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 the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

ON Semiconductor Corp., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 19.06%
01 FCFF0 505,498
1 FCFF1 560,243 = 505,498 × (1 + 10.83%) 470,547
2 FCFF2 630,036 = 560,243 × (1 + 12.46%) 444,446
3 FCFF3 718,779 = 630,036 × (1 + 14.09%) 425,869
4 FCFF4 831,722 = 718,779 × (1 + 15.71%) 413,891
5 FCFF5 975,950 = 831,722 × (1 + 17.34%) 407,908
5 Terminal value (TV5) 66,542,113 = 975,950 × (1 + 17.34%) ÷ (19.06% – 17.34%) 27,811,931
Intrinsic value of ON Semiconductor Corp. capital 29,974,591
Less: Long-term debt and financing lease liabilities, including current portion (fair value) 3,996,800
Intrinsic value of ON Semiconductor Corp. common stock 25,977,791
 
Intrinsic value of ON Semiconductor Corp. common stock (per share) $60.38
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.

Weighted Average Cost of Capital (WACC)

ON Semiconductor Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 30,469,022 0.88 21.27%
Long-term debt and financing lease liabilities, including current portion (fair value) 3,996,800 0.12 2.22% = 2.71% × (1 – 17.92%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 430,231,889 × $70.82
= $30,469,022,378.98

   Long-term debt and financing lease liabilities, including current portion (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (13.80% + 19.40% + 12.70% + 21.00% + 22.70%) ÷ 5
= 17.92%

WACC = 19.06%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

ON Semiconductor Corp., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Interest expense 74,800 94,900 130,400 168,400 148,300
Net income attributable to ON Semiconductor Corporation 2,183,700 1,902,200 1,009,600 234,200 211,700
 
Effective income tax rate (EITR)1 13.80% 19.40% 12.70% 21.00% 22.70%
 
Interest expense, after tax2 64,478 76,489 113,839 133,036 114,636
Interest expense (after tax) and dividends 64,478 76,489 113,839 133,036 114,636
 
EBIT(1 – EITR)3 2,248,178 1,978,689 1,123,439 367,236 326,336
 
Current portion of financing lease liabilities 800 14,200 12,700 — —
Current portion of long-term debt 794,000 147,800 160,700 531,600 736,000
Long-term debt, excluding current portion 2,542,600 3,045,700 2,913,900 2,959,700 2,876,500
Long-term financing lease liabilities 22,400 23,000 10,200 — —
Total ON Semiconductor Corporation stockholders’ equity 7,782,600 6,188,500 4,585,400 3,538,500 3,301,700
Total capital 11,142,400 9,419,200 7,682,900 7,029,800 6,914,200
Financial Ratios
Retention rate (RR)4 0.97 0.96 0.90 0.64 0.65
Return on invested capital (ROIC)5 20.18% 21.01% 14.62% 5.22% 4.72%
Averages
RR 0.82
ROIC 13.15%
 
FCFF growth rate (g)6 10.83%

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).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 74,800 × (1 – 13.80%)
= 64,478

3 EBIT(1 – EITR) = Net income attributable to ON Semiconductor Corporation + Interest expense, after tax
= 2,183,700 + 64,478
= 2,248,178

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,248,178 – 64,478] ÷ 2,248,178
= 0.97

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,248,178 ÷ 11,142,400
= 20.18%

6 g = RR × ROIC
= 0.82 × 13.15%
= 10.83%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (34,465,822 × 19.06% – 505,498) ÷ (34,465,822 + 505,498)
= 17.34%

where:

Total capital, fair value0 = current fair value of ON Semiconductor Corp. debt and equity (US$ in thousands)
FCFF0 = the last year ON Semiconductor Corp. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of ON Semiconductor Corp. capital

FCFF growth rate (g) forecast

ON Semiconductor Corp., H-model

Microsoft Excel
Year Value gt
1 g1 10.83%
2 g2 12.46%
3 g3 14.09%
4 g4 15.71%
5 and thereafter g5 17.34%

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)
= 10.83% + (17.34% – 10.83%) × (2 – 1) ÷ (5 – 1)
= 12.46%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 10.83% + (17.34% – 10.83%) × (3 – 1) ÷ (5 – 1)
= 14.09%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 10.83% + (17.34% – 10.83%) × (4 – 1) ÷ (5 – 1)
= 15.71%