Intrinsic value of Rambus, Inc. - RMBS

Previous Close

$12.23

  Intrinsic Value

$1.70

stock screener

  Rating & Target

str. sell

-86%

Previous close

$12.23

 
Intrinsic value

$1.70

 
Up/down potential

-86%

 
Rating

str. sell

We calculate the intrinsic value of RMBS 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 1.3

 

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
  236
  241
  247
  254
  262
  270
  280
  290
  300
  312
  324
  337
  351
  366
  382
  399
  416
  435
  455
  476
  498
  521
  546
  572
  599
  627
  658
  689
  723
  758
Variable operating expenses, $m
  40
  41
  41
  41
  42
  42
  43
  43
  44
  45
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  41
  44
Fixed operating expenses, $m
  283
  289
  296
  302
  309
  316
  323
  330
  337
  344
  352
  360
  368
  376
  384
  392
  401
  410
  419
  428
  437
  447
  457
  467
  477
  488
  498
  509
  521
  532
Total operating expenses, $m
  323
  330
  337
  343
  351
  358
  366
  373
  381
  389
  371
  379
  388
  397
  406
  415
  425
  435
  445
  455
  466
  477
  488
  500
  511
  524
  536
  549
  562
  576
Operating income, $m
  -88
  -89
  -89
  -89
  -89
  -88
  -86
  -83
  -81
  -77
  -46
  -42
  -36
  -31
  -24
  -17
  -9
  0
  10
  20
  32
  44
  57
  72
  87
  104
  121
  140
  160
  182
EBITDA, $m
  -37
  -38
  -38
  -37
  -36
  -34
  -31
  -28
  -24
  -19
  -14
  -8
  -1
  6
  15
  24
  33
  44
  56
  68
  82
  97
  112
  129
  147
  167
  188
  210
  233
  258
Interest expense (income), $m
  2
  14
  14
  15
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
  66
  70
Earnings before tax, $m
  -101
  -103
  -104
  -105
  -105
  -105
  -104
  -103
  -101
  -99
  -69
  -66
  -62
  -58
  -53
  -48
  -41
  -35
  -27
  -19
  -10
  0
  10
  22
  34
  48
  62
  78
  94
  112
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  3
  6
  9
  13
  17
  21
  25
  30
Net income, $m
  -101
  -103
  -104
  -105
  -105
  -105
  -104
  -103
  -101
  -99
  -69
  -66
  -62
  -58
  -53
  -48
  -41
  -35
  -27
  -19
  -10
  0
  8
  16
  25
  35
  45
  57
  69
  82

