Intrinsic value of Bel Fuse Inc. - BELFA

Previous Close

$21.70

  Intrinsic Value

$97.31

stock screener

  Rating & Target

str. buy

+348%

Previous close

$21.70

 
Intrinsic value

$97.31

 
Up/down potential

+348%

 
Rating

str. buy

We calculate the intrinsic value of BELFA 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 0001), $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
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.00
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
Revenue, $m
  652
  767
  892
  1,028
  1,174
  1,329
  1,495
  1,670
  1,854
  2,047
  2,249
  2,460
  2,681
  2,910
  3,149
  3,397
  3,655
  3,923
  4,202
  4,491
  4,792
  5,105
  5,431
  5,770
  6,123
  6,491
  6,874
  7,274
  7,691
  8,126
Variable operating expenses, $m
  512
  601
  699
  804
  917
  1,039
  1,167
  1,303
  1,447
  1,597
  1,750
  1,914
  2,086
  2,264
  2,450
  2,643
  2,844
  3,052
  3,269
  3,494
  3,728
  3,972
  4,225
  4,489
  4,763
  5,050
  5,348
  5,659
  5,983
  6,322
Fixed operating expenses, $m
  91
  93
  95
  97
  99
  101
  104
  106
  108
  111
  113
  116
  118
  121
  123
  126
  129
  132
  135
  138
  141
  144
  147
  150
  153
  157
  160
  164
  167
  171
Total operating expenses, $m
  603
  694
  794
  901
  1,016
  1,140
  1,271
  1,409
  1,555
  1,708
  1,863
  2,030
  2,204
  2,385
  2,573
  2,769
  2,973
  3,184
  3,404
  3,632
  3,869
  4,116
  4,372
  4,639
  4,916
  5,207
  5,508
  5,823
  6,150
  6,493
Operating income, $m
  49
  73
  99
  127
  157
  189
  224
  260
  299
  339
  386
  431
  477
  525
  576
  628
  683
  739
  798
  860
  923
  990
  1,059
  1,131
  1,206
  1,284
  1,366
  1,451
  1,540
  1,633
EBITDA, $m
  68
  94
  123
  154
  187
  223
  262
  302
  345
  389
  436
  485
  537
  590
  646
  704
  764
  827
  892
  960
  1,030
  1,104
  1,180
  1,259
  1,342
  1,429
  1,519
  1,613
  1,711
  1,814
Interest expense (income), $m
  5
  6
  9
  12
  15
  19
  23
  27
  31
  36
  41
  46
  51
  56
  62
  68
  75
  81
  88
  95
  102
  110
  118
  126
  135
  144
  153
  162
  173
  183
  194
Earnings before tax, $m
  43
  64
  87
  112
  138
  167
  197
  229
  263
  299
  341
  380
  421
  463
  508
  554
  602
  652
  703
  757
  814
  872
  933
  996
  1,063
  1,132
  1,204
  1,279
  1,357
  1,439
Tax expense, $m
  12
  17
  23
  30
  37
  45
  53
  62
  71
  81
  92
  103
  114
  125
  137
  149
  162
  176
  190
  205
  220
  235
  252
  269
  287
  306
  325
  345
  366
  389
Net income, $m
  32
  47
  63
  81
  101
  122
  144
  167
  192
  218
  249
  277
  307
  338
  370
  404
  439
  476
  514
  553
  594
  637
  681
  727
  776
  826
  879
  933
  991
  1,051

