Intrinsic value of Cypress Semiconductor Corporation - CY

Previous Close

$23.15

  Intrinsic Value

$3.75

stock screener

  Rating & Target

str. sell

-84%

Previous close

$23.15

 
Intrinsic value

$3.75

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of CY 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 8.4

 

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
  2,534
  2,592
  2,659
  2,733
  2,816
  2,907
  3,006
  3,113
  3,229
  3,353
  3,485
  3,627
  3,777
  3,937
  4,107
  4,287
  4,478
  4,679
  4,892
  5,117
  5,354
  5,604
  5,868
  6,146
  6,438
  6,746
  7,071
  7,412
  7,771
  8,148
Variable operating expenses, $m
  1,129
  1,155
  1,184
  1,216
  1,252
  1,292
  1,335
  1,381
  1,432
  1,485
  1,515
  1,576
  1,642
  1,711
  1,785
  1,863
  1,946
  2,034
  2,126
  2,224
  2,327
  2,436
  2,550
  2,671
  2,798
  2,932
  3,073
  3,221
  3,377
  3,541
Fixed operating expenses, $m
  1,265
  1,293
  1,322
  1,351
  1,380
  1,411
  1,442
  1,473
  1,506
  1,539
  1,573
  1,607
  1,643
  1,679
  1,716
  1,754
  1,792
  1,832
  1,872
  1,913
  1,955
  1,998
  2,042
  2,087
  2,133
  2,180
  2,228
  2,277
  2,327
  2,378
Total operating expenses, $m
  2,394
  2,448
  2,506
  2,567
  2,632
  2,703
  2,777
  2,854
  2,938
  3,024
  3,088
  3,183
  3,285
  3,390
  3,501
  3,617
  3,738
  3,866
  3,998
  4,137
  4,282
  4,434
  4,592
  4,758
  4,931
  5,112
  5,301
  5,498
  5,704
  5,919
Operating income, $m
  139
  144
  153
  167
  184
  205
  230
  259
  291
  328
  398
  443
  493
  547
  606
  670
  739
  814
  894
  980
  1,072
  1,170
  1,275
  1,388
  1,507
  1,634
  1,770
  1,914
  2,066
  2,229
EBITDA, $m
  330
  339
  352
  370
  393
  420
  451
  487
  527
  572
  621
  676
  735
  800
  870
  946
  1,027
  1,114
  1,208
  1,308
  1,416
  1,530
  1,652
  1,782
  1,920
  2,067
  2,224
  2,389
  2,565
  2,752
Interest expense (income), $m
  33
  62
  64
  66
  69
  73
  76
  80
  85
  90
  95
  100
  106
  112
  119
  126
  134
  142
  150
  159
  169
  179
  189
  200
  212
  224
  237
  251
  265
  280
  296
Earnings before tax, $m
  77
  80
  87
  97
  111
  128
  149
  174
  202
  234
  298
  337
  381
  428
  480
  537
  598
  664
  735
  811
  893
  981
  1,075
  1,176
  1,283
  1,397
  1,519
  1,648
  1,786
  1,932
Tax expense, $m
  21
  22
  23
  26
  30
  35
  40
  47
  55
  63
  80
  91
  103
  116
  130
  145
  161
  179
  198
  219
  241
  265
  290
  317
  346
  377
  410
  445
  482
  522
Net income, $m
  56
  59
  63
  71
  81
  94
  109
  127
  147
  171
  217
  246
  278
  313
  351
  392
  436
  485
  537
  592
  652
  716
  785
  858
  937
  1,020
  1,109
  1,203
  1,304
  1,411

