Intrinsic value of Coherent, Inc. - COHR

Previous Close

$135.18

  Intrinsic Value

$155.19

stock screener

  Rating & Target

hold

+15%

Previous close

$135.18

 
Intrinsic value

$155.19

 
Up/down potential

+15%

 
Rating

hold

We calculate the intrinsic value of COHR 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 3.3

 

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, %
  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
  1,941
  1,986
  2,037
  2,094
  2,158
  2,227
  2,303
  2,385
  2,474
  2,569
  2,670
  2,778
  2,894
  3,016
  3,147
  3,284
  3,430
  3,585
  3,748
  3,920
  4,102
  4,293
  4,495
  4,708
  4,932
  5,168
  5,417
  5,678
  5,953
  6,242
Variable operating expenses, $m
  1,148
  1,174
  1,204
  1,237
  1,273
  1,313
  1,357
  1,404
  1,455
  1,510
  1,537
  1,599
  1,666
  1,736
  1,811
  1,891
  1,975
  2,063
  2,157
  2,256
  2,361
  2,471
  2,588
  2,710
  2,839
  2,975
  3,118
  3,268
  3,427
  3,593
Fixed operating expenses, $m
  400
  408
  417
  427
  436
  446
  455
  465
  476
  486
  497
  508
  519
  530
  542
  554
  566
  578
  591
  604
  618
  631
  645
  659
  674
  688
  704
  719
  735
  751
Total operating expenses, $m
  1,548
  1,582
  1,621
  1,664
  1,709
  1,759
  1,812
  1,869
  1,931
  1,996
  2,034
  2,107
  2,185
  2,266
  2,353
  2,445
  2,541
  2,641
  2,748
  2,860
  2,979
  3,102
  3,233
  3,369
  3,513
  3,663
  3,822
  3,987
  4,162
  4,344
Operating income, $m
  393
  403
  416
  431
  448
  468
  491
  516
  543
  573
  636
  671
  709
  750
  793
  840
  890
  943
  999
  1,059
  1,123
  1,191
  1,263
  1,339
  1,420
  1,505
  1,595
  1,691
  1,792
  1,898
EBITDA, $m
  501
  513
  527
  545
  565
  588
  613
  641
  672
  705
  742
  781
  824
  869
  918
  970
  1,025
  1,084
  1,147
  1,214
  1,285
  1,361
  1,440
  1,525
  1,614
  1,709
  1,809
  1,915
  2,027
  2,145
Interest expense (income), $m
  27
  23
  24
  25
  27
  28
  30
  32
  34
  36
  38
  41
  44
  46
  50
  53
  56
  60
  64
  68
  72
  77
  82
  87
  92
  98
  104
  110
  117
  124
  132
Earnings before tax, $m
  370
  379
  391
  404
  420
  439
  459
  482
  507
  535
  596
  628
  663
  700
  741
  784
  830
  879
  931
  987
  1,046
  1,109
  1,176
  1,247
  1,321
  1,401
  1,485
  1,574
  1,667
  1,767
Tax expense, $m
  100
  102
  105
  109
  114
  118
  124
  130
  137
  144
  161
  170
  179
  189
  200
  212
  224
  237
  251
  266
  282
  299
  317
  337
  357
  378
  401
  425
  450
  477
Net income, $m
  270
  277
  285
  295
  307
  320
  335
  352
  370
  390
  435
  458
  484
  511
  541
  572
  606
  642
  680
  721
  764
  810
  858
  910
  965
  1,023
  1,084
  1,149
  1,217
  1,290

