Intrinsic value of Cabot Microelectronics - CCMP

Previous Close

$84.81

  Intrinsic Value

$80.99

stock screener

  Rating & Target

hold

-5%

Previous close

$84.81

 
Intrinsic value

$80.99

 
Up/down potential

-5%

 
Rating

hold

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

We calculate the intrinsic value of CCMP 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 2016), $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 2.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.86
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  430
  510
  597
  692
  795
  905
  1,022
  1,147
  1,278
  1,416
  1,561
  1,713
  1,871
  2,036
  2,207
  2,386
  2,572
  2,765
  2,965
  3,173
  3,390
  3,615
  3,849
  4,093
  4,346
  4,611
  4,886
  5,173
  5,472
  5,784
  6,110
Variable operating expenses, $m
 
  415
  485
  561
  642
  730
  823
  922
  1,027
  1,137
  1,252
  1,363
  1,488
  1,620
  1,756
  1,898
  2,046
  2,199
  2,359
  2,524
  2,697
  2,876
  3,062
  3,256
  3,458
  3,668
  3,887
  4,115
  4,353
  4,601
  4,861
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
  356
  415
  485
  561
  642
  730
  823
  922
  1,027
  1,137
  1,252
  1,363
  1,488
  1,620
  1,756
  1,898
  2,046
  2,199
  2,359
  2,524
  2,697
  2,876
  3,062
  3,256
  3,458
  3,668
  3,887
  4,115
  4,353
  4,601
  4,861
Operating income, $m
  75
  94
  112
  131
  152
  175
  199
  224
  251
  280
  309
  350
  383
  416
  451
  488
  526
  565
  606
  649
  693
  739
  787
  837
  889
  943
  999
  1,058
  1,119
  1,183
  1,249
EBITDA, $m
  101
  111
  130
  150
  173
  197
  222
  249
  278
  308
  339
  372
  407
  442
  480
  518
  559
  601
  644
  690
  737
  786
  836
  889
  944
  1,002
  1,062
  1,124
  1,189
  1,257
  1,328
Interest expense (income), $m
  4
  5
  7
  8
  10
  12
  14
  16
  18
  20
  23
  25
  28
  31
  34
  37
  40
  44
  47
  51
  54
  58
  62
  67
  71
  76
  80
  85
  90
  96
  101
Earnings before tax, $m
  70
  89
  105
  123
  143
  163
  185
  209
  233
  259
  286
  325
  354
  385
  417
  451
  486
  522
  559
  598
  639
  681
  725
  770
  818
  867
  919
  972
  1,029
  1,087
  1,148
Tax expense, $m
  10
  24
  28
  33
  38
  44
  50
  56
  63
  70
  77
  88
  96
  104
  113
  122
  131
  141
  151
  162
  172
  184
  196
  208
  221
  234
  248
  263
  278
  293
  310
Net income, $m
  60
  65
  77
  90
  104
  119
  135
  152
  170
  189
  209
  237
  259
  281
  305
  329
  354
  381
  408
  437
  466
  497
  529
  562
  597
  633
  671
  710
  751
  793
  838

