Intrinsic value of IntriCon - IIN

Previous Close

$11.60

  Intrinsic Value

$4.68

stock screener

  Rating & Target

str. sell

-60%

  Value-price divergence*

-94%

Previous close

$11.60

 
Intrinsic value

$4.68

 
Up/down potential

-60%

 
Rating

str. sell

 
Value-price divergence*

-94%

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

We calculate the intrinsic value of IIN 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 0.1

 

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, %
  -2.86
  29.40
  26.96
  24.76
  22.79
  21.01
  19.41
  17.97
  16.67
  15.50
  14.45
  13.51
  12.66
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
Revenue, $m
  68
  88
  112
  139
  171
  207
  247
  292
  340
  393
  450
  511
  575
  644
  716
  792
  871
  954
  1,040
  1,131
  1,224
  1,322
  1,423
  1,529
  1,638
  1,752
  1,870
  1,993
  2,121
  2,254
  2,393
Variable operating expenses, $m
 
  84
  106
  132
  162
  196
  234
  275
  321
  371
  424
  480
  541
  605
  673
  744
  819
  897
  978
  1,063
  1,151
  1,242
  1,338
  1,437
  1,540
  1,646
  1,758
  1,873
  1,993
  2,119
  2,249
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
  70
  84
  106
  132
  162
  196
  234
  275
  321
  371
  424
  480
  541
  605
  673
  744
  819
  897
  978
  1,063
  1,151
  1,242
  1,338
  1,437
  1,540
  1,646
  1,758
  1,873
  1,993
  2,119
  2,249
Operating income, $m
  -2
  4
  6
  7
  9
  11
  14
  16
  19
  23
  26
  31
  35
  39
  43
  48
  52
  57
  63
  68
  74
  80
  86
  92
  99
  105
  113
  120
  128
  136
  144
EBITDA, $m
  0
  6
  8
  10
  12
  15
  18
  21
  25
  29
  33
  37
  42
  47
  52
  58
  63
  70
  76
  82
  89
  96
  104
  111
  119
  128
  136
  145
  155
  164
  174
Interest expense (income), $m
  1
  1
  2
  2
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  45
  48
  51
  55
  59
  63
  67
  71
Earnings before tax, $m
  -3
  3
  4
  5
  6
  7
  8
  10
  11
  13
  15
  17
  19
  21
  24
  26
  28
  31
  33
  36
  39
  41
  44
  47
  51
  54
  57
  61
  65
  69
  73
Tax expense, $m
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  16
  17
  19
  20
Net income, $m
  -5
  2
  3
  4
  4
  5
  6
  7
  8
  9
  11
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  35
  37
  39
  42
  45
  47
  50
  53

