Intrinsic value of ITT Inc. - ITT

Previous Close

$65.01

  Intrinsic Value

$64.45

stock screener

  Rating & Target

hold

-1%

Previous close

$65.01

 
Intrinsic value

$64.45

 
Up/down potential

-1%

 
Rating

hold

We calculate the intrinsic value of ITT 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 5.7

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,800
  2,864
  2,938
  3,021
  3,112
  3,213
  3,322
  3,440
  3,568
  3,705
  3,851
  4,008
  4,174
  4,351
  4,539
  4,738
  4,948
  5,171
  5,406
  5,655
  5,917
  6,193
  6,484
  6,791
  7,115
  7,455
  7,813
  8,190
  8,587
  9,004
Variable operating expenses, $m
  998
  1,018
  1,042
  1,068
  1,097
  1,130
  1,165
  1,203
  1,243
  1,287
  1,233
  1,283
  1,336
  1,393
  1,453
  1,517
  1,584
  1,655
  1,731
  1,810
  1,894
  1,983
  2,076
  2,174
  2,278
  2,387
  2,501
  2,622
  2,749
  2,883
Fixed operating expenses, $m
  1,424
  1,455
  1,487
  1,520
  1,553
  1,587
  1,622
  1,658
  1,694
  1,732
  1,770
  1,809
  1,848
  1,889
  1,931
  1,973
  2,017
  2,061
  2,106
  2,153
  2,200
  2,248
  2,298
  2,348
  2,400
  2,453
  2,507
  2,562
  2,618
  2,676
Total operating expenses, $m
  2,422
  2,473
  2,529
  2,588
  2,650
  2,717
  2,787
  2,861
  2,937
  3,019
  3,003
  3,092
  3,184
  3,282
  3,384
  3,490
  3,601
  3,716
  3,837
  3,963
  4,094
  4,231
  4,374
  4,522
  4,678
  4,840
  5,008
  5,184
  5,367
  5,559
Operating income, $m
  379
  391
  409
  433
  462
  496
  535
  580
  630
  686
  849
  916
  989
  1,069
  1,155
  1,248
  1,348
  1,455
  1,569
  1,692
  1,823
  1,962
  2,111
  2,269
  2,437
  2,616
  2,805
  3,006
  3,220
  3,446
EBITDA, $m
  555
  569
  589
  615
  646
  683
  725
  773
  827
  886
  952
  1,023
  1,101
  1,185
  1,276
  1,374
  1,480
  1,593
  1,714
  1,843
  1,981
  2,128
  2,284
  2,450
  2,627
  2,815
  3,014
  3,225
  3,449
  3,687
Interest expense (income), $m
  0
  6
  8
  11
  14
  17
  21
  25
  29
  34
  39
  44
  50
  56
  63
  70
  78
  85
  94
  103
  112
  122
  132
  143
  155
  167
  180
  194
  208
  223
  239
Earnings before tax, $m
  372
  383
  398
  419
  444
  475
  510
  551
  596
  647
  804
  866
  933
  1,006
  1,085
  1,170
  1,262
  1,361
  1,467
  1,580
  1,701
  1,830
  1,967
  2,114
  2,270
  2,436
  2,612
  2,799
  2,997
  3,207
Tax expense, $m
  101
  103
  108
  113
  120
  128
  138
  149
  161
  175
  217
  234
  252
  272
  293
  316
  341
  367
  396
  427
  459
  494
  531
  571
  613
  658
  705
  756
  809
  866
Net income, $m
  272
  279
  291
  306
  324
  347
  373
  402
  435
  472
  587
  632
  681
  734
  792
  854
  921
  993
  1,071
  1,153
  1,241
  1,336
  1,436
  1,543
  1,657
  1,778
  1,907
  2,043
  2,188
  2,341

