Intrinsic value of Silicon Motion Technology ADR - SIMO

Previous Close

$35.26

  Intrinsic Value

$41.31

stock screener

  Rating & Target

hold

+17%

Previous close

$35.26

 
Intrinsic value

$41.31

 
Up/down potential

+17%

 
Rating

hold

We calculate the intrinsic value of SIMO 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
  534
  546
  560
  576
  593
  613
  633
  656
  680
  706
  734
  764
  796
  830
  865
  903
  944
  986
  1,031
  1,078
  1,128
  1,181
  1,236
  1,295
  1,357
  1,422
  1,490
  1,562
  1,637
  1,717
Variable operating expenses, $m
  402
  411
  421
  433
  446
  460
  476
  492
  510
  530
  544
  566
  589
  614
  641
  669
  698
  730
  763
  798
  835
  874
  915
  959
  1,004
  1,052
  1,103
  1,156
  1,212
  1,271
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
  402
  411
  421
  433
  446
  460
  476
  492
  510
  530
  544
  566
  589
  614
  641
  669
  698
  730
  763
  798
  835
  874
  915
  959
  1,004
  1,052
  1,103
  1,156
  1,212
  1,271
Operating income, $m
  132
  135
  139
  143
  147
  152
  158
  164
  170
  177
  191
  198
  207
  215
  225
  235
  245
  256
  268
  280
  293
  307
  321
  336
  352
  369
  387
  406
  425
  446
EBITDA, $m
  148
  152
  155
  160
  165
  170
  176
  182
  189
  196
  204
  212
  221
  230
  240
  251
  262
  274
  286
  299
  313
  328
  343
  359
  376
  394
  413
  433
  454
  476
Interest expense (income), $m
  0
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
Earnings before tax, $m
  131
  134
  137
  141
  145
  150
  155
  160
  166
  173
  186
  193
  201
  209
  218
  227
  237
  247
  258
  269
  282
  294
  308
  322
  337
  353
  369
  387
  405
  424
Tax expense, $m
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  100
  104
  109
  115
Net income, $m
  95
  98
  100
  103
  106
  109
  113
  117
  121
  126
  136
  141
  147
  153
  159
  166
  173
  180
  188
  197
  206
  215
  225
  235
  246
  258
  270
  282
  296
  310

