Intrinsic value of Alpha and Omega Semiconductor Limited - AOSL

Previous Close

$12.20

  Intrinsic Value

$18.91

stock screener

  Rating & Target

str. buy

+55%

Previous close

$12.20

 
Intrinsic value

$18.91

 
Up/down potential

+55%

 
Rating

str. buy

We calculate the intrinsic value of AOSL 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 0.3

 

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, %
  10.60
  10.04
  9.54
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
Revenue, $m
  467
  514
  563
  614
  667
  722
  780
  840
  902
  967
  1,034
  1,104
  1,176
  1,252
  1,331
  1,412
  1,498
  1,587
  1,679
  1,776
  1,877
  1,982
  2,092
  2,207
  2,327
  2,453
  2,585
  2,722
  2,866
  3,017
Variable operating expenses, $m
  448
  489
  533
  578
  626
  675
  726
  779
  834
  892
  918
  981
  1,045
  1,112
  1,182
  1,255
  1,331
  1,409
  1,492
  1,578
  1,667
  1,761
  1,859
  1,961
  2,068
  2,179
  2,296
  2,418
  2,546
  2,680
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
  448
  489
  533
  578
  626
  675
  726
  779
  834
  892
  918
  981
  1,045
  1,112
  1,182
  1,255
  1,331
  1,409
  1,492
  1,578
  1,667
  1,761
  1,859
  1,961
  2,068
  2,179
  2,296
  2,418
  2,546
  2,680
Operating income, $m
  19
  24
  30
  35
  41
  47
  54
  61
  68
  75
  115
  123
  131
  140
  149
  158
  167
  177
  188
  198
  210
  221
  234
  246
  260
  274
  289
  304
  320
  337
EBITDA, $m
  84
  93
  102
  111
  120
  130
  141
  152
  163
  175
  187
  199
  212
  226
  240
  255
  270
  287
  303
  321
  339
  358
  378
  399
  420
  443
  467
  492
  518
  545
Interest expense (income), $m
  0
  5
  7
  9
  12
  14
  17
  20
  23
  26
  29
  32
  35
  39
  42
  46
  50
  54
  58
  63
  67
  72
  77
  82
  88
  94
  100
  106
  112
  119
  126
Earnings before tax, $m
  14
  17
  20
  23
  27
  30
  34
  38
  42
  46
  83
  88
  93
  97
  102
  108
  113
  119
  125
  131
  137
  144
  151
  159
  166
  174
  183
  192
  201
  211
Tax expense, $m
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
Net income, $m
  10
  12
  15
  17
  20
  22
  25
  28
  31
  34
  61
  64
  68
  71
  75
  79
  83
  87
  91
  96
  100
  105
  110
  116
  121
  127
  133
  140
  147
  154

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
  737
  811
  889
  969
  1,054
  1,141
  1,232
  1,327
  1,425
  1,527
  1,633
  1,744
  1,858
  1,978
  2,102
  2,231
  2,366
  2,507
  2,653
  2,806
  2,965
  3,131
  3,305
  3,487
  3,677
  3,876
  4,083
  4,301
  4,528
  4,767
Adjusted assets (=assets-cash), $m
  737
  811
  889
  969
  1,054
  1,141
  1,232
  1,327
  1,425
  1,527
  1,633
  1,744
  1,858
  1,978
  2,102
  2,231
  2,366
  2,507
  2,653
  2,806
  2,965
  3,131
  3,305
  3,487
  3,677
  3,876
  4,083
  4,301
  4,528
  4,767
Revenue / Adjusted assets
  0.634
  0.634
  0.633
  0.634
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
Average production assets, $m
  270
  297
  326
  355
  386
  418
  452
  486
  522
  560
  599
  639
  681
  725
  770
  818
  867
  919
  972
  1,028
  1,087
  1,148
  1,211
  1,278
  1,348
  1,420
  1,497
  1,576
  1,660
  1,747
Working capital, $m
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Total debt, $m
  133
  176
  221
  268
  317
  368
  420
  476
  533
  592
  654
  718
  785
  855
  927
  1,002
  1,081
  1,162
  1,247
  1,336
  1,429
  1,526
  1,627
  1,733
  1,843
  1,959
  2,080
  2,206
  2,339
  2,478
Total liabilities, $m
  429
  472
  517
  564
  613
  664
  717
  772
  829
  889
  951
  1,015
  1,082
  1,151
  1,223
  1,299
  1,377
  1,459
  1,544
  1,633
  1,726
  1,823
  1,924
  2,029
  2,140
  2,256
  2,376
  2,503
  2,636
  2,774
Total equity, $m
  308
  339
  371
  405
  440
  477
  515
  555
  596
  638
  683
  729
  777
  827
  879
  933
  989
  1,048
  1,109
  1,173
  1,239
  1,309
  1,382
  1,458
  1,537
  1,620
  1,707
  1,798
  1,893
  1,993
Total liabilities and equity, $m
  737
  811
  888
  969
  1,053
  1,141
  1,232
  1,327
  1,425
  1,527
  1,634
  1,744
  1,859
  1,978
  2,102
  2,232
  2,366
  2,507
  2,653
  2,806
  2,965
  3,132
  3,306
  3,487
  3,677
  3,876
  4,083
  4,301
  4,529
  4,767
Debt-to-equity ratio
  0.430
  0.520
  0.590
  0.660
  0.720
  0.770
  0.820
  0.860
  0.890
  0.930
  0.960
  0.990
  1.010
  1.030
  1.050
  1.070
  1.090
  1.110
  1.120
  1.140
  1.150
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.240
Adjusted equity ratio
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  12
  15
  17
  20
  22
  25
  28
  31
  34
  61
  64
  68
  71
  75
  79
  83
  87
  91
  96
  100
  105
  110
  116
  121
  127
  133
  140
  147
  154
Depreciation, amort., depletion, $m
  65
  69
  72
  75
  79
  83
  87
  91
  95
  100
  71
  76
  81
  86
  92
  97
  103
  109
  116
  122
  129
  137
  144
  152
  160
  169
  178
  188
  198
  208
Funds from operations, $m
  76
  81
  87
  93
  99
  105
  112
  119
  126
  133
  132
  140
  149
  157
  167
  176
  186
  196
  207
  218
  230
  242
  255
  268
  282
  296
  312
  328
  344
  362
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Cash from operations, $m
  75
  80
  86
  92
  98
  104
  111
  118
  125
  132
  131
  139
  147
  156
  165
  175
  184
  195
  205
  216
  228
  240
  253
  266
  280
  294
  309
  325
  342
  359
Maintenance CAPEX, $m
  -29
  -32
  -35
  -39
  -42
  -46
  -50
  -54
  -58
  -62
  -67
  -71
  -76
  -81
  -86
  -92
  -97
  -103
  -109
  -116
  -122
  -129
  -137
  -144
  -152
  -160
  -169
  -178
  -188
  -198
New CAPEX, $m
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
Cash from investing activities, $m
  -55
  -59
  -63
  -69
  -73
  -78
  -83
  -89
  -94
  -99
  -106
  -111
  -118
  -125
  -132
  -139
  -146
  -154
  -163
  -172
  -180
  -190
  -201
  -211
  -222
  -233
  -245
  -258
  -271
  -285
Free cash flow, $m
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  26
  27
  29
  31
  33
  35
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  67
  71
  74
Issuance/(repayment) of debt, $m
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  132
  139
Issuance/(repurchase) of shares, $m
  19
  19
  18
  17
  16
  14
  13
  12
  11
  9
  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  
  60
  62
  63
  64
  65
  65
  66
  67
  68
  68
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  132
  139
Total cash flow (excl. dividends), $m
  80
  83
  85
  87
  89
  92
  94
  96
  99
  101
  87
  92
  96
  101
  106
  111
  116
  122
  127
  134
  140
  147
  154
  161
  169
  177
  185
  194
  203
  213
Retained Cash Flow (-), $m
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -100
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
  50
  52
  52
  53
  54
  55
  56
  57
  58
  59
  43
  45
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  94
  98
  103
  108
  113
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
  48
  47
  46
  44
  42
  40
  38
  35
  33
  31
  20
  19
  18
  17
  16
  14
  13
  12
  10
  9
  8
  6
  5
  4
  3
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  93.8
  88.7
  84.5
  81.0
  78.2
  75.8
  73.8
  72.3
  71.0
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9

