Intrinsic value of Esterline Technologies - ESL

Previous Close

$75.45

  Intrinsic Value

$75.16

stock screener

  Rating & Target

hold

-0%

Previous close

$75.45

 
Intrinsic value

$75.16

 
Up/down potential

-0%

 
Rating

hold

We calculate the intrinsic value of ESL 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.45
  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
  2,002
  2,042
  2,089
  2,143
  2,203
  2,270
  2,343
  2,423
  2,509
  2,602
  2,702
  2,809
  2,923
  3,044
  3,173
  3,310
  3,455
  3,609
  3,771
  3,943
  4,124
  4,315
  4,517
  4,729
  4,953
  5,189
  5,437
  5,699
  5,974
  6,263
  6,567
Variable operating expenses, $m
 
  1,864
  1,905
  1,951
  2,003
  2,060
  2,124
  2,192
  2,267
  2,347
  2,433
  2,420
  2,518
  2,622
  2,733
  2,851
  2,976
  3,109
  3,248
  3,396
  3,552
  3,717
  3,891
  4,074
  4,266
  4,470
  4,683
  4,908
  5,145
  5,395
  5,657
Fixed operating expenses, $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
Total operating expenses, $m
  1,807
  1,864
  1,905
  1,951
  2,003
  2,060
  2,124
  2,192
  2,267
  2,347
  2,433
  2,420
  2,518
  2,622
  2,733
  2,851
  2,976
  3,109
  3,248
  3,396
  3,552
  3,717
  3,891
  4,074
  4,266
  4,470
  4,683
  4,908
  5,145
  5,395
  5,657
Operating income, $m
  195
  178
  184
  192
  200
  209
  219
  231
  242
  255
  269
  389
  405
  422
  440
  459
  479
  500
  523
  547
  572
  598
  626
  656
  687
  719
  754
  790
  828
  868
  911
EBITDA, $m
  299
  327
  334
  343
  352
  363
  375
  387
  401
  416
  432
  449
  467
  487
  507
  529
  552
  577
  603
  630
  659
  690
  722
  756
  792
  830
  869
  911
  955
  1,001
  1,050
Interest expense (income), $m
  27
  27
  28
  29
  30
  31
  33
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  70
  74
  78
  83
  87
  92
  98
  103
  109
  115
  122
Earnings before tax, $m
  165
  151
  157
  163
  170
  178
  187
  196
  206
  217
  229
  347
  361
  375
  390
  406
  423
  441
  460
  481
  502
  524
  548
  573
  599
  627
  656
  687
  719
  753
  789
Tax expense, $m
  39
  41
  42
  44
  46
  48
  50
  53
  56
  59
  62
  94
  97
  101
  105
  110
  114
  119
  124
  130
  136
  142
  148
  155
  162
  169
  177
  185
  194
  203
  213
Net income, $m
  117
  110
  114
  119
  124
  130
  136
  143
  151
  159
  167
  253
  263
  274
  285
  297
  309
  322
  336
  351
  366
  383
  400
  418
  437
  458
  479
  501
  525
  550
  576

