Intrinsic value of Aehr Test Systems - AEHR

Previous Close

$3.82

  Intrinsic Value

$45.29

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

0%

Previous close

$3.82

 
Intrinsic value

$45.29

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of AEHR 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 2017), $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 0.1

 

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, %
  26.67
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  19
  30
  47
  70
  102
  144
  198
  265
  348
  448
  566
  703
  860
  1,036
  1,233
  1,450
  1,686
  1,942
  2,218
  2,512
  2,824
  3,154
  3,501
  3,866
  4,248
  4,647
  5,063
  5,496
  5,946
  6,415
  6,901
Variable operating expenses, $m
 
  22
  35
  52
  75
  106
  146
  196
  257
  330
  417
  518
  634
  764
  909
  1,068
  1,243
  1,432
  1,634
  1,851
  2,081
  2,324
  2,581
  2,849
  3,131
  3,425
  3,731
  4,050
  4,382
  4,728
  5,086
Fixed operating expenses, $m
 
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  16
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
Total operating expenses, $m
  24
  32
  46
  63
  86
  117
  158
  208
  269
  342
  430
  531
  647
  778
  923
  1,082
  1,258
  1,447
  1,650
  1,867
  2,097
  2,341
  2,598
  2,867
  3,149
  3,444
  3,750
  4,069
  4,402
  4,748
  5,107
Operating income, $m
  -5
  -2
  2
  8
  16
  27
  40
  58
  79
  105
  136
  172
  213
  259
  310
  367
  429
  496
  568
  645
  726
  813
  904
  999
  1,099
  1,204
  1,312
  1,426
  1,544
  1,667
  1,794
EBITDA, $m
  -5
  -2
  2
  8
  16
  27
  40
  58
  79
  105
  136
  172
  213
  259
  310
  367
  429
  496
  568
  645
  726
  813
  904
  999
  1,099
  1,204
  1,312
  1,426
  1,544
  1,667
  1,794
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  3
  4
  5
  7
  9
  12
  15
  18
  22
  26
  31
  36
  42
  48
  54
  61
  68
  75
  83
  91
  100
  109
  118
  128
  138
Earnings before tax, $m
  -6
  -2
  1
  7
  15
  25
  38
  54
  74
  98
  127
  160
  198
  240
  288
  340
  398
  460
  526
  597
  672
  752
  836
  924
  1,016
  1,112
  1,213
  1,317
  1,426
  1,539
  1,656
Tax expense, $m
  0
  0
  0
  2
  4
  7
  10
  15
  20
  27
  34
  43
  53
  65
  78
  92
  107
  124
  142
  161
  182
  203
  226
  249
  274
  300
  327
  356
  385
  415
  447
Net income, $m
  -6
  -2
  1
  5
  11
  18
  27
  39
  54
  72
  93
  117
  144
  176
  210
  249
  290
  336
  384
  436
  491
  549
  610
  675
  742
  812
  885
  961
  1,041
  1,123
  1,209

