Intrinsic value of Optical Cable - OCC

Previous Close

$4.62

  Intrinsic Value

$0.75

stock screener

  Rating & Target

str. sell

-84%

Previous close

$4.62

 
Intrinsic value

$0.75

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of OCC 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 0.0

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  103
  158
  237
  344
  485
  667
  895
  1,175
  1,512
  1,910
  2,372
  2,900
  3,495
  4,159
  4,890
  5,688
  6,553
  7,481
  8,473
  9,526
  10,639
  11,812
  13,042
  14,330
  15,675
  17,077
  18,538
  20,058
  21,638
  23,281
Variable operating expenses, $m
  88
  136
  203
  295
  416
  572
  768
  1,008
  1,298
  1,639
  2,035
  2,488
  2,999
  3,568
  4,196
  4,881
  5,622
  6,419
  7,270
  8,174
  9,129
  10,135
  11,190
  12,295
  13,449
  14,653
  15,906
  17,210
  18,566
  19,975
Fixed operating expenses, $m
  10
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  18
  18
  18
  19
  19
Total operating expenses, $m
  98
  146
  214
  306
  427
  583
  780
  1,020
  1,310
  1,651
  2,048
  2,501
  3,012
  3,582
  4,210
  4,895
  5,636
  6,434
  7,285
  8,189
  9,145
  10,151
  11,206
  12,312
  13,466
  14,671
  15,924
  17,228
  18,585
  19,994
Operating income, $m
  4
  12
  23
  38
  58
  83
  115
  155
  202
  259
  324
  399
  483
  577
  680
  793
  916
  1,047
  1,188
  1,337
  1,495
  1,661
  1,835
  2,018
  2,208
  2,407
  2,614
  2,829
  3,053
  3,286
EBITDA, $m
  7
  16
  29
  47
  70
  100
  138
  185
  241
  308
  385
  473
  573
  683
  806
  939
  1,084
  1,239
  1,405
  1,581
  1,767
  1,963
  2,169
  2,385
  2,610
  2,845
  3,089
  3,343
  3,608
  3,883
Interest expense (income), $m
  0
  0
  1
  2
  3
  4
  6
  9
  12
  16
  21
  27
  34
  41
  50
  59
  70
  81
  94
  107
  121
  137
  153
  170
  187
  206
  225
  245
  266
  288
  311
Earnings before tax, $m
  4
  11
  21
  35
  53
  77
  106
  143
  186
  237
  297
  365
  442
  527
  621
  724
  834
  954
  1,081
  1,215
  1,358
  1,508
  1,666
  1,830
  2,002
  2,182
  2,369
  2,563
  2,765
  2,975
Tax expense, $m
  1
  3
  6
  9
  14
  21
  29
  38
  50
  64
  80
  99
  119
  142
  168
  195
  225
  257
  292
  328
  367
  407
  450
  494
  541
  589
  639
  692
  747
  803
Net income, $m
  3
  8
  15
  26
  39
  56
  78
  104
  136
  173
  217
  267
  322
  385
  453
  528
  609
  696
  789
  887
  991
  1,101
  1,216
  1,336
  1,462
  1,593
  1,729
  1,871
  2,018
  2,172

