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.
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KLA Corp. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Aggregate Accruals
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Intrinsic Stock Value (Valuation Summary)
Year | Value | FCFE_{t} or Terminal value (TV_{t}) | Calculation | Present value at |
---|---|---|---|---|
0^{1} | FCFE_{0} | |||
1 | FCFE_{1} | = × (1 + ) | ||
2 | FCFE_{2} | = × (1 + ) | ||
3 | FCFE_{3} | = × (1 + ) | ||
4 | FCFE_{4} | = × (1 + ) | ||
5 | FCFE_{5} | = × (1 + ) | ||
5 | Terminal value (TV_{5}) | = × (1 + ) ÷ ( – ) | ||
Intrinsic value of KLA Corp. common stock | ||||
Intrinsic value of KLA Corp. common stock (per share) | ||||
Current share price |
Based on: 10-K (reporting date: 2022-06-30).
^{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)
Assumptions | ||
Rate of return on LT Treasury Composite^{1} | R_{F} | |
Expected rate of return on market portfolio^{2} | E(R_{M}) | |
Systematic risk of KLA Corp. common stock | β_{KLAC} | |
Required rate of return on KLA Corp. common stock^{3} | r_{KLAC} |
^{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} r_{KLAC} = R_{F} + β_{KLAC} [E(R_{M}) – R_{F}]
= + [ – ]
=
FCFE Growth Rate (g)
Based on: 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30).
2022 Calculations
^{1} Retention rate = (Net income attributable to KLA – Cash dividends and dividend equivalents declared) ÷ Net income attributable to KLA
= ( – ) ÷
=
^{2} Profit margin = 100 × Net income attributable to KLA ÷ Revenues
= 100 × ÷
=
^{3} Asset turnover = Revenues ÷ Total assets
= ÷
=
^{4} Financial leverage = Total assets ÷ Total KLA stockholders’ equity
= ÷
=
^{5} g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × ×
=
FCFE growth rate (g) implied by single-stage model
g = 100 × (Equity market value_{0} × r – FCFE_{0}) ÷ (Equity market value_{0} + FCFE_{0})
= 100 × ( × – ) ÷ ( + )
=
where:
Equity market value_{0} = current market value of KLA Corp. common stock (US$ in thousands)
FCFE_{0} = the last year KLA Corp. free cash flow to equity (US$ in thousands)
r = required rate of return on KLA Corp. common stock
Year | Value | g_{t} |
---|---|---|
1 | g_{1} | |
2 | g_{2} | |
3 | g_{3} | |
4 | g_{4} | |
5 and thereafter | g_{5} |
where:
g_{1} is implied by PRAT model
g_{5} is implied by single-stage model
g_{2}, g_{3} and g_{4} are calculated using linear interpoltion between g_{1} and g_{5}
Calculations
g_{2} = g_{1} + (g_{5} – g_{1}) × (2 – 1) ÷ (5 – 1)
= + ( – ) × (2 – 1) ÷ (5 – 1)
=
g_{3} = g_{1} + (g_{5} – g_{1}) × (3 – 1) ÷ (5 – 1)
= + ( – ) × (3 – 1) ÷ (5 – 1)
=
g_{4} = g_{1} + (g_{5} – g_{1}) × (4 – 1) ÷ (5 – 1)
= + ( – ) × (4 – 1) ÷ (5 – 1)
=