,704
  44,848
  48,124
  51,539
  55,102
  58,819
  62,701
  66,756
Issuance/(repayment) of debt, $m
  1,329
  2,703
  2,985
  3,249
  3,509
  3,762
  4,010
  4,252
  4,488
  4,720
  4,950
  5,177
  5,404
  5,633
  5,864
  6,099
  6,341
  6,590
  6,848
  7,117
  7,397
  7,691
  7,999
  8,323
  8,664
  9,023
  9,401
  9,801
  10,222
  10,667
  11,136
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
  2,703
  2,985
  3,249
  3,509
  3,762
  4,010
  4,252
  4,488
  4,720
  4,950
  5,177
  5,404
  5,633
  5,864
  6,099
  6,341
  6,590
  6,848
  7,117
  7,397
  7,691
  7,999
  8,323
  8,664
  9,023
  9,401
  9,801
  10,222
  10,667
  11,136
Total cash flow (excl. dividends), $m
  1,853
  3,428
  2,541
  3,816
  5,197
  6,679
  8,262
  9,941
  11,715
  13,582
  15,541
  17,592
  19,734
  21,968
  24,296
  26,720
  29,243
  31,867
  34,598
  37,439
  40,397
  43,476
  46,684
  50,026
  53,511
  57,147
  60,941
  64,903
  69,042
  73,368
  77,892
Retained Cash Flow (-), $m
  222
  -1,567
  -1,716
  -1,868
  -2,017
  -2,163
  -2,305
  -2,444
  -2,580
  -2,713
  -2,845
  -2,976
  -3,106
  -3,238
  -3,370
  -3,506
  -3,645
  -3,788
  -3,936
  -4,091
  -4,252
  -4,421
  -4,598
  -4,784
  -4,980
  -5,186
  -5,404
  -5,634
  -5,876
  -6,131
  -6,401
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
 
  5,503
  825
  1,949
  3,180
  4,517
  5,957
  7,497
  9,135
  10,869
  12,696
  14,616
  16,628
  18,731
  20,926
  23,214
  25,598
  28,079
  30,662
  33,349
  36,145
  39,056
  42,086
  45,243
  48,532
  51,960
  55,537
  59,269
  63,166
  67,237
  71,491
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
 
  5,256
  749
  1,675
  2,573
  3,421
  4,200
  4,889
  5,473
  5,940
  6,281
  6,493
  6,575
  6,532
  6,374
  6,111
  5,760
  5,337
  4,862
  4,354
  3,831
  3,310
  2,808
  2,338
  1,908
  1,525
  1,194
  914
  683
  499
  355
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. provides semiconductor systems worldwide. The company operates through four segments: Compute and Networking Business Unit, Storage Business Unit, Mobile Business Unit, and Embedded Business Unit. It offers DDR3 and DDR4 DRAM products for computers, servers, networking devices, communications equipment, consumer electronics, automotive, and industrial applications; mobile low-power DRAM products for smartphones, tablets, automotive, laptop computers, and other mobile consumer device applications; DDR2 and DDR DRAM, GDDR5 and GDDR5X DRAM, SDRAM, and RLDRAM products for networking devices, servers, consumer electronics, communications equipment, computer peripherals, automotive and industrial applications, and computer memory upgrades; and hybrid memory cube semiconductor memory devices for use in networking and computing applications. The company also provides NAND Flash products, which are electrically re-writeable, non-volatile semiconductor memory devices; client solid-state drives (SSDs) for notebooks, desktops, workstations, and other consumer applications; enterprise SSDs for server and storage applications; managed multi-chip package products; digital media products, including flash memory cards and JumpDrive products under the Lexar brand name. In addition, it manufactures products that are sold under other brand names; and resells flash memory products that are purchased from other NAND Flash suppliers. Further, the company provides 3D XPoint memory products; and NOR Flash, which are electrically re-writeable and semiconductor memory devices for automotive, industrial, connected home, and consumer applications. It markets its products to original equipment manufacturers and retailers through its internal sales force, independent sales representatives, and distributors; and through a Web-based customer direct sales channel, and channel and distribution partners. The company was founded in 1978 and is headquartered in Boise, Idaho.

FINANCIAL RATIOS  of  Micron Technology (MU)

Valuation Ratios
P/E Ratio -119.3
Price to Sales 2.7
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow -12.4
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 18.5% 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 1087.98 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 $34.4 billion.


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COMPANY NEWS

▶ Can Micron Stock Continue to Outperform the Market in 2017?   [Jun-28-17 09:05AM  Market Realist]
▶ [$$] Micron Will Keep Defying the Skeptics   [12:58AM  The Wall Street Journal]
▶ Options market points to a pop for this energy stock   [Jun-27-17 01:59PM  CNBC Videos]
▶ [$$] Micron Will Keep Defying the Skeptics   [10:20AM  The Wall Street Journal]
▶ Chipmakers Micron, Macom Surge On Price-Target Hikes   [04:04PM  Investor's Business Daily]
▶ iQ100 up over twenty percent this year   [02:38PM  CNBC Videos]
▶ Better Buy: Micron Technology, Inc. vs. Intel   [Jun-25-17 06:54PM  Motley Fool]
▶ Micron Concerns Over Chinese Competitors Are Overblown   [Jun-21-17 06:58PM  Investopedia]
▶ [$$] China No Threat to Micron Tech   [01:21PM  Barrons.com]
▶ Better Buy: Sierra Wireless vs. Micron Technology   [Jun-20-17 05:13PM  Motley Fool]
▶ Micron Will Still Dominate, JPMorgan Says   [04:16PM  TheStreet.com]
▶ [$$] Tech M&A: thrift shop picks   [06:55AM  Financial Times]
▶ Micron Shares Haven't Peaked, Credit Suisse Says   [Jun-14-17 04:07PM  Benzinga]
▶ Why Credit Suisse Is Defending Micron   [12:10PM  24/7 Wall St.]
▶ [$$] A Micron Q3 Earnings Options Play   [06:02AM  Barrons.com]
▶ Where Is Micron Stock Headed After Reaching Key Support?   [Jun-13-17 12:57PM  Investopedia]
▶ Stocks to Watch: Apple, Netflix, Amazon, Tesla, Nvidia   [09:31AM  The Wall Street Journal]
▶ [$$] Decline in Technology Stocks Moderates in Monday's Session   [Jun-12-17 06:45PM  The Wall Street Journal]
▶ 11 Best Growth Company Stocks To Buy Now   [12:11PM  Insider Monkey]
▶ The Best and Worst Chip Stock Performers of 2017   [Jun-11-17 03:20PM  TheStreet.com]
▶ Better Buy: Micron vs. NVIDIA   [Jun-08-17 03:07PM  Motley Fool]
▶ Micron, Let the Good Times Roll: Baird   [02:34PM  Investopedia]
▶ 3 Stocks to Watch in June   [Jun-06-17 09:00AM  Motley Fool]
▶ [$$] Einhorn Bulks Up on GM, Buys Micron, Dumps Yelp   [Jun-05-17 11:23PM  Barrons.com]
▶ What Micron Technologys New CEO Can Offer   [09:07AM  Market Realist]
▶ Technical Analysis of Qualcomm versus Its Peers   [Jun-02-17 09:08AM  Market Realist]
▶ Chip Stocks And Semiconductor Industry News   [10:37AM  Investor's Business Daily]
▶ Stocks Close Slightly Lower; Microsoft Reaches Record High   [04:14PM  Investor's Business Daily]
▶ Technical Analysis of Qualcomm   [07:37AM  Market Realist]
Stock chart of MU Financial statements of MU Annual reports 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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