Intrinsic value of IEC Electronics - IEC

Previous Close

$5.14

  Intrinsic Value

$3.77

stock screener

  Rating & Target

sell

-27%

Previous close

$5.14

 
Intrinsic value

$3.77

 
Up/down potential

-27%

 
Rating

sell

We calculate the intrinsic value of IEC 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 0.1

 

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, %
  12.40
  11.66
  10.99
  10.39
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
Revenue, $m
  108
  121
  134
  148
  163
  178
  194
  211
  228
  246
  265
  284
  304
  325
  347
  369
  393
  417
  443
  469
  497
  526
  556
  588
  620
  655
  691
  728
  767
  808
Variable operating expenses, $m
  89
  100
  111
  122
  134
  147
  160
  173
  188
  202
  218
  234
  250
  267
  285
  304
  323
  343
  364
  386
  409
  433
  458
  484
  511
  539
  568
  599
  632
  665
Fixed operating expenses, $m
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  27
  28
  29
  29
  30
  31
  31
  32
  33
Total operating expenses, $m
  106
  118
  129
  141
  153
  166
  180
  193
  209
  223
  240
  256
  273
  290
  309
  328
  348
  368
  390
  412
  436
  460
  486
  513
  540
  569
  599
  630
  664
  698
Operating income, $m
  2
  4
  6
  8
  10
  12
  15
  17
  20
  22
  25
  28
  31
  34
  38
  41
  45
  49
  53
  57
  61
  66
  70
  75
  81
  86
  92
  98
  104
  110
EBITDA, $m
  5
  7
  9
  12
  14
  17
  20
  23
  26
  29
  32
  36
  40
  43
  47
  51
  56
  60
  65
  70
  75
  80
  86
  91
  97
  104
  110
  117
  125
  132
Interest expense (income), $m
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
Earnings before tax, $m
  1
  2
  4
  6
  8
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  69
  74
  79
  84
  89
  95
Tax expense, $m
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
Net income, $m
  1
  2
  3
  4
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69

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
  59
  66
  73
  81
  89
  97
  106
  115
  125
  134
  145
  155
  166
  178
  189
  202
  215
  228
  242
  257
  272
  287
  304
  321
  339
  358
  377
  398
  419
  442
Adjusted assets (=assets-cash), $m
  59
  66
  73
  81
  89
  97
  106
  115
  125
  134
  145
  155
  166
  178
  189
  202
  215
  228
  242
  257
  272
  287
  304
  321
  339
  358
  377
  398
  419
  442
Revenue / Adjusted assets
  1.831
  1.833
  1.836
  1.827
  1.831
  1.835
  1.830
  1.835
  1.824
  1.836
  1.828
  1.832
  1.831
  1.826
  1.836
  1.827
  1.828
  1.829
  1.831
  1.825
  1.827
  1.833
  1.829
  1.832
  1.829
  1.830
  1.833
  1.829
  1.831
  1.828
Average production assets, $m
  16
  18
  20
  22
  24
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  55
  59
  63
  66
  70
  75
  79
  83
  88
  93
  98
  104
  109
  115
  121
Working capital, $m
  21
  23
  26
  28
  31
  34
  37
  40
  44
  47
  51
  55
  58
  62
  67
  71
  75
  80
  85
  90
  95
  101
  107
  113
  119
  126
  133
  140
  147
  155
Total debt, $m
  26
  31
  36
  41
  47
  53
  59
  66
  73
  80
  87
  95
  103
  111
  120
  129
  138
  148
  158
  169
  180
  191
  203
  215
  228
  242
  256
  271
  287
  303
Total liabilities, $m
  43
  48
  53
  59
  65
  71
  77
  83
  90
  97
  105
  112
  120
  129
  137
  146
  156
  165
  175
  186
  197
  208
  220
  233
  246
  259
  274
  288
  304
  320
Total equity, $m
  16
  18
  20
  22
  24
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  55
  59
  63
  67
  71
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
Total liabilities and equity, $m
  59
  66
  73
  81
  89
  98
  106
  115
  124
  134
  145
  155
  166
  178
  189
  201
  215
  228
  242
  257
  272
  287
  304
  321
  339
  357
  378
  397
  419
  441
Debt-to-equity ratio
  1.570
  1.680
  1.770
  1.850
  1.920
  1.990
  2.040
  2.090
  2.130
  2.160
  2.200
  2.230
  2.250
  2.280
  2.300
  2.320
  2.340
  2.360
  2.370
  2.390
  2.400
  2.420
  2.430
  2.440
  2.450
  2.460
  2.470
  2.480
  2.490
  2.490
Adjusted equity ratio
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  2
  3
  4
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  3
  5
  7
  8
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  35
  38
  41
  45
  48
  52
  55
  59
  63
  67
  72
  76
  81
  86
  91
Change in working capital, $m
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  1
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  74
  79
  83
Maintenance CAPEX, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Cash from investing activities, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
Free cash flow, $m
  -3
  -2
  -1
  0
  1
  2
  4
  5
  6
  8
  9
  11
  13
  15
  16
  18
  20
  22
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  53
  56
Issuance/(repayment) of debt, $m
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
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
Cash from financing (excl. dividends), $m  
  6
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
Total cash flow (excl. dividends), $m
  3
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  50
  53
  57
  60
  64
  68
  73
Retained Cash Flow (-), $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
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
  1
  1
  2
  3
  5
  6
  7
  9
  11
  12
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  39
  42
  45
  48
  51
  55
  59
  62
  66
Discount rate, %
  9.60
  10.08
  10.58
  11.11
  11.67
  12.25
  12.86
  13.51
  14.18
  14.89
  15.64
  16.42
  17.24
  18.10
  19.01
  19.96
  20.96
  22.00
  23.10
  24.26
  25.47
  26.75
  28.08
  29.49
  30.96
  32.51
  34.13
  35.84
  37.63
  39.51
PV of cash for distribution, $m
  1
  1
  1
  2
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  97.5
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1

