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STMicroelectronics N.V

NYSE:STM
Snowflake Description

Adequate balance sheet second-rate dividend payer.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
STM
NYSE
€9B
Market Cap
Semiconductors
Company description

STMicroelectronics N.V., together with its subsidiaries, designs, develops, manufactures, and markets semiconductor products, and subsystems and modules worldwide. More info.


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3 Month History
STM
Industry
5yr Volatility vs Market

Value

 Is STMicroelectronics N.V undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of STMicroelectronics N.V to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of STMicroelectronics N.V is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for STMicroelectronics N.V's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are STMicroelectronics N.V's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Overvalued based on earnings compared to the Semiconductors industry average.
  • Overvalued based on earnings compared to the overall market.
Price based on expected Growth
Does STMicroelectronics N.V's expected growth come at a high price?
  • Good value based on expected growth next year.
Price based on value of assets
What value do investors place on STMicroelectronics N.V's assets?
  • Good value based on assets compared to the Semiconductors industry average.
X
Value checks
We assess STMicroelectronics N.V's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Semiconductors industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Semiconductors industry average (and greater than 0)? (1 check)
  5. STMicroelectronics N.V has a total score of 2/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (567.74%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (Free cash flow to Equity)

The calculations below outline how an intrinsic value for STMicroelectronics N.V is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$1,833

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $432 × (1 + 2.5%) ÷ (9.22% – 2.5%)

Terminal value based on the Perpetuity Method where growth (g) = 2.5%:
$6,554

Present value of terminal value:
$4,218

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value

Value = Total value / Shares Outstanding ($6,050 / 860)

Value per share:
$7.03

Current discount (share price of $11.61): -65%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 9.22% = 2.47% + (0.896 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.896 = 0.803 (1 + (1- 30%) (16.6%))

Levered Beta used in calculation = 0.896



Equivilent number of shares

If the companies market cap is in a different currency to that of the listing the equivilent number of shares outstanding must be calculated.

Market Cap (EUR): 9,356

Exchange rate EUR/USD = 1.068

Market Cap (USD): $9,990

Equivilent shares outstanding: $9,990 / $11.61 = 860



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in United States.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is STMicroelectronics N.V expected to perform in the next 1 to 3 years based on estimates from 22 analysts?

    The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

    Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
    3 year growth
    568%
    Expected earnings growth over 1 year.
    Future Earnings growth analysis
    Is STMicroelectronics N.V expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.

    Are STMicroelectronics N.V's annual earnings growth expected to exceed 3.6% over the next 3 years?

    • After 1 year
    • + 3 year earnings data not available.
    1 & 3 year estimated growth in earnings
    Past and Future Earnings per Share
    The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
    Analysts growth expectations
    2 year growth check
    Super high growth metrics x1.5?

    Which of the these is expected to increase by over 50% in 2 year's time?

    • Revenue
    • Cash flow
    • Profit
    Performance in 3 years
    In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
    • STMicroelectronics N.V is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.

    Improvement & Relative to industry
    • Expected to be less than the Semiconductors industry average.
    • An improvement in STMicroelectronics N.V's performance (ROE) is expected over the next 3 years.
    X
    Future performance checks
    We assess STMicroelectronics N.V's future performance by looking at:
    1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
    2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
    3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
    4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
    5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
    Some of the above checks will fail if the company is expected to be loss making in the relevant year.
    STMicroelectronics N.V has a total score of 2/6, see the detailed checks below.

    Note: If no +3 year data is available, +2.5 year data may be used.

    Note 2: We use GAAP per Share in all our calculations.

    Full details on the Future part of the Simply Wall St company analysis model.

    Past Performance

     How has STMicroelectronics N.V performed over the past 5 years?

    The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
    Past earnings growth
    Below we compare STMicroelectronics N.V's growth in the last year to its industry (Semiconductors).
    Past Earnings growth analysis
    We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
    • STMicroelectronics N.V's earnings growth has not matched the industry average in the past year.
    • STMicroelectronics N.V's 1 year earnings growth is negative.
    • STMicroelectronics N.V earnings have fallen over the past 5 years.
    Profit History
    STMicroelectronics N.V's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
    Performance last year
    We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
    • Poor return on shareholders funds (ROE) last year.
    • STMicroelectronics N.V performed worse than the Semiconductors industry average based on return on assets (ROA) last year.
    • Performance based on revenue producing assets (ROCE) is broadly the same over 3 years.
    X
    Past performance checks
    We assess STMicroelectronics N.V's performance over the past 5 years by checking for:
    1. Has earnings per share (EPS) increased in past 5 years? (1 check)
    2. Has the EPS growth in the last year exceeded that of the Semiconductors industry? (1 check)
    3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
    4. Is the Return on Equity (ROE) higher than 20%? (1 check)
    5. Is the Return on Assets (ROA) above industry average? (1 check)
    6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
    The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
    STMicroelectronics N.V has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations.