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
  1,178
  1,205
  1,236
  1,271
  1,309
  1,352
  1,398
  1,448
  1,501
  1,559
  1,621
  1,686
  1,756
  1,831
  1,910
  1,993
  2,082
  2,176
  2,275
  2,379
  2,490
  2,606
  2,728
  2,858
  2,994
  3,137
  3,288
  3,446
  3,613
  3,789
Adjusted assets (=assets-cash), $m
  1,178
  1,205
  1,236
  1,271
  1,309
  1,352
  1,398
  1,448
  1,501
  1,559
  1,621
  1,686
  1,756
  1,831
  1,910
  1,993
  2,082
  2,176
  2,275
  2,379
  2,490
  2,606
  2,728
  2,858
  2,994
  3,137
  3,288
  3,446
  3,613
  3,789
Revenue / Adjusted assets
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
Average production assets, $m
  202
  206
  212
  218
  224
  231
  239
  248
  257
  267
  277
  289
  301
  313
  327
  341
  356
  372
  389
  407
  426
  446
  467
  489
  513
  537
  563
  590
  619
  649
Working capital, $m
  118
  121
  124
  127
  131
  135
  140
  145
  150
  156
  162
  169
  176
  183
  191
  199
  208
  218
  227
  238
  249
  261
  273
  286
  299
  314
  329
  345
  361
  379
Total debt, $m
  186
  194
  204
  214
  226
  239
  253
  268
  284
  302
  320
  340
  361
  384
  408
  433
  460
  488
  518
  550
  584
  619
  656
  695
  736
  780
  825
  873
  924
  977
Total liabilities, $m
  357
  365
  375
  385
  397
  410
  424
  439
  455
  472
  491
  511
  532
  555
  579
  604
  631
  659
  689
  721
  754
  790
  827
  866
  907
  950
  996
  1,044
  1,095
  1,148
Total equity, $m
  821
  840
  862
  886
  913
  942
  974
  1,009
  1,046
  1,087
  1,130
  1,175
  1,224
  1,276
  1,331
  1,389
  1,451
  1,516
  1,585
  1,658
  1,735
  1,816
  1,902
  1,992
  2,087
  2,186
  2,291
  2,402
  2,518
  2,641
Total liabilities and equity, $m
  1,178
  1,205
  1,237
  1,271
  1,310
  1,352
  1,398
  1,448
  1,501
  1,559
  1,621
  1,686
  1,756
  1,831
  1,910
  1,993
  2,082
  2,175
  2,274
  2,379
  2,489
  2,606
  2,729
  2,858
  2,994
  3,136
  3,287
  3,446
  3,613
  3,789
Debt-to-equity ratio
  0.230
  0.230
  0.240
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.360
  0.370
  0.370
Adjusted equity ratio
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -101
  -103
  -104
  -105
  -105
  -105
  -104
  -103
  -101
  -99
  -69
  -66
  -62
  -58
  -53
  -48
  -41
  -35
  -27
  -19
  -10
  0
  8
  16
  25
  35
  45
  57
  69
  82
Depreciation, amort., depletion, $m
  50
  51
  52
  52
  53
  54
  55
  56
  57
  58
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  69
  73
  76
Funds from operations, $m
  -51
  -52
  -53
  -52
  -52
  -51
  -49
  -47
  -44
  -41
  -37
  -32
  -27
  -21
  -15
  -7
  1
  9
  19
  29
  40
  52
  63
  74
  85
  98
  111
  126
  141
  158
Change in working capital, $m
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
Cash from operations, $m
  -53
  -55
  -56
  -56
  -56
  -55
  -54
  -52
  -49
  -46
  -43
  -39
  -34
  -29
  -23
  -16
  -8
  0
  9
  19
  29
  41
  50
  61
  72
  84
  96
  110
  125
  140
Maintenance CAPEX, $m
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -58
  -60
  -63
  -66
  -69
  -73
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
Cash from investing activities, $m
  -27
  -29
  -29
  -31
  -33
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -103
Free cash flow, $m
  -80
  -83
  -85
  -87
  -88
  -89
  -89
  -88
  -88
  -87
  -85
  -83
  -80
  -77
  -73
  -69
  -64
  -58
  -52
  -45
  -38
  -29
  -23
  -16
  -9
  -1
  7
  17
  27
  38
Issuance/(repayment) of debt, $m
  8
  8
  9
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
Issuance/(repurchase) of shares, $m
  119
  122
  126
  129
  132
  134
  136
  137
  138
  139
  112
  112
  111
  110
  108
  106
  103
  100
  96
  92
  87
  81
  78
  74
  70
  65
  60
  54
  48
  41
Cash from financing (excl. dividends), $m  
  127
  130
  135
  140
  144
  147
  150
  152
  154
  156
  131
  132
  132
  133
  132
  131
  130
  128
  126
  124
  120
  116
  115
  113
  111
  108
  106
  102
  99
  94
Total cash flow (excl. dividends), $m
  47
  47
  50
  53
  56
  58
  61
  64
  67
  70
  46
  49
  52
  56
  59
  63
  66
  70
  74
  78
  83
  87
  92
  97
  102
  107
  113
  119
  125
  131
Retained Cash Flow (-), $m
  -119
  -122
  -126
  -129
  -132
  -134
  -136
  -137
  -138
  -139
  -112
  -112
  -111
  -110
  -108
  -106
  -103
  -100
  -96
  -92
  -87
  -81
  -85
  -90
  -95
  -100
  -105
  -111
  -116
  -122
Prev. year cash balance distribution, $m
  208
  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
  136
  -75
  -76
  -76
  -76
  -76
  -75
  -73
  -71
  -69
  -66
  -63
  -59
  -54
  -49
  -43
  -37
  -30
  -22
  -13
  -4
  6
  6
  7
  7
  7
  8
  8
  9
  9
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
  130
  -69
  -66
  -63
  -59
  -55
  -51
  -46
  -41
  -36
  -31
  -27
  -22
  -18
  -14
  -11
  -8
  -5
  -3
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  90.0
  80.9
  72.7
  65.3
  58.7
  52.9
  47.7
  43.1
  39.1
  35.5
  33.0
  30.7
  28.6
  26.8
  25.2
  23.8
  22.5
  21.4
  20.4
  19.6
  18.8
  18.2
  17.6
  17.1
  16.7
  16.3
  16.0
  15.7
  15.5
  15.3

