Stock Analysis on Net

Advanced Micro Devices Inc. (NASDAQ:AMD)

Present Value of Free Cash Flow to Equity (FCFE) 

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Intrinsic Stock Value (Valuation Summary)

Advanced Micro Devices Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 19.43%
01 FCFE0 1,121
1 FCFE1 1,295 = 1,121 × (1 + 15.50%) 1,084
2 FCFE2 1,507 = 1,295 × (1 + 16.38%) 1,056
3 FCFE3 1,767 = 1,507 × (1 + 17.25%) 1,037
4 FCFE4 2,087 = 1,767 × (1 + 18.13%) 1,026
5 FCFE5 2,483 = 2,087 × (1 + 19.00%) 1,022
5 Terminal value (TV5) 683,925 = 2,483 × (1 + 19.00%) ÷ (19.43%19.00%) 281,438
Intrinsic value of Advanced Micro Devices Inc. common stock 286,663
 
Intrinsic value of Advanced Micro Devices Inc. common stock (per share) $177.41
Current share price $191.06

Based on: 10-K (reporting date: 2023-12-30).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.53%
Expected rate of return on market portfolio2 E(RM) 13.63%
Systematic risk of Advanced Micro Devices Inc. common stock βAMD 1.64
 
Required rate of return on Advanced Micro Devices Inc. common stock3 rAMD 19.43%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rAMD = RF + βAMD [E(RM) – RF]
= 4.53% + 1.64 [13.63%4.53%]
= 19.43%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Advanced Micro Devices Inc., PRAT model

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Average Dec 30, 2023 Dec 31, 2022 Dec 25, 2021 Dec 26, 2020 Dec 28, 2019
Selected Financial Data (US$ in millions)
Net income 854 1,320 3,162 2,490 341
Net revenue 22,680 23,601 16,434 9,763 6,731
Total assets 67,885 67,580 12,419 8,962 6,028
Stockholders’ equity 55,892 54,750 7,497 5,837 2,827
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 3.77% 5.59% 19.24% 25.50% 5.07%
Asset turnover3 0.33 0.35 1.32 1.09 1.12
Financial leverage4 1.21 1.23 1.66 1.54 2.13
Averages
Retention rate 1.00
Profit margin 11.83%
Asset turnover 0.84
Financial leverage 1.55
 
FCFE growth rate (g)5 15.50%

Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26), 10-K (reporting date: 2019-12-28).

2023 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income ÷ Net revenue
= 100 × 854 ÷ 22,680
= 3.77%

3 Asset turnover = Net revenue ÷ Total assets
= 22,680 ÷ 67,885
= 0.33

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 67,885 ÷ 55,892
= 1.21

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 11.83% × 0.84 × 1.55
= 15.50%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (308,712 × 19.43%1,121) ÷ (308,712 + 1,121)
= 19.00%

where:
Equity market value0 = current market value of Advanced Micro Devices Inc. common stock (US$ in millions)
FCFE0 = the last year Advanced Micro Devices Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Advanced Micro Devices Inc. common stock


FCFE growth rate (g) forecast

Advanced Micro Devices Inc., H-model

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Year Value gt
1 g1 15.50%
2 g2 16.38%
3 g3 17.25%
4 g4 18.13%
5 and thereafter g5 19.00%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 15.50% + (19.00%15.50%) × (2 – 1) ÷ (5 – 1)
= 16.38%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 15.50% + (19.00%15.50%) × (3 – 1) ÷ (5 – 1)
= 17.25%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 15.50% + (19.00%15.50%) × (4 – 1) ÷ (5 – 1)
= 18.13%