Intrinsic value of Inphi Corporation - IPHI

Previous Close

$45.76

  Intrinsic Value

$0.59

stock screener

  Rating & Target

str. sell

-99%

Previous close

$45.76

 
Intrinsic value

$0.59

 
Up/down potential

-99%

 
Rating

str. sell

We calculate the intrinsic value of IPHI 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 2.0

 

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
  300
  307
  315
  324
  333
  344
  356
  368
  382
  397
  413
  429
  447
  466
  486
  507
  530
  554
  579
  606
  634
  663
  695
  727
  762
  798
  837
  877
  920
  964
Variable operating expenses, $m
  275
  280
  287
  294
  302
  311
  321
  331
  342
  354
  339
  352
  367
  383
  399
  417
  435
  455
  475
  497
  520
  545
  570
  597
  626
  656
  687
  720
  755
  792
Fixed operating expenses, $m
  102
  104
  107
  109
  111
  114
  116
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  161
  165
  169
  172
  176
  180
  184
  188
  192
Total operating expenses, $m
  377
  384
  394
  403
  413
  425
  437
  450
  464
  478
  466
  482
  500
  519
  538
  559
  580
  603
  626
  652
  678
  706
  735
  766
  798
  832
  867
  904
  943
  984
Operating income, $m
  -77
  -78
  -79
  -80
  -80
  -81
  -81
  -82
  -82
  -82
  -53
  -53
  -53
  -52
  -52
  -51
  -50
  -49
  -48
  -46
  -45
  -43
  -41
  -38
  -36
  -33
  -30
  -27
  -23
  -20
EBITDA, $m
  -4
  -4
  -4
  -3
  -2
  -1
  0
  2
  4
  6
  8
  11
  14
  17
  21
  25
  29
  34
  39
  44
  50
  56
  63
  70
  77
  86
  94
  104
  113
  124
Interest expense (income), $m
  3
  33
  32
  32
  33
  34
  36
  37
  38
  40
  42
  44
  45
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  103
  108
Earnings before tax, $m
  -110
  -110
  -111
  -113
  -115
  -117
  -118
  -120
  -122
  -124
  -97
  -99
  -100
  -102
  -104
  -105
  -107
  -109
  -111
  -112
  -114
  -116
  -117
  -119
  -120
  -122
  -123
  -125
  -126
  -128
Tax expense, $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
Net income, $m
  -110
  -110
  -111
  -113
  -115
  -117
  -118
  -120
  -122
  -124
  -97
  -99
  -100
  -102
  -104
  -105
  -107
  -109
  -111
  -112
  -114
  -116
  -117
  -119
  -120
  -122
  -123
  -125
  -126
  -128

