Stock Analysis on Net
Stock Analysis on Net

ON Semiconductor Corp. (NASDAQ:ON)

This company has been moved to the archive! The financial data has not been updated since April 29, 2024.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

ON Semiconductor Corp., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 21.25%
01 FCFE0 126,800
1 FCFE1 152,729 = 126,800 × (1 + 20.45%) 125,960
2 FCFE2 184,076 = 152,729 × (1 + 20.52%) 125,204
3 FCFE3 221,994 = 184,076 × (1 + 20.60%) 124,530
4 FCFE4 267,890 = 221,994 × (1 + 20.67%) 123,936
5 FCFE5 323,477 = 267,890 × (1 + 20.75%) 123,423
5 Terminal value (TV5) 77,728,910 = 323,477 × (1 + 20.75%) ÷ (21.25% – 20.75%) 29,657,490
Intrinsic value of ON Semiconductor Corp. common stock 30,280,543
 
Intrinsic value of ON Semiconductor Corp. common stock (per share) $70.38
Current share price $70.82

Based on: 10-K (reporting date: 2023-12-31).

1 See details »

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 ON Semiconductor Corp. common stock βON 1.82
 
Required rate of return on ON Semiconductor Corp. common stock3 rON 21.25%

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 rON = RF + βON [E(RM) – RF]
= 4.69% + 1.82 [13.79% – 4.69%]
= 21.25%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

ON Semiconductor Corp., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Net income attributable to ON Semiconductor Corporation 2,183,700 1,902,200 1,009,600 234,200 211,700
Revenue 8,253,000 8,326,200 6,739,800 5,255,000 5,517,900
Total assets 13,215,200 11,978,500 9,626,000 8,668,000 8,425,500
Total ON Semiconductor Corporation stockholders’ equity 7,782,600 6,188,500 4,585,400 3,538,500 3,301,700
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 26.46% 22.85% 14.98% 4.46% 3.84%
Asset turnover3 0.62 0.70 0.70 0.61 0.65
Financial leverage4 1.70 1.94 2.10 2.45 2.55
Averages
Retention rate 1.00
Profit margin 14.52%
Asset turnover 0.66
Financial leverage 2.15
 
FCFE growth rate (g)5 20.45%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income attributable to ON Semiconductor Corporation ÷ Revenue
= 100 × 2,183,700 ÷ 8,253,000
= 26.46%

3 Asset turnover = Revenue ÷ Total assets
= 8,253,000 ÷ 13,215,200
= 0.62

4 Financial leverage = Total assets ÷ Total ON Semiconductor Corporation stockholders’ equity
= 13,215,200 ÷ 7,782,600
= 1.70

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 14.52% × 0.66 × 2.15
= 20.45%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (30,469,022 × 21.25% – 126,800) ÷ (30,469,022 + 126,800)
= 20.75%

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

FCFE growth rate (g) forecast

ON Semiconductor Corp., H-model

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Year Value gt
1 g1 20.45%
2 g2 20.52%
3 g3 20.60%
4 g4 20.67%
5 and thereafter g5 20.75%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 20.45% + (20.75% – 20.45%) × (2 – 1) ÷ (5 – 1)
= 20.52%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 20.45% + (20.75% – 20.45%) × (3 – 1) ÷ (5 – 1)
= 20.60%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 20.45% + (20.75% – 20.45%) × (4 – 1) ÷ (5 – 1)
= 20.67%