Intrinsic value of Advanced Micro Devices, Inc. - AMD

Previous Close

$30.56

  Intrinsic Value

$8.53

stock screener

  Rating & Target

str. sell

-72%

Previous close

$30.56

 
Intrinsic value

$8.53

 
Up/down potential

-72%

 
Rating

str. sell

We calculate the intrinsic value of AMD 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 33.0

 

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, %
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
Revenue, $m
  6,857
  7,255
  7,671
  8,105
  8,558
  9,031
  9,526
  10,044
  10,585
  11,151
  11,743
  12,364
  13,013
  13,694
  14,407
  15,154
  15,937
  16,757
  17,618
  18,520
  19,466
  20,459
  21,500
  22,592
  23,738
  24,940
  26,202
  27,525
  28,915
  30,373
Variable operating expenses, $m
  5,038
  5,329
  5,632
  5,948
  6,279
  6,624
  6,985
  7,363
  7,758
  8,171
  8,568
  9,021
  9,495
  9,991
  10,511
  11,056
  11,628
  12,227
  12,854
  13,513
  14,203
  14,927
  15,687
  16,484
  17,320
  18,197
  19,117
  20,083
  21,097
  22,161
Fixed operating expenses, $m
  1,322
  1,352
  1,381
  1,412
  1,443
  1,474
  1,507
  1,540
  1,574
  1,609
  1,644
  1,680
  1,717
  1,755
  1,793
  1,833
  1,873
  1,914
  1,957
  2,000
  2,044
  2,089
  2,135
  2,182
  2,229
  2,279
  2,329
  2,380
  2,432
  2,486
Total operating expenses, $m
  6,360
  6,681
  7,013
  7,360
  7,722
  8,098
  8,492
  8,903
  9,332
  9,780
  10,212
  10,701
  11,212
  11,746
  12,304
  12,889
  13,501
  14,141
  14,811
  15,513
  16,247
  17,016
  17,822
  18,666
  19,549
  20,476
  21,446
  22,463
  23,529
  24,647
Operating income, $m
  497
  575
  658
  745
  836
  933
  1,034
  1,141
  1,253
  1,372
  1,531
  1,663
  1,801
  1,948
  2,102
  2,264
  2,436
  2,616
  2,807
  3,008
  3,220
  3,443
  3,678
  3,927
  4,189
  4,465
  4,756
  5,062
  5,386
  5,726
EBITDA, $m
  626
  710
  799
  892
  989
  1,092
  1,200
  1,314
  1,434
  1,560
  1,693
  1,833
  1,981
  2,137
  2,300
  2,473
  2,655
  2,848
  3,050
  3,263
  3,488
  3,725
  3,975
  4,239
  4,516
  4,809
  5,117
  5,442
  5,785
  6,145
Interest expense (income), $m
  149
  114
  131
  150
  169
  189
  210
  232
  255
  279
  304
  330
  357
  386
  416
  448
  480
  515
  551
  589
  629
  671
  714
  760
  808
  859
  912
  968
  1,026
  1,087
  1,151
Earnings before tax, $m
  383
  444
  508
  576
  647
  723
  802
  886
  974
  1,068
  1,201
  1,305
  1,415
  1,531
  1,654
  1,784
  1,921
  2,065
  2,218
  2,379
  2,549
  2,729
  2,918
  3,118
  3,330
  3,553
  3,788
  4,036
  4,298
  4,575
Tax expense, $m
  103
  120
  137
  155
  175
  195
  217
  239
  263
  288
  324
  352
  382
  414
  447
  482
  519
  558
  599
  642
  688
  737
  788
  842
  899
  959
  1,023
  1,090
  1,161
  1,235
Net income, $m
  280
  324
  371
  420
  472
  527
  585
  647
  711
  779
  877
  953
  1,033
  1,118
  1,208
  1,302
  1,402
  1,507
  1,619
  1,737
  1,861
  1,992
  2,130
  2,276
  2,431
  2,593
  2,765
  2,947
  3,138
  3,340

