Intrinsic value of Vishay Precision Group - VPG

Previous Close

$24.40

  Intrinsic Value

$2.81

stock screener

  Rating & Target

str. sell

-88%

  Value-price divergence*

-118%

Previous close

$24.40

 
Intrinsic value

$2.81

 
Up/down potential

-88%

 
Rating

str. sell

 
Value-price divergence*

-118%

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

We calculate the intrinsic value of VPG 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 0.3

 

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, %
  -3.02
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
Revenue, $m
  225
  241
  257
  273
  291
  309
  328
  348
  368
  390
  412
  435
  460
  485
  512
  540
  569
  599
  631
  664
  699
  736
  774
  814
  856
  901
  947
  995
  1,046
  1,099
  1,155
Variable operating expenses, $m
 
  237
  253
  269
  287
  304
  323
  342
  362
  383
  405
  426
  450
  475
  501
  528
  556
  586
  617
  650
  684
  720
  758
  797
  838
  881
  926
  974
  1,024
  1,076
  1,131
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
  214
  237
  253
  269
  287
  304
  323
  342
  362
  383
  405
  426
  450
  475
  501
  528
  556
  586
  617
  650
  684
  720
  758
  797
  838
  881
  926
  974
  1,024
  1,076
  1,131
Operating income, $m
  11
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
EBITDA, $m
  22
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  59
  62
  65
  68
  72
Interest expense (income), $m
  0
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
Earnings before tax, $m
  10
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
Tax expense, $m
  4
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
Net income, $m
  6
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  58
  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
  271
  228
  243
  259
  275
  293
  311
  329
  349
  369
  390
  412
  435
  459
  485
  511
  539
  567
  598
  629
  662
  697
  733
  771
  811
  853
  897
  942
  991
  1,041
  1,094
Adjusted assets (=assets-cash), $m
  213
  228
  243
  259
  275
  293
  311
  329
  349
  369
  390
  412
  435
  459
  485
  511
  539
  567
  598
  629
  662
  697
  733
  771
  811
  853
  897
  942
  991
  1,041
  1,094
Revenue / Adjusted assets
  1.056
  1.057
  1.058
  1.054
  1.058
  1.055
  1.055
  1.058
  1.054
  1.057
  1.056
  1.056
  1.057
  1.057
  1.056
  1.057
  1.056
  1.056
  1.055
  1.056
  1.056
  1.056
  1.056
  1.056
  1.055
  1.056
  1.056
  1.056
  1.055
  1.056
  1.056
Average production assets, $m
  77
  82
  87
  93
  99
  105
  112
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
  204
  215
  226
  238
  250
  263
  277
  291
  306
  322
  338
  356
  374
  393
Working capital, $m
  119
  68
  73
  78
  83
  88
  93
  99
  105
  111
  117
  124
  131
  138
  145
  153
  162
  170
  179
  189
  199
  209
  220
  231
  243
  256
  269
  283
  297
  312
  328
Total debt, $m
  36
  40
  47
  54
  61
  69
  77
  86
  95
  104
  114
  124
  134
  145
  157
  168
  181
  194
  208
  222
  237
  253
  270
  287
  305
  324
  344
  365
  387
  410
  434
Total liabilities, $m
  99
  104
  111
  118
  125
  133
  141
  150
  159
  168
  178
  188
  198
  209
  221
  232
  245
  258
  272
  286
  301
  317
  334
  351
  369
  388
  408
  429
  451
  474
  498
Total equity, $m
  171
  124
  132
  141
  150
  160
  169
  179
  190
  201
  213
  225
  237
  250
  264
  278
  294
  309
  326
  343
  361
  380
  400
  420
  442
  465
  489
  514
  540
  567
  596
Total liabilities and equity, $m
  270
  228
  243
  259
  275
  293
  310
  329
  349
  369
  391
  413
  435
  459
  485
  510
  539
  567
  598
  629
  662
  697
  734
  771
  811
  853
  897
  943
  991
  1,041
  1,094
Debt-to-equity ratio
  0.211
  0.320
  0.350
  0.380
  0.410
  0.430
  0.460
  0.480
  0.500
  0.520
  0.530
  0.550
  0.570
  0.580
  0.590
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.700
  0.700
  0.710
  0.720
  0.720
  0.730
Adjusted equity ratio
  0.531
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545
  0.545

