Intrinsic value of Analog Devices - ADI

Previous Close

$96.14

  Intrinsic Value

$343.91

stock screener

  Rating & Target

str. buy

+258%

Previous close

$96.14

 
Intrinsic value

$343.91

 
Up/down potential

+258%

 
Rating

str. buy

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

We calculate the intrinsic value of ADI 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  49.31
  53.50
  48.65
  44.29
  40.36
  36.82
  33.64
  30.77
  28.20
  25.88
  23.79
  21.91
  20.22
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
Revenue, $m
  5,108
  7,841
  11,655
  16,817
  23,604
  32,295
  43,158
  56,440
  72,355
  91,078
  112,746
  137,449
  165,241
  196,138
  230,125
  267,164
  307,200
  350,169
  396,000
  444,628
  495,989
  550,035
  606,726
  666,040
  727,972
  792,534
  859,755
  929,684
  1,002,388
  1,077,950
  1,156,472
Variable operating expenses, $m
 
  4,827
  6,581
  8,955
  12,075
  16,072
  21,067
  27,174
  34,492
  43,102
  53,065
  63,203
  75,982
  90,189
  105,817
  122,849
  141,259
  161,017
  182,091
  204,451
  228,069
  252,920
  278,988
  306,263
  334,741
  364,428
  395,338
  427,493
  460,924
  495,670
  531,776
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
  4,052
  4,827
  6,581
  8,955
  12,075
  16,072
  21,067
  27,174
  34,492
  43,102
  53,065
  63,203
  75,982
  90,189
  105,817
  122,849
  141,259
  161,017
  182,091
  204,451
  228,069
  252,920
  278,988
  306,263
  334,741
  364,428
  395,338
  427,493
  460,924
  495,670
  531,776
Operating income, $m
  1,055
  3,014
  5,074
  7,862
  11,528
  16,223
  22,091
  29,266
  37,862
  47,976
  59,681
  74,247
  89,259
  105,949
  124,307
  144,315
  165,942
  189,152
  213,909
  240,176
  267,921
  297,114
  327,737
  359,778
  393,232
  428,106
  464,417
  502,191
  541,464
  582,280
  624,696
EBITDA, $m
  1,639
  4,553
  6,768
  9,765
  13,706
  18,752
  25,060
  32,773
  42,014
  52,886
  65,467
  79,812
  95,950
  113,890
  133,625
  155,132
  178,380
  203,330
  229,943
  258,179
  288,003
  319,385
  352,303
  386,745
  422,706
  460,195
  499,228
  539,833
  582,049
  625,926
  671,521
Interest expense (income), $m
  183
  287
  504
  807
  1,217
  1,756
  2,447
  3,310
  4,365
  5,629
  7,116
  8,838
  10,800
  13,008
  15,463
  18,162
  21,105
  24,285
  27,699
  31,340
  35,203
  39,283
  43,576
  48,080
  52,792
  57,712
  62,841
  68,181
  73,736
  79,512
  85,515
Earnings before tax, $m
  828
  2,727
  4,570
  7,055
  10,311
  14,467
  19,645
  25,956
  33,498
  42,347
  52,564
  65,409
  78,459
  92,940
  108,845
  126,152
  144,837
  164,867
  186,210
  208,836
  232,718
  257,831
  284,161
  311,698
  340,440
  370,394
  401,576
  434,010
  467,728
  502,769
  539,182
Tax expense, $m
  101
  736
  1,234
  1,905
  2,784
  3,906
  5,304
  7,008
  9,044
  11,434
  14,192
  17,660
  21,184
  25,094
  29,388
  34,061
  39,106
  44,514
  50,277
  56,386
  62,834
  69,614
  76,723
  84,158
  91,919
  100,006
  108,426
  117,183
  126,286
  135,748
  145,579
Net income, $m
  727
  1,991
  3,336
  5,150
  7,527
  10,561
  14,341
  18,948
  24,453
  30,914
  38,372
  47,748
  57,275
  67,847
  79,457
  92,091
  105,731
  120,353
  135,933
  152,451
  169,884
  188,217
  207,438
  227,539
  248,521
  270,388
  293,151
  316,827
  341,441
  367,021
  393,603