    Full details on the Past part of the Simply Wall St company analysis model.

    Health

     How is STMicroelectronics N.V's financial health and their level of debt?

    A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

    The boxes below represent the relative size of what makes up STMicroelectronics N.V's finances.

    The net worth of a company is the difference between its assets and liabilities.
    Net Worth
    • STMicroelectronics N.V is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
    • STMicroelectronics N.V's cash and other short term assets cover its long term commitments.
    Balance sheet
    This treemap shows a more detailed breakdown of STMicroelectronics N.V's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
    Assets
    Liabilities and shares
    The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
    • High level of stock/ inventory/ unsold assets.
    • Total debt is covered by short term assets.
    Historical Debt
    Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

    The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

    If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
    • The level of debt (33%) compared to net worth is satisfactory (less than 40%).
    • The level of debt compared to net worth has increased over the past 5 years (20% vs 33% today).
    • Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
    • Interest on debt is not strongly covered (ideally 5x) by earnings (earnings are 1.6x annual interest expense).
    X
    Financial health checks
    We assess STMicroelectronics N.V's financial health by checking for:
    1. Are short term assets greater than short term liabilities? (1 check)
    2. Are short term assets greater than long term liabilities? (1 check)
    3. Has the debt to equity ratio increased in the past 5 years? (1 check)
    4. Is the debt to equity ratio over 40%? (1 check)
    5. Is the debt covered by short term assets? (1 check)
    6. Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
    7. STMicroelectronics N.V has a total score of 4/6, see the detailed checks below.


    Full details on the Health part of the Simply Wall St company analysis model.

    Dividends

     What is STMicroelectronics N.V's current dividend yield, its reliability and sustainability?

    Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
    Annual Dividend Income
    Dividend payments
    2.1%
    Current annual income from STMicroelectronics N.V dividends. Estimated to be 2.43% next year.
    If you bought $2,000 of STMicroelectronics N.V shares you are expected to receive $42 in your first year as a dividend.
    Dividend Amount
    Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
    • Paying above low risk savings rate. (1.75%)
    • Paying below the markets top dividend payers. (3.18%)
    Upcoming dividend payment

    Purchase STMicroelectronics N.V on or before the 'Buy Limit' to receive their next dividend payment.

    Dividends are usually paid every 3 or 6 months, you can time your share purchase to take advantage of upcoming dividend payments.
    Dividend payment calendar
    Historical dividend yield
    It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

    We also check to see if the dividend has increased in the past 10 years.
    • Dividends per share have been volatile in the past 10 (annual drop of over 10%).
    • Dividends per share have increased over the past 10 years.
    Current Payout to shareholders
    What portion of STMicroelectronics N.V's earnings are paid to the shareholders as a dividend.
    • Dividends paid are not well covered by net profit (0.2x coverage).
    Future Payout to shareholders
    • Dividends after 3 years are expected to be well covered by net profit (2.4x coverage).
    X
    Income/ dividend checks
    We assess STMicroelectronics N.V's dividend by checking for:
    1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
    2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
    3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
    4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
    5. How sustainable is the dividend, can STMicroelectronics N.V afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
    6. STMicroelectronics N.V has a total score of 3/6, see the detailed checks below.


    Full details on the Dividends part of the Simply Wall St company analysis model.

    Management

     What is the CEO of STMicroelectronics N.V's salary, the management and board of directors tenure and is there insider trading?

    Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
    CEO
    Carlo Bozotti, image provided by Google.
    Carlo Bozotti
    COMPENSATION$2,532,343
    AGE65
    CEO Bio

    Mr. Carlo Bozotti has been the Chairman of Management Board, Chief Executive Officer and President at STMicroelectronics NV since March 18, 2005 and its Member of the Managing Board since February 2005. Mr. Bozotti served as a Corporate Vice President of Memory Products at STMicroelectronics N.V. since August, 1998 after served as Corporate Vice President of Europe and Headquarters Region from 1994 to 1998. He served as a Product Manager for the Industrial, Computer Peripheral and Telecom divisions and as Product Manager of the Monolithic Microsystems' Telecom business unit from 1986 to 1987. Mr. Bozotti served as a Director of Corporate Strategic Marketing and Key Accounts for the Headquarters Region in 1988 and became Vice President, Marketing and Sales, Americas Division at STMicroelectronics N.V. in 1991. He served as Vice Chairman and Director at ST-Ericsson NV. He joined SGS Microelettronica in 1977 after graduating in Electronic Engineering from the University of Pavia.

