Intrinsic value of FormFactor, Inc. - FORM

Previous Close

$18.30

  Intrinsic Value

$11.18

stock screener

  Rating & Target

sell

-39%

Previous close

$18.30

 
Intrinsic value

$11.18

 
Up/down potential

-39%

 
Rating

sell

We calculate the intrinsic value of FORM 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 1.4

 

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, %
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  566
  604
  642
  683
  725
  769
  815
  863
  913
  965
  1,019
  1,076
  1,135
  1,197
  1,262
  1,329
  1,400
  1,474
  1,552
  1,634
  1,719
  1,808
  1,902
  2,000
  2,103
  2,211
  2,324
  2,442
  2,567
  2,697
Variable operating expenses, $m
  262
  279
  297
  315
  335
  354
  375
  397
  420
  443
  462
  488
  515
  543
  573
  603
  635
  669
  704
  741
  780
  821
  863
  908
  954
  1,003
  1,055
  1,108
  1,165
  1,224
Fixed operating expenses, $m
  258
  263
  269
  275
  281
  287
  293
  300
  307
  313
  320
  327
  334
  342
  349
  357
  365
  373
  381
  389
  398
  407
  416
  425
  434
  444
  453
  463
  474
  484
Total operating expenses, $m
  520
  542
  566
  590
  616
  641
  668
  697
  727
  756
  782
  815
  849
  885
  922
  960
  1,000
  1,042
  1,085
  1,130
  1,178
  1,228
  1,279
  1,333
  1,388
  1,447
  1,508
  1,571
  1,639
  1,708
Operating income, $m
  46
  61
  77
  93
  110
  128
  146
  166
  187
  208
  236
  260
  285
  312
  340
  369
  400
  432
  467
  503
  541
  581
  623
  667
  714
  764
  816
  870
  928
  989
EBITDA, $m
  79
  95
  112
  131
  150
  170
  190
  212
  235
  260
  285
  311
  339
  369
  400
  432
  467
  503
  541
  581
  623
  667
  713
  763
  814
  869
  926
  987
  1,050
  1,117
Interest expense (income), $m
  2
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
Earnings before tax, $m
  43
  57
  72
  88
  104
  122
  140
  159
  179
  200
  228
  251
  275
  301
  328
  357
  387
  419
  452
  487
  524
  563
  604
  647
  693
  741
  792
  845
  902
  961
Tax expense, $m
  12
  15
  19
  24
  28
  33
  38
  43
  48
  54
  61
  68
  74
  81
  89
  96
  104
  113
  122
  131
  141
  152
  163
  175
  187
  200
  214
  228
  243
  259
Net income, $m
  31
  42
  53
  64
  76
  89
  102
  116
  131
  146
  166
  183
  201
  220
  240
  260
  282
  306
  330
  356
  383
  411
  441
  473
  506
  541
  578
  617
  658
  702

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
  694
  740
  787
  837
  889
  943
  999
  1,057
  1,118
  1,182
  1,249
  1,318
  1,391
  1,467
  1,546
  1,629
  1,716
  1,807
  1,902
  2,002
  2,106
  2,216
  2,331
  2,451
  2,577
  2,709
  2,848
  2,993
  3,145
  3,305
Adjusted assets (=assets-cash), $m
  694
  740
  787
  837
  889
  943
  999
  1,057
  1,118
  1,182
  1,249
  1,318
  1,391
  1,467
  1,546
  1,629
  1,716
  1,807
  1,902
  2,002
  2,106
  2,216
  2,331
  2,451
  2,577
  2,709
  2,848
  2,993
  3,145
  3,305
Revenue / Adjusted assets
  0.816
  0.816
  0.816
  0.816
  0.816
  0.815
  0.816
  0.816
  0.817
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
Average production assets, $m
  199
  212
  226
  240
  255
  271
  287
  304
  321
  340
  359
  379
  399
  421
  444
  468
  493
  519
  546
  575
  605
  636
  669
  704
  740
  778
  818
  860
  903
  949
Working capital, $m
  122
  130
  138
  147
  156
  165
  175
  186
  196
  207
  219
  231
  244
  257
  271
  286
  301
  317
  334
  351
  370
  389
  409
  430
  452
  475
  500
  525
  552
  580
Total debt, $m
  73
  81
  90
  99
  108
  118
  128
  139
  150
  162
  174
  187
  200
  214
  228
  243
  259
  275
  293
  311
  330
  350
  371
  393
  416
  440
  465
  491
  519
  548
Total liabilities, $m
  126
  135
  143
  152
  162
  172
  182
  192
  204
  215
  227
  240
  253
  267
  281
  296
  312
  329
  346
  364
  383
  403
  424
  446
  469
  493
  518
  545
  572
  602
Total equity, $m
  567
  605
  644
  685
  727
  771
  817
  865
  915
  967
  1,021
  1,078
  1,138
  1,200
  1,265
  1,333
  1,404
  1,478
  1,556
  1,638
  1,723
  1,813
  1,906
  2,005
  2,108
  2,216
  2,329
  2,448
  2,573
  2,704
Total liabilities and equity, $m
  693
  740
  787
  837
  889
  943
  999
  1,057
  1,119
  1,182
  1,248
  1,318
  1,391
  1,467
  1,546
  1,629
  1,716
  1,807
  1,902
  2,002
  2,106
  2,216
  2,330
  2,451
  2,577
  2,709
  2,847
  2,993
  3,145
  3,306
Debt-to-equity ratio
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.180
  0.180
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
Adjusted equity ratio
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  42
  53
  64
  76
  89
  102
  116
  131
  146
  166
  183
  201
  220
  240
  260
  282
  306
  330
  356
  383
  411
  441
  473
  506
  541
  578
  617
  658
  702
Depreciation, amort., depletion, $m
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  90
  95
  100
  105
  111
  116
  122
  128
Funds from operations, $m
  64
  76
  89
  102
  116
  131
  146
  163
  180
  197
  215
  234
  255
  277
  300
  324
  349
  376
  404
  433
  464
  497
  531
  568
  606
  646
  689
  733
  780
  830
Change in working capital, $m
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
Cash from operations, $m
  56
  68
  80
  93
  107
  121
  136
  152
  169
  186
  203
  222
  242
  263
  286
  309
  334
  360
  387
  416
  446
  478
  511
  547
  584
  623
  664
  708
  754
  802
Maintenance CAPEX, $m
  -25
  -27
  -29
  -31
  -32
  -34
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -95
  -100
  -105
  -111
  -116
  -122
New CAPEX, $m
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
Cash from investing activities, $m
  -38
  -40
  -43
  -45
  -47
  -49
  -53
  -56
  -59
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -97
  -103
  -108
  -113
  -119
  -125
  -131
  -138
  -145
  -153
  -160
  -168
Free cash flow, $m
  18
  28
  38
  48
  60
  71
  84
  97
  110
  124
  138
  154
  170
  188
  206
  225
  246
  267
  289
  313
  338
  365
  392
  422
  453
  485
  519
  556
  594
  634
Issuance/(repayment) of debt, $m
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Issuance/(repurchase) of shares, $m
  5
  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  
  13
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Total cash flow (excl. dividends), $m
  30
  36
  47
  58
  69
  81
  94
  107
  121
  136
  150
  166
  183
  201
  220
  240
  261
  284
  307
  331
  357
  385
  413
  444
  475
  509
  545
  582
  621
  663
Retained Cash Flow (-), $m
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -85
  -90
  -94
  -98
  -103
  -108
  -113
  -119
  -125
  -131
Prev. year cash balance distribution, $m
  49
  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
  43
  -2
  7
  17
  27
  37
  48
  59
  71
  84
  96
  110
  124
  139
  156
  172
  190
  209
  229
  250
  272
  295
  319
  345
  372
  401
  431
  463
  497
  532
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
  41
  -1
  6
  14
  21
  27
  32
  37
  41
  44
  45
  47
  47
  47
  46
  44
  41
  39
  35
  32
  28
  24
  21
  18
  14
  12
  9
  7
  5
  4
Current shareholders' claim on cash, %
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6

