ON Semiconductor Corporation's (NASDAQ:ON) Intrinsic Value Is Potentially 79% Above Its Share Price
ON Semiconductor Corporation's (NASDAQ:ON) Intrinsic Value Is Potentially 79% Above Its Share Price
Key Insights
- Using the 2 Stage Free Cash Flow to Equity, ON Semiconductor fair value estimate is US$119
- ON Semiconductor's US$66.64 share price signals that it might be 44% undervalued
- The US$88.36 analyst price target for ON is 26% less than our estimate of fair value
In this article we are going to estimate the intrinsic value of ON Semiconductor Corporation (NASDAQ:ON) by taking the expected future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!
We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.
What's The Estimated Valuation?
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$1.67b | US$1.87b | US$2.05b | US$2.28b | US$3.21b | US$3.63b | US$4.00b | US$4.30b | US$4.56b | US$4.79b |
Growth Rate Estimate Source | Analyst x6 | Analyst x6 | Analyst x4 | Analyst x2 | Analyst x1 | Est @ 13.27% | Est @ 9.97% | Est @ 7.67% | Est @ 6.06% | Est @ 4.93% |
Present Value ($, Millions) Discounted @ 8.8% | US$1.5k | US$1.6k | US$1.6k | US$1.6k | US$2.1k | US$2.2k | US$2.2k | US$2.2k | US$2.1k | US$2.1k |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$19b
The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.8%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$4.8b× (1 + 2.3%) ÷ (8.8%– 2.3%) = US$75b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$75b÷ ( 1 + 8.8%)10= US$32b
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$51b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of US$66.6, the company appears quite undervalued at a 44% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
The Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 8.8%, which is based on a levered beta of 1.426. 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.
SWOT Analysis for ON Semiconductor
- Earnings growth over the past year exceeded the industry.
- Debt is not viewed as a risk.
- Balance sheet summary for ON.
- Earnings growth over the past year is below its 5-year average.
- Annual earnings are forecast to grow for the next 3 years.
- Good value based on P/E ratio and estimated fair value.
- Annual earnings are forecast to grow slower than the American market.
- What else are analysts forecasting for ON?
Next Steps:
Whilst important, the DCF calculation is only one of many factors that you need to assess for 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 instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For ON Semiconductor, we've compiled three fundamental elements you should consider:
- Risks: For example, we've discovered 1 warning sign for ON Semiconductor that you should be aware of before investing here.
- 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 Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
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.
關鍵見解
- 使用兩階段自由現金流入股本,安森美半導體的公允價值估計爲119美元
- 安森美半導體66.64美元的股價表明其估值可能被低估了44%
- 分析師對ON的目標股價爲88.36美元,比我們對公允價值的估計低26%
在本文中,我們將通過計算預期的未來現金流並將其折現爲現值來估算安森美半導體公司(納斯達克股票代碼:ON)的內在價值。這將使用折扣現金流 (DCF) 模型來完成。聽起來可能很複雜,但實際上很簡單!
我們要提醒的是,對公司進行估值的方法有很多,就像DCF一樣,每種技術在某些情況下都有優點和缺點。對於那些熱衷於股票分析的人來說,你可能會對這裏的Simply Wall St分析模型感興趣。
估計估值是多少?
我們使用所謂的兩階段模型,這僅意味着公司的現金流有兩個不同的增長期。通常,第一階段是較高的增長階段,第二階段是較低的增長階段。首先,我們需要估計未來十年的現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
差價合約就是關於未來一美元的價值低於今天一美元的概念,因此我們將這些未來現金流的價值折現爲以今天的美元計算的估計價值:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 16.7 億美元 | 18.7 億美元 | 20.5 億美元 | 22.8 億美元 | 32.1 億美元 | 363 億美元 | 400 億美元 | 4.30億美元 | 4.56 億美元 | 4.79億美元 |
增長率估算來源 | 分析師 x6 | 分析師 x6 | 分析師 x4 | 分析師 x2 | 分析師 x1 | Est @ 13.27% | 美國東部標準時間 @ 9.97% | Est @ 7.67% | Est @ 6.06% | Est @ 4.93% |
現值(美元,百萬)折扣 @ 8.8% | 150 萬美元 | 160 萬美元 | 160 萬美元 | 160 萬美元 | 2.1 萬美元 | 2.2 萬美元 | 2.2 萬美元 | 2.2 萬美元 | 2.1 萬美元 | 2.1 萬美元 |
(“Est” = Simply Wall St估計的FCF增長率)
10 年期現金流 (PVCF) 的現值 = 190 億美元
第二階段也稱爲終值,這是企業在第一階段之後的現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長率。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們將未來的現金流折現爲今天的價值,使用8.8%的權益成本。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 48億美元× (1 + 2.3%) ÷ (8.8% — 2.3%) = 750億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 750億美元÷ (1 + 8.8%)10= 320億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲510億美元。爲了得出每股內在價值,我們將其除以已發行股票總數。相對於目前的66.6美元的股價,該公司的估值似乎被嚴重低估,與目前的股價相比折扣了44%。但請記住,這只是一個近似的估值,就像任何複雜的公式一樣,垃圾進出。
假設
現在,貼現現金流的最重要輸入是貼現率,當然還有實際現金流。你不必同意這些輸入,我建議你自己重做計算然後試一試。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將安森美半導體視爲潛在股東,因此使用權益成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了8.8%,這是基於1.426的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
安森美半導體的 SWOT 分析
- 過去一年的收益增長超過了該行業。
- 債務不被視爲風險。
- ON 的資產負債表摘要。
- 過去一年的收益增長低於其5年平均水平。
- 預計未來三年的年收入將增長。
- 根據市盈率和估計的公允價值,物有所值。
- 預計年收益的增長速度將低於美國市場。
- 分析師對ON還有什麼預測?
後續步驟:
雖然重要,但DCF的計算只是公司需要評估的衆多因素之一。DCF模型不是完美的股票估值工具。最好你運用不同的案例和假設,看看它們將如何影響公司的估值。例如,如果稍微調整終值增長率,則可能會極大地改變整體結果。股價低於內在價值的原因是什麼?對於安森美半導體,我們整理了您應該考慮的三個基本要素:
- 風險:例如,我們發現了安森美半導體的一個警告信號,在投資之前,您應該注意這一點。
- 未來收益:與同行和整個市場相比,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,深入了解未來幾年的分析師共識數字。
- 其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
PS。Simply Wall St應用程序每天對納斯達克證券交易所的每隻股票進行折扣現金流估值。如果您想找到其他股票的計算方法,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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