Intrinsic value of Inphi - IPHI

Previous Close

$38.01

  Intrinsic Value

$19.41

stock screener

  Rating & Target

sell

-49%

Previous close

$38.01

 
Intrinsic value

$19.41

 
Up/down potential

-49%

 
Rating

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 1.7

 

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
  355
  363
  373
  383
  395
  408
  421
  436
  453
  470
  489
  508
  529
  552
  576
  601
  628
  656
  686
  717
  751
  786
  823
  861
  902
  946
  991
  1,039
  1,089
  1,142
Variable operating expenses, $m
  321
  327
  335
  343
  353
  363
  374
  387
  400
  414
  396
  412
  429
  448
  467
  487
  509
  532
  556
  582
  609
  637
  667
  699
  732
  767
  804
  843
  883
  926
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
  321
  327
  335
  343
  353
  363
  374
  387
  400
  414
  396
  412
  429
  448
  467
  487
  509
  532
  556
  582
  609
  637
  667
  699
  732
  767
  804
  843
  883
  926
Operating income, $m
  34
  36
  38
  40
  42
  44
  47
  50
  53
  56
  92
  96
  100
  104
  109
  114
  119
  124
  130
  136
  142
  149
  155
  163
  171
  179
  187
  196
  206
  216
EBITDA, $m
  111
  114
  117
  120
  124
  128
  132
  137
  142
  147
  153
  159
  166
  173
  180
  188
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  311
  326
  341
  358
Interest expense (income), $m
  3
  31
  32
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  67
  70
  73
  77
  81
  85
  90
  94
  99
  104
  109
Earnings before tax, $m
  4
  4
  5
  6
  7
  9
  10
  11
  13
  14
  49
  50
  52
  54
  56
  59
  61
  64
  66
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  106
Tax expense, $m
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
Net income, $m
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  36
  37
  38
  40
  41
  43
  45
  46
  48
  50
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78

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
  584
  598
  613
  630
  649
  670
  693
  718
  744
  773
  804
  836
  871
  908
  947
  988
  1,032
  1,079
  1,128
  1,180
  1,234
  1,292
  1,353
  1,417
  1,484
  1,555
  1,630
  1,709
  1,792
  1,879
Adjusted assets (=assets-cash), $m
  584
  598
  613
  630
  649
  670
  693
  718
  744
  773
  804
  836
  871
  908
  947
  988
  1,032
  1,079
  1,128
  1,180
  1,234
  1,292
  1,353
  1,417
  1,484
  1,555
  1,630
  1,709
  1,792
  1,879
Revenue / Adjusted assets
  0.608
  0.607
  0.608
  0.608
  0.609
  0.609
  0.608
  0.607
  0.609
  0.608
  0.608
  0.608
  0.607
  0.608
  0.608
  0.608
  0.609
  0.608
  0.608
  0.608
  0.609
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
Average production assets, $m
  247
  253
  259
  267
  275
  284
  293
  304
  315
  327
  340
  354
  369
  384
  401
  418
  437
  457
  477
  499
  522
  547
  572
  600
  628
  658
  690
  723
  758
  795
Working capital, $m
  53
  54
  56
  57
  59
  61
  63
  65
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  128
  134
  141
  148
  155
  162
  170
Total debt, $m
  432
  444
  457
  472
  489
  508
  528
  550
  573
  599
  626
  654
  685
  718
  752
  789
  828
  869
  912
  958
  1,007
  1,058
  1,111
  1,168
  1,228
  1,290
  1,356
  1,426
  1,499
  1,576
Total liabilities, $m
  516
  528
  542
  557
  574
  593
  613
  635
  658
  683
  710
  739
  770
  802
  837
  874
  913
  954
  997
  1,043
  1,091
  1,142
  1,196
  1,253
  1,312
  1,375
  1,441
  1,511
  1,584
  1,661
Total equity, $m
  68
  69
  71
  73
  75
  78
  80
  83
  86
  90
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
  208
  218
Total liabilities and equity, $m
  584
  597
  613
  630
  649
  671
  693
  718
  744
  773
  803
  836
  871
  907
  947
  989
  1,033
  1,079
  1,128
  1,180
  1,234
  1,292
  1,353
  1,417
  1,484
  1,555
  1,630
  1,709
  1,792
  1,879
Debt-to-equity ratio
  6.370
  6.400
  6.430
  6.460
  6.500
  6.530
  6.570
  6.600
  6.640
  6.680
  6.710
  6.750
  6.780
  6.820
  6.850
  6.880
  6.910
  6.940
  6.970
  7.000
  7.030
  7.060
  7.080
  7.110
  7.130
  7.150
  7.170
  7.190
  7.210
  7.230
Adjusted equity ratio
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  36
  37
  38
  40
  41
  43
  45
  46
  48
  50
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
Depreciation, amort., depletion, $m
  77
  78
  79
  80
  82
  83
  85
  87
  89
  91
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  135
  142
Funds from operations, $m
  80
  81
  83
  85
  87
  90
  92
  95
  98
  102
  96
  100
  104
  108
  113
  118
  123
  128
  134
  140
  146
  152
  159
  167
  174
  183
  191
  200
  210
  220
Change in working capital, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  78
  80
  82
  83
  85
  88
  90
  93
  96
  99
  93
  97
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  154
  161
  168
  176
  184
  193
  202
  212
Maintenance CAPEX, $m
  -43
  -44
  -45
  -46
  -48
  -49
  -51
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -98
  -102
  -107
  -112
  -118
  -123
  -129
  -135
New CAPEX, $m
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
Cash from investing activities, $m
  -48
  -50
  -51
  -53
  -56
  -58
  -61
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -107
  -112
  -117
  -124
  -129
  -136
  -142
  -150
  -156
  -164
  -172
Free cash flow, $m
  30
  30
  30
  30
  30
  30
  30
  30
  30
  31
  22
  23
  23
  23
  24
  25
  25
  26
  27
  28
  29
  29
  31
  32
  33
  34
  35
  37
  38
  40
Issuance/(repayment) of debt, $m
  10
  12
  14
  15
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
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  
  10
  12
  14
  15
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
Total cash flow (excl. dividends), $m
  41
  42
  43
  45
  47
  48
  50
  52
  54
  56
  49
  51
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  111
  117
Retained Cash Flow (-), $m
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
Prev. year cash balance distribution, $m
  345
  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
  384
  40
  42
  43
  44
  46
  47
  49
  51
  53
  46
  48
  50
  52
  54
  57
  59
  62
  65
  67
  71
  74
  77
  81
  85
  89
  93
  97
  102
  106
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
  368
  37
  36
  35
  34
  33
  32
  31
  29
  28
  22
  20
  19
  17
  16
  14
  13
  11
  10
  9
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
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

