Intrinsic value of Strattec Security - STRT

Previous Close

$41.70

  Intrinsic Value

$40.08

stock screener

  Rating & Target

hold

-4%

  Value-price divergence*

-12%

Previous close

$41.70

 
Intrinsic value

$40.08

 
Up/down potential

-4%

 
Rating

hold

 
Value-price divergence*

-12%

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

We calculate the intrinsic value of STRT 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 0.2

 

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, %
  3.99
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  417
  434
  451
  470
  490
  512
  534
  558
  583
  610
  638
  668
  699
  732
  767
  804
  842
  883
  925
  970
  1,017
  1,067
  1,119
  1,174
  1,232
  1,292
  1,356
  1,423
  1,493
  1,567
  1,645
Variable operating expenses, $m
 
  412
  429
  447
  466
  486
  508
  530
  554
  580
  606
  635
  664
  696
  729
  763
  800
  839
  879
  922
  967
  1,014
  1,063
  1,115
  1,170
  1,228
  1,288
  1,352
  1,419
  1,489
  1,563
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
  404
  412
  429
  447
  466
  486
  508
  530
  554
  580
  606
  635
  664
  696
  729
  763
  800
  839
  879
  922
  967
  1,014
  1,063
  1,115
  1,170
  1,228
  1,288
  1,352
  1,419
  1,489
  1,563
Operating income, $m
  14
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  49
  51
  53
  56
  59
  62
  65
  68
  71
  75
  78
  82
EBITDA, $m
  25
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  116
Interest expense (income), $m
  0
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
Earnings before tax, $m
  16
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
Tax expense, $m
  4
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
Net income, $m
  7
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  274
  277
  288
  300
  313
  326
  341
  356
  372
  389
  407
  426
  446
  467
  489
  512
  537
  563
  590
  619
  649
  680
  714
  749
  786
  824
  865
  907
  952
  999
  1,049
Adjusted assets (=assets-cash), $m
  266
  277
  288
  300
  313
  326
  341
  356
  372
  389
  407
  426
  446
  467
  489
  512
  537
  563
  590
  619
  649
  680
  714
  749
  786
  824
  865
  907
  952
  999
  1,049
Revenue / Adjusted assets
  1.568
  1.567
  1.566
  1.567
  1.565
  1.571
  1.566
  1.567
  1.567
  1.568
  1.568
  1.568
  1.567
  1.567
  1.569
  1.570
  1.568
  1.568
  1.568
  1.567
  1.567
  1.569
  1.567
  1.567
  1.567
  1.568
  1.568
  1.569
  1.568
  1.569
  1.568
Average production assets, $m
  43
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  120
  126
  132
  138
  145
  152
  160
  168
Working capital, $m
  61
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  123
  129
  136
  142
  149
  156
  164
  172
  181
  190
  199
  209
Total debt, $m
  30
  35
  40
  46
  52
  58
  64
  71
  79
  87
  95
  104
  113
  123
  133
  144
  155
  167
  180
  193
  207
  221
  237
  253
  270
  288
  307
  326
  347
  369
  392
Total liabilities, $m
  123
  128
  133
  139
  145
  151
  157
  164
  172
  180
  188
  197
  206
  216
  226
  237
  248
  260
  273
  286
  300
  314
  330
  346
  363
  381
  400
  419
  440
  462
  485
Total equity, $m
  151
  149
  155
  161
  168
  176
  183
  192
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  317
  333
  349
  366
  384
  403
  423
  443
  465
  488
  512
  538
  564
Total liabilities and equity, $m
  274
  277
  288
  300
  313
  327
  340
  356
  372
  389
  407
  426
  446
  467
  489
  513
  537
  563
  590
  619
  649
  680
  714
  749
  786
  824
  865
  907
  952
  1,000
  1,049
Debt-to-equity ratio
  0.199
  0.230
  0.260
  0.280
  0.310
  0.330
  0.350
  0.370
  0.390
  0.410
  0.430
  0.450
  0.470
  0.490
  0.510
  0.520
  0.540
  0.550
  0.570
  0.580
  0.590
  0.600
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.680
  0.690
  0.690
Adjusted equity ratio
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
Depreciation, amort., depletion, $m
  11
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  34
Funds from operations, $m
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
Change in working capital, $m
  0
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Cash from operations, $m
  23
  22
  23
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
Maintenance CAPEX, $m
  0
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
New CAPEX, $m
  -37
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
Cash from investing activities, $m
  -40
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -35
  -36
  -38
  -40
Free cash flow, $m
  -17
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
Issuance/(repayment) of debt, $m
  10
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
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  
  11
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
Total cash flow (excl. dividends), $m
  -5
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  43
  45
  48
  50
  52
  55
  57
Retained Cash Flow (-), $m
  -12
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Prev. year cash balance distribution, $m
 
