Intrinsic value of Benchmark Electronics - BHE

Previous Close

$29.95

  Intrinsic Value

$26.64

stock screener

  Rating & Target

hold

-11%

Previous close

$29.95

 
Intrinsic value

$26.64

 
Up/down potential

-11%

 
Rating

hold

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

We calculate the intrinsic value of BHE 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -9.09
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  2,310
  2,430
  2,556
  2,688
  2,826
  2,971
  3,123
  3,283
  3,450
  3,626
  3,810
  4,003
  4,205
  4,418
  4,641
  4,875
  5,121
  5,379
  5,650
  5,934
  6,232
  6,546
  6,874
  7,219
  7,582
  7,962
  8,361
  8,780
  9,220
  9,682
  10,167
Variable operating expenses, $m
 
  2,240
  2,355
  2,475
  2,602
  2,734
  2,873
  3,019
  3,172
  3,332
  3,500
  3,657
  3,842
  4,037
  4,241
  4,455
  4,679
  4,915
  5,162
  5,422
  5,695
  5,981
  6,281
  6,596
  6,927
  7,275
  7,640
  8,022
  8,425
  8,847
  9,290
Fixed operating expenses, $m
 
  111
  113
  116
  119
  122
  125
  128
  132
  135
  138
  142
  145
  149
  153
  156
  160
  164
  168
  173
  177
  181
  186
  191
  195
  200
  205
  210
  216
  221
  227
Total operating expenses, $m
  2,235
  2,351
  2,468
  2,591
  2,721
  2,856
  2,998
  3,147
  3,304
  3,467
  3,638
  3,799
  3,987
  4,186
  4,394
  4,611
  4,839
  5,079
  5,330
  5,595
  5,872
  6,162
  6,467
  6,787
  7,122
  7,475
  7,845
  8,232
  8,641
  9,068
  9,517
Operating income, $m
  76
  80
  88
  96
  106
  115
  125
  136
  147
  159
  171
  204
  218
  232
  248
  264
  282
  300
  319
  340
  361
  384
  407
  433
  459
  487
  516
  547
  580
  615
  651
EBITDA, $m
  131
  133
  143
  153
  164
  176
  188
  201
  214
  229
  244
  260
  277
  294
  313
  333
  353
  375
  398
  423
  448
  475
  504
  534
  565
  598
  633
  670
  709
  750
  793
Interest expense (income), $m
  8
  7
  9
  10
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
  54
  57
  61
  64
  68
  73
  77
Earnings before tax, $m
  68
  72
  79
  87
  95
  103
  111
  121
  130
  141
  152
  182
  194
  207
  221
  235
  250
  266
  283
  301
  319
  339
  360
  382
  405
  430
  456
  483
  512
  542
  574
Tax expense, $m
  4
  20
  21
  23
  26
  28
  30
  33
  35
  38
  41
  49
  52
  56
  60
  63
  68
  72
  76
  81
  86
  92
  97
  103
  109
  116
  123
  130
  138
  146
  155
Net income, $m
  64
  53
  58
  63
  69
  75
  81
  88
  95
  103
  111
  133
  142
  151
  161
  172
  183
  194
  206
  219
  233
  248
  263
  279
  296
  314
  333
  353
  374
  396
  419