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
  3,921
  4,012
  4,115
  4,230
  4,359
  4,499
  4,653
  4,819
  4,997
  5,189
  5,394
  5,613
  5,846
  6,094
  6,357
  6,635
  6,930
  7,242
  7,572
  7,920
  8,287
  8,674
  9,082
  9,512
  9,965
  10,441
  10,943
  11,471
  12,027
  12,611
Adjusted assets (=assets-cash), $m
  3,921
  4,012
  4,115
  4,230
  4,359
  4,499
  4,653
  4,819
  4,997
  5,189
  5,394
  5,613
  5,846
  6,094
  6,357
  6,635
  6,930
  7,242
  7,572
  7,920
  8,287
  8,674
  9,082
  9,512
  9,965
  10,441
  10,943
  11,471
  12,027
  12,611
Revenue / Adjusted assets
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
Average production assets, $m
  1,056
  1,080
  1,108
  1,139
  1,173
  1,211
  1,252
  1,297
  1,345
  1,397
  1,452
  1,511
  1,574
  1,640
  1,711
  1,786
  1,865
  1,949
  2,038
  2,132
  2,231
  2,335
  2,445
  2,560
  2,682
  2,811
  2,946
  3,088
  3,237
  3,395
Working capital, $m
  333
  341
  350
  359
  370
  382
  395
  409
  425
  441
  458
  477
  497
  518
  540
  564
  589
  615
  643
  673
  704
  737
  772
  808
  847
  887
  930
  975
  1,022
  1,072
Total debt, $m
  154
  202
  256
  317
  384
  459
  539
  626
  720
  821
  929
  1,044
  1,167
  1,297
  1,435
  1,582
  1,737
  1,901
  2,074
  2,257
  2,451
  2,654
  2,869
  3,095
  3,333
  3,584
  3,848
  4,126
  4,418
  4,725
Total liabilities, $m
  2,063
  2,110
  2,164
  2,225
  2,293
  2,367
  2,447
  2,535
  2,629
  2,729
  2,837
  2,953
  3,075
  3,205
  3,344
  3,490
  3,645
  3,809
  3,983
  4,166
  4,359
  4,562
  4,777
  5,003
  5,241
  5,492
  5,756
  6,034
  6,326
  6,633
Total equity, $m
  1,859
  1,902
  1,950
  2,005
  2,066
  2,133
  2,205
  2,284
  2,369
  2,460
  2,557
  2,661
  2,771
  2,889
  3,013
  3,145
  3,285
  3,433
  3,589
  3,754
  3,928
  4,111
  4,305
  4,509
  4,723
  4,949
  5,187
  5,437
  5,701
  5,978
Total liabilities and equity, $m
  3,922
  4,012
  4,114
  4,230
  4,359
  4,500
  4,652
  4,819
  4,998
  5,189
  5,394
  5,614
  5,846
  6,094
  6,357
  6,635
  6,930
  7,242
  7,572
  7,920
  8,287
  8,673
  9,082
  9,512
  9,964
  10,441
  10,943
  11,471
  12,027
  12,611
Debt-to-equity ratio
  0.080
  0.110
  0.130
  0.160
  0.190
  0.210
  0.240
  0.270
  0.300
  0.330
  0.360
  0.390
  0.420
  0.450
  0.480
  0.500
  0.530
  0.550
  0.580
  0.600
  0.620
  0.650
  0.670
  0.690
  0.710
  0.720
  0.740
  0.760
  0.770
  0.790
Adjusted equity ratio
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  272
  279
  291
  306
  324
  347
  373
  402
  435
  472
  587
  632
  681
  734
  792
  854
  921
  993
  1,071
  1,153
  1,241
  1,336
  1,436
  1,543
  1,657
  1,778
  1,907
  2,043
  2,188
  2,341
Depreciation, amort., depletion, $m
  176
  178
  180
  182
  184
  187
  190
  193
  197
  200
  103
  107
  112
  116
  121
  127
  132
  138
  145
  151
  158
  166
  173
  182
  190
  199
  209
  219
  230
  241
Funds from operations, $m
  448
  457
  471
  488
  509
  534
  563
  595
  632
  673
  690
  739
  793
  851
  913
  981
  1,054
  1,132
  1,215
  1,304
  1,400
  1,501
  1,610
  1,725
  1,847
  1,977
  2,115
  2,262
  2,417
  2,582
Change in working capital, $m
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
  37
  38
  41
  43
  45
  47
  50
Cash from operations, $m
  441
  450
  462
  478
  498
  522
  550
  581
  617
  656
  673
  721
  773
  830
  891
  957
  1,029
  1,105
  1,187
  1,275
  1,368
  1,468
  1,575
  1,688
  1,809
  1,937
  2,073
  2,217
  2,370
  2,532
Maintenance CAPEX, $m
  -73
  -75
  -77
  -79
  -81
  -83
  -86
  -89
  -92
  -95
  -99
  -103
  -107
  -112
  -116
  -121
  -127
  -132
  -138
  -145
  -151
  -158
  -166
  -173
  -182
  -190
  -199
  -209
  -219
  -230
New CAPEX, $m
  -22
  -24
  -28
  -31
  -35
  -38
  -41
  -45
  -48
  -52
  -55
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -150
  -157
Cash from investing activities, $m
  -95
  -99
  -105
  -110
  -116
  -121
  -127
  -134
  -140
  -147
  -154
  -162
  -170
  -179
  -187
  -196
  -206
  -216
  -227
  -239
  -250
  -262
  -276
  -289
  -304
  -318
  -334
  -351
  -369
  -387
Free cash flow, $m
  347
  350
  357
  368
  383
  401
  422
  448
  477
  509
  518
  559
  603
  651
  704
  761
  823
  889
  960
  1,037
  1,118
  1,206
  1,299
  1,399
  1,505
  1,618
  1,738
  1,866
  2,002
  2,146
Issuance/(repayment) of debt, $m
  38
  47
  54
  61
  67
  74
  81
  87
  94
  101
  108
  115
  123
  130
  138
  147
  155
  164
  173
  183
  193
  204
  215
  226
  238
  251
  264
  278
  292
  307
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  
  38
  47
  54
  61
  67
  74
  81
  87
  94
  101
  108
  115
  123
  130
  138
  147
  155
  164
  173
  183
  193
  204
  215
  226
  238
  251
  264
  278
  292
  307
Total cash flow (excl. dividends), $m
  385
  398
  412
  429
  450
  475
  503
  535
  571
  610
  626
  674
  726
  782
  842
  908
  978
  1,053
  1,133
  1,220
  1,312
  1,410
  1,514
  1,625
  1,743
  1,869
  2,002
  2,144
  2,294
  2,453
Retained Cash Flow (-), $m
  -36
  -43
  -49
  -55
  -61
  -67
  -73
  -79
  -85
  -91
  -97
  -104
  -110
  -117
  -125
  -132
  -140
  -148
  -156
  -165
  -174
  -183
  -193
  -204
  -215
  -226
  -238
  -250
  -263
  -277
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
  348
  355
  363
  374
  389
  408
  430
  456
  486
  519
  529
  570
  615
  664
  718
  775
  838
  905
  977
  1,055
  1,138
  1,226
  1,321
  1,421
  1,529
  1,643
  1,765
  1,894
  2,031
  2,176
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
  334
  325
  316
  308
  302
  296
  291
  285
  279
  272
  251
  243
  234
  223
  211
  197
  182
  167
  150
  134
  118
  102
  87
  72
  59
  48
  38
  29
  22
  16
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

