Stock Analysis on Net

Illumina Inc. (NASDAQ:ILMN)

This company has been moved to the archive! The financial data has not been updated since November 5, 2021.

Present Value of Free Cash Flow to Equity (FCFE)

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Intrinsic Stock Value (Valuation Summary)

Illumina Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 14.36%
01 FCFE0 891
1 FCFE1 1,078 = 891 × (1 + 20.99%) 943
2 FCFE2 1,282 = 1,078 × (1 + 18.94%) 980
3 FCFE3 1,499 = 1,282 × (1 + 16.89%) 1,002
4 FCFE4 1,721 = 1,499 × (1 + 14.84%) 1,006
5 FCFE5 1,941 = 1,721 × (1 + 12.78%) 992
5 Terminal value (TV5) 138,985 = 1,941 × (1 + 12.78%) ÷ (14.36%12.78%) 71,055
Intrinsic value of Illumina Inc. common stock 75,979
 
Intrinsic value of Illumina Inc. common stock (per share) $486.11
Current share price $408.14

Based on: 10-K (reporting date: 2020-12-31).

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)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.69%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Illumina Inc. common stock βILMN 1.06
 
Required rate of return on Illumina Inc. common stock3 rILMN 14.36%

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 rILMN = RF + βILMN [E(RM) – RF]
= 4.69% + 1.06 [13.79%4.69%]
= 14.36%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Illumina Inc., PRAT model

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Average Dec 31, 2020 Dec 29, 2019 Dec 30, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Net income attributable to Illumina stockholders 656 1,002 826 726 463
Revenue 3,239 3,543 3,333 2,752 2,398
Total assets 7,585 7,316 6,959 5,257 4,281
Total Illumina stockholders’ equity 4,694 4,613 3,758 2,749 2,197
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 20.25% 28.28% 24.78% 26.38% 19.29%
Asset turnover3 0.43 0.48 0.48 0.52 0.56
Financial leverage4 1.62 1.59 1.85 1.91 1.95
Averages
Retention rate 1.00
Profit margin 23.80%
Asset turnover 0.49
Financial leverage 1.78
 
FCFE growth rate (g)5 20.99%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income attributable to Illumina stockholders ÷ Revenue
= 100 × 656 ÷ 3,239
= 20.25%

3 Asset turnover = Revenue ÷ Total assets
= 3,239 ÷ 7,585
= 0.43

4 Financial leverage = Total assets ÷ Total Illumina stockholders’ equity
= 7,585 ÷ 4,694
= 1.62

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 23.80% × 0.49 × 1.78
= 20.99%


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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (63,792 × 14.36%891) ÷ (63,792 + 891)
= 12.78%

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


FCFE growth rate (g) forecast

Illumina Inc., H-model

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Year Value gt
1 g1 20.99%
2 g2 18.94%
3 g3 16.89%
4 g4 14.84%
5 and thereafter g5 12.78%

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

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 20.99% + (12.78%20.99%) × (2 – 1) ÷ (5 – 1)
= 18.94%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 20.99% + (12.78%20.99%) × (3 – 1) ÷ (5 – 1)
= 16.89%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 20.99% + (12.78%20.99%) × (4 – 1) ÷ (5 – 1)
= 14.84%