Intrinsic value of Sigmatron International - SGMA

Previous Close

$9.49

  Intrinsic Value

$321.47

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  Rating & Target

str. buy

+999%

Previous close

$9.49

 
Intrinsic value

$321.47

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of SGMA 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 0.0

 

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, %
  -0.79
  20.30
  18.77
  17.39
  16.15
  15.04
  14.03
  13.13
  12.32
  11.59
  10.93
  10.33
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
Revenue, $m
  252
  303
  360
  423
  491
  565
  644
  729
  818
  913
  1,013
  1,118
  1,227
  1,342
  1,461
  1,585
  1,714
  1,849
  1,988
  2,133
  2,284
  2,441
  2,604
  2,773
  2,949
  3,133
  3,324
  3,523
  3,730
  3,947
  4,172
Variable operating expenses, $m
 
  152
  180
  211
  245
  282
  322
  364
  409
  456
  506
  558
  612
  669
  729
  791
  855
  922
  992
  1,064
  1,139
  1,217
  1,299
  1,383
  1,471
  1,563
  1,658
  1,757
  1,861
  1,969
  2,081
Fixed operating expenses, $m
 
  129
  132
  136
  139
  143
  146
  150
  154
  157
  161
  165
  169
  174
  178
  182
  187
  192
  197
  201
  206
  212
  217
  222
  228
  234
  239
  245
  252
  258
  264
Total operating expenses, $m
  249
  281
  312
  347
  384
  425
  468
  514
  563
  613
  667
  723
  781
  843
  907
  973
  1,042
  1,114
  1,189
  1,265
  1,345
  1,429
  1,516
  1,605
  1,699
  1,797
  1,897
  2,002
  2,113
  2,227
  2,345
Operating income, $m
  3
  22
  48
  76
  107
  140
  176
  215
  256
  300
  346
  395
  446
  499
  554
  612
  672
  735
  800
  868
  938
  1,012
  1,088
  1,167
  1,250
  1,336
  1,426
  1,520
  1,618
  1,720
  1,827
EBITDA, $m
  8
  24
  49
  78
  109
  143
  179
  218
  260
  304
  350
  399
  450
  504
  559
  618
  678
  741
  807
  875
  946
  1,020
  1,097
  1,177
  1,261
  1,348
  1,438
  1,533
  1,631
  1,734
  1,842
Interest expense (income), $m
  1
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
Earnings before tax, $m
  3
  21
  46
  73
  104
  136
  172
  209
  250
  292
  337
  385
  434
  486
  540
  596
  655
  716
  780
  846
  914
  986
  1,060
  1,138
  1,219
  1,303
  1,390
  1,482
  1,577
  1,677
  1,781
Tax expense, $m
  2
  6
  12
  20
  28
  37
  46
  57
  67
  79
  91
  104
  117
  131
  146
  161
  177
  193
  210
  228
  247
  266
  286
  307
  329
  352
  375
  400
  426
  453
  481
Net income, $m
  1
  16
  34
  54
  76
  99
  125
  153
  182
  213
  246
  281
  317
  355
  394
  435
  478
  523
  569
  617
  668
  720
  774
  831
  890
  951
  1,015
  1,082
  1,151
  1,224
  1,300

