Intrinsic value of Benchmark Electronics - BHE

Previous Close

$25.65

  Intrinsic Value

$14.49

stock screener

  Rating & Target

sell

-43%

Previous close

$25.65

 
Intrinsic value

$14.49

 
Up/down potential

-43%

 
Rating

sell

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

Revenue (in 2017), $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 1.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  2,635
  2,809
  2,991
  3,179
  3,376
  3,581
  3,794
  4,016
  4,248
  4,490
  4,743
  5,007
  5,283
  5,571
  5,872
  6,188
  6,518
  6,863
  7,225
  7,604
  8,001
  8,416
  8,852
  9,309
  9,788
  10,290
  10,816
  11,368
  11,947
  12,555
Variable operating expenses, $m
  2,547
  2,714
  2,888
  3,069
  3,257
  3,454
  3,658
  3,872
  4,094
  4,326
  4,549
  4,803
  5,067
  5,344
  5,633
  5,935
  6,252
  6,583
  6,930
  7,294
  7,674
  8,073
  8,491
  8,929
  9,388
  9,870
  10,375
  10,905
  11,460
  12,043
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
  2,547
  2,714
  2,888
  3,069
  3,257
  3,454
  3,658
  3,872
  4,094
  4,326
  4,549
  4,803
  5,067
  5,344
  5,633
  5,935
  6,252
  6,583
  6,930
  7,294
  7,674
  8,073
  8,491
  8,929
  9,388
  9,870
  10,375
  10,905
  11,460
  12,043
Operating income, $m
  88
  95
  103
  110
  118
  127
  136
  145
  154
  164
  193
  204
  215
  227
  239
  252
  266
  280
  295
  310
  326
  343
  361
  380
  399
  420
  441
  464
  487
  512
EBITDA, $m
  147
  156
  167
  177
  188
  199
  211
  224
  237
  250
  264
  279
  294
  310
  327
  345
  363
  382
  402
  423
  445
  469
  493
  518
  545
  573
  602
  633
  665
  699
Interest expense (income), $m
  8
  10
  13
  16
  19
  22
  25
  29
  32
  36
  40
  44
  48
  52
  57
  61
  66
  71
  77
  83
  88
  95
  101
  108
  115
  123
  131
  139
  147
  156
  166
Earnings before tax, $m
  78
  82
  87
  91
  96
  101
  107
  112
  118
  124
  150
  156
  163
  171
  178
  186
  194
  203
  212
  222
  232
  242
  253
  264
  276
  289
  302
  316
  331
  346
Tax expense, $m
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  65
  68
  71
  75
  78
  82
  85
  89
  93
Net income, $m
  57
  60
  63
  67
  70
  74
  78
  82
  86
  91
  109
  114
  119
  125
  130
  136
  142
  148
  155
  162
  169
  177
  185
  193
  202
  211
  221
  231
  241
  253

