Intrinsic value of Flex Ltd. - FLEX

Previous Close

$10.23

  Intrinsic Value

$16.53

stock screener

  Rating & Target

str. buy

+62%

Previous close

$10.23

 
Intrinsic value

$16.53

 
Up/down potential

+62%

 
Rating

str. buy

We calculate the intrinsic value of FLEX 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 5.3

 

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, %
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  26,179
  26,993
  27,883
  28,851
  29,896
  31,020
  32,225
  33,512
  34,885
  36,345
  37,896
  39,542
  41,284
  43,128
  45,077
  47,136
  49,309
  51,602
  54,020
  56,567
  59,251
  62,078
  65,053
  68,185
  71,480
  74,946
  78,592
  82,425
  86,456
  90,693
Variable operating expenses, $m
  25,623
  26,412
  27,276
  28,215
  29,229
  30,319
  31,488
  32,737
  34,069
  35,486
  36,767
  38,363
  40,054
  41,843
  43,734
  45,731
  47,840
  50,064
  52,410
  54,881
  57,485
  60,228
  63,114
  66,153
  69,350
  72,712
  76,249
  79,969
  83,879
  87,990
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
  25,623
  26,412
  27,276
  28,215
  29,229
  30,319
  31,488
  32,737
  34,069
  35,486
  36,767
  38,363
  40,054
  41,843
  43,734
  45,731
  47,840
  50,064
  52,410
  54,881
  57,485
  60,228
  63,114
  66,153
  69,350
  72,712
  76,249
  79,969
  83,879
  87,990
Operating income, $m
  556
  581
  607
  636
  667
  701
  736
  775
  816
  859
  1,129
  1,179
  1,230
  1,285
  1,344
  1,405
  1,470
  1,538
  1,610
  1,686
  1,766
  1,850
  1,939
  2,032
  2,130
  2,234
  2,342
  2,457
  2,577
  2,703
EBITDA, $m
  1,241
  1,280
  1,322
  1,368
  1,418
  1,471
  1,528
  1,589
  1,654
  1,723
  1,797
  1,875
  1,958
  2,045
  2,137
  2,235
  2,338
  2,447
  2,561
  2,682
  2,810
  2,944
  3,085
  3,233
  3,389
  3,554
  3,727
  3,908
  4,099
  4,300
Interest expense (income), $m
  127
  159
  176
  194
  214
  236
  260
  285
  313
  342
  373
  406
  442
  479
  519
  560
  605
  651
  701
  753
  808
  866
  927
  991
  1,058
  1,129
  1,204
  1,283
  1,366
  1,453
  1,544
Earnings before tax, $m
  397
  405
  413
  422
  431
  441
  451
  462
  474
  486
  723
  737
  751
  767
  783
  800
  818
  837
  857
  878
  900
  924
  948
  974
  1,001
  1,030
  1,060
  1,091
  1,124
  1,159
Tax expense, $m
  107
  109
  112
  114
  116
  119
  122
  125
  128
  131
  195
  199
  203
  207
  211
  216
  221
  226
  231
  237
  243
  249
  256
  263
  270
  278
  286
  295
  304
  313
Net income, $m
  290
  296
  301
  308
  314
  322
  329
  337
  346
  355
  528
  538
  549
  560
  572
  584
  597
  611
  626
  641
  657
  674
  692
  711
  731
  752
  773
  796
  821
  846

