Intrinsic value of Benchmark Electronics - BHE

Previous Close

$24.26

  Intrinsic Value

$9.90

stock screener

  Rating & Target

str. sell

-59%

Previous close

$24.26

 
Intrinsic value

$9.90

 
Up/down potential

-59%

 
Rating

str. 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 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 1.1

 

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, %
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  2,630
  2,799
  2,975
  3,159
  3,350
  3,549
  3,756
  3,973
  4,199
  4,435
  4,682
  4,939
  5,208
  5,490
  5,785
  6,093
  6,416
  6,754
  7,107
  7,478
  7,867
  8,274
  8,700
  9,148
  9,617
  10,109
  10,625
  11,166
  11,733
  12,329
Variable operating expenses, $m
  2,544
  2,707
  2,876
  3,052
  3,236
  3,427
  3,626
  3,834
  4,051
  4,278
  4,495
  4,743
  5,001
  5,272
  5,555
  5,851
  6,160
  6,485
  6,825
  7,181
  7,554
  7,945
  8,354
  8,784
  9,234
  9,707
  10,202
  10,722
  11,267
  11,839
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
  2,544
  2,707
  2,876
  3,052
  3,236
  3,427
  3,626
  3,834
  4,051
  4,278
  4,495
  4,743
  5,001
  5,272
  5,555
  5,851
  6,160
  6,485
  6,825
  7,181
  7,554
  7,945
  8,354
  8,784
  9,234
  9,707
  10,202
  10,722
  11,267
  11,839
Operating income, $m
  85
  92
  99
  106
  114
  122
  130
  139
  148
  157
  186
  196
  207
  218
  230
  242
  255
  269
  283
  297
  313
  329
  346
  364
  382
  402
  423
  444
  467
  490
EBITDA, $m
  143
  152
  161
  171
  182
  192
  204
  216
  228
  241
  254
  268
  283
  298
  314
  330
  348
  366
  386
  406
  427
  449
  472
  496
  522
  548
  576
  606
  636
  669
Interest expense (income), $m
  8
  11
  14
  17
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  57
  61
  66
  71
  77
  82
  88
  94
  100
  107
  114
  122
  129
  137
  146
  155
  164
Earnings before tax, $m
  74
  78
  82
  87
  91
  96
  101
  106
  112
  117
  142
  148
  155
  162
  169
  176
  184
  192
  201
  209
  219
  229
  239
  250
  261
  273
  285
  298
  312
  326
Tax expense, $m
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  74
  77
  80
  84
  88
Net income, $m
  54
  57
  60
  63
  67
  70
  74
  77
  81
  86
  104
  108
  113
  118
  123
  129
  134
  140
  146
  153
  160
  167
  174
  182
  190
  199
  208
  218
  228
  238

