Intrinsic value of Itron, Inc. - ITRI

Previous Close

$57.35

  Intrinsic Value

$29.32

stock screener

  Rating & Target

sell

-49%

Previous close

$57.35

 
Intrinsic value

$29.32

 
Up/down potential

-49%

 
Rating

sell

We calculate the intrinsic value of ITRI 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 2.3

 

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, %
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  2,533
  2,696
  2,866
  3,042
  3,226
  3,418
  3,618
  3,827
  4,045
  4,272
  4,509
  4,757
  5,017
  5,288
  5,572
  5,869
  6,179
  6,505
  6,846
  7,203
  7,577
  7,969
  8,380
  8,811
  9,263
  9,737
  10,234
  10,755
  11,301
  11,875
Variable operating expenses, $m
  2,336
  2,485
  2,640
  2,802
  2,970
  3,145
  3,328
  3,518
  3,717
  3,925
  4,119
  4,346
  4,582
  4,830
  5,089
  5,361
  5,645
  5,942
  6,253
  6,579
  6,921
  7,279
  7,655
  8,048
  8,461
  8,894
  9,348
  9,824
  10,323
  10,847
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
  2,336
  2,485
  2,640
  2,802
  2,970
  3,145
  3,328
  3,518
  3,717
  3,925
  4,119
  4,346
  4,582
  4,830
  5,089
  5,361
  5,645
  5,942
  6,253
  6,579
  6,921
  7,279
  7,655
  8,048
  8,461
  8,894
  9,348
  9,824
  10,323
  10,847
Operating income, $m
  197
  211
  225
  241
  257
  273
  290
  309
  327
  347
  390
  412
  434
  458
  482
  508
  535
  563
  593
  623
  656
  690
  725
  763
  802
  843
  886
  931
  978
  1,028
EBITDA, $m
  296
  315
  335
  356
  377
  399
  423
  447
  473
  499
  527
  556
  586
  618
  651
  686
  722
  760
  800
  842
  885
  931
  979
  1,030
  1,082
  1,138
  1,196
  1,257
  1,321
  1,388
Interest expense (income), $m
  10
  72
  81
  90
  100
  110
  120
  131
  143
  154
  167
  180
  193
  207
  222
  237
  253
  270
  288
  306
  325
  346
  367
  389
  412
  437
  462
  489
  517
  547
  578
Earnings before tax, $m
  124
  130
  135
  141
  147
  153
  159
  166
  173
  180
  211
  219
  227
  236
  245
  255
  265
  275
  286
  298
  310
  323
  336
  350
  365
  380
  397
  413
  431
  450
Tax expense, $m
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  57
  59
  61
  64
  66
  69
  71
  74
  77
  80
  84
  87
  91
  95
  99
  103
  107
  112
  116
  121
Net income, $m
  91
  95
  99
  103
  107
  112
  116
  121
  126
  132
  154
  160
  166
  172
  179
  186
  193
  201
  209
  218
  226
  236
  245
  256
  266
  278
  289
  302
  315
  328