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
  64
  99
  149
  216
  304
  418
  562
  737
  949
  1,198
  1,488
  1,819
  2,193
  2,609
  3,068
  3,569
  4,111
  4,693
  5,315
  5,976
  6,675
  7,410
  8,182
  8,990
  9,834
  10,714
  11,630
  12,583
  13,575
  14,605
Adjusted assets (=assets-cash), $m
  64
  99
  149
  216
  304
  418
  562
  737
  949
  1,198
  1,488
  1,819
  2,193
  2,609
  3,068
  3,569
  4,111
  4,693
  5,315
  5,976
  6,675
  7,410
  8,182
  8,990
  9,834
  10,714
  11,630
  12,583
  13,575
  14,605
Revenue / Adjusted assets
  1.609
  1.596
  1.591
  1.593
  1.595
  1.596
  1.593
  1.594
  1.593
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
  1.594
Average production assets, $m
  21
  32
  49
  70
  99
  137
  183
  241
  310
  392
  486
  594
  717
  853
  1,002
  1,166
  1,343
  1,534
  1,737
  1,953
  2,181
  2,421
  2,674
  2,938
  3,213
  3,501
  3,800
  4,112
  4,436
  4,773
Working capital, $m
  36
  55
  82
  120
  169
  232
  311
  409
  526
  665
  825
  1,009
  1,216
  1,447
  1,702
  1,980
  2,280
  2,603
  2,949
  3,315
  3,702
  4,110
  4,539
  4,987
  5,455
  5,943
  6,451
  6,980
  7,530
  8,102
Total debt, $m
  17
  31
  51
  79
  115
  162
  220
  293
  379
  482
  600
  736
  889
  1,060
  1,248
  1,453
  1,676
  1,914
  2,170
  2,440
  2,727
  3,028
  3,345
  3,676
  4,022
  4,383
  4,759
  5,149
  5,556
  5,978
Total liabilities, $m
  26
  41
  61
  88
  125
  172
  230
  302
  389
  491
  610
  746
  899
  1,070
  1,258
  1,463
  1,685
  1,924
  2,179
  2,450
  2,737
  3,038
  3,355
  3,686
  4,032
  4,393
  4,768
  5,159
  5,566
  5,988
Total equity, $m
  38
  59
  88
  127
  180
  247
  331
  435
  560
  707
  878
  1,073
  1,294
  1,539
  1,810
  2,105
  2,425
  2,769
  3,136
  3,526
  3,938
  4,372
  4,827
  5,304
  5,802
  6,321
  6,862
  7,424
  8,009
  8,617
Total liabilities and equity, $m
  64
  100
  149
  215
  305
  419
  561
  737
  949
  1,198
  1,488
  1,819
  2,193
  2,609
  3,068
  3,568
  4,110
  4,693
  5,315
  5,976
  6,675
  7,410
  8,182
  8,990
  9,834
  10,714
  11,630
  12,583
  13,575
  14,605
Debt-to-equity ratio
  0.440
  0.530
  0.580
  0.620
  0.640
  0.660
  0.670
  0.670
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  8
  15
  26
  39
  56
  78
  104
  136
  173
  217
  267
  322
  385
  453
  528
  609
  696
  789
  887
  991
  1,101
  1,216
  1,336
  1,462
  1,593
  1,729
  1,871
  2,018
  2,172
Depreciation, amort., depletion, $m
  3
  4
  6
  9
  12
  17
  23
  30
  39
  49
  61
  74
  90
  107
  125
  146
  168
  192
  217
  244
  273
  303
  334
  367
  402
  438
  475
  514
  554
  597
Funds from operations, $m
  6
  12
  22
  34
  51
  73
  101
  134
  175
  222
  278
  341
  412
  491
  579
  674
  777
  888
  1,006
  1,131
  1,264
  1,404
  1,550
  1,703
  1,863
  2,030
  2,204
  2,385
  2,573
  2,768
Change in working capital, $m
  13
  19
  27
  37
  49
  63
  79
  98
  117
  138
  161
  184
  207
  231
  254
  278
  301
  323
  345
  366
  387
  408
  428
  448
  468
  488
  508
  529
  550
  572
Cash from operations, $m
  -8
  -7
  -6
  -3
  2
  10
  21
  37
  57
  84
  117
  157
  205
  260
  324
  396
  476
  565
  661
  765
  877
  996
  1,122
  1,255
  1,395
  1,542
  1,696
  1,856
  2,023
  2,197
Maintenance CAPEX, $m
  -2
  -3
  -4
  -6
  -9
  -12
  -17
  -23
  -30
  -39
  -49
  -61
  -74
  -90
  -107
  -125
  -146
  -168
  -192
  -217
  -244
  -273
  -303
  -334
  -367
  -402
  -438
  -475
  -514
  -554
New CAPEX, $m
  -8
  -11
  -16
  -22
  -29
  -37
  -47
  -57
  -69
  -82
  -95
  -108
  -122
  -136
  -150
  -164
  -177
  -190
  -203
  -216
  -228
  -240
  -252
  -264
  -276
  -288
  -299
  -312
  -324
  -337
Cash from investing activities, $m
  -10
  -14
  -20
  -28
  -38
  -49
  -64
  -80
  -99
  -121
  -144
  -169
  -196
  -226
  -257
  -289
  -323
  -358
  -395
  -433
  -472
  -513
  -555
  -598
  -643
  -690
  -737
  -787
  -838
  -891
Free cash flow, $m
  -17
  -21
  -26
  -31
  -36
  -40
  -43
  -44
  -42
  -36
  -27
  -12
  8
  35
  68
  107
  153
  206
  266
  332
  404
  483
  567
  657
  752
  853
  959
  1,069
  1,185
  1,305
Issuance/(repayment) of debt, $m
  10
  14
  20
  27
  36
  47
  59
  72
  87
  102
  119
  136
  153
  171
  188
  205
  222
  239
  255
  271
  286
  302
  316
  331
  346
  361
  376
  391
  406
  422
Issuance/(repurchase) of shares, $m
  11
  13
  14
  14
  13
  11
  7
  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  
  21
  27
  34
  41
  49
  58
  66
  72
  87
  102
  119
  136
  153
  171
  188
  205
  222
  239
  255
  271
  286
  302
  316
  331
  346
  361
  376
  391
  406
  422
Total cash flow (excl. dividends), $m
  4
  6
  8
  11
  14
  18
  23
  28
  45
  66
  92
  124
  162
  206
  256
  313
  376
  445
  521
  603
  691
  784
  883
  988
  1,098
  1,214
  1,334
  1,460
  1,591
  1,728
Retained Cash Flow (-), $m
  -14
  -21
  -29
  -40
  -52
  -67
  -84
  -104
  -125
  -147
  -171
  -195
  -220
  -246
  -271
  -295
  -320
  -344
  -367
  -390
  -412
  -434
  -455
  -477
  -498
  -519
  -541
  -563
  -585
  -608
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
  -10
  -15
  -21
  -29
  -38
  -49
  -62
  -75
  -80
  -81
  -79
  -72
  -59
  -40
  -15
  17
  56
  101
  154
  213
  279
  350
  428
  512
  600
  695
  794
  898
  1,007
  1,120
Discount rate, %
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
  -10
  -13
  -17
  -21
  -26
  -30
  -33
  -36
  -34
  -30
  -25
  -19
  -13
  -7
  -2
  2
  5
  7
  9
  9
  9
  8
  7
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  75.7
  62.0
  53.7
  48.5
  45.3
  43.5
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7
  42.7