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  528
  620
  722
  832
  950
  1,076
  1,209
  1,351
  1,500
  1,656
  1,820
  1,991
  2,169
  2,355
  2,548
  2,749
  2,957
  3,174
  3,400
  3,634
  3,877
  4,131
  4,394
  4,668
  4,954
  5,251
  5,561
  5,885
  6,222
  6,574
Adjusted assets (=assets-cash), $m
  528
  620
  722
  832
  950
  1,076
  1,209
  1,351
  1,500
  1,656
  1,820
  1,991
  2,169
  2,355
  2,548
  2,749
  2,957
  3,174
  3,400
  3,634
  3,877
  4,131
  4,394
  4,668
  4,954
  5,251
  5,561
  5,885
  6,222
  6,574
Revenue / Adjusted assets
  1.235
  1.237
  1.235
  1.236
  1.236
  1.235
  1.237
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
  1.236
Average production assets, $m
  103
  121
  141
  162
  185
  210
  236
  264
  293
  323
  355
  389
  424
  460
  498
  537
  578
  620
  664
  710
  757
  807
  858
  912
  967
  1,026
  1,086
  1,149
  1,215
  1,284
Working capital, $m
  158
  186
  217
  250
  285
  323
  363
  406
  450
  497
  547
  598
  651
  707
  765
  826
  888
  953
  1,021
  1,091
  1,165
  1,241
  1,320
  1,402
  1,488
  1,577
  1,670
  1,767
  1,869
  1,975
Total debt, $m
  165
  221
  282
  348
  419
  495
  575
  660
  750
  844
  943
  1,046
  1,153
  1,265
  1,381
  1,502
  1,627
  1,758
  1,894
  2,035
  2,181
  2,334
  2,492
  2,657
  2,829
  3,008
  3,195
  3,390
  3,593
  3,805
Total liabilities, $m
  318
  374
  435
  501
  572
  647
  728
  813
  903
  997
  1,095
  1,198
  1,306
  1,417
  1,534
  1,655
  1,780
  1,911
  2,047
  2,188
  2,334
  2,487
  2,645
  2,810
  2,982
  3,161
  3,348
  3,543
  3,746
  3,958
Total equity, $m
  210
  247
  287
  331
  378
  428
  481
  538
  597
  659
  724
  792
  863
  937
  1,014
  1,094
  1,177
  1,263
  1,353
  1,446
  1,543
  1,644
  1,749
  1,858
  1,972
  2,090
  2,213
  2,342
  2,476
  2,617
Total liabilities and equity, $m
  528
  621
  722
  832
  950
  1,075
  1,209
  1,351
  1,500
  1,656
  1,819
  1,990
  2,169
  2,354
  2,548
  2,749
  2,957
  3,174
  3,400
  3,634
  3,877
  4,131
  4,394
  4,668
  4,954
  5,251
  5,561
  5,885
  6,222
  6,575
Debt-to-equity ratio
  0.780
  0.890
  0.980
  1.050
  1.110
  1.160
  1.200
  1.230
  1.260
  1.280
  1.300
  1.320
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.410
  1.410
  1.420
  1.430
  1.430
  1.440
  1.440
  1.440
  1.450
  1.450
  1.450
Adjusted equity ratio
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  32
  47
  63
  81
  101
  122
  144
  167
  192
  218
  249
  277
  307
  338
  370
  404
  439
  476
  514
  553
  594
  637
  681
  727
  776
  826
  879
  933
  991
  1,051
Depreciation, amort., depletion, $m
  19
  21
  24
  27
  31
  34
  38
  42
  46
  50
  50
  55
  60
  65
  70
  76
  81
  87
  94
  100
  107
  114
  121
  128
  136
  144
  153
  162
  171
  181
Funds from operations, $m
  50
  68
  88
  109
  131
  156
  182
  209
  238
  268
  299
  332
  367
  403
  441
  480
  521
  563
  607
  653
  701
  750
  802
  856
  912
  971
  1,032
  1,095
  1,162
  1,231
Change in working capital, $m
  25
  28
  30
  33
  35
  38
  40
  42
  45
  47
  49
  51
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  82
  86
  89
  93
  97
  101
  106
Cash from operations, $m
  25
  40
  57
  76
  96
  118
  141
  166
  193
  221
  250
  281
  313
  347
  383
  419
  458
  498
  539
  583
  627
  674
  723
  773
  826
  881
  938
  998
  1,061
  1,126
Maintenance CAPEX, $m
  -12
  -15
  -17
  -20
  -23
  -26
  -30
  -33
  -37
  -41
  -46
  -50
  -55
  -60
  -65
  -70
  -76
  -81
  -87
  -94
  -100
  -107
  -114
  -121
  -128
  -136
  -144
  -153
  -162
  -171
New CAPEX, $m
  -16
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -69
Cash from investing activities, $m
  -28
  -33
  -37
  -41
  -46
  -51
  -56
  -61
  -66
  -72
  -78
  -83
  -90
  -96
  -103
  -109
  -117
  -123
  -131
  -140
  -148
  -156
  -165
  -175
  -184
  -194
  -205
  -216
  -228
  -240
Free cash flow, $m
  -3
  8
  20
  34
  50
  67
  86
  106
  127
  149
  172
  197
  224
  251
  280
  310
  341
  374
  408
  443
  480
  518
  558
  599
  642
  687
  733
  782
  833
  886
Issuance/(repayment) of debt, $m
  51
  56
  61
  66
  71
  76
  81
  85
  90
  94
  99
  103
  107
  112
  116
  121
  126
  131
  136
  141
  147
  152
  159
  165
  172
  179
  187
  195
  203
  212
Issuance/(repurchase) of shares, $m
  2
  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  
  53
  56
  61
  66
  71
  76
  81
  85
  90
  94
  99
  103
  107
  112
  116
  121
  126
  131
  136
  141
  147
  152
  159
  165
  172
  179
  187
  195
  203
  212
Total cash flow (excl. dividends), $m
  49
  64
  81
  100
  121
  143
  166
  191
  217
  244
  271
  300
  331
  363
  396
  431
  467
  505
  544
  584
  627
  671
  716
  764
  814
  866
  920
  977
  1,036
  1,098
Retained Cash Flow (-), $m
  -34
  -37
  -40
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -118
  -123
  -129
  -134
  -140
Prev. year cash balance distribution, $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 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
  16
  27
  41
  57
  74
  93
  113
  134
  157
  181
  206
  232
  260
  289
  319
  351
  384
  418
  454
  491
  530
  570
  612
  655
  700
  748
  797
  848
  902
  958
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  15
  24
  34
  44
  53
  60
  67
  72
  75
  77
  76
  75
  72
  68
  63
  57
  51
  44
  38
  32
  26
  21
  17
  13
  10
  7
  5
  4
  2
  2
Current shareholders' claim on cash, %
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3