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
  3,765
  3,851
  3,950
  4,061
  4,185
  4,320
  4,467
  4,626
  4,798
  4,982
  5,179
  5,389
  5,613
  5,850
  6,103
  6,370
  6,653
  6,953
  7,269
  7,603
  7,956
  8,327
  8,719
  9,132
  9,566
  10,024
  10,506
  11,013
  11,546
  12,107
Adjusted assets (=assets-cash), $m
  3,765
  3,851
  3,950
  4,061
  4,185
  4,320
  4,467
  4,626
  4,798
  4,982
  5,179
  5,389
  5,613
  5,850
  6,103
  6,370
  6,653
  6,953
  7,269
  7,603
  7,956
  8,327
  8,719
  9,132
  9,566
  10,024
  10,506
  11,013
  11,546
  12,107
Revenue / Adjusted assets
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
  0.673
Average production assets, $m
  1,318
  1,348
  1,382
  1,421
  1,464
  1,512
  1,563
  1,619
  1,679
  1,743
  1,812
  1,886
  1,964
  2,047
  2,136
  2,229
  2,328
  2,433
  2,544
  2,661
  2,784
  2,914
  3,051
  3,196
  3,348
  3,508
  3,677
  3,854
  4,041
  4,237
Working capital, $m
  119
  122
  125
  128
  132
  137
  141
  146
  152
  158
  164
  170
  178
  185
  193
  201
  210
  220
  230
  240
  252
  263
  276
  289
  303
  317
  332
  348
  365
  383
Total debt, $m
  911
  948
  990
  1,038
  1,091
  1,148
  1,211
  1,279
  1,352
  1,431
  1,515
  1,605
  1,700
  1,802
  1,910
  2,024
  2,145
  2,273
  2,408
  2,550
  2,701
  2,859
  3,027
  3,203
  3,389
  3,584
  3,790
  4,006
  4,234
  4,474
Total liabilities, $m
  1,608
  1,645
  1,687
  1,734
  1,787
  1,845
  1,907
  1,975
  2,049
  2,127
  2,211
  2,301
  2,397
  2,498
  2,606
  2,720
  2,841
  2,969
  3,104
  3,247
  3,397
  3,556
  3,723
  3,899
  4,085
  4,280
  4,486
  4,703
  4,930
  5,170
Total equity, $m
  2,157
  2,207
  2,264
  2,327
  2,398
  2,475
  2,559
  2,651
  2,749
  2,855
  2,967
  3,088
  3,216
  3,352
  3,497
  3,650
  3,812
  3,984
  4,165
  4,357
  4,559
  4,771
  4,996
  5,232
  5,482
  5,744
  6,020
  6,310
  6,616
  6,937
Total liabilities and equity, $m
  3,765
  3,852
  3,951
  4,061
  4,185
  4,320
  4,466
  4,626
  4,798
  4,982
  5,178
  5,389
  5,613
  5,850
  6,103
  6,370
  6,653
  6,953
  7,269
  7,604
  7,956
  8,327
  8,719
  9,131
  9,567
  10,024
  10,506
  11,013
  11,546
  12,107
Debt-to-equity ratio
  0.420
  0.430
  0.440
  0.450
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.550
  0.560
  0.570
  0.580
  0.590
  0.590
  0.600
  0.610
  0.610
  0.620
  0.620
  0.630
  0.630
  0.640
  0.640
Adjusted equity ratio
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  59
  63
  71
  81
  94
  109
  127
  147
  171
  217
  246
  278
  313
  351
  392
  436
  485
  537
  592
  652
  716
  785
  858
  937
  1,020
  1,109
  1,203
  1,304
  1,411
Depreciation, amort., depletion, $m
  191
  195
  199
  204
  209
  215
  221
  228
  236
  244
  224
  233
  242
  253
  264
  275
  287
  300
  314
  328
  344
  360
  377
  395
  413
  433
  454
  476
  499
  523
Funds from operations, $m
  247
  253
  262
  275
  290
  309
  330
  355
  383
  414
  441
  479
  520
  565
  614
  667
  724
  785
  851
  921
  996
  1,076
  1,162
  1,253
  1,350
  1,453
  1,563
  1,679
  1,803
  1,934
Change in working capital, $m
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
Cash from operations, $m
  245
  251
  259
  271
  286
  304
  326
  350
  378
  408
  435
  472
  513
  558
  606
  659
  715
  776
  841
  910
  985
  1,064
  1,149
  1,240
  1,336
  1,439
  1,547
  1,663
  1,786
  1,916
Maintenance CAPEX, $m
  -159
  -163
  -166
  -171
  -175
  -181
  -187
  -193
  -200
  -207
  -215
  -224
  -233
  -242
  -253
  -264
  -275
  -287
  -300
  -314
  -328
  -344
  -360
  -377
  -395
  -413
  -433
  -454
  -476
  -499
New CAPEX, $m
  -27
  -30
  -35
  -39
  -43
  -47
  -51
  -56
  -60
  -64
  -69
  -74
  -78
  -83
  -88
  -94
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -144
  -152
  -160
  -169
  -177
  -187
  -196
Cash from investing activities, $m
  -186
  -193
  -201
  -210
  -218
  -228
  -238
  -249
  -260
  -271
  -284
  -298
  -311
  -325
  -341
  -358
  -374
  -392
  -411
  -431
  -451
  -474
  -497
  -521
  -547
  -573
  -602
  -631
  -663
  -695
Free cash flow, $m
  59
  58
  58
  62
  68
  76
  87
  101
  118
  137
  151
  175
  202
  232
  265
  301
  341
  383
  429
  479
  533
  591
  652
  719
  789
  865
  946
  1,032
  1,123
  1,221
Issuance/(repayment) of debt, $m
  30
  37
  42
  47
  53
  58
  63
  68
  73
  79
  84
  90
  96
  102
  108
  114
  121
  128
  135
  143
  150
  159
  167
  176
  186
  195
  206
  216
  228
  240
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  
  30
  37
  42
  47
  53
  58
  63
  68
  73
  79
  84
  90
  96
  102
  108
  114
  121
  128
  135
  143
  150
  159
  167
  176
  186
  195
  206
  216
  228
  240
Total cash flow (excl. dividends), $m
  89
  95
  101
  109
  120
  134
  150
  169
  191
  215
  235
  265
  298
  334
  373
  415
  461
  511
  565
  622
  683
  749
  820
  895
  975
  1,060
  1,151
  1,248
  1,351
  1,460
Retained Cash Flow (-), $m
  -41
  -50
  -57
  -64
  -71
  -77
  -84
  -91
  -98
  -106
  -113
  -120
  -128
  -136
  -145
  -153
  -162
  -172
  -181
  -191
  -202
  -213
  -224
  -237
  -249
  -262
  -276
  -290
  -306
  -321
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
  48
  45
  44
  45
  50
  57
  66
  78
  93
  110
  122
  144
  169
  197
  228
  262
  299
  340
  383
  431
  482
  536
  595
  658
  726
  798
  875
  958
  1,045
  1,139
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
  46
  41
  38
  37
  39
  41
  45
  49
  53
  58
  58
  62
  64
  66
  67
  67
  65
  63
  59
  55
  50
  45
  39
  34
  28
  23
  19
  15
  11
  9
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

