Intrinsic value of Deswell Industries, Inc. - DSWL

Previous Close

$3.01

  Intrinsic Value

$5.21

stock screener

  Rating & Target

str. buy

+73%

Previous close

$3.01

 
Intrinsic value

$5.21

 
Up/down potential

+73%

 
Rating

str. buy

We calculate the intrinsic value of DSWL 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 0.0

 

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, %
  36.30
  33.17
  30.35
  27.82
  25.54
  23.48
  21.63
  19.97
  18.47
  17.13
  15.91
  14.82
  13.84
  12.96
  12.16
  11.44
  10.80
  10.22
  9.70
  9.23
  8.81
  8.42
  8.08
  7.77
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
Revenue, $m
  83
  111
  144
  184
  232
  286
  348
  417
  494
  579
  671
  771
  877
  991
  1,112
  1,239
  1,373
  1,513
  1,660
  1,813
  1,972
  2,138
  2,311
  2,491
  2,678
  2,872
  3,073
  3,283
  3,501
  3,728
Variable operating expenses, $m
  60
  79
  102
  130
  162
  200
  242
  290
  343
  401
  461
  530
  603
  681
  764
  851
  943
  1,040
  1,140
  1,246
  1,355
  1,469
  1,588
  1,712
  1,840
  1,973
  2,112
  2,256
  2,406
  2,562
Fixed operating expenses, $m
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
Total operating expenses, $m
  74
  94
  117
  145
  178
  216
  258
  307
  360
  418
  479
  548
  622
  700
  783
  871
  963
  1,061
  1,161
  1,268
  1,377
  1,492
  1,611
  1,736
  1,864
  1,998
  2,137
  2,282
  2,432
  2,589
Operating income, $m
  9
  17
  27
  39
  54
  70
  89
  111
  135
  161
  192
  223
  256
  291
  328
  368
  409
  453
  498
  545
  595
  646
  700
  756
  814
  874
  936
  1,001
  1,069
  1,139
EBITDA, $m
  15
  24
  35
  49
  65
  84
  105
  129
  155
  184
  216
  250
  287
  326
  367
  411
  457
  506
  556
  609
  664
  721
  781
  843
  908
  975
  1,044
  1,117
  1,192
  1,270
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  44
  48
  51
  54
  58
Earnings before tax, $m
  9
  17
  26
  38
  52
  68
  86
  106
  129
  153
  183
  213
  244
  277
  313
  350
  389
  430
  473
  518
  565
  614
  665
  718
  772
  829
  889
  950
  1,014
  1,081
Tax expense, $m
  2
  4
  7
  10
  14
  18
  23
  29
  35
  41
  50
  57
  66
  75
  84
  94
  105
  116
  128
  140
  153
  166
  179
  194
  209
  224
  240
  257
  274
  292
Net income, $m
  6
  12
  19
  28
  38
  49
  62
  77
  94
  112
  134
  155
  178
  202
  228
  255
  284
  314
  346
  378
  413
  448
  485
  524
  564
  606
  649
  694
  741
  789