Optical Cable Corporation (OCC) is a manufacturer of a range of fiber optic and copper data communication cabling and connectivity solutions primarily for the enterprise market, and various harsh environment and specialty markets. The Company's product offerings include designs for uses ranging from enterprise networks, datacenters, residential and campus installations to customized products for specialty applications and harsh environments. OCC products include fiber optic and copper cabling, fiber optic and copper connectors, specialty fiber optic and copper connectors, fiber optic and copper patch cords, pre-terminated fiber optic and copper cable assemblies, racks, cabinets, datacom enclosures, patch panels, face plates, multi-media boxes, fiber optic reels and accessories, and other cable and connectivity management accessories. It markets and sells its harsh environment and specialty connectivity product offering under the names Optical Cable Corporation and OCC.

FINANCIAL RATIOS  of  Optical Cable (OCC)

Valuation Ratios
P/E Ratio -16.9
Price to Sales 0.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow -33.8
Price to Free Cash Flow -16.9
Growth Rates
Sales Growth Rate -1.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 50%
Total Debt to Equity 50%
Interest Coverage 0
Management Effectiveness
Return On Assets -4.9%
Ret/ On Assets - 3 Yr. Avg. -5.2%
Return On Total Capital -5.5%
Ret/ On T. Cap. - 3 Yr. Avg. -6.9%
Return On Equity -8.2%
Return On Equity - 3 Yr. Avg. -9.9%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 32.8%
Gross Margin - 3 Yr. Avg. 31.1%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0.1%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. -1.9%
Pre-Tax Margin -3.1%
Pre-Tax Margin - 3 Yr. Avg. -3.4%
Net Profit Margin -3.1%
Net Profit Margin - 3 Yr. Avg. -3.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -11.1%
Payout Ratio 0%

OCC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OCC stock intrinsic value calculation we used $64.092848 million for the last fiscal year's total revenue generated by Optical Cable. The default revenue input number comes from 0001 income statement of Optical Cable. 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 OCC stock valuation model: a) initial revenue growth rate of 60% 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 6.8%, whose default value for OCC is calculated based on our internal credit rating of Optical Cable, 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 Optical Cable.
    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 OCC stock the variable cost ratio is equal to 85.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10 million in the base year in the intrinsic value calculation for OCC 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 5.6% for Optical Cable.

Corporate tax rate of 27% is the nominal tax rate for Optical Cable. 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 OCC 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 OCC are equal to 20.5%.

Life of production assets of 8 years is the average useful life of capital assets used in Optical Cable 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 OCC is equal to 34.8%. 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 - $23.689522 million for Optical Cable - 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 7.696 million for Optical Cable 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 Optical Cable at the current share price and the inputted number of shares is $0.0 billion.

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