Intrinsic value of Celestica, Inc. - CLS

Previous Close

$7.02

  Intrinsic Value

$11.16

stock screener

  Rating & Target

str. buy

+59%

Previous close

$7.02

 
Intrinsic value

$11.16

 
Up/down potential

+59%

 
Rating

str. buy

We calculate the intrinsic value of CLS 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 0.8

 

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
  7,164
  7,715
  8,288
  8,884
  9,503
  10,147
  10,816
  11,512
  12,236
  12,990
  13,776
  14,594
  15,447
  16,338
  17,267
  18,236
  19,250
  20,308
  21,415
  22,573
  23,784
  25,051
  26,378
  27,767
  29,222
  30,746
  32,342
  34,016
  35,770
  37,609
Variable operating expenses, $m
  6,995
  7,530
  8,086
  8,663
  9,264
  9,888
  10,537
  11,212
  11,914
  12,645
  13,359
  14,152
  14,980
  15,843
  16,744
  17,685
  18,667
  19,694
  20,767
  21,890
  23,064
  24,293
  25,579
  26,926
  28,337
  29,815
  31,363
  32,986
  34,687
  36,471
Fixed operating expenses, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Total operating expenses, $m
  6,994
  7,529
  8,085
  8,662
  9,263
  9,887
  10,536
  11,211
  11,913
  12,644
  13,358
  14,151
  14,979
  15,842
  16,743
  17,684
  18,666
  19,693
  20,765
  21,888
  23,062
  24,291
  25,577
  26,924
  28,335
  29,813
  31,361
  32,984
  34,685
  36,469
Operating income, $m
  170
  186
  204
  222
  241
  260
  280
  301
  323
  346
  418
  443
  469
  496
  524
  553
  584
  616
  650
  685
  721
  760
  800
  842
  886
  932
  981
  1,031
  1,085
  1,140
EBITDA, $m
  294
  316
  340
  364
  389
  416
  443
  472
  501
  532
  564
  598
  632
  669
  707
  746
  788
  831
  876
  924
  973
  1,025
  1,079
  1,136
  1,196
  1,258
  1,323
  1,392
  1,463
  1,538
Interest expense (income), $m
  10
  41
  51
  62
  73
  85
  97
  110
  123
  137
  151
  166
  181
  197
  214
  231
  249
  268
  288
  309
  331
  353
  377
  402
  428
  455
  484
  513
  545
  577
  612
Earnings before tax, $m
  129
  135
  142
  148
  155
  163
  170
  178
  187
  195
  253
  262
  272
  282
  293
  304
  316
  328
  341
  354
  368
  383
  398
  414
  431
  449
  467
  487
  507
  528
Tax expense, $m
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  68
  71
  73
  76
  79
  82
  85
  89
  92
  96
  99
  103
  108
  112
  116
  121
  126
  131
  137
  143
Net income, $m
  94
  99
  103
  108
  113
  119
  124
  130
  136
  143
  184
  191
  198
  206
  214
  222
  230
  239
  249
  259
  269
  279
  291
  302
  315
  328
  341
  355
  370
  386

