Is NXP Semiconductors 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 NXP Semiconductors 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?
Amount off the current price NXP Semiconductors N.V is available for.
Share price is $104.77 vs Future cash flow value of $122.32
Current Discount Checks
For NXP Semiconductors N.V to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
- NXP Semiconductors N.V's share price is below the future cash flow value, but not at a significant discount (< 20%).
- NXP Semiconductors N.V's share price is below the future cash flow value, but not at a substantial discount (< 40%).
We assess NXP Semiconductors N.V's value by looking at:
- 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.)
- Is the PE ratio less than the market average, and/ or less than the Semiconductors industry average (and greater than 0)? (2 checks)
- Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
- Is the PB ratio less than the Semiconductors industry average (and greater than 0)? (1 check)
NXP Semiconductors 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 (340.27%).
Full details on the Value part of the Simply Wall St company analysis model.
Discounted cash flow (Free cash flow to Equity)
The calculations below outline how an intrinsic value for NXP Semiconductors 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.
5 year cash flow forecast
See our documentation to learn about this calculation.
|Levered FCF (USD, Millions)
||Extrapolated @ (17%, capped from 20.1%)
||Extrapolated @ (16%, capped from 20.1%)
Discounted (@ 9.8%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $3,501 × (1 + 2.5%) ÷ (9.82% – 2.5%)
Terminal value based on the Perpetuity Method where growth (g) = 2.5%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding ($40,863 / 334)
Value per share:
Current discount (share price of $104.77): 14%
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 = 9.82% = 2.47% + (0.976 * 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))
0.976 = 0.824 (1 + (1- 30%) (26.25%))
Levered Beta used in calculation = 0.976
- The risk free rate of 2.47% is from the 10 year government bond rate in US.
- The bottom-up beta is estimated by analysing other companies in the same industry.
- The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
- 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.
How is NXP Semiconductors N.V expected to perform in the next 1 to 3 years based on estimates from 21 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!
Expected earnings growth over 3 years.
Future Earnings growth analysis
Is NXP Semiconductors N.V expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.
Are NXP Semiconductors N.V's annual earnings growth expected to exceed 3.6% over the next 3 years?
- After 1 year
- After 3 years
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
Which of the these is expected to increase by over 50% in 2 year's time?
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.
- NXP Semiconductors 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.
- A decline in NXP Semiconductors N.V's performance (ROE) is expected over the next 3 years.
Future performance checks
We assess NXP Semiconductors N.V's future performance by looking at:
- 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)
- Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
- 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.
NXP Semiconductors N.V has a total score of 3/6, 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.
How has NXP Semiconductors 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 NXP Semiconductors 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.
- NXP Semiconductors N.V's earnings growth has not matched the industry average in the past year.
- NXP Semiconductors N.V's 1 year earnings growth is negative.
- NXP Semiconductors N.V has delivered strong earnings growth in the past 5 years.
NXP Semiconductors 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.
- NXP Semiconductors N.V performed worse than the Semiconductors industry average based on return on assets (ROA) last year.
- Return based on revenue producing assets (ROCE) is negative or zero.
Past performance checks
We assess NXP Semiconductors N.V's performance over the past 5 years by checking for:
- Has earnings per share (EPS) increased in past 5 years? (1 check)
- Has the EPS growth in the last year exceeded that of the Semiconductors industry? (1 check)
- Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
- Is the Return on Equity (ROE) higher than 20%? (1 check)
- Is the Return on Assets (ROA) above industry average? (1 check)
- 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.
NXP Semiconductors 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.
How is NXP Semiconductors 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 NXP Semiconductors N.V's finances.
The net worth of a company is the difference between its assets and liabilities.
- NXP Semiconductors N.V is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
- NXP Semiconductors N.V's long term commitments exceed its cash and other short term assets.
This treemap shows a more detailed breakdown of NXP Semiconductors 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.
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
- Low level of unsold assets
- Total debt is not covered by total short term assets.
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 (82%) compared to net worth is high (greater 40%).
- The level of debt compared to net worth has been reduced over the past 5 years (280% vs 82% 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 0.5x annual interest expense).
Financial health checks
We assess NXP Semiconductors N.V's financial health by checking for:
Full details on the Health part of the Simply Wall St company analysis model.
- Are short term assets greater than short term liabilities? (1 check)
- Are short term assets greater than long term liabilities? (1 check)
- Has the debt to equity ratio increased in the past 5 years? (1 check)
- Is the debt to equity ratio over 40%? (1 check)
- Is the debt covered by short term assets? (1 check)
- Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
NXP Semiconductors N.V has a total score of 3/6, see the detailed checks below.
What is NXP Semiconductors 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
Current annual income from NXP Semiconductors N.V dividends.
If you bought $2,000 of NXP Semiconductors N.V shares you are expected to receive $0 in your first year as a dividend.
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 below low risk savings rate. (1.75%)
- Paying below the markets top dividend payers. (3.18%)
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.
- Not paying a notable dividend.
- Not paying a notable dividend.
Current Payout to shareholders
What portion of NXP Semiconductors N.V's earnings are paid to the shareholders as a dividend.
- Not paying a notable dividend.
Future Payout to shareholders
- Insufficient estimate data to determine if a dividend will be paid in 3 years.
Income/ dividend checks
We assess NXP Semiconductors N.V's dividend by checking for:
Full details on the Dividends part of the Simply Wall St company analysis model.
- Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
- 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)
- Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
- If they have paid a dividend for 10 years has it increased in this time? (1 check)
- How sustainable is the dividend, can NXP Semiconductors N.V afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
NXP Semiconductors N.V has a total score of 0/6, see the detailed checks below.
What is the CEO of NXP Semiconductors 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.