    CEO Compensation
    • CEO's compensation has been consistent with company performance over the past year.
    • CEO's compensation appears reasonable.
    Management Team Tenure

    Average tenure of the STMicroelectronics N.V management team:

    Management tenure
    4.7 years
    • The tenure for the STMicroelectronics N.V management team is about average.
    Management Team

    Carlo Bozotti

    TITLE
    Chairman of Management Board
    COMPENSATION
    $2,532,343
    AGE
    65

    Carlo Ferro

    TITLE
    Chief Financial Officer
    AGE
    56

    Jean-Marc Chery

    TITLE
    Chief Operating Officer and Vice Chairman of Corporate Strategic Committee
    AGE
    57

    Fabio Gualandris

    TITLE
    Executive Vice President and General Manager of Back-End Manufacturing & Technology
    AGE
    58

    Stephane Delivré

    TITLE
    Global Chief Information Officer and Corporate Vice President
    AGE
    58

    Tait Sorensen

    TITLE
    Group Vice President of Investor Relations
    AGE
    49
    Board of Directors Tenure

    Average tenure of the STMicroelectronics N.V board of directors:

    Board tenure
    5.8 years
    • The tenure for the STMicroelectronics N.V board of directors is about average.
    Board of Directors

    Maurizio Tamagnini

    TITLE
    Chairman of Supervisory Board
    COMPENSATION
    $176,000
    AGE
    51

    Didier Lombard

    TITLE
    Vice Chairman of Supervisory Board
    COMPENSATION
    $176,000
    AGE
    75

    Pasquale Pistorio

    TITLE
    Honorary Chairman
    COMPENSATION
    $6,375,337
    AGE
    81

    Martine Verluyten

    TITLE
    Member of Supervisory Board and Chairman of Audit Committee
    COMPENSATION
    $150,500
    AGE
    66

    Heleen Kersten

    TITLE
    Member of Supervisory Board
    COMPENSATION
    $117,000
    AGE
    52

    Jean-Georges Malcor

    TITLE
    Member of Supervisory Board and Member of Audit Committee
    COMPENSATION
    $98,500
    AGE
    61
    Recent Insider Trading
    Who owns this company?
    X
    Management checks
    We assess STMicroelectronics N.V's management by checking for:
    1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
    2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
    3. Is the average tenure of the management team less than 2 years? (1 check)
    4. Is the average tenure of the board of directors team less than 3 years? (1 check)
    5. STMicroelectronics N.V has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


    Note: We use the top 6 management executives and board members in our calculations.

    Note 2: Insider trading include any internal stakeholders and these transactions.

    Full details on the Management part of the Simply Wall St company analysis model.

    Company News

    Articles
    Announcements

    Company Info

    Description

    STMicroelectronics N.V., together with its subsidiaries, designs, develops, manufactures, and markets semiconductor products, and subsystems and modules worldwide. The company offers a range of products, including discrete and standard commodity components, application-specific integrated circuits, full-custom devices and semi-custom devices, and application-specific standard products for analog, digital, and mixed-signal applications, as well as silicon chips and smartcards. It also provides subsystems and modules, including mobile phone accessories, battery chargers, and ISDN power supplies for the telecommunications, automotive, and industrial markets; and in-vehicle equipment for electronic toll payment. The company sells its products through its distributors and retailers, as well as through sales representatives. STMicroelectronics N.V. was founded in 1987 and is headquartered in Geneva, Switzerland.

    Details
    Name:STMicroelectronics N.V.
    Ticker:STM
    Exchange:NYSE
    Founded:1987
    Market Cap:€9,356 million
    Website:http://www2.st.com
    Listings
    Map

    39 Chemin du Champ des Filles, Geneva, 1228, Switzerland

    Number of employees
    Street

    Current staff
    Staff numbers
    43,183
    STMicroelectronics N.V employees.
    Industry
    Industry:Semiconductors
    Sector:Semiconductors and Semiconductor Equipment