Intrinsic value of Universal Electronics - UEIC

Previous Close

$53.85

  Intrinsic Value

$19.29

stock screener

  Rating & Target

str. sell

-64%

Previous close

$53.85

 
Intrinsic value

$19.29

 
Up/down potential

-64%

 
Rating

str. sell

We calculate the intrinsic value of UEIC 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 0.8

 

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, %
  7.96
  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
  4.96
Revenue, $m
  651
  678
  706
  736
  768
  802
  838
  876
  916
  958
  1,003
  1,050
  1,099
  1,151
  1,206
  1,264
  1,325
  1,389
  1,456
  1,527
  1,602
  1,680
  1,762
  1,849
  1,940
  2,036
  2,136
  2,242
  2,352
  2,469
  2,591
Variable operating expenses, $m
 
  637
  663
  692
  721
  753
  786
  822
  859
  899
  940
  980
  1,026
  1,075
  1,126
  1,180
  1,237
  1,296
  1,359
  1,425
  1,495
  1,568
  1,645
  1,726
  1,811
  1,900
  1,994
  2,092
  2,196
  2,305
  2,419
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
  626
  637
  663
  692
  721
  753
  786
  822
  859
  899
  940
  980
  1,026
  1,075
  1,126
  1,180
  1,237
  1,296
  1,359
  1,425
  1,495
  1,568
  1,645
  1,726
  1,811
  1,900
  1,994
  2,092
  2,196
  2,305
  2,419
Operating income, $m
  25
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  112
  117
  123
  129
  136
  142
  149
  157
  164
  173
EBITDA, $m
  52
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  142
  149
  156
  164
  172
  180
  189
  198
  208
  218
  229
  240
  252
Interest expense (income), $m
  1
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  14
  16
  17
  18
  19
Earnings before tax, $m
  25
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  66
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  107
  111
  117
  122
  128
  134
  140
  147
  154
Tax expense, $m
  5
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  41
Net income, $m
  20
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  51
  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
  521
  489
  510
  532
  555
  579
  605
  632
  661
  692
  724
  758
  794
  831
  871
  913
  957
  1,003
  1,052
  1,103
  1,156
  1,213
  1,272
  1,335
  1,401
  1,470
  1,542
  1,618
  1,699
  1,783
  1,871
Adjusted assets (=assets-cash), $m
  470
  489
  510
  532
  555
  579
  605
  632
  661
  692
  724
  758
  794
  831
  871
  913
  957
  1,003
  1,052
  1,103
  1,156
  1,213
  1,272
  1,335
  1,401
  1,470
  1,542
  1,618
  1,699
  1,783
  1,871
Revenue / Adjusted assets
  1.385
  1.387
  1.384
  1.383
  1.384
  1.385
  1.385
  1.386
  1.386
  1.384
  1.385
  1.385
  1.384
  1.385
  1.385
  1.384
  1.385
  1.385
  1.384
  1.384
  1.386
  1.385
  1.385
  1.385
  1.385
  1.385
  1.385
  1.386
  1.384
  1.385
  1.385
Average production assets, $m
  129
  134
  139
  145
  151
  158
  165
  173
  180
  189
  198
  207
  217
  227
  238
  249
  261
  274
  287
  301
  316
  331
  347
  364
  382
  401
  421
  442
  463
  486
  510
Working capital, $m
  108
  111
  116
  121
  126
  132
  137
  144
  150
  157
  164
  172
  180
  189
  198
  207
  217
  228
  239
  250
  263
  276
  289
  303
  318
  334
  350
  368
  386
  405
  425
Total debt, $m
  60
  18
  26
  35
  44
  54
  64
  75
  87
  99
  112
  126
  141
  156
  172
  189
  206
  225
  245
  265
  287
  310
  334
  359
  386
  414
  443
  474
  506
  540
  576
Total liabilities, $m
  241
  198
  206
  215
  224
  234
  244
  255
  267
  279
  292
  306
  321
  336
  352
  369
  386
  405
  425
  445
  467
  490
  514
  539
  566
  594
  623
  654
  686
  720
  756
Total equity, $m
  281
  292
  304
  317
  331
  345
  361
  377
  394
  412
  431
  452
  473
  495
  519
  544
  570
  598
  627
  657
  689
  723
  758
  796
  835
  876
  919
  965
  1,012
  1,062
  1,115
Total liabilities and equity, $m
  522
  490
  510
  532
  555
  579
  605
  632
  661
  691
  723
  758
  794
  831
  871
  913
  956
  1,003
  1,052
  1,102
  1,156
  1,213
  1,272
  1,335
  1,401
  1,470
  1,542
  1,619
  1,698
  1,782
  1,871
Debt-to-equity ratio
  0.214
  0.060
  0.090
  0.110
  0.130
  0.160
  0.180
  0.200
  0.220
  0.240
  0.260
  0.280
  0.300
  0.310
  0.330
  0.350
  0.360
  0.380
  0.390
  0.400
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
Adjusted equity ratio
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
Depreciation, amort., depletion, $m
  27
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  72
  76
  80
Funds from operations, $m
  36
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
Change in working capital, $m
  -14
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Cash from operations, $m
  50
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  73
  76
  79
  83
  86
  90
  95
  99
  103
  108
  113
  119
  124
  130
  136
  143
  149
  156
  164
  172
Maintenance CAPEX, $m
  0
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -76
New CAPEX, $m
  -43
  -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
  -24
Cash from investing activities, $m
  -43
  -25
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -62
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -91
  -95
  -100
Free cash flow, $m
  7
  25
  26
  26
  27
  28
  29
  30
  31
  32
  33
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  51
  53
  55
  58
  60
  63
  66
  69
  72
Issuance/(repayment) of debt, $m
  0
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
Issuance/(repurchase) of shares, $m
  -6
  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  
  -4
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
Total cash flow (excl. dividends), $m
  -2
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  46
  48
  50
  53
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  85
  89
  94
  98
  103
  107
Retained Cash Flow (-), $m
  -23
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
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
 
