Intrinsic value of Kemet Corporation - KEM

Previous Close

$18.08

  Intrinsic Value

$39.60

stock screener

  Rating & Target

str. buy

+119%

Previous close

$18.08

 
Intrinsic value

$39.60

 
Up/down potential

+119%

 
Rating

str. buy

We calculate the intrinsic value of KEM 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 1.0

 

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, %
  14.20
  13.28
  12.45
  11.71
  11.04
  10.43
  9.89
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
Revenue, $m
  1,370
  1,552
  1,746
  1,950
  2,165
  2,391
  2,628
  2,875
  3,132
  3,400
  3,680
  3,970
  4,271
  4,585
  4,911
  5,249
  5,601
  5,967
  6,348
  6,744
  7,157
  7,587
  8,035
  8,502
  8,989
  9,498
  10,030
  10,585
  11,165
  11,772
Variable operating expenses, $m
  1,128
  1,276
  1,434
  1,601
  1,776
  1,960
  2,153
  2,355
  2,565
  2,784
  3,001
  3,238
  3,484
  3,740
  4,005
  4,282
  4,569
  4,867
  5,178
  5,501
  5,838
  6,188
  6,554
  6,935
  7,332
  7,747
  8,181
  8,634
  9,107
  9,602
Fixed operating expenses, $m
  101
  103
  106
  108
  110
  113
  115
  118
  120
  123
  126
  129
  131
  134
  137
  140
  143
  146
  150
  153
  156
  160
  163
  167
  171
  174
  178
  182
  186
  190
Total operating expenses, $m
  1,229
  1,379
  1,540
  1,709
  1,886
  2,073
  2,268
  2,473
  2,685
  2,907
  3,127
  3,367
  3,615
  3,874
  4,142
  4,422
  4,712
  5,013
  5,328
  5,654
  5,994
  6,348
  6,717
  7,102
  7,503
  7,921
  8,359
  8,816
  9,293
  9,792
Operating income, $m
  141
  173
  206
  241
  279
  318
  359
  402
  447
  494
  552
  603
  656
  711
  768
  827
  889
  953
  1,020
  1,090
  1,163
  1,239
  1,318
  1,400
  1,486
  1,577
  1,671
  1,769
  1,872
  1,980
EBITDA, $m
  202
  240
  281
  324
  369
  416
  466
  518
  573
  629
  688
  750
  814
  880
  949
  1,021
  1,096
  1,174
  1,255
  1,339
  1,427
  1,519
  1,615
  1,715
  1,819
  1,928
  2,041
  2,160
  2,285
  2,415
Interest expense (income), $m
  39
  30
  39
  50
  61
  72
  85
  97
  111
  125
  139
  155
  170
  187
  204
  222
  240
  259
  279
  300
  322
  344
  367
  392
  417
  444
  471
  500
  530
  562
  594
Earnings before tax, $m
  112
  133
  156
  181
  206
  233
  262
  291
  322
  354
  398
  433
  469
  507
  546
  587
  630
  674
  720
  769
  819
  871
  926
  983
  1,043
  1,105
  1,171
  1,239
  1,310
  1,385
Tax expense, $m
  30
  36
  42
  49
  56
  63
  71
  79
  87
  96
  107
  117
  127
  137
  148
  159
  170
  182
  195
  208
  221
  235
  250
  265
  282
  298
  316
  335
  354
  374
Net income, $m
  81
  97
  114
  132
  151
  170
  191
  213
  235
  259
  291
  316
  343
  370
  399
  429
  460
  492
  526
  561
  598
  636
  676
  718
  761
  807
  855
  904
  957
  1,011

