Intrinsic value of Badger Meter, Inc. - BMI

Previous Close

$56.00

  Intrinsic Value

$17.61

stock screener

  Rating & Target

str. sell

-69%

Previous close

$56.00

 
Intrinsic value

$17.61

 
Up/down potential

-69%

 
Rating

str. sell

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, %
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
Revenue, $m
  469
  505
  542
  581
  622
  664
  708
  753
  801
  850
  901
  955
  1,011
  1,069
  1,130
  1,193
  1,260
  1,329
  1,401
  1,477
  1,556
  1,639
  1,726
  1,817
  1,912
  2,012
  2,116
  2,226
  2,340
  2,461
Variable operating expenses, $m
  402
  432
  463
  495
  529
  564
  600
  638
  677
  718
  748
  792
  839
  887
  937
  990
  1,045
  1,103
  1,163
  1,225
  1,291
  1,360
  1,432
  1,507
  1,586
  1,669
  1,756
  1,847
  1,942
  2,042
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
  402
  432
  463
  495
  529
  564
  600
  638
  677
  718
  748
  792
  839
  887
  937
  990
  1,045
  1,103
  1,163
  1,225
  1,291
  1,360
  1,432
  1,507
  1,586
  1,669
  1,756
  1,847
  1,942
  2,042
Operating income, $m
  67
  73
  80
  86
  93
  100
  108
  116
  124
  132
  153
  163
  172
  182
  192
  203
  214
  226
  239
  251
  265
  279
  294
  309
  326
  343
  360
  379
  398
  419
EBITDA, $m
  98
  106
  114
  122
  131
  139
  149
  158
  168
  179
  189
  201
  212
  225
  237
  251
  265
  279
  294
  310
  327
  344
  363
  382
  402
  423
  444
  467
  492
  517
Interest expense (income), $m
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
  22
Earnings before tax, $m
  66
  72
  78
  84
  91
  97
  104
  112
  119
  127
  148
  156
  165
  175
  184
  194
  205
  216
  228
  240
  252
  266
  280
  294
  309
  325
  342
  359
  378
  397
Tax expense, $m
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  40
  42
  45
  47
  50
  53
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
  92
  97
  102
  107
Net income, $m
  48
  52
  57
  61
  66
  71
  76
  81
  87
  93
  108
  114
  121
  127
  135
  142
  150
  158
  166
  175
  184
  194
  204
  215
  226
  237
  250
  262
  276
  290

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
  424
  457
  491
  526
  563
  601
  640
  682
  725
  769
  816
  864
  915
  967
  1,022
  1,080
  1,140
  1,203
  1,268
  1,337
  1,408
  1,483
  1,562
  1,644
  1,730
  1,821
  1,915
  2,014
  2,118
  2,227
Adjusted assets (=assets-cash), $m
  424
  457
  491
  526
  563
  601
  640
  682
  725
  769
  816
  864
  915
  967
  1,022
  1,080
  1,140
  1,203
  1,268
  1,337
  1,408
  1,483
  1,562
  1,644
  1,730
  1,821
  1,915
  2,014
  2,118
  2,227
Revenue / Adjusted assets
  1.106
  1.105
  1.104
  1.105
  1.105
  1.105
  1.106
  1.104
  1.105
  1.105
  1.104
  1.105
  1.105
  1.105
  1.106
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
  1.105
Average production assets, $m
  168
  181
  194
  208
  223
  238
  253
  270
  287
  304
  323
  342
  362
  383
  404
  427
  451
  476
  502
  529
  557
  587
  618
  650
  684
  720
  758
  797
  838
  881
Working capital, $m
  119
  128
  137
  147
  157
  168
  179
  191
  203
  215
  228
  242
  256
  270
  286
  302
  319
  336
  355
  374
  394
  415
  437
  460
  484
  509
  535
  563
  592
  623
Total debt, $m
  25
  33
  40
  48
  57
  65
  74
  84
  93
  103
  114
  125
  137
  148
  161
  174
  188
  202
  217
  232
  249
  266
  283
  302
  322
  342
  364
  386
  410
  434
Total liabilities, $m
  96
  104
  111
  119
  128
  136
  145
  155
  164
  175
  185
  196
  208
  220
  232
  245
  259
  273
  288
  303
  320
  337
  355
  373
  393
  413
  435
  457
  481
  506
Total equity, $m
  328
  353
  379
  407
  435
  464
  495
  527
  560
  595
  631
  668
  707
  748
  790
  835
  881
  930
  980
  1,033
  1,089
  1,147
  1,207
  1,271
  1,338
  1,407
  1,480
  1,557
  1,637
  1,721
Total liabilities and equity, $m
  424
  457
  490
  526
  563
  600
  640
  682
  724
  770
  816
  864
  915
  968
  1,022
  1,080
  1,140
  1,203
  1,268
  1,336
  1,409
  1,484
  1,562
  1,644
  1,731
  1,820
  1,915
  2,014
  2,118
  2,227
Debt-to-equity ratio
  0.080
  0.090
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
Adjusted equity ratio
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773
  0.773

