How far off is ON Semiconductor Corporation (NASDAQ:ON) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to their present value. Our analysis will employ the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.
See our latest analysis for ON Semiconductor
The Method
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) estimate
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
Levered FCF ($, Millions) | US$1.79b | US$1.98b | US$2.11b | US$2.21b | US$2.30b | US$2.38b | US$2.45b | US$2.51b | US$2.57b | US$2.63b |
Growth Rate Estimate Source | Analyst x8 | Analyst x4 | Analyst x1 | Est @ 4.84% | Est @ 3.97% | Est @ 3.36% | Est @ 2.93% | Est @ 2.64% | Est @ 2.43% | Est @ 2.28% |
Present Value ($, Millions) Discounted @ 7.3% | US$1.7k | US$1.7k | US$1.7k | US$1.7k | US$1.6k | US$1.6k | US$1.5k | US$1.4k | US$1.4k | US$1.3k |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$16b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 1.9%. We discount the terminal cash flows to today's value at a cost of equity of 7.3%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = US$2.6b× (1 + 1.9%) ÷ (7.3%– 1.9%) = US$50b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$50b÷ ( 1 + 7.3%)10= US$25b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$40b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$65.5, the company appears a touch undervalued at a 30% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
NasdaqGS:ON Discounted Cash Flow September 29th 2022
The Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at ON Semiconductor as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.3%, which is based on a levered beta of 1.258. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
Looking Ahead:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For ON Semiconductor, we've put together three additional elements you should further research:
- Financial Health: Does ON have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Future Earnings: How does ON's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
安森美半導體公司(納斯達克股票代碼:ON)距離其內在價值還有多遠?使用最新的財務數據,我們將通過提取預期的未來現金流並將其貼現到現值,來看看股票的定價是否公平。我們的分析將採用貼現現金流(DCF)模型。這聽起來可能很複雜,但實際上很簡單!
我們通常認為,一家公司的價值是它未來將產生的所有現金的現值。然而,貼現現金流只是眾多估值指標中的一個,它也並非沒有缺陷。如果你對這類估值還有一些亟待解決的問題,不妨看看Simply Wall St.的分析模型。
查看我們對安森美半導體的最新分析
該方法
我們將使用兩階段貼現現金流模型,顧名思義,該模型考慮了兩個增長階段。第一階段通常是一個較高的成長期,接近終值,在第二個“穩定增長”階段捕捉到。首先,我們必須對未來十年的現金流進行估計。在可能的情況下,我們使用分析師的估計,但當這些估計不可用時,我們會根據上次估計或報告的價值推斷先前的自由現金流(FCF)。我們假設,自由現金流萎縮的公司將減緩收縮速度,而自由現金流增長的公司在這段時間內的增長速度將放緩。我們這樣做是為了反映出,增長在最初幾年往往比後來幾年放緩得更多。
貼現現金流就是這樣一種想法,即未來的一美元不如現在的一美元,所以我們將這些未來現金流的價值貼現到以今天的美元計算的估計價值:
10年自由現金流(FCF)估計
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
槓桿式FCF(百萬美元) | 17.9億美元 | 19.8億美元 | 21.1億美元 | 22.1億美元 | 23億美元 | 23.8億美元 | 24.5億美元 | 25.1億美元 | 25.7億美元 | 26.3億美元 |
增長率預估來源 | 分析師x8 | 分析師x4 | 分析師x1 | Est@4.84% | Est@3.97% | Est@3.36% | Est@2.93% | Est@2.64% | Est@2.43% | Est@2.28% |
現值(美元,百萬)貼現@7.3% | 170萬美元 | 170萬美元 | 170萬美元 | 170萬美元 | 160萬美元 | 160萬美元 | 15萬美元 | 140萬美元 | 140萬美元 | 130萬美元 |
(“EST”=Simply Wall St.預估的FCF成長率)
10年期現金流現值(PVCF)=160億美元
我們現在需要計算終端價值,它説明瞭這十年之後的所有未來現金流。戈登增長公式用於計算終端價值,其未來年增長率等於10年期政府債券收益率1.9%的5年平均水平。我們以7.3%的權益成本將終端現金流貼現到今天的價值。
終端值(TV)=FCF2032×(1+g)?(r-g)=26億美元×(1+1.9%)?(7.3%-1.9%)=500億美元
終值現值(PVTV)=TV/(1+r)10=500億美元?(1+7.3%)10=250億美元
那麼,總價值或股權價值就是未來現金流的現值之和,在這種情況下,現金流是400億美元。最後一步是將股權價值除以流通股數量。與目前65.5美元的股價相比,該公司的估值似乎略有低估,較目前的股價有30%的折扣。然而,估值是不精確的工具,更像是一臺望遠鏡--移動幾度,就會到達另一個星系。一定要記住這一點。
NasdaqGS:2022年9月29日貼現現金流
假設
現在,貼現現金流最重要的投入是貼現率,當然還有實際現金流。投資的一部分是你自己對一家公司未來業績的評估,所以你自己試一試計算,檢查你自己的假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮一家公司未來的資本要求,因此它沒有給出一家公司潛在業績的全貌。鑑於我們將安森美半導體視為潛在股東,股權成本被用作貼現率,而不是佔債務的資本成本(或加權平均資本成本,WACC)。在這個計算中,我們使用了7.3%,這是基於槓桿率為1.258的測試值。貝塔係數是衡量一隻股票相對於整個市場的波動性的指標。我們的貝塔係數來自全球可比公司的行業平均貝塔係數,強制限制在0.8到2.0之間,這是一個穩定業務的合理範圍。
展望未來:
儘管一家公司的估值很重要,但它不應該是你在研究一家公司時唯一考慮的指標。貼現現金流模型並不是一個完美的股票估值工具。你最好應用不同的案例和假設,看看它們會如何影響公司的估值。例如,公司權益成本或無風險利率的變化可能會對估值產生重大影響。為什麼內在價值高於當前股價?對於安森美半導體,我們已經收集了三個你應該進一步研究的額外元素:
- 財務狀況:On有健康的資產負債表嗎?看看我們的自由資產負債表分析,對槓桿和風險等關鍵因素進行了六項簡單的檢查。
- 未來收益:與同行和更廣泛的市場相比,On的增長率如何?通過與我們的免費分析師增長預期圖表互動,更深入地挖掘分析師對未來幾年的共識數字。
- 其他高質量替代產品:你喜歡一個好的全能運動員嗎?瀏覽我們的高質量股票互動列表,瞭解您可能會錯過的其他股票!
PS.Simply Wall St.應用程序每天對納斯達克指數的每一隻股票進行現金流貼現估值。如果你想找到其他股票的計算方法,只需搜索此處。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。