Intrinsic value of SolarEdge Technologies, Inc. - SEDG

Previous Close

$37.12

  Intrinsic Value

$48.30

stock screener

  Rating & Target

buy

+30%

Previous close

$37.12

 
Intrinsic value

$48.30

 
Up/down potential

+30%

 
Rating

buy

We calculate the intrinsic value of SEDG 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 1.8

 

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, %
  39.30
  35.87
  32.78
  30.00
  27.50
  25.25
  23.23
  21.41
  19.77
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.36
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.80
  6.62
Revenue, $m
  1,305
  1,773
  2,355
  3,061
  3,903
  4,889
  6,025
  7,314
  8,760
  10,362
  12,120
  14,030
  16,091
  18,298
  20,649
  23,140
  25,767
  28,530
  31,425
  34,452
  37,612
  40,904
  44,331
  47,895
  51,600
  55,450
  59,452
  63,610
  67,933
  72,427
Variable operating expenses, $m
  1,107
  1,501
  1,991
  2,586
  3,295
  4,125
  5,081
  6,168
  7,385
  8,734
  10,207
  11,816
  13,552
  15,411
  17,391
  19,488
  21,701
  24,028
  26,466
  29,016
  31,677
  34,449
  37,336
  40,337
  43,458
  46,701
  50,071
  53,573
  57,213
  60,998
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
  1,107
  1,501
  1,991
  2,586
  3,295
  4,125
  5,081
  6,168
  7,385
  8,734
  10,207
  11,816
  13,552
  15,411
  17,391
  19,488
  21,701
  24,028
  26,466
  29,016
  31,677
  34,449
  37,336
  40,337
  43,458
  46,701
  50,071
  53,573
  57,213
  60,998
Operating income, $m
  199
  273
  364
  476
  609
  764
  943
  1,147
  1,375
  1,628
  1,912
  2,214
  2,539
  2,887
  3,258
  3,651
  4,066
  4,502
  4,959
  5,436
  5,935
  6,454
  6,995
  7,557
  8,142
  8,750
  9,381
  10,037
  10,719
  11,428
EBITDA, $m
  221
  300
  399
  518
  661
  827
  1,020
  1,238
  1,483
  1,754
  2,051
  2,374
  2,723
  3,097
  3,495
  3,916
  4,361
  4,828
  5,318
  5,830
  6,365
  6,922
  7,502
  8,105
  8,732
  9,384
  10,061
  10,765
  11,496
  12,257
Interest expense (income), $m
  0
  5
  39
  83
  137
  204
  282
  375
  481
  602
  738
  888
  1,052
  1,231
  1,424
  1,631
  1,851
  2,085
  2,331
  2,590
  2,861
  3,145
  3,441
  3,749
  4,070
  4,404
  4,752
  5,112
  5,487
  5,877
  6,282
Earnings before tax, $m
  194
  234
  281
  338
  405
  482
  569
  666
  773
  890
  1,025
  1,162
  1,308
  1,463
  1,627
  1,800
  1,981
  2,171
  2,369
  2,575
  2,790
  3,013
  3,246
  3,487
  3,738
  3,998
  4,269
  4,550
  4,842
  5,146
Tax expense, $m
  52
  63
  76
  91
  109
  130
  154
  180
  209
  240
  277
  314
  353
  395
  439
  486
  535
  586
  640
  695
  753
  814
  876
  941
  1,009
  1,079
  1,153
  1,228
  1,307
  1,390
Net income, $m
  142
  170
  205
  247
  296
  352
  415
  486
  564
  650
  748
  848
  955
  1,068
  1,188
  1,314
  1,446
  1,585
  1,729
  1,880
  2,037
  2,200
  2,369
  2,545
  2,728
  2,919
  3,116
  3,321
  3,535
  3,757