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  681
  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
  1,999
  1,386
  1,458
  1,533
  1,612
  1,695
  1,782
  1,873
  1,968
  2,068
  2,173
  2,283
  2,399
  2,520
  2,648
  2,781
  2,921
  3,069
  3,223
  3,385
  3,555
  3,734
  3,921
  4,118
  4,325
  4,542
  4,770
  5,009
  5,260
  5,523
  5,800
Adjusted assets (=assets-cash), $m
  1,318
  1,386
  1,458
  1,533
  1,612
  1,695
  1,782
  1,873
  1,968
  2,068
  2,173
  2,283
  2,399
  2,520
  2,648
  2,781
  2,921
  3,069
  3,223
  3,385
  3,555
  3,734
  3,921
  4,118
  4,325
  4,542
  4,770
  5,009
  5,260
  5,523
  5,800
Revenue / Adjusted assets
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
  1.753
Average production assets, $m
  274
  289
  304
  320
  336
  354
  372
  391
  411
  431
  453
  476
  500
  526
  552
  580
  609
  640
  672
  706
  742
  779
  818
  859
  902
  947
  995
  1,045
  1,097
  1,152
  1,210
Working capital, $m
  1,120
  474
  498
  524
  551
  579
  609
  640
  673
  707
  743
  781
  820
  862
  905
  951
  999
  1,049
  1,102
  1,157
  1,215
  1,276
  1,340
  1,408
  1,478
  1,553
  1,630
  1,712
  1,798
  1,888
  1,983
Total debt, $m
  224
  244
  278
  314
  351
  390
  431
  474
  519
  566
  616
  668
  722
  780
  840
  903
  969
  1,038
  1,111
  1,188
  1,268
  1,352
  1,441
  1,534
  1,631
  1,734
  1,841
  1,954
  2,073
  2,197
  2,328
Total liabilities, $m
  633
  654
  688
  724
  761
  800
  841
  884
  929
  976
  1,026
  1,078
  1,132
  1,190
  1,250
  1,313
  1,379
  1,448
  1,521
  1,598
  1,678
  1,762
  1,851
  1,944
  2,041
  2,144
  2,251
  2,364
  2,483
  2,607
  2,738
Total equity, $m
  1,365
  732
  770
  810
  851
  895
  941
  989
  1,039
  1,092
  1,147
  1,206
  1,267
  1,331
  1,398
  1,468
  1,543
  1,620
  1,702
  1,787
  1,877
  1,972
  2,071
  2,174
  2,284
  2,398
  2,518
  2,645
  2,777
  2,916
  3,062
Total liabilities and equity, $m
  1,998
  1,386
  1,458
  1,534
  1,612
  1,695
  1,782
  1,873
  1,968
  2,068
  2,173
  2,284
  2,399
  2,521
  2,648
  2,781
  2,922
  3,068
  3,223
  3,385
  3,555
  3,734
  3,922
  4,118
  4,325
  4,542
  4,769
  5,009
  5,260
  5,523
  5,800
Debt-to-equity ratio
  0.164
  0.330
  0.360
  0.390
  0.410
  0.440
  0.460
  0.480
  0.500
  0.520
  0.540
  0.550
  0.570
  0.590
  0.600
  0.610
  0.630
  0.640
  0.650
  0.660
  0.680
  0.690
  0.700
  0.710
  0.710
  0.720
  0.730
  0.740
  0.750
  0.750
  0.760
Adjusted equity ratio
  0.519
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  64
  53
  58
  63
  69
  75
  81
  88
  95
  103
  111
  133
  142
  151
  161
  172
  183
  194
  206
  219
  233
  248
  263
  279
  296
  314
  333
  353
  374
  396
  419
Depreciation, amort., depletion, $m
  55
  53
  55
  57
  59
  61
  63
  65
  68
  70
  73
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
  96
  101
  106
  111
  117
  123
  129
  136
  142
Funds from operations, $m
  415
  106
  113
  120
  128
  136
  144
  153
  163
  173
  183
  189
  201
  213
  226
  240
  254
  270
  286
  303
  320
  339
  359
  380
  402
  425
  450
  476
  503
  531
  561
Change in working capital, $m
  142
  23
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  41
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
Cash from operations, $m
  273
  83
  88
  94
  101
  108
  115
  122
  130
  138
  147
  151
  161
  172
  183
  194
  206
  219
  233
  247
  262
  278
  295
  313
  331
  351
  372
  394
  417
  441
  467
Maintenance CAPEX, $m
  0
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -111
  -117
  -123
  -129
  -136
New CAPEX, $m
  -32
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
Cash from investing activities, $m
  -21
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -97
  -103
  -107
  -113
  -118
  -124
  -131
  -137
  -144
  -151
  -159
  -167
  -175
  -184
  -194
Free cash flow, $m
  252
  35
  39
  43
  47
  51
  55
  59
  64
  69
  75
  75
  81
  87
  94
  101
  109
  117
  125
  134
  144
  154
  164
  175
  187
  200
  213
  227
  242
  257
  274
Issuance/(repayment) of debt, $m
  -12
  32
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  102
  107
  113
  118
  124
  131
Issuance/(repurchase) of shares, $m
  -23
  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  
  -35
  32
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  102
  107
  113
  118
  124
  131
Total cash flow (excl. dividends), $m
  215
  68
  73
  78
  84
  90
  96
  102
  109
  117
  124
  127
  136
  145
  154
  164
  175
  186
  198
  211
  224
  238
  253
  268
  285
  302
  320
  340
  360
  382
  404
Retained Cash Flow (-), $m
  -43
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -115
  -120
  -126
  -133
  -139
  -146
Prev. year cash balance distribution, $m
 