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
  110
  147
  191
  245
  307
  379
  461
  553
  656
  768
  890
  1,022
  1,164
  1,314
  1,474
  1,643
  1,820
  2,006
  2,201
  2,404
  2,616
  2,836
  3,065
  3,304
  3,551
  3,809
  4,076
  4,354
  4,643
  4,944
Adjusted assets (=assets-cash), $m
  110
  147
  191
  245
  307
  379
  461
  553
  656
  768
  890
  1,022
  1,164
  1,314
  1,474
  1,643
  1,820
  2,006
  2,201
  2,404
  2,616
  2,836
  3,065
  3,304
  3,551
  3,809
  4,076
  4,354
  4,643
  4,944
Revenue / Adjusted assets
  0.755
  0.755
  0.754
  0.751
  0.756
  0.755
  0.755
  0.754
  0.753
  0.754
  0.754
  0.754
  0.753
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
  0.754
Average production assets, $m
  43
  58
  75
  96
  120
  149
  181
  217
  257
  301
  349
  401
  456
  515
  578
  644
  714
  787
  863
  943
  1,026
  1,112
  1,202
  1,295
  1,392
  1,493
  1,598
  1,707
  1,821
  1,938
Working capital, $m
  17
  23
  30
  39
  48
  60
  73
  87
  103
  121
  140
  161
  183
  207
  232
  259
  287
  316
  347
  379
  412
  447
  483
  521
  560
  600
  642
  686
  732
  779
Total debt, $m
  7
  16
  26
  39
  53
  70
  90
  111
  136
  162
  191
  222
  255
  291
  329
  369
  410
  454
  500
  548
  598
  650
  704
  761
  819
  880
  943
  1,008
  1,077
  1,148
Total liabilities, $m
  26
  35
  45
  58
  72
  90
  109
  131
  155
  181
  210
  241
  275
  310
  348
  388
  430
  474
  519
  567
  617
  669
  723
  780
  838
  899
  962
  1,028
  1,096
  1,167
Total equity, $m
  84
  112
  146
  187
  235
  290
  352
  423
  501
  587
  680
  781
  889
  1,004
  1,126
  1,255
  1,391
  1,533
  1,682
  1,837
  1,998
  2,167
  2,342
  2,524
  2,713
  2,910
  3,114
  3,327
  3,547
  3,777
Total liabilities and equity, $m
  110
  147
  191
  245
  307
  380
  461
  554
  656
  768
  890
  1,022
  1,164
  1,314
  1,474
  1,643
  1,821
  2,007
  2,201
  2,404
  2,615
  2,836
  3,065
  3,304
  3,551
  3,809
  4,076
  4,355
  4,643
  4,944
Debt-to-equity ratio
  0.080
  0.140
  0.180
  0.210
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  12
  19
  28
  38
  49
  62
  77
  94
  112
  134
  155
  178
  202
  228
  255
  284
  314
  346
  378
  413
  448
  485
  524
  564
  606
  649
  694
  741
  789
Depreciation, amort., depletion, $m
  6
  7
  8
  10
  11
  13
  15
  18
  20
  23
  24
  27
  31
  35
  39
  44
  48
  53
  58
  64
  69
  75
  81
  88
  94
  101
  108
  115
  123
  131
Funds from operations, $m
  12
  19
  27
  37
  49
  62
  78
  95
  114
  135
  157
  182
  209
  237
  267
  299
  332
  367
  404
  442
  482
  523
  567
  611
  658
  706
  757
  809
  864
  920
Change in working capital, $m
  5
  6
  7
  8
  10
  11
  13
  15
  16
  18
  19
  21
  22
  24
  25
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
Cash from operations, $m
  8
  13
  20
  29
  39
  51
  65
  81
  98
  118
  138
  161
  187
  213
  242
  272
  304
  338
  373
  410
  449
  489
  530
  574
  619
  666
  715
  765
  818
  873
Maintenance CAPEX, $m
  -2
  -3
  -4
  -5
  -6
  -8
  -10
  -12
  -15
  -17
  -20
  -24
  -27
  -31
  -35
  -39
  -44
  -48
  -53
  -58
  -64
  -69
  -75
  -81
  -88
  -94
  -101
  -108
  -115
  -123
New CAPEX, $m
  -11
  -14
  -17
  -21
  -24
  -28
  -32
  -36
  -40
  -44
  -48
  -52
  -55
  -59
  -63
  -66
  -70
  -73
  -76
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -113
  -118
Cash from investing activities, $m
  -13
  -17
  -21
  -26
  -30
  -36
  -42
  -48
  -55
  -61
  -68
  -76
  -82
  -90
  -98
  -105
  -114
  -121
  -129
  -138
  -147
  -155
  -165
  -174
  -185
  -195
  -206
  -217
  -228
  -241
Free cash flow, $m
  -6
  -4
  -1
  3
  8
  15
  23
  32
  43
  56
  70
  86
  104
  124
  145
  167
  191
  217
  244
  272
  302
  333
  365
  399
  434
  471
  509
  548
  589
  632
Issuance/(repayment) of debt, $m
  7
  9
  11
  13
  15
  17
  19
  22
  24
  27
  29
  31
  33
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
Issuance/(repurchase) of shares, $m
  16
  16
  15
  13
  10
  6
  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  
  23
  25
  26
  26
  25
  23
  19
  22
  24
  27
  29
  31
  33
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
Total cash flow (excl. dividends), $m
  18
  21
  24
  28
  33
  37
  42
  54
  68
  83
  99
  117
  137
  159
  182
  207
  233
  261
  290
  320
  352
  385
  419
  455
  493
  532
  572
  614
  658
  703
Retained Cash Flow (-), $m
  -22
  -28
  -34
  -41
  -48
  -55
  -63
  -70
  -78
  -86
  -93
  -101
  -108
  -115
  -122
  -129
  -136
  -142
  -149
  -155
  -162
  -168
  -175
  -182
  -189
  -197
  -204
  -212
  -221
  -230
Prev. year cash balance distribution, $m
  19
  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
  14
  -7
  -10
  -12
  -15
  -18
  -20
  -16
  -11
  -3
  5
  16
  29
  44
  60
  78
  98
  119
  141
  165
  190
  217
  244
  273
  304
  335
  368
  402
  437
  473
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
  14
  -7
  -8
  -10
  -12
  -13
  -14
  -10
  -6
  -2
  3
  7
  11
  15
  18
  20
  21
  22
  22
  21
  20
  18
  16
  14
  12
  10
  8
  6
  5
  4
Current shareholders' claim on cash, %
  72.8
  57.4
  48.3
  42.8
  39.8
  38.4
  38.4
  38.4
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Deswell Industries, Inc. is engaged in the manufacturing and selling of injection-molded plastic parts and components. The Company also provides manufacturing services for electronic products and subassemblies, and manufactures metallic molds and accessory parts for original equipment manufacturers (OEMs) and contract manufacturers. Its segments include plastic injection molding and electronic products assembling. It produces a range of plastic parts and components that are used in the manufacture of consumer and industrial products, using various plastic injection technologies, such as film injection, integrated injection and insert injection. Its products include plastic components of electronic entertainment products; cases for flashlights, telephones, paging machines, projectors and alarm clocks; toner cartridges and cases for photocopy and printer machines; parts for electrical products, such as air-conditioning and ventilators; laser key caps, and automobile components.

