Intrinsic value of Universal Display Corporation - OLED

Previous Close

$154.31

  Intrinsic Value

$32.99

stock screener

  Rating & Target

str. sell

-79%

Previous close

$154.31

 
Intrinsic value

$32.99

 
Up/down potential

-79%

 
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 7.3

 

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
  252
  258
  264
  272
  280
  289
  299
  310
  321
  333
  347
  361
  376
  392
  408
  426
  445
  465
  486
  509
  532
  557
  583
  611
  640
  671
  703
  737
  773
  810
Variable operating expenses, $m
  142
  144
  148
  152
  156
  160
  165
  171
  177
  183
  175
  183
  190
  198
  207
  216
  225
  236
  246
  258
  270
  282
  295
  309
  324
  340
  356
  373
  391
  410
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
  142
  144
  148
  152
  156
  160
  165
  171
  177
  183
  175
  183
  190
  198
  207
  216
  225
  236
  246
  258
  270
  282
  295
  309
  324
  340
  356
  373
  391
  410
Operating income, $m
  110
  113
  117
  120
  124
  129
  134
  139
  145
  151
  171
  178
  185
  193
  202
  210
  220
  230
  240
  251
  263
  275
  288
  302
  316
  331
  347
  364
  381
  400
EBITDA, $m
  145
  148
  152
  156
  161
  166
  172
  178
  184
  191
  199
  207
  216
  225
  234
  245
  255
  267
  279
  292
  305
  320
  335
  351
  367
  385
  403
  423
  443
  465
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  23
  24
  26
  28
Earnings before tax, $m
  110
  113
  116
  119
  123
  127
  131
  136
  141
  147
  166
  173
  179
  186
  194
  202
  210
  219
  229
  238
  249
  260
  272
  284
  297
  310
  325
  340
  355
  372
Tax expense, $m
  30
  31
  31
  32
  33
  34
  35
  37
  38
  40
  45
  47
  48
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  100
Net income, $m
  81
  82
  85
  87
  90
  93
  96
  99
  103
  107
  122
  126
  131
  136
  142
  147
  153
  160
  167
  174
  182
  190
  198
  207
  217
  226
  237
  248
  259
  272

