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Oh no, not tech ..... Intersil
Posted by: kfh227 (IP Logged)
Date: February 26, 2008 10:35PM

I can not believe it has come to this. For all my GOOG/MSFT bashing (I think MSFT is warranted) I have broken down and done a DCF on Intersil (ticker: ISIL)

---------------- DCF

I did a discounted cash flow analysis in ISIL. Normally I wouldn't waste my time but curiosity got the best of me. Here is my valuation. I was wondering what other actual investors think.

$39 is Intrinsic value using some reasonable growth rate assumptions. Unfortunately, you better assign a 40%+ margin of safety. If you do that, buying now might actually make sense.

I assumed FCF would grow at 14% next year(overestimate, but next year should be the only slow one and 11% didn't impact IV much) and over the first 10 years the growth is assumed to slow to 11% annually. Years 11-20 got a 5% growth rate. Using these growth rate assumptions and a 15% discount rate, I came up with $39 as intrinsic value. That means Intersil is possibly worth $5B. Current market cap is $3B. The current market cap does take into account that 40% margin of safety. Face it, this is no JNJ and even that gets a 25% margin of safety.

So, congrats. If you believe in Intersil you are paying 60 cents for a dollar. Intersil closed at $23.73 today.

---------- PE RATIO
In terms of PE ratios, I have to admit that the PE ratio is a bit high but if you look at forward EPS(2009) of $1.70 the PE is under 15. That is not bad, especially when one consider that there is no debt and $3.70 per share in cash.

------- CONCLUSION (ISIL, LLTC)
Even though I have vowed to not invest in tech ever again, I have to admit that Intersil has left me a bit curious. The thing is, there are better more established players that might be worth a look. LLTC being hte prime example. It has a much better ROE than Intersils 7% ROE (last I looked). Simply put, LLTC is simply a much better company that has been around alot longer. I used to hold LLTC, so maybe I will take a look at that one again!





EDIT: I did a quick sanitization. A few of you might have caught it.


Stocks Discussed: ISIL, LLTC,
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