Intrinsic value of IDEX Corporation - IEX

Previous Close

$147.93

  Intrinsic Value

$111.69

stock screener

  Rating & Target

sell

-25%

Previous close

$147.93

 
Intrinsic value

$111.69

 
Up/down potential

-25%

 
Rating

sell

We calculate the intrinsic value of IEX 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 11.2

 

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, %
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  2,603
  2,729
  2,861
  3,000
  3,146
  3,299
  3,461
  3,630
  3,809
  3,996
  4,193
  4,400
  4,618
  4,846
  5,086
  5,339
  5,604
  5,882
  6,174
  6,481
  6,804
  7,143
  7,498
  7,872
  8,264
  8,676
  9,109
  9,563
  10,040
  10,542
Variable operating expenses, $m
  1,708
  1,780
  1,857
  1,937
  2,021
  2,109
  2,202
  2,300
  2,403
  2,511
  2,416
  2,536
  2,661
  2,793
  2,931
  3,076
  3,229
  3,389
  3,558
  3,735
  3,921
  4,116
  4,321
  4,536
  4,762
  4,999
  5,249
  5,511
  5,786
  6,074
Fixed operating expenses, $m
  287
  294
  300
  307
  313
  320
  327
  334
  342
  349
  357
  365
  373
  381
  389
  398
  407
  416
  425
  434
  444
  454
  464
  474
  484
  495
  506
  517
  528
  540
Total operating expenses, $m
  1,995
  2,074
  2,157
  2,244
  2,334
  2,429
  2,529
  2,634
  2,745
  2,860
  2,773
  2,901
  3,034
  3,174
  3,320
  3,474
  3,636
  3,805
  3,983
  4,169
  4,365
  4,570
  4,785
  5,010
  5,246
  5,494
  5,755
  6,028
  6,314
  6,614
Operating income, $m
  608
  655
  704
  756
  812
  870
  931
  996
  1,064
  1,136
  1,420
  1,500
  1,584
  1,673
  1,766
  1,864
  1,968
  2,077
  2,192
  2,312
  2,440
  2,573
  2,714
  2,862
  3,018
  3,182
  3,354
  3,536
  3,727
  3,927
EBITDA, $m
  862
  911
  963
  1,018
  1,075
  1,136
  1,201
  1,268
  1,340
  1,415
  1,494
  1,578
  1,666
  1,758
  1,856
  1,959
  2,067
  2,181
  2,301
  2,427
  2,560
  2,700
  2,847
  3,002
  3,164
  3,336
  3,516
  3,705
  3,904
  4,114
Interest expense (income), $m
  37
  46
  50
  54
  58
  62
  67
  72
  77
  83
  88
  95
  101
  108
  115
  122
  130
  138
  146
  155
  165
  174
  185
  196
  207
  219
  232
  245
  259
  274
  289
Earnings before tax, $m
  562
  605
  650
  698
  749
  803
  859
  919
  981
  1,048
  1,325
  1,399
  1,477
  1,558
  1,644
  1,735
  1,830
  1,931
  2,036
  2,148
  2,265
  2,388
  2,518
  2,655
  2,799
  2,950
  3,109
  3,277
  3,453
  3,639
Tax expense, $m
  152
  163
  176
  189
  202
  217
  232
  248
  265
  283
  358
  378
  399
  421
  444
  468
  494
  521
  550
  580
  612
  645
  680
  717
  756
  797
  840
  885
  932
  982
Net income, $m
  410
  442
  475
  510
  547
  586
  627
  671
  716
  765
  968
  1,021
  1,078
  1,137
  1,200
  1,266
  1,336
  1,409
  1,487
  1,568
  1,653
  1,744
  1,838
  1,938
  2,043
  2,154
  2,270
  2,392
  2,521
  2,656