ITT Inc. manufactures and sells engineered critical components and customized technology solutions for the energy, transportation, and industrial markets worldwide. The company operates in four segments: Industrial Process, Motion Technologies, Interconnect Solutions, and Control Technologies. The Industrial Process segment manufactures industrial pumps, valves, and plant optimization systems; and centrifugal pumps, vertical centrifugal pumps, twin screw pumps, and water systems, as well as aftermarket solutions, such as repairs and upgrades services. The Motion Technologies segment manufactures braking pads, shims, shock absorbers, damping, and sealing technologies for passenger cars, light and heavy-duty commercial and military vehicles, buses, and rail transportation markets. The Interconnect Solutions segment designs and manufactures engineered connectors and cable assemblies, including electrical connectors of various types, such as circular, rectangular, radio frequency, fiber optic, D-sub miniature, micro-miniature, and cable assemblies. The Control Technologies segment provides actuation, fuel management, noise and energy absorption, and environmental control system components for the aerospace and defense, and industrial markets. In addition, it manufactures engineered and customized components for railway and other harsh environment industrial markets. ITT Inc. was founded in 1920 and is headquartered in White Plains, New York.

FINANCIAL RATIOS  of  ITT Inc. (ITT)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

ITT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ITT stock intrinsic value calculation we used $2745 million for the last fiscal year's total revenue generated by ITT Inc.. The default revenue input number comes from 0001 income statement of ITT 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 ITT stock valuation model: a) initial revenue growth rate of 2% 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 ITT is calculated based on our internal credit rating of ITT 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 ITT 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 ITT stock the variable cost ratio is equal to 35.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1393 million in the base year in the intrinsic value calculation for ITT 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 ITT Inc..

Corporate tax rate of 27% is the nominal tax rate for ITT 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 ITT 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 ITT are equal to 37.7%.

Life of production assets of 14.1 years is the average useful life of capital assets used in ITT 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 ITT is equal to 11.9%. 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 - $1822.4 million for ITT 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 87.326 million for ITT 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 ITT Inc. at the current share price and the inputted number of shares is $5.7 billion.

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