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  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
  31
  21
  32
  48
  70
  98
  135
  181
  238
  307
  387
  481
  588
  709
  843
  992
  1,153
  1,329
  1,517
  1,718
  1,932
  2,157
  2,395
  2,644
  2,906
  3,178
  3,463
  3,759
  4,067
  4,388
  4,721
Adjusted assets (=assets-cash), $m
  13
  21
  32
  48
  70
  98
  135
  181
  238
  307
  387
  481
  588
  709
  843
  992
  1,153
  1,329
  1,517
  1,718
  1,932
  2,157
  2,395
  2,644
  2,906
  3,178
  3,463
  3,759
  4,067
  4,388
  4,721
Revenue / Adjusted assets
  1.462
  1.429
  1.469
  1.458
  1.457
  1.469
  1.467
  1.464
  1.462
  1.459
  1.463
  1.462
  1.463
  1.461
  1.463
  1.462
  1.462
  1.461
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
  1.462
Average production assets, $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
  0
Working capital, $m
  21
  5
  7
  11
  16
  23
  31
  42
  55
  71
  89
  111
  136
  164
  195
  229
  266
  307
  350
  397
  446
  498
  553
  611
  671
  734
  800
  868
  939
  1,013
  1,090
Total debt, $m
  6
  11
  21
  35
  55
  81
  114
  155
  206
  268
  341
  425
  521
  630
  751
  884
  1,030
  1,188
  1,357
  1,538
  1,730
  1,934
  2,147
  2,372
  2,607
  2,852
  3,108
  3,375
  3,652
  3,941
  4,241
Total liabilities, $m
  14
  19
  29
  43
  63
  89
  122
  163
  214
  276
  349
  433
  529
  638
  759
  892
  1,038
  1,196
  1,365
  1,546
  1,738
  1,942
  2,155
  2,380
  2,615
  2,860
  3,116
  3,383
  3,660
  3,949
  4,249
Total equity, $m
  17
  2
  3
  5
  7
  10
  14
  18
  24
  31
  39
  48
  59
  71
  84
  99
  115
  133
  152
  172
  193
  216
  239
  264
  291
  318
  346
  376
  407
  439
  472
Total liabilities and equity, $m
  31
  21
  32
  48
  70
  99
  136
  181
  238
  307
  388
  481
  588
  709
  843
  991
  1,153
  1,329
  1,517
  1,718
  1,931
  2,158
  2,394
  2,644
  2,906
  3,178
  3,462
  3,759
  4,067
  4,388
  4,721
Debt-to-equity ratio
  0.353
  5.150
  6.510
  7.330
  7.850
  8.190
  8.410
  8.560
  8.660
  8.740
  8.790
  8.830
  8.860
  8.890
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
Adjusted equity ratio
  -0.077
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -2
  1
  5
  11
  18
  27
  39
  54
  72
  93
  117
  144
  176
  210
  249
  290
  336
  384
  436
  491
  549
  610
  675
  742
  812
  885
  961
  1,041
  1,123
  1,209
Depreciation, amort., depletion, $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
  0
Funds from operations, $m
  -7
  -2
  1
  5
  11
  18
  27
  39
  54
  72
  93
  117
  144
  176
  210
  249
  290
  336
  384
  436
  491
  549
  610
  675
  742
  812
  885
  961
  1,041
  1,123
  1,209
Change in working capital, $m
  -1
  2
  3
  4
  5
  7
  9
  11
  13
  16
  19
  22
  25
  28
  31
  34
  37
  40
  43
  46
  49
  52
  55
  58
  60
  63
  66
  68
  71
  74
  77
Cash from operations, $m
  -6
  -4
  -2
  1
  6
  11
  19
  29
  41
  56
  74
  95
  120
  148
  179
  214
  253
  295
  341
  389
  442
  497
  555
  617
  681
  749
  820
  893
  970
  1,049
  1,132
Maintenance CAPEX, $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
  0
New CAPEX, $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 investing activities, $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
Free cash flow, $m
  -7
  -4
  -2
  1
  6
  11
  19
  29
  41
  56
  74
  95
  120
  148
  179
  214
  253
  295
  341
  389
  442
  497
  555
  617
  681
  749
  820
  893
  970
  1,049
  1,132
Issuance/(repayment) of debt, $m
  2
  5
  10
  14
  19
  26
  33
  42
  51
  62
  73
  84
  96
  109
  121
  133
  146
  158
  169
  181
  192
  203
  214
  225
  235
  245
  256
  267
  277
  288
  300
Issuance/(repurchase) of shares, $m
  1
  6
  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  
  3
  11
  10
  14
  19
  26
  33
  42
  51
  62
  73
  84
  96
  109
  121
  133
  146
  158
  169
  181
  192
  203
  214
  225
  235
  245
  256
  267
  277
  288
  300
Total cash flow (excl. dividends), $m
  -5
  6
  9
  16
  25
  37
  52
  70
  92
  117
  146
  179
  216
  256
  300
  348
  399
  453
  510
  570
  634
  700
  769
  841
  916
  994
  1,075
  1,160
  1,247
  1,338
  1,432
Retained Cash Flow (-), $m
  -18
  -6
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
Prev. year cash balance distribution, $m
 