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
  3,532
  3,702
  3,882
  4,070
  4,268
  4,477
  4,696
  4,926
  5,168
  5,422
  5,690
  5,971
  6,266
  6,576
  6,902
  7,244
  7,603
  7,981
  8,378
  8,794
  9,232
  9,691
  10,174
  10,681
  11,213
  11,772
  12,359
  12,976
  13,623
  14,303
Adjusted assets (=assets-cash), $m
  3,532
  3,702
  3,882
  4,070
  4,268
  4,477
  4,696
  4,926
  5,168
  5,422
  5,690
  5,971
  6,266
  6,576
  6,902
  7,244
  7,603
  7,981
  8,378
  8,794
  9,232
  9,691
  10,174
  10,681
  11,213
  11,772
  12,359
  12,976
  13,623
  14,303
Revenue / Adjusted assets
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
Average production assets, $m
  1,382
  1,449
  1,519
  1,593
  1,670
  1,752
  1,838
  1,928
  2,022
  2,122
  2,227
  2,337
  2,452
  2,573
  2,701
  2,835
  2,976
  3,123
  3,279
  3,442
  3,613
  3,793
  3,982
  4,180
  4,388
  4,607
  4,837
  5,078
  5,331
  5,598
Working capital, $m
  273
  287
  300
  315
  330
  346
  363
  381
  400
  420
  440
  462
  485
  509
  534
  561
  588
  618
  648
  681
  714
  750
  787
  827
  868
  911
  956
  1,004
  1,054
  1,107
Total debt, $m
  921
  995
  1,074
  1,157
  1,244
  1,335
  1,431
  1,533
  1,639
  1,750
  1,868
  1,991
  2,121
  2,257
  2,400
  2,550
  2,708
  2,874
  3,048
  3,231
  3,423
  3,625
  3,837
  4,059
  4,293
  4,538
  4,796
  5,067
  5,351
  5,649
Total liabilities, $m
  1,551
  1,625
  1,704
  1,787
  1,874
  1,965
  2,061
  2,162
  2,269
  2,380
  2,498
  2,621
  2,751
  2,887
  3,030
  3,180
  3,338
  3,504
  3,678
  3,861
  4,053
  4,255
  4,466
  4,689
  4,923
  5,168
  5,426
  5,696
  5,981
  6,279
Total equity, $m
  1,982
  2,077
  2,178
  2,283
  2,394
  2,511
  2,634
  2,763
  2,899
  3,042
  3,192
  3,349
  3,515
  3,689
  3,872
  4,064
  4,265
  4,477
  4,700
  4,934
  5,179
  5,437
  5,708
  5,992
  6,291
  6,604
  6,934
  7,280
  7,643
  8,024
Total liabilities and equity, $m
  3,533
  3,702
  3,882
  4,070
  4,268
  4,476
  4,695
  4,925
  5,168
  5,422
  5,690
  5,970
  6,266
  6,576
  6,902
  7,244
  7,603
  7,981
  8,378
  8,795
  9,232
  9,692
  10,174
  10,681
  11,214
  11,772
  12,360
  12,976
  13,624
  14,303
Debt-to-equity ratio
  0.460
  0.480
  0.490
  0.510
  0.520
  0.530
  0.540
  0.550
  0.570
  0.580
  0.590
  0.590
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.650
  0.660
  0.670
  0.670
  0.680
  0.680
  0.690
  0.690
  0.700
  0.700
  0.700
Adjusted equity ratio
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  410
  442
  475
  510
  547
  586
  627
  671
  716
  765
  968
  1,021
  1,078
  1,137
  1,200
  1,266
  1,336
  1,409
  1,487
  1,568
  1,653
  1,744
  1,838
  1,938
  2,043
  2,154
  2,270
  2,392
  2,521
  2,656
Depreciation, amort., depletion, $m
  254
  256
  259
  261
  264
  266
  269
  272
  276
  279
  74
  78
  82
  86
  90
  94
  99
  104
  109
  115
  120
  126
  133
  139
  146
  154
  161
  169
  178
  187
Funds from operations, $m
  664
  698
  734
  771
  811
  852
  896
  943
  992
  1,044
  1,042
  1,099
  1,160
  1,223
  1,290
  1,361
  1,435
  1,514
  1,596
  1,683
  1,774
  1,870
  1,971
  2,077
  2,189
  2,307
  2,431
  2,561
  2,699
  2,843
Change in working capital, $m
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  53
Cash from operations, $m
  652
  685
  720
  757
  795
  836
  880
  925
  973
  1,024
  1,021
  1,077
  1,137
  1,199
  1,265
  1,334
  1,407
  1,484
  1,565
  1,650
  1,740
  1,834
  1,934
  2,038
  2,148
  2,264
  2,386
  2,514
  2,648
  2,790
Maintenance CAPEX, $m
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -115
  -120
  -126
  -133
  -139
  -146
  -154
  -161
  -169
  -178
New CAPEX, $m
  -62
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -95
  -100
  -105
  -110
  -116
  -121
  -127
  -134
  -141
  -148
  -155
  -163
  -171
  -180
  -189
  -198
  -208
  -219
  -230
  -241
  -253
  -266
Cash from investing activities, $m
  -106
  -113
  -118
  -125
  -131
  -138
  -144
  -151
  -159
  -167
  -176
  -184
  -194
  -203
  -213
  -224
  -235
  -247
  -259
  -272
  -286
  -300
  -315
  -331
  -347
  -365
  -384
  -402
  -422
  -444
Free cash flow, $m
  545
  572
  601
  632
  665
  699
  735
  774
  814
  857
  846
  893
  943
  996
  1,052
  1,110
  1,172
  1,237
  1,306
  1,378
  1,454
  1,534
  1,618
  1,707
  1,801
  1,899
  2,002
  2,111
  2,226
  2,346
Issuance/(repayment) of debt, $m
  72
  75
  79
  83
  87
  91
  96
  101
  106
  112
  117
  123
  130
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  245
  258
  271
  284
  298
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  
  72
  75
  79
  83
  87
  91
  96
  101
  106
  112
  117
  123
  130
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  245
  258
  271
  284
  298
Total cash flow (excl. dividends), $m
  617
  647
  680
  715
  752
  791
  832
  875
  920
  969
  963
  1,017
  1,073
  1,132
  1,195
  1,261
  1,330
  1,403
  1,480
  1,561
  1,646
  1,736
  1,830
  1,930
  2,034
  2,144
  2,260
  2,382
  2,510
  2,645
Retained Cash Flow (-), $m
  -89
  -96
  -100
  -106
  -111
  -117
  -123
  -129
  -136
  -143
  -150
  -158
  -166
  -174
  -183
  -192
  -202
  -212
  -223
  -234
  -245
  -258
  -271
  -284
  -299
  -314
  -329
  -346
  -363
  -381
Prev. year cash balance distribution, $m
  102
  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
  630
  551
  579
  609
  641
  674
  709
  746
  785
  826
  813
  859
  907
  958
  1,012
  1,069
  1,128
  1,191
  1,257
  1,327
  1,401
  1,478
  1,560
  1,645
  1,736
  1,831
  1,931
  2,036
  2,147
  2,263
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
  604
  505
  504
  502
  496
  489
  479
  466
  451
  433
  386
  367
  345
  322
  297
  272
  246
  219
  194
  169
  145
  123
  102
  84
  68
  53
  41
  31
  23
  17
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

