Intrinsic value of MacDonald Dettwiler and Associates Ltd. - MDA

Previous Close

$64.73

  Intrinsic Value

$67.42

stock screener

  Rating & Target

hold

+4%

  Value-price divergence*

+75%

Previous close

$64.73

 
Intrinsic value

$67.42

 
Up/down potential

+4%

 
Rating

hold

 
Value-price divergence*

+75%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MDA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -2.50
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,064
  2,105
  2,154
  2,209
  2,271
  2,340
  2,416
  2,498
  2,587
  2,683
  2,786
  2,896
  3,014
  3,139
  3,272
  3,413
  3,562
  3,721
  3,888
  4,065
  4,252
  4,449
  4,657
  4,876
  5,107
  5,350
  5,606
  5,875
  6,159
  6,457
  6,770
Variable operating expenses, $m
 
  1,628
  1,663
  1,703
  1,748
  1,799
  1,854
  1,914
  1,978
  2,048
  2,123
  2,110
  2,195
  2,287
  2,383
  2,486
  2,595
  2,711
  2,832
  2,961
  3,097
  3,241
  3,392
  3,552
  3,720
  3,897
  4,084
  4,280
  4,487
  4,704
  4,932
Fixed operating expenses, $m
 
  258
  265
  271
  278
  285
  292
  300
  307
  315
  323
  331
  339
  347
  356
  365
  374
  383
  393
  403
  413
  423
  434
  445
  456
  467
  479
  491
  503
  516
  529
Total operating expenses, $m
  1,843
  1,886
  1,928
  1,974
  2,026
  2,084
  2,146
  2,214
  2,285
  2,363
  2,446
  2,441
  2,534
  2,634
  2,739
  2,851
  2,969
  3,094
  3,225
  3,364
  3,510
  3,664
  3,826
  3,997
  4,176
  4,364
  4,563
  4,771
  4,990
  5,220
  5,461
Operating income, $m
  221
  219
  226
  234
  245
  256
  270
  285
  301
  320
  340
  456
  479
  505
  532
  562
  593
  627
  663
  701
  741
  785
  830
  879
  931
  985
  1,043
  1,104
  1,169
  1,237
  1,310
EBITDA, $m
  324
  365
  373
  383
  394
  408
  423
  440
  459
  480
  502
  527
  553
  582
  613
  646
  681
  718
  758
  801
  846
  894
  945
  999
  1,056
  1,117
  1,181
  1,249
  1,320
  1,396
  1,476
Interest expense (income), $m
  0
  32
  33
  35
  37
  40
  42
  45
  48
  51
  55
  58
  63
  67
  72
  76
  82
  87
  93
  99
  106
  113
  120
  127
  136
  144
  153
  162
  172
  183
  194
Earnings before tax, $m
  171
  187
  193
  199
  207
  217
  228
  240
  254
  269
  285
  397
  417
  438
  461
  485
  511
  540
  570
  602
  636
  672
  711
  752
  795
  841
  890
  942
  997
  1,054
  1,116
Tax expense, $m
  31
  51
  52
  54
  56
  59
  61
  65
  68
  73
  77
  107
  113
  118
  124
  131
  138
  146
  154
  162
  172
  181
  192
  203
  215
  227
  240
  254
  269
  285
  301
Net income, $m
  140
  137
  141
  145
  151
  158
  166
  175
  185
  196
  208
  290
  304
  320
  336
  354
  373
  394
  416
  439
  464
  491
  519
  549
  580
  614
  650
  687
  727
  770
  814