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
  2,780
  2,959
  3,146
  3,340
  3,542
  3,752
  3,972
  4,201
  4,440
  4,689
  4,950
  5,222
  5,507
  5,805
  6,116
  6,442
  6,783
  7,140
  7,515
  7,907
  8,317
  8,748
  9,199
  9,672
  10,168
  10,688
  11,233
  11,805
  12,406
  13,035
Adjusted assets (=assets-cash), $m
  2,780
  2,959
  3,146
  3,340
  3,542
  3,752
  3,972
  4,201
  4,440
  4,689
  4,950
  5,222
  5,507
  5,805
  6,116
  6,442
  6,783
  7,140
  7,515
  7,907
  8,317
  8,748
  9,199
  9,672
  10,168
  10,688
  11,233
  11,805
  12,406
  13,035
Revenue / Adjusted assets
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
  0.911
Average production assets, $m
  767
  817
  868
  922
  978
  1,036
  1,096
  1,160
  1,225
  1,294
  1,366
  1,441
  1,520
  1,602
  1,688
  1,778
  1,872
  1,971
  2,074
  2,182
  2,296
  2,415
  2,539
  2,670
  2,807
  2,950
  3,101
  3,259
  3,424
  3,598
Working capital, $m
  160
  170
  181
  192
  203
  215
  228
  241
  255
  269
  284
  300
  316
  333
  351
  370
  389
  410
  431
  454
  477
  502
  528
  555
  584
  613
  645
  678
  712
  748
Total debt, $m
  1,142
  1,272
  1,407
  1,548
  1,695
  1,848
  2,008
  2,174
  2,348
  2,529
  2,719
  2,917
  3,124
  3,340
  3,567
  3,804
  4,052
  4,311
  4,583
  4,868
  5,167
  5,480
  5,808
  6,152
  6,512
  6,890
  7,287
  7,703
  8,139
  8,597
Total liabilities, $m
  2,021
  2,151
  2,287
  2,428
  2,575
  2,728
  2,887
  3,054
  3,228
  3,409
  3,598
  3,796
  4,003
  4,220
  4,446
  4,683
  4,931
  5,191
  5,463
  5,748
  6,047
  6,360
  6,688
  7,031
  7,392
  7,770
  8,167
  8,583
  9,019
  9,477
Total equity, $m
  759
  808
  859
  912
  967
  1,024
  1,084
  1,147
  1,212
  1,280
  1,351
  1,426
  1,503
  1,585
  1,670
  1,759
  1,852
  1,949
  2,051
  2,158
  2,271
  2,388
  2,511
  2,640
  2,776
  2,918
  3,067
  3,223
  3,387
  3,559
Total liabilities and equity, $m
  2,780
  2,959
  3,146
  3,340
  3,542
  3,752
  3,971
  4,201
  4,440
  4,689
  4,949
  5,222
  5,506
  5,805
  6,116
  6,442
  6,783
  7,140
  7,514
  7,906
  8,318
  8,748
  9,199
  9,671
  10,168
  10,688
  11,234
  11,806
  12,406
  13,036
Debt-to-equity ratio
  1.500
  1.570
  1.640
  1.700
  1.750
  1.800
  1.850
  1.900
  1.940
  1.980
  2.010
  2.050
  2.080
  2.110
  2.140
  2.160
  2.190
  2.210
  2.230
  2.260
  2.280
  2.290
  2.310
  2.330
  2.350
  2.360
  2.380
  2.390
  2.400
  2.420
Adjusted equity ratio
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  91
  95
  99
  103
  107
  112
  116
  121
  126
  132
  154
  160
  166
  172
  179
  186
  193
  201
  209
  218
  226
  236
  245
  256
  266
  278
  289
  302
  315
  328
Depreciation, amort., depletion, $m
  99
  104
  110
  115
  120
  126
  132
  139
  145
  152
  137
  144
  152
  160
  169
  178
  187
  197
  207
  218
  230
  241
  254
  267
  281
  295
  310
  326
  342
  360
Funds from operations, $m
  190
  199
  208
  218
  228
  238
  249
  260
  272
  284
  290
  304
  318
  332
  348
  364
  381
  398
  417
  436
  456
  477
  499
  523
  547
  573
  600
  628
  657
  688
Change in working capital, $m
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
Cash from operations, $m
  180
  189
  197
  206
  216
  226
  236
  247
  258
  269
  275
  288
  301
  315
  330
  345
  361
  378
  395
  413
  432
  452
  473
  496
  519
  543
  568
  595
  623
  652
Maintenance CAPEX, $m
  -72
  -77
  -82
  -87
  -92
  -98
  -104
  -110
  -116
  -123
  -129
  -137
  -144
  -152
  -160
  -169
  -178
  -187
  -197
  -207
  -218
  -230
  -241
  -254
  -267
  -281
  -295
  -310
  -326
  -342
New CAPEX, $m
  -48
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -158
  -166
  -174
Cash from investing activities, $m
  -120
  -126
  -133
  -141
  -148
  -156
  -165
  -173
  -182
  -192
  -201
  -212
  -223
  -234
  -246
  -259
  -272
  -286
  -300
  -315
  -331
  -349
  -366
  -385
  -404
  -425
  -446
  -468
  -492
  -516
Free cash flow, $m
  61
  63
  64
  66
  68
  70
  72
  74
  76
  78
  74
  76
  79
  81
  84
  86
  89
  92
  95
  98
  101
  104
  107
  111
  115
  119
  123
  127
  131
  136
Issuance/(repayment) of debt, $m
  125
  130
  135
  141
  147
  153
  160
  166
  174
  181
  189
  198
  207
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
  378
  397
  416
  436
  458
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  
  125
  130
  135
  141
  147
  153
  160
  166
  174
  181
  189
  198
  207
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
  378
  397
  416
  436
  458
Total cash flow (excl. dividends), $m
  186
  193
  200
  207
  215
  223
  231
  240
  250
  259
  264
  274
  286
  298
  310
  323
  337
  351
  367
  383
  399
  417
  435
  455
  475
  497
  519
  543
  568
  594
Retained Cash Flow (-), $m
  -46
  -49
  -51
  -53
  -55
  -57
  -60
  -63
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -98
  -102
  -107
  -112
  -118
  -123
  -129
  -135
  -142
  -149
  -156
  -164
  -172
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
  139
  144
  149
  154
  160
  165
  171
  178
  184
  191
  192
  200
  208
  216
  225
  234
  244
  254
  265
  276
  287
  300
  312
  326
  340
  355
  370
  387
  404
  422
Discount rate, %
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
  128
  121
  114
  106
  98
  89
  81
  72
  64
  55
  46
  39
  33
  27
  22
  17
  14
  10
  8
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
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

