Intrinsic value of Rudolph Technologies - RTEC

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$24.90

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of RTEC 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 0.8

 

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, %
  4.95
  13.00
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  233
  263
  295
  329
  365
  402
  442
  482
  525
  569
  615
  663
  713
  765
  819
  875
  933
  993
  1,056
  1,122
  1,190
  1,261
  1,335
  1,412
  1,493
  1,577
  1,665
  1,757
  1,853
  1,953
  2,058
Variable operating expenses, $m
 
  223
  250
  279
  309
  340
  373
  408
  443
  481
  519
  557
  599
  643
  688
  735
  784
  834
  887
  942
  1,000
  1,059
  1,122
  1,186
  1,254
  1,325
  1,399
  1,476
  1,557
  1,641
  1,729
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
  180
  223
  250
  279
  309
  340
  373
  408
  443
  481
  519
  557
  599
  643
  688
  735
  784
  834
  887
  942
  1,000
  1,059
  1,122
  1,186
  1,254
  1,325
  1,399
  1,476
  1,557
  1,641
  1,729
Operating income, $m
  52
  40
  45
  50
  56
  62
  68
  75
  82
  89
  96
  106
  114
  122
  131
  140
  149
  159
  169
  179
  190
  202
  213
  226
  239
  252
  266
  281
  296
  312
  329
EBITDA, $m
  58
  45
  50
  56
  62
  68
  75
  82
  89
  97
  105
  113
  121
  130
  139
  149
  159
  169
  180
  191
  202
  214
  227
  240
  254
  268
  283
  299
  315
  332
  350
Interest expense (income), $m
  2
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
Earnings before tax, $m
  50
  40
  45
  50
  55
  60
  66
  72
  78
  85
  92
  101
  108
  116
  124
  132
  141
  149
  159
  168
  178
  189
  200
  211
  223
  235
  248
  262
  276
  291
  306
Tax expense, $m
  13
  11
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  40
  43
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  78
  83
Net income, $m
  37
  29
  33
  36
  40
  44
  48
  53
  57
  62
  67
  74
  79
  85
  90
  96
  103
  109
  116
  123
  130
  138
  146
  154
  163
  172
  181
  191
  201
  212
  224

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  126
  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
  339
  241
  270
  301
  334
  368
  404
  441
  480
  520
  563
  606
  652
  699
  748
  799
  853
  908
  965
  1,025
  1,088
  1,153
  1,220
  1,291
  1,365
  1,442
  1,522
  1,606
  1,694
  1,785
  1,881
Adjusted assets (=assets-cash), $m
  213
  241
  270
  301
  334
  368
  404
  441
  480
  520
  563
  606
  652
  699
  748
  799
  853
  908
  965
  1,025
  1,088
  1,153
  1,220
  1,291
  1,365
  1,442
  1,522
  1,606
  1,694
  1,785
  1,881
Revenue / Adjusted assets
  1.094
  1.091
  1.093
  1.093
  1.093
  1.092
  1.094
  1.093
  1.094
  1.094
  1.092
  1.094
  1.094
  1.094
  1.095
  1.095
  1.094
  1.094
  1.094
  1.095
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
  1.094
Average production assets, $m
  24
  27
  30
  33
  37
  41
  45
  49
  53
  57
  62
  67
  72
  77
  83
  88
  94
  100
  107
  113
  120
  127
  135
  143
  151
  159
  168
  177
  187
  197
  208
Working capital, $m
  227
  114
  128
  143
  158
  174
  191
  209
  227
  247
  266
  287
  309
  331
  355
  379
  404
  430
  457
  486
  515
  546
  578
  612
  646
  683
  721
  761
  802
  846
  891
Total debt, $m
  0
  6
  12
  19
  25
  33
  40
  48
  56
  65
  74
  83
  93
  103
  113
  124
  135
  147
  159
  171
  184
  198
  212
  227
  243
  259
  276
  294
  312
  332
  352
Total liabilities, $m
  45
  51
  57
  64
  70
  78
  85
  93
  101
  110
  119
  128
  138
  148
  158
  169
  180
  192
  204
  216
  229
  243
  257
  272
  288
  304
  321
  339
  357
  377
  397
Total equity, $m
  294
  190
  213
  238
  263
  290
  318
  348
  379
  411
  444
  478
  514
  552
  590
  631
  673
  716
  762
  809
  858
  909
  963
  1,019
  1,077
  1,137
  1,201
  1,267
  1,336
  1,409
  1,484
Total liabilities and equity, $m
  339
  241
  270
  302
  333
  368
  403
  441
  480
  521
  563
  606
  652
  700
  748
  800
  853
  908
  966
  1,025
  1,087
  1,152
  1,220
  1,291
  1,365
  1,441
  1,522
  1,606
  1,693
  1,786
  1,881
Debt-to-equity ratio
  0.000
  0.030
  0.060
  0.080
  0.100
  0.110
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
Adjusted equity ratio
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789
  0.789

