Intrinsic value of Pixelworks, Inc. - PXLW

Previous Close

$2.96

  Intrinsic Value

$9.05

stock screener

  Rating & Target

str. buy

+206%

Previous close

$2.96

 
Intrinsic value

$9.05

 
Up/down potential

+206%

 
Rating

str. buy

We calculate the intrinsic value of PXLW 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 0.1

 

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, %
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  86
  95
  104
  114
  125
  136
  147
  159
  171
  184
  197
  211
  225
  240
  256
  272
  288
  306
  324
  343
  363
  383
  405
  427
  451
  476
  501
  528
  556
  586
Variable operating expenses, $m
  30
  33
  36
  39
  42
  46
  50
  53
  57
  61
  63
  68
  72
  77
  82
  87
  93
  98
  104
  110
  116
  123
  130
  137
  145
  153
  161
  170
  179
  188
Fixed operating expenses, $m
  56
  57
  59
  60
  61
  63
  64
  65
  67
  68
  70
  71
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
Total operating expenses, $m
  86
  90
  95
  99
  103
  109
  114
  118
  124
  129
  133
  139
  145
  152
  158
  165
  173
  179
  187
  195
  203
  212
  221
  230
  240
  250
  260
  271
  282
  294
Operating income, $m
  0
  5
  10
  15
  21
  27
  34
  40
  47
  54
  64
  72
  80
  88
  97
  106
  116
  126
  137
  148
  159
  171
  184
  197
  211
  226
  241
  257
  274
  292
EBITDA, $m
  5
  11
  16
  22
  28
  35
  42
  49
  56
  64
  72
  80
  89
  98
  108
  117
  128
  139
  150
  162
  174
  187
  200
  215
  229
  245
  261
  279
  297
  316
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Earnings before tax, $m
  0
  5
  10
  15
  21
  27
  33
  39
  46
  53
  62
  70
  78
  86
  95
  104
  113
  123
  133
  144
  156
  167
  180
  193
  206
  221
  236
  251
  268
  285
Tax expense, $m
  0
  1
  3
  4
  6
  7
  9
  11
  12
  14
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  72
  77
Net income, $m
  0
  3
  7
  11
  15
  19
  24
  29
  33
  39
  46
  51
  57
  63
  69
  76
  83
  90
  97
  105
  114
  122
  131
  141
  151
  161
  172
  183
  195
  208

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
  65
  72
  79
  87
  95
  103
  112
  121
  130
  140
  150
  160
  171
  182
  194
  206
  219
  232
  246
  261
  276
  291
  308
  325
  343
  361
  381
  401
  423
  445
Adjusted assets (=assets-cash), $m
  65
  72
  79
  87
  95
  103
  112
  121
  130
  140
  150
  160
  171
  182
  194
  206
  219
  232
  246
  261
  276
  291
  308
  325
  343
  361
  381
  401
  423
  445
Revenue / Adjusted assets
  1.323
  1.319
  1.316
  1.310
  1.316
  1.320
  1.313
  1.314
  1.315
  1.314
  1.313
  1.319
  1.316
  1.319
  1.320
  1.320
  1.315
  1.319
  1.317
  1.314
  1.315
  1.316
  1.315
  1.314
  1.315
  1.319
  1.315
  1.317
  1.314
  1.317
Average production assets, $m
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  52
  55
  59
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  134
Working capital, $m
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
Total debt, $m
  2
  5
  7
  10
  13
  16
  19
  22
  25
  29
  32
  36
  40
  44
  48
  52
  56
  61
  66
  71
  76
  82
  87
  93
  100
  106
  113
  120
  128
  136
Total liabilities, $m
  23
  25
  28
  31
  33
  36
  39
  42
  46
  49
  53
  56
  60
  64
  68
  72
  77
  82
  86
  91
  97
  102
  108
  114
  120
  127
  134
  141
  148
  156
Total equity, $m
  42
  47
  51
  56
  62
  67
  73
  78
  84
  91
  97
  104
  111
  118
  126
  134
  142
  151
  160
  169
  179
  189
  200
  211
  222
  235
  247
  260
  274
  289
Total liabilities and equity, $m
  65
  72
  79
  87
  95
  103
  112
  120
  130
  140
  150
  160
  171
  182
  194
  206
  219
  233
  246
  260
  276
  291
  308
  325
  342
  362
  381
  401
  422
  445
Debt-to-equity ratio
  0.060
  0.100
  0.140
  0.180
  0.210
  0.230
  0.260
  0.280
  0.300
  0.310
  0.330
  0.340
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
Adjusted equity ratio
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  3
  7
  11
  15
  19
  24
  29
  33
  39
  46
  51
  57
  63
  69
  76
  83
  90
  97
  105
  114
  122
  131
  141
  151
  161
  172
  183
  195
  208
Depreciation, amort., depletion, $m
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
Funds from operations, $m
  5
  9
  14
  18
  22
  27
  32
  37
  43
  48
  53
  60
  66
  73
  80
  87
  94
  102
  110
  119
  128
  138
  147
  158
  169
  180
  192
  205
  218
  232
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  6
  10
  14
  19
  23
  28
  33
  38
  44
  49
  54
  61
  67
  74
  81
  88
  96
  104
  112
  121
  130
  139
  149
  160
  170
  182
  194
  207
  220
  234
Maintenance CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
Cash from investing activities, $m
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -14
  -14
  -15
  -16
  -16
  -17
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
Free cash flow, $m
  1
  5
  8
  12
  16
  20
  25
  30
  34
  39
  44
  50
  55
  61
  68
  74
  81
  88
  95
  103
  111
  120
  129
  138
  148
  158
  169
  180
  192
  205
Issuance/(repayment) of debt, $m
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Issuance/(repurchase) of shares, $m
  5
  1
  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
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Total cash flow (excl. dividends), $m
  8
  8
  11
  15
  19
  23
  28
  33
  38
  43
  48
  53
  59
  65
  72
  78
  85
  93
  100
  108
  117
  125
  135
  144
  154
  165
  176
  188
  200
  213
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
Prev. year cash balance distribution, $m
  7
  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
  10
  4
  6
  10
  14
  18
  22
  27
  32
  37
  41
  46
  52
  58
  64
  70
  77
  84
  91
  99
  107
  115
  124
  133
  143
  153
  163
  174
  186
  198
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
  10
  3
  5
  8
  11
  13
  15
  17
  18
  19
  19
  20
  20
  19
  19
  18
  17
  15
  14
  13
  11
  10
  8
  7
  6
  4
  4
  3
  2
  1
Current shareholders' claim on cash, %
  95.3
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1