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
  1,375
  1,557
  1,751
  1,956
  2,172
  2,398
  2,636
  2,883
  3,142
  3,411
  3,691
  3,982
  4,284
  4,599
  4,925
  5,265
  5,618
  5,985
  6,367
  6,764
  7,178
  7,609
  8,059
  8,528
  9,017
  9,527
  10,060
  10,617
  11,199
  11,807
Adjusted assets (=assets-cash), $m
  1,375
  1,557
  1,751
  1,956
  2,172
  2,398
  2,636
  2,883
  3,142
  3,411
  3,691
  3,982
  4,284
  4,599
  4,925
  5,265
  5,618
  5,985
  6,367
  6,764
  7,178
  7,609
  8,059
  8,528
  9,017
  9,527
  10,060
  10,617
  11,199
  11,807
Revenue / Adjusted assets
  0.996
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
  0.997
Average production assets, $m
  400
  453
  510
  569
  632
  698
  767
  839
  915
  993
  1,074
  1,159
  1,247
  1,339
  1,434
  1,533
  1,636
  1,742
  1,854
  1,969
  2,090
  2,215
  2,346
  2,483
  2,625
  2,774
  2,929
  3,091
  3,260
  3,437
Working capital, $m
  143
  161
  182
  203
  225
  249
  273
  299
  326
  354
  383
  413
  444
  477
  511
  546
  583
  621
  660
  701
  744
  789
  836
  884
  935
  988
  1,043
  1,101
  1,161
  1,224
Total debt, $m
  429
  541
  660
  786
  919
  1,058
  1,204
  1,356
  1,514
  1,679
  1,851
  2,030
  2,216
  2,409
  2,609
  2,818
  3,035
  3,260
  3,495
  3,739
  3,993
  4,258
  4,533
  4,821
  5,121
  5,435
  5,762
  6,104
  6,461
  6,835
Total liabilities, $m
  844
  956
  1,075
  1,201
  1,333
  1,473
  1,618
  1,770
  1,929
  2,094
  2,266
  2,445
  2,631
  2,824
  3,024
  3,233
  3,449
  3,675
  3,909
  4,153
  4,407
  4,672
  4,948
  5,236
  5,536
  5,850
  6,177
  6,519
  6,876
  7,250
Total equity, $m
  531
  601
  676
  755
  838
  926
  1,017
  1,113
  1,213
  1,317
  1,425
  1,537
  1,654
  1,775
  1,901
  2,032
  2,169
  2,310
  2,458
  2,611
  2,771
  2,937
  3,111
  3,292
  3,480
  3,677
  3,883
  4,098
  4,323
  4,558
Total liabilities and equity, $m
  1,375
  1,557
  1,751
  1,956
  2,171
  2,399
  2,635
  2,883
  3,142
  3,411
  3,691
  3,982
  4,285
  4,599
  4,925
  5,265
  5,618
  5,985
  6,367
  6,764
  7,178
  7,609
  8,059
  8,528
  9,016
  9,527
  10,060
  10,617
  11,199
  11,808
Debt-to-equity ratio
  0.810
  0.900
  0.980
  1.040
  1.100
  1.140
  1.180
  1.220
  1.250
  1.280
  1.300
  1.320
  1.340
  1.360
  1.370
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.450
  1.460
  1.460
  1.470
  1.480
  1.480
  1.490
  1.490
  1.500
Adjusted equity ratio
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  81
  97
  114
  132
  151
  170
  191
  213
  235
  259
  291
  316
  343
  370
  399
  429
  460
  492
  526
  561
  598
  636
  676
  718
  761
  807
  855
  904
  957
  1,011
Depreciation, amort., depletion, $m
  61
  67
  75
  82
  90
  98
  107
  116
  126
  136
  136
  147
  158
  169
  182
  194
  207
  221
  235
  249
  265
  280
  297
  314
  332
  351
  371
  391
  413
  435
Funds from operations, $m
  142
  165
  189
  214
  241
  269
  298
  329
  361
  394
  427
  463
  500
  540
  580
  623
  667
  713
  761
  810
  862
  916
  973
  1,032
  1,094
  1,158
  1,225
  1,296
  1,369
  1,446
Change in working capital, $m
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
Cash from operations, $m
  124
  146
  169
  193
  218
  245
  274
  303
  334
  367
  398
  433
  469
  507
  546
  588
  630
  675
  721
  769
  819
  872
  926
  983
  1,043
  1,105
  1,170
  1,238
  1,309
  1,383
Maintenance CAPEX, $m
  -44
  -51
  -57
  -65
  -72
  -80
  -88
  -97
  -106
  -116
  -126
  -136
  -147
  -158
  -169
  -182
  -194
  -207
  -221
  -235
  -249
  -265
  -280
  -297
  -314
  -332
  -351
  -371
  -391
  -413
New CAPEX, $m
  -50
  -53
  -56
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -95
  -99
  -103
  -107
  -111
  -116
  -120
  -126
  -131
  -136
  -142
  -149
  -155
  -162
  -169
  -177
Cash from investing activities, $m
  -94
  -104
  -113
  -125
  -135
  -146
  -157
  -169
  -181
  -194
  -207
  -221
  -235
  -250
  -264
  -281
  -297
  -314
  -332
  -351
  -369
  -391
  -411
  -433
  -456
  -481
  -506
  -533
  -560
  -590
Free cash flow, $m
  30
  42
  55
  69
  83
  99
  116
  134
  153
  172
  190
  212
  234
  258
  282
  307
  333
  361
  389
  419
  450
  482
  515
  550
  586
  624
  664
  705
  748
  793
Issuance/(repayment) of debt, $m
  105
  112
  119
  126
  133
  139
  146
  152
  159
  165
  172
  179
  186
  193
  201
  208
  217
  225
  234
  244
  254
  265
  276
  288
  300
  313
  327
  342
  357
  374
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  
  105
  112
  119
  126
  133
  139
  146
  152
  159
  165
  172
  179
  186
  193
  201
  208
  217
  225
  234
  244
  254
  265
  276
  288
  300
  313
  327
  342
  357
  374
Total cash flow (excl. dividends), $m
  134
  154
  174
  194
  216
  238
  262
  286
  311
  338
  362
  391
  420
  451
  482
  516
  550
  586
  624
  663
  704
  746
  791
  838
  887
  938
  991
  1,047
  1,106
  1,167
Retained Cash Flow (-), $m
  -67
  -70
  -75
  -79
  -83
  -87
  -92
  -96
  -100
  -104
  -108
  -112
  -117
  -121
  -126
  -131
  -136
  -142
  -147
  -153
  -160
  -166
  -173
  -181
  -189
  -197
  -206
  -215
  -225
  -235
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
  68
  84
  99
  115
  133
  151
  170
  190
  212
  234
  254
  278
  303
  329
  356
  385
  414
  445
  476
  509
  544
  580
  618
  657
  698
  741
  785
  832
  881
  932
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
  65
  76
  86
  95
  103
  110
  115
  119
  122
  123
  121
  119
  115
  111
  105
  98
  90
  82
  73
  65
  56
  48
  40
  33
  27
  22
  17
  13
  10
  7
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