  18
  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
 
  18
  8
  14
  23
  34
  48
  66
  86
  111
  138
  170
  205
  244
  287
  333
  382
  435
  491
  550
  612
  678
  746
  816
  890
  967
  1,047
  1,130
  1,216
  1,306
  1,399
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
 
  18
  7
  12
  19
  27
  35
  44
  54
  64
  73
  81
  88
  93
  96
  98
  97
  95
  90
  85
  78
  70
  62
  54
  45
  38
  31
  24
  19
  14
  11
Current shareholders' claim on cash, %
  100
  50.0
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7
  49.7

Aehr Test Systems is engaged in the designing, manufacturing and marketing of advanced test and burn-in products to the semiconductor manufacturing industry. The Company manufactures and markets full wafer contact test systems, test during burn-in systems, test fixtures, die carriers and related accessories. The Company's principal products are the Advanced Burn-In and Test System (ABTS), the FOX full wafer contact parallel test and burn-in systems, WaferPak full wafer contactor, the DiePak carrier and test fixtures. The Company develops, manufactures and sells systems, which are designed to reduce the cost of testing and to perform reliability screening, or burn-in, of complex logic devices, memory integrated circuits (ICs), sensors and optical devices. These systems can be used to perform parallel testing and burn-in of packaged ICs, singulated bare die or ICs still in wafer form.

FINANCIAL RATIOS  of  Aehr Test Systems (AEHR)

Valuation Ratios
P/E Ratio -10.7
Price to Sales 3.4
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow -10.7
Price to Free Cash Flow -9.1
Growth Rates
Sales Growth Rate 26.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 35.3%
Total Debt to Equity 35.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -29.3%
Ret/ On Assets - 3 Yr. Avg. -45.7%
Return On Total Capital -42.9%
Ret/ On T. Cap. - 3 Yr. Avg. -75.1%
Return On Equity -75%
Return On Equity - 3 Yr. Avg. -180.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 36.8%
Gross Margin - 3 Yr. Avg. 36.7%
EBITDA Margin -31.6%
EBITDA Margin - 3 Yr. Avg. -49.4%
Operating Margin -26.3%
Oper. Margin - 3 Yr. Avg. -45.4%
Pre-Tax Margin -31.6%
Pre-Tax Margin - 3 Yr. Avg. -49.4%
Net Profit Margin -31.6%
Net Profit Margin - 3 Yr. Avg. -49.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

AEHR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AEHR stock intrinsic value calculation we used $19 million for the last fiscal year's total revenue generated by Aehr Test Systems. The default revenue input number comes from 2017 income statement of Aehr Test Systems. 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 AEHR stock valuation model: a) initial revenue growth rate of 60% 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 AEHR is calculated based on our internal credit rating of Aehr Test Systems, 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 Aehr Test Systems.
    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 AEHR stock the variable cost ratio is equal to 73.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10 million in the base year in the intrinsic value calculation for AEHR 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 Aehr Test Systems.

Corporate tax rate of 27% is the nominal tax rate for Aehr Test Systems. 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 AEHR 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 AEHR are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Aehr Test Systems 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 AEHR is equal to 15.8%. 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 - $17 million for Aehr Test Systems - 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 18 million for Aehr Test Systems 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 Aehr Test Systems at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Is It Time To Buy Aehr Test Systems (AEHR)?   [07:35AM  Simply Wall St.]
▶ Aehr Test Systems Added to Russell Microcap Index   [Jun-26-17 07:00AM  GlobeNewswire]
▶ ETFs with exposure to Aehr Test Systems : April 12, 2017   [Apr-12-17 01:08PM  Capital Cube]
▶ [$$] Two IPhone 8 Suppliers Set to Gain   [Apr-06-17 03:05PM  Barrons.com]
Financial statements of AEHR
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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