Intrinsic value of Ichor Holdings - ICHR

Previous Close

$21.96

  Intrinsic Value

$19.77

stock screener

  Rating & Target

hold

-10%

Previous close

$21.96

 
Intrinsic value

$19.77

 
Up/down potential

-10%

 
Rating

hold

We calculate the intrinsic value of ICHR 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 0.5

 

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
  840
  860
  882
  907
  934
  964
  997
  1,033
  1,071
  1,112
  1,156
  1,203
  1,253
  1,306
  1,362
  1,422
  1,485
  1,552
  1,623
  1,697
  1,776
  1,859
  1,947
  2,039
  2,136
  2,238
  2,345
  2,459
  2,578
  2,703
Variable operating expenses, $m
  750
  767
  786
  808
  833
  859
  889
  920
  954
  991
  1,025
  1,067
  1,111
  1,158
  1,208
  1,261
  1,317
  1,377
  1,439
  1,505
  1,575
  1,649
  1,726
  1,808
  1,894
  1,985
  2,080
  2,181
  2,286
  2,397
Fixed operating expenses, $m
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
  35
  36
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
Total operating expenses, $m
  777
  794
  814
  836
  862
  889
  919
  951
  986
  1,023
  1,058
  1,101
  1,146
  1,193
  1,244
  1,298
  1,355
  1,415
  1,478
  1,545
  1,616
  1,691
  1,769
  1,852
  1,939
  2,031
  2,127
  2,229
  2,335
  2,447
Operating income, $m
  64
  66
  68
  70
  72
  75
  78
  82
  85
  89
  98
  102
  107
  112
  118
  124
  130
  137
  144
  152
  160
  168
  177
  187
  197
  207
  218
  230
  243
  256
EBITDA, $m
  82
  84
  86
  89
  92
  95
  98
  102
  107
  111
  116
  122
  127
  133
  140
  147
  154
  162
  170
  179
  188
  198
  208
  219
  231
  243
  256
  270
  284
  299
Interest expense (income), $m
  4
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
  39
  42
  44
Earnings before tax, $m
  53
  55
  56
  58
  60
  62
  65
  68
  71
  74
  81
  85
  89
  94
  98
  103
  108
  114
  120
  126
  133
  140
  147
  155
  163
  172
  181
  191
  201
  212
Tax expense, $m
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  52
  54
  57
Net income, $m
  39
  40
  41
  42
  44
  46
  47
  49
  51
  54
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
  97
  102
  107
  113
  119
  125
  132
  139
  147
  155

