Intrinsic value of Elbit Systems Ltd. - ESLT

Previous Close

$154.56

  Intrinsic Value

$85.29

stock screener

  Rating & Target

sell

-45%

Previous close

$154.56

 
Intrinsic value

$85.29

 
Up/down potential

-45%

 
Rating

sell

We calculate the intrinsic value of ESLT 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 6.6

 

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, %
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  3,500
  3,630
  3,771
  3,921
  4,081
  4,251
  4,432
  4,624
  4,827
  5,043
  5,270
  5,511
  5,764
  6,032
  6,314
  6,612
  6,925
  7,255
  7,603
  7,969
  8,353
  8,758
  9,184
  9,632
  10,103
  10,598
  11,118
  11,665
  12,240
  12,843
Variable operating expenses, $m
  2,889
  2,995
  3,109
  3,231
  3,361
  3,499
  3,646
  3,801
  3,966
  4,141
  4,276
  4,471
  4,677
  4,894
  5,123
  5,364
  5,619
  5,886
  6,168
  6,465
  6,777
  7,106
  7,451
  7,815
  8,197
  8,598
  9,020
  9,464
  9,930
  10,420
Fixed operating expenses, $m
  280
  286
  292
  299
  305
  312
  319
  326
  333
  341
  348
  356
  364
  372
  380
  388
  397
  405
  414
  423
  433
  442
  452
  462
  472
  482
  493
  504
  515
  526
Total operating expenses, $m
  3,169
  3,281
  3,401
  3,530
  3,666
  3,811
  3,965
  4,127
  4,299
  4,482
  4,624
  4,827
  5,041
  5,266
  5,503
  5,752
  6,016
  6,291
  6,582
  6,888
  7,210
  7,548
  7,903
  8,277
  8,669
  9,080
  9,513
  9,968
  10,445
  10,946
Operating income, $m
  331
  349
  369
  391
  415
  440
  468
  497
  528
  561
  646
  684
  724
  767
  812
  859
  910
  964
  1,020
  1,080
  1,143
  1,210
  1,281
  1,355
  1,434
  1,517
  1,605
  1,697
  1,794
  1,897
EBITDA, $m
  463
  485
  508
  534
  561
  590
  622
  656
  692
  730
  771
  814
  860
  909
  961
  1,016
  1,074
  1,135
  1,200
  1,269
  1,341
  1,417
  1,498
  1,583
  1,673
  1,768
  1,868
  1,973
  2,084
  2,201
Interest expense (income), $m
  6
  36
  45
  55
  65
  76
  87
  99
  112
  126
  141
  157
  173
  190
  209
  228
  248
  270
  292
  316
  341
  368
  395
  425
  455
  488
  522
  557
  595
  634
  676
Earnings before tax, $m
  295
  304
  315
  327
  339
  353
  368
  384
  402
  420
  490
  511
  534
  558
  584
  611
  640
  671
  704
  739
  776
  815
  856
  900
  946
  995
  1,047
  1,102
  1,160
  1,221
Tax expense, $m
  80
  82
  85
  88
  92
  95
  99
  104
  108
  113
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  209
  220
  231
  243
  256
  269
  283
  298
  313
  330
Net income, $m
  215
  222
  230
  238
  248
  258
  269
  281
  293
  307
  358
  373
  390
  407
  426
  446
  467
  490
  514
  539
  566
  595
  625
  657
  691
  727
  764
  804
  847
  891