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
  4,825
  5,106
  5,398
  5,704
  6,023
  6,356
  6,704
  7,068
  7,449
  7,847
  8,264
  8,701
  9,158
  9,637
  10,138
  10,664
  11,215
  11,793
  12,398
  13,033
  13,699
  14,397
  15,130
  15,899
  16,705
  17,551
  18,439
  19,370
  20,348
  21,374
Adjusted assets (=assets-cash), $m
  4,825
  5,106
  5,398
  5,704
  6,023
  6,356
  6,704
  7,068
  7,449
  7,847
  8,264
  8,701
  9,158
  9,637
  10,138
  10,664
  11,215
  11,793
  12,398
  13,033
  13,699
  14,397
  15,130
  15,899
  16,705
  17,551
  18,439
  19,370
  20,348
  21,374
Revenue / Adjusted assets
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
  1.421
Average production assets, $m
  473
  501
  529
  559
  591
  623
  657
  693
  730
  769
  810
  853
  898
  945
  994
  1,046
  1,100
  1,156
  1,216
  1,278
  1,343
  1,412
  1,483
  1,559
  1,638
  1,721
  1,808
  1,899
  1,995
  2,096
Working capital, $m
  569
  602
  637
  673
  710
  750
  791
  834
  879
  926
  975
  1,026
  1,080
  1,137
  1,196
  1,258
  1,323
  1,391
  1,462
  1,537
  1,616
  1,698
  1,784
  1,875
  1,970
  2,070
  2,175
  2,285
  2,400
  2,521
Total debt, $m
  1,444
  1,646
  1,858
  2,078
  2,308
  2,549
  2,800
  3,063
  3,338
  3,626
  3,927
  4,242
  4,572
  4,918
  5,280
  5,659
  6,057
  6,474
  6,911
  7,370
  7,851
  8,355
  8,884
  9,439
  10,021
  10,632
  11,273
  11,945
  12,651
  13,392
Total liabilities, $m
  3,484
  3,686
  3,898
  4,118
  4,348
  4,589
  4,840
  5,103
  5,378
  5,666
  5,967
  6,282
  6,612
  6,958
  7,320
  7,699
  8,097
  8,514
  8,951
  9,410
  9,891
  10,395
  10,924
  11,479
  12,061
  12,672
  13,313
  13,985
  14,691
  15,432
Total equity, $m
  1,341
  1,419
  1,501
  1,586
  1,674
  1,767
  1,864
  1,965
  2,071
  2,182
  2,297
  2,419
  2,546
  2,679
  2,818
  2,965
  3,118
  3,278
  3,447
  3,623
  3,808
  4,003
  4,206
  4,420
  4,644
  4,879
  5,126
  5,385
  5,657
  5,942
Total liabilities and equity, $m
  4,825
  5,105
  5,399
  5,704
  6,022
  6,356
  6,704
  7,068
  7,449
  7,848
  8,264
  8,701
  9,158
  9,637
  10,138
  10,664
  11,215
  11,792
  12,398
  13,033
  13,699
  14,398
  15,130
  15,899
  16,705
  17,551
  18,439
  19,370
  20,348
  21,374
Debt-to-equity ratio
  1.080
  1.160
  1.240
  1.310
  1.380
  1.440
  1.500
  1.560
  1.610
  1.660
  1.710
  1.750
  1.800
  1.840
  1.870
  1.910
  1.940
  1.970
  2.010
  2.030
  2.060
  2.090
  2.110
  2.140
  2.160
  2.180
  2.200
  2.220
  2.240
  2.250
Adjusted equity ratio
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278
  0.278

