Intrinsic value of MACOM Technology Solutions Holdings - MTSI

Previous Close

$17.72

  Intrinsic Value

$10.05

stock screener

  Rating & Target

sell

-43%

Previous close

$17.72

 
Intrinsic value

$10.05

 
Up/down potential

-43%

 
Rating

sell

We calculate the intrinsic value of MTSI 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 1.2

 

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
  713
  729
  748
  769
  792
  818
  846
  876
  908
  943
  980
  1,020
  1,063
  1,108
  1,155
  1,206
  1,260
  1,316
  1,376
  1,439
  1,506
  1,577
  1,651
  1,729
  1,811
  1,898
  1,989
  2,085
  2,186
  2,292
Variable operating expenses, $m
  694
  708
  723
  741
  761
  782
  806
  831
  858
  888
  826
  859
  895
  933
  973
  1,016
  1,061
  1,109
  1,159
  1,212
  1,269
  1,328
  1,390
  1,456
  1,525
  1,598
  1,675
  1,756
  1,841
  1,930
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
  694
  708
  723
  741
  761
  782
  806
  831
  858
  888
  826
  859
  895
  933
  973
  1,016
  1,061
  1,109
  1,159
  1,212
  1,269
  1,328
  1,390
  1,456
  1,525
  1,598
  1,675
  1,756
  1,841
  1,930
Operating income, $m
  19
  22
  25
  28
  32
  36
  40
  45
  50
  55
  155
  161
  168
  175
  182
  190
  199
  208
  217
  227
  238
  249
  260
  273
  286
  299
  314
  329
  345
  362
EBITDA, $m
  167
  171
  175
  180
  186
  192
  198
  205
  213
  221
  230
  239
  249
  260
  271
  283
  295
  308
  322
  337
  353
  369
  387
  405
  424
  445
  466
  488
  512
  537
Interest expense (income), $m
  31
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  95
  100
  105
  110
  116
  122
  128
  135
Earnings before tax, $m
  -18
  -16
  -15
  -12
  -10
  -8
  -5
  -2
  1
  4
  102
  105
  109
  114
  118
  123
  128
  134
  139
  145
  152
  159
  166
  173
  181
  189
  198
  207
  217
  227
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  27
  28
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
Net income, $m
  -18
  -16
  -15
  -12
  -10
  -8
  -5
  -2
  1
  3
  74
  77
  80
  83
  86
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165

