Intrinsic value of Photronics, Inc. - PLAB

Previous Close

$8.92

  Intrinsic Value

$6.90

stock screener

  Rating & Target

sell

-23%

Previous close

$8.92

 
Intrinsic value

$6.90

 
Up/down potential

-23%

 
Rating

sell

We calculate the intrinsic value of PLAB 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 0.6

 

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
  546
  558
  573
  589
  607
  626
  647
  671
  695
  722
  751
  781
  814
  848
  885
  923
  964
  1,008
  1,054
  1,102
  1,153
  1,207
  1,264
  1,324
  1,387
  1,453
  1,523
  1,596
  1,674
  1,755
Variable operating expenses, $m
  330
  337
  346
  355
  366
  378
  391
  405
  420
  436
  452
  470
  490
  510
  532
  556
  580
  606
  634
  663
  694
  726
  761
  797
  834
  874
  916
  961
  1,007
  1,056
Fixed operating expenses, $m
  153
  157
  160
  164
  167
  171
  175
  179
  182
  186
  191
  195
  199
  203
  208
  212
  217
  222
  227
  232
  237
  242
  247
  253
  258
  264
  270
  276
  282
  288
Total operating expenses, $m
  483
  494
  506
  519
  533
  549
  566
  584
  602
  622
  643
  665
  689
  713
  740
  768
  797
  828
  861
  895
  931
  968
  1,008
  1,050
  1,092
  1,138
  1,186
  1,237
  1,289
  1,344
Operating income, $m
  63
  64
  67
  70
  73
  77
  82
  87
  93
  100
  108
  116
  125
  134
  144
  155
  167
  179
  193
  207
  222
  239
  256
  274
  294
  315
  337
  360
  385
  411
EBITDA, $m
  149
  153
  157
  163
  169
  176
  184
  193
  203
  214
  226
  238
  252
  267
  283
  300
  318
  337
  358
  379
  403
  427
  454
  481
  511
  542
  575
  610
  646
  685
Interest expense (income), $m
  0
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  37
Earnings before tax, $m
  60
  61
  63
  65
  68
  72
  76
  81
  86
  92
  100
  107
  115
  123
  132
  142
  152
  164
  176
  189
  202
  217
  233
  250
  267
  286
  306
  328
  350
  374
Tax expense, $m
  16
  16
  17
  18
  18
  19
  21
  22
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  51
  55
  59
  63
  67
  72
  77
  83
  88
  95
  101
Net income, $m
  44
  45
  46
  48
  50
  53
  56
  59
  63
  67
  73
  78
  84
  90
  96
  104
  111
  119
  128
  138
  148
  159
  170
  182
  195
  209
  224
  239
  256
  273

