Intrinsic value of Integrated Device Technology - IDTI

Previous Close

$34.69

  Intrinsic Value

$14.70

stock screener

  Rating & Target

str. sell

-58%

Previous close

$34.69

 
Intrinsic value

$14.70

 
Up/down potential

-58%

 
Rating

str. sell

We calculate the intrinsic value of IDTI 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 2017), $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 4.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  760
  794
  830
  868
  908
  950
  994
  1,041
  1,090
  1,142
  1,197
  1,255
  1,315
  1,379
  1,446
  1,517
  1,591
  1,669
  1,751
  1,837
  1,927
  2,022
  2,122
  2,227
  2,338
  2,454
  2,575
  2,703
  2,837
  2,979
Variable operating expenses, $m
  610
  635
  662
  690
  720
  752
  785
  820
  857
  896
  895
  938
  984
  1,031
  1,082
  1,134
  1,190
  1,248
  1,309
  1,374
  1,441
  1,513
  1,587
  1,666
  1,748
  1,835
  1,926
  2,022
  2,122
  2,228
Fixed operating expenses, $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 operating expenses, $m
  610
  635
  662
  690
  720
  752
  785
  820
  857
  896
  895
  938
  984
  1,031
  1,082
  1,134
  1,190
  1,248
  1,309
  1,374
  1,441
  1,513
  1,587
  1,666
  1,748
  1,835
  1,926
  2,022
  2,122
  2,228
Operating income, $m
  150
  159
  168
  177
  187
  198
  209
  221
  233
  246
  302
  316
  332
  348
  365
  382
  401
  421
  441
  463
  486
  510
  535
  562
  589
  619
  649
  682
  715
  751
EBITDA, $m
  244
  255
  266
  279
  291
  305
  319
  334
  350
  367
  384
  403
  422
  443
  464
  487
  511
  536
  562
  590
  619
  649
  681
  715
  751
  788
  827
  868
  911
  956
Interest expense (income), $m
  3
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  35
  38
  40
  42
  44
  47
  50
  53
  55
  59
  62
  65
  69
  73
  77
  81
  85
  90
Earnings before tax, $m
  133
  140
  148
  156
  165
  174
  184
  194
  205
  217
  270
  283
  296
  310
  325
  340
  357
  374
  392
  411
  431
  451
  473
  496
  521
  546
  573
  601
  630
  661
Tax expense, $m
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
  141
  147
  155
  162
  170
  179
Net income, $m
  97
  102
  108
  114
  120
  127
  134
  142
  150
  158
  197
  206
  216
  226
  237
  248
  260
  273
  286
  300
  314
  330
  346
  362
  380
  399
  418
  439
  460
  483

