Intrinsic value of Astronics - ATRO

Previous Close

$33.98

  Intrinsic Value

$25.15

stock screener

  Rating & Target

sell

-26%

Previous close

$33.98

 
Intrinsic value

$25.15

 
Up/down potential

-26%

 
Rating

sell

We calculate the intrinsic value of ATRO 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 1.0

 

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, %
  -8.53
  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
  633
  646
  661
  677
  697
  718
  741
  766
  793
  823
  854
  888
  924
  963
  1,003
  1,047
  1,093
  1,141
  1,192
  1,247
  1,304
  1,364
  1,428
  1,495
  1,566
  1,641
  1,719
  1,802
  1,889
  1,980
  2,076
Variable operating expenses, $m
 
  361
  369
  378
  388
  400
  412
  426
  441
  456
  474
  480
  500
  521
  543
  566
  591
  617
  645
  674
  705
  738
  772
  809
  847
  887
  930
  974
  1,021
  1,071
  1,123
Fixed operating expenses, $m
 
  216
  222
  227
  233
  239
  245
  251
  257
  264
  270
  277
  284
  291
  298
  306
  313
  321
  329
  337
  346
  354
  363
  372
  382
  391
  401
  411
  421
  432
  443
Total operating expenses, $m
  560
  577
  591
  605
  621
  639
  657
  677
  698
  720
  744
  757
  784
  812
  841
  872
  904
  938
  974
  1,011
  1,051
  1,092
  1,135
  1,181
  1,229
  1,278
  1,331
  1,385
  1,442
  1,503
  1,566
Operating income, $m
  73
  69
  70
  72
  75
  79
  84
  89
  96
  103
  111
  131
  141
  151
  163
  175
  188
  203
  218
  235
  253
  272
  292
  314
  337
  362
  388
  416
  446
  477
  511
EBITDA, $m
  99
  98
  100
  102
  106
  110
  116
  122
  129
  137
  145
  155
  166
  177
  190
  203
  218
  234
  251
  269
  288
  309
  331
  355
  380
  407
  435
  465
  497
  531
  567
Interest expense (income), $m
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
Earnings before tax, $m
  69
  64
  65
  67
  70
  73
  78
  83
  89
  95
  103
  123
  132
  142
  153
  164
  177
  191
  206
  222
  239
  257
  277
  298
  320
  343
  369
  395
  424
  454
  486
Tax expense, $m
  21
  17
  18
  18
  19
  20
  21
  22
  24
  26
  28
  33
  36
  38
  41
  44
  48
  52
  56
  60
  65
  69
  75
  80
  86
  93
  100
  107
  114
  123
  131
Net income, $m
  48
  46
  47
  49
  51
  53
  57
  60
  65
  70
  75
  90
  96
  103
  111
  120
  129
  139
  150
  162
  174
  188
  202
  217
  233
  251
  269
  289
  309
  331
  355