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
  933
  954
  979
  1,006
  1,037
  1,070
  1,107
  1,146
  1,189
  1,234
  1,283
  1,335
  1,391
  1,450
  1,512
  1,578
  1,649
  1,723
  1,801
  1,884
  1,971
  2,063
  2,160
  2,263
  2,370
  2,484
  2,603
  2,729
  2,861
  3,000
Adjusted assets (=assets-cash), $m
  933
  954
  979
  1,006
  1,037
  1,070
  1,107
  1,146
  1,189
  1,234
  1,283
  1,335
  1,391
  1,450
  1,512
  1,578
  1,649
  1,723
  1,801
  1,884
  1,971
  2,063
  2,160
  2,263
  2,370
  2,484
  2,603
  2,729
  2,861
  3,000
Revenue / Adjusted assets
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.584
  0.586
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
Average production assets, $m
  572
  585
  600
  617
  636
  656
  679
  703
  729
  757
  787
  819
  853
  889
  927
  968
  1,011
  1,056
  1,104
  1,155
  1,209
  1,265
  1,324
  1,387
  1,453
  1,523
  1,596
  1,673
  1,754
  1,839
Working capital, $m
  40
  41
  42
  44
  45
  46
  48
  50
  51
  53
  56
  58
  60
  63
  65
  68
  71
  75
  78
  82
  85
  89
  94
  98
  103
  108
  113
  118
  124
  130
Total debt, $m
  63
  70
  78
  87
  96
  107
  119
  131
  145
  160
  175
  192
  210
  228
  248
  270
  292
  316
  341
  367
  395
  425
  456
  489
  523
  559
  598
  638
  680
  725
Total liabilities, $m
  299
  305
  313
  322
  332
  343
  354
  367
  380
  395
  411
  427
  445
  464
  484
  505
  528
  551
  576
  603
  631
  660
  691
  724
  759
  795
  833
  873
  915
  960
Total equity, $m
  634
  649
  666
  684
  705
  728
  753
  779
  808
  839
  873
  908
  946
  986
  1,028
  1,073
  1,121
  1,171
  1,225
  1,281
  1,340
  1,403
  1,469
  1,539
  1,612
  1,689
  1,770
  1,856
  1,945
  2,040
Total liabilities and equity, $m
  933
  954
  979
  1,006
  1,037
  1,071
  1,107
  1,146
  1,188
  1,234
  1,284
  1,335
  1,391
  1,450
  1,512
  1,578
  1,649
  1,722
  1,801
  1,884
  1,971
  2,063
  2,160
  2,263
  2,371
  2,484
  2,603
  2,729
  2,860
  3,000
Debt-to-equity ratio
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
  0.310
  0.320
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
Adjusted equity ratio
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  45
  46
  48
  50
  53
  56
  59
  63
  67
  73
  78
  84
  90
  96
  104
  111
  119
  128
  138
  148
  159
  170
  182
  195
  209
  224
  239
  256
  273
Depreciation, amort., depletion, $m
  87
  89
  91
  93
  96
  99
  102
  106
  110
  114
  117
  122
  127
  133
  138
  144
  151
  158
  165
  172
  180
  189
  198
  207
  217
  227
  238
  250
  262
  275
Funds from operations, $m
  130
  133
  137
  141
  146
  152
  158
  165
  173
  181
  190
  200
  211
  222
  235
  248
  262
  277
  293
  310
  328
  347
  368
  389
  412
  436
  462
  489
  517
  548
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  129
  132
  136
  140
  145
  150
  157
  163
  171
  179
  188
  198
  209
  220
  232
  245
  259
  274
  290
  307
  324
  343
  364
  385
  407
  431
  457
  483
  512
  542
Maintenance CAPEX, $m
  -84
  -85
  -87
  -90
  -92
  -95
  -98
  -101
  -105
  -109
  -113
  -117
  -122
  -127
  -133
  -138
  -144
  -151
  -158
  -165
  -172
  -180
  -189
  -198
  -207
  -217
  -227
  -238
  -250
  -262
New CAPEX, $m
  -11
  -13
  -15
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -51
  -54
  -56
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
Cash from investing activities, $m
  -95
  -98
  -102
  -107
  -111
  -116
  -120
  -125
  -131
  -137
  -143
  -149
  -156
  -163
  -171
  -179
  -187
  -196
  -206
  -216
  -226
  -236
  -249
  -261
  -273
  -287
  -300
  -315
  -331
  -347
Free cash flow, $m
  35
  34
  33
  33
  34
  35
  36
  38
  40
  43
  45
  49
  52
  56
  61
  66
  72
  78
  84
  91
  98
  107
  115
  124
  134
  145
  156
  168
  181
  195
Issuance/(repayment) of debt, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
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  
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
Total cash flow (excl. dividends), $m
  40
  41
  41
  42
  44
  46
  48
  51
  54
  57
  61
  65
  70
  75
  81
  87
  94
  101
  109
  117
  126
  136
  146
  157
  169
  181
  194
  208
  223
  239
Retained Cash Flow (-), $m
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -90
  -95
Prev. year cash balance distribution, $m
  138
  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
  166
  26
  24
  23
  23
  23
  23
  24
  25
  26
  28
  30
  32
  35
  39
  42
  46
  51
  56
  61
  67
  73
  80
  88
  96
  104
  113
  123
  133
  144
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
  159
  24
  21
  19
  18
  17
  16
  15
  14
  14
  13
  13
  12
  12
  11
  11
  10
  9
  9
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
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
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Photronics, Inc. is a manufacturer of photomasks, which are photographic quartz plates containing microscopic images of electronic circuits. As of October 30, 2016, the Company operated principally from nine manufacturing facilities: two located in Europe, three in Taiwan, one in Korea and three in the United States. Photomasks are used in the manufacture of semiconductors and flat panel displays (FPDs), and are used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits (ICs), and a range of FPDs and other types of electrical and optical components. The Company offers reticle and photomask maintenance, including pellicle replacement, mask cleaning and re-certification, at all its sites across the world. Its products include Mature Binary, Advanced Binary Reticles, Phase Shift Masks-Embedded Attenuated Phase Shift Masks (EAPSM), Other Advanced Products and Large Area Masks.

FINANCIAL RATIOS  of  Photronics, Inc. (PLAB)

Valuation Ratios
P/E Ratio 47.1
Price to Sales 1.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow 153.1
Growth Rates
Sales Growth Rate -6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 86%
Cap. Spend. - 3 Yr. Gr. Rate 0.4%
Financial Strength
Quick Ratio 62
Current Ratio 0.1
LT Debt to Equity 7.7%
Total Debt to Equity 8.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.5%
Return On Equity 1.8%
Return On Equity - 3 Yr. Avg. 5.2%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 20.2%
Gross Margin - 3 Yr. Avg. 24%
EBITDA Margin 24.2%
EBITDA Margin - 3 Yr. Avg. 26.9%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 11.2%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. 10.6%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 7%
Effective Tax Rate 22.2%
Eff/ Tax Rate - 3 Yr. Avg. 15.8%
Payout Ratio 0%

PLAB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PLAB stock intrinsic value calculation we used $535 million for the last fiscal year's total revenue generated by Photronics, Inc.. The default revenue input number comes from 0001 income statement of Photronics, Inc.. 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 PLAB 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 PLAB is calculated based on our internal credit rating of Photronics, Inc., 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 Photronics, Inc..
    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 PLAB stock the variable cost ratio is equal to 60.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $150 million in the base year in the intrinsic value calculation for PLAB 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 Photronics, Inc..

Corporate tax rate of 27% is the nominal tax rate for Photronics, Inc.. 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 PLAB 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 PLAB are equal to 104.8%.

Life of production assets of 6.7 years is the average useful life of capital assets used in Photronics, Inc. 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 PLAB is equal to 7.4%. 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 - $759.671 million for Photronics, Inc. - 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 67.052 million for Photronics, Inc. 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 Photronics, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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