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1
  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
  44
  56
  71
  88
  108
  131
  156
  185
  215
  249
  285
  323
  364
  407
  453
  501
  551
  603
  658
  715
  774
  836
  900
  967
  1,036
  1,108
  1,183
  1,261
  1,342
  1,426
  1,514
Adjusted assets (=assets-cash), $m
  43
  56
  71
  88
  108
  131
  156
  185
  215
  249
  285
  323
  364
  407
  453
  501
  551
  603
  658
  715
  774
  836
  900
  967
  1,036
  1,108
  1,183
  1,261
  1,342
  1,426
  1,514
Revenue / Adjusted assets
  1.581
  1.571
  1.577
  1.580
  1.583
  1.580
  1.583
  1.578
  1.581
  1.578
  1.579
  1.582
  1.580
  1.582
  1.581
  1.581
  1.581
  1.582
  1.581
  1.582
  1.581
  1.581
  1.581
  1.581
  1.581
  1.581
  1.581
  1.580
  1.580
  1.581
  1.581
Average production assets, $m
  8
  10
  13
  16
  20
  24
  29
  34
  40
  46
  53
  60
  68
  76
  84
  93
  103
  113
  123
  133
  144
  156
  168
  180
  193
  207
  221
  235
  250
  266
  282
Working capital, $m
  8
  12
  15
  18
  23
  27
  33
  39
  45
  52
  59
  67
  76
  85
  94
  104
  115
  126
  137
  149
  162
  174
  188
  202
  216
  231
  247
  263
  280
  298
  316
Total debt, $m
  12
  18
  26
  36
  47
  60
  74
  90
  107
  126
  146
  167
  190
  214
  240
  266
  294
  324
  354
  386
  419
  454
  489
  527
  565
  605
  647
  690
  736
  783
  832
Total liabilities, $m
  25
  31
  39
  49
  60
  73
  87
  103
  120
  139
  159
  180
  203
  227
  253
  279
  307
  337
  367
  399
  432
  467
  502
  540
  578
  618
  660
  703
  749
  796
  845
Total equity, $m
  19
  25
  31
  39
  48
  58
  69
  82
  95
  110
  126
  143
  161
  180
  200
  221
  244
  267
  291
  316
  342
  370
  398
  427
  458
  490
  523
  557
  593
  630
  669
Total liabilities and equity, $m
  44
  56
  70
  88
  108
  131
  156
  185
  215
  249
  285
  323
  364
  407
  453
  500
  551
  604
  658
  715
  774
  837
  900
  967
  1,036
  1,108
  1,183
  1,260
  1,342
  1,426
  1,514
Debt-to-equity ratio
  0.632
  0.730
  0.850
  0.930
  0.990
  1.040
  1.070
  1.100
  1.130
  1.140
  1.160
  1.170
  1.180
  1.190
  1.200
  1.200
  1.210
  1.210
  1.220
  1.220
  1.220
  1.230
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
Adjusted equity ratio
  0.419
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  2
  3
  4
  4
  5
  6
  7
  8
  9
  11
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  35
  37
  39
  42
  45
  47
  50
  53
Depreciation, amort., depletion, $m
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
Funds from operations, $m
  1
  5
  5
  6
  8
  9
  10
  12
  14
  15
  17
  19
  21
  24
  26
  29
  32
  34
  37
  40
  44
  47
  50
  54
  58
  62
  66
  70
  74
  79
  83
Change in working capital, $m
  1
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
Cash from operations, $m
  0
  2
  2
  3
  3
  4
  5
  6
  7
  8
  10
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  43
  47
  50
  54
  57
  61
  65
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
New CAPEX, $m
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
Cash from investing activities, $m
  -2
  -3
  -4
  -4
  -6
  -6
  -8
  -8
  -10
  -10
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -28
  -29
  -30
  -32
  -34
  -36
  -39
  -40
  -43
  -45
Free cash flow, $m
  -2
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  2
  3
  4
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  19
  20
Issuance/(repayment) of debt, $m
  0
  7
  8
  10
  11
  13
  14
  16
  17
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
Issuance/(repurchase) of shares, $m
  0
  3
  4
  4
  5
  5
  5
  5
  5
  5
  5
  4
  4
  3
  3
  2
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4
  10
  12
  14
  16
  18
  19
  21
  22
  24
  25
  25
  27
  27
  28
  29
  30
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
Total cash flow (excl. dividends), $m
  0
  9
  10
  12
  14
  15
  17
  19
  20
  22
  24
  24
  26
  27
  29
  30
  31
  33
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
Retained Cash Flow (-), $m
  0
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
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
 
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  7
  7
  8
  8
  9
  9
  10
  10
  11
  13
  14
  16
  17
  19
  21
  23
  24
  26
  28
  30
Discount rate, %
 
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
 
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  96.1
  92.8
  90.0
  87.6
  85.5
  83.8
  82.3
  81.0
  79.9
  79.0
  78.4
  77.9
  77.5
  77.2
  77.0
  76.9
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8

IntriCon Corporation is engaged in designing, developing, engineering, manufacturing and distributing body-worn devices. The Company operates through body-worn device segment. The Company serves the body-worn device market by designing, developing, engineering and manufacturing micro-miniature products, microelectronics, micro-mechanical assemblies, complete assemblies and software solutions, primarily for the value hearing health market, the medical bio-telemetry market and the professional audio communication market. The Company has facilities in Minnesota, California, Singapore, Indonesia, the United Kingdom and Germany, and operates through its subsidiaries. The Company's product offering includes a hearing aid discount program for health plans. This program is available around the nation to health insurers, including employer-sponsored, individual and Medicare plans. The Company also has various international value hearing aid (VHA) initiatives.

