Intrinsic value of MACOM Technology Solutions Holdings, Inc - MTSI

Previous Close

$17.97

  Intrinsic Value

$20.87

stock screener

  Rating & Target

hold

+16%

Previous close

$17.97

 
Intrinsic value

$20.87

 
Up/down potential

+16%

 
Rating

hold

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, %
  15.10
  14.09
  13.18
  12.36
  11.63
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.11
  5.99
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
Revenue, $m
  656
  749
  847
  952
  1,063
  1,179
  1,301
  1,429
  1,563
  1,702
  1,847
  1,998
  2,155
  2,318
  2,488
  2,664
  2,847
  3,037
  3,235
  3,441
  3,655
  3,878
  4,111
  4,353
  4,606
  4,869
  5,145
  5,432
  5,732
  6,046
Variable operating expenses, $m
  181
  195
  210
  225
  242
  259
  278
  297
  317
  338
  277
  300
  323
  348
  373
  399
  427
  455
  485
  516
  548
  581
  616
  653
  690
  730
  771
  814
  859
  906
Fixed operating expenses, $m
  531
  543
  555
  567
  580
  593
  606
  619
  633
  646
  661
  675
  690
  705
  721
  737
  753
  769
  786
  804
  821
  839
  858
  877
  896
  916
  936
  956
  977
  999
Total operating expenses, $m
  712
  738
  765
  792
  822
  852
  884
  916
  950
  984
  938
  975
  1,013
  1,053
  1,094
  1,136
  1,180
  1,224
  1,271
  1,320
  1,369
  1,420
  1,474
  1,530
  1,586
  1,646
  1,707
  1,770
  1,836
  1,905
Operating income, $m
  -56
  10
  82
  159
  241
  327
  418
  513
  613
  718
  910
  1,023
  1,142
  1,265
  1,394
  1,528
  1,667
  1,812
  1,964
  2,121
  2,286
  2,457
  2,637
  2,824
  3,019
  3,224
  3,438
  3,661
  3,896
  4,141
EBITDA, $m
  100
  177
  260
  349
  442
  542
  646
  756
  871
  991
  1,116
  1,247
  1,383
  1,525
  1,672
  1,826
  1,986
  2,152
  2,326
  2,507
  2,695
  2,892
  3,097
  3,311
  3,535
  3,769
  4,014
  4,270
  4,538
  4,818
Interest expense (income), $m
  31
  38
  44
  51
  59
  67
  75
  84
  94
  103
  114
  124
  135
  147
  159
  171
  184
  198
  212
  226
  242
  257
  274
  291
  309
  327
  346
  367
  388
  410
  433
Earnings before tax, $m
  -94
  -34
  31
  100
  174
  252
  334
  420
  510
  604
  785
  888
  995
  1,107
  1,223
  1,343
  1,469
  1,601
  1,737
  1,880
  2,029
  2,184
  2,346
  2,515
  2,692
  2,877
  3,071
  3,274
  3,486
  3,708
Tax expense, $m
  0
  0
  8
  27
  47
  68
  90
  113
  138
  163
  212
  240
  269
  299
  330
  363
  397
  432
  469
  508
  548
  590
  633
  679
  727
  777
  829
  884
  941
  1,001
Net income, $m
  -94
  -34
  23
  73
  127
  184
  244
  306
  372
  441
  573
  648
  726
  808
  892
  981
  1,073
  1,168
  1,268
  1,372
  1,481
  1,594
  1,713
  1,836
  1,965
  2,100
  2,242
  2,390
  2,545
  2,707

