Intrinsic value of Lattice Semiconductor - LSCC

Previous Close

$7.68

  Intrinsic Value

$0.00

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  Rating & Target

str. sell

-100%

Previous close

$7.68

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of LSCC 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 0.9

 

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, %
  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
  394
  403
  413
  425
  438
  452
  467
  484
  502
  521
  542
  564
  587
  612
  638
  666
  696
  727
  760
  795
  832
  871
  912
  955
  1,000
  1,048
  1,099
  1,152
  1,208
  1,266
Variable operating expenses, $m
  193
  197
  201
  206
  211
  217
  223
  230
  237
  245
  222
  231
  240
  250
  261
  273
  285
  298
  311
  325
  341
  356
  373
  391
  410
  429
  450
  471
  494
  518
Fixed operating expenses, $m
  254
  260
  266
  272
  278
  284
  290
  296
  303
  310
  316
  323
  330
  338
  345
  353
  360
  368
  377
  385
  393
  402
  411
  420
  429
  438
  448
  458
  468
  478
Total operating expenses, $m
  447
  457
  467
  478
  489
  501
  513
  526
  540
  555
  538
  554
  570
  588
  606
  626
  645
  666
  688
  710
  734
  758
  784
  811
  839
  867
  898
  929
  962
  996
Operating income, $m
  -54
  -54
  -54
  -53
  -51
  -49
  -46
  -43
  -38
  -34
  4
  10
  16
  24
  32
  41
  51
  61
  73
  85
  98
  112
  128
  144
  162
  181
  201
  222
  245
  270
EBITDA, $m
  19
  19
  21
  23
  26
  30
  34
  39
  45
  52
  59
  68
  77
  87
  98
  110
  122
  136
  151
  167
  184
  202
  222
  243
  265
  289
  314
  341
  370
  400
Interest expense (income), $m
  18
  18
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
Earnings before tax, $m
  -72
  -72
  -72
  -72
  -71
  -70
  -68
  -65
  -62
  -59
  -23
  -18
  -13
  -7
  0
  7
  15
  24
  33
  43
  54
  66
  79
  93
  108
  124
  141
  159
  179
  199
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  4
  6
  9
  12
  15
  18
  21
  25
  29
  33
  38
  43
  48
  54
Net income, $m
  -72
  -72
  -72
  -72
  -71
  -70
  -68
  -65
  -62
  -59
  -23
  -18
  -13
  -7
  0
  5
  11
  17
  24
  32
  40
  48
  58
  68
  79
  90
  103
  116
  130
  146