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
  4,888
  5,071
  5,267
  5,476
  5,700
  5,937
  6,190
  6,458
  6,742
  7,043
  7,361
  7,696
  8,051
  8,424
  8,819
  9,234
  9,672
  10,133
  10,618
  11,129
  11,667
  12,232
  12,827
  13,452
  14,110
  14,801
  15,528
  16,292
  17,094
  17,938
Adjusted assets (=assets-cash), $m
  4,888
  5,071
  5,267
  5,476
  5,700
  5,937
  6,190
  6,458
  6,742
  7,043
  7,361
  7,696
  8,051
  8,424
  8,819
  9,234
  9,672
  10,133
  10,618
  11,129
  11,667
  12,232
  12,827
  13,452
  14,110
  14,801
  15,528
  16,292
  17,094
  17,938
Revenue / Adjusted assets
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
Average production assets, $m
  885
  919
  954
  992
  1,032
  1,076
  1,121
  1,170
  1,221
  1,276
  1,333
  1,394
  1,458
  1,526
  1,597
  1,673
  1,752
  1,836
  1,924
  2,016
  2,113
  2,216
  2,324
  2,437
  2,556
  2,681
  2,813
  2,951
  3,097
  3,249
Working capital, $m
  570
  592
  615
  639
  665
  693
  722
  754
  787
  822
  859
  898
  940
  983
  1,029
  1,078
  1,129
  1,183
  1,239
  1,299
  1,362
  1,428
  1,497
  1,570
  1,647
  1,727
  1,812
  1,901
  1,995
  2,093
Total debt, $m
  557
  674
  799
  933
  1,075
  1,227
  1,388
  1,559
  1,741
  1,932
  2,135
  2,349
  2,575
  2,814
  3,065
  3,331
  3,610
  3,904
  4,214
  4,540
  4,882
  5,243
  5,623
  6,022
  6,441
  6,882
  7,346
  7,833
  8,345
  8,883
Total liabilities, $m
  3,118
  3,235
  3,360
  3,494
  3,636
  3,788
  3,949
  4,120
  4,302
  4,493
  4,696
  4,910
  5,136
  5,375
  5,626
  5,891
  6,171
  6,465
  6,775
  7,100
  7,443
  7,804
  8,184
  8,583
  9,002
  9,443
  9,907
  10,394
  10,906
  11,444
Total equity, $m
  1,769
  1,836
  1,906
  1,982
  2,063
  2,149
  2,241
  2,338
  2,441
  2,549
  2,665
  2,786
  2,914
  3,050
  3,192
  3,343
  3,501
  3,668
  3,844
  4,029
  4,223
  4,428
  4,643
  4,870
  5,108
  5,358
  5,621
  5,898
  6,188
  6,493
Total liabilities and equity, $m
  4,887
  5,071
  5,266
  5,476
  5,699
  5,937
  6,190
  6,458
  6,743
  7,042
  7,361
  7,696
  8,050
  8,425
  8,818
  9,234
  9,672
  10,133
  10,619
  11,129
  11,666
  12,232
  12,827
  13,453
  14,110
  14,801
  15,528
  16,292
  17,094
  17,937
Debt-to-equity ratio
  0.320
  0.370
  0.420
  0.470
  0.520
  0.570
  0.620
  0.670
  0.710
  0.760
  0.800
  0.840
  0.880
  0.920
  0.960
  1.000
  1.030
  1.060
  1.100
  1.130
  1.160
  1.180
  1.210
  1.240
  1.260
  1.280
  1.310
  1.330
  1.350
  1.370
Adjusted equity ratio
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  215
  222
  230
  238
  248
  258
  269
  281
  293
  307
  358
  373
  390
  407
  426
  446
  467
  490
  514
  539
  566
  595
  625
  657
  691
  727
  764
  804
  847
  891
Depreciation, amort., depletion, $m
  132
  135
  139
  142
  146
  150
  154
  159
  164
  169
  125
  130
  136
  143
  149
  156
  164
  172
  180
  188
  198
  207
  217
  228
  239
  251
  263
  276
  289
  304
Funds from operations, $m
  347
  357
  369
  381
  394
  408
  423
  439
  457
  476
  482
  503
  526
  550
  575
  602
  631
  661
  694
  728
  764
  802
  842
  885
  930
  977
  1,027
  1,080
  1,136
  1,195
Change in working capital, $m
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  69
  73
  77
  81
  85
  89
  94
  98
Cash from operations, $m
  328
  336
  346
  356
  368
  380
  394
  408
  424
  441
  445
  464
  485
  506
  529
  554
  580
  608
  637
  668
  701
  736
  773
  812
  853
  897
  943
  991
  1,042
  1,097
Maintenance CAPEX, $m
  -80
  -83
  -86
  -89
  -93
  -96
  -101
  -105
  -109
  -114
  -119
  -125
  -130
  -136
  -143
  -149
  -156
  -164
  -172
  -180
  -188
  -198
  -207
  -217
  -228
  -239
  -251
  -263
  -276
  -289
New CAPEX, $m
  -31
  -33
  -36
  -38
  -40
  -43
  -46
  -49
  -51
  -54
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -84
  -88
  -93
  -97
  -102
  -108
  -113
  -119
  -125
  -132
  -138
  -145
  -153
Cash from investing activities, $m
  -111
  -116
  -122
  -127
  -133
  -139
  -147
  -154
  -160
  -168
  -177
  -186
  -194
  -204
  -214
  -224
  -235
  -248
  -260
  -273
  -285
  -300
  -315
  -330
  -347
  -364
  -383
  -401
  -421
  -442
Free cash flow, $m
  217
  220
  224
  229
  235
  241
  247
  255
  263
  272
  268
  279
  290
  302
  315
  329
  344
  360
  378
  396
  415
  436
  458
  481
  506
  532
  560
  590
  621
  654
Issuance/(repayment) of debt, $m
  112
  117
  125
  134
  143
  152
  161
  171
  181
  192
  203
  214
  226
  239
  252
  265
  279
  294
  310
  326
  343
  361
  379
  399
  420
  441
  464
  487
  512
  538
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  
  112
  117
  125
  134
  143
  152
  161
  171
  181
  192
  203
  214
  226
  239
  252
  265
  279
  294
  310
  326
  343
  361
  379
  399
  420
  441
  464
  487
  512
  538
Total cash flow (excl. dividends), $m
  329
  337
  349
  363
  377
  392
  409
  426
  444
  464
  471
  493
  516
  541
  567
  594
  624
  655
  687
  722
  758
  797
  837
  880
  926
  973
  1,024
  1,077
  1,133
  1,193
Retained Cash Flow (-), $m
  -61
  -66
  -71
  -76
  -81
  -86
  -91
  -97
  -103
  -109
  -115
  -122
  -128
  -135
  -143
  -150
  -158
  -167
  -176
  -185
  -195
  -205
  -215
  -226
  -238
  -250
  -263
  -276
  -291
  -305
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
  268
  271
  278
  287
  296
  306
  317
  329
  341
  355
  356
  371
  388
  405
  424
  444
  465
  488
  512
  537
  564
  592
  622
  654
  688
  723
  761
  801
  843
  887
Discount rate, %
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
  256
  247
  242
  235
  228
  221
  212
  203
  194
  183
  166
  155
  144
  133
  121
  109
  98
  87
  76
  65
  55
  47
  38
  31
  25
  20
  15
  11
  8
  6
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

