DCF Studio

    ON · NMS · Technology

    ON Semiconductor Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 14.04

    Market price

    USD 69.98

    Implied upside

    -79.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 11.6% of revenue against depreciation of 8.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 14.04-79.9%
    Exit multiple
    USD 37.48-46.4%
    Market price
    USD 69.98

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m419m839mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 5.4bnUSD 4.8bnUSD 4.3bnUSD 3.9bnUSD 3.5bn-10.4%
    EBITUSD 1.4bnUSD 1.3bnUSD 1.1bnUSD 1.0bnUSD 903.9m-10.4%
    NOPATUSD 1.2bnUSD 1.1bnUSD 967.0mUSD 866.7mUSD 776.9m-10.4%
    Add depreciation & amortisationUSD 463.9mUSD 415.8mUSD 372.7mUSD 334.0mUSD 299.4m-10.4%
    Less capital expenditureUSD -625.8mUSD -560.9mUSD -502.7mUSD -450.6mUSD -403.9m-10.4%
    Less increase in working capitalUSD -202.9mUSD -181.8mUSD -163.0mUSD -146.1mUSD -130.9m-10.4%
    Free cashflow to firmUSD 838.9mUSD 752.0mUSD 674.0mUSD 604.1mUSD 541.5m-10.4%
    Discount factor0.93990.83040.73360.64810.5726-
    Present valueUSD 788.5mUSD 624.4mUSD 494.4mUSD 391.5mUSD 310.0m-20.8%
    Present Value Of The ForecastUSD 2.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.668Reported 1.997, pulled toward 1.0 (Blume)
    Cost of equity14.17%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 27.2bn90.1% of capital
    Total debtUSD 3.0bn9.9% of capital, book value as a proxy
    Tax rate14.1%Effective, capped at statutory
    WACC13.19%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 14.04

    58% of EV

    Forecast FCFF, final year
    USD 541.5m
    Capex at depreciation, working capital in reinvestment
    USD 776.9m
    Less reinvestment at g/ROIC (14.9% of NOPAT)
    USD -115.4m
    Capitalised
    USD 661.5m
    ROIC (reported)
    16.8%
    Terminal value, undiscounted
    USD 6.3bn
    Terminal value, discounted
    USD 3.6bn
    Enterprise value
    USD 6.2bn
    Less net debt
    USD 457.2m
    Equity value
    USD 5.8bn

    Exit at 19.3x EBITDA

    Value per shareUSD 37.48

    84% of EV

    Terminal value, undiscounted
    USD 23.2bn
    Terminal value, discounted
    USD 13.3bn
    Enterprise value
    USD 15.9bn
    Less net debt
    USD 457.2m
    Equity value
    USD 15.4bn

    Spread between methods: 91%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    11.19%16.6316.9117.2217.5617.94
    12.19%15.0615.2615.4715.6915.95
    13.19%13.7713.9014.0414.2014.36
    14.19%12.6812.7712.8612.9713.07
    15.19%11.7511.8111.8711.9412.00

    Outlined: this model. Green text: above today's price of 69.98. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-10.4%24.0%+34.4pp
    Discount rate13.2%4.6%-8.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.