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
  557
  570
  585
  601
  620
  640
  661
  685
  710
  738
  767
  798
  831
  866
  904
  943
  985
  1,029
  1,076
  1,126
  1,178
  1,233
  1,291
  1,352
  1,416
  1,484
  1,555
  1,631
  1,710
  1,793
Adjusted assets (=assets-cash), $m
  557
  570
  585
  601
  620
  640
  661
  685
  710
  738
  767
  798
  831
  866
  904
  943
  985
  1,029
  1,076
  1,126
  1,178
  1,233
  1,291
  1,352
  1,416
  1,484
  1,555
  1,631
  1,710
  1,793
Revenue / Adjusted assets
  0.539
  0.539
  0.538
  0.539
  0.537
  0.538
  0.539
  0.537
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
Average production assets, $m
  223
  228
  234
  241
  248
  256
  265
  274
  284
  295
  307
  319
  333
  347
  362
  378
  394
  412
  431
  451
  471
  493
  517
  541
  567
  594
  623
  653
  684
  718
Working capital, $m
  40
  41
  42
  43
  45
  46
  48
  49
  51
  53
  55
  58
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  107
  112
  118
  123
  129
Total debt, $m
  426
  438
  451
  466
  482
  500
  520
  541
  564
  588
  615
  643
  673
  704
  738
  773
  811
  851
  893
  938
  985
  1,034
  1,086
  1,141
  1,199
  1,260
  1,325
  1,392
  1,463
  1,538
Total liabilities, $m
  502
  513
  526
  541
  558
  576
  595
  616
  639
  664
  690
  718
  748
  780
  813
  849
  887
  926
  969
  1,013
  1,060
  1,110
  1,162
  1,217
  1,275
  1,336
  1,400
  1,467
  1,539
  1,613
Total equity, $m
  56
  57
  58
  60
  62
  64
  66
  68
  71
  74
  77
  80
  83
  87
  90
  94
  99
  103
  108
  113
  118
  123
  129
  135
  142
  148
  156
  163
  171
  179
Total liabilities and equity, $m
  558
  570
  584
  601
  620
  640
  661
  684
  710
  738
  767
  798
  831
  867
  903
  943
  986
  1,029
  1,077
  1,126
  1,178
  1,233
  1,291
  1,352
  1,417
  1,484
  1,556
  1,630
  1,710
  1,792
Debt-to-equity ratio
  7.650
  7.680
  7.710
  7.750
  7.780
  7.820
  7.860
  7.900
  7.940
  7.980
  8.020
  8.060
  8.090
  8.130
  8.170
  8.200
  8.240
  8.270
  8.300
  8.330
  8.360
  8.390
  8.420
  8.440
  8.470
  8.490
  8.520
  8.540
  8.560
  8.580
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -110
  -110
  -111
  -113
  -115
  -117
  -118
  -120
  -122
  -124
  -97
  -99
  -100
  -102
  -104
  -105
  -107
  -109
  -111
  -112
  -114
  -116
  -117
  -119
  -120
  -122
  -123
  -125
  -126
  -128
Depreciation, amort., depletion, $m
  73
  74
  75
  77
  78
  80
  81
  83
  85
  88
  61
  64
  67
  69
  72
  76
  79
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
  131
  137
  144
Funds from operations, $m
  -37
  -35
  -36
  -36
  -37
  -37
  -37
  -37
  -36
  -36
  -35
  -35
  -34
  -33
  -31
  -30
  -28
  -26
  -24
  -22
  -20
  -17
  -14
  -11
  -7
  -3
  1
  6
  10
  16
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  -38
  -36
  -37
  -38
  -38
  -38
  -38
  -38
  -38
  -38
  -38
  -37
  -36
  -35
  -34
  -33
  -31
  -30
  -28
  -26
  -23
  -21
  -18
  -15
  -12
  -8
  -4
  0
  5
  10
Maintenance CAPEX, $m
  -44
  -45
  -46
  -47
  -48
  -50
  -51
  -53
  -55
  -57
  -59
  -61
  -64
  -67
  -69
  -72
  -76
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
  -125
  -131
  -137
New CAPEX, $m
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
Cash from investing activities, $m
  -48
  -50
  -52
  -54
  -55
  -58
  -60
  -62
  -65
  -68
  -71
  -73
  -77
  -81
  -84
  -88
  -93
  -97
  -101
  -106
  -111
  -116
  -122
  -127
  -134
  -140
  -148
  -155
  -163
  -170
Free cash flow, $m
  -86
  -86
  -89
  -91
  -93
  -96
  -98
  -101
  -103
  -106
  -108
  -111
  -113
  -116
  -118
  -121
  -124
  -126
  -129
  -132
  -134
  -137
  -140
  -143
  -146
  -149
  -151
  -154
  -157
  -160
Issuance/(repayment) of debt, $m
  -22
  12
  13
  15
  16
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
  71
  75
Issuance/(repurchase) of shares, $m
  142
  111
  113
  115
  117
  119
  120
  122
  124
  126
  100
  102
  104
  106
  107
  109
  111
  113
  115
  117
  119
  121
  123
  125
  127
  129
  131
  132
  134
  136
Cash from financing (excl. dividends), $m  
  120
  123
  126
  130
  133
  137
  140
  143
  147
  151
  126
  130
  134
  138
  141
  145
  149
  153
  157
  162
  166
  171
  175
  180
  185
  190
  195
  200
  205
  211
Total cash flow (excl. dividends), $m
  34
  36
  37
  38
  40
  41
  42
  43
  44
  45
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  50
Retained Cash Flow (-), $m
  -142
  -111
  -113
  -115
  -117
  -119
  -120
  -122
  -124
  -126
  -100
  -102
  -104
  -106
  -107
  -109
  -111
  -113
  -115
  -117
  -119
  -121
  -123
  -125
  -127
  -129
  -131
  -132
  -134
  -136
Prev. year cash balance distribution, $m
  343
  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
  235
  -75
  -75
  -76
  -77
  -78
  -79
  -80
  -80
  -81
  -82
  -83
  -83
  -84
  -85
  -85
  -86
  -86
  -87
  -87
  -87
  -88
  -88
  -88
  -88
  -88
  -87
  -87
  -86
  -86
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
  226
  -68
  -66
  -63
  -60
  -57
  -53
  -50
  -46
  -43
  -39
  -35
  -32
  -28
  -25
  -22
  -19
  -16
  -13
  -11
  -9
  -7
  -6
  -4
  -3
  -3
  -2
  -1
  -1
  -1
Current shareholders' claim on cash, %
  48.2
  35.5
  26.1
  19.3
  14.3
  10.6
  7.9
  6.0
  4.5
  3.4
  2.7
  2.2
  1.8
  1.5
  1.2
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2
  0.2
  0.1
  0.1
  0.1