FormFactor, Inc. is a provider of test and measurement solutions. The Company's segments include the Probe Cards segment and Systems segment. The Company designs, manufactures and sells multiple product lines, including probe cards, analytical probes, probe stations, integrated measurement systems, thermal sub-systems, reliability test systems, and related services. Its products provide electrical information from a range of semiconductor and electro-optical devices and integrated circuits (devices) from development to production. Probe Cards segment consists of probe card products and analytical probes. Systems segment consists of wafer probing, thermal and reliability products to enable precision on-wafer measurement of integrated circuits. Systems products are used in the early phases of the development and characterization of semiconductor processes.

FINANCIAL RATIOS  of  FormFactor, Inc. (FORM)

Valuation Ratios
P/E Ratio -185.4
Price to Sales 3.4
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 76.3
Price to Free Cash Flow 259.5
Growth Rates
Sales Growth Rate 36.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 5.9%
Financial Strength
Quick Ratio 8
Current Ratio 0
LT Debt to Equity 31.2%
Total Debt to Equity 34.4%
Interest Coverage -24
Management Effectiveness
Return On Assets -1.4%
Ret/ On Assets - 3 Yr. Avg. -2.5%
Return On Total Capital -1.7%
Ret/ On T. Cap. - 3 Yr. Avg. -3%
Return On Equity -2%
Return On Equity - 3 Yr. Avg. -3.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 26.8%
Gross Margin - 3 Yr. Avg. 28.6%
EBITDA Margin -0.3%
EBITDA Margin - 3 Yr. Avg. 3.9%
Operating Margin -12.5%
Oper. Margin - 3 Yr. Avg. -7.1%
Pre-Tax Margin -13%
Pre-Tax Margin - 3 Yr. Avg. -6.9%
Net Profit Margin -1.8%
Net Profit Margin - 3 Yr. Avg. -3.2%
Effective Tax Rate 86%
Eff/ Tax Rate - 3 Yr. Avg. -3%
Payout Ratio 0%

FORM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FORM stock intrinsic value calculation we used $530 million for the last fiscal year's total revenue generated by FormFactor, Inc.. The default revenue input number comes from 0001 income statement of FormFactor, 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 FORM stock valuation model: a) initial revenue growth rate of 6.8% 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 FORM is calculated based on our internal credit rating of FormFactor, 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 FormFactor, 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 FORM stock the variable cost ratio is equal to 46.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $252 million in the base year in the intrinsic value calculation for FORM 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 FormFactor, Inc..

Corporate tax rate of 27% is the nominal tax rate for FormFactor, 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 FORM 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 FORM are equal to 35.2%.

Life of production assets of 7.4 years is the average useful life of capital assets used in FormFactor, 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 FORM is equal to 21.5%. 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 - $580.164 million for FormFactor, 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 74.570 million for FormFactor, 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 FormFactor, Inc. at the current share price and the inputted number of shares is $1.4 billion.

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