Intrinsic value of Badger Meter - BMI

Previous Close

$54.90

  Intrinsic Value

$48.33

stock screener

  Rating & Target

hold

-12%

Previous close

$54.90

 
Intrinsic value

$48.33

 
Up/down potential

-12%

 
Rating

hold

We calculate the intrinsic value of BMI 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 1.6

 

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, %
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  439
  477
  517
  558
  601
  646
  692
  740
  790
  842
  897
  953
  1,012
  1,073
  1,136
  1,203
  1,272
  1,345
  1,420
  1,499
  1,581
  1,667
  1,758
  1,852
  1,950
  2,054
  2,162
  2,275
  2,394
  2,518
Variable operating expenses, $m
  202
  219
  236
  254
  272
  291
  311
  332
  354
  376
  387
  411
  437
  463
  490
  519
  549
  580
  613
  647
  682
  720
  758
  799
  842
  886
  933
  982
  1,033
  1,087
Fixed operating expenses, $m
  168
  171
  175
  179
  183
  187
  191
  195
  199
  204
  208
  213
  218
  222
  227
  232
  237
  243
  248
  253
  259
  265
  271
  276
  283
  289
  295
  302
  308
  315
Total operating expenses, $m
  370
  390
  411
  433
  455
  478
  502
  527
  553
  580
  595
  624
  655
  685
  717
  751
  786
  823
  861
  900
  941
  985
  1,029
  1,075
  1,125
  1,175
  1,228
  1,284
  1,341
  1,402
Operating income, $m
  69
  87
  106
  126
  146
  168
  190
  213
  237
  262
  301
  329
  358
  387
  419
  452
  486
  522
  559
  599
  640
  683
  729
  776
  826
  879
  934
  992
  1,053
  1,116
EBITDA, $m
  101
  121
  142
  163
  185
  209
  233
  258
  285
  312
  341
  371
  402
  435
  469
  505
  542
  581
  622
  665
  710
  757
  806
  858
  912
  969
  1,029
  1,092
  1,158
  1,227
Interest expense (income), $m
  1
  2
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
Earnings before tax, $m
  67
  84
  103
  122
  141
  162
  184
  206
  230
  254
  292
  319
  347
  376
  406
  438
  471
  506
  542
  581
  621
  663
  707
  753
  802
  853
  906
  962
  1,021
  1,083
Tax expense, $m
  18
  23
  28
  33
  38
  44
  50
  56
  62
  69
  79
  86
  94
  101
  110
  118
  127
  137
  146
  157
  168
  179
  191
  203
  216
  230
  245
  260
  276
  293
Net income, $m
  49
  62
  75
  89
  103
  118
  134
  150
  168
  185
  213
  233
  253
  274
  296
  320
  344
  369
  396
  424
  453
  484
  516
  550
  585
  622
  661
  702
  746
  791

