Intrinsic value of Veeco Instruments Inc. - VECO

Previous Close

$9.65

  Intrinsic Value

$0.88

stock screener

  Rating & Target

str. sell

-91%

Previous close

$9.65

 
Intrinsic value

$0.88

 
Up/down potential

-91%

 
Rating

str. sell

We calculate the intrinsic value of VECO 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 0.5

 

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
  553
  566
  580
  596
  614
  634
  656
  679
  705
  732
  760
  791
  824
  859
  896
  935
  977
  1,021
  1,067
  1,116
  1,168
  1,223
  1,280
  1,341
  1,405
  1,472
  1,543
  1,617
  1,696
  1,778
Variable operating expenses, $m
  636
  650
  666
  684
  704
  726
  749
  775
  803
  833
  838
  872
  908
  946
  987
  1,030
  1,076
  1,124
  1,176
  1,230
  1,287
  1,347
  1,410
  1,477
  1,547
  1,621
  1,699
  1,781
  1,867
  1,958
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
  636
  650
  666
  684
  704
  726
  749
  775
  803
  833
  838
  872
  908
  946
  987
  1,030
  1,076
  1,124
  1,176
  1,230
  1,287
  1,347
  1,410
  1,477
  1,547
  1,621
  1,699
  1,781
  1,867
  1,958
Operating income, $m
  -83
  -84
  -86
  -87
  -89
  -91
  -93
  -96
  -98
  -101
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -142
  -149
  -156
  -164
  -172
  -180
EBITDA, $m
  -27
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
Interest expense (income), $m
  0
  22
  23
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  70
  74
  78
  82
  87
  92
  97
Earnings before tax, $m
  -105
  -107
  -109
  -112
  -115
  -118
  -121
  -125
  -129
  -133
  -111
  -116
  -122
  -127
  -133
  -140
  -146
  -154
  -161
  -169
  -178
  -186
  -196
  -206
  -216
  -227
  -239
  -251
  -263
  -277
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
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -105
  -107
  -109
  -112
  -115
  -118
  -121
  -125
  -129
  -133
  -111
  -116
  -122
  -127
  -133
  -140
  -146
  -154
  -161
  -169
  -178
  -186
  -196
  -206
  -216
  -227
  -239
  -251
  -263
  -277

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
  815
  834
  856
  880
  906
  936
  967
  1,002
  1,039
  1,079
  1,122
  1,167
  1,216
  1,267
  1,322
  1,380
  1,441
  1,506
  1,574
  1,647
  1,723
  1,804
  1,888
  1,978
  2,072
  2,171
  2,275
  2,385
  2,501
  2,622
Adjusted assets (=assets-cash), $m
  815
  834
  856
  880
  906
  936
  967
  1,002
  1,039
  1,079
  1,122
  1,167
  1,216
  1,267
  1,322
  1,380
  1,441
  1,506
  1,574
  1,647
  1,723
  1,804
  1,888
  1,978
  2,072
  2,171
  2,275
  2,385
  2,501
  2,622
Revenue / Adjusted assets
  0.679
  0.679
  0.678
  0.677
  0.678
  0.677
  0.678
  0.678
  0.679
  0.678
  0.677
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
Average production assets, $m
  326
  333
  342
  351
  362
  374
  386
  400
  415
  431
  448
  466
  485
  506
  528
  551
  575
  601
  629
  658
  688
  720
  754
  790
  827
  867
  909
  953
  999
  1,047
Working capital, $m
  101
  103
  106
  109
  112
  115
  119
  124
  128
  133
  138
  144
  150
  156
  163
  170
  178
  186
  194
  203
  213
  223
  233
  244
  256
  268
  281
  294
  309
  324
Total debt, $m
  296
  307
  320
  334
  349
  366
  385
  404
  426
  449
  474
  500
  528
  558
  590
  623
  659
  696
  736
  778
  822
  869
  918
  970
  1,024
  1,081
  1,142
  1,205
  1,272
  1,343
Total liabilities, $m
  472
  483
  495
  509
  525
  542
  560
  580
  602
  625
  649
  676
  704
  734
  765
  799
  834
  872
  912
  953
  998
  1,044
  1,093
  1,145
  1,200
  1,257
  1,317
  1,381
  1,448
  1,518
Total equity, $m
  343
  351
  360
  370
  382
  394
  407
  422
  437
  454
  472
  491
  512
  533
  556
  581
  607
  634
  663
  693
  725
  759
  795
  833
  872
  914
  958
  1,004
  1,053
  1,104
Total liabilities and equity, $m
  815
  834
  855
  879
  907
  936
  967
  1,002
  1,039
  1,079
  1,121
  1,167
  1,216
  1,267
  1,321
  1,380
  1,441
  1,506
  1,575
  1,646
  1,723
  1,803
  1,888
  1,978
  2,072
  2,171
  2,275
  2,385
  2,501
  2,622
Debt-to-equity ratio
  0.860
  0.880
  0.890
  0.900
  0.910
  0.930
  0.940
  0.960
  0.970
  0.990
  1.000
  1.020
  1.030
  1.050
  1.060
  1.070
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
Adjusted equity ratio
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -105
  -107
  -109
  -112
  -115
  -118
  -121
  -125
  -129
  -133
  -111
  -116
  -122
  -127
  -133
  -140
  -146
  -154
  -161
  -169
  -178
  -186
  -196
  -206
  -216
  -227
  -239
  -251
  -263
  -277
Depreciation, amort., depletion, $m
  56
  57
  58
  59
  60
  61
  62
  63
  64
  66
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
Funds from operations, $m
  -49
  -50
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -86
  -90
  -95
  -99
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -149
  -157
  -165
  -174
  -183
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
Cash from operations, $m
  -51
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131
  -138
  -146
  -153
  -161
  -170
  -178
  -188
  -198
Maintenance CAPEX, $m
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
New CAPEX, $m
  -6
  -7
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
Cash from investing activities, $m
  -35
  -36
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -65
  -68
  -71
  -74
  -78
  -81
  -86
  -89
  -94
  -99
  -104
  -109
  -115
  -120
  -126
  -132
  -139
Free cash flow, $m
  -86
  -89
  -93
  -96
  -101
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -145
  -152
  -160
  -168
  -176
  -185
  -194
  -204
  -215
  -226
  -237
  -249
  -262
  -275
  -289
  -304
  -320
  -336
Issuance/(repayment) of debt, $m
  9
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  57
  60
  64
  67
  70
Issuance/(repurchase) of shares, $m
  112
  115
  118
  122
  126
  130
  135
  140
  145
  150
  129
  135
  142
  149
  156
  164
  172
  181
  190
  200
  210
  220
  232
  243
  256
  269
  283
  297
  312
  328
Cash from financing (excl. dividends), $m  
  121
  126
  130
  136
  141
  147
  153
  160
  167
  173
  154
  161
  170
  179
  188
  198
  208
  219
  230
  242
  254
  267
  281
  295
  311
  326
  343
  361
  379
  398
Total cash flow (excl. dividends), $m
  35
  37
  38
  39
  41
  42
  43
  45
  46
  47
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  62
Retained Cash Flow (-), $m
  -112
  -115
  -118
  -122
  -126
  -130
  -135
  -140
  -145
  -150
  -129
  -135
  -142
  -149
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -220
  -232
  -243
  -256
  -269
  -283
  -297
  -312
  -328
Prev. year cash balance distribution, $m
  101
  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
  25
  -78
  -80
  -83
  -85
  -88
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -128
  -134
  -141
  -148
  -155
  -162
  -170
  -179
  -188
  -197
  -207
  -218
  -229
  -241
  -253
  -266
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  23
  -69
  -67
  -64
  -61
  -57
  -54
  -51
  -47
  -43
  -40
  -36
  -32
  -29
  -25
  -22
  -19
  -16
  -13
  -11
  -8
  -7
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  76.2
  57.9
  43.9
  33.3
  25.2
  19.1
  14.4
  10.9
  8.2
  6.2
  4.9
  3.9
  3.0
  2.4
  1.9
  1.5
  1.1
  0.9
  0.7
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0

