Intrinsic value of Cirrus Logic - CRUS

Previous Close

$40.34

  Intrinsic Value

$52.99

stock screener

  Rating & Target

buy

+31%

Previous close

$40.34

 
Intrinsic value

$52.99

 
Up/down potential

+31%

 
Rating

buy

We calculate the intrinsic value of CRUS 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 2.5

 

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
  1,563
  1,599
  1,640
  1,686
  1,737
  1,793
  1,854
  1,920
  1,992
  2,068
  2,150
  2,237
  2,330
  2,429
  2,533
  2,644
  2,762
  2,886
  3,018
  3,156
  3,303
  3,457
  3,619
  3,791
  3,971
  4,161
  4,361
  4,572
  4,793
  5,026
Variable operating expenses, $m
  1,240
  1,268
  1,299
  1,335
  1,374
  1,417
  1,464
  1,515
  1,569
  1,628
  1,651
  1,718
  1,789
  1,865
  1,945
  2,031
  2,121
  2,216
  2,317
  2,424
  2,536
  2,654
  2,779
  2,911
  3,049
  3,195
  3,349
  3,511
  3,681
  3,859
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
  1,240
  1,268
  1,299
  1,335
  1,374
  1,417
  1,464
  1,515
  1,569
  1,628
  1,651
  1,718
  1,789
  1,865
  1,945
  2,031
  2,121
  2,216
  2,317
  2,424
  2,536
  2,654
  2,779
  2,911
  3,049
  3,195
  3,349
  3,511
  3,681
  3,859
Operating income, $m
  323
  331
  341
  351
  363
  376
  390
  406
  422
  440
  499
  519
  541
  564
  588
  614
  641
  670
  700
  733
  767
  802
  840
  880
  922
  966
  1,012
  1,061
  1,113
  1,167
EBITDA, $m
  417
  426
  437
  449
  463
  478
  494
  512
  531
  551
  573
  596
  621
  647
  675
  705
  736
  769
  804
  841
  880
  921
  965
  1,010
  1,058
  1,109
  1,162
  1,218
  1,277
  1,339
Interest expense (income), $m
  3
  0
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  8
  9
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
Earnings before tax, $m
  323
  331
  340
  350
  362
  374
  388
  403
  419
  436
  494
  513
  534
  556
  580
  604
  631
  658
  688
  719
  751
  786
  822
  860
  900
  943
  988
  1,034
  1,084
  1,136
Tax expense, $m
  87
  89
  92
  95
  98
  101
  105
  109
  113
  118
  133
  139
  144
  150
  156
  163
  170
  178
  186
  194
  203
  212
  222
  232
  243
  255
  267
  279
  293
  307
Net income, $m
  236
  241
  248
  256
  264
  273
  283
  294
  306
  318
  361
  375
  390
  406
  423
  441
  460
  481
  502
  525
  548
  574
  600
  628
  657
  688
  721
  755
  791
  829