IEC Electronics Corp. provides electronic manufacturing services (EMS) to a range of technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with an array of manufacturing services encompassing electronics, interconnect solutions and precision metalworking. It offers its customers a range of manufacturing services, combined with scientific technical support to ensure their products perform for the critical applications they are intended for. Its products are distributed to and through original equipment manufacturers (OEMs). Its capabilities include design and test development, analysis and testing laboratory, custom functional test design and component risk mitigation.

FINANCIAL RATIOS  of  IEC Electronics (IEC)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.5
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 26.2
Price to Free Cash Flow -26.2
Growth Rates
Sales Growth Rate -24.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 142.9%
Total Debt to Equity 150%
Interest Coverage 1
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -3.1%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -11.1%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 11.5%
Gross Margin - 3 Yr. Avg. 13.3%
EBITDA Margin 4.2%
EBITDA Margin - 3 Yr. Avg. 4.3%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. 1.4%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0.3%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -1.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

IEC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IEC stock intrinsic value calculation we used $96.455 million for the last fiscal year's total revenue generated by IEC Electronics. The default revenue input number comes from 0001 income statement of IEC Electronics. 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 IEC stock valuation model: a) initial revenue growth rate of 12.4% 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 9.6%, whose default value for IEC is calculated based on our internal credit rating of IEC Electronics, 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 IEC Electronics.
    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 IEC stock the variable cost ratio is equal to 82.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17 million in the base year in the intrinsic value calculation for IEC 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 IEC Electronics.

Corporate tax rate of 27% is the nominal tax rate for IEC Electronics. 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 IEC 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 IEC are equal to 15%.

Life of production assets of 5.5 years is the average useful life of capital assets used in IEC Electronics 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 IEC is equal to 19.2%. 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 - $14.429 million for IEC Electronics - 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 10.289 million for IEC Electronics 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 IEC Electronics at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ IEC Announces Fiscal 2018 Third Quarter Results   [Aug-08-18 08:30AM  GlobeNewswire]
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▶ IEC Announces Fiscal 2018 Second Quarter Results   [May-09-18 08:30AM  GlobeNewswire]
▶ NY firm to remain upstate, create and retain 800-plus jobs   [Feb-28-18 04:03PM  Associated Press]
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▶ What Does IEC Electronics Corps (IEC) Share Price Indicate?   [Sep-14-17 07:13PM  Simply Wall St.]
▶ IEC Announces Fiscal 2017 Second Quarter Results   [May-10-17 08:30AM  Marketwired]
▶ IEC to Present at the MicroCap Conference   [Mar-16-17 03:44PM  Accesswire]

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