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
  469
  480
  492
  506
  521
  538
  557
  576
  598
  621
  645
  672
  699
  729
  760
  794
  829
  866
  906
  947
  991
  1,038
  1,086
  1,138
  1,192
  1,249
  1,309
  1,372
  1,439
  1,509
Adjusted assets (=assets-cash), $m
  469
  480
  492
  506
  521
  538
  557
  576
  598
  621
  645
  672
  699
  729
  760
  794
  829
  866
  906
  947
  991
  1,038
  1,086
  1,138
  1,192
  1,249
  1,309
  1,372
  1,439
  1,509
Revenue / Adjusted assets
  1.139
  1.138
  1.138
  1.138
  1.138
  1.139
  1.136
  1.139
  1.137
  1.137
  1.138
  1.137
  1.139
  1.139
  1.138
  1.137
  1.139
  1.139
  1.138
  1.138
  1.138
  1.138
  1.138
  1.138
  1.138
  1.139
  1.138
  1.138
  1.138
  1.138
Average production assets, $m
  86
  88
  91
  93
  96
  99
  103
  106
  110
  114
  119
  124
  129
  134
  140
  146
  153
  160
  167
  175
  183
  191
  200
  210
  220
  230
  241
  253
  265
  278
Working capital, $m
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  94
  98
  103
Total debt, $m
  29
  33
  38
  43
  49
  55
  62
  70
  78
  87
  96
  106
  117
  128
  140
  152
  166
  180
  195
  211
  227
  245
  263
  283
  303
  325
  348
  372
  397
  423
Total liabilities, $m
  178
  182
  187
  192
  198
  204
  211
  218
  227
  235
  245
  255
  265
  276
  288
  301
  314
  328
  343
  359
  376
  393
  412
  431
  452
  473
  496
  520
  545
  572
Total equity, $m
  291
  298
  306
  314
  324
  334
  346
  358
  371
  386
  401
  417
  434
  453
  472
  493
  515
  538
  563
  588
  616
  644
  675
  707
  740
  776
  813
  852
  893
  937
Total liabilities and equity, $m
  469
  480
  493
  506
  522
  538
  557
  576
  598
  621
  646
  672
  699
  729
  760
  794
  829
  866
  906
  947
  992
  1,037
  1,087
  1,138
  1,192
  1,249
  1,309
  1,372
  1,438
  1,509
Debt-to-equity ratio
  0.100
  0.110
  0.120
  0.140
  0.150
  0.170
  0.180
  0.200
  0.210
  0.220
  0.240
  0.250
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
Adjusted equity ratio
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  95
  98
  100
  103
  106
  109
  113
  117
  121
  126
  136
  141
  147
  153
  159
  166
  173
  180
  188
  197
  206
  215
  225
  235
  246
  258
  270
  282
  296
  310
Depreciation, amort., depletion, $m
  16
  16
  17
  17
  17
  18
  18
  18
  19
  19
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
Funds from operations, $m
  111
  114
  117
  120
  123
  127
  131
  135
  140
  145
  149
  155
  161
  167
  174
  182
  190
  198
  207
  216
  226
  236
  247
  258
  270
  283
  296
  310
  325
  340
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
Cash from operations, $m
  111
  113
  116
  119
  122
  126
  130
  134
  139
  144
  147
  153
  159
  165
  172
  180
  187
  195
  204
  213
  223
  233
  243
  255
  266
  279
  292
  306
  320
  336
Maintenance CAPEX, $m
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -19
  -21
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -39
  -40
  -42
Free cash flow, $m
  100
  102
  104
  106
  109
  112
  115
  119
  123
  127
  130
  135
  140
  146
  152
  158
  165
  172
  179
  187
  195
  204
  213
  223
  233
  244
  256
  268
  280
  294
Issuance/(repayment) of debt, $m
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  19
  21
  22
  23
  24
  25
  26
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  
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  19
  21
  22
  23
  24
  25
  26
Total cash flow (excl. dividends), $m
  103
  106
  108
  112
  115
  118
  122
  127
  131
  136
  139
  145
  151
  157
  164
  171
  178
  186
  194
  203
  212
  222
  232
  243
  254
  266
  278
  292
  305
  320
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
Prev. year cash balance distribution, $m
  209
  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
  306
  99
  101
  103
  105
  108
  111
  114
  118
  122
  124
  129
  133
  139
  144
  150
  156
  163
  170
  177
  185
  193
  202
  211
  220
  230
  241
  252
  264
  277
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
  294
  91
  88
  85
  82
  78
  75
  71
  68
  64
  59
  55
  51
  47
  42
  38
  34
  30
  26
  22
  19
  16
  13
  11
  9
  7
  5
  4
  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

Silicon Motion Technology Corporation is a fabless semiconductor company. The Company designs, develops and markets low-power semiconductor solutions to original equipment manufacturers (OEMs) and other customers in the mobile storage and mobile communications markets. It is engaged in developing negative-AND (NAND) flash controller integrated circuits (ICs) for solid-state storage devices and specialty radio frequency (RF) ICs for mobile devices. In the mobile storage market, the Company's products are controllers used in embedded storage products, such as Solid State Drives (SSDs), and Embedded Multimedia Cards (eMMCs), as well as expandable storage products, such as flash memory cards and universal serial bus (USB) flash drives. For the mobile communications market, the Company's products are handset transceivers and mobile television (TV) System on Chips (SoCs). The Company's products are used in devices, such as smartphones, tablets and personal computers (PCs).

FINANCIAL RATIOS  of  Silicon Motion Technology ADR (SIMO)