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
  1,335
  1,365
  1,400
  1,440
  1,483
  1,531
  1,583
  1,640
  1,701
  1,766
  1,836
  1,910
  1,990
  2,074
  2,163
  2,258
  2,359
  2,465
  2,577
  2,695
  2,820
  2,952
  3,091
  3,237
  3,391
  3,554
  3,724
  3,904
  4,093
  4,292
Adjusted assets (=assets-cash), $m
  1,335
  1,365
  1,400
  1,440
  1,483
  1,531
  1,583
  1,640
  1,701
  1,766
  1,836
  1,910
  1,990
  2,074
  2,163
  2,258
  2,359
  2,465
  2,577
  2,695
  2,820
  2,952
  3,091
  3,237
  3,391
  3,554
  3,724
  3,904
  4,093
  4,292
Revenue / Adjusted assets
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
  1.171
Average production assets, $m
  392
  401
  412
  423
  436
  450
  465
  482
  500
  519
  540
  561
  585
  610
  636
  664
  693
  724
  757
  792
  829
  868
  908
  951
  997
  1,044
  1,095
  1,147
  1,203
  1,262
Working capital, $m
  216
  221
  226
  233
  240
  247
  256
  265
  275
  285
  297
  309
  322
  335
  350
  365
  381
  398
  416
  436
  456
  477
  499
  523
  548
  574
  602
  631
  661
  694
Total debt, $m
  5
  11
  19
  27
  36
  46
  56
  68
  80
  94
  108
  123
  139
  157
  175
  195
  215
  237
  260
  284
  310
  337
  365
  395
  427
  460
  495
  532
  571
  611
Total liabilities, $m
  274
  280
  287
  295
  304
  314
  325
  336
  349
  362
  376
  392
  408
  425
  444
  463
  484
  505
  528
  553
  578
  605
  634
  664
  695
  728
  763
  800
  839
  880
Total equity, $m
  1,061
  1,085
  1,113
  1,145
  1,179
  1,217
  1,259
  1,304
  1,352
  1,404
  1,460
  1,519
  1,582
  1,649
  1,720
  1,795
  1,875
  1,959
  2,049
  2,143
  2,242
  2,347
  2,457
  2,574
  2,696
  2,825
  2,961
  3,104
  3,254
  3,412
Total liabilities and equity, $m
  1,335
  1,365
  1,400
  1,440
  1,483
  1,531
  1,584
  1,640
  1,701
  1,766
  1,836
  1,911
  1,990
  2,074
  2,164
  2,258
  2,359
  2,464
  2,577
  2,696
  2,820
  2,952
  3,091
  3,238
  3,391
  3,553
  3,724
  3,904
  4,093
  4,292
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.020
  0.030
  0.040
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
Adjusted equity ratio
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  236
  241
  248
  256
  264
  273
  283
  294
  306
  318
  361
  375
  390
  406
  423
  441
  460
  481
  502
  525
  548
  574
  600
  628
  657
  688
  721
  755
  791
  829
Depreciation, amort., depletion, $m
  94
  95
  96
  98
  100
  102
  104
  106
  109
  111
  74
  77
  80
  84
  87
  91
  95
  99
  104
  109
  114
  119
  124
  130
  137
  143
  150
  157
  165
  173
Funds from operations, $m
  329
  336
  345
  354
  364
  375
  387
  400
  414
  429
  435
  452
  470
  490
  510
  532
  555
  580
  606
  633
  662
  692
  724
  758
  794
  831
  871
  912
  956
  1,002
Change in working capital, $m
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
Cash from operations, $m
  325
  332
  339
  347
  357
  367
  379
  391
  404
  419
  423
  440
  457
  476
  496
  517
  539
  563
  588
  614
  642
  671
  702
  735
  769
  805
  843
  883
  925
  970
Maintenance CAPEX, $m
  -53
  -54
  -55
  -56
  -58
  -60
  -62
  -64
  -66
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -104
  -109
  -114
  -119
  -124
  -130
  -137
  -143
  -150
  -157
  -165
New CAPEX, $m
  -7
  -9
  -10
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -58
Cash from investing activities, $m
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -87
  -92
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -139
  -146
  -153
  -160
  -167
  -175
  -185
  -193
  -203
  -213
  -223
Free cash flow, $m
  265
  269
  274
  279
  286
  293
  302
  311
  320
  331
  332
  344
  357
  371
  386
  402
  419
  437
  455
  475
  497
  519
  542
  567
  593
  621
  650
  681
  713
  747
Issuance/(repayment) of debt, $m
  5
  6
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
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  
  5
  6
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
Total cash flow (excl. dividends), $m
  270
  275
  281
  287
  295
  303
  312
  322
  333
  344
  346
  359
  373
  388
  404
  421
  439
  458
  478
  500
  522
  546
  571
  597
  625
  654
  685
  717
  751
  787
Retained Cash Flow (-), $m
  -21
  -24
  -28
  -31
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -59
  -63
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -99
  -105
  -110
  -116
  -123
  -129
  -136
  -143
  -150
  -158
Prev. year cash balance distribution, $m
  122
  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
  371
  251
  253
  256
  260
  265
  271
  277
  284
  292
  290
  300
  310
  321
  333
  346
  359
  374
  389
  406
  423
  441
  460
  481
  502
  525
  549
  574
  601
  629
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
  356
  229
  220
  211
  202
  192
  183
  173
  163
  153
  138
  128
  118
  108
  98
  88
  78
  69
  60
  52
  44
  37
  30
  24
  20
  15
  12
  9
  7
  5
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

Cirrus Logic, Inc. is engaged in providing integrated circuits (ICs) for audio and voice signal processing applications. The Company develops analog and mixed-signal ICs for a range of customers. The Company offers two product lines: Portable Audio, and Non-Portable Audio and Other. The Company's primary facility housing engineering, sales and marketing, and administration functions is located in Austin, Texas. The Company offers products through both direct and indirect sales channels across the world. The Company's portable audio products include analog and mixed-signal components designed for mobile devices including smartphones, tablets, digital headsets, wearables, smart accessories and portable media players. Its non-portable audio and other products include analog and mixed-signal components targeting the consumer market, including smart home applications, and the automotive, energy and industrial markets.

