Intrinsic value of Key Tronic Corporation - KTCC

Previous Close

$5.08

  Intrinsic Value

$70.69

stock screener

  Rating & Target

str. buy

+999%

Previous close

$5.08

 
Intrinsic value

$70.69

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of KTCC 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 0.1

 

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
  491
  538
  587
  638
  692
  747
  805
  865
  927
  992
  1,059
  1,129
  1,201
  1,277
  1,356
  1,438
  1,523
  1,612
  1,705
  1,802
  1,904
  2,009
  2,120
  2,236
  2,356
  2,483
  2,615
  2,754
  2,899
  3,051
Variable operating expenses, $m
  294
  322
  351
  381
  413
  446
  480
  515
  552
  591
  628
  669
  712
  757
  804
  852
  903
  956
  1,011
  1,068
  1,128
  1,191
  1,257
  1,325
  1,397
  1,472
  1,550
  1,632
  1,718
  1,808
Fixed operating expenses, $m
  186
  190
  194
  199
  203
  207
  212
  217
  221
  226
  231
  236
  242
  247
  252
  258
  263
  269
  275
  281
  287
  294
  300
  307
  314
  320
  328
  335
  342
  350
Total operating expenses, $m
  480
  512
  545
  580
  616
  653
  692
  732
  773
  817
  859
  905
  954
  1,004
  1,056
  1,110
  1,166
  1,225
  1,286
  1,349
  1,415
  1,485
  1,557
  1,632
  1,711
  1,792
  1,878
  1,967
  2,060
  2,158
Operating income, $m
  11
  26
  42
  59
  76
  94
  113
  133
  153
  175
  200
  223
  248
  273
  300
  328
  357
  387
  419
  453
  488
  525
  563
  604
  646
  691
  738
  787
  838
  893
EBITDA, $m
  21
  37
  53
  71
  89
  108
  127
  148
  170
  192
  215
  240
  265
  292
  320
  349
  379
  411
  444
  479
  515
  554
  594
  636
  680
  727
  775
  827
  880
  937
Interest expense (income), $m
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
Earnings before tax, $m
  9
  23
  38
  54
  70
  87
  105
  124
  143
  163
  187
  209
  232
  257
  282
  308
  336
  365
  395
  427
  460
  495
  531
  570
  610
  652
  697
  743
  792
  844
Tax expense, $m
  2
  6
  10
  14
  19
  24
  28
  33
  39
  44
  51
  57
  63
  69
  76
  83
  91
  98
  107
  115
  124
  134
  143
  154
  165
  176
  188
  201
  214
  228
Net income, $m
  6
  17
  28
  39
  51
  64
  77
  90
  104
  119
  137
  153
  170
  187
  206
  225
  245
  266
  288
  311
  336
  361
  388
  416
  445
  476
  508
  543
  578
  616

