Stock Analysis on Net
Stock Analysis on Net
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Intel Corp. (NASDAQ:INTC)

Present Value of Free Cash Flow to Equity (FCFE)

Intermediate level

Intrinsic Stock Value (Valuation Summary)

Intel Corp., 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 11.05%
01 FCFE0 17,697 
1 FCFE1 19,936  = 17,697 × (1 + 12.65%) 17,953 
2 FCFE2 21,900  = 19,936 × (1 + 9.85%) 17,759 
3 FCFE3 23,444  = 21,900 × (1 + 7.05%) 17,120 
4 FCFE4 24,440  = 23,444 × (1 + 4.25%) 16,072 
5 FCFE5 24,794  = 24,440 × (1 + 1.45%) 14,682 
5 Terminal value (TV5) 262,036  = 24,794 × (1 + 1.45%) ÷ (11.05%1.45%) 155,172 
Intrinsic value of Intel Corp.’s common stock 238,757 
 
Intrinsic value of Intel Corp.’s common stock (per share) $58.26
Current share price $45.64

Based on: 10-K (filing date: 2020-01-24).

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 1.36%
Expected rate of return on market portfolio2 E(RM) 12.52%
Systematic risk of Intel Corp.’s common stock βINTC 0.87
 
Required rate of return on Intel Corp.’s common stock3 rINTC 11.05%

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 rINTC = RF + βINTC [E(RM) – RF]
= 1.36% + 0.87 [12.52%1.36%]
= 11.05%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Intel Corp., PRAT model

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Average Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015
Selected Financial Data (US$ in millions)
Cash dividends declared 5,578  5,541  5,072  4,925  4,556 
Net income 21,048  21,053  9,601  10,316  11,420 
Net revenue 71,965  70,848  62,761  59,387  55,355 
Total assets 136,524  127,963  123,249  113,327  103,065 
Stockholders’ equity 77,504  74,563  69,019  66,226  61,085 
Financial Ratios
Retention rate1 0.73 0.74 0.47 0.52 0.60
Profit margin2 29.25% 29.72% 15.30% 17.37% 20.63%
Asset turnover3 0.53 0.55 0.51 0.52 0.54
Financial leverage4 1.76 1.72 1.79 1.71 1.69
Averages
Retention rate 0.61
Profit margin 22.45%
Asset turnover 0.53
Financial leverage 1.73
 
FCFE growth rate (g)5 12.65%

Based on: 10-K (filing date: 2020-01-24), 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12).

2019 Calculations

1 Retention rate = (Net income – Cash dividends declared) ÷ Net income
= (21,0485,578) ÷ 21,048 = 0.73

2 Profit margin = 100 × Net income ÷ Net revenue
= 100 × 21,048 ÷ 71,965 = 29.25%

3 Asset turnover = Net revenue ÷ Total assets
= 71,965 ÷ 136,524 = 0.53

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 136,524 ÷ 77,504 = 1.76

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.61 × 22.45% × 0.53 × 1.73 = 12.65%


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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (187,033 × 11.05%17,697) ÷ (187,033 + 17,697) = 1.45%

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


FCFE growth rate (g) forecast

Intel Corp., H-model

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Year Value gt
1 g1 12.65%
2 g2 9.85%
3 g3 7.05%
4 g4 4.25%
5 and thereafter g5 1.45%

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)
= 12.65% + (1.45%12.65%) × (2 – 1) ÷ (5 – 1) = 9.85%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 12.65% + (1.45%12.65%) × (3 – 1) ÷ (5 – 1) = 7.05%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 12.65% + (1.45%12.65%) × (4 – 1) ÷ (5 – 1) = 4.25%