FINANCIAL RATIOS  of  Cirrus Logic (CRUS)

Valuation Ratios
P/E Ratio 9.9
Price to Sales 1.7
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow 8.1
Growth Rates
Sales Growth Rate 31.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.9%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 5.2%
Total Debt to Equity 5.2%
Interest Coverage 106
Management Effectiveness
Return On Assets 20.3%
Ret/ On Assets - 3 Yr. Avg. 12.4%
Return On Total Capital 23.4%
Ret/ On T. Cap. - 3 Yr. Avg. 14.4%
Return On Equity 26%
Return On Equity - 3 Yr. Avg. 16.4%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 49.3%
Gross Margin - 3 Yr. Avg. 47.7%
EBITDA Margin 24.8%
EBITDA Margin - 3 Yr. Avg. 19.7%
Operating Margin 20.6%
Oper. Margin - 3 Yr. Avg. 16%
Pre-Tax Margin 20.5%
Pre-Tax Margin - 3 Yr. Avg. 15.2%
Net Profit Margin 17%
Net Profit Margin - 3 Yr. Avg. 11.2%
Effective Tax Rate 17.1%
Eff/ Tax Rate - 3 Yr. Avg. 29%
Payout Ratio 0%

CRUS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRUS stock intrinsic value calculation we used $1532.186 million for the last fiscal year's total revenue generated by Cirrus Logic. The default revenue input number comes from 0001 income statement of Cirrus Logic. 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 CRUS 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 CRUS is calculated based on our internal credit rating of Cirrus Logic, 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 Cirrus Logic.
    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 CRUS stock the variable cost ratio is equal to 79.4%.

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 CRUS 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 Cirrus Logic.

Corporate tax rate of 27% is the nominal tax rate for Cirrus Logic. 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 CRUS 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 CRUS are equal to 25.1%.

Life of production assets of 7.3 years is the average useful life of capital assets used in Cirrus Logic 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 CRUS is equal to 13.8%. 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 - $1161.728 million for Cirrus Logic - 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 60.979 million for Cirrus Logic 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 Cirrus Logic at the current share price and the inputted number of shares is $2.5 billion.

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COMPANY NEWS

▶ Here's How Much This Small Chip Company Needs Apple   [Nov-15-18 06:00AM  Motley Fool]
▶ Why Cirrus Logic Stock Tumbled Today   [11:48AM  Motley Fool]
▶ Cirrus Logic Suffers Another Revenue Decline   [Nov-02-18 10:00PM  Motley Fool]
▶ Cirrus Logic: Fiscal 2Q Earnings Snapshot   [05:45PM  Associated Press]
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▶ Cirrus Logic to Announce Q2 Results November 1   [Oct-04-18 04:00PM  Business Wire]
▶ Apples Latest Products Bring Bad News for Cirrus Logic   [Sep-23-18 05:04PM  Motley Fool]
▶ Cirrus Logic: Avoid This Value Trap   [Sep-06-18 08:32PM  Motley Fool]
▶ Here are the Austin stocks driving Wall Street's latest bull run   [Aug-23-18 09:03AM  American City Business Journals]
▶ How Cirrus Logic, Inc. Shares Rose 12.9% in July   [Aug-10-18 02:28PM  Motley Fool]
▶ Friday Apple Rumors: 6.1-inch LCD iPhone Will Be Dual-SIM   [Aug-03-18 01:26PM  InvestorPlace]
▶ Sluggish Smartphone Demand Hits Cirrus Logic   [Aug-02-18 09:33PM  Motley Fool]
▶ Chipmaker Qorvo Crushes Quarterly Views, Gets Apple Lift   [04:55PM  Investor's Business Daily]
▶ Cirrus Logic: Fiscal 1Q Earnings Snapshot   [04:21PM  Associated Press]

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