Intrinsic value of Preformed Line Products - PLPC

Previous Close

$64.53

  Intrinsic Value

$10.52

stock screener

  Rating & Target

str. sell

-84%

Previous close

$64.53

 
Intrinsic value

$10.52

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of PLPC 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 0.3

 

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, %
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  422
  469
  518
  569
  623
  678
  736
  797
  860
  925
  993
  1,063
  1,137
  1,213
  1,292
  1,375
  1,460
  1,550
  1,643
  1,740
  1,841
  1,947
  2,057
  2,172
  2,292
  2,418
  2,549
  2,686
  2,830
  2,980
Variable operating expenses, $m
  377
  419
  462
  507
  555
  604
  656
  709
  765
  823
  881
  943
  1,008
  1,076
  1,146
  1,219
  1,295
  1,375
  1,457
  1,543
  1,633
  1,727
  1,824
  1,926
  2,033
  2,144
  2,261
  2,383
  2,510
  2,644
Fixed operating expenses, $m
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
Total operating expenses, $m
  391
  434
  477
  522
  571
  620
  672
  726
  782
  840
  899
  961
  1,027
  1,095
  1,165
  1,239
  1,315
  1,396
  1,478
  1,565
  1,655
  1,750
  1,847
  1,950
  2,057
  2,169
  2,286
  2,409
  2,536
  2,671
Operating income, $m
  31
  36
  41
  46
  52
  58
  64
  71
  77
  84
  94
  102
  110
  118
  127
  136
  145
  154
  165
  175
  186
  197
  209
  222
  235
  249
  263
  278
  294
  310
EBITDA, $m
  46
  53
  59
  66
  74
  81
  89
  98
  106
  115
  125
  135
  145
  155
  166
  178
  189
  202
  215
  228
  242
  257
  272
  288
  305
  323
  341
  360
  380
  401
Interest expense (income), $m
  1
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  40
  42
  44
Earnings before tax, $m
  29
  33
  37
  42
  47
  52
  57
  63
  68
  74
  83
  89
  96
  103
  110
  118
  126
  134
  142
  151
  160
  170
  180
  191
  202
  213
  226
  238
  252
  266
Tax expense, $m
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  64
  68
  72
Net income, $m
  21
  24
  27
  31
  34
  38
  42
  46
  50
  54
  61
  65
  70
  75
  80
  86
  92
  98
  104
  110
  117
  124
  132
  139
  147
  156
  165
  174
  184
  194