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
Depreciation, amort., depletion, $m
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47
Funds from operations, $m
  6
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
Change in working capital, $m
  -5
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
Cash from operations, $m
  11
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
Maintenance CAPEX, $m
  0
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -45
New CAPEX, $m
  -10
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
Cash from investing activities, $m
  -17
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -64
Free cash flow, $m
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -24
  -25
Issuance/(repayment) of debt, $m
  3
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $m
  0
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
Cash from financing (excl. dividends), $m  
  3
  14
  14
  14
  15
  15
  16
  16
  17
  18
  19
  18
  19
  20
  20
  22
  23
  24
  26
  26
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
Total cash flow (excl. dividends), $m
  -4
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
Retained Cash Flow (-), $m
  1
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
Prev. year cash balance distribution, $m
 
  55
  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
 
  54
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
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
 
  52
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.1
  94.5
  92.0
  89.6
  87.3
  85.2
  83.1
  81.1
  79.2
  77.4
  75.9
  74.4
  73.0
  71.6
  70.2
  68.9
  67.6
  66.3
  65.1
  63.8
  62.6
  61.4
  60.3
  59.1
  58.0
  56.9
  55.8
  54.8
  53.7
  52.7

Vishay Precision Group, Inc. (VPG) is a designer, manufacturer and marketer of sensors and sensor-based measurement systems, as well as specialty resistors and strain gages. The Company operates through three business segments: Foil Technology Products, Force Sensors, and Weighing and Control Systems. Its Foil Technology Products segment includes foil resistor and strain gage operating segments. The Foil Technology Products segment's brands include Alpha Electronics, Micro-Measurements, Powertron and Vishay Foil Resistors. The Force Sensors segment includes load cells and force measurement transducers that are offered as precision sensors for industrial and commercial use. The Weighing and Control Systems segment designs and manufactures systems that consists of load cells and instrumentation for weighing and force control/measurement for a range of uses, including on-board weighing and overload monitor systems. The segment's brands include BLH Nobel, KELK and VPG Onboard Weighing.

FINANCIAL RATIOS  of  Vishay Precision Group (VPG)

Valuation Ratios
P/E Ratio 53.6
Price to Sales 1.4
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 29.3
Price to Free Cash Flow 321.8
Growth Rates
Sales Growth Rate -3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 7.4%
Financial Strength
Quick Ratio 19
Current Ratio 0
LT Debt to Equity 19.3%
Total Debt to Equity 21.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. -0.5%
Return On Total Capital 2.9%
Ret/ On T. Cap. - 3 Yr. Avg. -0.6%
Return On Equity 3.5%
Return On Equity - 3 Yr. Avg. -0.7%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 36.9%
Gross Margin - 3 Yr. Avg. 36.5%
EBITDA Margin 9.3%
EBITDA Margin - 3 Yr. Avg. 7.2%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. 2.4%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. -0.6%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 496.7%
Payout Ratio 0%

VPG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VPG stock intrinsic value calculation we used $225 million for the last fiscal year's total revenue generated by Vishay Precision Group. The default revenue input number comes from 2016 income statement of Vishay Precision Group. 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 VPG stock valuation model: a) initial revenue growth rate of 6.9% 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 VPG is calculated based on our internal credit rating of Vishay Precision Group, 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 Vishay Precision Group.
    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 VPG stock the variable cost ratio is equal to 98.7%.

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 VPG 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 Vishay Precision Group.

Corporate tax rate of 27% is the nominal tax rate for Vishay Precision Group. 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 VPG 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 VPG are equal to 34%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Vishay Precision Group 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 VPG is equal to 28.4%. 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 - $171 million for Vishay Precision Group - 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 13.503 million for Vishay Precision Group 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 Vishay Precision Group at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ What Is Vishay Precision Group Incs (VPG) Share Price Doing?   [Sep-11-17 06:21PM  Simply Wall St.]
▶ Vishay posts 2Q profit   [Aug-08-17 05:57PM  Associated Press]
▶ VPG Announces Annual Meeting Location and Webcast   [May-18-17 07:30AM  Business Wire]
▶ Vishay posts 1Q profit   [07:57AM  Associated Press]
▶ Vishay posts 4Q profit   [07:56AM  Associated Press]
▶ Do Hedge Funds Love Vishay Precision Group Inc (VPG)?   [Dec-12-16 06:01PM  at Insider Monkey]
▶ Vishay Precision Group Inc. (VPG): Nokomis Capital Raises Stake   [Aug-23-16 09:06AM  at Insider Monkey]
▶ Micro-Measurements® Releases New CEA-Series Strain Gages   [Aug-02-16 10:08AM  Business Wire]
▶ VPG Announces Annual Meeting Location and Webcast   [May-17-16 07:30AM  Business Wire]
▶ Vishay reports 4Q loss   [09:13AM  AP]
▶ Vishay acquires Washington firm for $20 million   [Jan-05-16 02:49PM  at bizjournals.com]
Financial statements of VPG
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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