Stock Analysis on Net
Stock Analysis on Net

First Solar Inc. (NASDAQ:FSLR)

Present Value of Free Cash Flow to Equity (FCFE)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

First Solar Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 17.81%
01 FCFE0 -416,532
1 FCFE1 — = -416,532 × (1 + 0.00%) —
2 FCFE2 — = — × (1 + 0.00%) —
3 FCFE3 — = — × (1 + 0.00%) —
4 FCFE4 — = — × (1 + 0.00%) —
5 FCFE5 — = — × (1 + 0.00%) —
5 Terminal value (TV5) — = — × (1 + 0.00%) ÷ (17.81% – 0.00%) —
Intrinsic value of First Solar Inc. common stock —
 
Intrinsic value of First Solar Inc. common stock (per share) $—
Current share price $216.19

Based on: 10-K (reporting date: 2023-12-31).

1 See details »

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 4.56%
Expected rate of return on market portfolio2 E(RM) 13.77%
Systematic risk of First Solar Inc. common stock βFSLR 1.44
 
Required rate of return on First Solar Inc. common stock3 rFSLR 17.81%

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 rFSLR = RF + βFSLR [E(RM) – RF]
= 4.56% + 1.44 [13.77% – 4.56%]
= 17.81%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

First Solar Inc., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Net income (loss) 830,777 (44,166) 468,693 398,355 (114,933)
Net sales 3,318,602 2,619,319 2,923,377 2,711,332 3,063,117
Total assets 10,365,132 8,251,228 7,413,746 7,108,931 7,515,689
Stockholders’ equity 6,687,469 5,836,055 5,959,551 5,520,928 5,096,767
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 25.03% -1.69% 16.03% 14.69% -3.75%
Asset turnover3 0.32 0.32 0.39 0.38 0.41
Financial leverage4 1.55 1.41 1.24 1.29 1.47
Averages
Retention rate 1.00
Profit margin 10.06%
Asset turnover 0.36
Financial leverage 1.39
 
FCFE growth rate (g)5 0.00%

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

2023 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × 830,777 ÷ 3,318,602
= 25.03%

3 Asset turnover = Net sales ÷ Total assets
= 3,318,602 ÷ 10,365,132
= 0.32

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 10,365,132 ÷ 6,687,469
= 1.55

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 10.06% × 0.36 × 1.39
= 0.00%

FCFE growth rate (g) forecast

First Solar Inc., H-model

Microsoft Excel
Year Value gt
1 g1 0.00%
2 g2 0.00%
3 g3 0.00%
4 g4 0.00%
5 and thereafter g5 0.00%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 0.00% + (0.00% – 0.00%) × (2 – 1) ÷ (5 – 1)
= 0.00%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 0.00% + (0.00% – 0.00%) × (3 – 1) ÷ (5 – 1)
= 0.00%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 0.00% + (0.00% – 0.00%) × (4 – 1) ÷ (5 – 1)
= 0.00%