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  37
  29
  33
  36
  40
  44
  48
  53
  57
  62
  67
  74
  79
  85
  90
  96
  103
  109
  116
  123
  130
  138
  146
  154
  163
  172
  181
  191
  201
  212
  224
Depreciation, amort., depletion, $m
  6
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
Funds from operations, $m
  36
  34
  38
  42
  46
  50
  55
  60
  65
  70
  75
  80
  86
  92
  99
  105
  112
  119
  127
  134
  142
  151
  159
  168
  178
  188
  198
  209
  220
  232
  244
Change in working capital, $m
  -11
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  40
  42
  43
  45
Cash from operations, $m
  47
  21
  24
  27
  31
  34
  38
  42
  46
  51
  55
  60
  65
  70
  75
  81
  87
  93
  99
  106
  113
  120
  127
  135
  143
  151
  160
  169
  179
  188
  199
Maintenance CAPEX, $m
  0
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
New CAPEX, $m
  -5
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
Cash from investing activities, $m
  24
  -5
  -6
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -18
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
Free cash flow, $m
  71
  15
  18
  21
  24
  27
  30
  33
  37
  41
  45
  49
  53
  57
  62
  67
  72
  77
  83
  89
  95
  101
  107
  114
  121
  128
  135
  143
  151
  160
  168
Issuance/(repayment) of debt, $m
  -60
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
Issuance/(repurchase) of shares, $m
  -17
  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  
  -78
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
Total cash flow (excl. dividends), $m
  -7
  21
  24
  27
  30
  34
  38
  41
  45
  50
  54
  58
  63
  67
  73
  78
  83
  89
  95
  101
  108
  114
  121
  129
  136
  144
  152
  161
  170
  179
  189
Retained Cash Flow (-), $m
  -23
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -76
Prev. year cash balance distribution, $m
 
  126
  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
 
  125
  1
  3
  5
  7
  9
  12
  15
  18
  21
  23
  27
  30
  34
  38
  41
  45
  50
  54
  58
  63
  68
  73
  78
  83
  89
  94
  100
  107
  113
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
 
  120
  1
  2
  4
  5
  7
  8
  9
  10
  11
  11
  11
  11
  11
  11
  11
  10
  9
  8
  7
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
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

Rudolph Technologies, Inc. designs, develops, manufactures, and supports process control defect inspection and metrology, advanced packaging lithography, and data analysis systems and software used in microelectronic device manufacturing. The company also offers process and yield management solutions used in wafer processing and final manufacturing through standalone systems for macro-defect inspection, lithography, probe card test and analysis, and transparent and opaque thin film measurements. In addition, it provides spare parts. The company markets and sells its products to logic, memory, data storage, flat panel, and application-specific integrated circuit device, and packaging manufacturers. Rudolph Technologies, Inc. offers its products in the United States, Taiwan, South Korea, Singapore, Austria, Japan, Germany, and China, as well as other European and Asian countries. The company was founded in 1940 and is headquartered in Wilmington, Massachusetts.

FINANCIAL RATIOS  of  Rudolph Technologies (RTEC)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 3.3
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 16.4
Price to Free Cash Flow 18.3
Growth Rates
Sales Growth Rate 5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.7%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 26
Management Effectiveness
Return On Assets 10.7%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 11.9%
Ret/ On T. Cap. - 3 Yr. Avg. 5.3%
Return On Equity 13.1%
Return On Equity - 3 Yr. Avg. 6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 53.2%
Gross Margin - 3 Yr. Avg. 53.1%
EBITDA Margin 24.9%
EBITDA Margin - 3 Yr. Avg. 13.9%
Operating Margin 22.7%
Oper. Margin - 3 Yr. Avg. 12.2%
Pre-Tax Margin 21.5%
Pre-Tax Margin - 3 Yr. Avg. 9.9%
Net Profit Margin 15.9%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 26%
Eff/ Tax Rate - 3 Yr. Avg. 29.3%
Payout Ratio 0%

RTEC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RTEC stock intrinsic value calculation we used $233 million for the last fiscal year's total revenue generated by Rudolph Technologies. The default revenue input number comes from 2016 income statement of Rudolph Technologies. 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 RTEC stock valuation model: a) initial revenue growth rate of 13% 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 RTEC is calculated based on our internal credit rating of Rudolph Technologies, 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 Rudolph Technologies.
    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 RTEC stock the variable cost ratio is equal to 85%.

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 RTEC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.9% for Rudolph Technologies.

Corporate tax rate of 27% is the nominal tax rate for Rudolph Technologies. 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 RTEC 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 RTEC are equal to 10.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Rudolph Technologies 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 RTEC is equal to 43.3%. 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 - $294 million for Rudolph Technologies - 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 30.186 million for Rudolph Technologies 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 Rudolph Technologies at the current share price and the inputted number of shares is $0.8 billion.


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Stock chart of RTEC Financial statements of RTEC Annual reports of RTEC
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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