Intrinsic value of Ultratech - UTEK

Previous Close

$29.23

  Intrinsic Value

$89.76

stock screener

  Rating & Target

str. buy

+207%

  Value-price divergence*

+3948%

Previous close

$29.23

 
Intrinsic value

$89.76

 
Up/down potential

+207%

 
Rating

str. buy

 
Value-price divergence*

+3948%

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

We calculate the intrinsic value of UTEK 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, %
  30.20
  26.70
  24.53
  22.58
  20.82
  19.24
  17.81
  16.53
  15.38
  14.34
  13.41
  12.57
  11.81
  11.13
  10.52
  9.96
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
Revenue, $m
  194
  246
  306
  375
  453
  541
  637
  742
  856
  979
  1,110
  1,250
  1,397
  1,553
  1,716
  1,887
  2,066
  2,252
  2,446
  2,648
  2,858
  3,077
  3,304
  3,539
  3,784
  4,039
  4,304
  4,580
  4,866
  5,165
  5,476
Variable operating expenses, $m
 
  120
  150
  184
  222
  265
  312
  364
  420
  480
  544
  612
  685
  761
  841
  925
  1,012
  1,104
  1,199
  1,298
  1,401
  1,508
  1,619
  1,734
  1,854
  1,979
  2,109
  2,244
  2,384
  2,531
  2,683
Fixed operating expenses, $m
 
  95
  98
  100
  103
  105
  108
  111
  113
  116
  119
  122
  125
  128
  131
  135
  138
  142
  145
  149
  152
  156
  160
  164
  168
  172
  177
  181
  186
  190
  195
Total operating expenses, $m
  186
  215
  248
  284
  325
  370
  420
  475
  533
  596
  663
  734
  810
  889
  972
  1,060
  1,150
  1,246
  1,344
  1,447
  1,553
  1,664
  1,779
  1,898
  2,022
  2,151
  2,286
  2,425
  2,570
  2,721
  2,878
Operating income, $m
  8
  30
  58
  91
  129
  170
  217
  268
  323
  383
  447
  515
  588
  664
  744
  828
  916
  1,007
  1,103
  1,202
  1,305
  1,413
  1,525
  1,641
  1,762
  1,888
  2,018
  2,154
  2,296
  2,444
  2,598
EBITDA, $m
  16
  34
  63
  97
  135
  178
  226
  278
  336
  397
  463
  533
  607
  686
  768
  855
  945
  1,039
  1,137
  1,240
  1,346
  1,457
  1,572
  1,691
  1,816
  1,945
  2,079
  2,219
  2,365
  2,517
  2,675
Interest expense (income), $m
  0
  0
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  40
  43
Earnings before tax, $m
  9
  30
  58
  90
  127
  168
  214
  264
  319
  377
  440
  507
  578
  653
  732
  815
  901
  991
  1,085
  1,183
  1,284
  1,390
  1,500
  1,614
  1,733
  1,857
  1,985
  2,119
  2,258
  2,403
  2,555
Tax expense, $m
  -2
  8
  16
  24
  34
  45
  58
  71
  86
  102
  119
  137
  156
  176
  198
  220
  243
  268
  293
  319
  347
  375
  405
  436
  468
  501
  536
  572
  610
  649
  690
Net income, $m
  11
  22
  42
  66
  93
  123
  156
  193
  233
  276
  322
  370
  422
  477
  534
  595
  658
  723
  792
  863
  937
  1,015
  1,095
  1,178
  1,265
  1,355
  1,449
  1,547
  1,649
  1,754
  1,865