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
  14,113
  14,551
  15,032
  15,553
  16,116
  16,722
  17,372
  18,066
  18,806
  19,593
  20,429
  21,316
  22,256
  23,250
  24,300
  25,410
  26,582
  27,818
  29,121
  30,495
  31,941
  33,465
  35,069
  36,757
  38,534
  40,402
  42,368
  44,434
  46,607
  48,891
Adjusted assets (=assets-cash), $m
  14,113
  14,551
  15,032
  15,553
  16,116
  16,722
  17,372
  18,066
  18,806
  19,593
  20,429
  21,316
  22,256
  23,250
  24,300
  25,410
  26,582
  27,818
  29,121
  30,495
  31,941
  33,465
  35,069
  36,757
  38,534
  40,402
  42,368
  44,434
  46,607
  48,891
Revenue / Adjusted assets
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
  1.855
Average production assets, $m
  3,089
  3,185
  3,290
  3,404
  3,528
  3,660
  3,803
  3,954
  4,116
  4,289
  4,472
  4,666
  4,872
  5,089
  5,319
  5,562
  5,819
  6,089
  6,374
  6,675
  6,992
  7,325
  7,676
  8,046
  8,435
  8,844
  9,274
  9,726
  10,202
  10,702
Working capital, $m
  497
  513
  530
  548
  568
  589
  612
  637
  663
  691
  720
  751
  784
  819
  856
  896
  937
  980
  1,026
  1,075
  1,126
  1,179
  1,236
  1,296
  1,358
  1,424
  1,493
  1,566
  1,643
  1,723
Total debt, $m
  3,251
  3,593
  3,968
  4,375
  4,814
  5,287
  5,793
  6,335
  6,912
  7,526
  8,178
  8,870
  9,603
  10,378
  11,198
  12,063
  12,977
  13,941
  14,958
  16,029
  17,158
  18,346
  19,597
  20,914
  22,300
  23,757
  25,290
  26,902
  28,597
  30,379
Total liabilities, $m
  11,008
  11,350
  11,725
  12,131
  12,571
  13,043
  13,550
  14,091
  14,669
  15,283
  15,935
  16,627
  17,359
  18,135
  18,954
  19,820
  20,734
  21,698
  22,714
  23,786
  24,914
  26,103
  27,354
  28,671
  30,056
  31,514
  33,047
  34,659
  36,354
  38,135
Total equity, $m
  3,105
  3,201
  3,307
  3,422
  3,546
  3,679
  3,822
  3,974
  4,137
  4,310
  4,494
  4,690
  4,896
  5,115
  5,346
  5,590
  5,848
  6,120
  6,407
  6,709
  7,027
  7,362
  7,715
  8,087
  8,477
  8,888
  9,321
  9,776
  10,254
  10,756
Total liabilities and equity, $m
  14,113
  14,551
  15,032
  15,553
  16,117
  16,722
  17,372
  18,065
  18,806
  19,593
  20,429
  21,317
  22,255
  23,250
  24,300
  25,410
  26,582
  27,818
  29,121
  30,495
  31,941
  33,465
  35,069
  36,758
  38,533
  40,402
  42,368
  44,435
  46,608
  48,891
Debt-to-equity ratio
  1.050
  1.120
  1.200
  1.280
  1.360
  1.440
  1.520
  1.590
  1.670
  1.750
  1.820
  1.890
  1.960
  2.030
  2.090
  2.160
  2.220
  2.280
  2.330
  2.390
  2.440
  2.490
  2.540
  2.590
  2.630
  2.670
  2.710
  2.750
  2.790
  2.820
Adjusted equity ratio
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  290
  296
  301
  308
  314
  322
  329
  337
  346
  355
  528
  538
  549
  560
  572
  584
  597
  611
  626
  641
  657
  674
  692
  711
  731
  752
  773
  796
  821
  846
Depreciation, amort., depletion, $m
  685
  699
  715
  732
  751
  770
  792
  814
  838
  864
  667
  696
  727
  760
  794
  830
  868
  909
  951
  996
  1,044
  1,093
  1,146
  1,201
  1,259
  1,320
  1,384
  1,452
  1,523
  1,597
Funds from operations, $m
  975
  995
  1,017
  1,040
  1,065
  1,092
  1,121
  1,151
  1,184
  1,219
  1,195
  1,234
  1,276
  1,319
  1,366
  1,414
  1,466
  1,520
  1,577
  1,637
  1,701
  1,768
  1,838
  1,912
  1,990
  2,072
  2,158
  2,248
  2,343
  2,443
Change in working capital, $m
  14
  15
  17
  18
  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
Cash from operations, $m
  961
  980
  1,000
  1,022
  1,045
  1,071
  1,098
  1,127
  1,158
  1,191
  1,166
  1,203
  1,243
  1,284
  1,329
  1,375
  1,424
  1,476
  1,531
  1,589
  1,650
  1,714
  1,781
  1,852
  1,927
  2,006
  2,088
  2,175
  2,267
  2,363
Maintenance CAPEX, $m
  -448
  -461
  -475
  -491
  -508
  -527
  -546
  -568
  -590
  -614
  -640
  -667
  -696
  -727
  -760
  -794
  -830
  -868
  -909
  -951
  -996
  -1,044
  -1,093
  -1,146
  -1,201
  -1,259
  -1,320
  -1,384
  -1,452
  -1,523
New CAPEX, $m
  -88
  -96
  -105
  -114
  -123
  -133
  -142
  -152
  -162
  -172
  -183
  -194
  -206
  -218
  -230
  -243
  -256
  -271
  -285
  -301
  -317
  -334
  -351
  -370
  -389
  -409
  -430
  -452
  -476
  -500
Cash from investing activities, $m
  -536
  -557
  -580
  -605
  -631
  -660
  -688
  -720
  -752
  -786
  -823
  -861
  -902
  -945
  -990
  -1,037
  -1,086
  -1,139
  -1,194
  -1,252
  -1,313
  -1,378
  -1,444
  -1,516
  -1,590
  -1,668
  -1,750
  -1,836
  -1,928
  -2,023
Free cash flow, $m
  426
  422
  419
  416
  414
  411
  409
  408
  406
  404
  343
  342
  341
  340
  339
  338
  338
  337
  337
  337
  337
  337
  337
  337
  337
  338
  338
  339
  339
  340
Issuance/(repayment) of debt, $m
  311
  342
  374
  407
  439
  473
  507
  541
  577
  614
  652
  692
  733
  775
  820
  866
  914
  964
  1,017
  1,071
  1,129
  1,188
  1,251
  1,317
  1,386
  1,458
  1,533
  1,612
  1,695
  1,782
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  
  311
  342
  374
  407
  439
  473
  507
  541
  577
  614
  652
  692
  733
  775
  820
  866
  914
  964
  1,017
  1,071
  1,129
  1,188
  1,251
  1,317
  1,386
  1,458
  1,533
  1,612
  1,695
  1,782
Total cash flow (excl. dividends), $m
  736
  765
  794
  823
  853
  884
  916
  949
  983
  1,019
  995
  1,033
  1,073
  1,115
  1,159
  1,204
  1,252
  1,302
  1,354
  1,408
  1,465
  1,525
  1,588
  1,654
  1,723
  1,795
  1,871
  1,951
  2,034
  2,122
Retained Cash Flow (-), $m
  -86
  -97
  -106
  -115
  -124
  -133
  -143
  -153
  -163
  -173
  -184
  -195
  -207
  -219
  -231
  -244
  -258
  -272
  -287
  -302
  -318
  -335
  -353
  -371
  -391
  -411
  -432
  -455
  -478
  -503
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
  650
  668
  688
  708
  729
  751
  773
  796
  820
  845
  811
  838
  867
  896
  927
  960
  994
  1,030
  1,067
  1,106
  1,147
  1,190
  1,235
  1,283
  1,332
  1,384
  1,439
  1,496
  1,556
  1,619
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
  623
  612
  599
  583
  565
  545
  522
  498
  471
  443
  385
  358
  329
  301
  272
  244
  216
  190
  164
  141
  119
  99
  81
  65
  52
  40
  31
  23
  17
  12
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

