Intrinsic value of NeoPhotonics Corporation - NPTN

Previous Close

$6.73

  Intrinsic Value

$13.09

stock screener

  Rating & Target

str. buy

+95%

Previous close

$6.73

 
Intrinsic value

$13.09

 
Up/down potential

+95%

 
Rating

str. buy

We calculate the intrinsic value of NPTN 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 0.3

 

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, %
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  383
  448
  520
  597
  680
  768
  861
  960
  1,064
  1,173
  1,287
  1,405
  1,529
  1,658
  1,792
  1,932
  2,077
  2,227
  2,384
  2,546
  2,715
  2,891
  3,074
  3,265
  3,463
  3,670
  3,886
  4,110
  4,345
  4,590
Variable operating expenses, $m
  254
  297
  344
  395
  450
  509
  570
  636
  704
  776
  851
  930
  1,012
  1,097
  1,186
  1,278
  1,374
  1,474
  1,577
  1,685
  1,797
  1,913
  2,035
  2,161
  2,292
  2,429
  2,571
  2,720
  2,875
  3,037
Fixed operating expenses, $m
  156
  160
  163
  167
  171
  174
  178
  182
  186
  190
  194
  199
  203
  207
  212
  217
  221
  226
  231
  236
  242
  247
  252
  258
  264
  269
  275
  281
  288
  294
Total operating expenses, $m
  410
  457
  507
  562
  621
  683
  748
  818
  890
  966
  1,045
  1,129
  1,215
  1,304
  1,398
  1,495
  1,595
  1,700
  1,808
  1,921
  2,039
  2,160
  2,287
  2,419
  2,556
  2,698
  2,846
  3,001
  3,163
  3,331
Operating income, $m
  -27
  -9
  12
  35
  59
  85
  113
  142
  173
  206
  241
  277
  314
  353
  394
  437
  481
  527
  575
  625
  677
  731
  787
  846
  908
  972
  1,039
  1,109
  1,182
  1,259
EBITDA, $m
  1
  24
  50
  78
  108
  141
  175
  212
  250
  291
  333
  378
  424
  473
  523
  576
  630
  687
  747
  808
  872
  939
  1,009
  1,081
  1,157
  1,236
  1,319
  1,405
  1,495
  1,589
Interest expense (income), $m
  0
  3
  5
  7
  9
  11
  14
  17
  19
  22
  26
  29
  32
  36
  40
  43
  48
  52
  56
  61
  65
  70
  75
  81
  86
  92
  98
  104
  111
  117
  125
Earnings before tax, $m
  -30
  -13
  5
  26
  47
  71
  96
  123
  151
  181
  212
  244
  278
  314
  351
  389
  429
  471
  514
  559
  607
  656
  707
  760
  816
  874
  935
  998
  1,065
  1,134
Tax expense, $m
  0
  0
  1
  7
  13
  19
  26
  33
  41
  49
  57
  66
  75
  85
  95
  105
  116
  127
  139
  151
  164
  177
  191
  205
  220
  236
  252
  270
  287
  306
Net income, $m
  -30
  -13
  4
  19
  35
  52
  70
  90
  110
  132
  155
  178
  203
  229
  256
  284
  313
  344
  375
  408
  443
  479
  516
  555
  596
  638
  682
  729
  777
  828