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
  1,948
  2,073
  2,204
  2,340
  2,481
  2,629
  2,783
  2,943
  3,110
  3,285
  3,468
  3,659
  3,858
  4,067
  4,285
  4,513
  4,752
  5,003
  5,265
  5,539
  5,827
  6,129
  6,445
  6,776
  7,124
  7,488
  7,870
  8,271
  8,691
  9,133
Adjusted assets (=assets-cash), $m
  1,948
  2,073
  2,204
  2,340
  2,481
  2,629
  2,783
  2,943
  3,110
  3,285
  3,468
  3,659
  3,858
  4,067
  4,285
  4,513
  4,752
  5,003
  5,265
  5,539
  5,827
  6,129
  6,445
  6,776
  7,124
  7,488
  7,870
  8,271
  8,691
  9,133
Revenue / Adjusted assets
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
Average production assets, $m
  289
  308
  327
  347
  368
  390
  413
  437
  462
  488
  515
  543
  573
  604
  636
  670
  706
  743
  782
  823
  865
  910
  957
  1,006
  1,058
  1,112
  1,169
  1,228
  1,291
  1,356
Working capital, $m
  458
  487
  518
  550
  583
  618
  654
  691
  731
  772
  815
  859
  906
  955
  1,007
  1,060
  1,116
  1,175
  1,237
  1,301
  1,369
  1,440
  1,514
  1,592
  1,673
  1,759
  1,849
  1,943
  2,042
  2,145
Total debt, $m
  262
  314
  368
  424
  482
  543
  606
  672
  741
  813
  889
  967
  1,049
  1,135
  1,225
  1,319
  1,418
  1,521
  1,629
  1,742
  1,861
  1,985
  2,115
  2,252
  2,395
  2,545
  2,702
  2,867
  3,041
  3,222
Total liabilities, $m
  803
  854
  908
  964
  1,022
  1,083
  1,146
  1,213
  1,282
  1,354
  1,429
  1,507
  1,590
  1,675
  1,765
  1,859
  1,958
  2,061
  2,169
  2,282
  2,401
  2,525
  2,655
  2,792
  2,935
  3,085
  3,242
  3,408
  3,581
  3,763
Total equity, $m
  1,145
  1,219
  1,296
  1,376
  1,459
  1,546
  1,636
  1,730
  1,829
  1,932
  2,039
  2,151
  2,269
  2,391
  2,520
  2,654
  2,794
  2,942
  3,096
  3,257
  3,426
  3,604
  3,790
  3,984
  4,189
  4,403
  4,628
  4,863
  5,111
  5,370
Total liabilities and equity, $m
  1,948
  2,073
  2,204
  2,340
  2,481
  2,629
  2,782
  2,943
  3,111
  3,286
  3,468
  3,658
  3,859
  4,066
  4,285
  4,513
  4,752
  5,003
  5,265
  5,539
  5,827
  6,129
  6,445
  6,776
  7,124
  7,488
  7,870
  8,271
  8,692
  9,133
Debt-to-equity ratio
  0.230
  0.260
  0.280
  0.310
  0.330
  0.350
  0.370
  0.390
  0.410
  0.420
  0.440
  0.450
  0.460
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
Adjusted equity ratio
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  54
  57
  60
  63
  67
  70
  74
  77
  81
  86
  104
  108
  113
  118
  123
  129
  134
  140
  146
  153
  160
  167
  174
  182
  190
  199
  208
  218
  228
  238
Depreciation, amort., depletion, $m
  57
  60
  62
  65
  68
  71
  74
  77
  80
  83
  68
  71
  75
  79
  84
  88
  93
  98
  103
  108
  114
  120
  126
  132
  139
  146
  154
  162
  170
  178
Funds from operations, $m
  111
  117
  122
  128
  134
  141
  147
  154
  161
  169
  172
  180
  188
  197
  207
  217
  227
  238
  249
  261
  274
  287
  300
  315
  330
  345
  362
  379
  397
  416
Change in working capital, $m
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
  104
Cash from operations, $m
  83
  87
  92
  96
  101
  106
  111
  116
  122
  128
  129
  135
  142
  148
  156
  163
  171
  179
  188
  197
  206
  216
  226
  237
  248
  260
  272
  285
  299
  313
Maintenance CAPEX, $m
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
  -126
  -132
  -139
  -146
  -154
  -162
  -170
New CAPEX, $m
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -62
  -66
Cash from investing activities, $m
  -53
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -91
  -96
  -101
  -106
  -111
  -118
  -123
  -130
  -137
  -144
  -151
  -159
  -167
  -175
  -184
  -193
  -203
  -214
  -224
  -236
Free cash flow, $m
  30
  30
  32
  33
  34
  36
  37
  38
  40
  41
  37
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  66
  69
  72
  75
  78
Issuance/(repayment) of debt, $m
  51
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  119
  124
  130
  137
  143
  150
  157
  165
  173
  182
Issuance/(repurchase) of shares, $m
  16
  17
  17
  17
  17
  17
  17
  17
  17
  17
  4
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  12
  13
  14
  15
  17
  18
  20
  21
Cash from financing (excl. dividends), $m  
  67
  69
  71
  73
  75
  78
  80
  83
  86
  89
  79
  83
  86
  91
  95
  100
  104
  110
  116
  122
  128
  134
  142
  150
  157
  165
  174
  183
  193
  203
Total cash flow (excl. dividends), $m
  97
  99
  102
  106
  109
  113
  117
  121
  126
  130
  116
  121
  127
  133
  139
  145
  152
  159
  167
  175
  183
  192
  201
  211
  221
  232
  243
  255
  267
  281
Retained Cash Flow (-), $m
  -70
  -74
  -77
  -80
  -83
  -87
  -90
  -94
  -98
  -103
  -107
  -112
  -117
  -123
  -128
  -134
  -141
  -147
  -154
  -161
  -169
  -177
  -186
  -195
  -204
  -214
  -225
  -236
  -247
  -259
Prev. year cash balance distribution, $m
  264
  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
  291
  25
  25
  26
  26
  26
  27
  27
  27
  28
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
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
  23
  22
  21
  20
  19
  18
  17
  16
  14
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.2
  96.5
  95.0
  93.6
  92.2
  91.0
  89.9
  88.8
  87.7
  86.8
  86.6
  86.4
  86.2
  86.0
  85.8
  85.5
  85.3
  85.0
  84.8
  84.5
  84.2
  83.9
  83.6
  83.3
  82.9
  82.6
  82.2
  81.8
  81.4
  81.0

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 18.7
Price to Sales 0.5
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 4.4
Price to Free Cash Flow 5
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 $2466.811 million for the last fiscal year's total revenue generated by Benchmark Electronics. The default revenue input number comes from 0001 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 6.6% 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 96.8%.

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%.

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%.

Life of production assets of 7.6 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 17.4%. 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 - $1339.138 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 46.586 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 $1.1 billion.

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COMPANY NEWS

▶ Benchmark Electronics Announces Quarterly Cash Dividend   [Sep-17-18 05:24PM  PR Newswire]
▶ 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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