Mr. Richard L. Clemmer, also known as Rick, has been Chief Executive Officer and President of NXP Semiconductors NV since January 1, 2009. Mr. Clemmer serves as Chief Executive Officer and President at NXP B.V since January 1, 2009. Mr. Clemmer served as the Head of Global Sales and Marketing at NXP Semiconductors N.V since July 2011. He served as a Senior Advisor at Kohlberg Kravis Roberts & Co. since June 13, 2007. He was Partner at Shelter Capital Partners. He serves as an Advisor of Jetalon Solutions, Inc. He drove the turnaround and re-emergence of Agere Systems Inc., a spin-out from Lucent Technologies Inc. He served as Senior Vice President of Texas Instruments Incorporated. He has over 30 years of experience in the technology industry, where he has held a variety of executive, financial and management positions. His experience includes operations control and finance, strategic acquisitions and structuring, capital fund-raising, investor relations and international operations. Mr. Clemmer served as the President and Chief Executive Officer of Agere Systems Inc., since October 26, 2005. He served as the Chairman and President of Venture Capital Technology LLC since mid-2003. He served as the Chief Executive Officer and President of PurchasePro.com Inc. since June 2001 and as its Chief Financial Officer from May 2001 to September 2001 and again since May 3, 2002. Mr. Clemmer has held executive leadership positions in high technology industries including Semiconductors, Storage, Disk Drives, e-Commerce and Software industries. Prior to joining PurchasePro, Mr. Clemmer served as an Executive Vice President of Finance and Chief Financial Officer of Quantum Corporation, Hard Disk Drive Group from August 1996 to May 2001. He served as Secretary and Chief Accounting Officer of Quantum Corporation. He served as the Chief Financial Officer, Secretary and Executive Vice President of Finance at Quantum Corp. He served as Senior Vice President and Chief Finance Officer of the Semiconductor Group at Texas Instruments Inc. from 1988 to 1996. He served as the Chairman of the Board and a Member of the Board of Directors at U-NAV Microelectronics Corporation until December 2005. He served as the Chairman of the Board of PurchasePro.com Inc. since June 4, 2002 and Vice Chairman from June 2001 to June 4, 2002. He has been an Executive Director of NXP Semiconductors N.V. since January 1, 2009. He serves as a Director of Jetalon Solutions, Inc. He has been Executive Director of NXP B.V. since January 1, 2009. He has been a Director of NCR Corporation since April 23, 2008, Trident Microsystems Inc. since February 2010. He served as a Director of i2 Technologies Inc., since June 2004. He served as a Non-Executive Director of Oxford Semiconductor Inc. He served as a Director at Agere Systems Inc., since October 2002. He served as a Director of Cantata Technology Inc. and PurchasePro.com Inc. He served as a Member of Advisory Board of ePolicy Solutions, Inc. He served as a Member of Board of Management and Chairman of Board of Management of NXP B.V. from December 1, 2007 to December 31, 2008. He holds a Master's in Business Administration from Southern Methodist University and a BA in Business Administration from Texas Tech University.
- CEO's compensation has been consistent with company performance over the past year.
- CEO's compensation is higher than average for a company of this size and profit level.
Management Team Tenure
Average tenure of the NXP Semiconductors N.V management team:
- The tenure for the NXP Semiconductors N.V management team is about average.
Chief Executive Officer
Chief Financial Officer and Executive Vice President
Executive Vice President of Technology and Operations
Vice President of Investor Relations
Executive Vice President
Executive Vice President of Global Sales & Marketing
Board of Directors Tenure
Average tenure of the NXP Semiconductors N.V board of directors:
- The tenure for the NXP Semiconductors N.V board of directors is about average.
Board of Directors
Chief Executive Officer
Non Executive Director
Recent Insider Trading
Who owns this company?
We assess NXP Semiconductors N.V's management by checking for:
- 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)
- Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
- Is the average tenure of the management team less than 2 years? (1 check)
- Is the average tenure of the board of directors team less than 3 years? (1 check)
NXP Semiconductors 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.
NXP Semiconductors N.V., a semiconductor company, provides high performance mixed signal and standard product solutions for radio frequency (RF), analog, power management, interface, security, and digital processing products worldwide. It offers products for audio and visual head-end unit applications, such as single-chip radio solutions, audio amplifiers and power analog products, and i.MX applications processors; and in-vehicle networking products, two-way secure entry products, and various sensors and microcontrollers, as well as power management solutions. The company also provides secure identification solutions comprising passive RF connectivity devices; microcontroller devices; and secure real-time operating system software products to facilitate the encryption-decryption of data, and the interaction with the reader infrastructure systems. In addition, it delivers semiconductor-based technologies for connected devices, including microcontrollers, as well as secure mobile transaction solutions and various connectivity solutions; and offers digital networking processors, secure interface and system management products, high-performance RF power-amplifiers, and smart antennae solutions. Further, the company provides standard semiconductor components, such as small signal discretes, power discretes, protection and signal conditioning devices, and standard logic devices. Its product solutions are used in a range of application areas, including automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer, computing, and software solutions for mobile phones. NXP Semiconductors N.V. markets its products to various original equipment manufacturers, original design manufacturers, contract manufacturers, and distributors. The company was formerly known as KASLION Acquisition B.V and changed its name to NXP Semiconductors N.V. in May 2010. NXP Semiconductors N.V. was founded in 2006 and is headquartered in Eindhoven, the Netherlands.
|Name:||NXP Semiconductors N.V.|
|Market Cap:||$35,002 million|
60 High Tech Campus, Eindhoven, 5656 AG, Netherlands
NXP Semiconductors N.V employees.
|Sector:||Semiconductors and Semiconductor Equipment|