Elbit Systems Ltd. is an international technology company engaged in a range of programs across the world. The Company develops and supplies a portfolio of airborne, land and naval systems and products for defense, homeland security and commercial aviation applications. Its systems and products are installed on new platforms, and it also performs platform modernization programs. In addition, it provides a range of support services. The Company's activities include military aircraft and helicopter systems; helmet mounted systems; commercial aviation systems and aerostructures; unmanned aircraft and unmanned surface vessels; land vehicle systems; command, control, communications, computer and intelligence (C4I) systems; intelligence and cyber systems; electro-optic and countermeasures systems; electronic warfare and signal intelligence systems, and various commercial activities. It operates primarily in the defense and homeland security arenas.

FINANCIAL RATIOS  of  Elbit Systems Ltd. (ESLT)

Valuation Ratios
P/E Ratio 27.9
Price to Sales 2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 31.8
Price to Free Cash Flow 78.7
Growth Rates
Sales Growth Rate 4.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25.3%
Cap. Spend. - 3 Yr. Gr. Rate 14.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 11%
Total Debt to Equity 26%
Interest Coverage 48
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 12.3%
Ret/ On T. Cap. - 3 Yr. Avg. 10.8%
Return On Equity 16.1%
Return On Equity - 3 Yr. Avg. 15.3%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 29.4%
Gross Margin - 3 Yr. Avg. 28.7%
EBITDA Margin 12.5%
EBITDA Margin - 3 Yr. Avg. 11.9%
Operating Margin 9.2%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 8.6%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 7.3%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate 16.1%
Eff/ Tax Rate - 3 Yr. Avg. 15.9%
Payout Ratio 28.7%

ESLT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ESLT stock intrinsic value calculation we used $3378 million for the last fiscal year's total revenue generated by Elbit Systems Ltd.. The default revenue input number comes from 0001 income statement of Elbit Systems Ltd.. 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 ESLT stock valuation model: a) initial revenue growth rate of 3.6% 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 4.4%, whose default value for ESLT is calculated based on our internal credit rating of Elbit Systems Ltd., 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 Elbit Systems Ltd..
    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 ESLT stock the variable cost ratio is equal to 82.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $274 million in the base year in the intrinsic value calculation for ESLT 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 8.1% for Elbit Systems Ltd..

Corporate tax rate of 27% is the nominal tax rate for Elbit Systems Ltd.. 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 ESLT 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 ESLT are equal to 25.3%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Elbit Systems Ltd. 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 ESLT is equal to 16.3%. 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 - $1708.31 million for Elbit Systems Ltd. - 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 42.748 million for Elbit Systems Ltd. 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 Elbit Systems Ltd. at the current share price and the inputted number of shares is $6.6 billion.

RELATED COMPANIES Price Int.Val. Rating
HRS Harris Corpora 190.60 127.95  sell
GD General Dynami 171.25 568.59  str.buy
RADA RADA Electroni 3.35 18.46  str.buy
LLL L3 Technologie 246.76 2,051.80  str.buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.