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
  906
  946
  989
  1,034
  1,082
  1,132
  1,185
  1,241
  1,300
  1,362
  1,427
  1,496
  1,568
  1,644
  1,724
  1,808
  1,896
  1,989
  2,087
  2,189
  2,297
  2,411
  2,530
  2,655
  2,786
  2,924
  3,070
  3,222
  3,382
  3,550
Adjusted assets (=assets-cash), $m
  906
  946
  989
  1,034
  1,082
  1,132
  1,185
  1,241
  1,300
  1,362
  1,427
  1,496
  1,568
  1,644
  1,724
  1,808
  1,896
  1,989
  2,087
  2,189
  2,297
  2,411
  2,530
  2,655
  2,786
  2,924
  3,070
  3,222
  3,382
  3,550
Revenue / Adjusted assets
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.838
  0.838
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
Average production assets, $m
  524
  547
  572
  598
  625
  654
  685
  717
  751
  787
  825
  865
  906
  950
  996
  1,045
  1,096
  1,150
  1,206
  1,266
  1,328
  1,393
  1,462
  1,535
  1,611
  1,691
  1,774
  1,862
  1,955
  2,052
Working capital, $m
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
Total debt, $m
  303
  323
  343
  364
  386
  410
  435
  462
  489
  519
  549
  582
  616
  652
  690
  729
  771
  815
  861
  909
  960
  1,014
  1,070
  1,129
  1,191
  1,256
  1,325
  1,397
  1,472
  1,552
Total liabilities, $m
  428
  447
  467
  488
  511
  534
  559
  586
  613
  643
  673
  706
  740
  776
  814
  853
  895
  939
  985
  1,033
  1,084
  1,138
  1,194
  1,253
  1,315
  1,380
  1,449
  1,521
  1,596
  1,676
Total equity, $m
  478
  500
  522
  546
  571
  598
  626
  655
  686
  719
  753
  790
  828
  868
  910
  955
  1,001
  1,050
  1,102
  1,156
  1,213
  1,273
  1,336
  1,402
  1,471
  1,544
  1,621
  1,701
  1,786
  1,874
Total liabilities and equity, $m
  906
  947
  989
  1,034
  1,082
  1,132
  1,185
  1,241
  1,299
  1,362
  1,426
  1,496
  1,568
  1,644
  1,724
  1,808
  1,896
  1,989
  2,087
  2,189
  2,297
  2,411
  2,530
  2,655
  2,786
  2,924
  3,070
  3,222
  3,382
  3,550
Debt-to-equity ratio
  0.630
  0.650
  0.660
  0.670
  0.680
  0.690
  0.700
  0.700
  0.710
  0.720
  0.730
  0.740
  0.740
  0.750
  0.760
  0.760
  0.770
  0.780
  0.780
  0.790
  0.790
  0.800
  0.800
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.830
Adjusted equity ratio
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  97
  102
  108
  114
  120
  127
  134
  142
  150
  158
  197
  206
  216
  226
  237
  248
  260
  273
  286
  300
  314
  330
  346
  362
  380
  399
  418
  439
  460
  483
Depreciation, amort., depletion, $m
  94
  96
  99
  101
  104
  107
  110
  113
  117
  120
  82
  86
  91
  95
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
  161
  169
  177
  186
  196
  205
Funds from operations, $m
  191
  199
  207
  215
  225
  234
  244
  255
  267
  278
  280
  293
  307
  321
  337
  353
  370
  388
  407
  426
  447
  469
  492
  516
  541
  568
  596
  625
  656
  688
Change in working capital, $m
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  190
  198
  206
  215
  224
  234
  244
  255
  266
  278
  279
  292
  306
  321
  336
  352
  369
  387
  405
  425
  446
  468
  490
  514
  540
  566
  594
  623
  654
  686
Maintenance CAPEX, $m
  -50
  -52
  -55
  -57
  -60
  -63
  -65
  -69
  -72
  -75
  -79
  -82
  -86
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -153
  -161
  -169
  -177
  -186
  -196
New CAPEX, $m
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -66
  -69
  -72
  -76
  -80
  -84
  -88
  -93
  -97
Cash from investing activities, $m
  -72
  -75
  -80
  -83
  -88
  -92
  -96
  -101
  -106
  -111
  -117
  -122
  -128
  -135
  -141
  -149
  -156
  -164
  -171
  -180
  -189
  -199
  -208
  -218
  -229
  -241
  -253
  -265
  -279
  -293
Free cash flow, $m
  119
  122
  127
  132
  137
  142
  148
  154
  160
  167
  163
  170
  178
  186
  195
  204
  213
  223
  234
  245
  257
  269
  282
  296
  310
  325
  341
  357
  375
  393
Issuance/(repayment) of debt, $m
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
  54
  56
  59
  62
  65
  68
  72
  76
  79
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  
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
  54
  56
  59
  62
  65
  68
  72
  76
  79
Total cash flow (excl. dividends), $m
  137
  141
  147
  153
  159
  166
  173
  180
  188
  196
  193
  202
  212
  222
  232
  243
  255
  267
  280
  294
  308
  323
  338
  355
  372
  390
  409
  429
  450
  473
Retained Cash Flow (-), $m
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -80
  -85
  -89
Prev. year cash balance distribution, $m
  315
  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
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  80
  83
  87
  92
  96
  101
  106
  111
  117
  123
  129
  135
  142
  149
  156
Cash available for distribution, $m
  432
  120
  124
  129
  134
  139
  145
  151
  157
  163
  159
  166
  174
  182
  190
  199
  208
  218
  229
  239
  251
  263
  275
  289
  303
  317
  333
  349
  366
  384
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
  414
  110
  108
  106
  104
  101
  98
  94
  90
  86
  75
  71
  66
  61
  56
  51
  45
  40
  35
  30
  26
  22
  18
  15
  12
  9
  7
  5
  4
  3
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

Integrated Device Technology, Inc. develops system-level solutions that optimize its customers' applications. The Company operates through two segments: the Communications, and the Computing, Consumer and Industrial. It offers products in radio frequency (RF), timing, wireless power transfer, serial switching, interfaces and sensing solutions. It offers a range of mixed-signal solutions for the communications, computing, consumer, automotive and industrial segments. These products are used for development in areas, such as fourth generation (4G) infrastructure, network communications, cloud datacenters and power management for computing and mobile devices. It offers solutions in designing communications, computing, consumer, automotive and industrial applications. It markets its products to original equipment manufacturers (OEMs) through a range of channels, including direct sales, distributors and electronic manufacturing suppliers (EMSs).

