Intrinsic value of DSP Group - DSPG

Previous Close

$11.65

  Intrinsic Value

$1.54

stock screener

  Rating & Target

str. sell

-87%

Previous close

$11.65

 
Intrinsic value

$1.54

 
Up/down potential

-87%

 
Rating

str. sell

We calculate the intrinsic value of DSPG 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, %
  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
  127
  130
  134
  137
  141
  146
  151
  156
  162
  168
  175
  182
  190
  198
  206
  215
  225
  235
  246
  257
  269
  281
  295
  309
  323
  339
  355
  372
  390
  409
Variable operating expenses, $m
  66
  68
  69
  71
  73
  76
  78
  81
  84
  87
  90
  93
  97
  101
  106
  110
  115
  121
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  200
  210
Fixed operating expenses, $m
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
  84
  86
  88
  90
  92
  94
  96
  98
  100
  103
  105
  107
  110
  112
  114
  117
  120
  122
  125
Total operating expenses, $m
  132
  136
  138
  142
  145
  150
  154
  158
  163
  168
  173
  177
  183
  189
  196
  202
  209
  217
  224
  232
  241
  249
  258
  268
  278
  288
  299
  311
  322
  335
Operating income, $m
  -5
  -5
  -5
  -5
  -4
  -4
  -3
  -2
  -1
  0
  3
  4
  6
  8
  10
  13
  15
  18
  21
  25
  28
  32
  36
  41
  46
  51
  56
  62
  68
  75
EBITDA, $m
  -3
  -3
  -2
  -2
  -2
  -1
  0
  1
  2
  4
  5
  7
  9
  11
  13
  16
  19
  22
  25
  28
  32
  36
  40
  45
  50
  55
  61
  67
  73
  80
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
Earnings before tax, $m
  -5
  -5
  -5
  -5
  -5
  -4
  -3
  -3
  -1
  0
  2
  4
  5
  7
  9
  11
  14
  17
  20
  23
  26
  30
  34
  38
  43
  47
  53
  58
  64
  70
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
Net income, $m
  -5
  -5
  -5
  -5
  -5
  -4
  -3
  -3
  -1
  0
  1
  3
  4
  5
  7
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  35
  38
  42
  47
  51

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
  163
  167
  171
  176
  181
  187
  193
  200
  208
  216
  224
  233
  243
  253
  264
  276
  288
  301
  315
  329
  344
  360
  377
  395
  414
  434
  455
  477
  500
  524
Adjusted assets (=assets-cash), $m
  163
  167
  171
  176
  181
  187
  193
  200
  208
  216
  224
  233
  243
  253
  264
  276
  288
  301
  315
  329
  344
  360
  377
  395
  414
  434
  455
  477
  500
  524
Revenue / Adjusted assets
  0.779
  0.778
  0.784
  0.778
  0.779
  0.781
  0.782
  0.780
  0.779
  0.778
  0.781
  0.781
  0.782
  0.783
  0.780
  0.779
  0.781
  0.781
  0.781
  0.781
  0.782
  0.781
  0.782
  0.782
  0.780
  0.781
  0.780
  0.780
  0.780
  0.781
Average production assets, $m
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
  26
  27
  28
Working capital, $m
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
Total debt, $m
  1
  2
  3
  4
  5
  6
  8
  10
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  40
  44
  48
  52
  56
  61
  65
  70
  76
  81
  87
Total liabilities, $m
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
Total equity, $m
  124
  127
  130
  134
  138
  142
  147
  152
  158
  164
  171
  177
  185
  193
  201
  210
  219
  229
  239
  250
  262
  274
  287
  301
  315
  330
  346
  363
  380
  399
Total liabilities and equity, $m
  163
  167
  171
  176
  181
  187
  193
  200
  208
  216
  225
  233
  243
  254
  264
  276
  288
  301
  314
  329
  344
  360
  377
  395
  414
  434
  455
  477
  499
  524
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.120
  0.130
  0.140
  0.150
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
Adjusted equity ratio
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  -5
  -5
  -5
  -5
  -4
  -3
  -3
  -1
  0
  1
  3
  4
  5
  7
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  35
  38
  42
  47
  51
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Funds from operations, $m
  -3
  -3
  -3
  -2
  -2
  -1
  0
  1
  2
  3
  4
  5
  6
  8
  10
  11
  13
  15
  18
  20
  23
  26
  29
  32
  35
  39
  43
  47
  52
  57
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  -3
  -3
  -3
  -2
  -2
  -1
  -1
  0
  1
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  35
  39
  43
  47
  51
  56
Maintenance CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Free cash flow, $m
  -5
  -5
  -5
  -5
  -4
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  4
  6
  8
  9
  11
  13
  16
  18
  21
  23
  26
  30
  33
  37
  41
  45
  49
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
Issuance/(repurchase) of shares, $m
  7
  8
  9
  9
  9
  9
  8
  8
  7
  6
  5
  4
  4
  3
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  8
  9
  10
  10
  10
  10
  10
  10
  9
  8
  7
  6
  6
  5
  5
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
Total cash flow (excl. dividends), $m
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  8
  8
  9
  10
  10
  11
  12
  14
  17
  19
  22
  24
  28
  31
  34
  38
  42
  46
  51
  55
Retained Cash Flow (-), $m
  -7
  -8
  -9
  -9
  -9
  -9
  -8
  -8
  -7
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
Prev. year cash balance distribution, $m
  25
  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
  21
  -4
  -4
  -3
  -3
  -2
  -1
  0
  1
  2
  1
  2
  2
  2
  2
  2
  3
  4
  6
  8
  10
  12
  15
  17
  20
  23
  26
  29
  33
  37
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
  20
  -4
  -3
  -3
  -2
  -2
  -1
  0
  0
  1
  1
  1
  1
  1
  1
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  96.7
  93.2
  89.8
  86.5
  83.5
  80.6
  78.1
  75.9
  73.9
  72.3
  71.1
  70.1
  69.3
  68.7
  68.4
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3
  68.3