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
  1,192
  1,620
  2,151
  2,796
  3,565
  4,465
  5,502
  6,680
  8,000
  9,463
  11,068
  12,813
  14,695
  16,711
  18,857
  21,132
  23,532
  26,055
  28,699
  31,463
  34,348
  37,355
  40,484
  43,739
  47,123
  50,640
  54,294
  58,091
  62,039
  66,143
Adjusted assets (=assets-cash), $m
  1,192
  1,620
  2,151
  2,796
  3,565
  4,465
  5,502
  6,680
  8,000
  9,463
  11,068
  12,813
  14,695
  16,711
  18,857
  21,132
  23,532
  26,055
  28,699
  31,463
  34,348
  37,355
  40,484
  43,739
  47,123
  50,640
  54,294
  58,091
  62,039
  66,143
Revenue / Adjusted assets
  1.095
  1.094
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
Average production assets, $m
  145
  197
  261
  340
  433
  543
  669
  812
  972
  1,150
  1,345
  1,557
  1,786
  2,031
  2,292
  2,569
  2,860
  3,167
  3,488
  3,824
  4,175
  4,540
  4,921
  5,316
  5,728
  6,155
  6,599
  7,061
  7,541
  8,039
Working capital, $m
  210
  286
  379
  493
  628
  787
  970
  1,178
  1,410
  1,668
  1,951
  2,259
  2,591
  2,946
  3,324
  3,725
  4,149
  4,593
  5,059
  5,547
  6,055
  6,585
  7,137
  7,711
  8,308
  8,928
  9,572
  10,241
  10,937
  11,661
Total debt, $m
  171
  364
  602
  893
  1,239
  1,644
  2,111
  2,641
  3,235
  3,893
  4,615
  5,401
  6,247
  7,155
  8,121
  9,144
  10,224
  11,359
  12,549
  13,793
  15,092
  16,444
  17,853
  19,317
  20,840
  22,423
  24,067
  25,776
  27,552
  29,399
Total liabilities, $m
  536
  729
  968
  1,258
  1,604
  2,009
  2,476
  3,006
  3,600
  4,258
  4,981
  5,766
  6,613
  7,520
  8,486
  9,509
  10,589
  11,725
  12,914
  14,158
  15,457
  16,810
  18,218
  19,683
  21,205
  22,788
  24,432
  26,141
  27,917
  29,764
Total equity, $m
  656
  891
  1,183
  1,538
  1,961
  2,456
  3,026
  3,674
  4,400
  5,205
  6,087
  7,047
  8,082
  9,191
  10,372
  11,623
  12,943
  14,330
  15,784
  17,305
  18,892
  20,545
  22,266
  24,057
  25,918
  27,852
  29,862
  31,950
  34,121
  36,379
Total liabilities and equity, $m
  1,192
  1,620
  2,151
  2,796
  3,565
  4,465
  5,502
  6,680
  8,000
  9,463
  11,068
  12,813
  14,695
  16,711
  18,858
  21,132
  23,532
  26,055
  28,698
  31,463
  34,349
  37,355
  40,484
  43,740
  47,123
  50,640
  54,294
  58,091
  62,038
  66,143
Debt-to-equity ratio
  0.260
  0.410
  0.510
  0.580
  0.630
  0.670
  0.700
  0.720
  0.740
  0.750
  0.760
  0.770
  0.770
  0.780
  0.780
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
Adjusted equity ratio
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  142
  170
  205
  247
  296
  352
  415
  486
  564
  650
  748
  848
  955
  1,068
  1,188
  1,314
  1,446
  1,585
  1,729
  1,880
  2,037
  2,200
  2,369
  2,545
  2,728
  2,919
  3,116
  3,321
  3,535
  3,757
Depreciation, amort., depletion, $m
  22
  28
  34
  42
  52
  63
  76
  91
  108
  126
  139
  161
  184
  209
  236
  265
  295
  326
  360
  394
  430
  468
  507
  548
  590
  635
  680
  728
  777
  829
Funds from operations, $m
  164
  198
  240
  289
  348
  415
  491
  577
  672
  776
  887
  1,008
  1,139
  1,277
  1,424
  1,579
  1,741
  1,911
  2,089
  2,274
  2,467
  2,668
  2,877
  3,094
  3,319
  3,553
  3,796
  4,049
  4,312
  4,586
Change in working capital, $m
  59
  75
  94
  114
  136
  159
  183
  208
  233
  258
  283
  308
  332
  355
  378
  401
  423
  445
  466
  487
  509
  530
  552
  574
  597
  620
  644
  669
  696
  724
Cash from operations, $m
  105
  123
  146
  176
  212
  256
  308
  369
  439
  518
  604
  701
  807
  922
  1,046
  1,178
  1,318
  1,466
  1,623
  1,787
  1,958
  2,138
  2,325
  2,520
  2,722
  2,933
  3,152
  3,380
  3,616
  3,862
Maintenance CAPEX, $m
  -11
  -15
  -20
  -27
  -35
  -45
  -56
  -69
  -84
  -100
  -119
  -139
  -161
  -184
  -209
  -236
  -265
  -295
  -326
  -360
  -394
  -430
  -468
  -507
  -548
  -590
  -635
  -680
  -728
  -777
New CAPEX, $m
  -41
  -52
  -65
  -78
  -93
  -109
  -126
  -143
  -160
  -178
  -195
  -212
  -229
  -245
  -261
  -276
  -292
  -307
  -321
  -336
  -351
  -365
  -380
  -396
  -411
  -427
  -444
  -462
  -480
  -499
Cash from investing activities, $m
  -52
  -67
  -85
  -105
  -128
  -154
  -182
  -212
  -244
  -278
  -314
  -351
  -390
  -429
  -470
  -512
  -557
  -602
  -647
  -696
  -745
  -795
  -848
  -903
  -959
  -1,017
  -1,079
  -1,142
  -1,208
  -1,276
Free cash flow, $m
  53
  56
  61
  70
  84
  102
  126
  157
  195
  240
  290
  350
  418
  493
  575
  665
  761
  865
  975
  1,091
  1,213
  1,342
  1,476
  1,617
  1,763
  1,915
  2,073
  2,238
  2,409
  2,586
Issuance/(repayment) of debt, $m
  151
  192
  239
  290
  346
  405
  467
  530
  594
  658
  722
  785
  847
  907
  966
  1,024
  1,080
  1,135
  1,190
  1,244
  1,298
  1,353
  1,408
  1,465
  1,523
  1,582
  1,644
  1,709
  1,776
  1,847
Issuance/(repurchase) of shares, $m
  44
  65
  87
  108
  127
  143
  155
  162
  162
  155
  135
  112
  80
  41
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  195
  257
  326
  398
  473
  548
  622
  692
  756
  813
  857
  897
  927
  948
  966
  1,024
  1,080
  1,135
  1,190
  1,244
  1,298
  1,353
  1,408
  1,465
  1,523
  1,582
  1,644
  1,709
  1,776
  1,847
Total cash flow (excl. dividends), $m
  248
  313
  387
  468
  557
  651
  749
  849
  951
  1,053
  1,147
  1,247
  1,345
  1,441
  1,541
  1,688
  1,841
  2,000
  2,165
  2,335
  2,512
  2,695
  2,885
  3,082
  3,286
  3,498
  3,718
  3,947
  4,185
  4,433
Retained Cash Flow (-), $m
  -185
  -235
  -292
  -355
  -423
  -495
  -570
  -648
  -726
  -805
  -883
  -960
  -1,035
  -1,109
  -1,181
  -1,251
  -1,320
  -1,387
  -1,454
  -1,521
  -1,587
  -1,654
  -1,721
  -1,790
  -1,861
  -1,934
  -2,010
  -2,089
  -2,171
  -2,257
Prev. year cash balance distribution, $m
  92
  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
  154
  78
  95
  114
  134
  156
  178
  201
  225
  248
  264
  287
  310
  332
  361
  437
  521
  613
  710
  815
  925
  1,041
  1,163
  1,291
  1,425
  1,564
  1,708
  1,858
  2,014
  2,175
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
  148
  71
  82
  94
  104
  113
  120
  126
  129
  130
  126
  123
  118
  111
  106
  111
  113
  113
  109
  104
  96
  86
  76
  66
  55
  46
  37
  29
  22
  16
Current shareholders' claim on cash, %
  97.1
  94.1
  91.3
  88.7
  86.4
  84.4
  82.8
  81.4
  80.2
  79.3
  78.7
  78.2
  77.9
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8