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
  620
  634
  651
  669
  689
  711
  736
  762
  790
  820
  853
  888
  924
  964
  1,005
  1,049
  1,096
  1,145
  1,197
  1,252
  1,310
  1,371
  1,436
  1,504
  1,576
  1,651
  1,730
  1,814
  1,902
  1,994
Adjusted assets (=assets-cash), $m
  620
  634
  651
  669
  689
  711
  736
  762
  790
  820
  853
  888
  924
  964
  1,005
  1,049
  1,096
  1,145
  1,197
  1,252
  1,310
  1,371
  1,436
  1,504
  1,576
  1,651
  1,730
  1,814
  1,902
  1,994
Revenue / Adjusted assets
  0.635
  0.636
  0.634
  0.635
  0.636
  0.636
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
Average production assets, $m
  407
  416
  427
  439
  452
  467
  483
  500
  518
  538
  559
  582
  606
  632
  659
  688
  719
  751
  785
  821
  859
  900
  942
  987
  1,033
  1,083
  1,135
  1,190
  1,247
  1,308
Working capital, $m
  26
  27
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
Total debt, $m
  309
  318
  330
  342
  356
  371
  388
  406
  425
  446
  468
  492
  517
  544
  573
  603
  635
  669
  704
  742
  782
  824
  868
  915
  964
  1,016
  1,070
  1,127
  1,188
  1,251
Total liabilities, $m
  425
  435
  446
  459
  473
  488
  505
  523
  542
  563
  585
  609
  634
  661
  690
  720
  752
  786
  821
  859
  899
  941
  985
  1,032
  1,081
  1,133
  1,187
  1,244
  1,305
  1,368
Total equity, $m
  195
  199
  204
  210
  216
  223
  231
  239
  248
  258
  268
  279
  290
  303
  316
  329
  344
  360
  376
  393
  411
  431
  451
  472
  495
  518
  543
  570
  597
  626
Total liabilities and equity, $m
  620
  634
  650
  669
  689
  711
  736
  762
  790
  821
  853
  888
  924
  964
  1,006
  1,049
  1,096
  1,146
  1,197
  1,252
  1,310
  1,372
  1,436
  1,504
  1,576
  1,651
  1,730
  1,814
  1,902
  1,994
Debt-to-equity ratio
  1.580
  1.600
  1.610
  1.630
  1.650
  1.660
  1.680
  1.700
  1.710
  1.730
  1.750
  1.770
  1.780
  1.800
  1.810
  1.830
  1.850
  1.860
  1.870
  1.890
  1.900
  1.910
  1.930
  1.940
  1.950
  1.960
  1.970
  1.980
  1.990
  2.000
Adjusted equity ratio
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -72
  -72
  -72
  -72
  -71
  -70
  -68
  -65
  -62
  -59
  -23
  -18
  -13
  -7
  0
  5
  11
  17
  24
  32
  40
  48
  58
  68
  79
  90
  103
  116
  130
  146
Depreciation, amort., depletion, $m
  73
  74
  75
  76
  77
  79
  80
  82
  84
  86
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
  131
Funds from operations, $m
  1
  1
  2
  4
  6
  9
  12
  16
  21
  27
  33
  40
  48
  56
  66
  74
  83
  92
  103
  114
  126
  138
  152
  167
  182
  199
  216
  235
  255
  276
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
Cash from operations, $m
  1
  1
  1
  3
  5
  8
  11
  15
  20
  26
  32
  39
  46
  55
  64
  72
  81
  90
  100
  111
  123
  136
  149
  164
  179
  196
  213
  232
  251
  273
Maintenance CAPEX, $m
  -40
  -41
  -42
  -43
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
  -125
New CAPEX, $m
  -8
  -9
  -11
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -58
  -61
Cash from investing activities, $m
  -48
  -50
  -53
  -55
  -57
  -60
  -63
  -65
  -69
  -72
  -75
  -79
  -82
  -87
  -90
  -95
  -100
  -104
  -109
  -115
  -120
  -126
  -132
  -139
  -146
  -152
  -160
  -168
  -177
  -186
Free cash flow, $m
  -47
  -49
  -51
  -52
  -52
  -52
  -51
  -50
  -48
  -46
  -43
  -40
  -36
  -32
  -27
  -23
  -19
  -14
  -9
  -3
  3
  10
  17
  25
  34
  43
  53
  63
  75
  87
Issuance/(repayment) of debt, $m
  9
  10
  11
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
Issuance/(repurchase) of shares, $m
  75
  77
  78
  78
  78
  77
  75
  74
  71
  68
  33
  29
  24
  19
  13
  9
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  84
  87
  89
  91
  92
  92
  92
  92
  90
  89
  55
  53
  49
  46
  42
  39
  36
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
Total cash flow (excl. dividends), $m
  36
  37
  38
  39
  39
  40
  41
  42
  42
  43
  12
  13
  14
  14
  15
  16
  17
  20
  27
  35
  43
  52
  61
  72
  83
  94
  107
  121
  135
  151
Retained Cash Flow (-), $m
  -75
  -77
  -78
  -78
  -78
  -77
  -75
  -74
  -71
  -68
  -33
  -29
  -24
  -19
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
Prev. year cash balance distribution, $m
  27
  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
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
  37
  39
Cash available for distribution, $m
  -12
  -40
  -40
  -39
  -38
  -37
  -35
  -32
  -29
  -25
  -21
  -16
  -11
  -5
  2
  2
  3
  4
  11
  17
  25
  32
  41
  50
  60
  71
  82
  94
  108
  122
Discount rate, %
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
  -11
  -34
  -31
  -28
  -24
  -21
  -17
  -14
  -11
  -8
  -6
  -4
  -2
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  91.7
  84.1
  77.1
  70.9
  65.3
  60.4
  56.0
  52.2
  48.8
  45.9
  44.6
  43.5
  42.6
  42.0
  41.6
  41.3
  41.2
  41.2
  41.2
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Lattice Semiconductor Corporation is a United States-based company, which develops semiconductor technologies that it monetizes through products, solutions and licenses. The Company operates through two segments: the core Lattice (Core) business, which includes intellectual property (IP) and semiconductor devices, and Qterics, a discrete software-as-a-service business unit in the Lattice legal entity structure. The Company is a provider of customizable smart connectivity solutions based on its low power field programmable gate array (FPGA), video application specific standard product (ASSP), 60 gigahertz millimeter wave, and IP products to the consumer, communications, industrial, computing and automotive markets across the world. Its products include iCE40 Ultra/UltraLite, iCE40 LP/HX/LM, MachXO3, MachXO2, MachXO, HDMI Transmitters, HDMI Receivers, USB Type-C Port Controllers, Port Processors, Analog to HDMI/MHL Converters, MHL Transmitters, UltraGig 6400 and 802.11ad Chipsets.

