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Xilinx Inc Valuation – February 2016 $XLNX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Xilinx Inc (XLNX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Xilinx, Inc. (Xilinx) designs and develops programmable devices and associated technologies. The Company’s programmable devices and associated technologies include integrated circuits (IC) in the form of programmable logic devices (PLD); software design tools to program the PLDs; targeted reference designs; printed circuit boards, and intellectual property (IP), which consists of Xilinx, and third-party verification and IP cores. The Company provides design services, customer training, field engineering and technical support. Its PLDs include field programmable gate arrays (FPGAs), complex programmable logic devices (CPLDs), programmable System on Chips (SoCs) and three-dimensional ICs (3D ICs). Its product portfolio is designed to provide integration for electronic equipment manufacturers in end markets, such as wired and wireless communications, industrial, scientific and medical, aerospace and defense, audio, video and broadcast, consumer, automotive, and test and measurement.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of XLNX – February 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,939,113,048 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.30 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 83.24% Pass
6. Moderate PEmg Ratio PEmg < 20 22.34 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.90 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.32 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

XLNX value Chart February 2016

EPSmg $2.11
MG Growth Estimate 2.52%
MG Value $28.54
Opinion Overvalued
MG Value based on 3% Growth $30.55
MG Value based on 0% Growth $17.91
Market Implied Growth Rate 6.92%
Current Price $47.07
% of Intrinsic Value 164.94%

Xilinx, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.80 in 2012 to an estimated $2.11 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.92% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Stage 3: Information for Further Research

XLNX Charts February 2016

Net Current Asset Value (NCAV) $6.30
Graham Number $21.40
PEmg 22.34
Current Ratio 4.30
PB Ratio 4.90
Dividend Yield 2.59%
Number of Consecutive Years of Dividend Growth 12

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Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $4,008,294,000
Total Current Liabilities $932,909,000
Long-Term Debt $995,584,000
Total Assets $4,898,157,000
Intangible Assets $166,742,000
Total Liabilities $2,308,453,000
Shares Outstanding (Diluted Average) 269,611,000

Earnings Per Share History

Next Fiscal Year Estimate $2.02
Mar2015 $2.35
Mar2014 $2.19
Mar2013 $1.79
Mar2012 $1.95
Mar2011 $2.39
Mar2010 $1.29
Mar2009 $1.31
Mar2008 $1.25
Mar2007 $1.02
Mar2006 $1.00
Mar2005 $0.87
Mar2004 $0.85
Mar2003 $0.36
Mar2002 -$0.34
Mar2001 $0.10
Mar2000 $1.90
Mar1999 $0.33
Mar1998 $0.40
Mar1997 $0.35
Mar1996 $0.32

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.11
Mar2015 $2.14
Mar2014 $2.00
Mar2013 $1.85
Mar2012 $1.80
Mar2011 $1.64
Mar2010 $1.23
Mar2009 $1.17
Mar2008 $1.06
Mar2007 $0.92
Mar2006 $0.76
Mar2005 $0.55
Mar2004 $0.45
Mar2003 $0.32
Mar2002 $0.36
Mar2001 $0.68
Mar2000 $0.87

Recommended Reading:

Other ModernGraham posts about the company

Xilinx Inc. Valuation – November 2015 Update $XLNX
Xilinx Inc. Analysis – August 2015 Update $XLNX
47 Companies in the Spotlight This Week – 5/16/15
Xilinx Inc. Quarterly Valuation – May 2015 $XLNX
34 Companies in the Spotlight This Week – 2/7/15

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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