Cree (CREE:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Cree(CREE:NAS)

Technology:Semiconductors

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$40.33 (USD) 08/11/2018

Weighted Valuation
$48.69 (USD)

Overall Rating
Undervalued by 20.7%

Valuation Models Analyst Consensus: $52.50 (USD)
(in order of importance) Discounted Cash Flow: $42.98 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (CREE:NAS USD)

Price 40.33
Range 39.59 – 40.83
52 week 32.00 – 51.25
Open 40.00
Vol / Avg. 861775/2.03M
Mkt cap 4.14B
P/E 0.00
Div/yield 0.00/0.00
EPS -2.81
Shares 102.56M
Beta 0.43

Company Description

Cree Inc is a US-based company which is involved in the manufacturing of lighting-class light emitting diode (LED) products, lighting products, and semiconductor products for power and radio-frequency (RF) applications. Its products are used in applications such as indoor and outdoor lighting, video displays, transportation, electronic signs and signals, power supplies, solar inverters and wireless systems. It develops, manufactures, and sells power and RF devices based on bandgap semiconductor materials such as SiC and gallium nitride (GaN). Its geographic areas include North Carolina, Wisconsin, and China. Its segments are Lighting Products, LED Products, Power and RF Products.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for CREE:NAS

Using a discounted cash flow model we generated an intrinsic value of $42.98 (USD) for CREE:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

CREE:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $42.98 1% 5% 1% 5%
WACC (or Ke) 7.50 $55.02 $34.97
Terminal Growth Rate 2.50 $35.55 $54.13
Tax Rate 0.12 $45.98 $39.98
Cash Flow 462,580,929 $39.44 $46.52
Capital Expenditures -153,929,400 $41.88 $44.08
Long Term Debt 187,000,000 $43.07 $42.89

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $28.94 (USD) for CREE:NAS. We also generated a valuation of $29.12 (USD) using other metrics and comparables.
The comparable companies were Cirrus Logic (CRUS:NAS), FormFactor (FORM:NAS), MACOM Technology (MTSI:NAS), ON Semiconductor (ON:NAS) and Semtech (SMTC:NAS).

Company CREE:NAS End Date Value
Earnings/Share ($2.72) (USD)
Book Value/Share $21.39 (USD)
Sales/Share $15.33 (USD)
Cash Flow/Share $1.46 (USD)
EBITDA/Share $0.83 (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) 0.0
$50.12 (USD) -39.9
$35.18 (USD) 8.5
$22.24 (USD) 9.6
$20.28 (USD) 14.4
CREE:NAS Ratios Used Average Values CRUS:NAS FORM:NAS MTSI:NAS ON:NAS SMTC:NAS
0.00 PE Ratio 30.45 21.39 31.38 0.00 7.46 61.56
1.81 PB Ratio 2.34 1.99 1.89 1.35 2.25 4.23
2.53 PS Ratio 2.29 1.65 1.73 1.56 1.30 5.24
26.51 PCF Ratio 17.17 7.38 12.37 38.77 6.93 20.42
38.57 EV to EBITDA 24.57 6.75 10.81 72.73 6.80 25.78

Multiples

Using a multiples approach we generated a valuation of  $23.75 (USD) for CREE:NAS

Company CREE:NAS End Date Value
Earnings/Share ($2.72) (USD)
Book Value/Share $21.39 (USD)
Sales/Share $15.33 (USD)
Cash Flow/Share $1.46 (USD)
EBITDA/Share $0.83 (USD)
Price Based on Comps Adjustment Factor
$0.00 (USD) 0
$26.10 (USD) 0
$30.17 (USD) 0
$21.18 (USD) 0
$17.53 (USD) 0
Ratios Ratio Average
PE Ratio 50.29
PB Ratio 1.22
PS Ratio 1.97
PCF Ratio 14.46
EV to EBITDA 21.23

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  CREE:NAS for the last 10 years was  1.24

We ran the Adjusted Book Value for  CREE:NAS and generated a book value of  $21.62 (USD)
By multiplying these we get an adjusted valuation of  $26.90 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for CREE:NAS. The 4 analysts have a concensus valuation for CREE:NAS for 2019 of $52.50 (USD).

CREE:NAS Cree

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
2 3 0 3.8000 Outperform 2018-11-7

Current Price: 40.33 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 0.69 1.40 1.96
# EPS Analysts 4 3 1
Mean Revenue 1,671.80 1,899.90 2,066.00
# Revenue Analysts 4 3 1
Mean Target Price 52.50
Mean Cash Flow 1.84 2.39 3.28
Mean EBITDA
Mean Net Income 68.70 144.10 201.00
Mean Debt Outstanding
Mean Tax Rate 11.05 18.50
Mean Growth Rate 20.00
Mean Capital Expenditure 218.00 197.00 157.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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