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
  1,563
  1,599
  1,640
  1,686
  1,737
  1,793
  1,855
  1,921
  1,992
  2,068
  2,150
  2,237
  2,330
  2,429
  2,534
  2,645
  2,762
  2,887
  3,018
  3,157
  3,303
  3,457
  3,620
  3,791
  3,972
  4,162
  4,362
  4,572
  4,794
  5,027
Adjusted assets (=assets-cash), $m
  1,563
  1,599
  1,640
  1,686
  1,737
  1,793
  1,855
  1,921
  1,992
  2,068
  2,150
  2,237
  2,330
  2,429
  2,534
  2,645
  2,762
  2,887
  3,018
  3,157
  3,303
  3,457
  3,620
  3,791
  3,972
  4,162
  4,362
  4,572
  4,794
  5,027
Revenue / Adjusted assets
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
Average production assets, $m
  453
  463
  475
  488
  503
  519
  537
  556
  577
  599
  623
  648
  675
  703
  734
  766
  800
  836
  874
  914
  956
  1,001
  1,048
  1,098
  1,150
  1,205
  1,263
  1,324
  1,388
  1,456
Working capital, $m
  244
  249
  256
  263
  271
  280
  289
  300
  311
  323
  335
  349
  363
  379
  395
  412
  431
  450
  471
  492
  515
  539
  565
  591
  619
  649
  680
  713
  748
  784
Total debt, $m
  703
  723
  746
  772
  800
  832
  866
  902
  942
  984
  1,030
  1,078
  1,130
  1,185
  1,243
  1,305
  1,370
  1,439
  1,512
  1,589
  1,671
  1,757
  1,847
  1,942
  2,043
  2,148
  2,260
  2,377
  2,500
  2,629
Total liabilities, $m
  869
  889
  912
  938
  966
  997
  1,031
  1,068
  1,107
  1,150
  1,195
  1,244
  1,296
  1,351
  1,409
  1,471
  1,536
  1,605
  1,678
  1,755
  1,836
  1,922
  2,013
  2,108
  2,208
  2,314
  2,425
  2,542
  2,665
  2,795
Total equity, $m
  694
  710
  728
  749
  771
  796
  823
  853
  884
  918
  955
  993
  1,035
  1,078
  1,125
  1,174
  1,226
  1,282
  1,340
  1,402
  1,467
  1,535
  1,607
  1,683
  1,763
  1,848
  1,937
  2,030
  2,128
  2,232
Total liabilities and equity, $m
  1,563
  1,599
  1,640
  1,687
  1,737
  1,793
  1,854
  1,921
  1,991
  2,068
  2,150
  2,237
  2,331
  2,429
  2,534
  2,645
  2,762
  2,887
  3,018
  3,157
  3,303
  3,457
  3,620
  3,791
  3,971
  4,162
  4,362
  4,572
  4,793
  5,027
Debt-to-equity ratio
  1.010
  1.020
  1.020
  1.030
  1.040
  1.040
  1.050
  1.060
  1.060
  1.070
  1.080
  1.090
  1.090
  1.100
  1.110
  1.110
  1.120
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.170
  1.170
  1.170
  1.180
Adjusted equity ratio
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -18
  -16
  -15
  -12
  -10
  -8
  -5
  -2
  1
  3
  74
  77
  80
  83
  86
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
Depreciation, amort., depletion, $m
  148
  149
  151
  152
  154
  156
  158
  160
  163
  166
  75
  78
  81
  85
  88
  92
  96
  101
  105
  110
  115
  121
  126
  132
  139
  145
  152
  160
  167
  175
Funds from operations, $m
  130
  133
  136
  140
  144
  148
  153
  158
  164
  169
  149
  155
  161
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  283
  297
  311
  325
  341
Change in working capital, $m
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
Cash from operations, $m
  125
  127
  130
  133
  136
  140
  144
  148
  153
  157
  136
  141
  147
  152
  158
  165
  172
  179
  187
  195
  203
  212
  222
  232
  242
  254
  265
  278
  291
  305
Maintenance CAPEX, $m
  -53
  -55
  -56
  -57
  -59
  -61
  -63
  -65
  -67
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -101
  -105
  -110
  -115
  -121
  -126
  -132
  -139
  -145
  -152
  -160
  -167
New CAPEX, $m
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
Cash from investing activities, $m
  -62
  -65
  -68
  -70
  -74
  -77
  -81
  -84
  -88
  -91
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -139
  -145
  -152
  -160
  -168
  -176
  -184
  -194
  -203
  -213
  -224
  -234
Free cash flow, $m
  63
  62
  62
  62
  62
  63
  63
  64
  65
  65
  41
  41
  42
  42
  43
  44
  45
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  65
  67
  70
Issuance/(repayment) of debt, $m
  17
  20
  23
  26
  28
  31
  34
  37
  40
  43
  45
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
Issuance/(repurchase) of shares, $m
  32
  32
  33
  33
  33
  33
  32
  31
  31
  31
  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  
  49
  52
  56
  59
  61
  64
  66
  68
  71
  74
  45
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
Total cash flow (excl. dividends), $m
  112
  115
  118
  121
  124
  127
  129
  132
  135
  139
  86
  90
  93
  97
  102
  106
  111
  116
  121
  126
  132
  138
  145
  151
  158
  166
  173
  182
  190
  199
Retained Cash Flow (-), $m
  -32
  -32
  -33
  -33
  -33
  -33
  -32
  -31
  -32
  -34
  -36
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
Prev. year cash balance distribution, $m
  97
  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
  177
  82
  85
  88
  91
  94
  97
  101
  104
  105
  50
  51
  52
  54
  55
  57
  59
  60
  63
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
Discount rate, %
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
  165
  72
  68
  65
  61
  57
  52
  48
  43
  38
  15
  13
  11
  10
  8
  7
  5
  4
  3
  3
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  96.9
  94.0
  91.2
  88.5
  85.9
  83.6
  81.3
  79.3
  77.4
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7