  22
  22
  22
  23
  23
  24
  24
  25
  26
  26
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
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
 
  21
  20
  19
  19
  18
  17
  16
  16
  15
  14
  12
  12
  11
  10
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  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
  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

Universal Electronics Inc. (UEI) develops control and sensor technology solutions and manufactures a line of pre-programmed and universal remote control products, audio-video (AV) accessories, and intelligent wireless security and automation components. The Company's offerings include pre-programmed universal infrared (IR) and radio frequency (RF) remote controls that are sold primarily to subscription broadcasting providers, original equipment manufacturers (OEMs), retailers, and private label customers, and integrated circuits, on which its software and universal device control database is embedded, sold primarily to OEMs, subscription broadcasting providers, and private label customers. Its offerings also include software, firmware and technology solutions that enable devices, such as televisions, set-top boxes, stereos, smart phones tablets, gaming controllers and other consumer electronic devices, to wirelessly connect and interact with home networks and interactive services.

FINANCIAL RATIOS  of  Universal Electronics (UEIC)

Valuation Ratios
P/E Ratio 39.2
Price to Sales 1.2
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 15.7
Price to Free Cash Flow 111.9
Growth Rates
Sales Growth Rate 8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.9%
Cap. Spend. - 3 Yr. Gr. Rate 29.1%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 3.6%
Total Debt to Equity 21.4%
Interest Coverage 26
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 5.9%
Return On Total Capital 6.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.7%
Return On Equity 7.4%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 25.2%
Gross Margin - 3 Yr. Avg. 27.5%
EBITDA Margin 8.1%
EBITDA Margin - 3 Yr. Avg. 9.2%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 5.7%
Pre-Tax Margin 3.8%
Pre-Tax Margin - 3 Yr. Avg. 5.6%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 20%
Eff/ Tax Rate - 3 Yr. Avg. 19%
Payout Ratio 0%

UEIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UEIC stock intrinsic value calculation we used $651 million for the last fiscal year's total revenue generated by Universal Electronics. The default revenue input number comes from 2016 income statement of Universal Electronics. 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 UEIC stock valuation model: a) initial revenue growth rate of 4.1% 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 UEIC is calculated based on our internal credit rating of Universal Electronics, 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 Universal Electronics.
    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 UEIC stock the variable cost ratio is equal to 94%.

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 UEIC 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 Universal Electronics.

Corporate tax rate of 27% is the nominal tax rate for Universal Electronics. 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 UEIC 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 UEIC are equal to 19.7%.

Life of production assets of 6.4 years is the average useful life of capital assets used in Universal Electronics 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 UEIC is equal to 16.4%. 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 - $281 million for Universal Electronics - 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 14.401 million for Universal Electronics 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 Universal Electronics at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Universal Electronics misses 3Q profit forecasts   [Nov-02-17 05:57PM  Associated Press]
▶ Universal Electronics beats 1Q profit forecasts   [May-04-17 06:53PM  Associated Press]
▶ Universal Electronics meets 4Q profit forecasts   [Feb-16-17 05:28PM  Associated Press]
Financial statements of UEIC
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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