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,048
  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
  21,141
  30,869
  45,887
  66,208
  92,927
  127,144
  169,914
  222,205
  284,861
  358,576
  443,881
  541,139
  650,556
  772,196
  906,003
  1,051,826
  1,209,450
  1,378,618
  1,559,057
  1,750,503
  1,952,714
  2,165,491
  2,388,685
  2,622,206
  2,866,032
  3,120,211
  3,384,861
  3,660,173
  3,946,409
  4,243,898
  4,553,041
Adjusted assets (=assets-cash), $m
  20,093
  30,869
  45,887
  66,208
  92,927
  127,144
  169,914
  222,205
  284,861
  358,576
  443,881
  541,139
  650,556
  772,196
  906,003
  1,051,826
  1,209,450
  1,378,618
  1,559,057
  1,750,503
  1,952,714
  2,165,491
  2,388,685
  2,622,206
  2,866,032
  3,120,211
  3,384,861
  3,660,173
  3,946,409
  4,243,898
  4,553,041
Revenue / Adjusted assets
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
Average production assets, $m
  3,806
  5,841
  8,683
  12,529
  17,585
  24,059
  32,153
  42,048
  53,904
  67,853
  83,996
  102,400
  123,105
  146,123
  171,443
  199,037
  228,864
  260,876
  295,020
  331,248
  369,512
  409,776
  452,011
  496,200
  542,339
  590,438
  640,517
  692,615
  746,779
  803,073
  861,572
Working capital, $m
  755
  8
  12
  17
  24
  32
  43
  56
  72
  91
  113
  137
  165
  196
  230
  267
  307
  350
  396
  445
  496
  550
  607
  666
  728
  793
  860
  930
  1,002
  1,078
  1,156
Total debt, $m
  7,851
  13,264
  21,238
  32,029
  46,216
  64,386
  87,096
  114,863
  148,133
  187,276
  232,573
  284,217
  342,317
  406,908
  477,960
  555,392
  639,090
  728,918
  824,731
  926,389
  1,033,763
  1,146,748
  1,265,264
  1,389,263
  1,518,735
  1,653,704
  1,794,233
  1,940,424
  2,092,415
  2,250,382
  2,414,537
Total liabilities, $m
  10,980
  16,392
  24,366
  35,157
  49,344
  67,514
  90,224
  117,991
  151,261
  190,404
  235,701
  287,345
  345,445
  410,036
  481,088
  558,520
  642,218
  732,046
  827,859
  929,517
  1,036,891
  1,149,876
  1,268,392
  1,392,391
  1,521,863
  1,656,832
  1,797,361
  1,943,552
  2,095,543
  2,253,510
  2,417,665
Total equity, $m
  10,162
  14,478
  21,521
  31,052
  43,583
  59,631
  79,690
  104,214
  133,600
  168,172
  208,180
  253,794
  305,111
  362,160
  424,915
  493,307
  567,232
  646,572
  731,198
  820,986
  915,823
  1,015,615
  1,120,293
  1,229,815
  1,344,169
  1,463,379
  1,587,500
  1,716,621
  1,850,866
  1,990,388
  2,135,376
Total liabilities and equity, $m
  21,142
  30,870
  45,887
  66,209
  92,927
  127,145
  169,914
  222,205
  284,861
  358,576
  443,881
  541,139
  650,556
  772,196
  906,003
  1,051,827
  1,209,450
  1,378,618
  1,559,057
  1,750,503
  1,952,714
  2,165,491
  2,388,685
  2,622,206
  2,866,032
  3,120,211
  3,384,861
  3,660,173
  3,946,409
  4,243,898
  4,553,041
Debt-to-equity ratio
  0.773
  0.920
  0.990
  1.030
  1.060
  1.080
  1.090
  1.100
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.120
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
Adjusted equity ratio
  0.454
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  727
  1,991
  3,336
  5,150
  7,527
  10,561
  14,341
  18,948
  24,453
  30,914
  38,372
  47,748
  57,275
  67,847
  79,457
  92,091
  105,731
  120,353
  135,933
  152,451
  169,884
  188,217
  207,438
  227,539
  248,521
  270,388
  293,151
  316,827
  341,441
  367,021
  393,603
Depreciation, amort., depletion, $m
  584
  1,539
  1,694
  1,903
  2,177
  2,529
  2,969
  3,507
  4,151
  4,909
  5,787
  5,565
  6,690
  7,941
  9,318
  10,817
  12,438
  14,178
  16,034
  18,003
  20,082
  22,270
  24,566
  26,967
  29,475