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  106
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,439
  3,401
  3,479
  3,569
  3,669
  3,780
  3,902
  4,035
  4,179
  4,334
  4,501
  4,678
  4,868
  5,071
  5,285
  5,513
  5,755
  6,011
  6,281
  6,567
  6,869
  7,187
  7,523
  7,877
  8,250
  8,642
  9,056
  9,491
  9,949
  10,431
  10,938
Adjusted assets (=assets-cash), $m
  3,333
  3,401
  3,479
  3,569
  3,669
  3,780
  3,902
  4,035
  4,179
  4,334
  4,501
  4,678
  4,868
  5,071
  5,285
  5,513
  5,755
  6,011
  6,281
  6,567
  6,869
  7,187
  7,523
  7,877
  8,250
  8,642
  9,056
  9,491
  9,949
  10,431
  10,938
Revenue / Adjusted assets
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
Average production assets, $m
  925
  943
  965
  990
  1,017
  1,048
  1,082
  1,119
  1,159
  1,202
  1,248
  1,297
  1,350
  1,406
  1,466
  1,529
  1,596
  1,667
  1,742
  1,821
  1,905
  1,993
  2,086
  2,184
  2,288
  2,397
  2,511
  2,632
  2,759
  2,893
  3,033
Working capital, $m
  -144
  -46
  -47
  -49
  -50
  -51
  -53
  -55
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -89
  -94
  -98
  -102
  -107
  -112
  -118
  -123
  -129
  -135
  -142
  -149
Total debt, $m
  1,017
  955
  1,006
  1,064
  1,129
  1,202
  1,281
  1,368
  1,462
  1,563
  1,671
  1,787
  1,911
  2,043
  2,183
  2,332
  2,489
  2,656
  2,832
  3,019
  3,215
  3,423
  3,642
  3,873
  4,116
  4,372
  4,641
  4,925
  5,224
  5,538
  5,868
Total liabilities, $m
  2,280
  2,218
  2,269
  2,327
  2,392
  2,465
  2,544
  2,631
  2,725
  2,826
  2,934
  3,050
  3,174
  3,306
  3,446
  3,595
  3,752
  3,919
  4,095
  4,282
  4,478
  4,686
  4,905
  5,136
  5,379
  5,635
  5,904
  6,188
  6,487
  6,801
  7,131
Total equity, $m
  1,159
  1,184
  1,211
  1,242
  1,277
  1,316
  1,358
  1,404
  1,454
  1,508
  1,566
  1,628
  1,694
  1,765
  1,839
  1,919
  2,003
  2,092
  2,186
  2,285
  2,390
  2,501
  2,618
  2,741
  2,871
  3,008
  3,151
  3,303
  3,462
  3,630
  3,806
Total liabilities and equity, $m
  3,439
  3,402
  3,480
  3,569
  3,669
  3,781
  3,902
  4,035
  4,179
  4,334
  4,500
  4,678
  4,868
  5,071
  5,285
  5,514
  5,755
  6,011
  6,281
  6,567
  6,868
  7,187
  7,523
  7,877
  8,250
  8,643
  9,055
  9,491
  9,949
  10,431
  10,937
Debt-to-equity ratio
  0.877
  0.810
  0.830
  0.860
  0.880
  0.910
  0.940
  0.970
  1.010
  1.040
  1.070
  1.100
  1.130
  1.160
  1.190
  1.220
  1.240
  1.270
  1.300
  1.320
  1.350
  1.370
  1.390
  1.410
  1.430
  1.450
  1.470
  1.490
  1.510
  1.530
  1.540
Adjusted equity ratio
  0.323
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  140
  137
  141
  145
  151
  158
  166
  175
  185
  196
  208
  290
  304
  320
  336
  354
  373
  394
  416
  439
  464
  491
  519
  549
  580
  614
  650
  687
  727
  770
  814
Depreciation, amort., depletion, $m
  103
  146
  147
  148
  150
  152
  153
  155
  158
  160
  162
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
Funds from operations, $m
  -1
  283
  288
  294
  301
  310
  320
  330
  343
  356
  371
  361
  378
  397
  417
  438
  461
  485
  512
  539
  569
  600
  633
  669
  706
  746
  788
  832
  879
  929
  981
Change in working capital, $m
  -174
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from operations, $m
  173
  283
  289
  295
  303
  311
  321
  332
  345
  358
  373
  364
  381
  400
  420
  441
  464
  489
  515
  543
  573
  604
  638
  673
  711
  751
  793
  838
  885
  935
  988
Maintenance CAPEX, $m
  0
  -51
  -52
  -53
  -54
  -56
  -58
  -59
  -61
  -64
  -66
  -69
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -145
  -152
  -159
New CAPEX, $m
  -133
  -19
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -109
  -115
  -121
  -127
  -134
  -141
Cash from investing activities, $m
  -132
  -70
  -74
  -78
  -82
  -87
  -92
  -96
  -101
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -167
  -175
  -184
  -193
  -203
  -213
  -223
  -235
  -247
  -259
  -272
  -286
  -300
Free cash flow, $m
  41
  214
  215
  217
  220
  225
  230
  236
  243
  251
  261
  246
  257
  269
  283
  298
  313
  330
  349
  368
  389
  411
  435
  461
  488
  516
  547
  579
  614
  650
  689
Issuance/(repayment) of debt, $m
  6
  44
  51
  58
  65
  73
  80
  87
  94
  101
  108
  116
  124
  132
  140
  149
  158
  167
  176
  186
  197
  208
  219
  231
  243
  256
  270
  284
  299
  314
  330
Issuance/(repurchase) of shares, $m
  5
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -30
  44
  51
  58
  65
  73
  80
  87
  94
  101
  108
  116
  124
  132
  140
  149
  158
  167
  176
  186
  197
  208
  219
  231
  243
  256
  270
  284
  299
  314
  330
Total cash flow (excl. dividends), $m
  7
  258
  266
  275
  286
  297
  309
  323
  337
  353
  369
  362
  381
  401
  423
  446
  471
  497
  525
  555
  586
  619
  654
  691
  731
  773
  817
  863
  912
  964
  1,019
Retained Cash Flow (-), $m
  -51
  -25
  -27
  -31
  -35
  -39
  -42
  -46
  -50
  -54
  -58
  -62
  -66
  -70
  -75
  -79
  -84
  -89
  -94
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -144
  -151
  -159
  -168
  -176
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  233
  239
  244
  251
  258
  267
  276
  287
  299
  311
  300
  315
  331
  348
  367
  387
  408
  431
  455
  481
  508
  537
  568
  601
  636
  673
  712
  753
  797
  843
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  220
  211
  201
  191
  181
  170
  159
  148
  137
  126
  106
  96
  86
  76
  66
  57
  49
  41
  34
  27
  22
  17
  13
  10
  7
  5
  4
  2
  2
  1
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