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
  562
  575
  590
  607
  625
  645
  667
  691
  717
  744
  774
  805
  838
  874
  912
  952
  994
  1,039
  1,086
  1,136
  1,188
  1,244
  1,302
  1,364
  1,429
  1,497
  1,569
  1,645
  1,725
  1,809
Adjusted assets (=assets-cash), $m
  562
  575
  590
  607
  625
  645
  667
  691
  717
  744
  774
  805
  838
  874
  912
  952
  994
  1,039
  1,086
  1,136
  1,188
  1,244
  1,302
  1,364
  1,429
  1,497
  1,569
  1,645
  1,725
  1,809
Revenue / Adjusted assets
  0.448
  0.449
  0.447
  0.448
  0.448
  0.448
  0.448
  0.449
  0.448
  0.448
  0.448
  0.448
  0.449
  0.449
  0.447
  0.447
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
Average production assets, $m
  141
  145
  148
  152
  157
  162
  168
  174
  180
  187
  194
  202
  211
  220
  229
  239
  250
  261
  273
  285
  299
  313
  327
  343
  359
  376
  394
  413
  433
  455
Working capital, $m
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -42
  -45
Total debt, $m
  5
  11
  17
  25
  33
  42
  51
  62
  73
  85
  98
  112
  127
  142
  159
  177
  195
  215
  236
  258
  281
  306
  331
  359
  387
  417
  449
  483
  518
  555
Total liabilities, $m
  248
  254
  260
  268
  276
  285
  294
  305
  316
  328
  341
  355
  370
  385
  402
  420
  438
  458
  479
  501
  524
  549
  574
  602
  630
  660
  692
  725
  761
  798
Total equity, $m
  314
  322
  330
  339
  349
  361
  373
  386
  401
  416
  432
  450
  469
  489
  510
  532
  556
  581
  607
  635
  664
  695
  728
  763
  799
  837
  877
  920
  964
  1,011
Total liabilities and equity, $m
  562
  576
  590
  607
  625
  646
  667
  691
  717
  744
  773
  805
  839
  874
  912
  952
  994
  1,039
  1,086
  1,136
  1,188
  1,244
  1,302
  1,365
  1,429
  1,497
  1,569
  1,645
  1,725
  1,809
Debt-to-equity ratio
  0.020
  0.030
  0.050
  0.070
  0.090
  0.120
  0.140
  0.160
  0.180
  0.200
  0.230
  0.250
  0.270
  0.290
  0.310
  0.330
  0.350
  0.370
  0.390
  0.410
  0.420
  0.440
  0.460
  0.470
  0.480
  0.500
  0.510
  0.520
  0.540
  0.550
Adjusted equity ratio
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  81
  82
  85
  87
  90
  93
  96
  99
  103
  107
  122
  126
  131
  136
  142
  147
  153
  160
  167
  174
  182
  190
  198
  207
  217
  226
  237
  248
  259
  272
Depreciation, amort., depletion, $m
  34
  35
  35
  36
  36
  37
  38
  39
  40
  41
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
Funds from operations, $m
  115
  117
  120
  123
  126
  130
  134
  138
  143
  148
  149
  155
  161
  167
  174
  182
  189
  197
  206
  215
  224
  234
  245
  256
  268
  280
  293
  307
  321
  337
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  115
  117
  120
  123
  127
  130
  134
  139
  143
  148
  150
  156
  162
  168
  175
  183
  190
  198
  207
  216
  226
  236
  246
  258
  269
  282
  295
  309
  323
  339
Maintenance CAPEX, $m
  -20
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -23
  -23
  -25
  -25
  -27
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -62
  -65
  -68
  -72
  -75
  -79
  -83
Free cash flow, $m
  92
  94
  96
  98
  100
  103
  106
  109
  112
  116
  116
  120
  125
  129
  134
  140
  145
  151
  158
  165
  172
  179
  187
  195
  204
  213
  223
  233
  244
  256
Issuance/(repayment) of debt, $m
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
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  
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
Total cash flow (excl. dividends), $m
  98
  100
  102
  105
  108
  112
  115
  119
  123
  128
  129
  134
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  213
  223
  233
  244
  255
  267
  279
  293
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
  -47
Prev. year cash balance distribution, $m
  382
  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
  92
  94
  96
  98
  100
  103
  106
  109
  113
  112
  116
  121
  125
  130
  135
  140
  146
  152
  159
  165
  173
  180
  188
  197
  205
  215
  225
  235
  246
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
  454
  85
  82
  79
  76
  73
  70
  66
  63
  59
  53
  50
  46
  42
  38
  34
  31
  27
  23
  20
  17
  14
  12
  10
  8
  6
  5
  3
  3
  2
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 Corporation (OLED)

Valuation Ratios
P/E Ratio 150.8
Price to Sales 36.4
Price to Book 13.7
Price to Tangible Book
Price to Cash Flow 90.5
Price to Free Cash Flow -314.7
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 $247 million for the last fiscal year's total revenue generated by Universal Display Corporation. The default revenue input number comes from 0001 income statement of Universal Display 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 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 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 Universal Display 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 OLED stock the variable cost ratio is equal to 56.3%.

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 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 Corporation.

Corporate tax rate of 27% is the nominal tax rate for Universal Display 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 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 56.1%.

Life of production assets of 7 years is the average useful life of capital assets used in Universal Display 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 OLED is equal to -5.5%. 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 - $690.506 million for Universal Display 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 47.082 million for Universal Display 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 Universal Display Corporation at the current share price and the inputted number of shares is $7.3 billion.

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