Intrinsic value of Semtech - SMTC

Previous Close

$46.89

  Intrinsic Value

$19.37

stock screener

  Rating & Target

str. sell

-59%

Previous close

$46.89

 
Intrinsic value

$19.37

 
Up/down potential

-59%

 
Rating

str. sell

We calculate the intrinsic value of SMTC 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 3.1

 

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, %
  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
  600
  613
  629
  647
  666
  688
  711
  737
  764
  793
  825
  858
  894
  932
  972
  1,015
  1,060
  1,107
  1,158
  1,211
  1,267
  1,326
  1,389
  1,454
  1,524
  1,597
  1,673
  1,754
  1,839
  1,928
Variable operating expenses, $m
  506
  517
  529
  543
  558
  574
  593
  612
  634
  656
  641
  667
  694
  724
  755
  788
  823
  860
  899
  940
  984
  1,030
  1,078
  1,129
  1,183
  1,240
  1,299
  1,362
  1,428
  1,498
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
  506
  517
  529
  543
  558
  574
  593
  612
  634
  656
  641
  667
  694
  724
  755
  788
  823
  860
  899
  940
  984
  1,030
  1,078
  1,129
  1,183
  1,240
  1,299
  1,362
  1,428
  1,498
Operating income, $m
  94
  97
  100
  104
  109
  113
  119
  124
  130
  137
  184
  192
  200
  208
  217
  227
  237
  247
  259
  271
  283
  296
  310
  325
  340
  357
  374
  392
  411
  431
EBITDA, $m
  165
  168
  173
  178
  183
  189
  195
  202
  210
  218
  226
  236
  245
  256
  267
  278
  291
  304
  318
  332
  348
  364
  381
  399
  418
  438
  459
  481
  505
  529
Interest expense (income), $m
  6
  12
  13
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  30
  32
  33
  35
  37
  40
  42
  44
  47
  50
  53
  56
  59
Earnings before tax, $m
  82
  84
  87
  91
  94
  98
  103
  108
  113
  118
  164
  171
  177
  185
  192
  200
  209
  218
  227
  237
  248
  259
  271
  283
  296
  310
  324
  339
  355
  372
Tax expense, $m
  22
  23
  24
  24
  25
  27
  28
  29
  30
  32
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  100
Net income, $m
  60
  61
  64
  66
  69
  72
  75
  79
  82
  86
  120
  125
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  216
  226
  237
  248
  259
  272