MACOM Technology Solutions Holdings, Inc. is a provider of high-performance analog semiconductor solutions that enable Internet applications, the cloud-connected applications economy, and the networked battlefield across the radio frequency (RF), microwave, millimeterwave and photonic spectrum. It has multiple design centers, silicon, gallium arsenide and indium phosphide fabrication, manufacturing, assembly and test, and operational facilities throughout North America, Europe, Asia and Australia. It also offers foundry services. It offered a portfolio of over 4,500 standard and custom devices, which include integrated circuits, multi-chip modules, power pallets and transistors, diodes, amplifiers, switches and switch limiters, passive and active components and complete subsystems, across more than 40 product lines serving three primary markets, as of September 30, 2016. The Company's products are RF Power Products, Optoelectronics and Photonic Solutions, among others.

FINANCIAL RATIOS  of  MACOM Technology Solutions Holdings (MTSI)

Valuation Ratios
P/E Ratio -6.7
Price to Sales 1.6
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 18.7
Price to Free Cash Flow 40.7
Growth Rates
Sales Growth Rate 28.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.1%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 27
Current Ratio 0.3
LT Debt to Equity 87.3%
Total Debt to Equity 88.3%
Interest Coverage -1
Management Effectiveness
Return On Assets -5.4%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital -13.5%
Ret/ On T. Cap. - 3 Yr. Avg. -2%
Return On Equity -27.3%
Return On Equity - 3 Yr. Avg. -4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 46.8%
Gross Margin - 3 Yr. Avg. 49%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 11.9%
Operating Margin -2.3%
Oper. Margin - 3 Yr. Avg. 0.8%
Pre-Tax Margin -7.2%
Pre-Tax Margin - 3 Yr. Avg. -4.9%
Net Profit Margin -24.2%
Net Profit Margin - 3 Yr. Avg. -4.1%
Effective Tax Rate -200%
Eff/ Tax Rate - 3 Yr. Avg. -19.4%
Payout Ratio 0%

MTSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTSI stock intrinsic value calculation we used $698.772 million for the last fiscal year's total revenue generated by MACOM Technology Solutions Holdings. The default revenue input number comes from 0001 income statement of MACOM Technology Solutions Holdings. 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 MTSI 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 6.9%, whose default value for MTSI is calculated based on our internal credit rating of MACOM Technology Solutions Holdings, 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 MACOM Technology Solutions Holdings.
    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 MTSI stock the variable cost ratio is equal to 97.6%.

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 MTSI 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 5.4% for MACOM Technology Solutions Holdings.

Corporate tax rate of 27% is the nominal tax rate for MACOM Technology Solutions Holdings. 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 MTSI 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 MTSI are equal to 63.5%.

Life of production assets of 8.3 years is the average useful life of capital assets used in MACOM Technology Solutions Holdings 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 MTSI is equal to 34.2%. 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 - $777.374 million for MACOM Technology Solutions Holdings - 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 65.163 million for MACOM Technology Solutions Holdings 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 MACOM Technology Solutions Holdings at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ M/A-Com (MTSI) Q4 Earnings Match Estimates   [Nov-13-18 05:35PM  Zacks]
▶ Why MACOM Technology Solutions Stock Dropped Today   [Sep-12-18 06:02PM  Motley Fool]
▶ MACOM Reports Fiscal Third Quarter 2018 Financial Results   [Jul-31-18 04:14PM  Business Wire]
▶ MACOM to Participate at Upcoming Financial Conferences   [May-16-18 04:05PM  Business Wire]
▶ MACOM Announces Extension of Revolving Credit Facility   [May-02-18 06:30PM  Business Wire]
▶ MACOM Reports Fiscal Second Quarter 2018 Financial Results   [May-01-18 04:05PM  Business Wire]
▶ Edited Transcript of MTSI presentation 6-Mar-17 8:25pm GMT   [Apr-10-18 11:27AM  Thomson Reuters StreetEvents]
▶ MACOM to Attend Mobile World Congress 2018   [Feb-13-18 08:00AM  Business Wire]
▶ M/A-Com reports 1Q loss   [Feb-06-18 05:35PM  Associated Press]
▶ MACOM to Participate at Upcoming Financial Conferences   [Nov-29-17 08:00AM  Business Wire]
▶ M/A-Com reports 4Q loss   [Nov-16-17 05:14AM  Associated Press]

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