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
  4,036
  4,347
  4,670
  5,005
  5,354
  5,716
  6,093
  6,486
  6,894
  7,318
  7,761
  8,222
  8,703
  9,204
  9,728
  10,274
  10,845
  11,441
  12,065
  12,717
  13,399
  14,113
  14,861
  15,643
  16,463
  17,321
  18,221
  19,164
  20,152
  21,188
Adjusted assets (=assets-cash), $m
  4,036
  4,347
  4,670
  5,005
  5,354
  5,716
  6,093
  6,486
  6,894
  7,318
  7,761
  8,222
  8,703
  9,204
  9,728
  10,274
  10,845
  11,441
  12,065
  12,717
  13,399
  14,113
  14,861
  15,643
  16,463
  17,321
  18,221
  19,164
  20,152
  21,188
Revenue / Adjusted assets
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
Average production assets, $m
  516
  555
  597
  640
  684
  731
  779
  829
  881
  935
  992
  1,051
  1,112
  1,176
  1,243
  1,313
  1,386
  1,462
  1,542
  1,625
  1,712
  1,804
  1,899
  1,999
  2,104
  2,214
  2,329
  2,449
  2,575
  2,708
Working capital, $m
  960
  1,034
  1,111
  1,190
  1,273
  1,360
  1,449
  1,543
  1,640
  1,741
  1,846
  1,956
  2,070
  2,189
  2,314
  2,444
  2,579
  2,721
  2,870
  3,025
  3,187
  3,357
  3,535
  3,721
  3,916
  4,120
  4,334
  4,558
  4,793
  5,040
Total debt, $m
  952
  1,152
  1,360
  1,576
  1,800
  2,034
  2,277
  2,529
  2,792
  3,066
  3,350
  3,647
  3,957
  4,280
  4,617
  4,969
  5,337
  5,721
  6,122
  6,542
  6,982
  7,441
  7,923
  8,427
  8,955
  9,507
  10,087
  10,694
  11,331
  11,998
Total liabilities, $m
  2,599
  2,799
  3,007
  3,223
  3,448
  3,681
  3,924
  4,177
  4,439
  4,713
  4,998
  5,295
  5,605
  5,928
  6,265
  6,617
  6,984
  7,368
  7,770
  8,190
  8,629
  9,089
  9,570
  10,074
  10,602
  11,155
  11,734
  12,342
  12,978
  13,645
Total equity, $m
  1,437
  1,547
  1,662
  1,782
  1,906
  2,035
  2,169
  2,309
  2,454
  2,605
  2,763
  2,927
  3,098
  3,277
  3,463
  3,658
  3,861
  4,073
  4,295
  4,527
  4,770
  5,024
  5,290
  5,569
  5,861
  6,166
  6,487
  6,822
  7,174
  7,543
Total liabilities and equity, $m
  4,036
  4,346
  4,669
  5,005
  5,354
  5,716
  6,093
  6,486
  6,893
  7,318
  7,761
  8,222
  8,703
  9,205
  9,728
  10,275
  10,845
  11,441
  12,065
  12,717
  13,399
  14,113
  14,860
  15,643
  16,463
  17,321
  18,221
  19,164
  20,152
  21,188
Debt-to-equity ratio
  0.660
  0.740
  0.820
  0.880
  0.940
  1.000
  1.050
  1.100
  1.140
  1.180
  1.210
  1.250
  1.280
  1.310
  1.330
  1.360
  1.380
  1.400
  1.430
  1.450
  1.460
  1.480
  1.500
  1.510
  1.530
  1.540
  1.560
  1.570
  1.580
  1.590
Adjusted equity ratio
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  94
  99
  103
  108
  113
  119
  124
  130
  136
  143
  184
  191
  198
  206
  214
  222
  230
  239
  249
  259
  269
  279
  291
  302
  315
  328
  341
  355
  370
  386
Depreciation, amort., depletion, $m
  124
  130
  136
  142
  149
  156
  163
  170
  178
  186
  146
  155
  164
  173
  183
  193
  204
  215
  227
  239
  252
  265
  279
  294
  309
  326
  342
  360
  379
  398
Funds from operations, $m
  218
  228
  239
  251
  262
  274
  287
  300
  314
  328
  330
  346
  362
  379
  397
  415
  434
  454
  476
  498
  521
  545
  570
  596
  624
  653
  684
  715
  749
  784
Change in working capital, $m
  71
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  110
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  246
Cash from operations, $m
  147
  155
  162
  171
  179
  188
  198
  207
  217
  227
  225
  236
  248
  260
  272
  285
  299
  313
  327
  342
  358
  375
  392
  410
  429
  449
  470
  491
  514
  537
Maintenance CAPEX, $m
  -70
  -76
  -82
  -88
  -94
  -101
  -107
  -115
  -122
  -130
  -138
  -146
  -155
  -164
  -173
  -183
  -193
  -204
  -215
  -227
  -239
  -252
  -265
  -279
  -294
  -309
  -326
  -342
  -360
  -379
New CAPEX, $m
  -39
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
Cash from investing activities, $m
  -109
  -116
  -123
  -131
  -139
  -147
  -155
  -165
  -174
  -184
  -195
  -205
  -216
  -228
  -240
  -253
  -266
  -280
  -295
  -310
  -326
  -343
  -361
  -379
  -399
  -419
  -441
  -462
  -486
  -511
Free cash flow, $m
  37
  39
  40
  40
  41
  41
  42
  42
  43
  44
  31
  31
  32
  32
  32
  32
  33
  33
  32
  32
  32
  32
  31
  31
  30
  30
  29
  28
  27
  26
Issuance/(repayment) of debt, $m
  194
  200
  208
  216
  225
  233
  243
  253
  263
  274
  285
  297
  310
  323
  337
  352
  368
  384
  402
  420
  439
  460
  481
  504
  528
  553
  579
  607
  636
  667
Issuance/(repurchase) of shares, $m
  11
  12
  12
  11
  11
  10
  10
  9
  9
  9
  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  
  205
  212
  220
  227
  236
  243
  253
  262
  272
  283
  285
  297
  310
  323
  337
  352
  368
  384
  402
  420
  439
  460
  481
  504
  528
  553
  579
  607
  636
  667
Total cash flow (excl. dividends), $m
  242
  251
  259
  267
  276
  285
  294
  304
  315
  326
  316
  328
  341
  355
  369
  384
  400
  417
  434
  452
  471
  492
  513
  535
  558
  583
  608
  635
  664
  694
Retained Cash Flow (-), $m
  -104
  -111
  -115
  -119
  -124
  -129
  -134
  -140
  -145
  -151
  -158
  -164
  -171
  -179
  -186
  -195
  -203
  -212
  -222
  -232
  -243
  -254
  -266
  -279
  -292
  -306
  -320
  -336
  -352
  -369
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
  137
  141
  144
  148
  152
  156
  160
  165
  169
  174
  158
  164
  170
  176
  183
  190
  197
  204
  212
  220
  229
  237
  247
  256
  266
  277
  288
  300
  312
  325
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  129
  124
  119
  113
  107
  100
  93
  86
  79
  72
  57
  51
  45
  39
  34
  29
  24
  20
  16
  13
  10
  8
  6
  4
  3
  2
  2
  1
  1
  0
Current shareholders' claim on cash, %
  98.9
  97.7
  96.7
  95.8
  94.9
  94.2
  93.6
  93.0
  92.5
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0
  92.0