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
  495
  507
  520
  534
  551
  568
  588
  609
  631
  655
  681
  709
  738
  770
  803
  838
  875
  915
  956
  1,000
  1,047
  1,095
  1,147
  1,201
  1,259
  1,319
  1,382
  1,449
  1,519
  1,593
Adjusted assets (=assets-cash), $m
  495
  507
  520
  534
  551
  568
  588
  609
  631
  655
  681
  709
  738
  770
  803
  838
  875
  915
  956
  1,000
  1,047
  1,095
  1,147
  1,201
  1,259
  1,319
  1,382
  1,449
  1,519
  1,593
Revenue / Adjusted assets
  1.697
  1.696
  1.696
  1.699
  1.695
  1.697
  1.696
  1.696
  1.697
  1.698
  1.698
  1.697
  1.698
  1.696
  1.696
  1.697
  1.697
  1.696
  1.698
  1.697
  1.696
  1.698
  1.697
  1.698
  1.697
  1.697
  1.697
  1.697
  1.697
  1.697
Average production assets, $m
  160
  163
  168
  172
  177
  183
  189
  196
  204
  211
  220
  229
  238
  248
  259
  270
  282
  295
  308
  323
  337
  353
  370
  387
  406
  425
  446
  467
  490
  514
Working capital, $m
  91
  93
  95
  98
  101
  104
  108
  112
  116
  120
  125
  130
  135
  141
  147
  154
  160
  168
  175
  183
  192
  201
  210
  220
  231
  242
  253
  266
  278
  292
Total debt, $m
  206
  213
  221
  229
  239
  250
  261
  273
  287
  301
  316
  333
  350
  369
  388
  409
  431
  454
  479
  505
  532
  561
  592
  624
  657
  693
  731
  770
  811
  855
Total liabilities, $m
  293
  299
  307
  316
  325
  336
  347
  360
  373
  387
  403
  419
  436
  455
  474
  495
  517
  541
  565
  591
  619
  647
  678
  710
  744
  779
  817
  856
  898
  941
Total equity, $m
  203
  207
  213
  219
  225
  232
  240
  249
  258
  268
  279
  290
  302
  315
  328
  343
  358
  374
  391
  409
  428
  448
  469
  491
  515
  539
  565
  593
  621
  651
Total liabilities and equity, $m
  496
  506
  520
  535
  550
  568
  587
  609
  631
  655
  682
  709
  738
  770
  802
  838
  875
  915
  956
  1,000
  1,047
  1,095
  1,147
  1,201
  1,259
  1,318
  1,382
  1,449
  1,519
  1,592
Debt-to-equity ratio
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.090
  1.100
  1.110
  1.120
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.280
  1.290
  1.300
  1.310
  1.310
Adjusted equity ratio
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  39
  40
  41
  42
  44
  46
  47
  49
  51
  54
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
  97
  102
  107
  113
  119
  125
  132
  139
  147
  155
Depreciation, amort., depletion, $m
  18
  18
  18
  19
  19
  20
  20
  21
  21
  22
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
Funds from operations, $m
  57
  58
  59
  61
  63
  65
  67
  70
  73
  76
  78
  81
  85
  89
  93
  98
  103
  108
  113
  119
  125
  132
  138
  146
  153
  161
  170
  179
  188
  198
Change in working capital, $m
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
Cash from operations, $m
  55
  56
  57
  58
  60
  62
  64
  66
  69
  71
  73
  76
  80
  83
  87
  91
  96
  101
  106
  111
  117
  123
  129
  136
  143
  150
  158
  166
  175
  184
Maintenance CAPEX, $m
  -13
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
New CAPEX, $m
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -24
Cash from investing activities, $m
  -16
  -17
  -18
  -19
  -19
  -21
  -21
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -53
  -56
  -59
  -62
  -65
Free cash flow, $m
  38
  39
  39
  40
  40
  41
  42
  43
  45
  46
  47
  49
  51
  53
  56
  58
  61
  64
  67
  71
  75
  78
  83
  87
  92
  97
  102
  107
  113
  119
Issuance/(repayment) of debt, $m
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
  39
  41
  44
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  
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
  39
  41
  44
Total cash flow (excl. dividends), $m
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  62
  65
  68
  72
  75
  79
  83
  88
  92
  97
  102
  107
  113
  119
  125
  132
  139
  147
  155
  163
Retained Cash Flow (-), $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
Prev. year cash balance distribution, $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 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
  40
  41
  41
  42
  43
  44
  46
  47
  49
  51
  52
  54
  56
  59
  62
  65
  68
  71
  75
  79
  83
  87
  92
  97
  102
  108
  113
  119
  126
  133
Discount rate, %
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
  37
  36
  35
  33
  31
  29
  28
  26
  24
  22
  20
  18
  16
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  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

Ichor Holdings, Ltd. is engaged in the design, engineering and manufacturing of critical fluid delivery subsystems for semiconductor capital equipment. The Company's primary offerings include gas and chemical delivery subsystems, collectively known as fluid delivery subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices. The Company's gas delivery subsystems deliver, monitor and control precise quantities of the specialized gases used in semiconductor manufacturing processes, such as etch and deposition. Its chemical delivery subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes, such as chemical-mechanical planarization (CMP) electroplating and cleaning. The Company also manufactures certain components for internal use in fluid delivery systems and for direct sales to its customers.

FINANCIAL RATIOS  of  Ichor Holdings (ICHR)

Valuation Ratios
P/E Ratio 30.8
Price to Sales 1.3
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 18.7
Price to Free Cash Flow 21.8
Growth Rates
Sales Growth Rate 39.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 300%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 26.8%
Total Debt to Equity 26.8%
Interest Coverage 6
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 15.7%
Return On Equity - 3 Yr. Avg. 12.1%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 16%
Gross Margin - 3 Yr. Avg. 15.8%
EBITDA Margin 8.4%
EBITDA Margin - 3 Yr. Avg. 7.1%
Operating Margin 5.9%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 4.9%
Pre-Tax Margin - 3 Yr. Avg. 2.7%
Net Profit Margin 4.2%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate -5%
Eff/ Tax Rate - 3 Yr. Avg. -16.5%
Payout Ratio 0%

ICHR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ICHR stock intrinsic value calculation we used $824 million for the last fiscal year's total revenue generated by Ichor Holdings. The default revenue input number comes from 0001 income statement of Ichor Holdings. 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 ICHR 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 5.6%, whose default value for ICHR is calculated based on our internal credit rating of Ichor Holdings, 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 Ichor Holdings.
    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 ICHR stock the variable cost ratio is equal to 89.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $26 million in the base year in the intrinsic value calculation for ICHR 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 Ichor Holdings.

Corporate tax rate of 27% is the nominal tax rate for Ichor Holdings. 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 ICHR 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 ICHR are equal to 19%.

Life of production assets of 11.9 years is the average useful life of capital assets used in Ichor Holdings 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 ICHR is equal to 10.8%. 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 - $198.326 million for Ichor Holdings - 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 22.369 million for Ichor Holdings 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 Ichor Holdings at the current share price and the inputted number of shares is $0.5 billion.

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