Rambus Inc. (Rambus) produces hardware and software technologies. The Company's segments include Memory and Interface Division (MID), which focuses the design, development, manufacturing through partnerships and licensing of technology and solutions that is related to memory and interfaces; Rambus Security Division (RSD), which focuses on the design, development and licensing of technologies for chip and system security, anti-counterfeiting, smart ticketing and mobile payments; Emerging Solutions Division (ESD), which encompasses its long-term research and development efforts in the area of emerging technologies, and Rambus Lighting Division (RLD), which focuses on the design, development and licensing of technologies for lighting. The Company collaborates with application-specific integrated circuit (ASIC) and System-on-Chip (SoC) designers, foundries, Internet protocol (IP) developers, processor companies, electronic design automation (EDA) companies and validation laboratories.

FINANCIAL RATIOS  of  Rambus, Inc. (RMBS)

Valuation Ratios
P/E Ratio 194
Price to Sales 4
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 14.6
Price to Free Cash Flow 16.2
Growth Rates
Sales Growth Rate 13.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate -2.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 29.7%
Total Debt to Equity 29.7%
Interest Coverage 13
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 13%
Return On Total Capital 1%
Ret/ On T. Cap. - 3 Yr. Avg. 13.2%
Return On Equity 1.3%
Return On Equity - 3 Yr. Avg. 18.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 80.1%
Gross Margin - 3 Yr. Avg. 83.6%
EBITDA Margin 22.3%
EBITDA Margin - 3 Yr. Avg. 29.5%
Operating Margin 10.1%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 6.8%
Pre-Tax Margin - 3 Yr. Avg. 14.6%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 27.4%
Effective Tax Rate 69.6%
Eff/ Tax Rate - 3 Yr. Avg. -44.7%
Payout Ratio 0%

RMBS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RMBS stock intrinsic value calculation we used $231 million for the last fiscal year's total revenue generated by Rambus, Inc.. The default revenue input number comes from 0001 income statement of Rambus, 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 RMBS 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 RMBS is calculated based on our internal credit rating of Rambus, 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 Rambus, 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 RMBS stock the variable cost ratio is equal to 17.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $277 million in the base year in the intrinsic value calculation for RMBS 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 7.6% for Rambus, Inc..

Corporate tax rate of 27% is the nominal tax rate for Rambus, 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 RMBS 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 RMBS are equal to 85.6%.

Life of production assets of 8.5 years is the average useful life of capital assets used in Rambus, 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 RMBS is equal to 50%. 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 - $1012.112 million for Rambus, 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 109.767 million for Rambus, 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 Rambus, Inc. at the current share price and the inputted number of shares is $1.3 billion.

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