Intrinsic value of Universal Electronics - UEIC

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$70.60

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$70.60

 
Intrinsic value

$20.60

 
Up/down potential

-71%

 
Rating

str. sell

 
Value-price divergence* premium content

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

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 1.0

 

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
  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
  651
  664
  679
  697
  716
  738
  762
  788
  816
  846
  879
  913
  950
  990
  1,032
  1,076
  1,124
  1,174
  1,226
  1,282
  1,341
  1,403
  1,469
  1,538
  1,611
  1,687
  1,768
  1,853
  1,942
  2,037
  2,135
Variable operating expenses, $m
 
  624
  638
  655
  673
  693
  715
  740
  766
  794
  824
  853
  887
  924
  963
  1,005
  1,049
  1,095
  1,145
  1,197
  1,252
  1,310
  1,371
  1,435
  1,503
  1,575
  1,650
  1,730
  1,813
  1,901
  1,993
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
  624
  638
  655
  673
  693
  715
  740
  766
  794
  824
  853
  887
  924
  963
  1,005
  1,049
  1,095
  1,145
  1,197
  1,252
  1,310
  1,371
  1,435
  1,503
  1,575
  1,650
  1,730
  1,813
  1,901
  1,993
Operating income, $m
  25
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  136
  142
EBITDA, $m
  52
  65
  66
  68
  70
  72
  74
  77
  79
  82
  86
  89
  93
  96
  100
  105
  109
  114
  119
  125
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
  208
Interest expense (income), $m
  1
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  14
Earnings before tax, $m
  25
  40
  40
  41
  43
  44
  45
  47
  48
  50
  52
  58
  60
  63
  65
  67
  70
  73
  76
  79
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
Tax expense, $m
  5
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  34
Net income, $m
  20
  29
  30
  30
  31
  32
  33
  34
  35
  37
  38
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  66
  68
  71
  75
  78
  82
  85
  89
  93

