Intrinsic value of Nova Measuring Instruments - NVMI

Previous Close

$23.20

  Intrinsic Value

$6.31

stock screener

  Rating & Target

str. sell

-73%

  Value-price divergence*

-199%

Previous close

$23.20

 
Intrinsic value

$6.31

 
Up/down potential

-73%

 
Rating

str. sell

 
Value-price divergence*

-199%

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

We calculate the intrinsic value of NVMI 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 0.6

 

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, %
  10.07
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
Revenue, $m
  164
  181
  198
  216
  235
  254
  275
  296
  318
  341
  365
  389
  415
  442
  470
  499
  529
  560
  593
  627
  663
  700
  739
  780
  822
  866
  913
  962
  1,013
  1,066
  1,122
Variable operating expenses, $m
 
  166
  182
  198
  215
  233
  252
  271
  291
  312
  333
  354
  377
  401
  427
  453
  480
  509
  539
  570
  602
  636
  671
  708
  747
  787
  830
  874
  920
  969
  1,019
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
  154
  166
  182
  198
  215
  233
  252
  271
  291
  312
  333
  354
  377
  401
  427
  453
  480
  509
  539
  570
  602
  636
  671
  708
  747
  787
  830
  874
  920
  969
  1,019
Operating income, $m
  10
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  36
  38
  40
  43
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
EBITDA, $m
  17
  19
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  60
  64
  68
  71
  75
  80
  84
  89
  93
  98
  104
  109
  115
  121
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
Earnings before tax, $m
  11
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  89
  94
Tax expense, $m
  1
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Net income, $m
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  22
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  59
  62
  65
  68

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  91
  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
  219
  141
  154
  169
  183
  199
  214
  231
  248
  266
  285
  304
  324
  345
  367
  389
  413
  437
  463
  489
  517
  546
  577
  609
  642
  676
  713
  751
  790
  832
  876
Adjusted assets (=assets-cash), $m
  128
  141
  154
  169
  183
  199
  214
  231
  248
  266
  285
  304
  324
  345
  367
  389
  413
  437
  463
  489
  517
  546
  577
  609
  642
  676
  713
  751
  790
  832
  876
Revenue / Adjusted assets
  1.281
  1.284
  1.286
  1.278
  1.284
  1.276
  1.285
  1.281
  1.282
  1.282
  1.281
  1.280
  1.281
  1.281
  1.281
  1.283
  1.281
  1.281
  1.281
  1.282
  1.282
  1.282
  1.281
  1.281
  1.280
  1.281
  1.281
  1.281
  1.282
  1.281
  1.281
Average production assets, $m
  27
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  73
  77
  82
  87
  92
  98
  103
  109
  115
  122
  129
  136
  143
  151
  159
  167
  176
  185
Working capital, $m
  129
  42
  46
  50
  54
  59
  64
  69
  74
  79
  85
  90
  96
  102
  109
  116
  123
  130
  138
  145
  154
  162
  171
  181
  191
  201
  212
  223
  235
  247
  260
Total debt, $m
  0
  4
  9
  14
  19
  24
  30
  35
  41
  48
  54
  61
  67
  75
  82
  90
  98
  106
  115
  124
  134
  144
  154
  165
  177
  189
  201
  214
  228
  242
  257
Total liabilities, $m
  44
  48
  53
  58
  63
  68
  74
  79
  85
  92
  98
  105
  111
  119
  126
  134
  142
  150
  159
  168
  178
  188
  198
  209
  221
  233
  245
  258
  272
  286
  301
Total equity, $m
  175
  92
  101
  111
  120
  130
  141
  152
  163
  175
  187
  199
  213
  226
  240
  255
  271
  287
  304
  321
  339
  358
  378
  399
  421
  444
  468
  492
  519
  546
  574
Total liabilities and equity, $m
  219
  140
  154
  169
  183
  198
  215
  231
  248
  267
  285
  304
  324
  345
  366
  389
  413
  437
  463
  489
  517
  546
  576
  608
  642
  677
  713
  750
  791
  832
  875
Debt-to-equity ratio
  0.000
  0.050
  0.090
  0.130
  0.160
  0.190
  0.210
  0.230
  0.250
  0.270
  0.290
  0.300
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.410
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.440
  0.450
Adjusted equity ratio
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  22
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  59
  62
  65
  68
Depreciation, amort., depletion, $m
  7
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
Funds from operations, $m
  -28
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
  75
  79
  83
  87
Change in working capital, $m
  -24
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
Cash from operations, $m
  -4
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
New CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -4
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
Free cash flow, $m
  -8
  6
  7
  8
  9
  10
  10
  11
  12
  13
  15
  15
  16
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
Issuance/(repayment) of debt, $m
  0
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Issuance/(repurchase) of shares, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Total cash flow (excl. dividends), $m
  -7
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
Retained Cash Flow (-), $m
  -14
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
Prev. year cash balance distribution, $m
 