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
  402
  446
  493
  542
  592
  645
  701
  758
  818
  880
  945
  1,012
  1,082
  1,154
  1,229
  1,308
  1,390
  1,475
  1,563
  1,655
  1,752
  1,852
  1,957
  2,066
  2,181
  2,300
  2,425
  2,556
  2,693
  2,836
Adjusted assets (=assets-cash), $m
  402
  446
  493
  542
  592
  645
  701
  758
  818
  880
  945
  1,012
  1,082
  1,154
  1,229
  1,308
  1,390
  1,475
  1,563
  1,655
  1,752
  1,852
  1,957
  2,066
  2,181
  2,300
  2,425
  2,556
  2,693
  2,836
Revenue / Adjusted assets
  1.050
  1.052
  1.051
  1.050
  1.052
  1.051
  1.050
  1.051
  1.051
  1.051
  1.051
  1.050
  1.051
  1.051
  1.051
  1.051
  1.050
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
  1.051
Average production assets, $m
  134
  149
  165
  181
  198
  216
  234
  253
  273
  294
  316
  338
  361
  386
  411
  437
  464
  493
  522
  553
  585
  619
  654
  691
  729
  769
  811
  854
  900
  948
Working capital, $m
  114
  127
  140
  154
  169
  184
  200
  216
  233
  251
  269
  288
  308
  329
  350
  373
  396
  420
  445
  471
  499
  528
  557
  589
  621
  655
  691
  728
  767
  808
Total debt, $m
  51
  66
  82
  98
  115
  133
  152
  171
  191
  212
  234
  257
  280
  305
  330
  356
  384
  413
  442
  474
  506
  540
  575
  612
  651
  691
  733
  777
  823
  871
Total liabilities, $m
  135
  150
  166
  183
  200
  218
  236
  256
  276
  297
  318
  341
  364
  389
  414
  441
  468
  497
  527
  558
  590
  624
  659
  696
  735
  775
  817
  861
  907
  956
Total equity, $m
  267
  296
  327
  359
  393
  428
  465
  503
  542
  584
  626
  671
  717
  765
  815
  867
  921
  978
  1,036
  1,098
  1,161
  1,228
  1,297
  1,370
  1,446
  1,525
  1,608
  1,695
  1,785
  1,880
Total liabilities and equity, $m
  402
  446
  493
  542
  593
  646
  701
  759
  818
  881
  944
  1,012
  1,081
  1,154
  1,229
  1,308
  1,389
  1,475
  1,563
  1,656
  1,751
  1,852
  1,956
  2,066
  2,181
  2,300
  2,425
  2,556
  2,692
  2,836
Debt-to-equity ratio
  0.190
  0.220
  0.250
  0.270
  0.290
  0.310
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.460
  0.460
  0.460
  0.460
Adjusted equity ratio
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  24
  27
  31
  34
  38
  42
  46
  50
  54
  61
  65
  70
  75
  80
  86
  92
  98
  104
  110
  117
  124
  132
  139
  147
  156
  165
  174
  184
  194
Depreciation, amort., depletion, $m
  16
  17
  18
  20
  22
  23
  25
  27
  29
  31
  30
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  60
  63
  66
  70
  74
  78
  82
  87
  91
Funds from operations, $m
  37
  41
  46
  51
  56
  61
  67
  73
  79
  85
  91
  98
  105
  112
  120
  128
  136
  145
  154
  164
  173
  184
  194
  206
  217
  230
  243
  256
  270
  285
Change in working capital, $m
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
Cash from operations, $m
  25
  28
  33
  37
  41
  46
  51
  56
  62
  67
  73
  79
  85
  92
  98
  106
  113
  121
  129
  137
  146
  155
  165
  175
  185
  196
  207
  219
  231
  244
Maintenance CAPEX, $m
  -12
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -33
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -87
New CAPEX, $m
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
Cash from investing activities, $m
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -42
  -44
  -47
  -50
  -52
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -104
  -110
  -116
  -122
  -128
  -135
Free cash flow, $m
  -1
  1
  3
  5
  7
  9
  12
  15
  17
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  56
  61
  65
  70
  75
  80
  86
  91
  97
  103
  110
Issuance/(repayment) of debt, $m
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
Issuance/(repurchase) of shares, $m
  7
  5
  4
  2
  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  
  21
  20
  20
  18
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
Total cash flow (excl. dividends), $m
  20
  21
  22
  23
  24
  27
  31
  34
  38
  41
  44
  48
  53
  57
  62
  66
  71
  76
  82
  87
  93
  99
  105
  112
  119
  126
  133
  141
  149
  158
Retained Cash Flow (-), $m
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -95
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
  -8
  -8
  -9
  -10
  -10
  -8
  -6
  -4
  -2
  0
  2
  4
  6
  9
  12
  14
  17
  20
  23
  26
  29
  32
  36
  39
  43
  47
  51
  55
  59
  63
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
  -8
  -8
  -8
  -8
  -7
  -6
  -4
  -3
  -1
  0
  1
  2
  2
  3
  3
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  97.9
  96.5
  95.6
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3
  95.3

Preformed Line Products Company (PLPC) is a designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators and information industries. The Company's products include Formed Wire and Related Hardware Products, Protective Closures, Plastic Products and Other Products. The Company operates through four segments: PLP-USA (including corporate), The Americas (includes operations in North and South America without PLP-USA), EMEA (Europe, Middle East and Africa) and Asia-Pacific. The Company's PLP-USA segment consists of its United States operations manufacturing its traditional products primarily supporting its domestic energy, telecommunications and solar products. Its other three segments, The Americas, EMEA and Asia-Pacific, support its energy, telecommunications, data communication and solar products in each respective geographical region.