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
  479
  490
  503
  517
  533
  550
  569
  589
  611
  634
  660
  686
  715
  745
  777
  811
  847
  885
  926
  968
  1,013
  1,060
  1,110
  1,163
  1,218
  1,277
  1,338
  1,402
  1,470
  1,542
Adjusted assets (=assets-cash), $m
  470
  479
  490
  503
  517
  533
  550
  569
  589
  611
  634
  660
  686
  715
  745
  777
  811
  847
  885
  926
  968
  1,013
  1,060
  1,110
  1,163
  1,218
  1,277
  1,338
  1,402
  1,470
  1,542
Revenue / Adjusted assets
  1.385
  1.386
  1.386
  1.386
  1.385
  1.385
  1.385
  1.385
  1.385
  1.385
  1.386
  1.383
  1.385
  1.385
  1.385
  1.385
  1.386
  1.386
  1.385
  1.384
  1.385
  1.385
  1.386
  1.386
  1.385
  1.385
  1.384
  1.385
  1.385
  1.386
  1.385
Average production assets, $m
  129
  131
  134
  137
  141
  145
  150
  155
  161
  167
  173
  180
  187
  195
  203
  212
  221
  231
  242
  253
  264
  276
  289
  303
  317
  332
  348
  365
  383
  401
  421
Working capital, $m
  108
  109
  111
  114
  117
  121
  125
  129
  134
  139
  144
  150
  156
  162
  169
  177
  184
  192
  201
  210
  220
  230
  241
  252
  264
  277
  290
  304
  319
  334
  350
Total debt, $m
  60
  14
  18
  23
  29
  35
  42
  50
  58
  67
  76
  86
  97
  109
  121
  134
  148
  162
  178
  194
  211
  229
  248
  269
  290
  312
  336
  361
  387
  414
  443
Total liabilities, $m
  241
  194
  198
  203
  209
  215
  222
  230
  238
  247
  256
  266
  277
  289
  301
  314
  328
  342
  358
  374
  391
  409
  428
  449
  470
  492
  516
  541
  567
  594
  623
Total equity, $m
  281
  286
  292
  300
  308
  318
  328
  339
  351
  364
  378
  393
  409
  426
  444
  463
  484
  505
  528
  552
  577
  604
  632
  662
  693
  726
  761
  797
  836
  876
  919
Total liabilities and equity, $m
  522
  480
  490
  503
  517
  533
  550
  569
  589
  611
  634
  659
  686
  715
  745
  777
  812
  847
  886
  926
  968
  1,013
  1,060
  1,111
  1,163
  1,218
  1,277
  1,338
  1,403
  1,470
  1,542
Debt-to-equity ratio
  0.214
  0.050
  0.060
  0.080
  0.090
  0.110
  0.130
  0.150
  0.170
  0.180
  0.200
  0.220
  0.240
  0.260
  0.270
  0.290
  0.310
  0.320
  0.340
  0.350
  0.370
  0.380
  0.390
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
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
  29
  30
  30
  31
  32
  33
  34
  35
  37
  38
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  66
  68
  71
  75
  78
  82
  85
  89
  93
Depreciation, amort., depletion, $m
  27
  25
  25
  26
  26
  27
  28
  29
  29
  30
  31
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
Funds from operations, $m
  36
  54
  55
  56
  57
  59
  61
  63
  65
  67
  69
  71
  73
  76
  79
  82
  86
  89
  93
  97
  102
  106
  111
  116
  121
  127
  132
  139
  145
  152
  159
Change in working capital, $m
  -14
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
Cash from operations, $m
  50
  57
  52
  53
  54
  55
  57
  58
  60
  62
  64
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
  100
  104
  109
  114
  119
  125
  130
  136
  143
Maintenance CAPEX, $m
  0
  -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
New CAPEX, $m
  -43
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -19
Cash from investing activities, $m
  -43
  -22
  -23
  -24
  -25
  -26
  -28
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -41
  -42
  -45
  -46
  -49
  -51
  -53
  -56
  -59
  -61
  -65
  -68
  -71
  -75
  -79
  -82
Free cash flow, $m
  7
  35
  29
  29
  29
  29
  29
  30
  30
  31
  31
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  61
Issuance/(repayment) of debt, $m
  0
  4
  4
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
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
  4
  4
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
Total cash flow (excl. dividends), $m
  -2
  38
  33
  34
  35
  35
  36
  37
  38
  40
  41
  41
  43
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  89
Retained Cash Flow (-), $m
  -23
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -43
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
 
  34
  27
  26
  26
  26
  26
  26
  26
  27
  27
  26
  27
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
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
 
  32
  24
  23
  22
  20
  19
  18
  16
  15
  14
  12
  11
  10
  9
  8
  7
  6
  6
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
  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
  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. develops and manufactures pre-programmed and universal wireless remote control products, audio-video accessories, and software home entertainment systems. The company offers universal infrared and radio frequency (RF) remote controls; integrated circuits on which software and universal device control database is embedded; and software, firmware, and technology solutions, which 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 to deliver digital entertainment and information. It also provides proprietary and standards-based RF sensors for residential security, safety, and automation applications; and audio-video accessories, as well as licenses intellectual property, including its patented technologies, trademarks, and database of home connectivity software and infrared codes. The company sells its products directly, as well as through distributors in Europe, Australia, New Zealand, South Africa, the Middle East, Mexico, Asia, and Latin America under the One For All and Nevo brands. It serves cable and satellite television service providers; original equipment manufacturers; software development companies; subscription broadcasting providers; and retail, private label, pro-security installation, and personal computing companies. Universal Electronics Inc. was founded in 1986 and is headquartered in Santa Ana, California.

FINANCIAL RATIOS  of  Universal Electronics (UEIC)

Valuation Ratios
P/E Ratio 51.4
Price to Sales 1.6
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 20.5
Price to Free Cash Flow 146.7
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 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 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 14.599 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 $1.0 billion.


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COMPANY NEWS

▶ Universal Electronics meets 4Q profit forecasts   [Feb-16-17 05:28PM  Associated Press]
Stock chart of UEIC Financial statements of UEIC
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