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3
  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
  151
  178
  211
  248
  288
  332
  378
  428
  481
  536
  595
  656
  721
  788
  858
  931
  1,007
  1,085
  1,167
  1,253
  1,341
  1,433
  1,529
  1,628
  1,732
  1,839
  1,952
  2,069
  2,190
  2,317
  2,450
Adjusted assets (=assets-cash), $m
  148
  178
  211
  248
  288
  332
  378
  428
  481
  536
  595
  656
  721
  788
  858
  931
  1,007
  1,085
  1,167
  1,253
  1,341
  1,433
  1,529
  1,628
  1,732
  1,839
  1,952
  2,069
  2,190
  2,317
  2,450
Revenue / Adjusted assets
  1.703
  1.702
  1.706
  1.706
  1.705
  1.702
  1.704
  1.703
  1.701
  1.703
  1.703
  1.704
  1.702
  1.703
  1.703
  1.702
  1.702
  1.704
  1.704
  1.702
  1.703
  1.703
  1.703
  1.703
  1.703
  1.704
  1.703
  1.703
  1.703
  1.703
  1.703
Average production assets, $m
  5
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  29
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
Working capital, $m
  53
  62
  74
  87
  101
  116
  133
  150
  169
  188
  209
  230
  253
  276
  301
  327
  353
  381
  410
  439
  470
  503
  536
  571
  608
  645
  685
  726
  768
  813
  860
Total debt, $m
  33
  49
  68
  90
  114
  139
  166
  196
  227
  259
  294
  330
  368
  407
  448
  491
  536
  582
  630
  681
  733
  787
  843
  901
  962
  1,026
  1,092
  1,160
  1,232
  1,307
  1,385
Total liabilities, $m
  89
  105
  124
  146
  170
  195
  222
  252
  283
  315
  350
  386
  424
  463
  504
  547
  592
  638
  686
  737
  789
  843
  899
  957
  1,018
  1,082
  1,148
  1,216
  1,288
  1,363
  1,441
Total equity, $m
  62
  73
  87
  102
  119
  137
  156
  176
  198
  221
  245
  270
  297
  325
  353
  383
  415
  447
  481
  516
  553
  590
  630
  671
  713
  758
  804
  852
  902
  955
  1,009
Total liabilities and equity, $m
  151
  178
  211
  248
  289
  332
  378
  428
  481
  536
  595
  656
  721
  788
  857
  930
  1,007
  1,085
  1,167
  1,253
  1,342
  1,433
  1,529
  1,628
  1,731
  1,840
  1,952
  2,068
  2,190
  2,318
  2,450
Debt-to-equity ratio
  0.532
  0.660
  0.780
  0.880
  0.960
  1.020
  1.070
  1.110
  1.140
  1.170
  1.200
  1.220
  1.240
  1.250
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.330
  1.340
  1.340
  1.350
  1.350
  1.360
  1.360
  1.370
  1.370
  1.370
Adjusted equity ratio
  0.399
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  16
  34
  54
  76
  99
  125
  153
  182
  213
  246
  281
  317
  355
  394
  435
  478
  523
  569
  617
  668
  720
  774
  831
  890
  951
  1,015
  1,082
  1,151
  1,224
  1,300
Depreciation, amort., depletion, $m
  5
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
Funds from operations, $m
  -7
  17
  35
  55
  78
  102
  128
  156
  185
  217
  250
  285
  321
  359
  399
  441
  484
  529
  576
  625
  676
  729
  783
  841
  900
  962
  1,027
  1,094
  1,165
  1,238
  1,315
Change in working capital, $m
  -7
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  45
  47
Cash from operations, $m
  0
  6
  24
  43
  64
  87
  111
  138
  167
  197
  229
  263
  299
  336
  375
  415
  458
  502
  547
  595
  645
  696
  750
  806
  864
  925
  988
  1,053
  1,122
  1,194
  1,269
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
New CAPEX, $m
  -4
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -4
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -16
  -17
  -17
  -18
Free cash flow, $m
  -4
  5
  21
  40
  61
  83
  108
  134
  163
  193
  224
  258
  293
  329
  368
  408
  450
  493
  538
  585
  634
  685
  738
  793
  851
  911
  973
  1,038
  1,106
  1,177
  1,250
Issuance/(repayment) of debt, $m
  2
  18
  20
  22
  24
  25
  27
  29
  31
  33
  34
  36
  38
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  3
  18
  20
  22
  24
  25
  27
  29
  31
  33
  34
  36
  38
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
Total cash flow (excl. dividends), $m
  -1
  22
  41
  62
  84
  109
  135
  164
  194
  225
  259
  294
  331
  369
  409
  451
  494
  539
  587
  635
  686
  739
  794
  852
  912
  974
  1,039
  1,107
  1,177
  1,251
  1,328
Retained Cash Flow (-), $m
  -2
  -12
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -55
Prev. year cash balance distribution, $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
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
 
