Intrinsic value of Materion Corporation - MTRN

Previous Close

$63.24

  Intrinsic Value

$26.03

stock screener

  Rating & Target

str. sell

-59%

Previous close

$63.24

 
Intrinsic value

$26.03

 
Up/down potential

-59%

 
Rating

str. sell

We calculate the intrinsic value of MTRN 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 1.3

 

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, %
  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
  1,232
  1,260
  1,293
  1,329
  1,370
  1,414
  1,462
  1,514
  1,570
  1,630
  1,695
  1,764
  1,837
  1,915
  1,997
  2,085
  2,178
  2,276
  2,379
  2,488
  2,604
  2,725
  2,854
  2,989
  3,131
  3,281
  3,438
  3,604
  3,779
  3,963
Variable operating expenses, $m
  843
  862
  884
  908
  935
  965
  998
  1,033
  1,071
  1,112
  1,146
  1,192
  1,242
  1,294
  1,350
  1,409
  1,472
  1,538
  1,608
  1,682
  1,760
  1,842
  1,929
  2,020
  2,116
  2,218
  2,324
  2,436
  2,554
  2,679
Fixed operating expenses, $m
  333
  341
  348
  356
  363
  371
  380
  388
  397
  405
  414
  423
  433
  442
  452
  462
  472
  482
  493
  504
  515
  526
  538
  550
  562
  574
  587
  600
  613
  626
Total operating expenses, $m
  1,176
  1,203
  1,232
  1,264
  1,298
  1,336
  1,378
  1,421
  1,468
  1,517
  1,560
  1,615
  1,675
  1,736
  1,802
  1,871
  1,944
  2,020
  2,101
  2,186
  2,275
  2,368
  2,467
  2,570
  2,678
  2,792
  2,911
  3,036
  3,167
  3,305
Operating income, $m
  56
  58
  61
  65
  71
  77
  84
  93
  103
  113
  135
  148
  163
  178
  195
  214
  234
  255
  278
  303
  329
  357
  387
  419
  453
  489
  528
  568
  612
  658
EBITDA, $m
  97
  100
  104
  109
  115
  122
  131
  141
  152
  164
  178
  193
  209
  227
  246
  267
  289
  313
  338
  366
  395
  426
  459
  495
  532
  572
  615
  660
  708
  758
Interest expense (income), $m
  2
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  54
  58
  62
  66
  71
Earnings before tax, $m
  54
  55
  57
  61
  65
  70
  76
  84
  92
  101
  121
  133
  145
  159
  174
  190
  208
  227
  247
  269
  292
  317
  344
  372
  403
  435
  470
  506
  545
  587
Tax expense, $m
  15
  15
  16
  16
  18
  19
  21
  23
  25
  27
  33
  36
  39
  43
  47
  51
  56
  61
  67
  73
  79
  86
  93
  101
  109
  118
  127
  137
  147
  158
Net income, $m
  39
  40
  42
  44
  47
  51
  56
  61
  67
  74
  89
  97
  106
  116
  127
  139
  152
  166
  180
  196
  213
  232
  251
  272
  294
  318
  343
  370
  398
  428

