Intrinsic value of Preformed Line Products Company - PLPC

Previous Close

$52.50

  Intrinsic Value

$42.38

stock screener

  Rating & Target

hold

-19%

Previous close

$52.50

 
Intrinsic value

$42.38

 
Up/down potential

-19%

 
Rating

hold

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, %
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
Revenue, $m
  458
  497
  537
  578
  622
  667
  714
  762
  813
  865
  920
  977
  1,037
  1,098
  1,163
  1,230
  1,300
  1,374
  1,450
  1,530
  1,614
  1,701
  1,792
  1,888
  1,988
  2,093
  2,203
  2,318
  2,438
  2,564
Variable operating expenses, $m
  384
  416
  449
  484
  520
  557
  596
  637
  679
  723
  766
  813
  863
  914
  968
  1,024
  1,082
  1,143
  1,207
  1,273
  1,343
  1,416
  1,492
  1,571
  1,655
  1,742
  1,833
  1,929
  2,029
  2,134
Fixed operating expenses, $m
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
Total operating expenses, $m
  421
  454
  487
  523
  560
  598
  638
  680
  723
  768
  812
  860
  911
  963
  1,018
  1,075
  1,134
  1,196
  1,261
  1,329
  1,400
  1,474
  1,551
  1,632
  1,717
  1,805
  1,898
  1,995
  2,097
  2,203
Operating income, $m
  38
  43
  49
  55
  62
  68
  75
  83
  90
  98
  109
  117
  126
  135
  145
  155
  166
  177
  189
  201
  214
  227
  241
  256
  271
  288
  305
  322
  341
  361
EBITDA, $m
  52
  59
  66
  73
  81
  89
  97
  105
  114
  124
  133
  143
  154
  165
  176
  188
  201
  214
  228
  242
  257
  273
  289
  306
  325
  344
  364
  385
  406
  430
Interest expense (income), $m
  1
  2
  2
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  29
  30
Earnings before tax, $m
  36
  41
  46
  52
  58
  64
  70
  77
  83
  91
  100
  108
  116
  125
  134
  143
  153
  163
  173
  185
  196
  208
  221
  235
  249
  264
  279
  296
  313
  331
Tax expense, $m
  10
  11
  12
  14
  16
  17
  19
  21
  23
  24
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  80
  84
  89
Net income, $m
  26
  30
  34
  38
  42
  46
  51
  56
  61
  66
  73
  79
  85
  91
  98
  104
  111
  119
  127
  135
  143
  152
  162
  171
  182
  192
  204
  216
  228
  241