  11
  27
  47
  68
  91
  116
  143
  172
  202
  235
  268
  304
  341
  380
  421
  463
  507
  553
  600
  650
  701
  755
  811
  869
  930
  993
  1,059
  1,127
  1,199
  1,274
Discount rate, %
 
  6.40
  6.72
  7.06
  7.41
  7.78
  8.17
  8.58
  9.01
  9.46
  9.93
  10.42
  10.95
  11.49
  12.07
  12.67
  13.31
  13.97
  14.67
  15.40
  16.17
  16.98
  17.83
  18.72
  19.66
  20.64
  21.67
  22.76
  23.89
  25.09
  26.34
PV of cash for distribution, $m
 
  10
  24
  38
  51
  63
  73
  80
  86
  90
  91
  90
  87
  83
  77
  70
  63
  55
  47
  39
  32
  26
  20
  16
  12
  9
  6
  4
  3
  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

SigmaTron International, Inc. is a provider of electronic manufacturing service (EMS), which includes printed circuit board assemblies, and assembled (box-build) electronic products. The Company also provides services to its customers, including automatic and manual assembly and testing of products; material sourcing and procurement; manufacturing and test engineering support, and assistance in obtaining product approval from governmental and other regulatory bodies. The Company provides manufacturing and assembly services ranging from the assembly of individual components to the assembly and testing of box-build electronic products. Its technologies and services include manufacturing and testing services, design services, supply chain management, and warehousing and distribution. The Company's products are sold in various industries, including appliance, consumer electronics, gaming, fitness, industrial electronics, medical/life sciences, semiconductor and telecommunications.

FINANCIAL RATIOS  of  Sigmatron International (SGMA)

Valuation Ratios
P/E Ratio 39.9
Price to Sales 0.2
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -10
Growth Rates
Sales Growth Rate -0.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 50%
Total Debt to Equity 53.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 0.9%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.5%
Return On Equity 1.6%
Return On Equity - 3 Yr. Avg. 2.3%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 9.5%
Gross Margin - 3 Yr. Avg. 9.8%
EBITDA Margin 3.6%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin 1.2%
Oper. Margin - 3 Yr. Avg. 1.2%
Pre-Tax Margin 1.2%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin 0.4%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 66.7%
Eff/ Tax Rate - 3 Yr. Avg. 50%
Payout Ratio 0%

SGMA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SGMA stock intrinsic value calculation we used $252 million for the last fiscal year's total revenue generated by Sigmatron International. The default revenue input number comes from 2017 income statement of Sigmatron International. 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 SGMA stock valuation model: a) initial revenue growth rate of 20.3% 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 6.4%, whose default value for SGMA is calculated based on our internal credit rating of Sigmatron International, 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 Sigmatron International.
    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 SGMA stock the variable cost ratio is equal to 50%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $126 million in the base year in the intrinsic value calculation for SGMA 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 Sigmatron International.

Corporate tax rate of 27% is the nominal tax rate for Sigmatron International. 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 SGMA 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 SGMA are equal to 1.8%.

Life of production assets of 1.5 years is the average useful life of capital assets used in Sigmatron International 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 SGMA is equal to 20.6%. 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 - $62 million for Sigmatron International - 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 4.201 million for Sigmatron International 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 Sigmatron International at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ 10-K for SigmaTron International, Inc.   [Jul-29  08:09PM  at Company Spotlight]
▶ 10-Q for SigmaTron International, Inc.   [May-04  08:12PM  at Company Spotlight]
▶ 10-Q for SigmaTron International, Inc.   [Dec-14  07:07PM  at Company Spotlight]
▶ SigmaTron - Small, Diverse And Ready For Global Growth   [Jun-03  04:23AM  at Seeking Alpha]
▶ Winning 14.77% on the Perfect Bull Stock   [Mar-17  10:30AM  at TheStreet]
Financial statements of SGMA
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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