DSP Group, Inc. is a global provider of wireless and audio chipset solutions for converged communications. Delivering semiconductor system solutions with software and hardware reference designs, the Company enables original equipment manufacturers, original design manufacturers, consumer electronics manufacturers and service providers to develop new products. Its segments include Home, Office and Mobile. The Home segment includes wireless chipset solutions for converged communication at home. The Office segment offers solution for Voice-over-Internet protocol (VoIP) office products, including office solutions that provide businesses with VoIP terminals with converged voice and data applications. The Mobile segment offers products for the mobile market that provides voice enhancement, always-on and far-end noise elimination targeted for mobile phone and mobile headsets and wearable devices that incorporate its noise suppression and voice quality enhancement HDClear technology.

FINANCIAL RATIOS  of  DSP Group (DSPG)

Valuation Ratios
P/E Ratio 51.1
Price to Sales 1.9
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow 17
Growth Rates
Sales Growth Rate -4.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.7%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 3.5%
Return On Equity - 3 Yr. Avg. 2.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 44.2%
Gross Margin - 3 Yr. Avg. 41.9%
EBITDA Margin 5.8%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 2.9%
Oper. Margin - 3 Yr. Avg. 1%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 2.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -100%
Payout Ratio 0%

DSPG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DSPG stock intrinsic value calculation we used $124.753 million for the last fiscal year's total revenue generated by DSP Group. The default revenue input number comes from 0001 income statement of DSP Group. 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 DSPG 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 DSPG is calculated based on our internal credit rating of DSP Group, 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 DSP Group.
    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 DSPG stock the variable cost ratio is equal to 52%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $65 million in the base year in the intrinsic value calculation for DSPG 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 DSP Group.

Corporate tax rate of 27% is the nominal tax rate for DSP Group. 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 DSPG 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 DSPG are equal to 6.9%.

Life of production assets of 3.9 years is the average useful life of capital assets used in DSP Group 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 DSPG is equal to 3.6%. 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 - $146.95 million for DSP Group - 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 22.439 million for DSP Group 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 DSP Group at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Should You Be Holding DSP Group Inc (NASDAQ:DSPG) Right Now?   [Sep-11-18 10:19AM  Simply Wall St.]
▶ DSP Group Announces Upcoming Investor Events   [Aug-17-18 07:00AM  GlobeNewswire]
▶ DSP Group, Inc. Reports Second Quarter 2018 Results   [Jul-30-18 07:00AM  GlobeNewswire]
▶ DSP Group, Inc. to Host Earnings Call   [06:30AM  ACCESSWIRE]
▶ BlackRock exits mutual fund venture with DSP Group   [May-07-18 11:05AM  Reuters]
▶ [$$] BlackRock to Sell Stake in Indian Joint Venture to DSP   [11:03AM  The Wall Street Journal]
▶ DSP Group: 1Q Earnings Snapshot   [Apr-30-18 07:48AM  Associated Press]
▶ DSP Group, Inc. to Host Earnings Call   [06:30AM  ACCESSWIRE]
▶ DSP Group reports 4Q loss   [Feb-01-18 08:51AM  Associated Press]
▶ DSP Group, Inc. to Host Earnings Call   [07:20AM  ACCESSWIRE]
▶ DSP Group to Host Analyst Day Event on February 7th   [Jan-22-18 07:00AM  GlobeNewswire]
▶ ETFs with exposure to DSP Group, Inc. : December 27, 2017   [Dec-27-17 11:10AM  Capital Cube]
▶ ETFs with exposure to DSP Group, Inc. : December 12, 2017   [Dec-12-17 01:06PM  Capital Cube]
▶ DSP Group posts 3Q profit   [Nov-02-17 09:27AM  Associated Press]
▶ DSP Group, Inc. to Host Earnings Call   [06:20AM  ACCESSWIRE]
▶ DSP Group Announces Upcoming Investor Events   [Aug-21-17 07:00AM  GlobeNewswire]
▶ DSP Group reports 2Q loss   [01:34AM  Associated Press]
▶ DSP Group, Inc. Reports Second Quarter 2017 Results   [Jul-27-17 07:00AM  GlobeNewswire]
▶ ETFs with exposure to DSP Group, Inc. : July 10, 2017   [Jul-10-17 02:21PM  Capital Cube]
▶ ETFs with exposure to DSP Group, Inc. : June 27, 2017   [Jun-27-17 03:09PM  Capital Cube]
▶ ETFs with exposure to DSP Group, Inc. : June 12, 2017   [Jun-12-17 02:00PM  Capital Cube]
▶ DSP Group reports 1Q loss   [Apr-27-17 09:48AM  Associated Press]
▶ ETFs with exposure to DSP Group, Inc. : April 5, 2017   [Apr-05-17 04:39PM  Capital Cube]
▶ DSP Group tops Street 4Q forecasts   [08:01AM  Associated Press]

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