Intrinsic value of MagnaChip Semiconductor - MX

Previous Close

$10.80

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

0%

Previous close

$10.80

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

0%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MX 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 2016), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.52
  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
  688
  702
  718
  736
  757
  780
  805
  833
  862
  894
  929
  965
  1,005
  1,046
  1,091
  1,138
  1,187
  1,240
  1,296
  1,355
  1,417
  1,483
  1,552
  1,625
  1,702
  1,783
  1,869
  1,958
  2,053
  2,152
  2,257
Variable operating expenses, $m
 
  150
  154
  158
  162
  167
  172
  178
  185
  191
  199
  207
  215
  224
  233
  243
  254
  265
  277
  290
  303
  317
  332
  348
  364
  382
  400
  419
  439
  461
  483
Fixed operating expenses, $m
 
  570
  584
  599
  614
  629
  645
  661
  677
  694
  712
  730
  748
  766
  786
  805
  825
  846
  867
  889
  911
  934
  957
  981
  1,006
  1,031
  1,057
  1,083
  1,110
  1,138
  1,166
Total operating expenses, $m
  685
  720
  738
  757
  776
  796
  817
  839
  862
  885
  911
  937
  963
  990
  1,019
  1,048
  1,079
  1,111
  1,144
  1,179
  1,214
  1,251
  1,289
  1,329
  1,370
  1,413
  1,457
  1,502
  1,549
  1,599
  1,649
Operating income, $m
  3
  -18
  -20
  -20
  -19
  -16
  -12
  -6
  0
  9
  18
  29
  42
  56
  72
  89
  108
  129
  152
  176
  203
  232
  263
  296
  332
  371
  412
  456
  503
  554
  608
EBITDA, $m
  28
  7
  6
  7
  9
  13
  18
  24
  32
  41
  52
  64
  78
  94
  111
  130
  151
  174
  199
  226
  255
  286
  320
  356
  394
  436
  480
  528
  578
  633
  690
Interest expense (income), $m
  15
  15
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  30
  32
  34
  37
  40
  43
  46
  49
Earnings before tax, $m
  -26
  -33
  -22
  -23
  -22
  -20
  -17
  -12
  -6
  1
  10
  19
  31
  44
  58
  74
  92
  111
  132
  155
  180
  206
  235
  267
  300
  336
  375
  417
  461
  508
  559
Tax expense, $m
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  3
  5
  8
  12
  16
  20
  25
  30
  36
  42
  48
  56
  64
  72
  81
  91
  101
  112
  124
  137
  151
Net income, $m
  -30
  -33
  -22
  -23
  -22
  -20
  -17
  -12
  -6
  1
  7
  14
  23
  32
  42
  54
  67
  81
  96
  113
  131
  151
  172
  195
  219
  246
  274
  304
  336
  371
  408

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  83
  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
  442
  366
  375
  384
  395
  407
  420
  435
  450
  467
  485
  504
  524
  546
  569
  594
  620
  647
  676
  707
  740
  774
  810
  848
  888
  931
  975
  1,022
  1,071
  1,123
  1,178
Adjusted assets (=assets-cash), $m
  359
  366
  375
  384
  395
  407
  420
  435
  450
  467
  485
  504
  524
  546
  569
  594
  620
  647
  676
  707
  740
  774
  810
  848
  888
  931
  975
  1,022
  1,071
  1,123
  1,178
Revenue / Adjusted assets
  1.916
  1.918
  1.915
  1.917
  1.916
  1.916
  1.917
  1.915
  1.916
  1.914
  1.915
  1.915
  1.918
  1.916
  1.917
  1.916
  1.915
  1.917
  1.917
  1.917
  1.915
  1.916
  1.916
  1.916
  1.917
  1.915
  1.917
  1.916
  1.917
  1.916
  1.916
Average production assets, $m
  189
  192
  197
  202
  207
  214
  221
  228
  236
  245
  254
  264
  275
  287
  299
  312
  325
  340
  355
  371
  388
  406
  425
  445
  466
  489
  512
  537
  562
  590
  618
Working capital, $m
  90
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
Total debt, $m
  221
  37
  44
  53
  63
  73
  85
  98
  112
  127
  143
  160
  179
  198
  219
  241
  265
  290
  316
  343
  373
  404
  436
  470
  507
  545
  585
  627
  671
  718
  767
Total liabilities, $m
  514
  330
  337
  346
  356
  366
  378
  391
  405
  420
  436
  453
  472
  491
  512
  534
  558
  583
  609
  636
  666
  697
  729
  763
  800
  838
  878
  920
  964
  1,011
  1,060
Total equity, $m
  -72
  37
  37
  38
  40
  41
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
  112
  118
Total liabilities and equity, $m
  442
  367
  374
  384
  396
  407
  420
  434
  450
  467
  484
  503
  524
  546
  569
  593
  620
  648
  677
  707
  740
  774
  810
  848
  889
  931
  976
  1,022
  1,071
  1,123
  1,178
Debt-to-equity ratio
  -3.069
  1.000
  1.180
  1.380
  1.580
  1.800
  2.030
  2.260
  2.490
  2.720
  2.950
  3.180
  3.410
  3.630
  3.850
  4.070
  4.270
  4.470
  4.670
  4.860
  5.040
  5.210
  5.380
  5.550
  5.700
  5.850
  6.000
  6.130
  6.270
  6.390
  6.510
Adjusted equity ratio
  -0.432
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -30
  -33
  -22
  -23
  -22
  -20
  -17
  -12
  -6
  1
  7
  14
  23
  32
  42
  54
  67
  81
  96
  113
  131
  151
  172
  195
  219
  246
  274
  304
  336
  371
  408
Depreciation, amort., depletion, $m
  25
  26
  26
  27
  28
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  82
Funds from operations, $m
  -10
  -8
  4
  4
  5
  8
  13
  18
  25
  33
  41
  49
  59
  70
  82
  96
  110
  126
  144
  162
  183
  205
  229
  254
  281
  311
  342
  376
  411
  450
  490
Change in working capital, $m
  -18
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  8
  -8
  4
  4
  5
  8
  12
  18
  25
  33
  41
  49
  59
  70
  82
  95
  110
  126
  143
  162
  182
  204
  228
  253
  281
  310
  341
  375
  410
  449
  489
Maintenance CAPEX, $m
  0
  -25
  -26
  -26
  -27
  -28
  -28
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
New CAPEX, $m
  -20
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
Cash from investing activities, $m
  -16
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -41
  -42
  -44
  -46
  -48
  -50
  -53
  -56
  -57
  -60
  -63
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -93
  -98
  -102
  -108
Free cash flow, $m
  -8
  -37
  -26
  -28
  -27
  -26
  -23
  -19
  -14
  -7
  -2
  5
  13
  22
  31
  42
  54
  68
  82
  98
  116
  134
  155
  177
  200
  225
  253
  282
  313
  346
  382
Issuance/(repayment) of debt, $m
  0
  -184
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
Issuance/(repurchase) of shares, $m
  2
  225
  23
  24
  23
  21
  18
  14
  8
  1
  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  
  2
  41
  31
  33
  33
  32
  30
  27
  22
  16
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
Total cash flow (excl. dividends), $m
  -8
  4
  4
  5
  6
  6
  7
  8
  8
  9
  15
  22
  31
  41
  52
  64
  78
  93
  109
  126
  145
  165
  187
  211
  236
  264
  293
  324
  357
  393
  431
Retained Cash Flow (-), $m
  10
  -225
  -23
  -24
  -23
  -21
  -18
  -14
  -8
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
Prev. year cash balance distribution, $m
 