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  280
  324
  371
  420
  472
  527
  585
  647
  711
  779
  877
  953
  1,033
  1,118
  1,208
  1,302
  1,402
  1,507
  1,619
  1,737
  1,861
  1,992
  2,130
  2,276
  2,431
  2,593
  2,765
  2,947
  3,138
  3,340
Depreciation, amort., depletion, $m
  129
  135
  141
  147
  153
  159
  166
  173
  181
  189
  162
  171
  180
  189
  199
  209
  220
  231
  243
  256
  269
  282
  297
  312
  328
  344
  362
  380
  399
  419
Funds from operations, $m
  409
  459
  512
  567
  625
  687
  752
  820
  892
  968
  1,039
  1,124
  1,213
  1,307
  1,406
  1,511
  1,622
  1,739
  1,862
  1,992
  2,129
  2,274
  2,427
  2,588
  2,758
  2,938
  3,127
  3,326
  3,537
  3,759
Change in working capital, $m
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  79
  82
  86
  91
  95
  100
  105
  110
  115
  121
Cash from operations, $m
  377
  426
  477
  531
  588
  648
  711
  777
  847
  921
  990
  1,072
  1,159
  1,250
  1,347
  1,449
  1,557
  1,671
  1,791
  1,917
  2,051
  2,192
  2,341
  2,498
  2,663
  2,838
  3,022
  3,217
  3,422
  3,638
Maintenance CAPEX, $m
  -90
  -95
  -100
  -106
  -112
  -118
  -125
  -131
  -139
  -146
  -154
  -162
  -171
  -180
  -189
  -199
  -209
  -220
  -231
  -243
  -256
  -269
  -282
  -297
  -312
  -328
  -344
  -362
  -380
  -399
New CAPEX, $m
  -24
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
  -96
  -101
Cash from investing activities, $m
  -114
  -122
  -129
  -136
  -143
  -151
  -159
  -167
  -176
  -185
  -195
  -205
  -216
  -227
  -238
  -251
  -263
  -277
  -290
  -305
  -321
  -337
  -354
  -372
  -391
  -411
  -431
  -453
  -476
  -500
Free cash flow, $m
  263
  304
  348
  395
  445
  497
  552
  610
  671
  736
  795
  867
  943
  1,024
  1,109
  1,199
  1,294
  1,394
  1,500
  1,612
  1,730
  1,855
  1,986
  2,125
  2,272
  2,427
  2,591
  2,764
  2,946
  3,138
Issuance/(repayment) of debt, $m
  194
  202
  211
  220
  230
  241
  251
  263
  275
  288
  301
  315
  330
  346
  362
  380
  398
  417
  437
  458
  481
  504
  529
  555
  582
  611
  641
  673
  706
  741
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  
  194
  202
  211
  220
  230
  241
  251
  263
  275
  288
  301
  315
  330
  346
  362
  380
  398
  417
  437
  458
  481
  504
  529
  555
  582
  611
  641
  673
  706
  741
Total cash flow (excl. dividends), $m
  457
  506
  559
  616
  675
  737
  803
  873
  946
  1,024
  1,096
  1,182
  1,273
  1,370
  1,471
  1,578
  1,692
  1,811
  1,937
  2,070
  2,211
  2,359
  2,515
  2,680
  2,855
  3,038
  3,232
  3,436
  3,652
  3,879
Retained Cash Flow (-), $m
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -121
  -127
  -133
  -139
  -146
  -153
  -161
  -168
  -177
  -185
  -194
  -204
  -214
  -224
  -235
  -247
  -259
  -272
  -285
Prev. year cash balance distribution, $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 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
  382
  428
  478
  531
  586
  645
  706
  772
  840
  913
  980
  1,061
  1,146
  1,237
  1,332
  1,432
  1,538
  1,651
  1,769
  1,894
  2,026
  2,165
  2,312
  2,467
  2,630
  2,803
  2,985
  3,177
  3,380
  3,594
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
  366
  392
  416
  437
  454
  468
  477
  482
  483
  479
  465
  453
  436
  415
  391
  364
  335
  304
  272
  241
  210
  180
  152
  126
  102
  82
  64
  49
  37
  27
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 Micro Devices, Inc. is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company's segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio.

FINANCIAL RATIOS  of  Advanced Micro Devices, Inc. (AMD)

Valuation Ratios
P/E Ratio -57.5
Price to Sales 6.7
Price to Book 68.7
Price to Tangible Book
Price to Cash Flow 317.5
Price to Free Cash Flow 2198
Growth Rates
Sales Growth Rate 7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.8%
Cap. Spend. - 3 Yr. Gr. Rate -1.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 345%
Total Debt to Equity 345%
Interest Coverage -2
Management Effectiveness
Return On Assets -10.5%
Ret/ On Assets - 3 Yr. Avg. -10.6%
Return On Total Capital -27%
Ret/ On T. Cap. - 3 Yr. Avg. -24.8%
Return On Equity -24850%
Return On Equity - 3 Yr. Avg. -8124.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 23.4%
Gross Margin - 3 Yr. Avg. 27.9%
EBITDA Margin -3.9%
EBITDA Margin - 3 Yr. Avg. -4.4%
Operating Margin -10.3%
Oper. Margin - 3 Yr. Avg. -8.8%
Pre-Tax Margin -10.5%
Pre-Tax Margin - 3 Yr. Avg. -11.3%
Net Profit Margin -11.6%
Net Profit Margin - 3 Yr. Avg. -11.8%
Effective Tax Rate -8.7%
Eff/ Tax Rate - 3 Yr. Avg. -4%
Payout Ratio 0%

AMD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMD stock intrinsic value calculation we used $6475 million for the last fiscal year's total revenue generated by Advanced Micro Devices, Inc.. The default revenue input number comes from 0001 income statement of Advanced Micro Devices, 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 AMD stock valuation model: a) initial revenue growth rate of 5.9% 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 AMD is calculated based on our internal credit rating of Advanced Micro Devices, 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 Micro Devices, 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 AMD stock the variable cost ratio is equal to 73.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1294 million in the base year in the intrinsic value calculation for AMD 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 9.1% for Advanced Micro Devices, Inc..

Corporate tax rate of 27% is the nominal tax rate for Advanced Micro Devices, 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 AMD 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 AMD are equal to 6.9%.

Life of production assets of 3.5 years is the average useful life of capital assets used in Advanced Micro Devices, 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 AMD is equal to 8.3%. 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 - $1266 million for Advanced Micro Devices, 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 1080.292 million for Advanced Micro Devices, 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 Micro Devices, Inc. at the current share price and the inputted number of shares is $33.0 billion.

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