Intrinsic value of Kulicke and Soffa Industries, Inc. - KLIC

Previous Close

$20.56

  Intrinsic Value

$35.28

stock screener

  Rating & Target

str. buy

+72%

Previous close

$20.56

 
Intrinsic value

$35.28

 
Up/down potential

+72%

 
Rating

str. buy

We calculate the intrinsic value of KLIC 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 1.4

 

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
  907
  928
  951
  978
  1,008
  1,040
  1,076
  1,114
  1,156
  1,200
  1,247
  1,298
  1,352
  1,409
  1,470
  1,534
  1,603
  1,675
  1,751
  1,831
  1,916
  2,006
  2,100
  2,199
  2,304
  2,414
  2,530
  2,653
  2,781
  2,916
Variable operating expenses, $m
  301
  308
  315
  324
  333
  344
  355
  367
  380
  395
  399
  415
  432
  451
  470
  491
  512
  535
  560
  586
  613
  641
  671
  703
  737
  772
  809
  848
  889
  932
Fixed operating expenses, $m
  447
  456
  466
  477
  487
  498
  509
  520
  532
  543
  555
  567
  580
  593
  606
  619
  633
  647
  661
  675
  690
  705
  721
  737
  753
  769
  786
  804
  821
  839
Total operating expenses, $m
  748
  764
  781
  801
  820
  842
  864
  887
  912
  938
  954
  982
  1,012
  1,044
  1,076
  1,110
  1,145
  1,182
  1,221
  1,261
  1,303
  1,346
  1,392
  1,440
  1,490
  1,541
  1,595
  1,652
  1,710
  1,771
Operating income, $m
  159
  164
  170
  178
  188
  199
  212
  227
  244
  262
  293
  316
  340
  366
  394
  425
  458
  493
  530
  570
  613
  659
  708
  759
  815
  873
  935
  1,001
  1,070
  1,144
EBITDA, $m
  184
  188
  195
  203
  213
  225
  239
  254
  272
  291
  312
  335
  360
  387
  416
  447
  481
  517
  556
  598
  642
  689
  739
  792
  849
  909
  972
  1,040
  1,112
  1,187
Interest expense (income), $m
  1
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
Earnings before tax, $m
  158
  162
  168
  175
  184
  195
  208
  222
  237
  255
  285
  306
  329
  354
  381
  410
  442
  475
  511
  550
  591
  634
  681
  731
  783
  839
  899
  962
  1,029
  1,100
Tax expense, $m
  43
  44
  45
  47
  50
  53
  56
  60
  64
  69
  77
  83
  89
  96
  103
  111
  119
  128
  138
  148
  159
  171
  184
  197
  211
  227
  243
  260
  278
  297
Net income, $m
  116
  118
  123
  128
  135
  142
  152
  162
  173
  186
  208
  224
  240
  259
  278
  300
  322
  347
  373
  401
  431
  463
  497
  533
  572
  613
  656
  702
  751
  803

