Intrinsic value of Advanced Energy Industries, Inc. - AEIS

Previous Close

$53.32

  Intrinsic Value

$60.88

stock screener

  Rating & Target

hold

+14%

Previous close

$53.32

 
Intrinsic value

$60.88

 
Up/down potential

+14%

 
Rating

hold

We calculate the intrinsic value of AEIS 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 0001), $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 2.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  733
  750
  770
  791
  815
  841
  870
  901
  935
  970
  1,009
  1,050
  1,093
  1,140
  1,189
  1,241
  1,296
  1,354
  1,416
  1,481
  1,550
  1,622
  1,698
  1,779
  1,864
  1,953
  2,047
  2,145
  2,249
  2,359
Variable operating expenses, $m
  514
  526
  539
  554
  571
  589
  609
  631
  654
  679
  703
  731
  762
  794
  828
  865
  903
  944
  987
  1,032
  1,080
  1,130
  1,183
  1,239
  1,298
  1,360
  1,426
  1,495
  1,567
  1,643
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
  514
  526
  539
  554
  571
  589
  609
  631
  654
  679
  703
  731
  762
  794
  828
  865
  903
  944
  987
  1,032
  1,080
  1,130
  1,183
  1,239
  1,298
  1,360
  1,426
  1,495
  1,567
  1,643
Operating income, $m
  219
  224
  230
  237
  244
  252
  261
  270
  280
  291
  306
  318
  332
  346
  361
  376
  393
  411
  430
  449
  470
  492
  515
  540
  565
  592
  621
  651
  682
  715
EBITDA, $m
  231
  236
  242
  249
  256
  265
  274
  283
  294
  305
  317
  330
  344
  358
  374
  390
  407
  426
  445
  466
  487
  510
  534
  559
  586
  614
  643
  674
  707
  741
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  23
  24
Earnings before tax, $m
  219
  224
  230
  236
  243
  251
  259
  268
  277
  288
  302
  314
  326
  340
  354
  369
  385
  402
  419
  438
  458
  479
  501
  524
  549
  574
  601
  630
  660
  691
Tax expense, $m
  59
  61
  62
  64
  66
  68
  70
  72
  75
  78
  82
  85
  88
  92
  96
  100
  104
  108
  113
  118
  124
  129
  135
  142
  148
  155
  162
  170
  178
  187
Net income, $m
  160
  164
  168
  172
  177
  183
  189
  196
  203
  210
  220
  229
  238
  248
  258
  269
  281
  293
  306
  320
  334
  350
  366
  383
  400
  419
  439
  460
  482
  505

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  587
  600
  616
  633
  652
  673
  696
  721
  748
  776
  807
  840
  875
  912
  951
  993
  1,037
  1,084
  1,133
  1,185
  1,240
  1,298
  1,359
  1,423
  1,491
  1,562
  1,637
  1,716
  1,799
  1,887
Adjusted assets (=assets-cash), $m
  587
  600
  616
  633
  652
  673
  696
  721
  748
  776
  807
  840
  875
  912
  951
  993
  1,037
  1,084
  1,133
  1,185
  1,240
  1,298
  1,359
  1,423
  1,491
  1,562
  1,637
  1,716
  1,799
  1,887
Revenue / Adjusted assets
  1.249
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.249
  1.250
  1.250
  1.250
  1.250
  1.249
  1.250
  1.250
  1.250
  1.250
  1.249
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
Average production assets, $m
  87
  89
  92
  94
  97
  100
  104
  107
  111
  115
  120
  125
  130
  136
  141
  148
  154
  161
  169
  176
  184
  193
  202
  212
  222
  232
  244
  255
  268
  281
Working capital, $m
  109
  111
  114
  117
  121
  125
  129
  133
  138
  144
  149
  155
  162
  169
  176
  184
  192
  200
  210
  219
  229
  240
  251
  263
  276
  289
  303
  318
  333
  349
Total debt, $m
  4
  9
  15
  21
  28
  36
  44
  53
  63
  74
  85
  97
  110
  123
  137
  153
  169
  186
  204
  223
  243
  264
  286
  310
  334
  361
  388
  417
  447
  479
Total liabilities, $m
  214
  219
  225
  231
  238
  246
  254
  263
  273
  283
  295
  307
  319
  333
  347
  362
  378
  395
  413
  432
  453
  474
  496
  519
  544
  570
  598
  626
  657
  689
Total equity, $m
  373
  381
  391
  402
  414
  427
  442
  458
  475
  493
  512
  533
  555
  579
  604
  630
  658
  688
  719
  752
  787
  824
  863
  904
  947
  992
  1,040
  1,090
  1,143
  1,198
Total liabilities and equity, $m
  587
  600
  616
  633
  652
  673
  696
  721
  748
  776
  807
  840
  874
  912
  951
  992
  1,036
  1,083
  1,132
  1,184
  1,240
  1,298
  1,359
  1,423
  1,491
  1,562
  1,638
  1,716
  1,800
  1,887
Debt-to-equity ratio
  0.010
  0.020
  0.040
  0.050
  0.070
  0.080
  0.100
  0.120
  0.130
  0.150
  0.170
  0.180
  0.200
  0.210
  0.230
  0.240
  0.260
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
Adjusted equity ratio
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  160
  164
  168
  172
  177
  183
  189
  196
  203
  210
  220
  229
  238
  248
  258
  269
  281
  293
  306
  320
  334
  350
  366
  383
  400
  419
  439
  460
  482
  505
Depreciation, amort., depletion, $m
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Funds from operations, $m
  171
  175
  179
  184
  189
  195
  202
  209
  216
  224
  232
  241
  250
  261
  271
  283
  295
  308
  322
  336
  351
  367
  384
  402
  421
  441
  461
  483
  506
  531
Change in working capital, $m
  2
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
Cash from operations, $m
  169
  173
  176
  181
  186
  191
  197
  204
  211
  219
  226
  235
  244
  254
  264
  275
  287
  300
  313
  327
  341
  357
  373
  390
  408
  428
  448
  469
  491
  514
Maintenance CAPEX, $m
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -14
  -14
  -14
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -21
  -22
  -24
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
Free cash flow, $m
  160
  162
  166
  170
  174
  179
  185
  191
  197
  204
  211
  219
  227
  236
  246
  256
  267
  278
  290
  303
  317
  331
  346
  362
  379
  396
  415
  434
  455
  477
Issuance/(repayment) of debt, $m
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
Total cash flow (excl. dividends), $m
  164
  167
  172
  176
  181
  187
  193
  200
  207
  215
  222
  231
  240
  250
  260
  271
  283
  295
  308
  322
  337
  352
  368
  385
  403
  422
  442
  463
  485
  509
Retained Cash Flow (-), $m
  -7
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
Prev. year cash balance distribution, $m
  241
  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
  398
  159
  162
  165
  169
  174
  179
  184
  190
  196
  202
  210
  218
  226
  235
  245
  255
  266
  277
  289
  302
  315
  330
  345
  360
  377
  395
  413
  433
  453
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
  382
  145
  141
  136
  131
  126
  121
  115
  109
  103
  96
  90
  83
  76
  69
  62
  55
  49
  43
  37
  31
  26
  22
  18
  14
  11
  8
  6
  5
  3
Current shareholders' claim on cash, %
  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