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  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
  604
  598
  612
  627
  645
  665
  686
  709
  735
  762
  791
  822
  856
  891
  929
  969
  1,012
  1,057
  1,104
  1,154
  1,207
  1,263
  1,322
  1,385
  1,450
  1,519
  1,592
  1,668
  1,749
  1,834
  1,923
Adjusted assets (=assets-cash), $m
  586
  598
  612
  627
  645
  665
  686
  709
  735
  762
  791
  822
  856
  891
  929
  969
  1,012
  1,057
  1,104
  1,154
  1,207
  1,263
  1,322
  1,385
  1,450
  1,519
  1,592
  1,668
  1,749
  1,834
  1,923
Revenue / Adjusted assets
  1.080
  1.080
  1.080
  1.080
  1.081
  1.080
  1.080
  1.080
  1.079
  1.080
  1.080
  1.080
  1.079
  1.081
  1.080
  1.080
  1.080
  1.079
  1.080
  1.081
  1.080
  1.080
  1.080
  1.079
  1.080
  1.080
  1.080
  1.080
  1.080
  1.080
  1.080
Average production assets, $m
  227
  232
  237
  243
  250
  258
  266
  275
  285
  295
  307
  319
  332
  346
  360
  376
  392
  410
  428
  448
  468
  490
  513
  537
  562
  589
  617
  647
  678
  711
  745
Working capital, $m
  168
  156
  160
  164
  169
  174
  179
  185
  192
  199
  207
  215
  224
  233
  243
  253
  264
  276
  289
  302
  316
  330
  346
  362
  379
  397
  416
  436
  457
  479
  502
Total debt, $m
  148
  151
  157
  164
  172
  181
  190
  201
  212
  225
  238
  252
  267
  283
  300
  318
  337
  358
  379
  402
  426
  451
  477
  505
  535
  566
  599
  633
  670
  708
  748
Total liabilities, $m
  267
  270
  276
  283
  291
  300
  309
  320
  331
  344
  357
  371
  386
  402
  419
  437
  456
  477
  498
  521
  545
  570
  596
  624
  654
  685
  718
  752
  789
  827
  867
Total equity, $m
  337
  328
  336
  344
  354
  365
  377
  389
  403
  418
  434
  451
  470
  489
  510
  532
  555
  580
  606
  634
  663
  694
  726
  760
  796
  834
  874
  916
  960
  1,007
  1,056
Total liabilities and equity, $m
  604
  598
  612
  627
  645
  665
  686
  709
  734
  762
  791
  822
  856
  891
  929
  969
  1,011
  1,057
  1,104
  1,155
  1,208
  1,264
  1,322
  1,384
  1,450
  1,519
  1,592
  1,668
  1,749
  1,834
  1,923
Debt-to-equity ratio
  0.439
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
Adjusted equity ratio
  0.544
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48
  46
  47
  49
  51
  53
  57
  60
  65
  70
  75
  90
  96
  103
  111
  120
  129
  139
  150
  162
  174
  188
  202
  217
  233
  251
  269
  289
  309
  331
  355
Depreciation, amort., depletion, $m
  26
  29
  29
  30
  30
  31
  32
  32
  33
  34
  35
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
Funds from operations, $m
  24
  75
  77
  79
  81
  85
  88
  93
  98
  103
  110
  114
  121
  130
  139
  149
  159
  171
  183
  196
  210
  225
  241
  258
  276
  295
  316
  338
  361
  385
  411
Change in working capital, $m
  -25
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
Cash from operations, $m
  49
  72
  73
  75
  77
  79
  83
  87
  91
  96
  102
  106
  113
  120
  129
  138
  148
  159
  170
  183
  196
  210
  225
  242
  259
  277
  297
  318
  340
  363
  388
Maintenance CAPEX, $m
  0
  -17
  -18
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
New CAPEX, $m
  -13
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
Cash from investing activities, $m
  -15
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -33
  -35
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -51
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -89
Free cash flow, $m
  34
  50
  50
  51
  51
  53
  55
  57
  61
  64
  68
  70
  76
  81
  88
  95
  103
  112
  121
  131
  142
  153
  165
  179
  193
  208
  224
  241
  259
  279
  300
Issuance/(repayment) of debt, $m
  -22
  6
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
Issuance/(repurchase) of shares, $m
  -14
  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  
  -35
  6
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
Total cash flow (excl. dividends), $m
  -1
  56
  57
  58
  59
  62
  65
  68
  72
  77
  82
  84
  91
  98
  105
  113
  122
  132
  142
  153
  165
  178
  192
  207
  222
  239
  257
  276
  296
  317
  340
Retained Cash Flow (-), $m
  -37
  -6
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
Prev. year cash balance distribution, $m
 
  15
  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
 
  65
  49
  49
  50
  51
  53
  55
  58
  62
  66
  67
  72
  78
  84
  91
  99
  107
  116
  126
  136
  148
  160
  173
  186
  201
  217
  234
  252
  271
  291
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  62
  45
  42
  41
  39
  38
  37
  36
  34
  33
  31
  30
  28
  27
  25
  24
  22
  20
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  100.0
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Astronics Corporation is a supplier of products to the aerospace, defense, electronics and semiconductor industries. The Company's products and services include electrical power generation, distribution and motion systems, lighting and safety systems, avionics products, aircraft structures, systems certification and automated test systems. The Company operates through two segments: Aerospace and Test Systems. The Aerospace segment designs and manufactures products for the global aerospace industry. Its product lines include lighting and safety systems, electrical power generation, distribution and motions systems, aircraft structures, avionics products, systems certification and other products. The Test Systems segment designs, develops, manufactures and maintains automated test systems that support the semiconductor, aerospace, communications and weapons test systems, as well as training and simulation devices for both commercial and military applications.