Bel Fuse Inc. (Bel) designs, manufactures and markets a range of products that power, protect and connect electronic circuits. The Company's products include magnetic solutions, power solutions and protection, and connectivity solutions. The Company's operating segments are North America, Asia and Europe. The Company markets magnetic solutions under the brand names, including Bel, TRP, MagJack and Signal. The Company markets power solutions and protection under the brand names, which include Bel Power Solutions, Power-One and Melcher. The Company markets connectivity solutions under the brand names Stratos, Fibreco, Cinch, Johnson, Trompeter, Midwest Microwave, Semflex and Stewart Connector. The Company's products are used in the networking, telecommunications, computing, military, aerospace, transportation and broadcasting industries. Bel's portfolio of products has application in the automotive, medical and consumer electronics markets.

FINANCIAL RATIOS  of  Bel Fuse Inc. (BELFA)

Valuation Ratios
P/E Ratio -4
Price to Sales 0.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 8.4
Growth Rates
Sales Growth Rate -11.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 7
Current Ratio 0.1
LT Debt to Equity 82.3%
Total Debt to Equity 89.2%
Interest Coverage -16
Management Effectiveness
Return On Assets -12.1%
Ret/ On Assets - 3 Yr. Avg. -1.9%
Return On Total Capital -18.2%
Ret/ On T. Cap. - 3 Yr. Avg. -3.7%
Return On Equity -33.2%
Return On Equity - 3 Yr. Avg. -7%
Asset Turnover 1
Profitability Ratios
Gross Margin 20%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin -11.2%
EBITDA Margin - 3 Yr. Avg. 1.8%
Operating Margin -15.4%
Oper. Margin - 3 Yr. Avg. -2.5%
Pre-Tax Margin -16.6%
Pre-Tax Margin - 3 Yr. Avg. -3.3%
Net Profit Margin -13%
Net Profit Margin - 3 Yr. Avg. -2.6%
Effective Tax Rate 21.7%
Eff/ Tax Rate - 3 Yr. Avg. 19.5%
Payout Ratio -4.6%

BELFA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BELFA stock intrinsic value calculation we used $548 million for the last fiscal year's total revenue generated by Bel Fuse Inc.. The default revenue input number comes from 0001 income statement of Bel Fuse Inc.. 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 BELFA stock valuation model: a) initial revenue growth rate of 19% 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 5.8%, whose default value for BELFA is calculated based on our internal credit rating of Bel Fuse Inc., 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 Bel Fuse Inc..
    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 BELFA stock the variable cost ratio is equal to 78.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $89 million in the base year in the intrinsic value calculation for BELFA 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 5.4% for Bel Fuse Inc..

Corporate tax rate of 27% is the nominal tax rate for Bel Fuse Inc.. 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 BELFA 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 BELFA are equal to 15.8%.

Life of production assets of 7.1 years is the average useful life of capital assets used in Bel Fuse Inc. 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 BELFA is equal to 24.3%. 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 - $176.47 million for Bel Fuse Inc. - 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 12.265 million for Bel Fuse Inc. 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 Bel Fuse Inc. at the current share price and the inputted number of shares is $0.3 billion.

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