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  308
  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
  3,130
  2,880
  2,946
  3,022
  3,107
  3,201
  3,305
  3,417
  3,539
  3,670
  3,811
  3,962
  4,123
  4,294
  4,476
  4,669
  4,874
  5,090
  5,319
  5,561
  5,817
  6,086
  6,371
  6,670
  6,986
  7,319
  7,669
  8,037
  8,425
  8,833
  9,263
Adjusted assets (=assets-cash), $m
  2,822
  2,880
  2,946
  3,022
  3,107
  3,201
  3,305
  3,417
  3,539
  3,670
  3,811
  3,962
  4,123
  4,294
  4,476
  4,669
  4,874
  5,090
  5,319
  5,561
  5,817
  6,086
  6,371
  6,670
  6,986
  7,319
  7,669
  8,037
  8,425
  8,833
  9,263
Revenue / Adjusted assets
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
Average production assets, $m
  720
  733
  750
  769
  791
  815
  841
  870
  901
  934
  970
  1,008
  1,049
  1,093
  1,139
  1,188
  1,240
  1,296
  1,354
  1,415
  1,481
  1,549
  1,622
  1,698
  1,778
  1,863
  1,952
  2,046
  2,144
  2,248
  2,358
Working capital, $m
  887
  609
  623
  639
  656
  676
  698
  722
  748
  775
  805
  837
  871
  907
  946
  986
  1,030
  1,075
  1,124
  1,175
  1,229
  1,286
  1,346
  1,409
  1,476
  1,546
  1,620
  1,698
  1,780
  1,866
  1,957
Total debt, $m
  777
  786
  816
  850
  888
  931
  978
  1,029
  1,084
  1,143
  1,207
  1,275
  1,347
  1,425
  1,507
  1,594
  1,687
  1,785
  1,888
  1,998
  2,113
  2,235
  2,364
  2,499
  2,642
  2,792
  2,950
  3,117
  3,292
  3,477
  3,671
Total liabilities, $m
  1,294
  1,302
  1,332
  1,366
  1,404
  1,447
  1,494
  1,545
  1,600
  1,659
  1,723
  1,791
  1,863
  1,941
  2,023
  2,110
  2,203
  2,301
  2,404
  2,514
  2,629
  2,751
  2,880
  3,015
  3,158
  3,308
  3,466
  3,633
  3,808
  3,993
  4,187
Total equity, $m
  1,837
  1,578
  1,615
  1,656
  1,703
  1,754
  1,811
  1,873
  1,939
  2,011
  2,089
  2,171
  2,259
  2,353
  2,453
  2,559
  2,671
  2,789
  2,915
  3,048
  3,188
  3,335
  3,491
  3,655
  3,828
  4,011
  4,203
  4,405
  4,617
  4,841
  5,076
Total liabilities and equity, $m
  3,131
  2,880
  2,947
  3,022
  3,107
  3,201
  3,305
  3,418
  3,539
  3,670
  3,812
  3,962
  4,122
  4,294
  4,476
  4,669
  4,874
  5,090
  5,319
  5,562
  5,817
  6,086
  6,371
  6,670
  6,986
  7,319
  7,669
  8,038
  8,425
  8,834
  9,263
Debt-to-equity ratio
  0.423
  0.500
  0.510
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.720
Adjusted equity ratio
  0.542
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  117
  110
  114
  119
  124
  130
  136
  143
  151
  159
  167
  253
  263
  274
  285
  297
  309
  322
  336
  351
  366
  383
  400
  418
  437
  458
  479
  501
  525
  550
  576
Depreciation, amort., depletion, $m
  104
  149
  150
  151
  152
  154
  155
  157
  159
  161
  163
  60
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
  100
  105
  110
  116
  121
  127
  133
  140
Funds from operations, $m
  155
  259
  264
  270
  277
  284
  292
  300
  309
  319
  330
  313
  325
  338
  352
  367
  382
  399
  416
  435
  454
  474
  496
  519
  543
  568
  594
  622
  652
  683
  715
Change in working capital, $m
  -38
  12
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  91
Cash from operations, $m
  193
  247
  250
  254
  259
  264
  270
  276
  284
  292
  300
  281
  291
  302
  314
  326
  339
  353
  368
  383
  400
  417
  436
  455
  476
  498
  520
  545
  570
  597
  625
Maintenance CAPEX, $m
  0
  -43
  -43
  -44
  -46
  -47
  -48
  -50
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -100
  -105
  -110
  -116
  -121
  -127
  -133
New CAPEX, $m
  -58
  -14
  -17
  -19
  -22
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -109
Cash from investing activities, $m
  -57
  -57
  -60
  -63
  -68
  -71
  -74
  -79
  -82
  -86
  -91
  -95
  -101
  -106
  -111
  -116
  -122
  -128
  -135
  -142
  -149
  -157
  -164
  -172
  -180
  -190
  -199
  -210
  -220
  -231
  -242
Free cash flow, $m
  136
  191
  190
  190
  191
  193
  195
  198
  201
  205
  209
  186
  191
  197
  203
  210
  217
  225
  233
  242
  251
  261
  272
  283
  295
  308
  321
  335
  350
  366
  382
Issuance/(repayment) of debt, $m
  -121
  26
  30
  34
  38
  43
  47
  51
  55
  59
  64
  68
  73
  77
  82
  87
  92
  98
  104
  109
  115
  122
  129
  135
  143
  150
  158
  167
  175
  184
  194
Issuance/(repurchase) of shares, $m
  28
  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  
  -94
  26
  30
  34
  38
  43
  47
  51
  55
  59
  64
  68
  73
  77
  82
  87
  92
  98
  104
  109
  115
  122
  129
  135
  143
  150
  158
  167
  175
  184
  194
Total cash flow (excl. dividends), $m
  49
  217
  220
  225
  230
  236
  242
  249
  256
  264
  273
  254
  263
  274
  285
  297
  309
  322
  336
  351
  367
  383
  400
  419
  438
  458
  479
  502
  525
  550
  576
Retained Cash Flow (-), $m
  -236
  -32
  -36
  -41
  -47
  -52
  -57
  -62
  -67
  -72
  -77
  -83
  -88
  -94
  -100
  -106
  -112
  -119
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -192
  -202
  -213
  -224
  -235
Prev. year cash balance distribution, $m
 
