Intrinsic value of Park Electrochemical - PKE

Previous Close

$18.46

  Intrinsic Value

$7.23

stock screener

  Rating & Target

str. sell

-61%

  Value-price divergence*

-83%

Previous close

$18.46

 
Intrinsic value

$7.23

 
Up/down potential

-61%

 
Rating

str. sell

 
Value-price divergence*

-83%

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

We calculate the intrinsic value of PKE 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 2017), $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 0.4

 

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, %
  -21.23
  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
  115
  117
  120
  123
  127
  130
  135
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  207
  217
  226
  237
  248
  259
  272
  285
  298
  312
  327
  343
  360
  377
Variable operating expenses, $m
 
  75
  77
  79
  81
  84
  86
  89
  92
  96
  99
  102
  107
  111
  116
  121
  126
  131
  137
  144
  150
  157
  165
  172
  180
  189
  198
  208
  218
  228
  239
Fixed operating expenses, $m
 
  33
  34
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
Total operating expenses, $m
  105
  108
  111
  113
  116
  120
  123
  127
  131
  136
  140
  144
  150
  155
  161
  167
  174
  180
  187
  195
  202
  211
  220
  228
  238
  248
  259
  270
  282
  293
  306
Operating income, $m
  10
  9
  9
  10
  10
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  50
  53
  57
  62
  66
  71
EBITDA, $m
  13
  12
  12
  13
  13
  14
  14
  15
  16
  17
  19
  20
  21
  23
  25
  26
  29
  31
  33
  36
  38
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
Interest expense (income), $m
  1
  2
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Earnings before tax, $m
  10
  7
  9
  9
  9
  10
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  50
  53
  57
  61
  66
Tax expense, $m
  1
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  17
  18
Net income, $m
  9
  5
  6
  7
  7
  7
  8
  8
  9
  9
  10
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  239
  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
  309
  71
  73
  75
  77
  79
  82
  85
  88
  91
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  209
  219
  230
Adjusted assets (=assets-cash), $m
  70
  71
  73
  75
  77
  79
  82
  85
  88
  91
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  209
  219
  230
Revenue / Adjusted assets
  1.643
  1.648
  1.644
  1.640
  1.649
  1.646
  1.646
  1.635
  1.636
  1.637
  1.649
  1.643
  1.647
  1.651
  1.640
  1.638
  1.636
  1.643
  1.644
  1.638
  1.646
  1.642
  1.639
  1.648
  1.647
  1.646
  1.642
  1.643
  1.641
  1.644
  1.639
Average production assets, $m
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
Working capital, $m
  255
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
Total debt, $m
  72
  10
  12
  13
  15
  17
  20
  22
  25
  28
  31
  34
  38
  42
  46
  50
  55
  60
  65
  70
  76
  82
  88
  95
  102
  109
  117
  125
  134
  143
  153
Total liabilities, $m
  126
  64
  66
  67
  69
  71
  74
  76
  79
  82
  85
  88
  92
  96
  100
  104
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  207
Total equity, $m
  183
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Total liabilities and equity, $m
  309
  71
  73
  74
  77
  79
  82
  84
  88
  91
  94
  98
  102
  107
  111
  116
  121
  127
  132
  138
  144
  151
  158
  166
  173
  181
  190
  199
  209
  219
  230
Debt-to-equity ratio
  0.393
  1.440
  1.610
  1.790
  1.990
  2.200
  2.410
  2.630
  2.840
  3.060
  3.280
  3.500
  3.720
  3.930
  4.130
  4.330
  4.530
  4.720
  4.900
  5.080
  5.250
  5.420
  5.580
  5.730
  5.880
  6.020
  6.160
  6.290
  6.410
  6.530
  6.650
Adjusted equity ratio
  -0.800
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  5
  6
  7
  7
  7
  8
  8
  9
  9
  10
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
Funds from operations, $m
  14
  8
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  17
  18
  19
  20
  22
  24
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
Change in working capital, $m
  1
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
Cash from operations, $m
  13
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  18
  19
  20
  22
  24
  25
  27
  29
  32
  34
  36
  39
  42
  45
  48
  52
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
New CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -9
Free cash flow, $m
  15
  5
  7
  7
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  37
  39
  42
Issuance/(repayment) of debt, $m
  -3
  -58
  1
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Issuance/(repurchase) of shares, $m
  0
  54
  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  
  -3
  -4
  1
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Total cash flow (excl. dividends), $m
  13
  2
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  32
  34
  37
  39
  42
  45
  48
  52
Retained Cash Flow (-), $m
  -2
  -59
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Prev. year cash balance distribution, $m
 