MacDonald, Dettwiler and Associates Ltd., a communications and information company, provides operational solutions to commercial and government organizations worldwide. The company operates through two segments, Communications, and Surveillance and Intelligence. The Communications segment offers space-based solutions for the delivery of a range of services, including television and radio distribution, broadband Internet, and mobile communications. This segment supplies communication satellites, satellite payloads, satellite antenna subsystems, and associated ground infrastructure and support services for the communication satellite operators, communication satellite manufacturers, and government agencies. The Surveillance and Intelligence segment provides space-based and airborne surveillance solutions, imaging satellite ground systems, geospatial information services, and associated support services. Its solutions support the operational needs of government and commercial customers, including space agencies, defense and civil departments, intelligence agencies, aerospace prime contractors, aviation authorities, imaging satellite operators, oil and gas companies, etc. This segment also supplies robotic systems for the space and terrestrial markets. The company was founded in 1969 and is headquartered in Richmond, Canada.

FINANCIAL RATIOS  of  MacDonald Dettwiler and Associates Ltd. (MDA)

Valuation Ratios
P/E Ratio 16.8
Price to Sales 1.1
Price to Book 2
Price to Tangible Book
Price to Cash Flow 13.6
Price to Free Cash Flow 58.9
Growth Rates
Sales Growth Rate -2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 66.3%
Cap. Spend. - 3 Yr. Gr. Rate 16.1%
Financial Strength
Quick Ratio 1
Current Ratio 0.3
LT Debt to Equity 70.1%
Total Debt to Equity 87.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.9%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 11.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 17.2%
Gross Margin - 3 Yr. Avg. 17.2%
EBITDA Margin 13.3%
EBITDA Margin - 3 Yr. Avg. 11.6%
Operating Margin 10.7%
Oper. Margin - 3 Yr. Avg. 10.7%
Pre-Tax Margin 8.3%
Pre-Tax Margin - 3 Yr. Avg. 7.1%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 18.1%
Eff/ Tax Rate - 3 Yr. Avg. 28.8%
Payout Ratio 38.6%

MDA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MDA stock intrinsic value calculation we used $2064 million for the last fiscal year's total revenue generated by MacDonald Dettwiler and Associates Ltd.. The default revenue input number comes from 2016 income statement of MacDonald Dettwiler and Associates Ltd.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MDA stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.1%, whose default value for MDA is calculated based on our internal credit rating of MacDonald Dettwiler and Associates Ltd., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of MacDonald Dettwiler and Associates Ltd..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MDA stock the variable cost ratio is equal to 77.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $252 million in the base year in the intrinsic value calculation for MDA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for MacDonald Dettwiler and Associates Ltd..

Corporate tax rate of 27% is the nominal tax rate for MacDonald Dettwiler and Associates Ltd.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MDA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MDA are equal to 44.8%.

Life of production assets of 18.2 years is the average useful life of capital assets used in MacDonald Dettwiler and Associates Ltd. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MDA is equal to -2.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1159 million for MacDonald Dettwiler and Associates Ltd. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 36.572 million for MacDonald Dettwiler and Associates Ltd. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of MacDonald Dettwiler and Associates Ltd. at the current share price and the inputted number of shares is $2.4 billion.

RELATED COMPANIES Price Int.Val. Rating
FLY FLYHT Aerospac 2.32 0.00  str.sell
Stock chart of MDA Financial statements of MDA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.