FINANCIAL RATIOS  of  Integrated Device Technology (IDTI)

Valuation Ratios
P/E Ratio 42
Price to Sales 6.3
Price to Book 6
Price to Tangible Book
Price to Cash Flow 27.3
Price to Free Cash Flow 33.7
Growth Rates
Sales Growth Rate 4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18.5%
Cap. Spend. - 3 Yr. Gr. Rate 13.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 37%
Total Debt to Equity 37%
Interest Coverage 34
Management Effectiveness
Return On Assets 9.9%
Ret/ On Assets - 3 Yr. Avg. 13.4%
Return On Total Capital 11%
Ret/ On T. Cap. - 3 Yr. Avg. 15.3%
Return On Equity 15.2%
Return On Equity - 3 Yr. Avg. 18%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 57.8%
Gross Margin - 3 Yr. Avg. 59.5%
EBITDA Margin 20.2%
EBITDA Margin - 3 Yr. Avg. 23%
Operating Margin 15.1%
Oper. Margin - 3 Yr. Avg. 18%
Pre-Tax Margin 13.6%
Pre-Tax Margin - 3 Yr. Avg. 17.7%
Net Profit Margin 15.1%
Net Profit Margin - 3 Yr. Avg. 19.8%
Effective Tax Rate -10.1%
Eff/ Tax Rate - 3 Yr. Avg. -18.3%
Payout Ratio 0%

IDTI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IDTI stock intrinsic value calculation we used $728 million for the last fiscal year's total revenue generated by Integrated Device Technology. The default revenue input number comes from 2017 income statement of Integrated Device Technology. 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 IDTI stock valuation model: a) initial revenue growth rate of 4.4% 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 IDTI is calculated based on our internal credit rating of Integrated Device Technology, 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 Integrated Device Technology.
    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 IDTI stock the variable cost ratio is equal to 80.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for IDTI 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 6.1% for Integrated Device Technology.

Corporate tax rate of 27% is the nominal tax rate for Integrated Device Technology. 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 IDTI stock is equal to 5.5%.

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 IDTI are equal to 68.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Integrated Device Technology 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 IDTI is equal to 1.4%. 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 - $774 million for Integrated Device Technology - 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 134 million for Integrated Device Technology 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 Integrated Device Technology at the current share price and the inputted number of shares is $4.6 billion.

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COMPANY NEWS

▶ IDT and RFMW Ltd. Announce New Franchise   [Jun-04-18 03:33AM  PR Newswire]
▶ Chip Stocks Notch Solid Gains After Latest Earnings Reports   [May-01-18 07:40PM  Investor's Business Daily]
▶ Integrated Device Tech: Fiscal 4Q Earnings Snapshot   [Apr-30-18 05:08PM  Associated Press]
▶ These Semiconductor Stock Charts Are in Peril   [Apr-03-18 01:00PM  TheStreet.com]
▶ IDT To Participate In Upcoming Investor Conferences   [Mar-06-18 06:33AM  PR Newswire]
▶ IDT To Present At Upcoming Investor Conferences   [Feb-07-18 04:05PM  PR Newswire]
▶ IDT and Premier Farnell Announce New Franchise   [Feb-05-18 06:33AM  PR Newswire]
▶ Integrated Device Tech reports 3Q loss   [Jan-29-18 04:15PM  Associated Press]
▶ IDT Introduces Timing Solutions for Cavium Processors   [Dec-18-17 03:36PM  PR Newswire]
▶ Qualcomm Slumps On Apple News; IDT Jumps On Earnings Beat   [04:51PM  Investor's Business Daily]
▶ Integrated Device Tech tops Street 2Q forecasts   [Oct-30-17 05:11PM  Associated Press]
▶ Integrated Device Technology Could Rally 25% From Here   [Oct-26-17 02:01PM  TheStreet.com]
▶ IDT Introduces Low Power UWB Motion Sensor   [Oct-25-17 02:44PM  Marketwired]
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