  8
  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
 
  19
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
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
 
  18
  10
  10
  10
  9
  9
  9
  8
  8
  7
  7
  6
  6
  5
  5
  4
  4
  3
  3
  3
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Strattec Security Corporation designs, develops, manufactures and markets automotive access control products. The Company offers access control products, including mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings, latches, power sliding side door systems, power lift gate systems, power deck lid systems, door handles and related products for North American automotive customers. The Company supplies its products under the VAST brand name. The Company's products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea and China, and it also provides full service and aftermarket support. The Company provides its customers with engineered access control products, including locksets, fobs, push button ignition systems, steering column lock housings, seatback and secondary power liftgate systems, power decklids, door handles, and trim and other access products.

FINANCIAL RATIOS  of  Strattec Security (STRT)

Valuation Ratios
P/E Ratio 21.3
Price to Sales 0.4
Price to Book 1
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow -10.6
Growth Rates
Sales Growth Rate 4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 54.2%
Cap. Spend. - 3 Yr. Gr. Rate 23.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 19.9%
Total Debt to Equity 19.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.7%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital 4.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 4.8%
Return On Equity - 3 Yr. Avg. 9%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 14.4%
Gross Margin - 3 Yr. Avg. 16.1%
EBITDA Margin 6.5%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 5.2%
Pre-Tax Margin 3.8%
Pre-Tax Margin - 3 Yr. Avg. 5.6%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 25.9%
Payout Ratio 28.6%

STRT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STRT stock intrinsic value calculation we used $417 million for the last fiscal year's total revenue generated by Strattec Security. The default revenue input number comes from 2017 income statement of Strattec Security. 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 STRT stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for STRT is calculated based on our internal credit rating of Strattec Security, 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 Strattec Security.
    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 STRT stock the variable cost ratio is equal to 95%.

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 STRT 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 Strattec Security.

Corporate tax rate of 27% is the nominal tax rate for Strattec Security. 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 STRT 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 STRT are equal to 10.2%.

Life of production assets of 3.9 years is the average useful life of capital assets used in Strattec Security 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 STRT is equal to 12.7%. 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 - $151 million for Strattec Security - 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 3.833 million for Strattec Security 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 Strattec Security at the current share price and the inputted number of shares is $0.2 billion.

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DLPH Delphi Automot 97.98 75.71  hold
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COMPANY NEWS

▶ STRATTEC SECURITY CORPORATION Declares Quarterly Dividend   [Oct-10-17 04:00PM  GlobeNewswire]
▶ STRATTEC SECURITY CORPORATION Declares Quarterly Dividend   [Aug-23-17 04:00PM  GlobeNewswire]
▶ Strattec Security posts 4Q profit   [Aug-10-17 09:19PM  Associated Press]
▶ STRATTEC SECURITY CORPORATION Declares Quarterly Dividend   [May-16-17 04:00PM  GlobeNewswire]
▶ Strattec Security posts 3Q profit   [Apr-27-17 05:34PM  Associated Press]
▶ Strattec Security posts 2Q profit   [Jan-26-17 07:12PM  Associated Press]
▶ How ArQule, Inc. (ARQL) Stacks Up Against Its Peers   [Dec-20-16 02:02PM  Insider Monkey]
▶ Is Xerium Technologies, Inc. (XRM) A Good Stock To Buy?   [Dec-12-16 05:31PM  at Insider Monkey]
▶ Investors Are Losing Confidence In Black Box Corporation (BBOX)   [Nov-27  11:29PM  at Insider Monkey]
▶ Strattec, Connecture quarterly reports disappoint   [Aug-07  01:20PM  at bizjournals.com]
Financial statements of STRT
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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