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
  1,600
  1,826
  2,066
  2,322
  2,592
  2,876
  3,174
  3,486
  3,812
  4,152
  4,505
  4,873
  5,256
  5,654
  6,067
  6,497
  6,943
  7,407
  7,890
  8,392
  8,915
  9,459
  10,026
  10,617
  11,233
  11,877
  12,548
  13,249
  13,981
  14,747
Adjusted assets (=assets-cash), $m
  1,600
  1,826
  2,066
  2,322
  2,592
  2,876
  3,174
  3,486
  3,812
  4,152
  4,505
  4,873
  5,256
  5,654
  6,067
  6,497
  6,943
  7,407
  7,890
  8,392
  8,915
  9,459
  10,026
  10,617
  11,233
  11,877
  12,548
  13,249
  13,981
  14,747
Revenue / Adjusted assets
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
Average production assets, $m
  669
  763
  863
  970
  1,083
  1,201
  1,326
  1,456
  1,593
  1,734
  1,882
  2,036
  2,196
  2,362
  2,535
  2,714
  2,901
  3,095
  3,296
  3,506
  3,724
  3,952
  4,189
  4,436
  4,693
  4,962
  5,242
  5,535
  5,841
  6,161
Working capital, $m
  192
  219
  247
  278
  310
  344
  380
  417
  456
  497
  539
  583
  629
  677
  726
  778
  831
  887
  945
  1,005
  1,067
  1,132
  1,200
  1,271
  1,345
  1,422
  1,502
  1,586
  1,674
  1,766
Total debt, $m
  818
  949
  1,089
  1,237
  1,394
  1,559
  1,732
  1,914
  2,103
  2,300
  2,506
  2,720
  2,942
  3,173
  3,413
  3,663
  3,922
  4,192
  4,472
  4,764
  5,068
  5,384
  5,713
  6,057
  6,415
  6,789
  7,179
  7,586
  8,012
  8,456
Total liabilities, $m
  930
  1,061
  1,201
  1,349
  1,506
  1,671
  1,844
  2,025
  2,215
  2,412
  2,618
  2,831
  3,054
  3,285
  3,525
  3,775
  4,034
  4,304
  4,584
  4,876
  5,179
  5,496
  5,825
  6,169
  6,527
  6,900
  7,290
  7,698
  8,123
  8,568
Total equity, $m
  670
  765
  866
  973
  1,086
  1,205
  1,330
  1,461
  1,597
  1,740
  1,888
  2,042
  2,202
  2,369
  2,542
  2,722
  2,909
  3,104
  3,306
  3,516
  3,735
  3,963
  4,201
  4,449
  4,707
  4,976
  5,258
  5,551
  5,858
  6,179
Total liabilities and equity, $m
  1,600
  1,826
  2,067
  2,322
  2,592
  2,876
  3,174
  3,486
  3,812
  4,152
  4,506
  4,873
  5,256
  5,654
  6,067
  6,497
  6,943
  7,408
  7,890
  8,392
  8,914
  9,459
  10,026
  10,618
  11,234
  11,876
  12,548
  13,249
  13,981
  14,747
Debt-to-equity ratio
  1.220
  1.240
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.320
  1.330
  1.330
  1.340
  1.340
  1.340
  1.350
  1.350
  1.350
  1.350
  1.350
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.370
  1.370
  1.370
  1.370
Adjusted equity ratio
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -94
  -34
  23
  73
  127
  184
  244
  306
  372
  441
  573
  648
  726
  808
  892
  981
  1,073
  1,168
  1,268
  1,372
  1,481
  1,594
  1,713
  1,836
  1,965
  2,100
  2,242
  2,390
  2,545
  2,707
Depreciation, amort., depletion, $m
  156
  167
  178
  189
  202
  215
  228
  243
  258
  273
  207
  224
  241
  260
  279
  298
  319
  340
  362
  385
  409
  434
  460
  487
  516
  545
  576
  608
  642
  677
Funds from operations, $m
  62
  133
  200
  263
  329
  399
  472
  549
  630
  714
  780
  872
  968
  1,067
  1,171
  1,279
  1,391
  1,508
  1,630
  1,758
  1,890
  2,028
  2,173
  2,324
  2,481
  2,646
  2,818
  2,998
  3,187
  3,384
Change in working capital, $m
  25
  27
  29
  31
  32
  34
  36
  37
  39
  41
  42
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
Cash from operations, $m
  37
  106
  171
  232
  296
  365
  436
  512
  591
  674
  738
  828
  922
  1,020
  1,122
  1,228
  1,338
  1,453
  1,573
  1,697
  1,828
  1,963
  2,105
  2,253
  2,407
  2,569
  2,738
  2,914
  3,099
  3,292
Maintenance CAPEX, $m
  -64
  -73
  -84
  -95
  -107
  -119
  -132
  -146
  -160
  -175
  -191
  -207
  -224
  -241
  -260
  -279
  -298
  -319
  -340
  -362
  -385
  -409
  -434
  -460
  -487
  -516
  -545
  -576
  -608
  -642
New CAPEX, $m
  -88
  -94
  -101
  -107
  -113
  -119
  -125
  -130
  -136
  -142
  -148
  -154
  -160
  -166
  -173
  -179
  -187
  -194
  -202
  -210
  -218
  -227
  -237
  -247
  -258
  -269
  -280
  -293
  -306
  -320