KEMET Corporation (KEMET) is a manufacturer of passive electronic components. The Company operates in two segments: Solid Capacitors, and Film and Electrolytic. The Solid Capacitors segment primarily produces tantalum, aluminum, polymer and ceramic capacitors. Solid Capacitors also produces tantalum powder used in the production of tantalum capacitors. The Film and Electrolytic Business Group produces film, paper and wet aluminum electrolytic capacitors. It also designs and produces EMI Filters. The Company's product offerings include surface mount, which are attached directly to the circuit board; leaded capacitors, which are attached to the circuit board using lead wires, and chassis-mount and other pin-through-hole board-mount capacitors, which utilize attachment methods, such as screw terminal and snap-in. The Company sells its products to a range of original equipment manufacturers (OEMs) and electronics manufacturing services (EMS) providers.

FINANCIAL RATIOS  of  Kemet Corporation (KEM)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 1.1
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 18.4
Growth Rates
Sales Growth Rate 3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30%
Cap. Spend. - 3 Yr. Gr. Rate -4.1%
Financial Strength
Quick Ratio 55
Current Ratio 0
LT Debt to Equity 250.6%
Total Debt to Equity 251.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 9.7%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 9.2%
Ret/ On T. Cap. - 3 Yr. Avg. -1.1%
Return On Equity 36.1%
Return On Equity - 3 Yr. Avg. -3.4%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 24.5%
Gross Margin - 3 Yr. Avg. 22.1%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 8.7%
Operating Margin 4.6%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. -1.4%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. -0.9%
Effective Tax Rate 45.5%
Eff/ Tax Rate - 3 Yr. Avg. -5.2%
Payout Ratio 0%

KEM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEM stock intrinsic value calculation we used $1200 million for the last fiscal year's total revenue generated by Kemet Corporation. The default revenue input number comes from 0001 income statement of Kemet 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 KEM stock valuation model: a) initial revenue growth rate of 14.2% 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 KEM is calculated based on our internal credit rating of Kemet 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 Kemet 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 KEM stock the variable cost ratio is equal to 82.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $99 million in the base year in the intrinsic value calculation for KEM 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 9.2% for Kemet Corporation.

Corporate tax rate of 27% is the nominal tax rate for Kemet 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 KEM 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 KEM are equal to 29.2%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Kemet 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 KEM is equal to 10.4%. 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 - $463.875 million for Kemet 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 57.546 million for Kemet 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 Kemet Corporation at the current share price and the inputted number of shares is $1.0 billion.

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