What is IPHI's Intrinsic value?

Inphi Corp (IPHI) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Inphi Corp's estimated intrinsic value ranges from $0.97 to $11.53 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $11.53 -93.3%
Dividend Discount Model (Multi-Stage) $1.51 -99.1%
Earnings Power Value $0.97 -99.4%

Is Inphi Corp (IPHI) undervalued or overvalued?

With the current market price at $172.27, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Inphi Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 1 1.11
Cost of equity 7.4% 10.0%
Cost of debt 4.0% 7.0%
Tax rate 8.0% 11.7%
Debt/Equity ratio 0.05 0.05
After-tax WACC 7.2% 9.8%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $683 (FY12-2020) to $2,520 (FY12-2030)
  • Net profit margin expansion from -9% to 4%
  • Capital expenditures maintained at approximately 10% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $(95)M 24.4%
10-Year Growth $12 $979M 88.9%
5-Year EBITDA $37 $2,324M 103.1%
10-Year EBITDA $67 $3,940M 97.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.7%
  • Long-term growth rate: 4.0%
  • Fair value: $1.51 (-99.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.0% (Low) to 7.4% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(11) to $(42)
  • Selected fair value: $-26.45 (-115.4% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $34M
Discount Rate (WACC) 9.8% - 7.2%
Enterprise Value $350M - $474M
Net Debt $360M
Equity Value $(10)M - $114M
Outstanding Shares 54M
Fair Value $(0) - $2
Selected Fair Value $0.97

Key Financial Metrics

Metric Value
Market Capitalization $9246M
Enterprise Value $9606M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 23.30
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.05

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 50% $3.46
Dividend Discount Model (Multi-Stage) 33% $0.30
Earnings Power Value 17% $0.10
Weighted Average 100% $6.43

Investment Conclusion

Based on our comprehensive valuation analysis, Inphi Corp's weighted average intrinsic value is $6.43, which is approximately 96.3% below the current market price of $172.27.

Key investment considerations:

  • Strong projected earnings growth (-9% to 4% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.05)

Given these factors, we believe Inphi Corp is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.