FINANCIAL RATIOS  of  IntriCon (IIN)

Valuation Ratios
P/E Ratio -15.8
Price to Sales 1.2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -39.6
Growth Rates
Sales Growth Rate -2.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 52.6%
Total Debt to Equity 63.2%
Interest Coverage -2
Management Effectiveness
Return On Assets -9.3%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital -16.7%
Ret/ On T. Cap. - 3 Yr. Avg. -0%
Return On Equity -26.3%
Return On Equity - 3 Yr. Avg. -0.4%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 25%
Gross Margin - 3 Yr. Avg. 26.2%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 4.4%
Operating Margin -2.9%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin -4.4%
Pre-Tax Margin - 3 Yr. Avg. 1%
Net Profit Margin -7.4%
Net Profit Margin - 3 Yr. Avg. -0.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

IIN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IIN stock intrinsic value calculation we used $68 million for the last fiscal year's total revenue generated by IntriCon. The default revenue input number comes from 2016 income statement of IntriCon. 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 IIN stock valuation model: a) initial revenue growth rate of 29.4% 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 8.5%, whose default value for IIN is calculated based on our internal credit rating of IntriCon, 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 IntriCon.
    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 IIN stock the variable cost ratio is equal to 95.6%.

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 IIN 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 9.1% for IntriCon.

Corporate tax rate of 27% is the nominal tax rate for IntriCon. 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 IIN 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 IIN are equal to 11.8%.

Life of production assets of 9.3 years is the average useful life of capital assets used in IntriCon 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 IIN is equal to 13.2%. 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 - $19 million for IntriCon - 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 6.971 million for IntriCon 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 IntriCon at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ IntriCon Reports 2017 Second-Quarter Results   [Aug-02-17 04:05PM  Business Wire]
▶ ETFs with exposure to Intricon Corp. : June 26, 2017   [Jun-26-17 04:11PM  Capital Cube]
▶ IntriCon Reports 2017 First-Quarter Results   [Apr-25-17 04:05PM  Business Wire]
▶ IntriCon Reports 2016 Fourth-Quarter Results   [04:05PM  Business Wire]
▶ ETFs with exposure to Intricon Corp. : December 8, 2016   [Dec-08-16 12:39PM  Capital Cube]
▶ IntriCon Reports 2016 Third-Quarter Results   [04:05PM  Business Wire]
▶ IntriCon Reports 2016 Second-Quarter Results   [04:05PM  Business Wire]
▶ Royal Bank of Scotland in Fridays 52-Week Low Club   [Jul-01-16 04:04PM  at 24/7 Wall St.]
▶ IntriCon Reports Preliminary Second-Quarter Results   [Jun-30-16 04:05PM  Business Wire]
▶ IntriCon Prices Common Stock Offering   [May-13-16 09:16AM  Business Wire]
▶ IntriCon Reports 2016 First-Quarter Results   [04:05PM  Business Wire]
▶ IntriCon Amends Credit Facilities   [04:01PM  Business Wire]
▶ IntriCon Appoints New Independent Director   [04:05PM  Business Wire]
▶ IntriCon Reports 2015 Third-Quarter Results   [04:05PM  Business Wire]
▶ IntriCon Acquires PC Werth Ltd   [04:05PM  Business Wire]
▶ IntriCon Secures National Health Service Product Approval   [Sep-17  09:00AM  Business Wire]
▶ 10-Q for Intricon Corp.   [Aug-15  08:10PM  at Company Spotlight]
▶ IntriCon Reports 2015 Second-Quarter Results   [04:00PM  Business Wire]
▶ 10-Q for Intricon Corp.   [May-15  08:09PM  at Company Spotlight]
Financial statements of IIN
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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