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
  2,305
  2,358
  2,419
  2,487
  2,562
  2,645
  2,735
  2,833
  2,938
  3,050
  3,171
  3,300
  3,437
  3,582
  3,737
  3,901
  4,074
  4,257
  4,451
  4,656
  4,871
  5,099
  5,339
  5,592
  5,858
  6,138
  6,433
  6,744
  7,070
  7,414
Adjusted assets (=assets-cash), $m
  2,305
  2,358
  2,419
  2,487
  2,562
  2,645
  2,735
  2,833
  2,938
  3,050
  3,171
  3,300
  3,437
  3,582
  3,737
  3,901
  4,074
  4,257
  4,451
  4,656
  4,871
  5,099
  5,339
  5,592
  5,858
  6,138
  6,433
  6,744
  7,070
  7,414
Revenue / Adjusted assets
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
  0.842
Average production assets, $m
  606
  620
  635
  653
  673
  695
  719
  744
  772
  801
  833
  867
  903
  941
  982
  1,025
  1,070
  1,118
  1,169
  1,223
  1,280
  1,340
  1,403
  1,469
  1,539
  1,613
  1,690
  1,772
  1,857
  1,948
Working capital, $m
  571
  584
  599
  616
  634
  655
  677
  701
  727
  755
  785
  817
  851
  887
  925
  966
  1,009
  1,054
  1,102
  1,153
  1,206
  1,262
  1,322
  1,384
  1,450
  1,519
  1,593
  1,669
  1,750
  1,835
Total debt, $m
  444
  466
  491
  520
  551
  586
  624
  664
  708
  755
  806
  860
  917
  978
  1,042
  1,111
  1,183
  1,260
  1,341
  1,426
  1,517
  1,612
  1,712
  1,818
  1,929
  2,046
  2,169
  2,299
  2,436
  2,579
Total liabilities, $m
  964
  986
  1,011
  1,040
  1,071
  1,106
  1,143
  1,184
  1,228
  1,275
  1,326
  1,379
  1,437
  1,497
  1,562
  1,631
  1,703
  1,780
  1,861
  1,946
  2,036
  2,131
  2,232
  2,337
  2,449
  2,566
  2,689
  2,819
  2,955
  3,099
Total equity, $m
  1,342
  1,373
  1,408
  1,447
  1,491
  1,539
  1,592
  1,649
  1,710
  1,775
  1,846
  1,920
  2,000
  2,085
  2,175
  2,270
  2,371
  2,478
  2,591
  2,710
  2,835
  2,968
  3,107
  3,254
  3,409
  3,572
  3,744
  3,925
  4,115
  4,315
Total liabilities and equity, $m
  2,306
  2,359
  2,419
  2,487
  2,562
  2,645
  2,735
  2,833
  2,938
  3,050
  3,172
  3,299
  3,437
  3,582
  3,737
  3,901
  4,074
  4,258
  4,452
  4,656
  4,871
  5,099
  5,339
  5,591
  5,858
  6,138
  6,433
  6,744
  7,070
  7,414
Debt-to-equity ratio
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.600
Adjusted equity ratio
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  270
  277
  285
  295
  307
  320
  335
  352
  370
  390
  435
  458
  484
  511
  541
  572
  606
  642
  680
  721
  764
  810
  858
  910
  965
  1,023
  1,084
  1,149
  1,217
  1,290
Depreciation, amort., depletion, $m
  108
  110
  112
  114
  116
  119
  122
  125
  129
  133
  105
  110
  114
  119
  124
  130
  135
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  247
Funds from operations, $m
  378
  386
  397
  409
  423
  439
  457
  477
  499
  523
  540
  568
  598
  630
  665
  702
  741
  783
  828
  875
  926
  979
  1,036
  1,096
  1,159
  1,227
  1,298
  1,373
  1,452
  1,536
Change in working capital, $m
  11
  13
  15
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
  53
  56
  59
  63
  66
  69
  73
  77
  81
  85
Cash from operations, $m
  367
  373
  382
  392
  405
  419
  435
  453
  473
  495
  510
  536
  564
  594
  627
  661
  698
  738
  780
  825
  872
  923
  976
  1,033
  1,094
  1,157
  1,225
  1,296
  1,371
  1,451
Maintenance CAPEX, $m
  -75
  -77
  -78
  -80
  -83
  -85
  -88
  -91
  -94
  -98
  -101
  -105
  -110
  -114
  -119
  -124
  -130
  -135
  -142
  -148
  -155
  -162
  -170
  -178
  -186
  -195
  -204
  -214
  -224
  -235
New CAPEX, $m
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -90
Cash from investing activities, $m
  -87
  -91
  -94
  -98
  -103
  -107
  -112
  -117
  -122
  -128
  -133
  -139
  -146
  -152
  -160
  -167
  -176
  -183
  -193
  -202
  -212
  -222
  -233
  -244
  -256
  -269
  -282
  -296
  -310
  -325
Free cash flow, $m
  280
  283
  287
  294
  302
  312
  323
  337
  351
  368
  377
  397
  419
  442
  467
  494
  523
  554
  587
  623
  661
  701
  744
  789
  838
  889
  943
  1,001
  1,061
  1,126
Issuance/(repayment) of debt, $m
  18
  22
  25
  28
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  68
  72
  77
  81
  85
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
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  
  18
  22
  25
  28
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  68
  72
  77
  81
  85
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
Total cash flow (excl. dividends), $m
  298
  305
  313
  322
  334
  347
  361
  377
  395
  415
  428
  451
  476
  503
  532
  562
  596
  631
  668
  708
  751
  796
  844
  895
  949
  1,006
  1,066
  1,130
  1,198
  1,269
Retained Cash Flow (-), $m
  -27
  -31
  -35
  -40
  -44
  -48
  -52
  -57
  -61
  -66
  -70
  -75
  -80
  -85
  -90
  -95
  -101
  -107
  -113
  -119
  -126
  -132
  -140
  -147
  -155
  -163
  -172
  -181
  -190
  -200
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
  270
  274
  278
  283
  290
  298
  309
  321
  334
  349
  357
  376
  396
  418
  442
  467
  495
  524
  556
  589
  625
  664
  705
  748
  794
  843
  895
  950
  1,008
  1,069
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
  259
  251
  242
  233
  225
  217
  209
  200
  192
  183
  170
  160
  151
  140
  130
  119
  108
  97
  86
  75
  65
  55
  46
  38
  31
  25
  19
  15
  11
  8
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