Valuation Ratios
P/E Ratio 44.9
Price to Sales 9
Price to Book 11.2
Price to Tangible Book
Price to Cash Flow 39.5
Price to Free Cash Flow 39.5
Growth Rates
Sales Growth Rate 54%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 11
Current Ratio 0.3
LT Debt to Equity 0%
Total Debt to Equity 5.6%
Interest Coverage 0
Management Effectiveness
Return On Assets 21.1%
Ret/ On Assets - 3 Yr. Avg. 16.2%
Return On Total Capital 27.3%
Ret/ On T. Cap. - 3 Yr. Avg. 20.4%
Return On Equity 28.2%
Return On Equity - 3 Yr. Avg. 20.7%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 49.5%
Gross Margin - 3 Yr. Avg. 50.9%
EBITDA Margin 27%
EBITDA Margin - 3 Yr. Avg. 25%
Operating Margin 24.6%
Oper. Margin - 3 Yr. Avg. 22%
Pre-Tax Margin 25%
Pre-Tax Margin - 3 Yr. Avg. 22.7%
Net Profit Margin 20%
Net Profit Margin - 3 Yr. Avg. 17.3%
Effective Tax Rate 20.1%
Eff/ Tax Rate - 3 Yr. Avg. 24%
Payout Ratio 20.7%

SIMO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SIMO stock intrinsic value calculation we used $523.404 million for the last fiscal year's total revenue generated by Silicon Motion Technology ADR. The default revenue input number comes from 0001 income statement of Silicon Motion Technology ADR. 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 SIMO 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 SIMO is calculated based on our internal credit rating of Silicon Motion Technology ADR, 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 Silicon Motion Technology ADR.
    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 SIMO stock the variable cost ratio is equal to 75.3%.

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 SIMO 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 Silicon Motion Technology ADR.

Corporate tax rate of 27% is the nominal tax rate for Silicon Motion Technology ADR. 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 SIMO 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 SIMO are equal to 16.2%.

Life of production assets of 9.1 years is the average useful life of capital assets used in Silicon Motion Technology ADR 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 SIMO is equal to 6%. 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 - $494.051 million for Silicon Motion Technology ADR - 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 36.106 million for Silicon Motion Technology ADR 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 Silicon Motion Technology ADR at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Silicon Motion: 3Q Earnings Snapshot   [Oct-30-18 07:11PM  Associated Press]
▶ Silicon Motion Announces Annual Cash Dividend   [Oct-29-18 08:00AM  GlobeNewswire]
▶ 3 Top Tech Stocks to Buy Right Now   [Aug-06-18 07:26AM  Motley Fool]
▶ Silicon Motion: 2Q Earnings Snapshot   [Jul-31-18 06:47PM  Associated Press]
▶ Silicon Motion Confirms Quarterly Dividend   [Jul-30-18 08:00AM  GlobeNewswire]
▶ Micron stock rises after SK Hynix reports results   [Jul-26-18 10:14AM  MarketWatch]
▶ Biogen, Microsoft gain; PriceSmart, Silicon Motion fall   [Jul-06-18 04:37PM  Associated Press]
▶ Silicon Motion: 1Q Earnings Snapshot   [Apr-26-18 07:31PM  Associated Press]
▶ Silicon Motion Confirms Quarterly Dividend   [Apr-23-18 08:00AM  GlobeNewswire]
▶ Silicon Motion beats 4Q profit forecasts   [05:01AM  Associated Press]
▶ Silicon Motion Confirms Quarterly Dividend   [Feb-05-18 08:00AM  GlobeNewswire]
▶ Stocks With Rising Relative Strength: Silicon Motion Technology   [Dec-05-17 03:00AM  Investor's Business Daily]
▶ Silicon Motion meets 3Q profit forecasts   [05:02AM  Associated Press]
▶ Silicon Motion Announces 50% Annual Dividend Increase   [Oct-24-17 08:00AM  GlobeNewswire]
▶ 1 Thing That's Hurting Silicon Motion Technology Stock   [Aug-11-17 08:45AM  Motley Fool]
▶ Silicon Motion misses Street 2Q forecasts   [Jul-31-17 11:14PM  Associated Press]
▶ Silicon Motion Confirms Quarterly Dividend   [Jul-28-17 08:00AM  GlobeNewswire]
▶ Story Stocks from Briefing.com   [Jul-07-17 01:19PM  Briefing.com]
▶ Build Your Investing Watch List With Stock Ratings, Buy Zones, Earnings   [May-31-17 07:57PM  Investor's Business Daily]
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▶ As Nvidia Zooms Higher, This Chip Stock Tests New Buy Zone   [01:06PM  Investor's Business Daily]
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▶ Can This Chip Stock Join Nvidia, Maxlinear And Break Out?   [11:14AM  Investor's Business Daily]

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