IDEX Corporation (IDEX) operates an applied solutions business that sells pumps, flow meters and other fluidics systems, and components and engineered products. The Company operates through three segments: Fluid & Metering Technologies (FMT), Health & Science Technologies (HST) and Fire & Safety/Diversified Products (FSDP). With its segments, as of December 31, 2016, the Company maintained 13 platforms, where it focused on growth and acquisitions. The Company's FMT segment provides flow monitoring and other services for the food, chemical, general industrial, water and wastewater, agricultural and energy industries. The HST segment designs, produces and distributes precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems. Its FSDP segment produces firefighting pumps and controls, rescue tools, lifting bags and other components and systems; engineered stainless steel banding and clamping devices, and precision equipment.

FINANCIAL RATIOS  of  IDEX Corporation (IEX)

Valuation Ratios
P/E Ratio 41.7
Price to Sales 5.4
Price to Book 7.3
Price to Tangible Book
Price to Cash Flow 28.3
Price to Free Cash Flow 31.2
Growth Rates
Sales Growth Rate 4.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.6%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio 236
Current Ratio 0.2
LT Debt to Equity 65.7%
Total Debt to Equity 65.7%
Interest Coverage 11
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 10.4%
Return On Total Capital 11.2%
Ret/ On T. Cap. - 3 Yr. Avg. 11.8%
Return On Equity 18.1%
Return On Equity - 3 Yr. Avg. 18.6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 44.1%
Gross Margin - 3 Yr. Avg. 44.3%
EBITDA Margin 23.3%
EBITDA Margin - 3 Yr. Avg. 23.9%
Operating Margin 19.2%
Oper. Margin - 3 Yr. Avg. 20.2%
Pre-Tax Margin 17.5%
Pre-Tax Margin - 3 Yr. Avg. 18.4%
Net Profit Margin 12.8%
Net Profit Margin - 3 Yr. Avg. 13.3%
Effective Tax Rate 26.6%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 38%

IEX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IEX stock intrinsic value calculation we used $2484 million for the last fiscal year's total revenue generated by IDEX Corporation. The default revenue input number comes from 0001 income statement of IDEX Corporation. 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 IEX stock valuation model: a) initial revenue growth rate of 4.8% 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 IEX is calculated based on our internal credit rating of IDEX Corporation, 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 IDEX Corporation.
    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 IEX stock the variable cost ratio is equal to 66%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $281 million in the base year in the intrinsic value calculation for IEX 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 IDEX Corporation.

Corporate tax rate of 27% is the nominal tax rate for IDEX Corporation. 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 IEX 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 IEX are equal to 53.1%.

Life of production assets of 30.6 years is the average useful life of capital assets used in IDEX Corporation 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 IEX is equal to 10.5%. 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 - $1994.64 million for IDEX Corporation - 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 75.819 million for IDEX Corporation 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 IDEX Corporation at the current share price and the inputted number of shares is $11.2 billion.

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