SolarEdge Technologies, Inc. offers an inverter solution for a solar photovoltaic (PV) system. The Company's products include SolarEdge Power Optimizer, SolarEdge Inverter, StorEdge Solutions and SolarEdge Monitoring Software. Its product roadmap consists of categories, including power optimizers, inverters, monitoring services, energy storage and smart energy management. The Company's power optimizers provide module-level maximum power point (MPP) tracking and real-time adjustments of current and voltage to the optimal working point of each individual PV module. The Company's solution consists of a direct current (DC) power optimizer, an inverter and a cloud-based monitoring platform that operates as a single integrated system.

FINANCIAL RATIOS  of  SolarEdge Technologies, Inc. (SEDG)

Valuation Ratios
P/E Ratio 61.3
Price to Sales 6.4
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow 31.3
Price to Free Cash Flow 41.4
Growth Rates
Sales Growth Rate -51%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0.7%
Total Debt to Equity 0.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.1%
Ret/ On Assets - 3 Yr. Avg. 13.2%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 23.3%
Return On Equity 9.2%
Return On Equity - 3 Yr. Avg. 24.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 33.8%
Gross Margin - 3 Yr. Avg. 30%
EBITDA Margin 14.2%
EBITDA Margin - 3 Yr. Avg. 12.6%
Operating Margin 13.8%
Oper. Margin - 3 Yr. Avg. 12.4%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 11.6%
Net Profit Margin 10.4%
Net Profit Margin - 3 Yr. Avg. 10.9%
Effective Tax Rate 19.4%
Eff/ Tax Rate - 3 Yr. Avg. 7%
Payout Ratio 0%

SEDG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SEDG stock intrinsic value calculation we used $937 million for the last fiscal year's total revenue generated by SolarEdge Technologies, Inc.. The default revenue input number comes from 0001 income statement of SolarEdge Technologies, 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 SEDG stock valuation model: a) initial revenue growth rate of 39.3% 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 SEDG is calculated based on our internal credit rating of SolarEdge Technologies, 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 SolarEdge Technologies, 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 SEDG stock the variable cost ratio is equal to 85%.

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 SEDG 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 22.8% for SolarEdge Technologies, Inc..

Corporate tax rate of 27% is the nominal tax rate for SolarEdge Technologies, 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 SEDG 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 SEDG are equal to 11.1%.

Life of production assets of 9.7 years is the average useful life of capital assets used in SolarEdge Technologies, 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 SEDG is equal to 16.1%. 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 - $562.408 million for SolarEdge Technologies, 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 47.333 million for SolarEdge Technologies, 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 SolarEdge Technologies, Inc. at the current share price and the inputted number of shares is $1.8 billion.

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