Intrinsic value of Nova Measuring Instruments Ltd. - NVMI

Previous Close

$25.02

  Intrinsic Value

$37.17

stock screener

  Rating & Target

buy

+49%

Previous close

$25.02

 
Intrinsic value

$37.17

 
Up/down potential

+49%

 
Rating

buy

We calculate the intrinsic value of NVMI 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 0.7

 

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, %
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  284
  319
  356
  394
  435
  478
  522
  568
  617
  667
  719
  773
  830
  888
  949
  1,012
  1,078
  1,147
  1,218
  1,292
  1,369
  1,450
  1,534
  1,622
  1,713
  1,809
  1,909
  2,013
  2,123
  2,237
Variable operating expenses, $m
  210
  235
  262
  291
  320
  351
  384
  417
  453
  489
  524
  564
  605
  648
  692
  738
  786
  836
  888
  942
  998
  1,057
  1,118
  1,182
  1,249
  1,319
  1,392
  1,468
  1,547
  1,631
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
  210
  235
  262
  291
  320
  351
  384
  417
  453
  489
  524
  564
  605
  648
  692
  738
  786
  836
  888
  942
  998
  1,057
  1,118
  1,182
  1,249
  1,319
  1,392
  1,468
  1,547
  1,631
Operating income, $m
  74
  83
  93
  104
  115
  126
  138
  151
  164
  178
  195
  210
  225
  241
  257
  274
  292
  311
  330
  350
  371
  393
  416
  439
  464
  490
  517
  546
  575
  606
EBITDA, $m
  83
  93
  103
  115
  127
  139
  152
  165
  179
  194
  209
  225
  241
  258
  276
  295
  314
  334
  354
  376
  398
  422
  446
  472
  499
  526
  555
  586
  618
  651
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
Earnings before tax, $m
  74
  83
  93
  103
  113
  124
  136
  148
  160
  174
  190
  204
  219
  234
  250
  266
  283
  301
  320
  339
  359
  380
  402
  425
  449
  474
  500
  527
  555
  585
Tax expense, $m
  20
  22
  25
  28
  31
  34
  37
  40
  43
  47
  51
  55
  59
  63
  67
  72
  77
  81
  86
  92
  97
  103
  109
  115
  121
  128
  135
  142
  150
  158
Net income, $m
  54
  61
  68
  75
  83
  91
  99
  108
  117
  127
  139
  149
  160
  171
  182
  194
  207
  220
  233
  248
  262
  278
  294
  310
  328
  346
  365
  385
  405
  427

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
  233
  261
  291
  323
  357
  392
  428
  466
  505
  547
  589
  634
  680
  728
  778
  830
  884
  940
  998
  1,059
  1,122
  1,189
  1,257
  1,329
  1,404
  1,483
  1,565
  1,650
  1,740
  1,833
Adjusted assets (=assets-cash), $m
  233
  261
  291
  323
  357
  392
  428
  466
  505
  547
  589
  634
  680
  728
  778
  830
  884
  940
  998
  1,059
  1,122
  1,189
  1,257
  1,329
  1,404
  1,483
  1,565
  1,650
  1,740
  1,833
Revenue / Adjusted assets
  1.219
  1.222
  1.223
  1.220
  1.218
  1.219
  1.220
  1.219
  1.222
  1.219
  1.221
  1.219
  1.221
  1.220
  1.220
  1.219
  1.219
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
Average production assets, $m
  33
  38
  42
  47
  51
  56
  62
  67
  73
  79
  85
  91
  98
  105
  112
  119
  127
  135
  144
  152
  162
  171
  181
  191
  202
  213
  225
  238
  250
  264
Working capital, $m
  65
  73
  82
  91
  100
  110
  120
  131
  142
  153
  165
  178
  191
  204
  218
  233
  248
  264
  280
  297
  315
  334
  353
  373
  394
  416
  439
  463
  488
  514
Total debt, $m
  7
  14
  22
  30
  39
  48
  57
  67
  77
  87
  98
  110
  121
  134
  146
  160
  174
  188
  203
  218
  235
  252
  269
  288
  307
  327
  348
  370
  393
  417
Total liabilities, $m
  60
  67
  75
  83
  91
  100
  110
  119
  129
  140
  151
  162
  174
  186
  199
  212
  226
  241
  256
  271
  287
  304
  322
  340
  360
  380
  401
  422
  445
  469
Total equity, $m
  173
  194
  217
  241
  265
  291
  318
  347
  376
  407
  438
  472
  506
  542
  579
  617
  657
  699
  743
  788
  835
  884
  936
  989
  1,045
  1,103
  1,164
  1,228
  1,294
  1,364
Total liabilities and equity, $m
  233
  261
  292
  324
  356
  391
  428
  466
  505
  547
  589
  634
  680
  728
  778
  829
  883
  940
  999
  1,059
  1,122
  1,188
  1,258
  1,329
  1,405
  1,483
  1,565
  1,650
  1,739
  1,833
Debt-to-equity ratio
  0.040
  0.070
  0.100
  0.130
  0.150
  0.160
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.270
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.310
Adjusted equity ratio
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  54
  61
  68
  75
  83
  91
  99
  108
  117
  127
  139
  149
  160
  171
  182
  194
  207
  220
  233
  248
  262
  278
  294
  310
  328
  346
  365
  385
  405
  427
Depreciation, amort., depletion, $m
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  14
  15
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  45
Funds from operations, $m
  63
  70
  78
  86
  94
  103
  113
  122
  132
  143
  153
  165
  176
  189
  201
  215
  229
  243
  258
  273
  290
  307
  324
  343
  362
  382
  403
  425
  448
  472
Change in working capital, $m
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
Cash from operations, $m
  55
  62
  69
  77
  85
  94
  102
  112
  121
  131
  141
  152
  163
  175
  187
  200
  213
  227
  241
  256
  272
  288
  305
  322
  341
  360
  380
  401
  423
  445
Maintenance CAPEX, $m
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
New CAPEX, $m
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
Cash from investing activities, $m
  -9
  -10
  -10
  -12
  -13
  -14
  -15
  -15
  -17
  -18
  -19
  -20
  -22
  -24
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
Free cash flow, $m
  46
  52
  59
  65
  72
  80
  88
  96
  104
  113
  122
  131
  141
  152
  162
  174
  185
  197
  210
  223
  237
  251
  266
  281
  298
  314
  332
  350
  369
  389
Issuance/(repayment) of debt, $m
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  53
  59
  66
  73
  81
  89
  97
  106
  114
  124
  133
  143
  153
  164
  175
  187
  199
  212
  225
  239
  253
  268
  284
  300
  317
  334
  353
  372
  392
  413
Retained Cash Flow (-), $m
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
Prev. year cash balance distribution, $m
  128
  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
  161
  38
  44
  50
  56
  63
  70
  77
  85
  93
  101
  110
  119
  128
  138
  148
  159
  170
  182
  194
  206
  219
  232
  246
  261
  276
  292
  308
  326
  344
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
  154
  35
  38
  41
  43
  46
  47
  48
  49
  49
  48
  47
  45
  43
  41
  38
  35
  31
  28
  25
  21
  18
  15
  13
  10
  8
  6
  5
  4
  3
Current shareholders' claim on cash, %
  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
  100.0

