Intrinsic value of Universal Display - OLED

Previous Close

$90.84

  Intrinsic Value

$40.97

stock screener

  Rating & Target

str. sell

-55%

Previous close

$90.84

 
Intrinsic value

$40.97

 
Up/down potential

-55%

 
Rating

str. sell

We calculate the intrinsic value of OLED 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 4.3

 

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, %
  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
  342
  350
  359
  369
  381
  393
  406
  421
  436
  453
  471
  490
  510
  532
  555
  579
  605
  632
  661
  691
  723
  757
  793
  830
  870
  912
  955
  1,001
  1,050
  1,101
Variable operating expenses, $m
  147
  150
  153
  157
  161
  166
  171
  176
  182
  189
  179
  187
  194
  203
  211
  221
  230
  241
  252
  263
  275
  288
  302
  316
  331
  347
  364
  381
  400
  419
Fixed operating expenses, $m
  47
  48
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  70
  71
  73
  74
  76
  78
  79
  81
  83
  85
  86
  88
Total operating expenses, $m
  194
  198
  202
  207
  212
  218
  225
  231
  238
  246
  237
  247
  255
  265
  275
  286
  297
  309
  322
  334
  348
  362
  378
  394
  410
  428
  447
  466
  486
  507
Operating income, $m
  149
  153
  157
  162
  168
  175
  182
  190
  198
  207
  233
  244
  255
  267
  280
  294
  308
  323
  340
  357
  375
  395
  415
  437
  459
  483
  509
  536
  564
  593
EBITDA, $m
  181
  186
  190
  196
  203
  210
  217
  226
  235
  245
  256
  267
  279
  292
  306
  321
  337
  354
  371
  390
  410
  431
  453
  476
  501
  527
  554
  583
  614
  646
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
Earnings before tax, $m
  149
  153
  157
  162
  168
  174
  181
  188
  196
  205
  231
  241
  252
  264
  276
  289
  303
  318
  334
  351
  368
  387
  407
  428
  450
  473
  498
  524
  551
  580
Tax expense, $m
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
  105
  110
  116
  121
  128
  134
  141
  149
  156
Net income, $m
  109
  111
  115
  118
  122
  127
  132
  137
  143
  150
  169
  176
  184
  192
  202
  211
  221
  232
  244
  256
  269
  283
  297
  312
  328
  345
  363
  382
  402
  423

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
  432
  442
  453
  466
  480
  495
  512
  530
  550
  571
  594
  618
  644
  671
  700
  730
  763
  797
  834
  872
  912
  955
  1,000
  1,047
  1,097
  1,149
  1,205
  1,263
  1,324
  1,388
Adjusted assets (=assets-cash), $m
  432
  442
  453
  466
  480
  495
  512
  530
  550
  571
  594
  618
  644
  671
  700
  730
  763
  797
  834
  872
  912
  955
  1,000
  1,047
  1,097
  1,149
  1,205
  1,263
  1,324
  1,388
Revenue / Adjusted assets
  0.792
  0.792
  0.792
  0.792
  0.794
  0.794
  0.793
  0.794
  0.793
  0.793
  0.793
  0.793
  0.792
  0.793
  0.793
  0.793
  0.793
  0.793
  0.793
  0.792
  0.793
  0.793
  0.793
  0.793
  0.793
  0.794
  0.793
  0.793
  0.793
  0.793
Average production assets, $m
  131
  134
  137
  141
  145
  150
  155
  161
  167
  173
  180
  187
  195
  203
  212
  221
  231
  242
  253
  264
  276
  289
  303
  317
  332
  348
  365
  383
  401
  421
Working capital, $m
  36
  36
  37
  38
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
Total debt, $m
  2
  5
  8
  12
  16
  20
  25
  30
  36
  42
  48
  55
  63
  70
  79
  87
  97
  106
  117
  128
  139
  151
  164
  178
  192
  207
  222
  239
  256
  275
Total liabilities, $m
  123
  126
  129
  133
  137
  141
  146
  151
  157
  163
  169
  176
  183
  191
  199
  208
  217
  227
  238
  248
  260
  272
  285
  298
  313
  328
  343
  360
  377
  396
Total equity, $m
  309
  316
  324
  333
  343
  354
  366
  379
  393
  408
  425
  442
  460
  480
  500
  522
  546
  570
  596
  623
  652
  683
  715
  749
  784
  822
  861
  903
  947
  993
Total liabilities and equity, $m
  432
  442
  453
  466
  480
  495
  512
  530
  550
  571
  594
  618
  643
  671
  699
  730
  763
  797
  834
  871
  912
  955
  1,000
  1,047
  1,097
  1,150
  1,204
  1,263
  1,324
  1,389
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.230
  0.240
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
Adjusted equity ratio
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  109
  111
  115
  118
  122
  127
  132
  137
  143
  150
  169
  176
  184
  192
  202
  211
  221
  232
  244
  256
  269
  283
  297
  312
  328
  345
  363
  382
  402
  423
Depreciation, amort., depletion, $m
  33
  33
  33
  34
  34
  35
  36
  36
  37
  38
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
Funds from operations, $m
  141
  144
  148
  152
  157
  162
  167
  174
  180
  188
  191
  199
  208
  218
  228
  239
  250
  263
  275
  289
  304
  319
  335
  352
  370
  389
  409
  430
  452
  476
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
Cash from operations, $m
  140
  143
  147
  151
  155
  161
  166
  172
  179
  186
  189
  197
  206
  216
  226
  236
  248
  260
  272
  286
  300
  315
  331
  348
  366
  385
  404
  425
  447
  470
Maintenance CAPEX, $m
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
New CAPEX, $m
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -19
Cash from investing activities, $m
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -29
  -31
  -32
  -34
  -35
  -38
  -39
  -41
  -44
  -45
  -48
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -69
Free cash flow, $m
  122
  124
  127
  130
  134
  138
  142
  147
  153
  159
  161
  168
  175
  183
  191
  201
  210
  220
  231
  243
  255
  268
  281
  296
  311
  327
  344
  362
  381
  401
Issuance/(repayment) of debt, $m
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
  18
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  
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
  18
Total cash flow (excl. dividends), $m
  125
  127
  130
  134
  138
  142
  147
  152
  158
  165
  167
  175
  182
  191
  200
  209
  219
  230
  242
  254
  266
  280
  294
  309
  325
  342
  360
  379
  398
  419
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
Prev. year cash balance distribution, $m
  356
  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
  474
  120
  122
  124
  127
  131
  135
  139
  144
  150
  151
  157
  164
  171
  179
  187
  196
  206
  216
  226
  238
  249
  262
  275
  290
  305
  320
  337
  355
  373
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
  455
  110
  106
  102
  99
  95
  91
  87
  83
  78
  72
  67
  62
  58
  53
  48
  43
  38
  33
  29
  25
  21
  17
  14
  11
  9
  7
  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

