Intrinsic value of Elbit Systems - ESLT

Previous Close

$149.14

  Intrinsic Value

$99.91

stock screener

  Rating & Target

sell

-33%

Previous close

$149.14

 
Intrinsic value

$99.91

 
Up/down potential

-33%

 
Rating

sell

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

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Elbit Systems (ESLT) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  4.89
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  3,260
  3,345
  3,440
  3,545
  3,660
  3,785
  3,921
  4,067
  4,224
  4,391
  4,570
  4,760
  4,963
  5,177
  5,404
  5,645
  5,899
  6,168
  6,452
  6,751
  7,067
  7,399
  7,750
  8,119
  8,508
  8,917
  9,347
  9,800
  10,276
  10,777
  11,304
Variable operating expenses, $m
 
  2,684
  2,758
  2,840
  2,930
  3,028
  3,134
  3,248
  3,370
  3,501
  3,641
  3,717
  3,874
  4,042
  4,219
  4,407
  4,606
  4,815
  5,037
  5,271
  5,517
  5,777
  6,051
  6,339
  6,642
  6,962
  7,298
  7,651
  8,023
  8,414
  8,825
Fixed operating expenses, $m
 
  362
  371
  380
  390
  399
  409
  420
  430
  441
  452
  463
  475
  487
  499
  511
  524
  537
  551
  564
  578
  593
  608
  623
  638
  654
  671
  688
  705
  722
  740
Total operating expenses, $m
  2,961
  3,046
  3,129
  3,220
  3,320
  3,427
  3,543
  3,668
  3,800
  3,942
  4,093
  4,180
  4,349
  4,529
  4,718
  4,918
  5,130
  5,352
  5,588
  5,835
  6,095
  6,370
  6,659
  6,962
  7,280
  7,616
  7,969
  8,339
  8,728
  9,136
  9,565
Operating income, $m
  299
  299
  311
  325
  340
  358
  378
  400
  423
  449
  478
  581
  613
  649
  686
  726
  769
  815
  864
  916
  971
  1,030
  1,092
  1,157
  1,227
  1,301
  1,379
  1,461
  1,549
  1,641
  1,738
EBITDA, $m
  422
  411
  423
  438
  456
  475
  496
  520
  545
  573
  603
  636
  671
  709
  749
  792
  838
  887
  939
  995
  1,053
  1,116
  1,182
  1,252
  1,326
  1,405
  1,488
  1,575
  1,668
  1,766
  1,870
Interest expense (income), $m
  6
  6
  8
  11
  14
  17
  20
  24
  28
  32
  37
  42
  47
  53
  59
  65
  72
  78
  86
  94
  102
  111
  120
  129
  139
  150
  161
  173
  186
  199
  212
Earnings before tax, $m
  279
  293
  302
  314
  326
  341
  357
  375
  395
  417
  441
  539
  566
  596
  628
  662
  698
  737
  778
  822
  869
  919
  972
  1,028
  1,088
  1,151
  1,217
  1,288
  1,363
  1,442
  1,526
Tax expense, $m
  45
  79
  82
  85
  88
  92
  96
  101
  107
  113
  119
  145
  153
  161
  169
  179
  188
  199
  210
  222
  235
  248
  262
  278
  294
  311
  329
  348
  368
  389
  412
Net income, $m
  237
  214
  221
  229
  238
  249
  261
  274
  289
  304
  322
  393
  413
  435
  458
  483
  510
  538
  568
  600
  634
  671
  709
  750
  794
  840
  889
  940
  995
  1,053
  1,114

