What is XLNX's Intrinsic value?

Xilinx Inc (XLNX) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Xilinx Inc's estimated intrinsic value ranges from $41.19 to $117.14 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $117.14 -39.9%
Discounted Cash Flow (5Y) $97.53 -50.0%
Dividend Discount Model (Multi-Stage) $74.11 -62.0%
Dividend Discount Model (Stable) $88.22 -54.7%
Earnings Power Value $41.19 -78.9%

Is Xilinx Inc (XLNX) undervalued or overvalued?

With the current market price at $194.92, 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 Xilinx Inc'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 1.01 1.08
Cost of equity 7.4% 9.8%
Cost of debt 4.0% 4.5%
Tax rate 7.7% 9.8%
Debt/Equity ratio 0.03 0.03
After-tax WACC 7.3% 9.6%

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: 5-year DCF and 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 $3,148 (FY04-2021) to $6,872 (FY04-2031)
  • Net profit margin expansion from 21% to 29%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $98 $23,779M 83.3%
10-Year Growth $117 $28,650M 69.2%
5-Year EBITDA $91 $22,279M 82.2%
10-Year EBITDA $111 $27,005M 67.3%

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: 9.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.6%
  • Long-term growth rate: 4.0%
  • Fair value: $74.11 (-62.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.8% (Low) to 7.4% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $38 to $138
  • Selected fair value: $88.22 (-54.7% 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 $815M
Discount Rate (WACC) 9.6% - 7.3%
Enterprise Value $8,448M - $11,125M
Net Debt $(445)M
Equity Value $8,893M - $11,570M
Outstanding Shares 248M
Fair Value $36 - $47
Selected Fair Value $41.19

Key Financial Metrics

Metric Value
Market Capitalization $48414M
Enterprise Value $47969M
Trailing P/E 52.12
Forward P/E 60.22
Trailing EV/EBITDA 17.25
Current Dividend Yield 18.94%
Dividend Growth Rate (5Y) -4.32%
Debt-to-Equity Ratio 0.03

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) 30% $35.14
Discounted Cash Flow (5Y) 25% $24.38
Dividend Discount Model (Multi-Stage) 20% $14.82
Dividend Discount Model (Stable) 15% $13.23
Earnings Power Value 10% $4.12
Weighted Average 100% $91.70

Investment Conclusion

Based on our comprehensive valuation analysis, Xilinx Inc's weighted average intrinsic value is $91.70, which is approximately 53.0% below the current market price of $194.92.

Key investment considerations:

  • Strong projected earnings growth (21% to 29% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.03)

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