FINANCIAL RATIOS  of  Lattice Semiconductor (LSCC)

Valuation Ratios
P/E Ratio -17.3
Price to Sales 2.2
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 22.2
Price to Free Cash Flow 37.4
Growth Rates
Sales Growth Rate 5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.6%
Cap. Spend. - 3 Yr. Gr. Rate 5.5%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 111.5%
Total Debt to Equity 124.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -4.1%
Ret/ On Assets - 3 Yr. Avg. -5.4%
Return On Total Capital -8.6%
Ret/ On T. Cap. - 3 Yr. Avg. -8.7%
Return On Equity -18.8%
Return On Equity - 3 Yr. Avg. -16.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 57.6%
Gross Margin - 3 Yr. Avg. 56.1%
EBITDA Margin 8.7%
EBITDA Margin - 3 Yr. Avg. 4.4%
Operating Margin -6.3%
Oper. Margin - 3 Yr. Avg. -7.2%
Pre-Tax Margin -10.1%
Pre-Tax Margin - 3 Yr. Avg. -9.8%
Net Profit Margin -12.6%
Net Profit Margin - 3 Yr. Avg. -12.8%
Effective Tax Rate -23.3%
Eff/ Tax Rate - 3 Yr. Avg. -21.1%
Payout Ratio 0%

LSCC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LSCC stock intrinsic value calculation we used $386 million for the last fiscal year's total revenue generated by Lattice Semiconductor. The default revenue input number comes from 2017 income statement of Lattice Semiconductor. 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 LSCC 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 7.7%, whose default value for LSCC is calculated based on our internal credit rating of Lattice Semiconductor, 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 Lattice Semiconductor.
    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 LSCC stock the variable cost ratio is equal to 49.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $249 million in the base year in the intrinsic value calculation for LSCC 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 5.9% for Lattice Semiconductor.

Corporate tax rate of 27% is the nominal tax rate for Lattice Semiconductor. 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 LSCC stock is equal to 3.2%.

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 LSCC are equal to 103.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Lattice Semiconductor 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 LSCC is equal to 6.6%. 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 - $218 million for Lattice Semiconductor - 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 123 million for Lattice Semiconductor 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 Lattice Semiconductor at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ Lattice: 2Q Earnings Snapshot   [Jul-26-18 05:31PM  Associated Press]
▶ [$$] T. Rowe Buys Lattice Semi, Maxim Integrated   [Jul-10-18 04:10PM  Barrons.com]
▶ Lattice: 1Q Earnings Snapshot   [Apr-26-18 05:40PM  Associated Press]
▶ Lattice Semiconductor CEO to retire this week   [Mar-12-18 06:39PM  American City Business Journals]
▶ Lattice strikes deal with activist investor, expands board   [Mar-07-18 06:18PM  American City Business Journals]
▶ Lattice reports 4Q loss   [Feb-13-18 04:23PM  Associated Press]
▶ Activist investor buys 6% stake in Lattice Semiconductor   [Feb-05-18 08:13PM  American City Business Journals]
▶ Lattice reports 3Q loss   [Nov-07-17 04:23PM  Associated Press]
▶ Lattice Semiconductor Schedules Q3 2017 Conference Call   [Oct-26-17 05:30AM  Business Wire]
▶ Susquehanna: Semiconductors showing signs of slowing   [Sep-21-17 01:16PM  CNBC Videos]
▶ [$$] The Lattice Warning to China   [Sep-15-17 11:41PM  The Wall Street Journal]
▶ Company News For Sep 15, 2017   [10:15AM  Zacks]
▶ Yahoo Finance Live: Midday Movers - Sep 15th, 2017   [09:40AM  Yahoo Finance Video]
▶ Are China deals in danger?   [01:07PM  CNBC Videos]
▶ Trump blocks Lattice Semiconductor deal   [11:34AM  CNBC Videos]
▶ Trump stops China-backed fund from buying Lattice   [10:52AM  Yahoo Finance Video]
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