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
  390
  423
  458
  493
  530
  568
  608
  650
  693
  738
  784
  833
  884
  936
  991
  1,049
  1,108
  1,171
  1,236
  1,304
  1,376
  1,450
  1,528
  1,610
  1,695
  1,784
  1,878
  1,976
  2,079
  2,186
Adjusted assets (=assets-cash), $m
  390
  423
  458
  493
  530
  568
  608
  650
  693
  738
  784
  833
  884
  936
  991
  1,049
  1,108
  1,171
  1,236
  1,304
  1,376
  1,450
  1,528
  1,610
  1,695
  1,784
  1,878
  1,976
  2,079
  2,186
Revenue / Adjusted assets
  1.174
  1.175
  1.172
  1.172
  1.174
  1.174
  1.174
  1.172
  1.173
  1.172
  1.173
  1.173
  1.173
  1.173
  1.174
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
  1.173
Average production assets, $m
  129
  140
  151
  163
  175
  187
  201
  214
  228
  243
  259
  275
  291
  309
  327
  346
  365
  386
  407
  430
  453
  478
  504
  531
  559
  588
  619
  651
  685
  721
Working capital, $m
  121
  132
  142
  153
  165
  177
  189
  202
  215
  229
  244
  259
  275
  291
  308
  326
  345
  364
  384
  405
  428
  451
  475
  500
  527
  555
  584
  614
  646
  680
Total debt, $m
  45
  55
  66
  76
  88
  99
  112
  124
  137
  151
  165
  180
  196
  212
  228
  246
  264
  283
  303
  324
  346
  368
  392
  417
  443
  470
  499
  529
  560
  593
Total liabilities, $m
  119
  129
  140
  150
  162
  173
  186
  198
  211
  225
  239
  254
  270
  286
  302
  320
  338
  357
  377
  398
  420
  442
  466
  491
  517
  544
  573
  603
  634
  667
Total equity, $m
  271
  294
  318
  343
  368
  395
  423
  452
  482
  513
  545
  579
  614
  651
  689
  729
  770
  814
  859
  907
  956
  1,008
  1,062
  1,119
  1,178
  1,240
  1,305
  1,373
  1,445
  1,519
Total liabilities and equity, $m
  390
  423
  458
  493
  530
  568
  609
  650
  693
  738
  784
  833
  884
  937
  991
  1,049
  1,108
  1,171
  1,236
  1,305
  1,376
  1,450
  1,528
  1,610
  1,695
  1,784
  1,878
  1,976
  2,079
  2,186
Debt-to-equity ratio
  0.170
  0.190
  0.210
  0.220
  0.240
  0.250
  0.260
  0.280
  0.290
  0.290
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
  0.370
  0.380
  0.380
  0.380
  0.380
  0.390
  0.390
Adjusted equity ratio
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  26
  30
  34
  38
  42
  46
  51
  56
  61
  66
  73
  79
  85
  91
  98
  104
  111
  119
  127
  135
  143
  152
  162
  171
  182
  192
  204
  216
  228
  241
Depreciation, amort., depletion, $m
  15
  16
  17
  18
  19
  20
  21
  23
  24
  26
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  65
  69
Funds from operations, $m
  41
  46
  50
  56
  61
  67
  73
  79
  85
  92
  98
  105
  113
  121
  129
  137
  146
  156
  165
  176
  186
  198
  210
  222
  235
  248
  263
  278
  294
  310
Change in working capital, $m
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
Cash from operations, $m
  31
  35
  40
  45
  50
  55
  60
  66
  72
  78
  83
  90
  97
  104
  112
  119
  128
  136
  145
  155
  164
  175
  185
  197
  208
  221
  234
  247
  262
  277
Maintenance CAPEX, $m
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
New CAPEX, $m
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
Cash from investing activities, $m
  -21
  -23
  -24
  -26
  -27
  -30
  -31
  -33
  -34
  -37
  -38
  -41
  -43
  -45
  -47
  -50
  -53
  -56
  -58
  -61
  -64
  -68
  -72
  -75
  -79
  -82
  -87
  -91
  -96
  -100
Free cash flow, $m
  9
  12
  15
  19
  22
  25
  29
  33
  37
  41
  45
  49
  54
  59
  64
  69
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
  147
  156
  166
  176
Issuance/(repayment) of debt, $m
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
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  
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
Total cash flow (excl. dividends), $m
  19
  22
  26
  29
  33
  37
  41
  46
  50
  55
  59
  64
  70
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
  147
  156
  165
  175
  186
  197
  209
Retained Cash Flow (-), $m
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
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
  -1
  2
  5
  8
  11
  14
  17
  20
  24
  27
  30
  34
  38
  43
  47
  52
  56
  61
  67
  72
  78
  84
  90
  96
  103
  110
  118
  126
  134
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
  -3
  -1
  2
  4
  6
  8
  9
  11
  12
  12
  13
  13
  13
  13
  13
  12
  11
  10
  9
  8
  7
  6
  5
  5
  4
  3
  2
  2
  1
  1
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
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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 Company (PLPC)

Valuation Ratios
P/E Ratio 17.9
Price to Sales 0.8
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 10.3
Price to Free Cash Flow 268.8
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 $421 million for the last fiscal year's total revenue generated by Preformed Line Products Company. The default revenue input number comes from 0001 income statement of Preformed Line Products Company. 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 8.8% 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 Company, 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 Company.
    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 83.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $36 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 Company.

Corporate tax rate of 27% is the nominal tax rate for Preformed Line Products Company. 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 28.1%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Preformed Line Products Company 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 26.5%. 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 - $249.37 million for Preformed Line Products Company - 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 5.062 million for Preformed Line Products Company 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 Company at the current share price and the inputted number of shares is $0.3 billion.

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