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
  428
  465
  504
  544
  586
  629
  675
  722
  770
  821
  874
  929
  986
  1,046
  1,108
  1,172
  1,240
  1,310
  1,384
  1,461
  1,541
  1,625
  1,713
  1,805
  1,901
  2,002
  2,107
  2,217
  2,333
  2,454
Adjusted assets (=assets-cash), $m
  428
  465
  504
  544
  586
  629
  675
  722
  770
  821
  874
  929
  986
  1,046
  1,108
  1,172
  1,240
  1,310
  1,384
  1,461
  1,541
  1,625
  1,713
  1,805
  1,901
  2,002
  2,107
  2,217
  2,333
  2,454
Revenue / Adjusted assets
  1.026
  1.026
  1.026
  1.026
  1.026
  1.027
  1.025
  1.025
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
  1.025
  1.026
  1.026
  1.027
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
  1.026
Average production assets, $m
  162
  177
  191
  207
  222
  239
  256
  274
  292
  312
  332
  353
  374
  397
  421
  445
  471
  497
  525
  555
  585
  617
  650
  685
  722
  760
  800
  842
  886
  932
Working capital, $m
  108
  117
  127
  137
  148
  159
  170
  182
  194
  207
  221
  234
  249
  264
  280
  296
  313
  331
  349
  369
  389
  410
  432
  456
  480
  505
  532
  560
  589
  619
Total debt, $m
  55
  66
  77
  89
  101
  114
  127
  141
  155
  170
  185
  201
  218
  236
  254
  273
  292
  313
  334
  357
  380
  405
  430
  457
  485
  515
  546
  578
  612
  647
Total liabilities, $m
  125
  136
  147
  159
  171
  184
  197
  211
  225
  240
  255
  271
  288
  305
  323
  342
  362
  383
  404
  427
  450
  475
  500
  527
  555
  584
  615
  647
  681
  717
Total equity, $m
  303
  329
  357
  385
  415
  446
  478
  511
  545
  581
  619
  658
  698
  740
  784
  830
  878
  928
  980
  1,034
  1,091
  1,151
  1,213
  1,278
  1,346
  1,417
  1,492
  1,570
  1,652
  1,738
Total liabilities and equity, $m
  428
  465
  504
  544
  586
  630
  675
  722
  770
  821
  874
  929
  986
  1,045
  1,107
  1,172
  1,240
  1,311
  1,384
  1,461
  1,541
  1,626
  1,713
  1,805
  1,901
  2,001
  2,107
  2,217
  2,333
  2,455
Debt-to-equity ratio
  0.180
  0.200
  0.220
  0.230
  0.240
  0.260
  0.270
  0.280
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
  0.370
  0.370
  0.370
  0.370
Adjusted equity ratio
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  49
  62
  75
  89
  103
  118
  134
  150
  168
  185
  213
  233
  253
  274
  296
  320
  344
  369
  396
  424
  453
  484
  516
  550
  585
  622
  661
  702
  746
  791
Depreciation, amort., depletion, $m
  32
  34
  35
  37
  39
  41
  43
  45
  47
  50
  39
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  73
  77
  82
  86
  90
  95
  100
  105
  111
Funds from operations, $m
  81
  95
  110
  126
  142
  159
  177
  196
  215
  235
  253
  275
  298
  322
  346
  373
  400
  429
  458
  490
  523
  557
  593
  631
  671
  713
  757
  803
  851
  902
Change in working capital, $m
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
Cash from operations, $m
  72
  86
  101
  116
  132
  148
  166
  184
  203
  222
  239
  261
  283
  306
  331
  356
  383
  411
  440
  470
  502
  536
  571
  608
  647
  687
  730
  775
  822
  871
Maintenance CAPEX, $m
  -18
  -19
  -21
  -23
  -25
  -26
  -28
  -30
  -33
  -35
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -77
  -82
  -86
  -90
  -95
  -100
  -105
New CAPEX, $m
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
Cash from investing activities, $m
  -32
  -33
  -36
  -38
  -41
  -43
  -45
  -48
  -52
  -54
  -57
  -60
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -96
  -102
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
Free cash flow, $m
  41
  52
  65
  78
  91
  105
  120
  136
  152
  168
  182
  200
  219
  239
  260
  282
  304
  328
  353
  379
  406
  434
  464
  496
  529
  563
  600
  638
  678
  720
Issuance/(repayment) of debt, $m
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  35
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  35
Total cash flow (excl. dividends), $m
  51
  63
  76
  90
  104
  118
  133
  149
  166
  183
  198
  217
  236
  257
  278
  301
  324
  349
  374
  401
  429
  459
  490
  523
  557
  593
  630
  670
  712
  755
Retained Cash Flow (-), $m
  -26
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
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
  26
  37
  49
  61
  74
  87
  101
  116
  131
  147
  160
  178
  196
  215
  234
  255
  276
  299
  322
  347
  373
  400
  428
  458
  489
  521
  556
  592
  630
  669
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
  25
  34
  42
  50
  57
  63
  69
  73
  75
  77
  76
  76
  74
  72
  69
  65
  60
  55
  50
  44
  39
  33
  28
  23
  19
  15
  12
  9
  7
  5
Current shareholders' claim on cash, %
  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

Badger Meter, Inc. is a manufacturer and marketer of products incorporating flow measurement, control and communication solutions, serving water utilities, municipalities, and commercial and industrial customers around the world. The Company's products measure water, oil, chemicals and other fluids, provide and communicate timely measurement data. Its product lines include two categories: sales of water meters and related technologies to municipal water utilities (municipal water), and sales of meters to various industries for water and other fluids (flow instrumentation). The municipal water offering includes mechanical and ultrasonic (electronic) water meters and related technologies and services used by water utilities as the basis for generating water and wastewater. The flow instrumentation category includes the sale of meters and valves around the world to measure and control materials flowing through a pipe or pipeline, including air, steam, oil, and other liquids and gases.

