Intrinsic value of GSI Technology, Inc. - GSIT

Previous Close

$8.40

  Intrinsic Value

$42.57

stock screener

  Rating & Target

str. buy

+407%

Previous close

$8.40

 
Intrinsic value

$42.57

 
Up/down potential

+407%

 
Rating

str. buy

We calculate the intrinsic value of GSIT 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 0.2

 

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, %
  32.20
  29.48
  27.03
  24.83
  22.85
  21.06
  19.46
  18.01
  16.71
  15.54
  14.48
  13.54
  12.68
  11.91
  11.22
  10.60
  10.04
  9.54
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
Revenue, $m
  57
  74
  94
  117
  143
  174
  207
  245
  286
  330
  378
  429
  483
  541
  602
  665
  732
  802
  875
  951
  1,030
  1,112
  1,197
  1,286
  1,378
  1,474
  1,573
  1,677
  1,785
  1,897
Variable operating expenses, $m
  17
  22
  27
  34
  41
  50
  60
  70
  82
  94
  107
  122
  137
  153
  170
  189
  207
  227
  248
  269
  292
  315
  339
  364
  391
  418
  446
  475
  506
  538
Fixed operating expenses, $m
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  44
  45
  46
  47
  49
  50
  51
  52
  53
  54
  55
  56
  58
  59
  60
  62
  63
  64
  66
  67
Total operating expenses, $m
  53
  59
  64
  72
  80
  90
  101
  112
  125
  138
  151
  167
  183
  200
  219
  239
  258
  279
  301
  323
  347
  371
  397
  423
  451
  480
  509
  539
  572
  605
Operating income, $m
  4
  15
  29
  45
  63
  84
  107
  133
  161
  192
  226
  262
  300
  340
  383
  427
  474
  523
  574
  627
  683
  740
  800
  862
  927
  994
  1,064
  1,137
  1,213
  1,292
EBITDA, $m
  6
  18
  32
  48
  67
  88
  112
  139
  168
  200
  234
  271
  310
  351
  395
  441
  489
  539
  592
  647
  704
  763
  825
  889
  956
  1,025
  1,097
  1,172
  1,250
  1,331
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
Earnings before tax, $m
  4
  15
  28
  44
  62
  82
  105
  130
  158
  188
  222
  257
  294
  333
  375
  418
  464
  512
  562
  614
  668
  724
  783
  844
  907
  973
  1,042
  1,113
  1,187
  1,264
Tax expense, $m
  1
  4
  8
  12
  17
  22
  28
  35
  43
  51
  60
  69
  79
  90
  101
  113
  125
  138
  152
  166
  180
  196
  211
  228
  245
  263
  281
  300
  320
  341
Net income, $m
  3
  11
  21
  32
  45
  60
  77
  95
  115
  137
  162
  187
  214
  243
  273
  305
  339
  374
  410
  448
  488
  529
  572
  616
  662
  710
  760
  812
  866
  923

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
  64
  83
  106
  132
  162
  196
  234
  276
  323
  373
  427
  485
  546
  611
  680
  752
  827
  906
  988
  1,074
  1,163
  1,256
  1,353
  1,453
  1,557
  1,665
  1,778
  1,895
  2,017
  2,143
Adjusted assets (=assets-cash), $m
  64
  83
  106
  132
  162
  196
  234
  276
  323
  373
  427
  485
  546
  611
  680
  752
  827
  906
  988
  1,074
  1,163
  1,256
  1,353
  1,453
  1,557
  1,665
  1,778
  1,895
  2,017
  2,143
Revenue / Adjusted assets
  0.891
  0.892
  0.887
  0.886
  0.883
  0.888
  0.885
  0.888
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.884
  0.885
  0.885
  0.886
  0.885
  0.886
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
Average production assets, $m
  18
  23
  29
  37
  45
  55
  65
  77
  90
  104
  119
  135
  152
  170
  189
  209
  230
  252
  275
  298
  323
  349
  376
  404
  433
  463
  494
  527
  560
  596
Working capital, $m
  7
  9
  12
  15
  18
  22
  27
  31
  37
  42
  48
  55
  62
  69
  77
  85
  94
  103
  112
  122
  132
  142
  153
  165
  176
  189
  201
  215
  228
  243
Total debt, $m
  4
  9
  15
  22
  30
  39
  49
  60
  72
  85
  99
  114
  130
  147
  165
  184
  204
  225
  246
  269
  292
  316
  342
  368
  395
  424
  453
  484
  516
  549
Total liabilities, $m
  17
  22
  28
  35
  42
  51
  61
  72
  85
  98
  112
  127
  143
  160
  178
  197
  217
  237
  259
  281
  305
  329
  354
  381
  408
  436
  466
  496
  528
  562
Total equity, $m
  47
  61
  78
  97
  120
  145
  173
  204
  238
  275
  315
  358
  403
  451
  502
  555
  610
  669
  729
  793
  859
  927
  998
  1,072
  1,149
  1,229
  1,312
  1,398
  1,488
  1,582
Total liabilities and equity, $m
  64
  83
  106
  132
  162
  196
  234
  276
  323
  373
  427
  485
  546
  611
  680
  752
  827
  906
  988
  1,074
  1,164
  1,256
  1,352
  1,453
  1,557
  1,665
  1,778
  1,894
  2,016
  2,144
Debt-to-equity ratio
  0.090
  0.150
  0.190
  0.220
  0.250
  0.270
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
Adjusted equity ratio
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738
  0.738