Universal Display Corporation is engaged in the research, development and commercialization of organic light emitting diode (OLED), technologies and materials for use in display and solid-state lighting applications. The Company also supplies its OLED materials to manufacturers of OLED displays and lighting products for evaluation and for use in product development and for pre-commercial activities, and it also provides technical assistance and support to these manufacturers. The Company has produced and sold phosphorescent emitter materials that produce red, yellow, green and light-blue light, which are combined in various ways for the display and lighting markets. It has also developed host materials for the emissive layer. The Company is a supplier of phosphorescent emitter materials to OLED product manufacturers. Phosphorescent OLEDs utilize specialized materials and device structures that allow OLEDs to emit light through a process known as phosphorescence.

FINANCIAL RATIOS  of  Universal Display (OLED)

Valuation Ratios
P/E Ratio 88.8
Price to Sales 21.4
Price to Book 8.1
Price to Tangible Book
Price to Cash Flow 53.3
Price to Free Cash Flow -185.3
Growth Rates
Sales Growth Rate 4.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1960%
Cap. Spend. - 3 Yr. Gr. Rate 83.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.4
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.1%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 9.6%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. 7.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 86.9%
Gross Margin - 3 Yr. Avg. 77.5%
EBITDA Margin 44.7%
EBITDA Margin - 3 Yr. Avg. 35.7%
Operating Margin 34.7%
Oper. Margin - 3 Yr. Avg. 27.4%
Pre-Tax Margin 34.7%
Pre-Tax Margin - 3 Yr. Avg. 27.6%
Net Profit Margin 24.1%
Net Profit Margin - 3 Yr. Avg. 18%
Effective Tax Rate 30.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio 0%

OLED stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OLED stock intrinsic value calculation we used $335.629 million for the last fiscal year's total revenue generated by Universal Display. The default revenue input number comes from 0001 income statement of Universal Display. 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 OLED 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 4.3%, whose default value for OLED is calculated based on our internal credit rating of Universal Display, 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 Universal Display.
    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 OLED stock the variable cost ratio is equal to 42.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $46 million in the base year in the intrinsic value calculation for OLED 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 Universal Display.

Corporate tax rate of 27% is the nominal tax rate for Universal Display. 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 OLED 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 OLED are equal to 38.2%.

Life of production assets of 8 years is the average useful life of capital assets used in Universal Display 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 OLED is equal to 10.4%. 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 - $659.054 million for Universal Display - 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 47.086 million for Universal Display 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 Universal Display at the current share price and the inputted number of shares is $4.3 billion.

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COMPANY NEWS

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