  669
  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
 
  701
  35
  39
  42
  46
  50
  54
  59
  64
  69
  69
  75
  81
  87
  94
  101
  109
  117
  125
  134
  144
  154
  164
  176
  188
  200
  213
  228
  242
  258
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
 
  672
  32
  34
  35
  36
  36
  37
  37
  37
  36
  33
  32
  31
  29
  28
  26
  24
  21
  19
  17
  15
  13
  11
  9
  7
  6
  5
  4
  3
  2
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

Benchmark Electronics, Inc. is a provider of electronic manufacturing services. The Company operates through three segments: the Americas, Asia and Europe. It provides services to original equipment manufacturers of industrial control equipment, including equipment for the aerospace and defense industry; telecommunication equipment; computers and related products for business enterprises; medical devices, and testing and instrumentation products. It offers integrated design and manufacturing services. Its operations consist of over three principal areas: manufacturing and assembly operations, including printed circuit boards assemblies and subsystem assembly, box build and systems integration; precision technology manufacturing, which include precision machining, metal joining, assembly and functional testing, and specialized engineering services, and specialized engineering services, such as product design, printed circuit board layout, prototyping, automation and test development.

FINANCIAL RATIOS  of  Benchmark Electronics (BHE)

Valuation Ratios
P/E Ratio 23.1
Price to Sales 0.6
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 6.1
Growth Rates
Sales Growth Rate -9.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.8%
Cap. Spend. - 3 Yr. Gr. Rate 2%
Financial Strength
Quick Ratio 57
Current Ratio 0
LT Debt to Equity 15.5%
Total Debt to Equity 16.4%
Interest Coverage 10
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 4.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5.7%
Return On Equity 4.8%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 9.2%
Gross Margin - 3 Yr. Avg. 8.6%
EBITDA Margin 5.7%
EBITDA Margin - 3 Yr. Avg. 5.5%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 3.5%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 2.8%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 5.9%
Eff/ Tax Rate - 3 Yr. Avg. 6.2%
Payout Ratio 0%

BHE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BHE stock intrinsic value calculation we used $2310 million for the last fiscal year's total revenue generated by Benchmark Electronics. The default revenue input number comes from 2016 income statement of Benchmark 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 BHE stock valuation model: a) initial revenue growth rate of 5.2% 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 BHE is calculated based on our internal credit rating of Benchmark 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 Benchmark 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 BHE stock the variable cost ratio is equal to 92.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $108 million in the base year in the intrinsic value calculation for BHE 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 Benchmark Electronics.

Corporate tax rate of 27% is the nominal tax rate for Benchmark 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 BHE 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 BHE are equal to 11.9%.

Life of production assets of 8.5 years is the average useful life of capital assets used in Benchmark 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 BHE is equal to 19.5%. 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 - $1365 million for Benchmark 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 49.828 million for Benchmark 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 Benchmark Electronics at the current share price and the inputted number of shares is $1.5 billion.

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COMPANY NEWS

▶ Benchmark posts 3Q profit   [Oct-18-17 04:17PM  Associated Press]
▶ Qualcomm Invents New, Smart Single-Use Biometric Patches   [Sep-27-17 07:30AM  PR Newswire]
▶ Benchmark posts 2Q profit   [Jul-19-17 10:03PM  Associated Press]
▶ 3 Top Printed Circuit Board Stocks to Buy in 2017   [May-17-17 07:33PM  Motley Fool]
▶ Benchmark Electronics Announces Changes Among Officers   [May-16-17 06:15PM  PR Newswire]
▶ Houston-area electronics manufacturer to move corporate headquarters to Arizona   [Apr-20-17 03:32PM  American City Business Journals]
▶ Benchmark posts 1Q profit   [Apr-19-17 04:54PM  Associated Press]
▶ Benchmark posts 4Q profit   [07:21AM  Associated Press]
Financial statements of BHE
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