Alpha and Omega Semiconductor Limited is a designer, developer and global supplier of power semiconductors. The Company's portfolio of power semiconductors includes approximately 1,600 products, as of June 30, 2016. The Company's product portfolio consists of two categories: power discretes and power integrated circuits (ICs). The Company's portfolio of products focuses high-volume applications, including personal computers, flat panel televisions, light-emitting diode (LED) lighting, smart phones, battery packs, consumer and industrial motor controls and power supplies for television, computers, servers and telecommunications equipment. The Company sells its products primarily to distributors in the Asia Pacific region, who in turn sell these products to end customers. The Company conducts its operations primarily in the United States, Hong Kong, China, Taiwan, Korea and Japan. Its products are applicable in desktop and tablet personal computers, flat panel displays and televisions.

FINANCIAL RATIOS  of  Alpha and Omega Semiconductor Limited (AOSL)

Valuation Ratios
P/E Ratio 20.9
Price to Sales 0.8
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 6.8
Price to Free Cash Flow -22.5
Growth Rates
Sales Growth Rate 14%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 154.5%
Cap. Spend. - 3 Yr. Gr. Rate 44.1%
Financial Strength
Quick Ratio 116
Current Ratio 0.1
LT Debt to Equity 0.4%
Total Debt to Equity 0.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.9%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 5.5%
Return On Equity - 3 Yr. Avg. 0.5%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 24%
Gross Margin - 3 Yr. Avg. 20.7%
EBITDA Margin 10.4%
EBITDA Margin - 3 Yr. Avg. 8.7%
Operating Margin 3.4%
Oper. Margin - 3 Yr. Avg. 0.9%
Pre-Tax Margin 3.4%
Pre-Tax Margin - 3 Yr. Avg. 0.8%
Net Profit Margin 3.7%
Net Profit Margin - 3 Yr. Avg. 0.1%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 110.3%
Payout Ratio 0%

AOSL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AOSL stock intrinsic value calculation we used $422 million for the last fiscal year's total revenue generated by Alpha and Omega Semiconductor Limited. The default revenue input number comes from 0001 income statement of Alpha and Omega Semiconductor Limited. 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 AOSL stock valuation model: a) initial revenue growth rate of 10.6% 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 AOSL is calculated based on our internal credit rating of Alpha and Omega Semiconductor Limited, 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 Alpha and Omega Semiconductor Limited.
    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 AOSL stock the variable cost ratio is equal to 96.7%.

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 AOSL 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 Alpha and Omega Semiconductor Limited.

Corporate tax rate of 27% is the nominal tax rate for Alpha and Omega Semiconductor Limited. 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 AOSL 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 AOSL are equal to 57.9%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Alpha and Omega Semiconductor Limited 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 AOSL is equal to 1.7%. 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 - $278.594 million for Alpha and Omega Semiconductor Limited - 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 23.940 million for Alpha and Omega Semiconductor Limited 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 Alpha and Omega Semiconductor Limited at the current share price and the inputted number of shares is $0.3 billion.

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