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  245
  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
  4,352
  4,213
  4,332
  4,465
  4,610
  4,768
  4,938
  5,122
  5,320
  5,531
  5,756
  5,995
  6,250
  6,520
  6,806
  7,109
  7,430
  7,768
  8,125
  8,502
  8,900
  9,319
  9,761
  10,225
  10,715
  11,230
  11,772
  12,343
  12,943
  13,574
  14,237
Adjusted assets (=assets-cash), $m
  4,107
  4,213
  4,332
  4,465
  4,610
  4,768
  4,938
  5,122
  5,320
  5,531
  5,756
  5,995
  6,250
  6,520
  6,806
  7,109
  7,430
  7,768
  8,125
  8,502
  8,900
  9,319
  9,761
  10,225
  10,715
  11,230
  11,772
  12,343
  12,943
  13,574
  14,237
Revenue / Adjusted assets
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
  0.794
Average production assets, $m
  299
  308
  316
  326
  337
  348
  361
  374
  389
  404
  420
  438
  457
  476
  497
  519
  543
  567
  594
  621
  650
  681
  713
  747
  783
  820
  860
  902
  945
  992
  1,040
Working capital, $m
  497
  498
  513
  528
  545
  564
  584
  606
  629
  654
  681
  709
  739
  771
  805
  841
  879
  919
  961
  1,006
  1,053
  1,102
  1,155
  1,210
  1,268
  1,329
  1,393
  1,460
  1,531
  1,606
  1,684
Total debt, $m
  406
  238
  313
  395
  486
  584
  691
  805
  928
  1,060
  1,200
  1,349
  1,508
  1,676
  1,854
  2,043
  2,243
  2,454
  2,676
  2,911
  3,159
  3,420
  3,695
  3,984
  4,289
  4,610
  4,948
  5,304
  5,677
  6,070
  6,484
Total liabilities, $m
  2,792
  2,624
  2,699
  2,781
  2,872
  2,970
  3,077
  3,191
  3,314
  3,446
  3,586
  3,735
  3,894
  4,062
  4,240
  4,429
  4,629
  4,840
  5,062
  5,297
  5,545
  5,806
  6,081
  6,370
  6,675
  6,996
  7,334
  7,690
  8,063
  8,456
  8,870
Total equity, $m
  1,560
  1,588
  1,633
  1,683
  1,738
  1,797
  1,862
  1,931
  2,006
  2,085
  2,170
  2,260
  2,356
  2,458
  2,566
  2,680
  2,801
  2,929
  3,063
  3,205
  3,355
  3,513
  3,680
  3,855
  4,040
  4,234
  4,438
  4,653
  4,879
  5,117
  5,367
Total liabilities and equity, $m
  4,352
  4,212
  4,332
  4,464
  4,610
  4,767
  4,939
  5,122
  5,320
  5,531
  5,756
  5,995
  6,250
  6,520
  6,806
  7,109
  7,430
  7,769
  8,125
  8,502
  8,900
  9,319
  9,761
  10,225
  10,715
  11,230
  11,772
  12,343
  12,942
  13,573
  14,237
Debt-to-equity ratio
  0.260
  0.150
  0.190
  0.230
  0.280
  0.330
  0.370
  0.420
  0.460
  0.510
  0.550
  0.600
  0.640
  0.680
  0.720
  0.760
  0.800
  0.840
  0.870
  0.910
  0.940
  0.970
  1.000
  1.030
  1.060
  1.090
  1.110
  1.140
  1.160
  1.190
  1.210
Adjusted equity ratio
  0.321
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  237
  214
  221
  229
  238
  249
  261
  274
  289
  304
  322
  393
  413
  435
  458
  483
  510
  538
  568
  600
  634
  671
  709
  750
  794
  840
  889
  940
  995
  1,053
  1,114
Depreciation, amort., depletion, $m
  123
  112
  113
  114
  115
  117
  118
  120
  122
  124
  126
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
  120
  126
  132
Funds from operations, $m
  73
  325
  333
  343
  354
  366
  379
  394
  410
  428
  447
  449
  471
  495
  521
  549
  578
  610
  643
  679
  717
  757
  800
  845
  893
  944
  998
  1,054
  1,115
  1,178
  1,245
Change in working capital, $m
  -135
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  67
  71
  75
  78
Cash from operations, $m
  208
  313
  319
  327
  336
  347
  359
  372
  387
  403
  421
  420
  441
  463
  487
  513
  540
  570
  601
  634
  670
  707
  748
  790
  835
  883
  933
  987
  1,044
  1,104
  1,167
Maintenance CAPEX, $m
  0
  -38
  -39
  -40
  -41
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -95
  -99
  -104
  -109
  -114
  -120
  -126
New CAPEX, $m
  -124
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
Cash from investing activities, $m
  -118
  -47
  -48
  -50
  -52
  -55
  -56
  -59
  -61
  -64
  -67
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -131
  -137
  -144
  -151
  -158
  -166
  -174
Free cash flow, $m
  90
  266
  272
  277
  284
  293
  302
  313
  325
  339
  353
  350
  367
  386
  406
  428
  451
  476
  503
  532
  562
  595
  629
  666
  705
  746
  790
  836
  886
  938
  993
Issuance/(repayment) of debt, $m
  -99
  66
  75
  82
  90
  98
  106
  115
  123
  131
  140
  149
  159
  168
  178
  189
  200
  211
  223
  235
  248
  261
  275
  290
  305
  321
  338
  355
  374
  393
  413
Issuance/(repurchase) of shares, $m
  1
  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  
  -99
  66
  75
  82
  90
  98
  106
  115
  123
  131
  140
  149
  159
  168
  178
  189
  200
  211
  223
  235
  248
  261
  275
  290
  305
  321
  338
  355
  374
  393
  413
Total cash flow (excl. dividends), $m
  -9
  333
  346
  360
  375
  391
  409
  428
  448
  470
  493
  499
  526
  554
  584
  617
  651
  687
  726
  766
  810
  856
  904
  955
  1,010
  1,067
  1,128
  1,192
  1,259
  1,331
  1,406
Retained Cash Flow (-), $m
  -169
  -39
  -45
  -50
  -55
  -60
  -64
  -69
  -74
  -80
  -85
  -90
  -96
  -102
  -108
  -114
  -121
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -185
  -194
  -204
  -215
  -226
  -238
  -250
Prev. year cash balance distribution, $m
 