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
  271
  297
  325
  353
  382
  413
  445
  478
  512
  548
  585
  624
  664
  706
  749
  795
  842
  891
  943
  996
  1,052
  1,111
  1,172
  1,236
  1,303
  1,372
  1,446
  1,522
  1,602
  1,686
Adjusted assets (=assets-cash), $m
  271
  297
  325
  353
  382
  413
  445
  478
  512
  548
  585
  624
  664
  706
  749
  795
  842
  891
  943
  996
  1,052
  1,111
  1,172
  1,236
  1,303
  1,372
  1,446
  1,522
  1,602
  1,686
Revenue / Adjusted assets
  1.812
  1.811
  1.806
  1.807
  1.812
  1.809
  1.809
  1.810
  1.811
  1.810
  1.810
  1.809
  1.809
  1.809
  1.810
  1.809
  1.809
  1.809
  1.808
  1.809
  1.810
  1.808
  1.809
  1.809
  1.808
  1.810
  1.808
  1.809
  1.810
  1.810
Average production assets, $m
  40
  44
  48
  52
  56
  61
  65
  70
  75
  80
  86
  91
  97
  103
  110
  116
  123
  131
  138
  146
  154
  163
  172
  181
  191
  201
  212
  223
  235
  247
Working capital, $m
  111
  122
  133
  145
  157
  170
  183
  196
  210
  225
  240
  256
  273
  290
  308
  326
  346
  366
  387
  409
  432
  456
  481
  507
  535
  564
  594
  625
  658
  692
Total debt, $m
  48
  62
  76
  90
  106
  122
  138
  156
  173
  192
  211
  232
  253
  274
  297
  321
  345
  371
  398
  426
  455
  485
  517
  550
  585
  622
  660
  700
  741
  785
Total liabilities, $m
  141
  155
  169
  184
  199
  215
  232
  249
  267
  286
  305
  325
  346
  368
  390
  414
  439
  464
  491
  519
  548
  579
  611
  644
  679
  715
  753
  793
  835
  879
Total equity, $m
  130
  142
  156
  169
  183
  198
  213
  229
  245
  263
  280
  299
  318
  338
  359
  381
  403
  427
  452
  477
  504
  532
  561
  592
  624
  657
  692
  729
  768
  808
Total liabilities and equity, $m
  271
  297
  325
  353
  382
  413
  445
  478
  512
  549
  585
  624
  664
  706
  749
  795
  842
  891
  943
  996
  1,052
  1,111
  1,172
  1,236
  1,303
  1,372
  1,445
  1,522
  1,603
  1,687
Debt-to-equity ratio
  0.370
  0.430
  0.490
  0.530
  0.580
  0.620
  0.650
  0.680
  0.710
  0.730
  0.750
  0.770
  0.790
  0.810
  0.830
  0.840
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.950
  0.960
  0.970
  0.970
Adjusted equity ratio
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  17
  28
  39
  51
  64
  77
  90
  104
  119
  137
  153
  170
  187
  206
  225
  245
  266
  288
  311
  336
  361
  388
  416
  445
  476
  508
  543
  578
  616
Depreciation, amort., depletion, $m
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
Funds from operations, $m
  16
  27
  39
  51
  64
  77
  91
  106
  121
  136
  152
  169
  187
  206
  225
  246
  267
  289
  313
  337
  363
  390
  418
  448
  479
  512
  546
  582
  620
  660
Change in working capital, $m
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
Cash from operations, $m
  6
  17
  28
  40
  52
  65
  78
  92
  107
  122
  137
  153
  171
  189
  207
  227
  248
  269
  292
  315
  340
  366
  393
  422
  452
  483
  516
  551
  587
  626
Maintenance CAPEX, $m
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
New CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
Cash from investing activities, $m
  -10
  -11
  -12
  -12
  -13
  -14
  -16
  -17
  -18
  -18
  -19
  -21
  -22
  -23
  -24
  -27
  -28
  -29
  -31
  -33
  -34
  -37
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
Free cash flow, $m
  -4
  6
  16
  27
  38
  50
  63
  75
  89
  103
  117
  132
  148
  165
  183
  201
  220
  240
  261
  283
  306
  330
  355
  382
  410
  439
  470
  502
  536
  571
Issuance/(repayment) of debt, $m
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
Issuance/(repurchase) of shares, $m
  5
  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  
  18
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
Total cash flow (excl. dividends), $m
  15
  19
  30
  42
  54
  66
  79
  93
  107
  122
  136
  152
  169
  187
  205
  224
  245
  266
  288
  311
  335
  360
  387
  415
  444
  475
  508
  542
  578
  615
Retained Cash Flow (-), $m
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
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
  3
  7
  17
  28
  40
  51
  64
  77
  90
  105
  119
  134
  150
  167
  184
  203
  222
  242
  263
  285
  308
  332
  358
  385
  412
  442
  473
  505
  539
  575
Discount rate, %
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
  2
  6
  15
  22
  29
  35
  41
  45
  48
  50
  50
  50
  49
  47
  45
  42
  38
  34
  30
  26
  23
  19
  15
  12
  10
  8
  6
  4
  3
  2
Current shareholders' claim on cash, %
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8
  93.8

Key Tronic Corporation, doing business as KeyTronicEMS Co., is engaged in contract manufacturing for a range of products. The Company provides electronic manufacturing services (EMS) and solutions to original equipment manufacturers (OEMs) of a range of products. The Company provides engineering services, procurement and distribution, materials management, manufacturing and assembly services, in-house testing, and customer service. The Company provides EMS services, such as product design, surface mount technologies (SMT) and pin through hole capability for printed circuit board assembly (PCBA), tool making, precision plastic molding, sheet metal fabrication, liquid injection molding, complex assembly, automated tape winding, prototype design and full product assembly. The Company's manufacturing operations are located in Oakdale, Minnesota; Fayetteville, Arkansas; Corinth, Mississippi; Harrodsburg, Kentucky, and foreign manufacturing operations in Juarez, Mexico, and Shanghai, China.

FINANCIAL RATIOS  of  Key Tronic Corporation (KTCC)

Valuation Ratios
P/E Ratio 9.1
Price to Sales 0.1
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.8%
Cap. Spend. - 3 Yr. Gr. Rate 2.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 31.6%
Total Debt to Equity 36.8%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. 5.3%
Asset Turnover 2
Profitability Ratios
Gross Margin 8.1%
Gross Margin - 3 Yr. Avg. 7.9%
EBITDA Margin 3.4%
EBITDA Margin - 3 Yr. Avg. 3.2%
Operating Margin 2.1%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 1.3%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 15.6%
Payout Ratio 0%

KTCC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KTCC stock intrinsic value calculation we used $446 million for the last fiscal year's total revenue generated by Key Tronic Corporation. The default revenue input number comes from 0001 income statement of Key Tronic 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 KTCC 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 5%, whose default value for KTCC is calculated based on our internal credit rating of Key Tronic 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 Key Tronic 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 KTCC stock the variable cost ratio is equal to 59.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $182 million in the base year in the intrinsic value calculation for KTCC 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 6.6% for Key Tronic Corporation.

Corporate tax rate of 27% is the nominal tax rate for Key Tronic 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 KTCC 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 KTCC are equal to 8.1%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Key Tronic 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 KTCC is equal to 22.7%. 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 - $118.081 million for Key Tronic 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 10.760 million for Key Tronic 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 Key Tronic Corporation at the current share price and the inputted number of shares is $0.1 billion.

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