  291
  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
 
  476
  184
  183
  183
  184
  185
  187
  190
  192
  196
  171
  175
  180
  185
  191
  197
  204
  211
  219
  227
  235
  245
  254
  265
  276
  288
  300
  313
  327
  341
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
 
  455
  167
  158
  150
  141
  133
  124
  116
  108
  100
  79
  72
  66
  59
  53
  47
  41
  36
  31
  26
  22
  18
  15
  12
  9
  7
  5
  4
  3
  2
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

Esterline Technologies Corporation is a specialized manufacturing company. The Company designs, manufactures and markets engineered products and systems for application within the industries it serves. The Company operates through three segments: Avionics & Controls, Sensors & Systems, and Advanced Materials. The Company serves aerospace and defense customers. The Company's Avionics & Controls business segment includes avionics systems, control and communication systems, and interface technologies capabilities. The Company's Sensors & Systems business segment includes power systems, connection technologies and advanced sensors capabilities. The Company's Advanced Materials business segment includes engineered materials and defense technologies capabilities. The Company designs and manufactures ruggedized military personal communication equipment, primarily headsets, handsets and field communications.

FINANCIAL RATIOS  of  Esterline Technologies (ESL)

Valuation Ratios
P/E Ratio 19.3
Price to Sales 1.1
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 16.8
Growth Rates
Sales Growth Rate 0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.7%
Cap. Spend. - 3 Yr. Gr. Rate 4.7%
Financial Strength
Quick Ratio 18
Current Ratio 0.1
LT Debt to Equity 41.4%
Total Debt to Equity 42.3%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 4.6%
Ret/ On T. Cap. - 3 Yr. Avg. 3.7%
Return On Equity 6.8%
Return On Equity - 3 Yr. Avg. 5.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 33.2%
Gross Margin - 3 Yr. Avg. 33.4%
EBITDA Margin 14.8%
EBITDA Margin - 3 Yr. Avg. 13.8%
Operating Margin 9.7%
Oper. Margin - 3 Yr. Avg. 8.8%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 7.3%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 23.6%
Eff/ Tax Rate - 3 Yr. Avg. 18.6%
Payout Ratio 0%

ESL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ESL stock intrinsic value calculation we used $2002 million for the last fiscal year's total revenue generated by Esterline Technologies. The default revenue input number comes from 2017 income statement of Esterline Technologies. 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 ESL 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 ESL is calculated based on our internal credit rating of Esterline Technologies, 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 Esterline Technologies.
    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 ESL stock the variable cost ratio is equal to 91.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ESL 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 Esterline Technologies.

Corporate tax rate of 27% is the nominal tax rate for Esterline Technologies. 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 ESL 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 ESL are equal to 35.9%.

Life of production assets of 16.9 years is the average useful life of capital assets used in Esterline Technologies 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 ESL is equal to 29.8%. 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 - $1837 million for Esterline Technologies - 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 30.12 million for Esterline Technologies 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 Esterline Technologies at the current share price and the inputted number of shares is $2.3 billion.

RELATED COMPANIES Price Int.Val. Rating
HON Honeywell Inte 154.03 134.30  hold
UTX United Technol 129.26 194.86  str.buy
HEI Heico 80.64 92.63  hold
TATT Tat Technologi 9.95 2.52  str.sell
WWD Woodward 73.92 48.17  sell
ATRO Astronics 41.88 24.83  sell

COMPANY NEWS

▶ Esterline Notice On Timing of Form 10-Q Filing   [Feb-16-18 06:00AM  GlobeNewswire]
▶ Esterline Technologies reports 1Q loss   [Feb-01-18 04:45PM  Associated Press]
▶ New Strong Sell Stocks for January 29th   [Jan-29-18 04:59AM  Zacks]
▶ 4 Top Aerospace Stocks to Consider Buying Now   [Nov-29-17 08:46PM  Motley Fool]
▶ Esterline Technologies misses Street 4Q forecasts   [Nov-09-17 04:43PM  Associated Press]
▶ New Strong Sell Stocks for August 15th   [Aug-15-17 10:14AM  Zacks]
▶ Esterline Technologies misses Street 3Q forecasts   [Aug-04-17 02:50AM  Associated Press]
▶ Esterline Reports Fiscal 2017 Third Quarter Results   [Aug-03-17 04:05PM  GlobeNewswire]
▶ Facebook Snags MLB, ESL Streaming Deal   [May-21-17 05:53PM  GuruFocus.com]
▶ Esterline Technologies tops Street 2Q forecasts   [May-04-17 04:44PM  Associated Press]
Financial statements of ESL
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

ASSET ALLOCATION

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

Copyright © X-FIN.com 2005-2018. All rigths reserved.