  11
  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
 
  305
  301
  310
  320
  332
  344
  358
  374
  390
  409
  409
  430
  452
  476
  502
  530
  559
  591
  624
  660
  698
  738
  780
  825
  873
  923
  977
  1,033
  1,093
  1,156
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
 
  292
  276
  270
  264
  257
  250
  242
  234
  224
  214
  194
  183
  172
  160
  147
  135
  122
  109
  96
  84
  72
  61
  51
  42
  34
  27
  21
  16
  12
  9
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

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 (ESLT)

Valuation Ratios
P/E Ratio 26.9
Price to Sales 2
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 30.7
Price to Free Cash Flow 75.9
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 $3260 million for the last fiscal year's total revenue generated by Elbit Systems. The default revenue input number comes from 2016 income statement of Elbit Systems. 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 2.6% 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 4.3%, whose default value for ESLT is calculated based on our internal credit rating of Elbit Systems, 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.
    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 80.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $353 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 3.5% for Elbit Systems.

Corporate tax rate of 27% is the nominal tax rate for Elbit Systems. 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 9.2%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Elbit Systems 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 14.9%. 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 - $1560 million for Elbit Systems - 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 42.914 million for Elbit Systems 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 at the current share price and the inputted number of shares is $6.4 billion.

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COMPANY NEWS

▶ Elbit Systems Response to Press Reports   [07:59AM  PR Newswire]
▶ North Korea's missile has more advanced tech   [Nov-30-17 11:42AM  Yahoo Finance Video]
▶ Elbit posts 3Q profit   [05:01AM  Associated Press]
▶ Cyberbit Opens New Office in Germany   [Oct-04-17 03:00AM  PR Newswire]
▶ Elbit Systems to Reorganize the Business of CYBERBIT   [Sep-18-17 03:09AM  PR Newswire]
▶ Elbit posts 2Q profit   [Aug-15-17 11:22PM  Associated Press]
▶ [$$] Israel Aerospace Industries hunts for US acquisitions   [Aug-13-17 10:47AM  Financial Times]
▶ Aerospace business looks to sign bigger lease at San Antonio airport   [Aug-03-17 04:05PM  American City Business Journals]
▶ Cyberbit Opens Singapore Office   [Jul-23-17 08:00PM  PR Newswire]
Financial statements of ESLT
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