FINANCIAL RATIOS  of  Badger Meter (BMI)

Valuation Ratios
P/E Ratio 50
Price to Sales 4.1
Price to Book 6.2
Price to Tangible Book
Price to Cash Flow 28.5
Price to Free Cash Flow 35.5
Growth Rates
Sales Growth Rate 4.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -45%
Cap. Spend. - 3 Yr. Gr. Rate -4.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 14.8%
Interest Coverage 51
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 13.1%
Return On Equity - 3 Yr. Avg. 13.1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 38.3%
Gross Margin - 3 Yr. Avg. 36.7%
EBITDA Margin 18.8%
EBITDA Margin - 3 Yr. Avg. 17.5%
Operating Margin 12.9%
Oper. Margin - 3 Yr. Avg. 12.3%
Pre-Tax Margin 12.7%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 8.1%
Net Profit Margin - 3 Yr. Avg. 7.7%
Effective Tax Rate 36%
Eff/ Tax Rate - 3 Yr. Avg. 35.3%
Payout Ratio 37.5%

BMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BMI stock intrinsic value calculation we used $402.44 million for the last fiscal year's total revenue generated by Badger Meter. The default revenue input number comes from 0001 income statement of Badger Meter. 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 BMI stock valuation model: a) initial revenue growth rate of 9.1% 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 BMI is calculated based on our internal credit rating of Badger Meter, 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 Badger Meter.
    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 BMI stock the variable cost ratio is equal to 46.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $164 million in the base year in the intrinsic value calculation for BMI 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 Badger Meter.

Corporate tax rate of 27% is the nominal tax rate for Badger Meter. 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 BMI 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 BMI are equal to 37%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Badger Meter 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 BMI is equal to 24.6%. 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 - $277.452 million for Badger Meter - 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 29.114 million for Badger Meter 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 Badger Meter at the current share price and the inputted number of shares is $1.6 billion.

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COMPANY NEWS

▶ Ciena (CIEN) Jumps: Stock Rises 8.6%   [Dec-14-18 09:00AM  Zacks]
▶ Badger Meter Declares Regular Quarterly Cash Dividend   [Nov-09-18 05:00PM  Business Wire]
▶ Badger Meter (BMI) Beats Q3 Earnings Estimates   [Oct-17-18 09:55AM  Zacks]
▶ Badger Meter: 3Q Earnings Snapshot   [08:49AM  Associated Press]
▶ Meeusen to retire as CEO of Badger Meter at end of 2018   [Sep-25-18 10:26AM  American City Business Journals]
▶ WEDC gives Badger Meter $250,000 in tax credits for job relocation   [Sep-12-18 05:54PM  American City Business Journals]
▶ Badger Meter Increases Dividend   [Aug-10-18 04:15PM  Business Wire]
▶ Badger Meter Appoints Bauer Investor Relations Executive   [Jul-31-18 04:30PM  Business Wire]
▶ Badger Meter: 2Q Earnings Snapshot   [Jul-18-18 04:40PM  Associated Press]
▶ A Preview Of Badger Meter's Earnings   [07:57AM  Benzinga]
▶ Badger Meter Announces Second Quarter Conference Call   [Jun-12-18 03:00PM  Business Wire]
▶ Badger Meter Joins AT&T Smart City Alliance   [11:00AM  Business Wire]
▶ Badger Meter names new president; Meeusen remains chairman and CEO   [Apr-27-18 05:39PM  American City Business Journals]
▶ Badger Meter, Inc. to Host Earnings Call   [Apr-18-18 09:00AM  ACCESSWIRE]
▶ Badger Meter: 1Q Earnings Snapshot   [Apr-17-18 04:19PM  Associated Press]
▶ Badger Meter Announces First Quarter Conference Call   [Mar-13-18 11:34AM  Business Wire]
▶ Badger Meter Declares Regular Quarterly Dividend   [Feb-09-18 03:33PM  Business Wire]
▶ Is Badger Meter Incs (NYSE:BMI) ROE Of 12.70% Sustainable?   [Feb-06-18 11:59AM  Simply Wall St.]
▶ Badger Meter tops 4Q profit forecasts   [Feb-05-18 06:37PM  Associated Press]
▶ Badger Meter Q4 Earnings Preview   [10:31AM  Benzinga]
▶ Badger Meter Announces Fourth Quarter Conference Call   [Jan-03-18 03:16PM  Business Wire]
▶ Badger Meter moving 35 jobs to Racine from Arizona   [Nov-29-17 06:30PM  American City Business Journals]
▶ Badger Meter Declares Regular Quarterly Dividend   [Nov-10-17 11:52AM  Business Wire]

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