FINANCIAL RATIOS  of  Preformed Line Products (PLPC)

Valuation Ratios
P/E Ratio 22
Price to Sales 1
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 330.4
Growth Rates
Sales Growth Rate -5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 127.3%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio 16
Current Ratio 0.1
LT Debt to Equity 19.6%
Total Debt to Equity 20.5%
Interest Coverage 22
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 3.6%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 6.8%
Return On Equity - 3 Yr. Avg. 5%
Asset Turnover 1
Profitability Ratios
Gross Margin 32.3%
Gross Margin - 3 Yr. Avg. 30.8%
EBITDA Margin 10.1%
EBITDA Margin - 3 Yr. Avg. 8.7%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 5.2%
Pre-Tax Margin 6.2%
Pre-Tax Margin - 3 Yr. Avg. 5%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 36.1%
Payout Ratio 26.7%

PLPC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PLPC stock intrinsic value calculation we used $378.212 million for the last fiscal year's total revenue generated by Preformed Line Products. The default revenue input number comes from 0001 income statement of Preformed Line Products. 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 PLPC stock valuation model: a) initial revenue growth rate of 11.7% 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 PLPC is calculated based on our internal credit rating of Preformed Line Products, 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 Preformed Line Products.
    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 PLPC stock the variable cost ratio is equal to 89.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14 million in the base year in the intrinsic value calculation for PLPC 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 5.4% for Preformed Line Products.

Corporate tax rate of 27% is the nominal tax rate for Preformed Line Products. 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 PLPC 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 PLPC are equal to 31.8%.

Life of production assets of 10.4 years is the average useful life of capital assets used in Preformed Line Products 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 PLPC is equal to 27.1%. 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 - $238.537 million for Preformed Line Products - 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 5.037 million for Preformed Line Products 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 Preformed Line Products at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Preformed Line: 3Q Earnings Snapshot   [Nov-08-18 09:18AM  Associated Press]
▶ Preformed Line: 2Q Earnings Snapshot   [Aug-03-18 08:19AM  Associated Press]
▶ Preformed Line Products Announces Quarterly Dividend   [Jun-12-18 04:20PM  PR Newswire]
▶ Preformed Line: 1Q Earnings Snapshot   [May-04-18 08:19AM  Associated Press]
▶ Preformed Line Products Announces Quarterly Dividend   [Mar-19-18 11:15AM  PR Newswire]
▶ Preformed Line posts 4Q profit   [08:17AM  Associated Press]
▶ Preformed Line Products Announces Quarterly Dividend   [Dec-15-17 11:39AM  PR Newswire]
▶ Preformed Line posts 3Q profit   [Nov-03-17 08:13AM  Associated Press]
▶ Preformed Line Products Announces Quarterly Dividend   [Sep-20-17 12:49PM  PR Newswire]
▶ Preformed Line posts 2Q profit   [Aug-04-17 11:18PM  Associated Press]
▶ POWER DISK Mounts Solar Modules Anywhere on the Roof   [Jul-10-17 12:00PM  PR Newswire]
▶ Preformed Line Products Announces Quarterly Dividend   [Jun-20-17 09:25AM  PR Newswire]
▶ Preformed Line posts 1Q profit   [May-05-17 08:10AM  Associated Press]
▶ Preformed Line Products Goes Platinum   [Apr-26-17 03:41PM  PR Newswire]
▶ Preformed Line posts 4Q profit   [Mar-10-17 08:12AM  Associated Press]
▶ Preformed Line Products Announces Quarterly Dividend   [Dec-20-16 09:07AM  PR Newswire]
▶ Preformed Line Products Announces Quarterly Dividend   [Sep-14-16 10:20AM  PR Newswire]
▶ Preformed Line Products Announces Quarterly Dividend   [Jun-17-16 08:49AM  PR Newswire]
▶ Preformed Line Products (PLP) Announces Website Redesign   [Apr-11-16 03:47PM  PR Newswire]
▶ Preformed Line Products Announces Quarterly Dividend   [Mar-22-16 09:20AM  PR Newswire]
▶ Preformed Line Products Announces Quarterly Dividend   [Dec-10  10:05AM  PR Newswire]

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