CIRRUS LOGIC, INC. (CRUS) stock intrinsic value fair value estimate & owner earnings analysis

Cirrus Logic designs the audio and power chips inside smartphones, laptops and other devices and owns no factories; wafers are made by outside foundries, mainly GlobalFoundries. The business is overwhelmingly one customer. Apple, buying through several contract manufacturers, was about 91 percent of fiscal 2026 sales (89 percent in 2025, 87 percent in 2024), and the ten largest customers were 96 percent. About 53 percent of sales are billed to contract manufacturers in China and 99 percent are outside the United States, but the end customer is a US company and Cirrus is a US-run business. Apple has no minimum purchase commitment, and the filing notes that large customers can design equivalent parts themselves. We treat that dependence as the central fact about the shares. What the business earns. We measure owner earnings as operating cash flow after removing working-capital swings, then subtracting all stock compensation and the capital spending needed to maintain the business. Per diluted share this was roughly $4.69 in fiscal 2017, fell to $2.37 and $2.35 in 2018 and 2019 when Apple cut the chip content in its phones, then recovered: $3.73, $4.00, $5.98, $4.88, $4.92, $6.47 and $8.57 in fiscal 2026. Fiscal 2022 cash flow was depressed by a one-time $195 million wafer prepayment to GlobalFoundries, and fiscal 2024 to 2026 were helped by drawing that prepayment down, so both are stripped out. We also strip out investment income (about $38 million in fiscal 2026) because the company's roughly $1.17 billion of cash and securities is valued separately. We anchor on the middle of fiscal 2022 to 2026, a full run of shortage-driven boom, inventory correction and recovery since the earlier content reset: about $6.00 per share, or roughly $315 million a year. Fiscal 2026's roughly $8.00 per share is not used as the level because it came with an unusually low 16.6 percent tax rate and is a single year; the June 2026 quarter (sales up 13 percent, net income up 27 percent) points the same direction but is one quarter. Growth check: owner earnings per share grew about 33 percent in fiscal 2026; the base case assumes no growth from the $6.00 anchor, which is below that. Debt. The company has no borrowings; its $300 million bank revolver was undrawn at March 2026. Cash and securities were about $1.17 billion at June 2026, and we count about $1.07 billion, roughly $20 per share, as excess. The remaining purchase obligation to GlobalFoundries (about $180 million of wafers through calendar 2026) runs through normal operating costs and is not treated as debt. Bear case: $60 per share (business $39, debt $0, net cash $20). We use Cirrus's own 2017 to 2019 episode, when Apple reset the chip content in its phones and owner earnings fell about 54 percent in two years, from $312 million to $145 million. We repeat it in years three and four, with earnings stepping from $315 million to about $142 million, no recovery credited, and then declining 6 percent a year after year ten. With no debt there is no refinancing risk in this case. Base case: $97 per share (business $76, debt $0, net cash $20). Earnings hold at about $315 million for ten years, then decline 4 percent a year. We credit no growth: revenue has compounded about 3 percent over nine years, but that came from Apple content gains rather than a repeatable, self-funded process, so it is left out. Persistence is supported by more than fifteen years of supplying Apple and a general-market business that survived the earlier reset; the decline after year ten reflects that nothing contractual secures the relationship. Bull case: $163 per share (business $143, debt $0, net cash $20). Earnings return to about $420 million, near fiscal 2026's level, and grow 3.5 percent a year for ten years, close to the 3.4 percent compound rate of fiscal 2017 to 2026, on the strength of the 22-nanometer smart codec and boosted amplifier in current phones, PC share gains, and the smart power chip for Apple's FaceID, which Apple has publicly said it is collaborating on. After year ten, earnings decline 2 percent a year. Left out of every case: new products not yet shipping, the planned manufacturing at GlobalFoundries' Malta, New York plant under Apple's American Manufacturing Program (early stage), and share buybacks, which add nothing beyond the cash already counted. What changed. Our previous figures (bear $51, base $136, bull $226, margin-of-safety price $36) were prepared on a different basis and are not comparable. On the business, results have been strong: fiscal 2026 net income was $414 million, and sales and profits rose again in the June 2026 quarter. Why the margin-of-safety price is $48. We are fairly sure of the earnings level: five years of owner earnings per share, stripped of the prepayment and tax benefits, ran from about $4.60 to $8.00 with a median near $6.00, and the company has no debt. We are not sure it will last, because one customer decides it. The worst plausible outcome is Apple removing most of Cirrus's content, worse than the bear case: the operating business might then be worth only $5 to $10 a share and the shares about $25 to $30, almost all of it cash. The structure survives that: no debt, cash is roughly 40 percent of the margin-of-safety price, and the wafer commitment is small relative to cash. If we are wrong that Apple's content holds near today's level, the bear case is $60; if we are wrong that tax and margins stay near current levels, owner earnings could sit nearer $5 per share. The company pays no dividend, so over the holding period the return comes from earnings accumulating as cash and from buybacks, and the price assumes a holding period of about five years. At $48 the price includes about $28 per share for an operating business that earned about $6 per share at its median and $8 last year; from that price the base case implies above 20 percent a year over five years, and the bear case implies a positive return.