Nova Measuring Instruments Ltd. provides metrology solutions for the semiconductor manufacturing industry. The Company offers in-line Optical and x-ray stand-alone metrology systems, as well as integrated optical metrology systems, which are attached directly to wafer fabrication process equipment. Its metrology systems measure various film thickness and composition properties, as well as critical-dimension (CD) variables during various front-end and back-end of line steps in the semiconductor wafer fabrication process. Its product portfolio includes a set of in-situ, integrated and stand-alone metrology platforms suited for dimensional, films and material metrology measurements for process control across multiple semiconductor manufacturing process steps. Its products include NovaScan 2040, NovaScan 3090Next, Nova i500, Nova T500, Nova T600, Nova V2600 TSV metrology system, NovaMars, Nova Hybrid Metrology solution, Nova Fleet Management, VeraFlex II, VeraFlex III XF and QED.

FINANCIAL RATIOS  of  Nova Measuring Instruments Ltd. (NVMI)

Valuation Ratios
P/E Ratio 67.8
Price to Sales 4.1
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow -169.4
Price to Free Cash Flow -96.8
Growth Rates
Sales Growth Rate 10.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 8.2%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 6%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 45.7%
Gross Margin - 3 Yr. Avg. 50.1%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 14.4%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 9.4%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 10.8%
Effective Tax Rate 9.1%
Eff/ Tax Rate - 3 Yr. Avg. -12%
Payout Ratio 0%

NVMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NVMI stock intrinsic value calculation we used $251 million for the last fiscal year's total revenue generated by Nova Measuring Instruments Ltd.. The default revenue input number comes from 0001 income statement of Nova Measuring Instruments Ltd.. 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 NVMI stock valuation model: a) initial revenue growth rate of 13.1% 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 4.3%, whose default value for NVMI is calculated based on our internal credit rating of Nova Measuring Instruments Ltd., 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 Nova Measuring Instruments Ltd..
    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 NVMI stock the variable cost ratio is equal to 74.1%.

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 NVMI 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 Nova Measuring Instruments Ltd..

Corporate tax rate of 27% is the nominal tax rate for Nova Measuring Instruments Ltd.. 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 NVMI 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 NVMI are equal to 11.8%.

Life of production assets of 5.9 years is the average useful life of capital assets used in Nova Measuring Instruments Ltd. 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 NVMI is equal to 23%. 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 - $280.74 million for Nova Measuring Instruments Ltd. - 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 27.925 million for Nova Measuring Instruments Ltd. 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 Nova Measuring Instruments Ltd. at the current share price and the inputted number of shares is $0.7 billion.

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