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
  761
  778
  798
  821
  846
  873
  903
  935
  969
  1,007
  1,046
  1,089
  1,134
  1,182
  1,233
  1,287
  1,344
  1,405
  1,469
  1,536
  1,608
  1,683
  1,762
  1,845
  1,933
  2,026
  2,123
  2,225
  2,333
  2,446
Adjusted assets (=assets-cash), $m
  761
  778
  798
  821
  846
  873
  903
  935
  969
  1,007
  1,046
  1,089
  1,134
  1,182
  1,233
  1,287
  1,344
  1,405
  1,469
  1,536
  1,608
  1,683
  1,762
  1,845
  1,933
  2,026
  2,123
  2,225
  2,333
  2,446
Revenue / Adjusted assets
  1.192
  1.193
  1.192
  1.191
  1.191
  1.191
  1.192
  1.191
  1.193
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.193
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
  1.192
Average production assets, $m
  131
  135
  138
  142
  146
  151
  156
  162
  168
  174
  181
  188
  196
  204
  213
  222
  232
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  385
  403
  423
Working capital, $m
  203
  208
  213
  219
  226
  233
  241
  250
  259
  269
  279
  291
  303
  316
  329
  344
  359
  375
  392
  410
  429
  449
  470
  493
  516
  541
  567
  594
  623
  653
Total debt, $m
  22
  29
  37
  46
  56
  68
  80
  93
  107
  122
  139
  156
  175
  194
  215
  237
  261
  286
  312
  340
  369
  400
  432
  466
  502
  540
  580
  622
  666
  713
Total liabilities, $m
  312
  319
  327
  336
  347
  358
  370
  383
  397
  413
  429
  446
  465
  485
  506
  528
  551
  576
  602
  630
  659
  690
  722
  757
  793
  830
  870
  912
  957
  1,003
Total equity, $m
  449
  459
  471
  484
  499
  515
  533
  552
  572
  594
  617
  642
  669
  697
  728
  759
  793
  829
  867
  906
  948
  993
  1,039
  1,089
  1,140
  1,195
  1,252
  1,313
  1,377
  1,443
Total liabilities and equity, $m
  761
  778
  798
  820
  846
  873
  903
  935
  969
  1,007
  1,046
  1,088
  1,134
  1,182
  1,234
  1,287
  1,344
  1,405
  1,469
  1,536
  1,607
  1,683
  1,761
  1,846
  1,933
  2,025
  2,122
  2,225
  2,334
  2,446
Debt-to-equity ratio
  0.050
  0.060
  0.080
  0.100
  0.110
  0.130
  0.150
  0.170
  0.190
  0.210
  0.220
  0.240
  0.260
  0.280
  0.300
  0.310
  0.330
  0.340
  0.360
  0.370
  0.390
  0.400
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
Adjusted equity ratio
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  116
  118
  123
  128
  135
  142
  152
  162
  173
  186
  208
  224
  240
  259
  278
  300
  322
  347
  373
  401
  431
  463
  497
  533
  572
  613
  656
  702
  751
  803
Depreciation, amort., depletion, $m
  24
  25
  25
  25
  26
  26
  27
  27
  28
  29
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
Funds from operations, $m
  140
  143
  148
  153
  160
  169
  178
  189
  201
  215
  227
  243
  260
  279
  300
  322
  346
  372
  399
  428
  459
  493
  528
  566
  606
  648
  694
  741
  792
  846
Change in working capital, $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
Cash from operations, $m
  136
  138
  142
  147
  154
  161
  170
  181
  192
  205
  216
  231
  248
  267
  286
  308
  331
  356
  382
  410
  440
  473
  507
  544
  582
  624
  668
  714
  763
  816
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
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -22
  -23
  -25
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -44
  -45
  -48
  -50
  -53
  -55
  -58
  -61
Free cash flow, $m
  120
  122
  125
  129
  135
  142
  150
  159
  170
  181
  191
  206
  221
  238
  257
  277
  298
  321
  346
  373
  401
  431
  464
  498
  535
  574
  615
  659
  705
  755
Issuance/(repayment) of debt, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
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
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
Total cash flow (excl. dividends), $m
  127
  129
  133
  139
  145
  153
  162
  172
  184
  197
  208
  223
  240
  258
  278
  299
  322
  346
  372
  400
  430
  462
  496
  532
  571
  612
  655
  701
  750
  801
Retained Cash Flow (-), $m
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -57
  -60
  -64
  -67
Prev. year cash balance distribution, $m
  440
  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
  558
  119
  121
  125
  131
  137
  145
  153
  163
  175
  184
  198
  213
  230
  248
  267
  288
  310
  335
  361
  388
  418
  449
  483
  519
  557
  597
  640
  686
  734
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
  535
  109
  106
  103
  101
  99
  98
  96
  94
  92
  87
  84
  81
  77
  73
  68
  63
  57
  52
  46
  40
  35
  29
  25
  20
  16
  13
  10
  7
  6
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
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Kulicke and Soffa Industries, Inc. designs, manufactures and sells capital equipment and expendable tools, as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices. The Company supplies a range of bonding equipment. The Company operates through two segments: Equipment and Expendable Tools. The Equipment segment manufactures and sells a line of ball bonders, wedge bonders, advanced packaging and surface mount technology solutions. The Expendable Tools segment manufactures and sells expendable tools for a range of semiconductor packaging applications. It offers capital equipment and expendable tools used to assemble semiconductor devices, including integrated circuits, high and low powered discrete devices, light-emitting diodes and power modules. Its customers primarily consist of semiconductor device manufacturers, outsourced semiconductor assembly and test providers, other electronics manufacturers and automotive electronics suppliers.

FINANCIAL RATIOS  of  Kulicke and Soffa Industries, Inc. (KLIC)

Valuation Ratios
P/E Ratio 12.9
Price to Sales 1.8
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 13.1
Growth Rates
Sales Growth Rate 29%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 333.3%
Cap. Spend. - 3 Yr. Gr. Rate 21.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 1.8%
Total Debt to Equity 1.8%
Interest Coverage 105
Management Effectiveness
Return On Assets 10.5%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 12.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 13%
Return On Equity - 3 Yr. Avg. 8.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 46.4%
Gross Margin - 3 Yr. Avg. 46.8%
EBITDA Margin 15%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 9.1%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 13.8%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate -7.7%
Eff/ Tax Rate - 3 Yr. Avg. -9.1%
Payout Ratio 0%

KLIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KLIC stock intrinsic value calculation we used $889 million for the last fiscal year's total revenue generated by Kulicke and Soffa Industries, Inc.. The default revenue input number comes from 0001 income statement of Kulicke and Soffa Industries, 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 KLIC 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 KLIC is calculated based on our internal credit rating of Kulicke and Soffa Industries, 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 Kulicke and Soffa Industries, 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 KLIC stock the variable cost ratio is equal to 33.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $437 million in the base year in the intrinsic value calculation for KLIC 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 6.7% for Kulicke and Soffa Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for Kulicke and Soffa Industries, 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 KLIC 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 KLIC are equal to 14.5%.

Life of production assets of 9.8 years is the average useful life of capital assets used in Kulicke and Soffa Industries, 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 KLIC is equal to 22.4%. 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 - $880.207 million for Kulicke and Soffa Industries, 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 66.116 million for Kulicke and Soffa Industries, 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 Kulicke and Soffa Industries, Inc. at the current share price and the inputted number of shares is $1.4 billion.

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