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  287
  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
  727
  522
  611
  708
  813
  926
  1,046
  1,174
  1,308
  1,450
  1,598
  1,753
  1,915
  2,084
  2,259
  2,442
  2,632
  2,830
  3,035
  3,248
  3,470
  3,700
  3,940
  4,189
  4,449
  4,719
  5,001
  5,294
  5,601
  5,920
  6,254
Adjusted assets (=assets-cash), $m
  440
  522
  611
  708
  813
  926
  1,046
  1,174
  1,308
  1,450
  1,598
  1,753
  1,915
  2,084
  2,259
  2,442
  2,632
  2,830
  3,035
  3,248
  3,470
  3,700
  3,940
  4,189
  4,449
  4,719
  5,001
  5,294
  5,601
  5,920
  6,254
Revenue / Adjusted assets
  0.977
  0.977
  0.977
  0.977
  0.978
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
  0.977
Average production assets, $m
  28
  33
  38
  44
  51
  58
  65
  73
  82
  91
  100
  110
  120
  130
  141
  153
  165
  177
  190
  203
  217
  231
  246
  262
  278
  295
  313
  331
  350
  370
  391
Working capital, $m
  371
  109
  128
  148
  170
  194
  219
  245
  274
  303
  334
  367
  400
  436
  472
  511
  550
  592
  635
  679
  725
  774
  824
  876
  930
  987
  1,046
  1,107
  1,171
  1,238
  1,308
Total debt, $m
  155
  188
  233
  282
  334
  391
  451
  515
  583
  654
  728
  806
  887
  972
  1,060
  1,152
  1,247
  1,346
  1,449
  1,557
  1,668
  1,783
  1,904
  2,029
  2,159
  2,295
  2,436
  2,584
  2,738
  2,898
  3,066
Total liabilities, $m
  230
  262
  307
  356
  408
  465
  525
  589
  657
  728
  802
  880
  961
  1,046
  1,134
  1,226
  1,321
  1,420
  1,523
  1,631
  1,742
  1,857
  1,978
  2,103
  2,233
  2,369
  2,510
  2,658
  2,812
  2,972
  3,140
Total equity, $m
  498
  260
  304
  353
  405
  461
  521
  585
  651
  722
  796
  873
  954
  1,038
  1,125
  1,216
  1,311
  1,409
  1,511
  1,618
  1,728
  1,843
  1,962
  2,086
  2,215
  2,350
  2,490
  2,637
  2,789
  2,948
  3,114
Total liabilities and equity, $m
  728
  522
  611
  709
  813
  926
  1,046
  1,174
  1,308
  1,450
  1,598
  1,753
  1,915
  2,084
  2,259
  2,442
  2,632
  2,829
  3,034
  3,249
  3,470
  3,700
  3,940
  4,189
  4,448
  4,719
  5,000
  5,295
  5,601
  5,920
  6,254
Debt-to-equity ratio
  0.311
  0.720
  0.760
  0.800
  0.830
  0.850
  0.870
  0.880
  0.890
  0.910
  0.920
  0.920
  0.930
  0.940
  0.940
  0.950
  0.950
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
Adjusted equity ratio
  0.480
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  60
  65
  77
  90
  104
  119
  135
  152
  170
  189
  209
  237
  259
  281
  305
  329
  354
  381
  408
  437
  466
  497
  529
  562
  597
  633
  671
  710
  751
  793
  838
Depreciation, amort., depletion, $m
  26
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  22
  24
  26
  28
  31
  33
  35
  38
  41
  43
  46
  49
  52
  56
  59
  63
  66
  70
  74
  78
Funds from operations, $m
  91
  82
  95
  109
  124
  141
  158
  177
  197
  217
  239
  259
  283
  307
  333
  360
  387
  416
  446
  477
  510
  543
  578
  615
  653
  692
  733
  776
  821
  868
  916
Change in working capital, $m
  -4
  17
  19
  20
  22
  24
  25
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  57
  59
  61
  64
  67
  70
Cash from operations, $m
  95
  65
  76
  89
  102
  117
  133
  150
  169
  188
  208
  227
  249
  272
  296
  321
  348
  375
  403
  433
  463
  495
  528
  563
  598
  636
  674
  715
  757
  801
  847
Maintenance CAPEX, $m
  0
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -31
  -33
  -35
  -38
  -41
  -43
  -46
  -49
  -52
  -56
  -59
  -63
  -66
  -70
  -74
New CAPEX, $m
  -18
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -144
  -11
  -13
  -14
  -16
  -17
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -37
  -39
  -43
  -45
  -48
  -51
  -55
  -57
  -61
  -65
  -68
  -73
  -77
  -81
  -85
  -90
  -95
Free cash flow, $m
  -49
  54
  64
  75
  87
  100
  114
  129
  146
  163
  181
  197
  217
  238
  259
  282
  305
  330
  355
  381
  409
  437
  467
  498
  530
  563
  598
  634
  671
  711
  752
Issuance/(repayment) of debt, $m
  -9
  41
  45
  49
  53
  57
  60
  64
  68
  71
  74
  78
  81
  85
  88
  92
  95
  99
  103
  107
  111
  116
  120
  125
  130
  136
  141
  147
  154
  160
  167
Issuance/(repurchase) of shares, $m
  -9
  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  
  -15
  41
  45
  49
  53
  57
  60
  64
  68
  71
  74
  78
  81
  85
  88
  92
  95
  99
  103
  107
  111
  116
  120
  125
  130
  136
  141
  147
  154
  160
  167
Total cash flow (excl. dividends), $m
  -58
  95
  109
  124
  140
  157
  175
  193
  213
  234
  255
  275
  298
  322
  347
  373
  401
  429
  458
  488
  520
  553
  587
  623
  660
  699
  739
  781
  825
  871
  919
Retained Cash Flow (-), $m
  -69
  -41
  -45
  -48
  -52
  -56
  -60
  -63
  -67
  -70
  -74
  -77
  -81
  -84
  -87
  -91
  -95
  -98
  -102
  -106
  -110
  -115
  -119
  -124
  -129
  -135
  -140
  -146
  -153
  -159
  -166
Prev. year cash balance distribution, $m
 