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  268
  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
  416
  187
  233
  286
  346
  412
  486
  566
  653
  747
  847
  953
  1,066
  1,184
  1,309
  1,439
  1,576
  1,718
  1,866
  2,020
  2,180
  2,347
  2,520
  2,700
  2,887
  3,081
  3,283
  3,493
  3,712
  3,940
  4,177
Adjusted assets (=assets-cash), $m
  148
  187
  233
  286
  346
  412
  486
  566
  653
  747
  847
  953
  1,066
  1,184
  1,309
  1,439
  1,576
  1,718
  1,866
  2,020
  2,180
  2,347
  2,520
  2,700
  2,887
  3,081
  3,283
  3,493
  3,712
  3,940
  4,177
Revenue / Adjusted assets
  1.311
  1.316
  1.313
  1.311
  1.309
  1.313
  1.311
  1.311
  1.311
  1.311
  1.311
  1.312
  1.311
  1.312
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
  1.311
Average production assets, $m
  28
  35
  43
  53
  64
  77
  90
  105
  122
  139
  158
  177
  198
  221
  244
  268
  293
  320
  347
  376
  406
  437
  469
  503
  537
  574
  611
  650
  691
  733
  778
Working capital, $m
  342
  98
  122
  149
  180
  215
  253
  295
  340
  389
  441
  496
  555
  616
  681
  749
  820
  894
  971
  1,051
  1,135
  1,221
  1,312
  1,405
  1,502
  1,604
  1,709
  1,818
  1,932
  2,050
  2,174
Total debt, $m
  2
  12
  27
  44
  63
  85
  108
  134
  163
  193
  225
  260
  296
  335
  375
  417
  462
  508
  556
  606
  657
  711
  767
  826
  886
  949
  1,015
  1,083
  1,154
  1,227
  1,304
Total liabilities, $m
  50
  61
  76
  93
  112
  134
  157
  183
  212
  242
  274
  309
  345
  384
  424
  466
  511
  557
  605
  655
  706
  760
  816
  875
  935
  998
  1,064
  1,132
  1,203
  1,276
  1,353
Total equity, $m
  365
  127
  158
  193
  234
  279
  328
  383
  441
  505
  572
  644
  721
  801
  885
  973
  1,065
  1,161
  1,261
  1,366
  1,474
  1,586
  1,703
  1,825
  1,951
  2,083
  2,219
  2,361
  2,509
  2,663
  2,824
Total liabilities and equity, $m
  415
  188
  234
  286
  346
  413
  485
  566
  653
  747
  846
  953
  1,066
  1,185
  1,309
  1,439
  1,576
  1,718
  1,866
  2,021
  2,180
  2,346
  2,519
  2,700
  2,886
  3,081
  3,283
  3,493
  3,712
  3,939
  4,177
Debt-to-equity ratio
  0.005
  0.090
  0.170
  0.230
  0.270
  0.300
  0.330
  0.350
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
Adjusted equity ratio
  0.669
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  22
  42
  66
  93
  123
  156
  193
  233
  276
  322
  370
  422
  477
  534
  595
  658
  723
  792
  863
  937
  1,015
  1,095
  1,178
  1,265
  1,355
  1,449
  1,547
  1,649
  1,754
  1,865
Depreciation, amort., depletion, $m
  8
  3
  4
  5
  6
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  27
  29
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  78
Funds from operations, $m
  12
  25
  47
  71
  99
  130
  165
  203
  245
  289
  337
  388
  442
  499
  559
  621
  687
  755
  827
  901
  978
  1,058
  1,142
  1,229
  1,319
  1,413
  1,510
  1,612
  1,718
  1,828
  1,943
Change in working capital, $m
  -10
  21
  24
  27
  31
  35
  38
  42
  45
  49
  52
  55
  59
  62
  65
  68
  71
  74
  77
  80
  83
  87
  90
  94
  97
  101
  105
  109
  114
  119
  123
Cash from operations, $m
  22
  5
  23
  44
  68
  96
  127
  162
  199
  241
  285
  333
  384
  437
  494
  554
  616
  681
  750
  821
  895
  972
  1,052
  1,135
  1,221
  1,311
  1,405
  1,502
  1,604
  1,709
  1,819
Maintenance CAPEX, $m
  0
  -3
  -3
  -4
  -5
  -6
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -73
New CAPEX, $m
  -2
  -7
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
Cash from investing activities, $m
  6
  -10
  -12
  -14
  -16
  -18
  -22
  -24
  -27
  -29
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -90
  -95
  -100
  -106
  -111
  -117
Free cash flow, $m
  28
  -5
  11
  30
  52
  77
  106
  138
  173
  211
  253
  297
  345
  395
  449
  505
  564
  626
  690
  757
  827
  900
  976
  1,055
  1,136
  1,222
  1,310
  1,402
  1,498
  1,598
  1,702
Issuance/(repayment) of debt, $m
  -4
  13
  15
  17
  19
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  65
  68
  71
  74
  77
Issuance/(repurchase) of shares, $m
  2
  5
  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  
  -4
  18
  15
  17
  19
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  65
  68
  71
  74
  77
Total cash flow (excl. dividends), $m
  24
  12
  26
  47
  71
  99
  129
  164
  201
  241
  285
  332
  381
  434
  489
  547
  608
  672
  738
  807
  879
  954
  1,032
  1,113
  1,197
  1,285
  1,376
  1,470
  1,569
  1,672
  1,779
Retained Cash Flow (-), $m
  -23
  -27
  -31
  -36
  -40
  -45
  -50
  -54
  -59
  -63
  -68
  -72
  -76
  -80
  -84
  -88
  -92
  -96
  -100
  -104
  -108
  -113
  -117
  -122
  -126
  -131
  -137
  -142
  -148
  -154
  -160
Prev. year cash balance distribution, $m
 