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  11
  21
  32
  45
  60
  77
  95
  115
  137
  162
  187
  214
  243
  273
  305
  339
  374
  410
  448
  488
  529
  572
  616
  662
  710
  760
  812
  866
  923
Depreciation, amort., depletion, $m
  2
  2
  3
  3
  4
  4
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  27
  28
  30
  33
  35
  37
  39
Funds from operations, $m
  5
  13
  23
  35
  49
  64
  82
  101
  122
  145
  170
  196
  224
  254
  286
  319
  354
  390
  428
  468
  509
  552
  596
  643
  691
  741
  793
  847
  903
  962
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
Cash from operations, $m
  3
  11
  21
  32
  45
  60
  77
  96
  117
  139
  163
  190
  217
  247
  278
  311
  345
  381
  419
  458
  499
  541
  585
  631
  679
  729
  780
  834
  890
  948
Maintenance CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -27
  -28
  -30
  -33
  -35
  -37
New CAPEX, $m
  -4
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
Cash from investing activities, $m
  -5
  -6
  -8
  -9
  -10
  -12
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -58
  -61
  -66
  -69
  -72
Free cash flow, $m
  -2
  5
  13
  23
  35
  48
  63
  80
  99
  120
  142
  166
  191
  219
  248
  278
  311
  344
  379
  416
  454
  494
  536
  579
  623
  670
  718
  769
  821
  876
Issuance/(repayment) of debt, $m
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
Issuance/(repurchase) of shares, $m
  9
  3
  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
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
Total cash flow (excl. dividends), $m
  11
  13
  19
  30
  43
  57
  73
  91
  111
  133
  156
  181
  208
  236
  266
  297
  330
  365
  401
  439
  478
  519
  561
  605
  651
  698
  748
  799
  853
  909
Retained Cash Flow (-), $m
  -12
  -14
  -17
  -19
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -45
  -48
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
Prev. year cash balance distribution, $m
  51
  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
  50
  -1
  2
  11
  20
  32
  45
  60
  77
  96
  116
  138
  162
  188
  215
  244
  275
  307
  340
  375
  412
  450
  490
  531
  574
  618
  665
  713
  763
  815
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
  48
  -1
  2
  9
  16
  23
  30
  38
  44
  50
  55
  59
  62
  63
  63
  62
  60
  56
  52
  48
  43
  37
  32
  27
  22
  18
  14
  11
  8
  6
Current shareholders' claim on cash, %
  90.0
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5

GSI Technology, Inc. is a provider of Very Fast static random access memory (SRAM) products and low latency dynamic random access memory (LLDRAM) products. The Company operates through the design, development and sale of integrated circuits segment. Its products are incorporated primarily in high-performance networking and telecommunications equipment, such as routers, switches, area network infrastructure equipment, wireless base stations and network access equipment. In addition, the Company serves military, industrial, test equipment and medical markets for SRAMs. It offers products in various categories, including Synchronous SRAM Products, Low Latency DRAM Products and Bandwidth Engine Products. The Company offers over 30 families of SRAMs, approximately two families of LLDRAMs and a family of Bandwidth Engine products. These basic product configurations are the basis for over 15,000 individual products that incorporate a range of specifications and optional features.

FINANCIAL RATIOS  of  GSI Technology, Inc. (GSIT)

Valuation Ratios
P/E Ratio 0
Price to Sales 3.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 86.6
Price to Free Cash Flow 86.6
Growth Rates
Sales Growth Rate -9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -1.9%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -2.2%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -2.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 54.2%
Gross Margin - 3 Yr. Avg. 50.5%
EBITDA Margin 4.2%
EBITDA Margin - 3 Yr. Avg. -2.3%
Operating Margin -2.1%
Oper. Margin - 3 Yr. Avg. -6.3%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. -5.6%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -4.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

GSIT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GSIT stock intrinsic value calculation we used $43 million for the last fiscal year's total revenue generated by GSI Technology, Inc.. The default revenue input number comes from 0001 income statement of GSI Technology, 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 GSIT stock valuation model: a) initial revenue growth rate of 32.2% 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 GSIT is calculated based on our internal credit rating of GSI Technology, 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 GSI Technology, 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 GSIT stock the variable cost ratio is equal to 30.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $35 million in the base year in the intrinsic value calculation for GSIT 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 GSI Technology, Inc..

Corporate tax rate of 27% is the nominal tax rate for GSI Technology, 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 GSIT 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 GSIT are equal to 31.4%.

Life of production assets of 15.2 years is the average useful life of capital assets used in GSI Technology, 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 GSIT is equal to 12.8%. 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 - $86.815 million for GSI Technology, 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 22.044 million for GSI Technology, 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 GSI Technology, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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