  279
  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
 
  333
  64
  75
  87
  101
  115
  130
  146
  163
  181
  197
  217
  238
  260
  282
  306
  330
  356
  382
  410
  438
  468
  499
  531
  564
  599
  635
  673
  712
  753
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
 
  319
  59
  65
  72
  78
  83
  88
  91
  94
  95
  94
  93
  91
  87
  83
  78
  72
  66
  59
  52
  45
  39
  33
  27
  22
  17
  14
  10
  8
  6
Current shareholders' claim on cash, %
  100
  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

Cabot Microelectronics Corporation supplies polishing slurries and pads used in the manufacture of integrated circuit (IC) devices within the semiconductor industry, in a process called chemical mechanical planarization (CMP). The Company is engaged in the development, manufacture and sale of CMP consumables. The Company develops, produces and sells CMP slurries for polishing conducting and insulating materials used in IC devices, and also for polishing the disk substrates and magnetic heads used in hard disk drives. It also develops, manufactures and sells CMP polishing pads, which are used in conjunction with slurries in the CMP process. The Company also pursues other surface modification applications through its engineered surface finishes (ESF) business. The Company offers CMP polishing pads, under the Epic and NexPlanar brand names, for a range of applications and technology nodes.

FINANCIAL RATIOS  of  Cabot Microelectronics (CCMP)

Valuation Ratios
P/E Ratio 34.7
Price to Sales 4.8
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 21.9
Price to Free Cash Flow 27
Growth Rates
Sales Growth Rate 3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.6%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 36
Current Ratio 0
LT Debt to Equity 29.5%
Total Debt to Equity 31.1%
Interest Coverage 19
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 9.3%
Return On Total Capital 9.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.8%
Return On Equity 12.9%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 48.8%
Gross Margin - 3 Yr. Avg. 49.3%
EBITDA Margin 23.3%
EBITDA Margin - 3 Yr. Avg. 22.5%
Operating Margin 17.2%
Oper. Margin - 3 Yr. Avg. 17.4%
Pre-Tax Margin 16.3%
Pre-Tax Margin - 3 Yr. Avg. 16.6%
Net Profit Margin 14%
Net Profit Margin - 3 Yr. Avg. 13.2%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 20.5%
Payout Ratio 15%

CCMP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CCMP stock intrinsic value calculation we used $430 million for the last fiscal year's total revenue generated by Cabot Microelectronics. The default revenue input number comes from 2016 income statement of Cabot Microelectronics. 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 CCMP stock valuation model: a) initial revenue growth rate of 18.5% 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 4.3%, whose default value for CCMP is calculated based on our internal credit rating of Cabot Microelectronics, 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 Cabot Microelectronics.
    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 CCMP stock the variable cost ratio is equal to 81.9%.

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 CCMP 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 Cabot Microelectronics.

Corporate tax rate of 27% is the nominal tax rate for Cabot Microelectronics. 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 CCMP 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 CCMP are equal to 6.4%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Cabot Microelectronics 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 CCMP is equal to 21.4%. 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 - $498 million for Cabot Microelectronics - 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 25.318 million for Cabot Microelectronics 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 Cabot Microelectronics at the current share price and the inputted number of shares is $2.1 billion.

RELATED COMPANIES Price Int.Val. Rating
RBCN Rubicon Techno 8.12 4.59  sell
OLED Universal Disp 134.85 2.72  str.sell
CBT Cabot 58.36 4.51  str.sell
COHU Cohu 25.07 7.71  str.sell
ROG Rogers 139.04 605.83  str.buy
KMG KMG Chemicals 54.86 116.23  str.buy

COMPANY NEWS

▶ [$$] CCMP-Backed PQ Declines in Stock Market Debut   [Sep-29-17 12:10PM  The Wall Street Journal]
▶ Cabot posts 3Q profit   [01:24AM  Associated Press]
▶ STOCKS SLIP LOWER: Here's what you need to know   [May-12-17 04:02PM  Business Insider]
▶ STOCKS SLIDE LOWER: Here's what you need to know   [May-11-17 04:06PM  Business Insider]
▶ STOCKS DO NOTHING: Here's what you need to know   [May-10-17 04:00PM  Business Insider]
▶ STOCKS EDGE LOWER: Here's what you need to know   [May-09-17 04:00PM  Business Insider]
▶ STOCKS GO NOWHERE: Here's what you need to know   [May-08-17 04:04PM  Business Insider]
▶ Cabot posts 2Q profit   [Apr-27-17 09:32AM  Associated Press]
▶ Cabot posts 1Q profit   [06:07AM  Associated Press]
▶ Is Cabot Microelectronics Corporation (CCMP) A Good Stock To Buy?   [Dec-08-16 10:40AM  at Insider Monkey]
Financial statements of CCMP
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.