  265
  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
 
  251
  -6
  11
  31
  54
  80
  109
  142
  178
  217
  260
  305
  354
  405
  459
  516
  576
  638
  703
  771
  841
  915
  991
  1,071
  1,153
  1,239
  1,328
  1,421
  1,518
  1,618
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
 
  240
  -5
  10
  25
  42
  58
  74
  89
  102
  114
  123
  130
  134
  136
  135
  131
  125
  117
  108
  98
  87
  76
  65
  55
  45
  36
  29
  22
  17
  12
Current shareholders' claim on cash, %
  100
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8

Ultratech, Inc. develops, manufactures, and markets photolithography, laser thermal processing, and inspection equipment. It supplies step-and-repeat photolithography systems based on one-to-one imaging technology for semiconductor device and nanotechnology manufacturers. The company’s products include the 1000 series consisting of Sapphire 100 and Sapphire 100E for high-brightness light emitting diodes (HBLED), semiconductor fabrication, and nanotechnology applications; and AP series for advanced packaging applications. It also offers a family of laser-based thermal annealing tools, such as LSA101, LSA101LP, LSA201, and LSA201LP that are used by the semiconductor industry for various process steps, including activation of implanted impurities, dopant activation, dielectric film formation, formation of silicide, and stabilization of copper grain structures. In addition, the company provides Superfast 3G, an in-line wafer inspection system for the inspection of various critical semiconductor process steps. Ultratech, Inc. sells its systems to semiconductor, advanced packaging, HBLED, thin film head, and various other nanotechnology manufacturers in North America, Europe, and Asia. The company was founded in 1979 and is headquartered in San Jose, California.

FINANCIAL RATIOS  of  Ultratech (UTEK)

Valuation Ratios
P/E Ratio 71.6
Price to Sales 4.1
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 35.8
Price to Free Cash Flow 39.4
Growth Rates
Sales Growth Rate 30.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -31.2%
Financial Strength
Quick Ratio 89
Current Ratio 0
LT Debt to Equity -0.3%
Total Debt to Equity 0.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.7%
Ret/ On Assets - 3 Yr. Avg. -1.8%
Return On Total Capital 3.1%
Ret/ On T. Cap. - 3 Yr. Avg. -2%
Return On Equity 3.1%
Return On Equity - 3 Yr. Avg. -2.1%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 45.9%
Gross Margin - 3 Yr. Avg. 43.7%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. -0.6%
Operating Margin 4.1%
Oper. Margin - 3 Yr. Avg. -6.2%
Pre-Tax Margin 4.6%
Pre-Tax Margin - 3 Yr. Avg. -6%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. -5.7%
Effective Tax Rate -22.2%
Eff/ Tax Rate - 3 Yr. Avg. -7.4%
Payout Ratio 0%

UTEK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UTEK stock intrinsic value calculation we used $194 million for the last fiscal year's total revenue generated by Ultratech. The default revenue input number comes from 2016 income statement of Ultratech. 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 UTEK stock valuation model: a) initial revenue growth rate of 26.7% 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 UTEK is calculated based on our internal credit rating of Ultratech, 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 Ultratech.
    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 UTEK stock the variable cost ratio is equal to 49%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $93 million in the base year in the intrinsic value calculation for UTEK 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 Ultratech.

Corporate tax rate of 27% is the nominal tax rate for Ultratech. 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 UTEK 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 UTEK are equal to 14.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Ultratech 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 UTEK is equal to 39.7%. 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 - $365 million for Ultratech - 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 26.765 million for Ultratech 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 Ultratech at the current share price and the inputted number of shares is $0.8 billion.

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Stock chart of UTEK Financial statements of UTEK Annual reports of UTEK
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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