Flex Ltd, formerly Flextronics International Ltd. provides design, engineering, manufacturing, and supply chain services and solutions. The Company designs, builds, ships and services packaged consumer electronics and industrial products for original equipment manufacturers (OEMs). Its segments include High Reliability Solutions (HRS), Consumer Technologies Group (CTG), Industrial and Emerging Industries (IEI) and Communications & Enterprise Compute (CEC). The HRS segment consists of its medical business, automotive business, and defense and aerospace businesses. The CTG segment includes its mobile devices business, consumer electronics business and high-volume computing business. The IEI segment consists of semiconductor and capital equipment, office solutions, household industrial and lifestyle, industrial automation and kiosks, energy and metering, and lighting. The CEC segment includes radio access base stations, remote radio heads, and small cells for wireless infrastructure.

FINANCIAL RATIOS  of  Flex Ltd. (FLEX)

Valuation Ratios
P/E Ratio 17
Price to Sales 0.2
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow 8.7
Growth Rates
Sales Growth Rate -2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.7%
Cap. Spend. - 3 Yr. Gr. Rate -3%
Financial Strength
Quick Ratio 30
Current Ratio 0.1
LT Debt to Equity 109.3%
Total Debt to Equity 111.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 12.3%
Return On Equity - 3 Yr. Avg. 18.9%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 6.5%
Gross Margin - 3 Yr. Avg. 6.3%
EBITDA Margin 4.6%
EBITDA Margin - 3 Yr. Avg. 4.7%
Operating Margin 2%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 1.6%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 1.3%
Net Profit Margin - 3 Yr. Avg. 1.8%
Effective Tax Rate 13.7%
Eff/ Tax Rate - 3 Yr. Avg. 8.9%
Payout Ratio 0%

FLEX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FLEX stock intrinsic value calculation we used $25441 million for the last fiscal year's total revenue generated by Flex Ltd.. The default revenue input number comes from 0001 income statement of Flex 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 FLEX stock valuation model: a) initial revenue growth rate of 2.9% 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 FLEX is calculated based on our internal credit rating of Flex 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 Flex 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 FLEX stock the variable cost ratio is equal to 97.9%.

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 FLEX 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 Flex Ltd..

Corporate tax rate of 27% is the nominal tax rate for Flex 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 FLEX 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 FLEX are equal to 11.8%.

Life of production assets of 6.7 years is the average useful life of capital assets used in Flex 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 FLEX is equal to 1.9%. 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 - $3018.573 million for Flex 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 521.823 million for Flex 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 Flex Ltd. at the current share price and the inputted number of shares is $5.3 billion.

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