Cash from investing activities, $m
  -152
  -167
  -185
  -202
  -220
  -238
  -257
  -276
  -296
  -317
  -339
  -361
  -384
  -407
  -433
  -458
  -485
  -513
  -542
  -572
  -603
  -636
  -671
  -707
  -745
  -785
  -825
  -869
  -914
  -962
Free cash flow, $m
  -114
  -62
  -13
  30
  77
  127
  180
  236
  295
  357
  399
  467
  538
  612
  689
  770
  853
  940
  1,031
  1,125
  1,224
  1,327
  1,434
  1,546
  1,662
  1,784
  1,912
  2,045
  2,185
  2,331
Issuance/(repayment) of debt, $m
  123
  131
  140
  148
  157
  165
  173
  181
  189
  197
  206
  214
  222
  231
  240
  250
  259
  270
  280
  292
  304
  316
  329
  343
  358
  374
  390
  407
  426
  445
Issuance/(repurchase) of shares, $m
  182
  128
  78
  34
  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  
  305
  259
  218
  182
  157
  165
  173
  181
  189
  197
  206
  214
  222
  231
  240
  250
  259
  270
  280
  292
  304
  316
  329
  343
  358
  374
  390
  407
  426
  445
Total cash flow (excl. dividends), $m
  190
  197
  205
  213
  234
  292
  353
  417
  484
  554
  605
  681
  761
  843
  929
  1,019
  1,113
  1,210
  1,311
  1,417
  1,528
  1,643
  1,763
  1,889
  2,020
  2,158
  2,302
  2,453
  2,610
  2,776
Retained Cash Flow (-), $m
  -182
  -128
  -101
  -107
  -113
  -119
  -125
  -131
  -137
  -142
  -148
  -154
  -160
  -167
  -173
  -180
  -187
  -194
  -202
  -210
  -219
  -228
  -238
  -248
  -258
  -269
  -281
  -294
  -307
  -321
Prev. year cash balance distribution, $m
  86
  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
  95
  69
  104
  106
  121
  173
  228
  286
  348
  412
  457
  527
  600
  677
  756
  839
  925
  1,015
  1,109
  1,207
  1,309
  1,415
  1,526
  1,641
  1,762
  1,889
  2,021
  2,159
  2,303
  2,455
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
  88
  59
  82
  75
  77
  99
  115
  126
  132
  133
  125
  119
  111
  101
  90
  78
  66
  54
  44
  34
  26
  20
  14
  10
  7
  5
  3
  2
  1
  1
Current shareholders' claim on cash, %
  84.9
  76.5
  72.3
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7
  70.7

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, Inc (MTSI)

Valuation Ratios
P/E Ratio -6.8
Price to Sales 1.7
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 18.9
Price to Free Cash Flow 41.2
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 $570 million for the last fiscal year's total revenue generated by MACOM Technology Solutions Holdings, Inc. The default revenue input number comes from 0001 income statement of MACOM Technology Solutions Holdings, 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 MTSI stock valuation model: a) initial revenue growth rate of 15.1% 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 MTSI is calculated based on our internal credit rating of MACOM Technology Solutions Holdings, 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 MACOM Technology Solutions Holdings, 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 MTSI stock the variable cost ratio is equal to 29.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $520 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, Inc.

Corporate tax rate of 27% is the nominal tax rate for MACOM Technology Solutions Holdings, 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 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 101.9%.

Life of production assets of 9.1 years is the average useful life of capital assets used in MACOM Technology Solutions Holdings, 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 MTSI is equal to 29.2%. 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 - $668.675 million for MACOM Technology Solutions Holdings, 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 65.150 million for MACOM Technology Solutions Holdings, 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 MACOM Technology Solutions Holdings, Inc at the current share price and the inputted number of shares is $1.2 billion.

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