Is Skyworks Solutions 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 Skyworks Solutions 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 Skyworks Solutions is available for.
Share price is $105.41 vs Future cash flow value of $152.41
Current Discount Checks
For Skyworks Solutions to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
- Skyworks Solutions's share price is below the future cash flow value, and at a significant discount (> 20%).
- Skyworks Solutions's share price is below the future cash flow value, but not at a substantial discount (< 40%).
We assess Skyworks Solutions'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)
Skyworks Solutions has a total score of 4/6, 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 (19.11%).
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 Skyworks Solutions 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 @ (18%, capped from 21.84%)
||Extrapolated @ (17%, capped from 21.84%)
||Extrapolated @ (16%, capped from 21.84%)
Discounted (@ 8.5%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $1,974 × (1 + 2.3%) ÷ (8.47% – 2.3%)
Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding ($27,701 / 182)
Value per share:
Current discount (share price of $105.41): 31%
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 = 8.47% = 2.33% + (0.8 * 7.67%)
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))
0.792 = 0.792 (1 + (1- 30%) (0%))
Levered Beta used in calculation = 0.8
- The risk free rate of 2.33% 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 Skyworks Solutions expected to perform in the next 1 to 3 years based on estimates from 23 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 1 year.
Future Earnings growth analysis
Is Skyworks Solutions expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.
Are Skyworks Solutions's annual earnings growth expected to exceed 3.4% 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
Which of the these is expected to increase by over 50% in 2 year's time?
- Cash flow data unavailable.
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.
- Skyworks Solutions is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.
Improvement & Relative to industry
- Expected to be above the Semiconductors industry average.
- A decline in Skyworks Solutions's performance (ROE) is expected over the next 3 years.
Future performance checks
We assess Skyworks Solutions'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.
Skyworks Solutions 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 Skyworks Solutions 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 Skyworks Solutions'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.
- Skyworks Solutions's earnings growth has not matched the industry average in the past year.
- Skyworks Solutions's 1 year earnings growth is negative.
- Skyworks Solutions has delivered strong earnings growth in the past 5 years.
Skyworks Solutions'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.
- Strong return on shareholders funds (ROE) last year.
- Skyworks Solutions performed above the Semiconductors industry average based on return on assets (ROA) last year.
- Performance based on revenue producing assets (ROCE) has been diminishing over 3 years.
Past performance checks
We assess Skyworks Solutions'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.
Skyworks Solutions has a total score of 3/6, 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 Skyworks Solutions'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 Skyworks Solutions's finances.
The net worth of a company is the difference between its assets and liabilities.
- Skyworks Solutions is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
- Skyworks Solutions's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of Skyworks Solutions'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.
- High level of stock/ inventory/ unsold 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.
- Skyworks Solutions has no debt.
Financial health checks
We assess Skyworks Solutions'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)
Skyworks Solutions has a total score of 6/6, see the detailed checks below.
What is Skyworks Solutions'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 Skyworks Solutions dividends. Estimated to be 1.12% next year.
If you bought $2,000 of Skyworks Solutions shares you are expected to receive $22 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. (2.25%)
- 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.
- Whilst dividend payments have been stable, Skyworks Solutions has been paying a dividend for less than 10 years.
- Dividend payments have increased, but Skyworks Solutions only paid a dividend in the past 3 years.
Current Payout to shareholders
What portion of Skyworks Solutions's earnings are paid to the shareholders as a dividend.
- Dividends paid are well covered by net profit (4.5x coverage).
Future Payout to shareholders
- Dividends after 3 years are expected to be well covered by net profit (6.3x coverage).
Income/ dividend checks
We assess Skyworks Solutions'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 Skyworks Solutions afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
Skyworks Solutions has a total score of 2/6, see the detailed checks below.
What is the CEO of Skyworks Solutions'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. Liam K. Griffin has been the President of Skyworks Solutions, Inc. since May 8, 2014 and its Chief Executive Officer since May 11, 2016. Mr. Griffin serves as Senior Vice President of Sales and Marketing at Advanced Analogic Technologies, Inc. Mr. Griffin served as an Executive Vice President of Skyworks Solutions Inc. since May 2011 until May 08, 2014 and served as its Corporate General Manager since November 20, 2012 until May 08, 2014. He served as Senior Vice President of Sales and Marketing of Skyworks Solutions Inc since August 2001 until May 2011. and served as its General Manager of High Performance Analog from May 2011 to November 2012. He served as a Vice President, Sales and Marketing of Skyworks Solutions Inc. since August 2001. He served as a Senior Vice President of Sales and Marketing and Vice President - Sales and Marketing at Alpha Industries Inc. He served as Vice President of Worldwide Sales of Vectron International, a division of Dover Corp. from 1997 to 2001 and served as its the Vice President of North American sales from 1995 to 1997. His prior experience included positions in marketing and engineering with units of AT&T Corp. He served as Marketing Manager at&T Microelectronics, Inc. and product and Process Engineer at&T Network Systems. He has been an Independent Director at Vicor Corp., since October 1, 2009. Mr. Griffin holds an M.B.A. degree from Boston University and a B.S. degree in Mechanical Engineering from the University of Massachusetts.
- 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 Skyworks Solutions management team:
- The average tenure for the Skyworks Solutions management team is over 5 years, this suggests they are a seasoned and experienced team.
Chief Executive Officer
Chief Financial Officer and Senior Vice President
Chief Technology Officer
Vice President of Worldwide Operations
Board of Directors Tenure
Average tenure of the Skyworks Solutions board of directors:
- The average tenure for the Skyworks Solutions board of directors is over 10 years, this suggests they are a seasoned and experienced board.
Board of Directors
Chief Executive Officer
Independent Non-Employee Director
Lead Independent Director
Recent Insider Trading
- Skyworks Solutions insiders have sold more shares than they have bought in the past 3 months.
Who owns this company?
We assess Skyworks Solutions'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)
Skyworks Solutions 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.
Skyworks Solutions, Inc., together with its subsidiaries, designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. Its product portfolio includes amplifiers, attenuators, circulators/isolators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, voltage controlled oscillators/synthesizers, and voltage regulators. The company provides its products for automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet, and wearable applications. Skyworks Solutions, Inc. sells its products through direct sales force, electronic component distributors, and independent sales representatives. The company was founded in 1962 and is headquartered in Woburn, Massachusetts.
|Name:||Skyworks Solutions, Inc.|
|Market Cap:||$19,159 million|
20 Sylvan Road, Woburn, 01801, United States
Skyworks Solutions employees.
|Sector:||Semiconductors and Semiconductor Equipment|