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
  1,957
  2,087
  2,222
  2,362
  2,508
  2,660
  2,819
  2,984
  3,156
  3,336
  3,524
  3,720
  3,925
  4,139
  4,363
  4,597
  4,842
  5,099
  5,368
  5,649
  5,944
  6,253
  6,577
  6,916
  7,272
  7,645
  8,036
  8,446
  8,876
  9,327
Adjusted assets (=assets-cash), $m
  1,957
  2,087
  2,222
  2,362
  2,508
  2,660
  2,819
  2,984
  3,156
  3,336
  3,524
  3,720
  3,925
  4,139
  4,363
  4,597
  4,842
  5,099
  5,368
  5,649
  5,944
  6,253
  6,577
  6,916
  7,272
  7,645
  8,036
  8,446
  8,876
  9,327
Revenue / Adjusted assets
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
  1.346
Average production assets, $m
  393
  419
  446
  474
  503
  534
  565
  598
  633
  669
  707
  746
  787
  830
  875
  922
  971
  1,023
  1,077
  1,133
  1,192
  1,254
  1,319
  1,387
  1,458
  1,533
  1,612
  1,694
  1,780
  1,871
Working capital, $m
  37
  39
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
Total debt, $m
  244
  297
  352
  409
  469
  531
  596
  664
  734
  808
  885
  965
  1,049
  1,136
  1,228
  1,324
  1,424
  1,529
  1,639
  1,754
  1,874
  2,001
  2,133
  2,272
  2,417
  2,570
  2,730
  2,898
  3,074
  3,258
Total liabilities, $m
  801
  854
  909
  966
  1,026
  1,088
  1,153
  1,220
  1,291
  1,364
  1,441
  1,521
  1,605
  1,693
  1,784
  1,880
  1,981
  2,085
  2,195
  2,310
  2,431
  2,557
  2,690
  2,829
  2,974
  3,127
  3,287
  3,454
  3,630
  3,815
Total equity, $m
  1,157
  1,233
  1,313
  1,396
  1,482
  1,572
  1,666
  1,763
  1,865
  1,972
  2,082
  2,198
  2,319
  2,446
  2,578
  2,717
  2,862
  3,013
  3,172
  3,339
  3,513
  3,695
  3,887
  4,087
  4,298
  4,518
  4,749
  4,992
  5,246
  5,513
Total liabilities and equity, $m
  1,958
  2,087
  2,222
  2,362
  2,508
  2,660
  2,819
  2,983
  3,156
  3,336
  3,523
  3,719
  3,924
  4,139
  4,362
  4,597
  4,843
  5,098
  5,367
  5,649
  5,944
  6,252
  6,577
  6,916
  7,272
  7,645
  8,036
  8,446
  8,876
  9,328
Debt-to-equity ratio
  0.210
  0.240
  0.270
  0.290
  0.320
  0.340
  0.360
  0.380
  0.390
  0.410
  0.420
  0.440
  0.450
  0.460
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
Adjusted equity ratio
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  57
  60
  63
  67
  70
  74
  78
  82
  86
  91
  109
  114
  119
  125
  130
  136
  142
  148
  155
  162
  169
  177
  185
  193
  202
  211
  221
  231
  241
  253
Depreciation, amort., depletion, $m
  58
  61
  64
  67
  70
  73
  76
  79
  82
  86
  71
  75
  79
  83
  87
  92
  97
  102
  108
  113
  119
  125
  132
  139
  146
  153
  161
  169
  178
  187
Funds from operations, $m
  115
  121
  127
  133
  140
  147
  154
  161
  169
  177
  180
  189
  198
  208
  218
  228
  239
  250
  262
  275
  288
  302
  317
  332
  348
  364
  382
  400
  419
  440
Change in working capital, $m
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
Cash from operations, $m
  113
  119
  125
  131
  137
  144
  151
  158
  166
  173
  176
  185
  194
  203
  213
  224
  234
  246
  257
  270
  283
  296
  310
  325
  341
  357
  374
  392
  411
  431
Maintenance CAPEX, $m
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
  -108
  -113
  -119
  -125
  -132
  -139
  -146
  -153
  -161
  -169
  -178
New CAPEX, $m
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -91
Cash from investing activities, $m
  -62
  -65
  -69
  -73
  -76
  -80
  -85
  -90
  -95
  -99
  -105
  -110
  -116
  -122
  -128
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -221
  -231
  -243
  -255
  -269
Free cash flow, $m
  51
  53
  56
  58
  60
  63
  66
  68
  71
  74
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  110
  115
  120
  125
  131
  137
  143
  149
  156
  163
Issuance/(repayment) of debt, $m
  51
  53
  55
  57
  60
  62
  65
  68
  70
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  121
  126
  132
  139
  145
  153
  160
  168
  176
  185
Issuance/(repurchase) of shares, $m
  17
  17
  16
  16
  16
  16
  16
  16
  16
  16
  2
  2
  2
  2
  2
  3
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  12
  13
  14
Cash from financing (excl. dividends), $m  
  68
  70
  71
  73
  76
  78
  81
  84
  86
  90
  79
  82
  86
  90
  94
  99
  103
  108
  114
  120
  126
  132
  139
  146
  153
  162
  170
  180
  189
  199
Total cash flow (excl. dividends), $m
  119
  123
  127
  131
  136
  141
  146
  151
  157
  163
  150
  157
  164
  171
  179
  188
  196
  205
  215
  225
  236
  247
  259
  272
  285
  299
  313
  328
  344
  361
Retained Cash Flow (-), $m
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -106
  -111
  -116
  -121
  -127
  -132
  -138
  -145
  -152
  -159
  -166
  -174
  -183
  -191
  -201
  -210
  -220
  -231
  -242
  -254
  -267
Prev. year cash balance distribution, $m
  246
  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
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
Cash available for distribution, $m
  291
  46
  47
  49
  50
  51
  52
  54
  55
  57
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
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
  279
  42
  41
  40
  39
  37
  35
  34
  32
  30
  19
  18
  16
  15
  14
  12
  11
  10
  9
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  98.4
  97.0
  95.6
  94.4
  93.3
  92.3
  91.4
  90.5
  89.7
  88.9
  88.8
  88.8
  88.7
  88.6
  88.5
  88.4
  88.3
  88.2
  88.1
  88.0
  87.8
  87.7
  87.5
  87.3
  87.1
  86.9
  86.7
  86.5
  86.3
  86.0

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 19.8
Price to Sales 0.5
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 4.6
Price to Free Cash Flow 5.3
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 $2467 million for the last fiscal year's total revenue generated by Benchmark Electronics. The default revenue input number comes from 2017 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 6.8% 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 96.7%.

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 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 5.4% 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 0.3%.

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 14.9%.

Life of production assets of 10 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 1.4%. 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 - $1329 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 50 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 $1.3 billion.

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COMPANY NEWS

▶ Benchmark: 2Q Earnings Snapshot   [Jul-24-18 04:51PM  Associated Press]
▶ Here's What Cash-Rich Small Caps Do With All Its Liquidity   [Jun-27-18 11:00AM  TheStreet.com]
▶ 2 Cash-Rich Small-Caps to Check Out   [11:00AM  TheStreet.com]
▶ Benchmark Electronics Announces Quarterly Cash Dividend   [Jun-08-18 07:00AM  PR Newswire]
▶ Benchmark: 1Q Earnings Snapshot   [Apr-25-18 05:52PM  Associated Press]
▶ Benchmark reports 4Q loss   [Feb-07-18 04:53PM  Associated Press]
▶ 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]
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