  32,089
  34,811
  37,642
  40,586
  43,645
  46,825
Funds from operations, $m
  1,330
  3,530
  5,030
  7,053
  9,705
  13,090
  17,310
  22,455
  28,605
  35,823
  44,158
  53,314
  63,965
  75,788
  88,774
  102,909
  118,169
  134,531
  151,967
  170,453
  189,966
  210,487
  232,003
  254,507
  277,996
  302,477
  327,961
  354,469
  382,027
  410,666
  440,427
Change in working capital, $m
  217
  3
  4
  5
  7
  9
  11
  13
  16
  19
  22
  25
  28
  31
  34
  37
  40
  43
  46
  49
  51
  54
  57
  59
  62
  65
  67
  70
  73
  76
  79
Cash from operations, $m
  1,113
  3,527
  5,026
  7,048
  9,698
  13,081
  17,299
  22,442
  28,589
  35,804
  44,137
  53,289
  63,938
  75,757
  88,740
  102,871
  118,129
  134,488
  151,921
  170,405
  189,915
  210,433
  231,947
  254,447
  277,934
  302,412
  327,894
  354,400
  381,954
  410,591
  440,349
Maintenance CAPEX, $m
  0
  -207
  -317
  -472
  -681
  -956
  -1,308
  -1,747
  -2,285
  -2,930
  -3,688
  -4,565
  -5,565
  -6,690
  -7,941
  -9,318
  -10,817
  -12,438
  -14,178
  -16,034
  -18,003
  -20,082
  -22,270
  -24,566
  -26,967
  -29,475
  -32,089
  -34,811
  -37,642
  -40,586
  -43,645
New CAPEX, $m
  -204
  -2,036
  -2,842
  -3,845
  -5,056
  -6,475
  -8,093
  -9,895
  -11,856
  -13,949
  -16,142
  -18,404
  -20,705
  -23,018
  -25,320
  -27,594
  -29,827
  -32,012
  -34,145
  -36,227
  -38,265
  -40,264
  -42,235
  -44,189
  -46,139
  -48,098
  -50,080
  -52,097
  -54,164
  -56,294
  -58,499
Cash from investing activities, $m
  -6,618
  -2,243
  -3,159
  -4,317
  -5,737
  -7,431
  -9,401
  -11,642
  -14,141
  -16,879
  -19,830
  -22,969
  -26,270
  -29,708
  -33,261
  -36,912
  -40,644
  -44,450
  -48,323
  -52,261
  -56,268
  -60,346
  -64,505
  -68,755
  -73,106
  -77,573
  -82,169
  -86,908
  -91,806
  -96,880
  -102,144
Free cash flow, $m
  -5,505
  1,284
  1,867
  2,731
  3,961
  5,651
  7,898
  10,799
  14,447
  18,926
  24,307
  30,320
  37,667
  46,049
  55,479
  65,960
  77,485
  90,038
  103,599
  118,144
  133,648
  150,087
  167,441
  185,692
  204,827
  224,839
  245,725
  267,492
  290,148
  313,711
  338,204
Issuance/(repayment) of debt, $m
  6,110
  5,713
  7,974
  10,791
  14,188
  18,169
  22,711
  27,766
  33,270
  39,143
  45,297
  51,644
  58,101
  64,591
  71,051
  77,432
  83,698
  89,828
  95,813
  101,658
  107,374
  112,985
  118,516
  124,000
  129,472
  134,969
  140,529
  146,191
  151,991
  157,967
  164,155
Issuance/(repurchase) of shares, $m
  87
  3,073
  3,707
  4,380
  5,004
  5,487
  5,718
  5,576
  4,932
  3,659
  1,636
  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  
  6,231
  8,786
  11,681
  15,171
  19,192
  23,656
  28,429
  33,342
  38,202
  42,802
  46,933
  51,644
  58,101
  64,591
  71,051
  77,432
  83,698
  89,828
  95,813
  101,658
  107,374
  112,985
  118,516
  124,000
  129,472
  134,969
  140,529
  146,191
  151,991
  157,967
  164,155
Total cash flow (excl. dividends), $m
  729
  10,070
  13,548
  17,901
  23,153
  29,307
  36,327
  44,142
  52,650
  61,727
  71,240
  81,964
  95,768
  110,640
  126,530
  143,392
  161,183
  179,866
  199,412
  219,801
  241,022
  263,072
  285,957
  309,692
  334,299
  359,808
  386,255
  413,682
  442,139
  471,678
  502,359
Retained Cash Flow (-), $m
  -4,996
  -5,064
  -7,043
  -9,531
  -12,531
  -16,048
  -20,059
  -24,524
  -29,386
  -34,572
  -40,008
  -45,614
  -51,317
  -57,049
  -62,755
  -68,391
  -73,926
  -79,340
  -84,626
  -89,788
  -94,837
  -99,792
  -104,678
  -109,521
  -114,355
  -119,210
  -124,121
  -129,121
  -134,244
  -139,523
  -144,988
Prev. year cash balance distribution, $m
 
