Xilinx Inc: $XLNX cash flow valuation

Current Price: ~ $36/share
Projected Yield: ~ 2.05%

Founded in 1984, Xilinx is the top designer of programmable logic devices by market share. Its chips are critical in the performance of various devices in the communications, data processing, industrial, consumer, and automobile markets. Xilinx designs and sells chips, but it outsources manufacturing to third-party chip foundries like United Microelectronics.

I estimated the firm's WACC today at 10.28% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and growth rates:

Year	FCF $Millions
2002	186
2003	299
2004	391
2005	214
2006	422
2007	441
2008	535
2009	403
2010	526
2011	659

Average Annual Growth FCF: ~ 22%

CAGR FCF: ~ 15%

Consensus Forecast Industry 5-Year Growth: ~ 16% per year

Consensus Forecast Company 5-Year Growth: ~ 12% per year

Scenario 1

Starting at $659 million FCF, assuming the company achieves a 5-year growth rate in FCF of 12% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	659
1	738
2	827
3	926
4	1037
5	1161
Terminal Value	12650

The firm's future cash flows, discounted at a WACC of 10.28%, give a present value for the entire firm (Debt + Equity) of $11,206 million. If the firm's fair value of debt is estimated at $1300 million, then the fair value of the firm's equity could be $9906 million.  $9906 million / 266 million outstanding shares is approximately $37 per share and a 20% margin of safety is $30/share.

Scenario 2

Starting at $659 million FCF, assuming the company achieves a 5-year growth rate in FCF of 12% per year, and then a growth rate in FCF of 2% per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	659
1	738
2	827
3	926
4	1037
5	1161
Terminal Value	15704

The firm's future cash flows, discounted at a WACC of 10.28%, give a present value for the entire firm (Debt + Equity) of $13,079 million. If the firm's fair value of debt is estimated at $1300 million, then the fair value of the firm's equity could be $11,779 million.  $11,779 million / 266 million outstanding shares is approximately $44 per share and a 20% margin of safety is $35/share.

Sources

Morningstar.com

Yahoo! Finance

Xilinx.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.