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
  906
  927
  950
  977
  1,007
  1,039
  1,075
  1,113
  1,154
  1,199
  1,246
  1,296
  1,350
  1,408
  1,468
  1,533
  1,601
  1,673
  1,749
  1,829
  1,914
  2,003
  2,098
  2,197
  2,302
  2,412
  2,528
  2,650
  2,778
  2,913
Adjusted assets (=assets-cash), $m
  906
  927
  950
  977
  1,007
  1,039
  1,075
  1,113
  1,154
  1,199
  1,246
  1,296
  1,350
  1,408
  1,468
  1,533
  1,601
  1,673
  1,749
  1,829
  1,914
  2,003
  2,098
  2,197
  2,302
  2,412
  2,528
  2,650
  2,778
  2,913
Revenue / Adjusted assets
  0.662
  0.661
  0.662
  0.662
  0.661
  0.662
  0.661
  0.662
  0.662
  0.661
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
Average production assets, $m
  321
  329
  337
  347
  357
  369
  381
  395
  410
  425
  442
  460
  479
  499
  521
  544
  568
  594
  621
  649
  679
  711
  744
  780
  817
  856
  897
  940
  986
  1,034
Working capital, $m
  43
  44
  45
  47
  48
  50
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  105
  110
  115
  120
  126
  132
  139
Total debt, $m
  234
  244
  255
  267
  280
  295
  311
  329
  348
  368
  389
  412
  437
  463
  491
  520
  551
  584
  619
  655
  694
  735
  778
  823
  871
  921
  974
  1,029
  1,088
  1,149
Total liabilities, $m
  413
  423
  433
  446
  459
  474
  490
  508
  526
  547
  568
  591
  616
  642
  670
  699
  730
  763
  797
  834
  873
  914
  957
  1,002
  1,050
  1,100
  1,153
  1,208
  1,267
  1,328
Total equity, $m
  493
  504
  517
  532
  548
  565
  585
  605
  628
  652
  678
  705
  735
  766
  799
  834
  871
  910
  951
  995
  1,041
  1,090
  1,141
  1,195
  1,252
  1,312
  1,375
  1,441
  1,511
  1,585
Total liabilities and equity, $m
  906
  927
  950
  978
  1,007
  1,039
  1,075
  1,113
  1,154
  1,199
  1,246
  1,296
  1,351
  1,408
  1,469
  1,533
  1,601
  1,673
  1,748
  1,829
  1,914
  2,004
  2,098
  2,197
  2,302
  2,412
  2,528
  2,649
  2,778
  2,913
Debt-to-equity ratio
  0.480
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.730
Adjusted equity ratio
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  60
  61
  64
  66
  69
  72
  75
  79
  82
  86
  120
  125
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  216
  226
  237
  248
  259
  272
Depreciation, amort., depletion, $m
  71
  72
  72
  73
  74
  75
  77
  78
  79
  81
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  90
  94
  98
Funds from operations, $m
  130
  133
  136
  139
  143
  147
  152
  156
  162
  167
  162
  168
  175
  182
  190
  198
  206
  215
  225
  235
  245
  257
  268
  281
  294
  308
  322
  337
  353
  370
Change in working capital, $m
  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
  6
  6
  6
  6
Cash from operations, $m
  129
  132
  135
  138
  142
  146
  150
  155
  160
  165
  160
  166
  173
  180
  187
  195
  203
  212
  221
  231
  241
  252
  264
  276
  289
  302
  316
  331
  347
  364
Maintenance CAPEX, $m
  -30
  -31
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -90
  -94
New CAPEX, $m
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
Cash from investing activities, $m
  -36
  -38
  -39
  -41
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
  -122
  -128
  -136
  -142
Free cash flow, $m
  93
  94
  95
  96
  98
  100
  102
  105
  107
  110
  103
  106
  110
  114
  118
  122
  127
  132
  138
  143
  150
  156
  163
  170
  177
  185
  194
  203
  212
  222
Issuance/(repayment) of debt, $m
  8
  9
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
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  
  8
  9
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
Total cash flow (excl. dividends), $m
  101
  103
  106
  109
  112
  115
  118
  122
  126
  130
  124
  129
  134
  140
  146
  152
  158
  165
  172
  180
  188
  197
  206
  215
  225
  236
  247
  258
  271
  283
Retained Cash Flow (-), $m
  -9
  -11
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
Prev. year cash balance distribution, $m
  182
  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
  273
  92
  93
  94
  96
  97
  99
  101
  104
  106
  98
  102
  105
  109
  113
  117
  121
  126
  131
  136
  142
  148
  154
  161
  168
  176
  184
  192
  201
  210
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
  262
  84
  81
  77
  74
  71
  67
  63
  60
  56
  47
  43
  40
  36
  33
  30
  26
  23
  20
  17
  15
  12
  10
  8
  7
  5
  4
  3
  2
  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

Semtech Corporation is a supplier of analog and mixed-signal semiconductor products. The Company designs, develops and markets a range of products for commercial applications, which are sold into the enterprise computing, communications, consumer and industrial end-markets. Its product lines include Signal Integrity, Protection, Wireless and Sensing, and Power and High-Reliability. Applications for the industrial market include video broadcast studio equipment, automated meter reading, wireless charging, military and aerospace, medical, security systems, automotive, Internet of Things, industrial and home automation, and video security and surveillance. Enterprise computing end-markets include desktops, notebooks, servers, graphic boards, printers, datacenter related equipment and passive optical networks. Communications end-market applications include wireless base stations, carrier networks, switches and routers, cable modems, signal conditioners and wireless local area network.

