An Intrinsic Calculation For Adeia Inc. (NASDAQ:ADEA) Suggests It's 31% Undervalued

Simply Wall St.04-05

Key Insights Using the 2 Stage Free Cash Flow to Equity, Adeia fair value estimate is US$15.64 Adeia is estimated to be 31% undervalued based on current share price of US$10.78 The US$15.00 ...

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(NASDAQ:ADEA) Suggests It's 31% Undervalued","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Adeia fair value estimate is US$15.64 \n Adeia is estimated to be 31% undervalued based on current share price of US$10.78 \n  The US$15.00 ...</p>\n\n<a href=\"https://finance.yahoo.com/news/intrinsic-calculation-adeia-inc-nasdaq-115915892.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>An Intrinsic Calculation For Adeia Inc. (NASDAQ:ADEA) Suggests It's 31% Undervalued</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAn Intrinsic Calculation For Adeia Inc. (NASDAQ:ADEA) Suggests It's 31% Undervalued\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-05 19:59 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/intrinsic-calculation-adeia-inc-nasdaq-115915892.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Adeia fair value estimate is US$15.64 \n Adeia is estimated to be 31% undervalued based on current share price of US$10.78 \n  The US$15.00 ...</p>\n\n<a href=\"https://finance.yahoo.com/news/intrinsic-calculation-adeia-inc-nasdaq-115915892.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":".IXIC","symbol_name":"NASDAQ Composite","start_time":0,"source_url":"https://finance.yahoo.com/news/intrinsic-calculation-adeia-inc-nasdaq-115915892.html","article_id":"2425554255","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/WqdWK.nWNWL524wke6jUzg--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/36ca5b522ba2e0a30acf16e5282f313b"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2425554255","pubTimestamp":1712318355,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Using the 2 Stage Free Cash Flow to Equity, Adeia fair value estimate is US$15.64. Adeia is estimated to be 31% undervalued based on current share price of US$10.78. The US$15.00 analyst price target for ADEA is 4.1% less than our estimate of fair value. Today we will run through one way of estimating the intrinsic value of Adeia Inc.  by taking the expected future cash flows and discounting them to today's value. This will be done using the Discounted Cash Flow  model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value:. Present Value of Terminal Value ","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{".IXIC":"NASDAQ Composite","SQQQ":"纳指三倍做空ETF","QLD":"纳指两倍做多ETF","PSQ":"纳指反向ETF","BK4097":"系统软件","LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4112":"金融交易所和数据","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","ADEA":"Adeia","QQQ":"纳指100ETF","TQQQ":"纳指三倍做多ETF","TV":"墨西哥电视","NDAQ":"纳斯达克OMX交易所","BK4585":"ETF&股票定投概念","QID":"纳指两倍做空ETF","BK4100":"有线和卫星","BK4211":"区域性银行","FCF":"第一联邦金融","BK4588":"碎股","ADEAV":"Xperi Holding Corp"},"translate_title":"对Adeia Inc。（纳斯达克：ADEA）的内在计算表明，它被低估了31%","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ADEA":1,"TV":1,"NDAQ":1,"FCF":1,"DCF":1,".IXIC":1,"ADEAV":0.9,"TQQQ":0.6,"SQQQ":0.6,"QQQ":0.6,"QLD":0.6,"QID":0.6,"PSQ":0.6,"NQmain":0.6,"MNQmain":0.6},"content_text":"Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Adeia fair value estimate is US$15.64 \n Adeia is estimated to be 31% undervalued based on current share price of US$10.78 \n  The US$15.00 analyst price target for ADEA is 4.1% less than our estimate of fair value \n\n Today we will run through one way of estimating the intrinsic value of Adeia Inc. (NASDAQ:ADEA) by taking the expected future cash flows and discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. \n Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. \n See our latest analysis for Adeia \n The Method \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2024\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n\n\n Levered FCF ($, Millions) \nUS$126.2m\nUS$117.2m\nUS$112.1m\nUS$109.5m\nUS$108.4m\nUS$108.5m\nUS$109.2m\nUS$110.5m\nUS$112.2m\nUS$114.1m\n\n\nGrowth Rate Estimate Source\nEst @ -11.21%\nEst @ -7.16%\nEst @ -4.32%\nEst @ -2.34%\nEst @ -0.95%\nEst @ 0.02%\nEst @ 0.70%\nEst @ 1.18%\nEst @ 1.51%\nEst @ 1.75%\n\n\n Present Value ($, Millions) Discounted @ 8.0% \nUS$117\nUS$100\nUS$88.9\nUS$80.3\nUS$73.6\nUS$68.2\nUS$63.5\nUS$59.5\nUS$55.9\nUS$52.7\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$760m\n We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.3%. We discount the terminal cash flows to today's value at a cost of equity of 8.0%. \nTerminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$114m× (1 + 2.3%) ÷ (8.0%– 2.3%) = US$2.0b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$2.0b÷ ( 1 + 8.0%)10= US$936m\n The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$1.7b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$10.8, the company appears quite undervalued at a 31% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NasdaqGS:ADEA Discounted Cash Flow April 5th 2024\n \n\n Important Assumptions \n The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Adeia as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.0%, which is based on a levered beta of 1.251. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Adeia\n\n\nStrength\n\nDebt is well covered by cash flow.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for ADEA.\n\n\n\nWeakness\n\nEarnings declined over the past year.\n\n\nInterest payments on debt are not well covered.\n\n\nDividend is low compared to the top 25% of dividend payers in the Software market.\n\n\nShareholders have been diluted in the past year.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow faster than the American market.\n\n\nGood value based on P/E ratio and estimated fair value.\n\n\n\nThreat\n\nAnnual revenue is forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for ADEA?\n\n\n\n Moving On: \n Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Can we work out why the company is trading at a discount to intrinsic value? For Adeia, there are three fundamental aspects you should assess: \n\n Risks: As an example, we've found 4 warning signs for Adeia (1 is concerning!) that you need to consider before investing here. \nFuture Earnings: How does ADEA's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.\n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2425554255"}