FINANCIAL RATIOS  of  Astronics (ATRO)

Valuation Ratios
P/E Ratio 20.6
Price to Sales 1.6
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 20.2
Price to Free Cash Flow 27.5
Growth Rates
Sales Growth Rate -8.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.6%
Cap. Spend. - 3 Yr. Gr. Rate 13.2%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 43%
Total Debt to Equity 43.9%
Interest Coverage 15
Management Effectiveness
Return On Assets 8.5%
Ret/ On Assets - 3 Yr. Avg. 10.7%
Return On Total Capital 10.1%
Ret/ On T. Cap. - 3 Yr. Avg. 13.2%
Return On Equity 15.1%
Return On Equity - 3 Yr. Avg. 22.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 25.1%
Gross Margin - 3 Yr. Avg. 25.9%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin 11.5%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 10.9%
Pre-Tax Margin - 3 Yr. Avg. 12.1%
Net Profit Margin 7.6%
Net Profit Margin - 3 Yr. Avg. 8.6%
Effective Tax Rate 30.4%
Eff/ Tax Rate - 3 Yr. Avg. 29.4%
Payout Ratio 0%

ATRO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATRO stock intrinsic value calculation we used $633 million for the last fiscal year's total revenue generated by Astronics. The default revenue input number comes from 2016 income statement of Astronics. 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 ATRO 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 4.5%, whose default value for ATRO is calculated based on our internal credit rating of Astronics, 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 Astronics.
    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 ATRO stock the variable cost ratio is equal to 55.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $211 million in the base year in the intrinsic value calculation for ATRO 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 Astronics.

Corporate tax rate of 27% is the nominal tax rate for Astronics. 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 ATRO 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 ATRO are equal to 35.9%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Astronics 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 ATRO is equal to 24.2%. 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 - $337 million for Astronics - 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 28.563 million for Astronics 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 Astronics at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ ETFs with exposure to Astronics Corp. : October 20, 2017   [Oct-20-17 10:06AM  Capital Cube]
▶ ETFs with exposure to Astronics Corp. : October 9, 2017   [Oct-09-17 11:17AM  Capital Cube]
▶ Astronics Launches Next-Gen Radio Test Solution   [Sep-08-17 10:00AM  Business Wire]
▶ ETFs with exposure to Astronics Corp. : September 5, 2017   [Sep-05-17 07:57PM  Capital Cube]
▶ New Strong Sell Stocks for August 21st   [Aug-21-17 10:06AM  Zacks]
▶ Astronics posts 2Q profit   [Aug-02-17 09:22PM  Associated Press]
▶ Astronics posts 2Q profit   [09:22PM  Associated Press]
▶ ETFs with exposure to Astronics Corp. : July 6, 2017   [Jul-06-17 01:42PM  Capital Cube]
▶ ETFs with exposure to Astronics Corp. : June 6, 2017   [Jun-06-17 11:37AM  Capital Cube]
▶ ETFs with exposure to Astronics Corp. : May 26, 2017   [May-26-17 12:59PM  Capital Cube]
▶ Astronics posts 1Q profit   [May-04-17 09:38AM  Associated Press]
▶ Astronics posts 1Q profit   [06:47AM  Associated Press]
▶ Astronics Corporation Acquires Custom Controls Concepts   [Apr-03-17 04:15PM  Business Wire]
▶ Astronics posts 4Q profit   [07:35AM  Associated Press]
▶ Astronics Test Systems Announces New PXIe Test Instruments   [Jan-23-17 05:15PM  GlobeNewswire]
▶ Is Gentherm Inc (THRM) A Good Stock to Buy?   [Dec-13-16 04:07AM  at Insider Monkey]
▶ Is Astronics Corporation (ATRO) Going to Burn These Hedge Funds?   [Dec-12-16 12:41PM  at Insider Monkey]
▶ [$$] Astronics Has an Ample Runway to Growth   [Nov-19-16 12:01AM  at Barrons.com]
Financial statements of ATRO
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.

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