FINANCIAL RATIOS  of  Semtech (SMTC)

Valuation Ratios
P/E Ratio 56.1
Price to Sales 5.7
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 26.1
Price to Free Cash Flow 36.3
Growth Rates
Sales Growth Rate 11%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 153.8%
Cap. Spend. - 3 Yr. Gr. Rate -4.2%
Financial Strength
Quick Ratio 21
Current Ratio 0.1
LT Debt to Equity 37.5%
Total Debt to Equity 39.8%
Interest Coverage 13
Management Effectiveness
Return On Assets 6.2%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 6.7%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity 9.7%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 59.7%
Gross Margin - 3 Yr. Avg. 59.7%
EBITDA Margin 23.2%
EBITDA Margin - 3 Yr. Avg. 19.4%
Operating Margin 15.4%
Oper. Margin - 3 Yr. Avg. 9.7%
Pre-Tax Margin 13.4%
Pre-Tax Margin - 3 Yr. Avg. 8%
Net Profit Margin 10.1%
Net Profit Margin - 3 Yr. Avg. 5.9%
Effective Tax Rate 24.7%
Eff/ Tax Rate - 3 Yr. Avg. 29%
Payout Ratio 0%

SMTC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMTC stock intrinsic value calculation we used $587.847 million for the last fiscal year's total revenue generated by Semtech. The default revenue input number comes from 0001 income statement of Semtech. 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 SMTC 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 SMTC is calculated based on our internal credit rating of Semtech, 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 Semtech.
    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 SMTC stock the variable cost ratio is equal to 84.5%.

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 SMTC 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 Semtech.

Corporate tax rate of 27% is the nominal tax rate for Semtech. 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 SMTC 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 SMTC are equal to 53.6%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Semtech 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 SMTC is equal to 7.2%. 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 - $665.013 million for Semtech - 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 66.185 million for Semtech 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 Semtech at the current share price and the inputted number of shares is $3.1 billion.

RELATED COMPANIES Price Int.Val. Rating
ON ON Semiconduct 17.48 29.83  buy
MXIM Maxim Integrat 51.69 15.99  str.sell
TXN Texas Instrume 94.70 122.57  hold
ADI Analog Devices 86.13 168.02  str.buy
MCHP Microchip Tech 72.02 43.53  sell
MTSI MACOM Technolo 17.95 13.19  sell
IPHI Inphi 36.20 24.92  sell
MPWR Monolithic Pow 122.14 60.65  str.sell

COMPANY NEWS

▶ Trade of the Day: Semtech Corp (SMTC)   [Oct-29-18 09:41AM  InvestorPlace]
▶ Here's Why Leading Semiconductor Stocks Plunged Today   [Oct-24-18 06:10PM  Motley Fool]
▶ 3 "Internet of Things" Stocks to Buy Right Now   [Oct-17-18 05:33PM  Zacks]
▶ Semtech Welcomes New Members to Its Board of Directors   [Sep-24-18 04:30PM  Business Wire]
▶ Why Semtech Stock Jumped Thursday   [Aug-30-18 04:50PM  Motley Fool]
▶ Semtech: Fiscal 2Q Earnings Snapshot   [04:33PM  Associated Press]
▶ Semtech's Q2 Earnings Preview   [07:44AM  Benzinga]
▶ Semtechs LoRa Technology Creates Smarter Streets in India   [Jul-26-18 08:00AM  Business Wire]
▶ 3 Hot Stocks From One of Wall Street's Best Analysts   [Jun-13-18 11:59AM  TheStreet.com]
▶ Semtech to Host Analyst Day   [Jun-06-18 04:30PM  Business Wire]
▶ Marvell Technology Edges Views, Offers Mixed Guidance   [May-31-18 04:46PM  Investor's Business Daily]
▶ Semtech: Fiscal 1Q Earnings Snapshot   [May-30-18 04:31PM  Associated Press]
▶ Semtech to Present Educational Sessions at InfoComm 2018   [May-24-18 08:00AM  GlobeNewswire]
▶ Semtech Keynotes at LoRa Alliance 10th All Members Meeting   [May-17-18 08:00AM  GlobeNewswire]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.