Intrinsic value of Kimball Electronics, Inc. - KE

Previous Close

$15.36

  Intrinsic Value

$14.73

stock screener

  Rating & Target

hold

-4%

Previous close

$15.36

 
Intrinsic value

$14.73

 
Up/down potential

-4%

 
Rating

hold

We calculate the intrinsic value of KE 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 0.4

 

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, %
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  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
Revenue, $m
  1,180
  1,293
  1,412
  1,535
  1,663
  1,796
  1,934
  2,078
  2,228
  2,383
  2,545
  2,713
  2,887
  3,069
  3,259
  3,456
  3,661
  3,875
  4,099
  4,332
  4,575
  4,830
  5,095
  5,373
  5,664
  5,968
  6,286
  6,619
  6,967
  7,332
Variable operating expenses, $m
  1,123
  1,230
  1,341
  1,457
  1,577
  1,702
  1,832
  1,968
  2,108
  2,254
  2,393
  2,551
  2,715
  2,886
  3,064
  3,249
  3,442
  3,644
  3,854
  4,073
  4,302
  4,541
  4,791
  5,052
  5,325
  5,611
  5,910
  6,223
  6,551
  6,894
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
  1,123
  1,230
  1,341
  1,457
  1,577
  1,702
  1,832
  1,968
  2,108
  2,254
  2,393
  2,551
  2,715
  2,886
  3,064
  3,249
  3,442
  3,644
  3,854
  4,073
  4,302
  4,541
  4,791
  5,052
  5,325
  5,611
  5,910
  6,223
  6,551
  6,894
Operating income, $m
  57
  64
  71
  78
  86
  94
  102
  111
  119
  129
  152
  162
  173
  183
  195
  207
  219
  232
  245
  259
  274
  289
  305
  321
  339
  357
  376
  396
  417
  438
EBITDA, $m
  99
  108
  118
  128
  139
  150
  162
  174
  186
  199
  213
  227
  241
  256
  272
  289
  306
  324
  342
  362
  382
  403
  426
  449
  473
  498
  525
  553
  582
  612
Interest expense (income), $m
  0
  0
  2
  3
  5
  7
  8
  10
  12
  14
  16
  18
  20
  23
  25
  27
  30
  33
  35
  38
  41
  44
  48
  51
  55
  58
  62
  66
  71
  75
  80
Earnings before tax, $m
  56
  62
  67
  73
  79
  85
  92
  98
  105
  113
  134
  142
  150
  159
  167
  177
  186
  196
  207
  218
  229
  241
  254
  267
  280
  294
  309
  325
  341
  358
Tax expense, $m
  15
  17
  18
  20
  21
  23
  25
  27
  28
  30
  36
  38
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
  79
  84
  88
  92
  97
Net income, $m
  41
  45
  49
  53
  58
  62
  67
  72
  77
  82
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
  205
  215
  226
  237
  249
  262

