Intrinsic value of Emcore - EMKR

Previous Close

$4.51

  Intrinsic Value

$3.22

stock screener

  Rating & Target

sell

-29%

Previous close

$4.51

 
Intrinsic value

$3.22

 
Up/down potential

-29%

 
Rating

sell

We calculate the intrinsic value of EMKR 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 0.1

 

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
  125
  128
  132
  135
  139
  144
  149
  154
  160
  166
  172
  179
  187
  195
  203
  212
  222
  232
  242
  253
  265
  277
  290
  304
  319
  334
  350
  367
  384
  403
Variable operating expenses, $m
  106
  108
  111
  114
  118
  122
  126
  130
  135
  140
  146
  152
  158
  165
  172
  179
  187
  196
  205
  214
  224
  235
  246
  257
  269
  282
  296
  310
  325
  341
Fixed operating expenses, $m
  11
  11
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
Total operating expenses, $m
  117
  119
  123
  126
  130
  135
  139
  143
  148
  154
  160
  166
  173
  180
  187
  195
  203
  212
  222
  231
  241
  253
  264
  276
  288
  301
  316
  330
  346
  362
Operating income, $m
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  39
  41
EBITDA, $m
  11
  11
  12
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  38
  40
  42
  45
  48
  50
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
Earnings before tax, $m
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
Tax expense, $m
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Net income, $m
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28

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
  99
  101
  104
  107
  110
  113
  117
  121
  126
  131
  136
  142
  147
  154
  160
  167
  175
  183
  191
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
Adjusted assets (=assets-cash), $m
  99
  101
  104
  107
  110
  113
  117
  121
  126
  131
  136
  142
  147
  154
  160
  167
  175
  183
  191
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
Revenue / Adjusted assets
  1.263
  1.267
  1.269
  1.262
  1.264
  1.274
  1.274
  1.273
  1.270
  1.267
  1.265
  1.261
  1.272
  1.266
  1.269
  1.269
  1.269
  1.268
  1.267
  1.265
  1.268
  1.265
  1.266
  1.267
  1.271
  1.270
  1.268
  1.270
  1.267
  1.267
Average production assets, $m
  15
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
Working capital, $m
  35
  36
  37
  38
  39
  40
  41
  43
  45
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
  112
Total debt, $m
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  53
Total liabilities, $m
  24
  24
  25
  26
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  69
  73
  76
Total equity, $m
  75
  77
  79
  81
  84
  86
  89
  92
  96
  99
  103
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  230
  242
Total liabilities and equity, $m
  99
  101
  104
  107
  110
  113
  117
  121
  126
  130
  136
  142
  147
  154
  160
  167
  175
  183
  191
  200
  209
  218
  229
  240
  251
  263
  276
  289
  303
  318
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
  0.160
  0.160
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
Adjusted equity ratio
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
Funds from operations, $m
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
Change in working capital, $m
  1
  1
  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
Cash from operations, $m
  8
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
Maintenance CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
New CAPEX, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
Free cash flow, $m
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
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  
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
Total cash flow (excl. dividends), $m
  6
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
Retained Cash Flow (-), $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Prev. year cash balance distribution, $m
  47
  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
  51
  4
  4
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
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
  49
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
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

EMCORE Corporation is engaged in designing and manufacturing indium phosphide (InP) optical chips, components, subsystems and systems for the broadband and specialty fiber optics market. The Company focuses on linear fiber optic transmission technology. The Company operates through Fiber Optics segment. The Company provides optical components, and also end-to-end solutions for high-speed communications network infrastructures. The Company's optical technologies are designed for cable television (CATV) and fiber-to-the-premise (FTTP) networks, telecommunications and data centers, satellite communications, aerospace and defense, wireless networks, and broadcast and professional audio/video systems. The Company's fiber optics products enable information that is modulated on light signals to be transmitted, routed (switched) and received in communication systems and networks.

FINANCIAL RATIOS  of  Emcore (EMKR)

Valuation Ratios
P/E Ratio 15.2
Price to Sales 1
Price to Book 1
Price to Tangible Book
Price to Cash Flow 10.2
Price to Free Cash Flow 61
Growth Rates
Sales Growth Rate 33.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 66.7%
Cap. Spend. - 3 Yr. Gr. Rate 27.2%
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 5.9%
Ret/ On Assets - 3 Yr. Avg. 15.8%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 19.9%
Return On Equity 7%
Return On Equity - 3 Yr. Avg. 21.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 35%
Gross Margin - 3 Yr. Avg. 34.7%
EBITDA Margin 9.8%
EBITDA Margin - 3 Yr. Avg. 5%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 1.6%
Pre-Tax Margin 6.5%
Pre-Tax Margin - 3 Yr. Avg. 1.6%
Net Profit Margin 6.5%
Net Profit Margin - 3 Yr. Avg. 30.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

EMKR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EMKR stock intrinsic value calculation we used $122.895 million for the last fiscal year's total revenue generated by Emcore. The default revenue input number comes from 0001 income statement of Emcore. 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 EMKR 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 EMKR is calculated based on our internal credit rating of Emcore, 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 Emcore.
    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 EMKR stock the variable cost ratio is equal to 84.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 million in the base year in the intrinsic value calculation for EMKR 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 Emcore.

Corporate tax rate of 27% is the nominal tax rate for Emcore. 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 EMKR 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 EMKR are equal to 11.7%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Emcore 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 EMKR is equal to 27.9%. 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 - $120.774 million for Emcore - 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 27.494 million for Emcore 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 Emcore at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Emcore: Fiscal 3Q Earnings Snapshot   [09:29AM  Associated Press]
▶ Emcore: Fiscal 2Q Earnings Snapshot   [May-03-18 09:29AM  Associated Press]
▶ EMCORE Corporation to Host Earnings Call   [Feb-06-18 06:30AM  ACCESSWIRE]
▶ Emcore misses 1Q profit forecasts   [06:07AM  Associated Press]
▶ ETFs with exposure to EMCORE Corp. : January 1, 2018   [Jan-01-18 11:34AM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : December 19, 2017   [Dec-19-17 12:52PM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : December 8, 2017   [Dec-08-17 12:45PM  Capital Cube]
▶ Emcore posts 4Q profit   [06:27AM  Associated Press]
▶ ETFs with exposure to EMCORE Corp. : November 27, 2017   [Nov-27-17 01:20PM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : November 10, 2017   [Nov-10-17 12:19PM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : October 30, 2017   [Oct-30-17 11:44AM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : October 2, 2017   [Oct-02-17 10:49AM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : September 7, 2017   [Sep-07-17 01:02PM  Capital Cube]
▶ Emcore meets 3Q profit forecasts   [Aug-04-17 01:49AM  Associated Press]
▶ ETFs with exposure to EMCORE Corp. : June 13, 2017   [Jun-13-17 12:27PM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : June 1, 2017   [Jun-01-17 01:47PM  Capital Cube]
▶ ETFs with exposure to EMCORE Corp. : May 19, 2017   [May-19-17 01:51PM  Capital Cube]
▶ EMCORE Corp.: Strong price momentum but will it sustain?   [May-05-17 02:32PM  Capital Cube]
▶ Emcore beats Street 2Q forecasts   [06:08AM  Associated Press]
▶ ETFs with exposure to EMCORE Corp. : April 5, 2017   [Apr-05-17 04:41PM  Capital Cube]
▶ Harry Boxer: These four momentum stocks are breaking out   [Feb-15-17 05:41PM  MarketWatch]
▶ Emcore tops Street 1Q forecasts   [Feb-07-17 06:43PM  Associated Press]

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