Cypress Semiconductor Corporation manufactures embedded system solutions for automotive, industrial, home automation and appliances, consumer electronics and medical products. The Company's segments include Microcontroller and Connectivity Division (MCD), and Memory Products Division (MPD). MCD focuses on microcontroller (MCU), analog and wireless and wired connectivity solutions. MPD focuses on parallel and serial NOR flash memories, NAND flash memories, static random access memory (SRAM), ferroelectric-random access memory (F-RAM) ferroelectric memory devices and other specialty memories. The Company's products include Traveo MCUs and Flexible MCUs; PSoC 1, PSoC 3, PSoC 4 and PSoC 5LP; CapSense, and TrueTouch Analog Power Management integrated circuits (PMICs) and energy harvesting solutions.

FINANCIAL RATIOS  of  Cypress Semiconductor Corporation (CY)

Valuation Ratios
P/E Ratio -10.9
Price to Sales 3.9
Price to Book 4
Price to Tangible Book
Price to Cash Flow 34.5
Price to Free Cash Flow 46.8
Growth Rates
Sales Growth Rate 19.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 21.3%
Cap. Spend. - 3 Yr. Gr. Rate 9%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 63.2%
Total Debt to Equity 64.7%
Interest Coverage -19
Management Effectiveness
Return On Assets -16.6%
Ret/ On Assets - 3 Yr. Avg. -9.9%
Return On Total Capital -21%
Ret/ On T. Cap. - 3 Yr. Avg. -12.2%
Return On Equity -29.7%
Return On Equity - 3 Yr. Avg. -15.4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 35.6%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin -19.1%
EBITDA Margin - 3 Yr. Avg. -5.5%
Operating Margin -31.8%
Oper. Margin - 3 Yr. Avg. -16.5%
Pre-Tax Margin -34.7%
Pre-Tax Margin - 3 Yr. Avg. -18%
Net Profit Margin -35.7%
Net Profit Margin - 3 Yr. Avg. -18.9%
Effective Tax Rate -0.3%
Eff/ Tax Rate - 3 Yr. Avg. -5%
Payout Ratio -20.6%

CY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CY stock intrinsic value calculation we used $2484 million for the last fiscal year's total revenue generated by Cypress Semiconductor Corporation. The default revenue input number comes from 0001 income statement of Cypress Semiconductor Corporation. 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 CY 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 CY is calculated based on our internal credit rating of Cypress Semiconductor Corporation, 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 Cypress Semiconductor Corporation.
    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 CY stock the variable cost ratio is equal to 44.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1238 million in the base year in the intrinsic value calculation for CY 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 7% for Cypress Semiconductor Corporation.

Corporate tax rate of 27% is the nominal tax rate for Cypress Semiconductor Corporation. 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 CY 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 CY are equal to 52%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Cypress Semiconductor Corporation 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 CY is equal to 4.7%. 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 - $2115.734 million for Cypress Semiconductor Corporation - 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 363.755 million for Cypress Semiconductor Corporation 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 Cypress Semiconductor Corporation at the current share price and the inputted number of shares is $8.4 billion.

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