Intrinsic value of Electronics for Imaging - EFII

Previous Close

$42.66

  Intrinsic Value

$30.93

stock screener

  Rating & Target

sell

-28%

Previous close

$42.66

 
Intrinsic value

$30.93

 
Up/down potential

-28%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of EFII 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 2016), $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 2.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.34
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  992
  1,012
  1,035
  1,062
  1,092
  1,125
  1,161
  1,201
  1,243
  1,289
  1,339
  1,392
  1,448
  1,508
  1,572
  1,640
  1,712
  1,788
  1,869
  1,954
  2,043
  2,138
  2,238
  2,343
  2,454
  2,571
  2,694
  2,824
  2,960
  3,103
  3,254
Variable operating expenses, $m
 
  945
  966
  990
  1,017
  1,047
  1,079
  1,115
  1,153
  1,195
  1,239
  1,251
  1,302
  1,356
  1,413
  1,474
  1,539
  1,607
  1,679
  1,756
  1,836
  1,922
  2,011
  2,106
  2,206
  2,311
  2,421
  2,538
  2,660
  2,789
  2,924
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
  936
  945
  966
  990
  1,017
  1,047
  1,079
  1,115
  1,153
  1,195
  1,239
  1,251
  1,302
  1,356
  1,413
  1,474
  1,539
  1,607
  1,679
  1,756
  1,836
  1,922
  2,011
  2,106
  2,206
  2,311
  2,421
  2,538
  2,660
  2,789
  2,924
Operating income, $m
  57
  66
  69
  72
  75
  78
  82
  86
  90
  95
  100
  141
  147
  153
  159
  166
  173
  181
  189
  198
  207
  217
  227
  237
  249
  260
  273
  286
  300
  314
  330
EBITDA, $m
  112
  122
  124
  128
  131
  135
  140
  144
  150
  155
  161
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  257
  269
  282
  295
  309
  324
  340
  356
  373
  391
Interest expense (income), $m
  3
  11
  12
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  38
  40
  42
  45
  48
  50
  53
  57
  60
Earnings before tax, $m
  39
  55
  57
  59
  62
  64
  67
  71
  74
  78
  82
  122
  126
  131
  136
  142
  147
  153
  160
  167
  174
  181
  189
  197
  206
  216
  225
  236
  246
  258
  270
Tax expense, $m
  -7
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
Net income, $m
  46
  40
  42
  43
  45
  47
  49
  51
  54
  57
  60
  89
  92
  96
  99
  103
  108
  112
  117
  122
  127
  132
  138
  144
  151
  157
  164
  172
  180
  188
  197

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  460
  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
  1,482
  1,042
  1,066
  1,093
  1,124
  1,158
  1,196
  1,236
  1,280
  1,328
  1,379
  1,433
  1,492
  1,554
  1,619
  1,689
  1,763
  1,842
  1,924
  2,012
  2,104
  2,202
  2,305
  2,413
  2,528
  2,648
  2,775
  2,908
  3,048
  3,196
  3,351
Adjusted assets (=assets-cash), $m
  1,022
  1,042
  1,066
  1,093
  1,124
  1,158
  1,196
  1,236
  1,280
  1,328
  1,379
  1,433
  1,492
  1,554
  1,619
  1,689
  1,763
  1,842
  1,924
  2,012
  2,104
  2,202
  2,305
  2,413
  2,528
  2,648
  2,775
  2,908
  3,048
  3,196
  3,351
Revenue / Adjusted assets
  0.971
  0.971
  0.971
  0.972
  0.972
  0.972
  0.971
  0.972
  0.971
  0.971
  0.971
  0.971
  0.971
  0.970
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
Average production assets, $m
  181
  184
  188
  193
  199
  205
  211
  218
  226
  235
  244
  253
  264
  275
  286
  299
  312
  325
  340
  356
  372
  389
  407
  426
  447
  468
  490
  514
  539
  565
  592
Working capital, $m
  552
  94
  96
  99
  102
  105
  108
  112
  116
  120
  125
  129
  135
  140
  146
  153
  159
  166
  174
  182
  190
  199
  208
  218
  228
  239
  251
  263
  275
  289
  303
Total debt, $m
  319
  332
  347
  365
  384
  406
  430
  456
  484
  515
  548
  582
  620
  659
  701
  746
  793
  844
  897
  953
  1,012
  1,074
  1,140
  1,210
  1,283
  1,360
  1,441
  1,526
  1,616
  1,710
  1,810
Total liabilities, $m
  654
  667
  682
  700
  719
  741
  765
  791
  819
  850
  883
  917
  955
  994
  1,036
  1,081
  1,128
  1,179
  1,232
  1,288
  1,347
  1,409
  1,475
  1,545
  1,618
  1,695
  1,776
  1,861
  1,951
  2,045
  2,145
Total equity, $m
  828
  375
  384
  394
  405
  417
  430
  445
  461
  478
  496
  516
  537
  559
  583
  608
  635
  663
  693
  724
  758
  793
  830
  869
  910
  953
  999
  1,047
  1,097
  1,151
  1,206
Total liabilities and equity, $m
  1,482
  1,042
  1,066
  1,094
  1,124
  1,158
  1,195
  1,236
  1,280
  1,328
  1,379
  1,433
  1,492
  1,553
  1,619
  1,689
  1,763
  1,842
  1,925
  2,012
  2,105
  2,202
  2,305
  2,414
  2,528
  2,648
  2,775
  2,908
  3,048
  3,196
  3,351
Debt-to-equity ratio
  0.385
  0.880
  0.900
  0.930
  0.950
  0.970
  1.000
  1.030
  1.050
  1.080
  1.100
  1.130
  1.150
  1.180
  1.200
  1.230
  1.250
  1.270
  1.290
  1.320
  1.340
  1.360
  1.370
  1.390
  1.410
  1.430
  1.440
  1.460
  1.470
  1.490
  1.500
Adjusted equity ratio
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  46
  40
  42
  43
  45
  47
  49
  51
  54
  57
  60
  89
  92
  96
  99
  103
  108
  112
  117
  122
  127
  132
  138
  144
  151
  157
  164
  172
  180
  188
  197
Depreciation, amort., depletion, $m
  55
  55
  56
  56
  57
  57
  58
  59
  60
  60
  61
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
  41
  42
  44
  47
  49
  51
  54
  56
  59
  62
Funds from operations, $m
  86
  96
  97
  99
  102
  104
  107
  110
  114
  117
  121
  115
  120
  124
  129
  134
  140
  146
  152
  159
  165
  173
  180
  189
  197
  206
  216
  226
  236
  247
  259
Change in working capital, $m
  -35
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
Cash from operations, $m
  121
  94
  95
  97
  99
  101
  104
  107
  110
  113
  116
  110
  114
  119
  123
  128
  133
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  213
  223
  234
  245
Maintenance CAPEX, $m
  0
  -19
  -19
  -20
  -20
  -21
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -42
  -44
  -47
  -49
  -51
  -54
  -56
  -59
New CAPEX, $m
  -22
  -3
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
Cash from investing activities, $m
  -12
  -22
  -23
  -25
  -25
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -41
  -42
  -44
  -46
  -49
  -50
  -53
  -56
  -59
  -61
  -64
  -68
  -71
  -75
  -79
  -82
  -86
Free cash flow, $m
  109
  72
  72
  73
  73
  75
  76
  77
  79
  81
  83
  75
  78
  80
  83
  86
  89
  92
  96
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  151
  158
Issuance/(repayment) of debt, $m
  -9
  13
  15
  18
  20
  22
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
  99
Issuance/(repurchase) of shares, $m
  -72
  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  
  -109
  13
  15
  18
  20
  22
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
  99
Total cash flow (excl. dividends), $m
  0
  85
  87
  90
  93
  96
  100
  103
  107
  111
  116
  110
  115
  120
  125
  131
  137
  143
  149
  156
  163
  170
  178
  187
  195
  204
  214
  224
  235
  246
  258
Retained Cash Flow (-), $m
  -4
  -7
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
Prev. year cash balance distribution, $m
 