Pixelworks, Inc. designs, develops and markets video and pixel processing semiconductors, intellectual property cores, software and custom application specific integrated circuit (ASIC) solutions for digital video applications. The Company is engaged in the design and development of integrated circuits (ICs) for use in electronic display devices. It provides its customers with software development tools and with software that provides basic functionality for its ICs and enables connectivity of its customers' products. Its primary target markets include digital projection systems, Ultrabook devices, tablets and smartphones. Its video display processing technologies include Halo Free Motion Estimation and Motion Compensation (MEMC), Advanced Scaling, Mobile Video Display Processing, and Vuemagic and Networked Displays. Its primary video display processor product categories include ImageProcessor ICs, Video Co-Processor ICs and Networked Display ICs.

FINANCIAL RATIOS  of  Pixelworks, Inc. (PXLW)

Valuation Ratios
P/E Ratio -7.8
Price to Sales 1.6
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow -42.8
Price to Free Cash Flow -21.4
Growth Rates
Sales Growth Rate -11.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -29.3%
Ret/ On Assets - 3 Yr. Avg. -28.6%
Return On Total Capital -45.8%
Ret/ On T. Cap. - 3 Yr. Avg. -46.8%
Return On Equity -48.9%
Return On Equity - 3 Yr. Avg. -52.8%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 50.9%
Gross Margin - 3 Yr. Avg. 50.6%
EBITDA Margin -15.1%
EBITDA Margin - 3 Yr. Avg. -10.6%
Operating Margin -20.8%
Oper. Margin - 3 Yr. Avg. -16.8%
Pre-Tax Margin -20.8%
Pre-Tax Margin - 3 Yr. Avg. -17.4%
Net Profit Margin -20.8%
Net Profit Margin - 3 Yr. Avg. -18.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -7%
Payout Ratio 0%

PXLW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PXLW stock intrinsic value calculation we used $77 million for the last fiscal year's total revenue generated by Pixelworks, Inc.. The default revenue input number comes from 0001 income statement of Pixelworks, 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 PXLW stock valuation model: a) initial revenue growth rate of 11.3% 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 PXLW is calculated based on our internal credit rating of Pixelworks, 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 Pixelworks, 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 PXLW stock the variable cost ratio is equal to 35.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $55 million in the base year in the intrinsic value calculation for PXLW 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 Pixelworks, Inc..

Corporate tax rate of 27% is the nominal tax rate for Pixelworks, 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 PXLW 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 PXLW are equal to 22.9%.

Life of production assets of 5.7 years is the average useful life of capital assets used in Pixelworks, 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 PXLW is equal to -7.5%. 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 - $44.823 million for Pixelworks, 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 36.608 million for Pixelworks, 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 Pixelworks, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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