Advanced Energy Industries, Inc. is a provider of engineered, precision power conversion, measurement and control solutions. The Company is engaged in designing, manufacturing, selling and supporting its power conversion products and solutions that transform power into various forms in various applications ranging from manufacturing and industrial processes to instrumentation, and test and measurement. It also provides repair and maintenance services for all of its products. Its process power systems include direct current (DC), pulsed DC, low frequency, high voltage, and radio frequency (RF) power supplies, matching networks, remote plasma sources for reactive gas applications and RF instrumentation. These power conversion systems refine, modify and control the raw electrical power from a utility and convert it into power that may be customized and is predictable and repeatable. Its power control modules and thermal instrumentation products are used in the semiconductor industry.

FINANCIAL RATIOS  of  Advanced Energy Industries, Inc. (AEIS)

Valuation Ratios
P/E Ratio 16.7
Price to Sales 4.4
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 17.8
Price to Free Cash Flow 18.9
Growth Rates
Sales Growth Rate 16.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 75%
Cap. Spend. - 3 Yr. Gr. Rate 18.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 24.5%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 38.7%
Ret/ On T. Cap. - 3 Yr. Avg. 1.9%
Return On Equity 38.7%
Return On Equity - 3 Yr. Avg. 2%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 52.3%
Gross Margin - 3 Yr. Avg. 51.9%
EBITDA Margin 28.1%
EBITDA Margin - 3 Yr. Avg. 27.2%
Operating Margin 26.2%
Oper. Margin - 3 Yr. Avg. 25.2%
Pre-Tax Margin 26.4%
Pre-Tax Margin - 3 Yr. Avg. 25.1%
Net Profit Margin 26.2%
Net Profit Margin - 3 Yr. Avg. 0.3%
Effective Tax Rate 8.6%
Eff/ Tax Rate - 3 Yr. Avg. 16.1%
Payout Ratio 0%

AEIS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AEIS stock intrinsic value calculation we used $719 million for the last fiscal year's total revenue generated by Advanced Energy Industries, Inc.. The default revenue input number comes from 0001 income statement of Advanced Energy Industries, Inc.. 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 AEIS stock valuation model: a) initial revenue growth rate of 2% 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 AEIS is calculated based on our internal credit rating of Advanced Energy Industries, Inc., 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 Advanced Energy Industries, Inc..
    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 AEIS stock the variable cost ratio is equal to 70.1%.

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 AEIS 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 5.4% for Advanced Energy Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for Advanced Energy Industries, Inc.. 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 AEIS 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 AEIS are equal to 11.9%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Advanced Energy Industries, Inc. 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 AEIS is equal to 14.8%. 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 - $606.79 million for Advanced Energy Industries, Inc. - 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 38.105 million for Advanced Energy Industries, Inc. 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 Advanced Energy Industries, Inc. at the current share price and the inputted number of shares is $2.0 billion.

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