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 (IPHI)

Valuation Ratios
P/E Ratio 15.9
Price to Sales 5.9
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 24.9
Price to Free Cash Flow 38.3
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 $348.201 million for the last fiscal year's total revenue generated by Inphi. The default revenue input number comes from 0001 income statement of Inphi. 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, 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.
    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 90.5%.

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 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 7.3% for Inphi.

Corporate tax rate of 27% is the nominal tax rate for Inphi. 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 69.6%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Inphi 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 14.9%. 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 - $411.401 million for Inphi - 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 43.85 million for Inphi 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 at the current share price and the inputted number of shares is $1.7 billion.

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COMPANY NEWS

▶ Inphi: 3Q Earnings Snapshot   [07:50PM  Associated Press]
▶ Inphi: 2Q Earnings Snapshot   [Jul-24-18 05:10PM  Associated Press]
▶ Inphi's Q2 Earnings Preview   [08:13AM  Benzinga]
▶ What Does Inphi Corporations (NYSE:IPHI) Share Price Indicate?   [Jun-26-18 08:54AM  Simply Wall St.]
▶ Why Shares of Inphi Corp. Slumped Today   [03:24PM  Motley Fool]
▶ Inphi: 1Q Earnings Snapshot   [Apr-24-18 05:01PM  Associated Press]
▶ Inphi Corporation Announces Q1 2018 Results   [04:10PM  GlobeNewswire]
▶ Inphi Corporation to Host Earnings Call   [12:30PM  ACCESSWIRE]
▶ 3 Tech Stock Ideas for Patient Investors   [07:27AM  TheStreet.com]
▶ 3 Tech Stock Ideas for Patient Investors   [Mar-07-18 09:38PM  TheStreet.com]
▶ Weekly CEO Buys Highlight   [Mar-05-18 10:45AM  GuruFocus.com]
▶ Weekly CEO Buys Highlight   [Feb-26-18 10:49AM  GuruFocus.com]
▶ Inphi Awarded by InnoLight for Technology Innovation   [Feb-14-18 08:00AM  GlobeNewswire]
▶ Why Shares of Inphi Corp. Slumped Today   [02:11PM  Motley Fool]
▶ Inphi tops 4Q profit forecasts   [Feb-07-18 06:21PM  Associated Press]
▶ Inphi Corporation to Host Earnings Call   [01:00PM  ACCESSWIRE]
▶ ETFs with exposure to Inphi Corp. : December 8, 2017   [Dec-08-17 01:05PM  Capital Cube]
▶ Inphi reports 3Q loss   [Oct-31-17 04:41PM  Associated Press]
▶ Inphi Corporation to Host Earnings Call   [09:55AM  ACCESSWIRE]
▶ What Factors Could Drive Inphis Earnings in the Long Run?   [Oct-11-17 01:36PM  Market Realist]
▶ ETFs with exposure to Inphi Corp. : October 4, 2017   [Oct-04-17 10:48AM  Capital Cube]

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