  460
  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
 
  537
  79
  80
  82
  84
  86
  89
  91
  94
  97
  91
  94
  98
  101
  106
  110
  114
  119
  124
  130
  135
  141
  148
  154
  161
  168
  176
  184
  193
  202
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
 
  515
  72
  70
  68
  65
  63
  60
  57
  54
  51
  43
  40
  37
  34
  31
  28
  25
  22
  19
  16
  14
  12
  10
  8
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  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

Electronics For Imaging, Inc. is engaged in digital printing, focused on the transformation of the printing, packaging, ceramic tile decoration, and textile industries from the use of traditional analog-based printing to digital on-demand printing. It operates through three segments. The Industrial Inkjet segment consists of its VUTEk and Matan super-wide and wide format display graphics, Reggiani textile, Jetrion label and packaging and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers; ceramic, water-based, and thermoforming ink, and digital inkjet printer parts, and professional services. The Productivity Software segment consists of a software suite that enables automated end-to-end business and production workflows for the print and packaging industry. The Fiery segment consists of digital front ends that transform digital copiers and printers into networked printing devices for the office, industrial and commercial printing markets.

FINANCIAL RATIOS  of  Electronics for Imaging (EFII)

Valuation Ratios
P/E Ratio 43.2
Price to Sales 2
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 16.4
Price to Free Cash Flow 20.1
Growth Rates
Sales Growth Rate 12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.2%
Cap. Spend. - 3 Yr. Gr. Rate -15.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 38.5%
Total Debt to Equity 38.5%
Interest Coverage 14
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.6%
Return On Equity 5.6%
Return On Equity - 3 Yr. Avg. 4.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 51.3%
Gross Margin - 3 Yr. Avg. 52.6%
EBITDA Margin 9.8%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin 5.6%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 4.5%
Net Profit Margin 4.6%
Net Profit Margin - 3 Yr. Avg. 4.3%
Effective Tax Rate -17.9%
Eff/ Tax Rate - 3 Yr. Avg. 3.9%
Payout Ratio 0%

EFII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EFII stock intrinsic value calculation we used $992 million for the last fiscal year's total revenue generated by Electronics for Imaging. The default revenue input number comes from 2016 income statement of Electronics for Imaging. 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 EFII stock valuation model: a) initial revenue growth rate of 2% 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 EFII is calculated based on our internal credit rating of Electronics for Imaging, 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 Electronics for Imaging.
    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 EFII stock the variable cost ratio is equal to 93.5%.

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 EFII 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 3.5% for Electronics for Imaging.

Corporate tax rate of 27% is the nominal tax rate for Electronics for Imaging. 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 EFII 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 EFII are equal to 18.2%.

Life of production assets of 9.6 years is the average useful life of capital assets used in Electronics for Imaging 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 EFII is equal to 9.3%. 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 - $828 million for Electronics for Imaging - 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 46.501 million for Electronics for Imaging 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 Electronics for Imaging at the current share price and the inputted number of shares is $2.0 billion.

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COMPANY NEWS

▶ Electronics for Imaging posts 2Q profit   [Sep-11-17 11:26PM  Associated Press]
▶ EFI Reports Second Quarter 2017 Results   [07:14AM  GlobeNewswire]
Financial statements of EFII
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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