  91
  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
 
  93
  3
  3
  4
  5
  5
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
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
 
  89
  3
  3
  3
  4
  4
  4
  4
  5
  5
  4
  4
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
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
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Nova Measuring Instruments Ltd. designs, develops, produces, and sells process control systems used in the manufacture of semiconductors in Israel. The company offers in-line and x-ray stand-alone metrology systems, as well as integrated optical metrology systems that attach directly to wafer fabrication process equipment. Its products include thin film and optical CD process control for dimensional, films, and material metrology measurements for process control across multiple semiconductor manufacturing process steps, including lithography, etch, chemical mechanical polishing, and deposition. The company’s products also comprise integrated thickness monitoring systems for chemical mechanical polishing of thin films and layer stacks. It serves various sectors of the integrated circuit manufacturing industry, including logic, ASIC, foundries, and memory manufactures, as well as process equipment manufacturers worldwide. Nova Measuring Instruments Ltd. was founded in 1993 and is headquartered in Ness Ziona, Israel.

FINANCIAL RATIOS  of  Nova Measuring Instruments (NVMI)

Valuation Ratios
P/E Ratio 63.5
Price to Sales 3.9
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow -158.6
Price to Free Cash Flow -90.6
Growth Rates
Sales Growth Rate 10.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 8.2%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 6%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 45.7%
Gross Margin - 3 Yr. Avg. 50.1%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 14.4%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 9.4%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 10.8%
Effective Tax Rate 9.1%
Eff/ Tax Rate - 3 Yr. Avg. -12%
Payout Ratio 0%

NVMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NVMI stock intrinsic value calculation we used $164 million for the last fiscal year's total revenue generated by Nova Measuring Instruments. The default revenue input number comes from 2016 income statement of Nova Measuring 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 NVMI stock valuation model: a) initial revenue growth rate of 10.1% 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 NVMI is calculated based on our internal credit rating of Nova Measuring 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 Nova Measuring 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 NVMI stock the variable cost ratio is equal to 92.1%.

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 NVMI 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 Nova Measuring Instruments.

Corporate tax rate of 27% is the nominal tax rate for Nova Measuring 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 NVMI 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 NVMI are equal to 16.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Nova Measuring 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 NVMI is equal to 23.2%. 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 - $175 million for Nova Measuring 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 26.932 million for Nova Measuring 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 Nova Measuring Instruments at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Nova Measuring Instruments posts 2Q profit   [Aug-02-17 10:50PM  Associated Press]
▶ Nova Measuring Instruments posts 2Q profit   [05:02AM  Associated Press]
▶ Nova to Attend SEMICON West 2017   [09:30AM  PR Newswire]
▶ 5 Dependable Tech Stocks in a Volatile Industry   [Jun-15-17 03:32PM  Zacks]
▶ Shark Bites: Market Isn't a Morning Person   [May-12-17 12:10PM  TheStreet.com]
▶ Nova Measuring Instruments posts 1Q profit   [May-09-17 05:32AM  Associated Press]
▶ Top 10 Stocks Under $20   [Apr-06-17 03:55PM  Zacks]
▶ Crude Bucks Choppy Trend - Dave's Daily Dive   [Apr-04-17 07:52PM  Zacks]
▶ Eli Fruchter Joins Nova's Board of Directors   [Aug-08-16 07:20AM  PR Newswire]
Stock chart of NVMI Financial statements of NVMI
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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