  748
  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
 
  5,754
  6,505
  8,371
  10,622
  13,259
  16,268
  19,618
  23,264
  27,155
  31,232
  36,350
  44,451
  53,590
  63,775
  75,001
  87,257
  100,526
  114,786
  130,013
  146,185
  163,280
  181,279
  200,171
  219,944
  240,598
  262,134
  284,561
  307,894
  332,155
  357,371
Discount rate, %
 
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  5,348
  5,579
  6,575
  7,581
  8,524
  9,335
  9,949
  10,320
  10,421
  10,246
  10,068
  10,257
  10,157
  9,780
  9,160
  8,346
  7,397
  6,376
  5,345
  4,355
  3,448
  2,651
  1,978
  1,431
  1,003
  680
  446
  282
  173
  102
Current shareholders' claim on cash, %
  100
  91.5
  85.2
  80.6
  77.0
  74.3
  72.4
  70.9
  70.0
  69.4
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3
  69.3

Analog Devices, Inc. (Analog Devices) designs, manufactures and markets a portfolio of solutions that leverage high-performance analog, mixed-signal and digital signal processing technology, including integrated circuits (ICs), algorithms, software and subsystems. Its products include Analog Products, Converters, Amplifiers/Radio Frequency, Other Analog, Power Management and Reference, and Digital Signal Processing Products. The Company is a supplier of data converter products. The Company is a supplier of high-performance amplifiers. Its analog product line also includes products of high performance radio frequency (RF) ICs. The Company's DSPs are used for high-speed numeric calculations. The Company offers its products for applications in various end markets, such as industrial, automotive, consumer and communications. The Company operates in the United States, Rest of North/South America, Europe, Japan and China.

FINANCIAL RATIOS  of  Analog Devices (ADI)

Valuation Ratios
P/E Ratio 48.7
Price to Sales 6.9
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 31.8
Price to Free Cash Flow 39
Growth Rates
Sales Growth Rate 49.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 60.6%
Cap. Spend. - 3 Yr. Gr. Rate 2.8%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 74.3%
Total Debt to Equity 77.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.1%
Ret/ On Assets - 3 Yr. Avg. 9.5%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 10.4%
Return On Equity 9.5%
Return On Equity - 3 Yr. Avg. 13.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 59.9%
Gross Margin - 3 Yr. Avg. 63.6%
EBITDA Margin 31.2%
EBITDA Margin - 3 Yr. Avg. 32.5%
Operating Margin 20.7%
Oper. Margin - 3 Yr. Avg. 25%
Pre-Tax Margin 16.2%
Pre-Tax Margin - 3 Yr. Avg. 22.6%
Net Profit Margin 14.2%
Net Profit Margin - 3 Yr. Avg. 19.9%
Effective Tax Rate 12.2%
Eff/ Tax Rate - 3 Yr. Avg. 12%
Payout Ratio 82.8%

ADI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADI stock intrinsic value calculation we used $5108 million for the last fiscal year's total revenue generated by Analog Devices. The default revenue input number comes from 2017 income statement of Analog Devices. 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 ADI stock valuation model: a) initial revenue growth rate of 53.5% 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 7.6%, whose default value for ADI is calculated based on our internal credit rating of Analog Devices, 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 Analog Devices.
    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 ADI stock the variable cost ratio is equal to 69.9%.

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 ADI 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 3.8% for Analog Devices.

Corporate tax rate of 27% is the nominal tax rate for Analog Devices. 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 ADI 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 ADI are equal to 74.5%.

Life of production assets of 18.4 years is the average useful life of capital assets used in Analog Devices 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 ADI is equal to 0.1%. 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 - $10162 million for Analog Devices - 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 370.1 million for Analog Devices 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 Analog Devices at the current share price and the inputted number of shares is $35.6 billion.

Management's discussion and analysis

Results of Operations

Overview
 
Fiscal Year
 
2016 over 2015
 
2015 over 2014
 
2016
 
2015
 
2014
 
  $ Change
 
% Change
 
  $ Change
 
% Change
Revenue
$
3,421,409
   
$
3,435,092
   
$
2,864,773
   
$
(13,683
)
 