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
  817
  835
  857
  881
  908
  937
  969
  1,003
  1,041
  1,080
  1,123
  1,169
  1,217
  1,269
  1,324
  1,382
  1,443
  1,508
  1,577
  1,649
  1,725
  1,806
  1,891
  1,981
  2,075
  2,174
  2,279
  2,389
  2,504
  2,626
Adjusted assets (=assets-cash), $m
  817
  835
  857
  881
  908
  937
  969
  1,003
  1,041
  1,080
  1,123
  1,169
  1,217
  1,269
  1,324
  1,382
  1,443
  1,508
  1,577
  1,649
  1,725
  1,806
  1,891
  1,981
  2,075
  2,174
  2,279
  2,389
  2,504
  2,626
Revenue / Adjusted assets
  1.508
  1.509
  1.509
  1.509
  1.509
  1.509
  1.509
  1.509
  1.508
  1.509
  1.509
  1.509
  1.509
  1.509
  1.508
  1.509
  1.509
  1.509
  1.509
  1.509
  1.510
  1.509
  1.509
  1.509
  1.509
  1.509
  1.509
  1.509
  1.509
  1.509
Average production assets, $m
  309
  316
  325
  334
  344
  355
  367
  380
  394
  409
  425
  443
  461
  481
  501
  523
  547
  571
  597
  625
  654
  684
  716
  750
  786
  823
  863
  905
  949
  995
Working capital, $m
  234
  239
  246
  253
  260
  269
  278
  288
  298
  310
  322
  335
  349
  364
  380
  396
  414
  432
  452
  473
  495
  518
  542
  568
  595
  623
  653
  685
  718
  753
Total debt, $m
  23
  29
  36
  43
  51
  60
  70
  81
  92
  104
  118
  132
  147
  163
  179
  197
  216
  236
  257
  280
  303
  328
  354
  382
  411
  441
  473
  507
  543
  580
Total liabilities, $m
  251
  257
  264
  271
  280
  289
  298
  309
  320
  333
  346
  360
  375
  391
  408
  426
  444
  464
  486
  508
  531
  556
  582
  610
  639
  670
  702
  736
  771
  809
Total equity, $m
  565
  578
  593
  610
  628
  648
  670
  694
  720
  748
  777
  809
  842
  878
  916
  956
  999
  1,044
  1,091
  1,141
  1,194
  1,250
  1,309
  1,371
  1,436
  1,505
  1,577
  1,653
  1,733
  1,817
Total liabilities and equity, $m
  816
  835
  857
  881
  908
  937
  968
  1,003
  1,040
  1,081
  1,123
  1,169
  1,217
  1,269
  1,324
  1,382
  1,443
  1,508
  1,577
  1,649
  1,725
  1,806
  1,891
  1,981
  2,075
  2,175
  2,279
  2,389
  2,504
  2,626
Debt-to-equity ratio
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
  0.310
  0.310
  0.320
Adjusted equity ratio
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  39
  40
  42
  44
  47
  51
  56
  61
  67
  74
  89
  97
  106
  116
  127
  139
  152
  166
  180
  196
  213
  232
  251
  272
  294
  318
  343
  370
  398
  428
Depreciation, amort., depletion, $m
  41
  42
  42
  43
  44
  46
  47
  48
  50
  51
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
Funds from operations, $m
  80
  82
  84
  88
  92
  97
  103
  109
  117
  125
  132
  142
  153
  165
  178
  192
  207
  223
  241
  259
  279
  301
  323
  348
  373
  401
  430
  461
  494
  529
Change in working capital, $m
  5
  5
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
Cash from operations, $m
  76
  77
  78
  81
  84
  88
  93
  99
  106
  114
  119
  129
  139
  150
  162
  175
  189
  205
  221
  239
  257
  278
  299
  322
  346
  372
  400
  429
  461
  494
Maintenance CAPEX, $m
  -31
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
New CAPEX, $m
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
Cash from investing activities, $m
  -38
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -67
  -70
  -73
  -76
  -80
  -84
  -87
  -92
  -97
  -101
  -106
  -112
  -117
  -123
  -129
  -135
  -142
Free cash flow, $m
  39
  38
  38
  39
  40
  43
  46
  49
  54
  59
  62
  68
  76
  84
  93
  103
  113
  125
  137
  151
  165
  181
  198
  216
  235
  255
  277
  301
  325
  352
Issuance/(repayment) of debt, $m
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
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  
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
Total cash flow (excl. dividends), $m
  44
  44
  45
  46
  49
  52
  55
  60
  65
  71
  75
  82
  91
  100
  110
  120
  132
  145
  158
  173
  189
  206
  224
  243
  264
  286
  310
  335
  361
  389
Retained Cash Flow (-), $m
  -11
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
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
  33
  31
  30
  30
  30
  31
  33
  36
  39
  43
  45
  51
  57
  64
  72
  80
  90
  100
  111
  123
  136
  150
  165
  181
  199
  217
  237
  258
  281
  305
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
  31
  28
  26
  24
  23
  23
  22
  22
  23
  23
  22
  22
  22
  21
  21
  20
  20
  18
  17
  16
  14
  12
  11
  9
  8
  6
  5
  4
  3
  2
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
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Materion Corporation, through its subsidiaries, is an integrated producer of engineered materials used in a range of electrical, electronic, thermal, and structural applications. The Company operates in four segments: Performance Alloys and Composites, Advanced Materials, Precision Coatings, and Other. The Performance Alloys and Composites segment consists of businesses, such as Performance Metals and Technical Materials. The Advanced Materials segment produces chemicals, microelectronics packaging, precious metal, non-precious metal and specialty metal products. The Precision Coatings segment includes units, such as Precision Optics and Large Area Coatings. Its products include inorganic chemicals and powders, specialty coatings, specialty engineered beryllium and copper-based alloys, beryllium composites, ceramics and engineered clad, and plated metal systems.

FINANCIAL RATIOS  of  Materion Corporation (MTRN)

Valuation Ratios
P/E Ratio 48.5
Price to Sales 1.3
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 18.8
Price to Free Cash Flow 31.5
Growth Rates
Sales Growth Rate -5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 31
Current Ratio 0
LT Debt to Equity 0.6%
Total Debt to Equity 0.8%
Interest Coverage 14
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.7%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 18.9%
Gross Margin - 3 Yr. Avg. 18.6%
EBITDA Margin 7.5%
EBITDA Margin - 3 Yr. Avg. 8.2%
Operating Margin 2.8%
Oper. Margin - 3 Yr. Avg. 4.1%
Pre-Tax Margin 2.6%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 3.2%
Effective Tax Rate -4%
Eff/ Tax Rate - 3 Yr. Avg. 15.1%
Payout Ratio 30.8%

MTRN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTRN stock intrinsic value calculation we used $1208 million for the last fiscal year's total revenue generated by Materion Corporation. The default revenue input number comes from 0001 income statement of Materion 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 MTRN 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 MTRN is calculated based on our internal credit rating of Materion 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 Materion 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 MTRN stock the variable cost ratio is equal to 68.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $326 million in the base year in the intrinsic value calculation for MTRN 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 13.1% for Materion Corporation.

Corporate tax rate of 27% is the nominal tax rate for Materion 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 MTRN 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 MTRN are equal to 25.1%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Materion 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 MTRN is equal to 19%. 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 - $553.906 million for Materion 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 20.170 million for Materion 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 Materion Corporation at the current share price and the inputted number of shares is $1.3 billion.

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