  83
  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
 
  -138
  -19
  -19
  -18
  -15
  -11
  -6
  0
  7
  13
  20
  29
  39
  50
  62
  75
  90
  106
  123
  142
  162
  184
  207
  232
  259
  288
  319
  352
  388
  426
Discount rate, %
 
  12.50
  13.13
  13.78
  14.47
  15.19
  15.95
  16.75
  17.59
  18.47
  19.39
  20.36
  21.38
  22.45
  23.57
  24.75
  25.99
  27.29
  28.65
  30.08
  31.59
  33.17
  34.82
  36.57
  38.39
  40.31
  42.33
  44.45
  46.67
  49.00
  51.45
PV of cash for distribution, $m
 
  -123
  -15
  -13
  -10
  -7
  -5
  -2
  0
  2
  2
  3
  3
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  30.6
  18.7
  11.6
  7.5
  5.2
  3.9
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3
  3.3

MagnaChip Semiconductor Corporation is a designer and manufacturer of analog and mixed-signal semiconductor products for consumer, computing, communication, industrial, automotive and Internet of Things (IoT) applications. The Company provides technology platforms for analog, mixed signal, power, high voltage, non-volatile memory and Radio Frequency (RF) applications. The Company has two segments: Foundry Services Group and Standard Products Group. The Company's Foundry Services Group provides analog and mixed-signal foundry services to semiconductor companies and Integrated Device Manufacturers (IDMs) that serve consumer, computing, communication, industrial, automotive and IoT applications. The Company manufactures wafers-based on its customers’ product designs. The Company's Standard Products Group includes its Display Solutions and Power Solutions business lines.

FINANCIAL RATIOS  of  MagnaChip Semiconductor (MX)

Valuation Ratios
P/E Ratio -12.6
Price to Sales 0.6
Price to Book -5.3
Price to Tangible Book
Price to Cash Flow 47.3
Price to Free Cash Flow -31.5
Growth Rates
Sales Growth Rate 8.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 185.7%
Cap. Spend. - 3 Yr. Gr. Rate -14.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity -306.9%
Total Debt to Equity -306.9%
Interest Coverage -1
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. -11.6%
Return On Total Capital -19.5%
Ret/ On T. Cap. - 3 Yr. Avg. -37.4%
Return On Equity 44.8%
Return On Equity - 3 Yr. Avg. -38.9%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 22.7%
Gross Margin - 3 Yr. Avg. 22%
EBITDA Margin 2%
EBITDA Margin - 3 Yr. Avg. -5.8%
Operating Margin 0.4%
Oper. Margin - 3 Yr. Avg. -5.8%
Pre-Tax Margin -3.8%
Pre-Tax Margin - 3 Yr. Avg. -12.1%
Net Profit Margin -4.4%
Net Profit Margin - 3 Yr. Avg. -11.5%
Effective Tax Rate -15.4%
Eff/ Tax Rate - 3 Yr. Avg. -0.4%
Payout Ratio 0%

MX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MX stock intrinsic value calculation we used $688 million for the last fiscal year's total revenue generated by MagnaChip Semiconductor. The default revenue input number comes from 2016 income statement of MagnaChip 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 MX 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 12.5%, whose default value for MX is calculated based on our internal credit rating of MagnaChip 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 MagnaChip 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 MX stock the variable cost ratio is equal to 21.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $556 million in the base year in the intrinsic value calculation for MX 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 6.8% for MagnaChip Semiconductor.

Corporate tax rate of 27% is the nominal tax rate for MagnaChip 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 MX 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 MX are equal to 27.4%.

Life of production assets of 7.5 years is the average useful life of capital assets used in MagnaChip 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 MX is equal to 1%. 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 - $-72 million for MagnaChip 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 39.904 million for MagnaChip 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 MagnaChip Semiconductor at the current share price and the inputted number of shares is $0.4 billion.

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Financial statements of MX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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