  235
  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
 
  177
  8
  8
  8
  9
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  51
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  170
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
  5
  5
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
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Park Electrochemical Corp. is a global advanced materials company. The Company develops, manufactures, markets and sells digital and radio frequency (RF)/microwave printed circuit materials products principally for the telecommunications and Internet infrastructure and high-end computing markets and advanced composite materials, parts and assemblies and low-volume tooling products for the aerospace markets. The Company operates through integrated business units in Asia, Europe and North America. The Company's manufacturing facilities are located in Singapore, France, Kansas, Arizona and California. The Company also maintains research and development facilities in Arizona, Kansas and Singapore. The Company's foreign operations are conducted principally by the Company's subsidiaries in Singapore and France.

FINANCIAL RATIOS  of  Park Electrochemical (PKE)

Valuation Ratios
P/E Ratio 41.5
Price to Sales 3.2
Price to Book 2
Price to Tangible Book
Price to Cash Flow 28.7
Price to Free Cash Flow 28.7
Growth Rates
Sales Growth Rate -21.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 60
Current Ratio 0
LT Debt to Equity 37.2%
Total Debt to Equity 39.3%
Interest Coverage 11
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 5.7%
Return On Equity 4.9%
Return On Equity - 3 Yr. Avg. 8.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 26.1%
Gross Margin - 3 Yr. Avg. 28.6%
EBITDA Margin 12.2%
EBITDA Margin - 3 Yr. Avg. 15.5%
Operating Margin 8.7%
Oper. Margin - 3 Yr. Avg. 12.4%
Pre-Tax Margin 8.7%
Pre-Tax Margin - 3 Yr. Avg. 12.4%
Net Profit Margin 7.8%
Net Profit Margin - 3 Yr. Avg. 10.8%
Effective Tax Rate 10%
Eff/ Tax Rate - 3 Yr. Avg. 12.4%
Payout Ratio 88.9%

PKE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PKE stock intrinsic value calculation we used $115 million for the last fiscal year's total revenue generated by Park Electrochemical. The default revenue input number comes from 2017 income statement of Park Electrochemical. 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 PKE 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 4.3%, whose default value for PKE is calculated based on our internal credit rating of Park Electrochemical, 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 Park Electrochemical.
    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 PKE stock the variable cost ratio is equal to 64.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $32 million in the base year in the intrinsic value calculation for PKE 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 Park Electrochemical.

Corporate tax rate of 27% is the nominal tax rate for Park Electrochemical. 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 PKE 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 PKE are equal to 17.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Park Electrochemical 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 PKE is equal to 17.4%. 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 - $183 million for Park Electrochemical - 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 20.257 million for Park Electrochemical 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 Park Electrochemical at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Park Electrochemical Corp. Declares Cash Dividend   [Sep-13-17 09:52AM  GlobeNewswire]
▶ Park Electrochemical posts 1Q profit   [Jun-28-17 09:45PM  Associated Press]
▶ Park Electrochemical Corp. Declares Cash Dividend   [Jun-14-17 09:30AM  GlobeNewswire]
▶ Park Electrochemical posts 4Q profit   [May-02-17 06:47AM  Associated Press]
▶ Park Electrochemical Corp. Declares Cash Dividend   [Mar-15-17 02:21PM  GlobeNewswire]
▶ Park Electrochemical posts 3Q profit   [06:38AM  Associated Press]
▶ Is Park Electrochemical Corp. (PKE) A Good Stock To Buy?   [Dec-18-16 09:56PM  Insider Monkey]
▶ Park Electrochemical Corp. Declares Cash Dividend   [Dec-14-16 09:37AM  GlobeNewswire]
▶ Park Electrochemical Corp. Declares Cash Dividend   [Jun-20-16 10:43AM  GlobeNewswire]
Financial statements of PKE
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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