Current Price: ~ $51/share
Yield: ~ 2.78%
KLATencor designs and manufactures yieldmanagement and processmonitoring systems for the semiconductor industry. The systems are used to analyze the manufacturing process at various steps in a product's development. The firm's laserscanning products are used for wafer qualification, process monitoring, and equipment monitoring. KLATencor also provides systems for optical metrology and ebeam metrology.
Estimated WACC for the firm today is 14.52% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year

FCF
$Millions

2003

112

2004

294

2005

447

2006

241

2007

527

2008

611

2009

173

2010

418

2011

772

2012

884

Average Annual Growth FCF: ~ 52%
CAGR FCF: ~ 26%
Consensus Forecast Industry 5Year Growth: ~ 14% per year
Consensus Forecast Company 5Year Growth: ~ 10% per year
Internal Growth Rate: ~ 12%
Sustainable Growth Rate: ~ 20%
Scenario 1
Average FCF (2012, 2011, 2010) is $691 million
Average FCF (2012, 2011, 2010) is $691 million
 Start at $691 million FCF
 Assume a 5year growth rate in FCF of 10% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future free cash flows, discounted at a WACC of 14.52%, give a present value for the entire firm (Debt + Equity) of $7349 million. If the firm's fair value of debt is estimated at $902 million, then the fair value of the firm's equity could be $6447 million. $6447 million / 167 million outstanding shares is approximately $39 per share and a 20% margin of safety is $31/share.
Year

FCF
$Millions

0

691

1

760

2

836

3

920

4

1012

5

1113

Terminal
Value

8433

The firm's future free cash flows, discounted at a WACC of 14.52%, give a present value for the entire firm (Debt + Equity) of $7349 million. If the firm's fair value of debt is estimated at $902 million, then the fair value of the firm's equity could be $6447 million. $6447 million / 167 million outstanding shares is approximately $39 per share and a 20% margin of safety is $31/share.
Scenario 2
All else being equal,
All else being equal,
 Assume a 5year growth rate in FCF of 10% per year, then 5% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year

FCF
$Millions

0

691

1

760

2

836

3

920

4

1012

5

1113

Terminal
Value

12863

 Present Value of the entire firm (Debt + Equity): $9598 million
 Value of Equity: $8696 million or $52/share
 20% margin of safety is $42/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.