Stock Analysis on Net
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Stock Analysis on Net

Lumentum Holdings Inc. (NASDAQ:LITE)

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)

Lumentum Holdings 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 20.05%
01 FCFE0 163,600
1 FCFE1 159,441 = 163,600 × (1 + -2.54%) 132,817
2 FCFE2 164,285 = 159,441 × (1 + 3.04%) 114,000
3 FCFE3 178,445 = 164,285 × (1 + 8.62%) 103,149
4 FCFE4 203,784 = 178,445 × (1 + 14.20%) 98,126
5 FCFE5 244,094 = 203,784 × (1 + 19.78%) 97,909
5 Terminal value (TV5) 110,296,728 = 244,094 × (1 + 19.78%) ÷ (20.05% – 19.78%) 44,241,332
Intrinsic value of Lumentum Holdings Inc. common stock 44,787,333
 
Intrinsic value of Lumentum Holdings Inc. common stock (per share) $499.30
Current share price $824.13

Based on: 10-K (reporting date: 2026-06-27).

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)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 5.64%
Expected rate of return on market portfolio2 E(RM) 17.45%
Systematic risk of Lumentum Holdings Inc. common stock βLITE 1.22
 
Required rate of return on Lumentum Holdings Inc. common stock3 rLITE 20.05%

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 rLITE = RF + βLITE [E(RM) – RF]
= 5.64% + 1.22 [17.45% – 5.64%]
= 20.05%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Lumentum Holdings Inc., PRAT model

Microsoft Excel
Average Jun 27, 2026 Jun 28, 2025 Jun 29, 2024 Jul 1, 2023 Jul 2, 2022 Jul 3, 2021
Selected Financial Data (US$ in thousands)
Net income (loss) (6,935,100) 25,900 (546,500) (131,600) 198,900 397,300
Net revenue 3,014,000 1,645,000 1,359,200 1,767,000 1,712,600 1,742,800
Total assets 7,307,500 4,218,700 3,931,900 4,632,100 4,162,200 3,551,600
Stockholders’ equity 4,643,900 1,134,700 957,300 1,355,800 1,875,000 1,972,800
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00 1.00
Profit margin2 -230.10% 1.57% -40.21% -7.45% 11.61% 22.80%
Asset turnover3 0.41 0.39 0.35 0.38 0.41 0.49
Financial leverage4 1.57 3.72 4.11 3.42 2.22 1.80
Averages
Retention rate 1.00
Profit margin -2.33%
Asset turnover 0.39
Financial leverage 2.81
 
FCFE growth rate (g)5 -2.54%

Based on: 10-K (reporting date: 2026-06-27), 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03).

2026 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income (loss) ÷ Net revenue
= 100 × -6,935,100 ÷ 3,014,000
= -230.10%

3 Asset turnover = Net revenue ÷ Total assets
= 3,014,000 ÷ 7,307,500
= 0.41

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 7,307,500 ÷ 4,643,900
= 1.57

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × -2.33% × 0.39 × 2.81
= -2.54%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (73,924,461 × 20.05% – 163,600) ÷ (73,924,461 + 163,600)
= 19.78%

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

FCFE growth rate (g) forecast

Lumentum Holdings Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -2.54%
2 g2 3.04%
3 g3 8.62%
4 g4 14.20%
5 and thereafter g5 19.78%

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

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -2.54% + (19.78% – -2.54%) × (2 – 1) ÷ (5 – 1)
= 3.04%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -2.54% + (19.78% – -2.54%) × (3 – 1) ÷ (5 – 1)
= 8.62%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -2.54% + (19.78% – -2.54%) × (4 – 1) ÷ (5 – 1)
= 14.20%