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
  670
  735
  802
  871
  944
  1,020
  1,098
  1,180
  1,265
  1,353
  1,445
  1,540
  1,640
  1,743
  1,850
  1,962
  2,079
  2,201
  2,328
  2,460
  2,598
  2,743
  2,893
  3,051
  3,216
  3,389
  3,569
  3,758
  3,956
  4,164
Adjusted assets (=assets-cash), $m
  670
  735
  802
  871
  944
  1,020
  1,098
  1,180
  1,265
  1,353
  1,445
  1,540
  1,640
  1,743
  1,850
  1,962
  2,079
  2,201
  2,328
  2,460
  2,598
  2,743
  2,893
  3,051
  3,216
  3,389
  3,569
  3,758
  3,956
  4,164
Revenue / Adjusted assets
  1.761
  1.759
  1.761
  1.762
  1.762
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.762
  1.760
  1.761
  1.762
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
  1.761
Average production assets, $m
  157
  172
  188
  204
  221
  239
  257
  276
  296
  317
  338
  361
  384
  408
  433
  460
  487
  515
  545
  576
  609
  642
  678
  715
  753
  794
  836
  880
  927
  975
Working capital, $m
  188
  206
  224
  244
  264
  286
  308
  330
  354
  379
  405
  431
  459
  488
  518
  549
  582
  616
  652
  689
  727
  768
  810
  854
  901
  949
  999
  1,052
  1,108
  1,166
Total debt, $m
  34
  61
  89
  118
  148
  179
  212
  246
  281
  318
  356
  396
  437
  480
  525
  571
  620
  671
  723
  778
  836
  896
  959
  1,024
  1,093
  1,165
  1,240
  1,319
  1,401
  1,487
Total liabilities, $m
  279
  306
  333
  363
  393
  424
  457
  491
  526
  563
  601
  641
  682
  725
  770
  816
  865
  915
  968
  1,023
  1,081
  1,141
  1,204
  1,269
  1,338
  1,410
  1,485
  1,564
  1,646
  1,732
Total equity, $m
  391
  429
  468
  509
  551
  596
  641
  689
  739
  790
  844
  900
  958
  1,018
  1,081
  1,146
  1,214
  1,285
  1,359
  1,437
  1,517
  1,602
  1,690
  1,782
  1,878
  1,979
  2,085
  2,195
  2,311
  2,432
Total liabilities and equity, $m
  670
  735
  801
  872
  944
  1,020
  1,098
  1,180
  1,265
  1,353
  1,445
  1,541
  1,640
  1,743
  1,851
  1,962
  2,079
  2,200
  2,327
  2,460
  2,598
  2,743
  2,894
  3,051
  3,216
  3,389
  3,570
  3,759
  3,957
  4,164
Debt-to-equity ratio
  0.090
  0.140
  0.190
  0.230
  0.270
  0.300
  0.330
  0.360
  0.380
  0.400
  0.420
  0.440
  0.460
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.600
  0.610
  0.610
Adjusted equity ratio
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  41
  45
  49
  53
  58
  62
  67
  72
  77
  82
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
  205
  215
  226
  237
  249
  262
Depreciation, amort., depletion, $m
  42
  44
  47
  50
  53
  56
  60
  63
  67
  70
  60
  64
  69
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
  128
  135
  142
  149
  157
  165
  174
Funds from operations, $m
  83
  89
  96
  103
  111
  119
  127
  135
  144
  153
  158
  168
  178
  189
  200
  211
  223
  235
  248
  262
  276
  291
  306
  322
  339
  357
  375
  394
  415
  436
Change in working capital, $m
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  51
  53
  55
  58
Cash from operations, $m
  66
  71
  78
  84
  90
  97
  105
  112
  120
  128
  133
  141
  150
  160
  170
  180
  190
  201
  213
  225
  237
  250
  264
  278
  293
  308
  325
  341
  359
  378
Maintenance CAPEX, $m
  -25
  -28
  -31
  -34
  -36
  -39
  -43
  -46
  -49
  -53
  -57
  -60
  -64
  -69
  -73
  -77
  -82
  -87
  -92
  -97
  -103
  -109
  -115
  -121
  -128
  -135
  -142
  -149
  -157
  -165
New CAPEX, $m
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
Cash from investing activities, $m
  -39
  -43
  -47
  -50
  -53
  -57
  -61
  -65
  -69
  -74
  -78
  -82
  -87
  -93
  -98
  -103
  -109
  -115
  -122
  -128
  -135
  -143
  -150
  -158
  -167
  -175
  -184
  -193
  -203
  -214
Free cash flow, $m
  26
  28
  31
  34
  37
  40
  44
  47
  51
  54
  54
  59
  63
  67
  71
  76
  81
  86
  91
  96
  102
  108
  114
  120
  127
  133
  141
  148
  156
  164
Issuance/(repayment) of debt, $m
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
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  
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
Total cash flow (excl. dividends), $m
  52
  55
  59
  63
  67
  72
  76
  81
  86
  91
  93
  98
  104
  110
  116
  123
  129
  136
  144
  151
  159
  168
  177
  186
  195
  205
  216
  227
  238
  250
Retained Cash Flow (-), $m
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -101
  -105
  -110
  -116
  -121
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
  16
  18
  20
  22
  25
  27
  30
  33
  36
  39
  39
  42
  46
  50
  53
  57
  61
  65
  70
  74
  79
  84
  88
  94
  99
  104
  110
  116
  122
  129
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
  15
  16
  17
  18
  19
  20
  20
  21
  21
  21
  19
  18
  17
  17
  16
  15
  13
  12
  11
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
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

Kimball Electronics, Inc. (Kimball Electronics) is an electronics manufacturing services (EMS) company. The Company is engaged in producing electronics for the automotive, medical, industrial and public safety markets. It provides design, engineering, manufacturing, packaging and distribution of electronic assemblies and circuit boards on a contract basis to a range of industries. The Company offers various engineering, manufacturing and supply chain services, such as design services; production and testing of printed circuit board assemblies (PCBAS); industrialization and automation of manufacturing processes; product design and process validation and qualification; reliability testing, which include testing of products under a series of environmental conditions; assembly, production and packaging of other related non-electronic products, and product life cycle management. It is engaged in producing safety critical electronic assemblies for the automotive market.

FINANCIAL RATIOS  of  Kimball Electronics, Inc. (KE)

Valuation Ratios
P/E Ratio 12.1
Price to Sales 0.4
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 31.7
Growth Rates
Sales Growth Rate 10.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.9%
Cap. Spend. - 3 Yr. Gr. Rate 10.1%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 2.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 9.9%
Ret/ On T. Cap. - 3 Yr. Avg. 8.7%
Return On Equity 10.2%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 8.2%
Gross Margin - 3 Yr. Avg. 8.2%
EBITDA Margin 7.3%
EBITDA Margin - 3 Yr. Avg. 6.6%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 4.1%
Net Profit Margin 3.7%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 22.7%
Eff/ Tax Rate - 3 Yr. Avg. 23.3%
Payout Ratio 0%

KE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KE stock intrinsic value calculation we used $1072 million for the last fiscal year's total revenue generated by Kimball Electronics, Inc.. The default revenue input number comes from 0001 income statement of Kimball Electronics, 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 KE stock valuation model: a) initial revenue growth rate of 10.1% 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 KE is calculated based on our internal credit rating of Kimball Electronics, 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 Kimball Electronics, 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 KE stock the variable cost ratio is equal to 95.3%.

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 KE 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 5.7% for Kimball Electronics, Inc..

Corporate tax rate of 27% is the nominal tax rate for Kimball Electronics, 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 KE 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 KE are equal to 13.3%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Kimball Electronics, 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 KE is equal to 15.9%. 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 - $355.527 million for Kimball Electronics, 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 25.546 million for Kimball Electronics, 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 Kimball Electronics, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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