Celestica Inc. is a provider of supply chain solutions. The Company operates in electronics manufacturing services business segment. The Company offers a range of services to its customers, including design and development, engineering services, supply chain management, new product introduction, component sourcing, electronics manufacturing, assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and after-market repair and return services. Its products and services serve a range of applications, including servers; storage systems; optical equipment; aerospace and defense electronics; healthcare products and applications; semiconductor equipment, and a range of industrial and alternative energy products, including solar panels and inverters. It designs, manufactures and tests solar panels for the residential, commercial and utility scale markets. It uses technologies in the assembly and testing of its products.

FINANCIAL RATIOS  of  Celestica, Inc. (CLS)

Valuation Ratios
P/E Ratio 7.3
Price to Sales 0.2
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 9.1
Growth Rates
Sales Growth Rate 6.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1.6%
Cap. Spend. - 3 Yr. Gr. Rate 3.8%
Financial Strength
Quick Ratio 10
Current Ratio 0.1
LT Debt to Equity 15.3%
Total Debt to Equity 19.8%
Interest Coverage 17
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 9.5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.4%
Return On Equity 11.7%
Return On Equity - 3 Yr. Avg. 8.3%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 7.1%
Gross Margin - 3 Yr. Avg. 7.1%
EBITDA Margin 4.1%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 2.3%
Net Profit Margin 2.3%
Net Profit Margin - 3 Yr. Avg. 1.8%
Effective Tax Rate 15.5%
Eff/ Tax Rate - 3 Yr. Avg. 22.6%
Payout Ratio 0%

CLS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLS stock intrinsic value calculation we used $6633 million for the last fiscal year's total revenue generated by Celestica, Inc.. The default revenue input number comes from 0001 income statement of Celestica, 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 CLS 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 6%, whose default value for CLS is calculated based on our internal credit rating of Celestica, 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 Celestica, 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 CLS stock the variable cost ratio is equal to 97.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $-1 million in the base year in the intrinsic value calculation for CLS 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 Celestica, Inc..

Corporate tax rate of 27% is the nominal tax rate for Celestica, 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 CLS 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 CLS are equal to 7.2%.

Life of production assets of 6.8 years is the average useful life of capital assets used in Celestica, 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 CLS is equal to 13.4%. 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 - $1332.3 million for Celestica, 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 117.647 million for Celestica, 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 Celestica, Inc. at the current share price and the inputted number of shares is $0.8 billion.

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