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
  404
  473
  548
  630
  717
  810
  909
  1,013
  1,122
  1,237
  1,357
  1,482
  1,613
  1,749
  1,891
  2,038
  2,191
  2,349
  2,514
  2,686
  2,864
  3,050
  3,243
  3,444
  3,653
  3,871
  4,099
  4,336
  4,583
  4,841
Adjusted assets (=assets-cash), $m
  404
  473
  548
  630
  717
  810
  909
  1,013
  1,122
  1,237
  1,357
  1,482
  1,613
  1,749
  1,891
  2,038
  2,191
  2,349
  2,514
  2,686
  2,864
  3,050
  3,243
  3,444
  3,653
  3,871
  4,099
  4,336
  4,583
  4,841
Revenue / Adjusted assets
  0.948
  0.947
  0.949
  0.948
  0.948
  0.948
  0.947
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
  0.948
Average production assets, $m
  138
  161
  187
  215
  245
  276
  310
  346
  383
  422
  463
  506
  551
  597
  645
  695
  748
  802
  858
  917
  978
  1,041
  1,107
  1,175
  1,247
  1,321
  1,399
  1,480
  1,564
  1,652
Working capital, $m
  57
  66
  77
  88
  101
  114
  127
  142
  157
  174
  190
  208
  226
  245
  265
  286
  307
  330
  353
  377
  402
  428
  455
  483
  513
  543
  575
  608
  643
  679
Total debt, $m
  92
  128
  168
  212
  258
  307
  359
  415
  473
  533
  597
  664
  733
  805
  880
  958
  1,039
  1,123
  1,210
  1,301
  1,396
  1,494
  1,597
  1,703
  1,814
  1,930
  2,050
  2,176
  2,307
  2,444
Total liabilities, $m
  214
  251
  291
  334
  380
  429
  482
  537
  595
  656
  719
  786
  855
  927
  1,002
  1,080
  1,161
  1,245
  1,333
  1,424
  1,518
  1,616
  1,719
  1,825
  1,936
  2,052
  2,172
  2,298
  2,429
  2,566
Total equity, $m
  190
  222
  258
  296
  337
  381
  427
  476
  527
  581
  638
  697
  758
  822
  889
  958
  1,030
  1,104
  1,182
  1,262
  1,346
  1,433
  1,524
  1,619
  1,717
  1,820
  1,926
  2,038
  2,154
  2,275
Total liabilities and equity, $m
  404
  473
  549
  630
  717
  810
  909
  1,013
  1,122
  1,237
  1,357
  1,483
  1,613
  1,749
  1,891
  2,038
  2,191
  2,349
  2,515
  2,686
  2,864
  3,049
  3,243
  3,444
  3,653
  3,872
  4,098
  4,336
  4,583
  4,841
Debt-to-equity ratio
  0.480
  0.580
  0.650
  0.710
  0.770
  0.810
  0.840
  0.870
  0.900
  0.920
  0.940
  0.950
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.020
  1.030
  1.040
  1.040
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
Adjusted equity ratio
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -30
  -13
  4
  19
  35
  52
  70
  90
  110
  132
  155
  178
  203
  229
  256
  284
  313
  344
  375
  408
  443
  479
  516
  555
  596
  638
  682
  729
  777
  828
Depreciation, amort., depletion, $m
  28
  33
  38
  43
  49
  56
  62
  70
  77
  85
  93
  101
  110
  119
  129
  139
  150
  160
  172
  183
  196
  208
  221
  235
  249
  264
  280
  296
  313
  330
Funds from operations, $m
  -2
  19
  42
  62
  84
  108
  133
  159
  187
  217
  247
  280
  313
  348
  385
  423
  463
  504
  547
  592
  638
  687
  737
  790
  845
  902
  962
  1,025
  1,090
  1,158
Change in working capital, $m
  9
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
Cash from operations, $m
  -11
  9
  31
  51
  72
  95
  119
  145
  172
  201
  231
  262
  295
  329
  365
  403
  441
  482
  524
  568
  613
  661
  710
  762
  816
  872
  930
  991
  1,055
  1,122
Maintenance CAPEX, $m
  -23
  -28
  -32
  -37
  -43
  -49
  -55
  -62
  -69
  -77
  -84
  -93
  -101
  -110
  -119
  -129
  -139
  -150
  -160
  -172
  -183
  -196
  -208
  -221
  -235
  -249
  -264
  -280
  -296
  -313
New CAPEX, $m
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -78
  -81
  -84
  -88
Cash from investing activities, $m
  -45
  -52
  -58
  -65
  -73
  -81
  -89
  -98
  -106
  -116
  -125
  -136
  -146
  -156
  -167
  -179
  -191
  -204
  -216
  -231
  -244
  -259
  -274
  -290
  -306
  -323
  -342
  -361
  -380
  -401
Free cash flow, $m
  -56
  -42
  -27
  -15
  -1
  14
  30
  47
  65
  85
  105
  127
  149
  173
  198
  223
  250
  278
  307
  338
  369
  402
  436
  472
  509
  548
  588
  631
  675
  721
Issuance/(repayment) of debt, $m
  34
  37
  40
  43
  46
  49
  52
  55
  58
  61
  64
  66
  69
  72
  75
  78
  81
  84
  87
  91
  95
  98
  102
  107
  111
  116
  120
  126
  131
  137
Issuance/(repurchase) of shares, $m
  60
  46
  32
  20
  6
  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  
  94
  83
  72
  63
  52
  49
  52
  55
  58
  61
  64
  66
  69
  72
  75
  78
  81
  84
  87
  91
  95
  98
  102
  107
  111
  116
  120
  126
  131
  137
Total cash flow (excl. dividends), $m
  37
  41
  45
  48
  52
  63
  82
  102
  123
  146
  169
  193
  218
  245
  273
  301
  331
  362
  395
  428
  464
  500
  538
  578
  620
  663
  709
  756
  806
  858
Retained Cash Flow (-), $m
  -60
  -46
  -35
  -38
  -41
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -107
  -111
  -116
  -121
Prev. year cash balance distribution, $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 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
  -22
  -5
  9
  10
  11
  19
  36
  53
  72
  92
  112
  134
  157
  181
  206
  232
  259
  288
  317
  348
  380
  413
  448
  484
  522
  561
  602
  645
  690
  737
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
  -22
  -5
  8
  8
  8
  14
  24
  33
  41
  48
  53
  57
  60
  61
  60
  59
  56
  53
  49
  44
  39
  34
  29
  25
  20
  16
  13
  10
  8
  6
Current shareholders' claim on cash, %
  83.9
  74.6
  69.5
  66.9
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2
  66.2