Veeco Instruments Inc. is engaged in the design, development, manufacture and support of thin film process equipment, primarily sold to make electronic devices. The Company's geographical segments include the United States; China; Europe, Middle East and Africa (EMEA), and Rest of World (ROW). The Company's portfolio of technology solutions focus on market areas, including Lighting, Display & Power Electronics; Advanced Packaging, micro-electromechanical systems (MEMS) & radio frequency (RF); Scientific & Industrial, and Data Storage. The Company's equipment is used to make electronic devices, including light emitting diodes (LEDs), MEMS, wireless devices, power electronics, hard disk drives (HDDs) and semiconductor devices. The Company's System products include Metal Organic Chemical Vapor Deposition Systems, Precision Surface Processing Systems, Ion Beam Etch and Deposition Systems, Molecular Beam Epitaxy Systems, and Other Deposition and Industrial Products.

FINANCIAL RATIOS  of  Veeco Instruments Inc. (VECO)

Valuation Ratios
P/E Ratio -3.2
Price to Sales 1.2
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow -16.3
Price to Free Cash Flow -11.2
Growth Rates
Sales Growth Rate -30.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.4%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0.2%
Total Debt to Equity 0.2%
Interest Coverage 0
Management Effectiveness
Return On Assets -14.8%
Ret/ On Assets - 3 Yr. Avg. -8.5%
Return On Total Capital -18.6%
Ret/ On T. Cap. - 3 Yr. Avg. -10.6%
Return On Equity -18.6%
Return On Equity - 3 Yr. Avg. -10.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 40.1%
Gross Margin - 3 Yr. Avg. 37.2%
EBITDA Margin -25.9%
EBITDA Margin - 3 Yr. Avg. -11.9%
Operating Margin -36.4%
Oper. Margin - 3 Yr. Avg. -20.5%
Pre-Tax Margin -35.8%
Pre-Tax Margin - 3 Yr. Avg. -20.2%
Net Profit Margin -36.7%
Net Profit Margin - 3 Yr. Avg. -20.2%
Effective Tax Rate -2.5%
Eff/ Tax Rate - 3 Yr. Avg. -9.2%
Payout Ratio 0%

VECO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VECO stock intrinsic value calculation we used $542 million for the last fiscal year's total revenue generated by Veeco Instruments Inc.. The default revenue input number comes from 0001 income statement of Veeco Instruments 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 VECO 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 5.8%, whose default value for VECO is calculated based on our internal credit rating of Veeco Instruments 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 Veeco Instruments 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 VECO stock the variable cost ratio is equal to 115.1%.

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 VECO 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 Veeco Instruments Inc..

Corporate tax rate of 27% is the nominal tax rate for Veeco Instruments 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 VECO 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 VECO are equal to 58.9%.

Life of production assets of 11.1 years is the average useful life of capital assets used in Veeco Instruments 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 VECO is equal to 18.2%. 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 - $437.775 million for Veeco Instruments 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 48.039 million for Veeco Instruments 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 Veeco Instruments Inc. at the current share price and the inputted number of shares is $0.5 billion.

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