Coherent, Inc. is a photonics manufacturer. The Company is engaged in designing, manufacturing, servicing and marketing of lasers and related accessories for a range of scientific, commercial and industrial applications. It operates through two segments: Specialty Lasers and Systems (SLS) and Commercial Lasers and Components (CLC). SLS develops and manufactures configurable products serving the microelectronics, scientific research and government programs, and original equipment manufacturer (OEM) components and instrumentation markets. The Commercial Lasers and Components segment focuses on higher volume products that are offered in set configurations. The product architectures are designed for exchange at the point of use such that substantially all product service and repairs are based upon advanced replacement and depot (that is factory) repair. CLC's primary markets include materials processing, OEM components, and instrumentation and microelectronics.

FINANCIAL RATIOS  of  Coherent, Inc. (COHR)

Valuation Ratios
P/E Ratio 16.1
Price to Sales 1.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 10.4
Growth Rates
Sales Growth Rate 101.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.6%
Cap. Spend. - 3 Yr. Gr. Rate 22.7%
Financial Strength
Quick Ratio 95
Current Ratio 0.1
LT Debt to Equity 50.6%
Total Debt to Equity 51.1%
Interest Coverage 12
Management Effectiveness
Return On Assets 12.9%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 11.7%
Return On Equity 20%
Return On Equity - 3 Yr. Avg. 13.2%
Asset Turnover 1
Profitability Ratios
Gross Margin 43.5%
Gross Margin - 3 Yr. Avg. 43.3%
EBITDA Margin 25.2%
EBITDA Margin - 3 Yr. Avg. 20%
Operating Margin 18.9%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 17.5%
Pre-Tax Margin - 3 Yr. Avg. 14.8%
Net Profit Margin 12%
Net Profit Margin - 3 Yr. Avg. 10.6%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 0%

COHR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the COHR stock intrinsic value calculation we used $1903 million for the last fiscal year's total revenue generated by Coherent, Inc.. The default revenue input number comes from 0001 income statement of Coherent, 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 COHR 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 COHR is calculated based on our internal credit rating of Coherent, 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 Coherent, 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 COHR stock the variable cost ratio is equal to 59.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $391 million in the base year in the intrinsic value calculation for COHR 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 Coherent, Inc..

Corporate tax rate of 27% is the nominal tax rate for Coherent, 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 COHR 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 COHR are equal to 31.2%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Coherent, 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 COHR is equal to 29.4%. 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 - $1314.464 million for Coherent, 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 24.314 million for Coherent, 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 Coherent, Inc. at the current share price and the inputted number of shares is $3.3 billion.

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