Inphi Corporation is a provider of analog and mixed signal semiconductor solutions for the communications and datacenter markets. The Company's solutions provide an interface between analog signals and digital information in systems, such as telecommunications transport systems, enterprise networking equipment and datacenters. It is engaged in the design, development and sale of analog connectivity components that operate to maintain, amplify and manage signal integrity at high speeds in a range of applications. Its semiconductor solutions are designed to address bandwidth bottlenecks in networks and enable the rollout of communications and datacenter infrastructures. The Company provides 25 gigabit (G) to 600G high-speed analog semiconductor solutions for the communications market. As of December 31, 2016, the Company's product portfolio included products that had commercially shipped, products for which the Company had shipped engineering samples and products under development.

FINANCIAL RATIOS  of  Inphi Corporation (IPHI)

Valuation Ratios
P/E Ratio 19.1
Price to Sales 7.1
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 30
Price to Free Cash Flow 46.1
Growth Rates
Sales Growth Rate 37.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.4%
Cap. Spend. - 3 Yr. Gr. Rate 5.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 86%
Total Debt to Equity 86%
Interest Coverage 5
Management Effectiveness
Return On Assets 14.2%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 15%
Ret/ On T. Cap. - 3 Yr. Avg. -0.2%
Return On Equity 26.3%
Return On Equity - 3 Yr. Avg. 3.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 68%
Gross Margin - 3 Yr. Avg. 61.5%
EBITDA Margin 16.9%
EBITDA Margin - 3 Yr. Avg. 1.3%
Operating Margin 9.4%
Oper. Margin - 3 Yr. Avg. -10.9%
Pre-Tax Margin 4.1%
Pre-Tax Margin - 3 Yr. Avg. -12.5%
Net Profit Margin 37.2%
Net Profit Margin - 3 Yr. Avg. 2%
Effective Tax Rate -145.5%
Eff/ Tax Rate - 3 Yr. Avg. -70.4%
Payout Ratio 0%

IPHI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IPHI stock intrinsic value calculation we used $294 million for the last fiscal year's total revenue generated by Inphi Corporation. The default revenue input number comes from 0001 income statement of Inphi Corporation. 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 IPHI 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 IPHI is calculated based on our internal credit rating of Inphi Corporation, 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 Inphi Corporation.
    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 IPHI stock the variable cost ratio is equal to 91.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $100 million in the base year in the intrinsic value calculation for IPHI 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 7.4% for Inphi Corporation.

Corporate tax rate of 27% is the nominal tax rate for Inphi Corporation. 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 IPHI 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 IPHI are equal to 74.4%.

Life of production assets of 4.5 years is the average useful life of capital assets used in Inphi Corporation 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 IPHI is equal to 13.4%. 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 - $366.694 million for Inphi Corporation - 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 44.490 million for Inphi Corporation 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 Inphi Corporation at the current share price and the inputted number of shares is $2.0 billion.

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