FINANCIAL RATIOS  of  Deswell Industries, Inc. (DSWL)

Valuation Ratios
P/E Ratio 47.8
Price to Sales 1.1
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow -47.8
Price to Free Cash Flow -15.9
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
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 1.1%
Ret/ On Assets - 3 Yr. Avg. -2.5%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. -2.8%
Return On Equity 1.3%
Return On Equity - 3 Yr. Avg. -2.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 15.6%
Gross Margin - 3 Yr. Avg. 12.4%
EBITDA Margin 8.9%
EBITDA Margin - 3 Yr. Avg. 1.6%
Operating Margin -4.4%
Oper. Margin - 3 Yr. Avg. -9.6%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. -4%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. -5.6%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 200%

DSWL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DSWL stock intrinsic value calculation we used $61 million for the last fiscal year's total revenue generated by Deswell Industries, Inc.. The default revenue input number comes from 0001 income statement of Deswell Industries, 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 DSWL stock valuation model: a) initial revenue growth rate of 36.3% 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 DSWL is calculated based on our internal credit rating of Deswell Industries, 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 Deswell Industries, 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 DSWL stock the variable cost ratio is equal to 73.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14 million in the base year in the intrinsic value calculation for DSWL 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 Deswell Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for Deswell Industries, 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 DSWL 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 DSWL are equal to 52%.

Life of production assets of 14.8 years is the average useful life of capital assets used in Deswell Industries, 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 DSWL is equal to 20.9%. 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 - $81.279 million for Deswell Industries, 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 15.886 million for Deswell Industries, 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 Deswell Industries, Inc. at the current share price and the inputted number of shares is $0.0 billion.

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