 %
 
$
570,319
   
20
%
Gross Margin %
65.1
%
 
65.8
%
 
63.9
%
               
Net income
$
861,664
   
$
696,878
   
$
629,320
   
$
164,786
   
24
 %
 
$
67,558
   
11
%
Net income as a % of Revenue
25.2
%
 
20.3
%
 
22.0
%
               
Diluted EPS
$
2.76
   
$
2.20
   
$
1.98
   
$
0.56
   
25
 %
 
$
0.22
   
11
%
Proposed Acquisition of Linear Technology Corporation
On July 26, 2016, we entered into a definitive agreement (the Merger Agreement) to acquire Linear Technology Corporation (Linear), an independent manufacturer of high performance linear integrated circuits. Under the terms of the Merger Agreement, Linear stockholders will receive, for each outstanding share of Linear common stock, $46.00 in cash and 0.2321 of a share of our common stock at the closing. Based on the number of outstanding shares of Linear common stock as of July 26, 2016 and our 5-day volume weighted average price as of July 21, 2016, the value of the total consideration to be paid by us is estimated to be approximately $14.8 billion. On October 18, 2016, Linear stockholders approved the Merger Agreement. As of October 29, 2016 we had received antitrust clearance in the United States and Germany. Subsequently, we have also received antitrust clearances in Japan and Israel. We currently expect the transaction to be completed by the end of the second quarter of our fiscal year ended October 28, 2017 (fiscal 2017), subject to receipt of the remaining required regulatory clearances and the satisfaction or waiver of the other conditions contained in the Merger Agreement.
We intend to fund the acquisition with the issuance of approximately 58.0 million new shares of our common stock and approximately $11.6 billion of new short- and long-term indebtedness. The financing is supported by fully underwritten bridge financing commitments and is expected to consist of term loans and bonds. See Note 6, Acquisitions and Note 16, Debt, of the Notes to the Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information.
Acquisition of Hittite Microwave Corporation (Hittite)
On July 22, 2014, we completed the acquisition of Hittite, a company that designed and developed high performance integrated circuits, modules, subsystems and instrumentation for radio frequency, microwave and millimeterwave applications. The total consideration paid to acquire Hittite was approximately $2.4 billion, financed through a combination of existing cash on hand and a 90-day term loan facility of $2.0 billion. The acquisition of Hittite is referred to as the Hittite Acquisition. See Note 6, Acquisitions, of the Notes to the Consolidated Financial Statements contained in Item 8 of this Annual Report on From 10-K for further discussion related to the Hittite Acquisition.
Revenue Trends by End Market
The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the “ship to” customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data evolve and improve, the categorization of products by end market can vary over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.
Automotive end market revenue increased year-over-year in fiscal 2016 primarily as a result of increased demand for our powertrain, advanced driver assistance systems, and infotainment products. The year-over-year decrease in the consumer end market in fiscal 2016 was primarily the result of lower demand for products sold into portable consumer applications.
The year-over-year increase in the industrial and communications end markets revenue in fiscal 2015 was the result of the Hittite Acquisition. Consumer end market revenue increased in fiscal 2015 as compared to fiscal 2014 as a result of increased demand for products sold into the portable sector of this end market.

[Source: Form 10-K dated 2016-11-22]

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COMPANY NEWS

▶ Stocks Generating Improved Relative Strength: Analog Devices   [03:00AM  Investor's Business Daily]
▶ Rising Chip Content in Cars a Main Theme at CES   [Jan-17-18 07:00AM  Morningstar]
▶ As Electric Car Use Grows, These Chipmakers Are In The Driver's Seat   [Jan-11-18 04:14PM  Investor's Business Daily]
▶ Stocks With Rising Relative Strength: Analog Devices   [03:00AM  Investor's Business Daily]
▶ Tread Carefully on Analog Devices   [Dec-20-17 11:47AM  TheStreet.com]
▶ GOP Senate Majority Shrinks; Apple Is Carving New Base: S&P 500 Futures   [Dec-13-17 07:01AM  Investor's Business Daily]
▶ Chips That Stay Crisp: Nvidia, Monolithic Look Like Buys   [Dec-08-17 03:27PM  Barrons.com]
▶ Analog Devices and the 'Renaissance' of Analog Chips   [Nov-22-17 10:28AM  Barrons.com]
▶ Analog Devices Posts Beat-And-Raise Quarterly Results   [09:26AM  Investor's Business Daily]
▶ Analog Devices beats Street 4Q forecasts   [08:17AM  Associated Press]
▶ Will Apple Suppliers Join iPhone X Rally?   [11:05AM  Investopedia]
▶ Earnings Season Watch List: Analog Devices   [03:00AM  Investor's Business Daily]
▶ 1 Big Reason to Buy Analog Devices   [Oct-29-17 09:49AM  Motley Fool]
▶ Analog Devices Could Stall in Its Uptrend   [Oct-25-17 10:22AM  TheStreet.com]
▶ Top Analog Chip Stocks Get Price-Target Hikes On Strong Fundamentals   [Oct-19-17 04:37PM  Investor's Business Daily]
Financial statements of ADI
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