NeoPhotonics Corporation develops, manufactures and markets optoelectronic products that transmit, receive and switch digital optical signals for communications networks. The Company develops and manufactures Transmitter Products, Receiver Products and Switch Products that are used in ultra-high speed digital optical communications, high speed switching and provisioning, and access connections for wireless and fiber-to-the-home communications networks. The Company's products are categorized into groups, including High Speed Products and Network Products and Solutions. The High Speed Products includes products designed for 100G and beyond for telecommunication and datacenter or content provider networks and applications. Its Network Products and Solutions consist of various products designed for applications below 100G, and include 40G products. The Company combines its transmitter and receiver products into Transceiver modules.

FINANCIAL RATIOS  of  NeoPhotonics Corporation (NPTN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.7
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 5.3
Price to Free Cash Flow 143.1
Growth Rates
Sales Growth Rate 21.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 205.9%
Cap. Spend. - 3 Yr. Gr. Rate 21.1%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 4.4%
Total Debt to Equity 18.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -1.6%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -2.6%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -3.2%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 28.5%
Gross Margin - 3 Yr. Avg. 27.1%
EBITDA Margin 6.1%
EBITDA Margin - 3 Yr. Avg. 5.8%
Operating Margin 0.7%
Oper. Margin - 3 Yr. Avg. -1.4%
Pre-Tax Margin 0.7%
Pre-Tax Margin - 3 Yr. Avg. -0.9%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -1.8%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 41.7%
Payout Ratio 0%

NPTN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NPTN stock intrinsic value calculation we used $323 million for the last fiscal year's total revenue generated by NeoPhotonics Corporation. The default revenue input number comes from 0001 income statement of NeoPhotonics Corporation. 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 NPTN stock valuation model: a) initial revenue growth rate of 18.5% 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 NPTN is calculated based on our internal credit rating of NeoPhotonics Corporation, 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 NeoPhotonics Corporation.
    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 NPTN stock the variable cost ratio is equal to 66.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $153 million in the base year in the intrinsic value calculation for NPTN 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 NeoPhotonics Corporation.

Corporate tax rate of 27% is the nominal tax rate for NeoPhotonics Corporation. 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 NPTN 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 NPTN are equal to 36%.

Life of production assets of 3.8 years is the average useful life of capital assets used in NeoPhotonics Corporation 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 NPTN is equal to 14.8%. 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 - $160.24 million for NeoPhotonics Corporation - 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 46.427 million for NeoPhotonics Corporation 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 NeoPhotonics Corporation at the current share price and the inputted number of shares is $0.3 billion.

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