Itron, Inc. (Itron) is a technology and service company. The Company provides solutions that measure, manage and analyze energy and water use. The Company operates through three segments: Electricity, Gas and Water. It provides a portfolio of products, solutions, software and services to electric, gas and water utility customers across the globe. It offers solutions that enable electric and natural gas utilities to build smart grids to manage assets. It offers a product portfolio, including standard meters and smart metering products, systems and services, for applications in the residential and commercial industrial markets for water and heat. The Company operates under the Itron brand across the world. Its Gas and Water manufacturing facilities are located throughout the world, while its Electricity manufacturing facilities are located in Europe, Middle East and Africa (EMEA), and North America.

FINANCIAL RATIOS  of  Itron, Inc. (ITRI)

Valuation Ratios
P/E Ratio 68.7
Price to Sales 1.1
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 18.9
Price to Free Cash Flow 30.5
Growth Rates
Sales Growth Rate 6.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -6%
Financial Strength
Quick Ratio 10
Current Ratio 0.2
LT Debt to Equity 46%
Total Debt to Equity 48.3%
Interest Coverage 10
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital 3.3%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity 5.2%
Return On Equity - 3 Yr. Avg. 1.4%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 32.8%
Gross Margin - 3 Yr. Avg. 31.3%
EBITDA Margin 8.1%
EBITDA Margin - 3 Yr. Avg. 6.4%
Operating Margin 4.8%
Oper. Margin - 3 Yr. Avg. 2.5%
Pre-Tax Margin 4.2%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin 1.6%
Net Profit Margin - 3 Yr. Avg. 0.3%
Effective Tax Rate 58.8%
Eff/ Tax Rate - 3 Yr. Avg. 32%
Payout Ratio 0%

ITRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ITRI stock intrinsic value calculation we used $2376 million for the last fiscal year's total revenue generated by Itron, Inc.. The default revenue input number comes from 0001 income statement of Itron, Inc.. 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 ITRI stock valuation model: a) initial revenue growth rate of 6.6% 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 8.5%, whose default value for ITRI is calculated based on our internal credit rating of Itron, Inc., 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 Itron, Inc..
    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 ITRI stock the variable cost ratio is equal to 92.3%.

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 ITRI 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 7.1% for Itron, Inc..

Corporate tax rate of 27% is the nominal tax rate for Itron, Inc.. 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 ITRI 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 ITRI are equal to 30.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Itron, Inc. 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 ITRI is equal to 6.3%. 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 - $712.663 million for Itron, Inc. - 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 39.612 million for Itron, Inc. 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 Itron, Inc. at the current share price and the inputted number of shares is $2.3 billion.

RELATED COMPANIES Price Int.Val. Rating
BMI Badger Meter, 52.66 17.85  str.sell
MWA Mueller Water 9.30 16.38  str.buy
HON Honeywell Inte 166.68 132.66  hold

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

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