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48
  52
  57
  61
  66
  71
  76
  81
  87
  93
  108
  114
  121
  127
  135
  142
  150
  158
  166
  175
  184
  194
  204
  215
  226
  237
  250
  262
  276
  290
Depreciation, amort., depletion, $m
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  36
  38
  40
  43
  45
  47
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  89
  93
  98
Funds from operations, $m
  80
  85
  91
  97
  104
  110
  117
  124
  131
  139
  144
  152
  161
  170
  180
  189
  200
  211
  222
  234
  246
  259
  273
  287
  302
  317
  334
  351
  369
  388
Change in working capital, $m
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Cash from operations, $m
  71
  76
  82
  87
  93
  99
  106
  113
  120
  127
  131
  139
  147
  155
  164
  173
  183
  193
  204
  215
  226
  238
  251
  264
  278
  292
  307
  323
  340
  357
Maintenance CAPEX, $m
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -93
New CAPEX, $m
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
Cash from investing activities, $m
  -29
  -32
  -33
  -36
  -38
  -40
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -96
  -102
  -106
  -112
  -117
  -123
  -130
  -136
Free cash flow, $m
  41
  45
  48
  52
  56
  60
  64
  68
  73
  77
  79
  84
  89
  94
  100
  106
  112
  118
  125
  132
  139
  147
  154
  163
  171
  180
  190
  200
  210
  221
Issuance/(repayment) of debt, $m
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  24
  25
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  
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  24
  25
Total cash flow (excl. dividends), $m
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  89
  95
  100
  106
  112
  119
  125
  132
  140
  147
  155
  164
  172
  181
  191
  201
  211
  222
  234
  246
Retained Cash Flow (-), $m
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -41
  -43
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
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
  24
  27
  30
  33
  36
  39
  42
  46
  49
  53
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
  106
  112
  118
  124
  131
  138
  146
  153
  162
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
  23
  24
  26
  27
  28
  28
  28
  29
  28
  28
  25
  24
  23
  22
  20
  19
  17
  15
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
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, Inc. (BMI)

Valuation Ratios
P/E Ratio 51
Price to Sales 4.1
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow 29.1
Price to Free Cash Flow 36.2
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 $434 million for the last fiscal year's total revenue generated by Badger Meter, Inc.. The default revenue input number comes from 0001 income statement of Badger Meter, 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 BMI stock valuation model: a) initial revenue growth rate of 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 BMI is calculated based on our internal credit rating of Badger Meter, 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 Badger Meter, 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 BMI stock the variable cost ratio is equal to 85.9%.

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 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Badger Meter, 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 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 35.8%.

Life of production assets of 9 years is the average useful life of capital assets used in Badger Meter, 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 BMI is equal to 25.3%. 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 - $303.503 million for Badger Meter, 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 29.131 million for Badger Meter, 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 Badger Meter, Inc. at the current share price and the inputted number of shares is $1.6 billion.

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