Intrinsic value of Plantronics - PLT

Previous Close

$46.43

  Intrinsic Value

$24.39

stock screener

  Rating & Target

sell

-47%

  Value-price divergence*

-36%

Previous close

$46.43

 
Intrinsic value

$24.39

 
Up/down potential

-47%

 
Rating

sell

 
Value-price divergence*

-36%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PLT 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 2017), $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 1.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.80
  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
  881
  899
  919
  943
  969
  999
  1,031
  1,066
  1,104
  1,145
  1,189
  1,236
  1,286
  1,340
  1,396
  1,457
  1,521
  1,588
  1,660
  1,735
  1,815
  1,899
  1,988
  2,081
  2,180
  2,283
  2,393
  2,508
  2,629
  2,756
  2,890
Variable operating expenses, $m
 
  262
  268
  275
  283
  292
  301
  311
  322
  334
  347
  361
  376
  391
  408
  425
  444
  464
  485
  507
  530
  554
  580
  608
  636
  667
  699
  732
  768
  805
  844
Fixed operating expenses, $m
 
  524
  537
  550
  564
  578
  593
  607
  623
  638
  654
  670
  687
  704
  722
  740
  759
  778
  797
  817
  837
  858
  880
  902
  924
  947
  971
  995
  1,020
  1,046
  1,072
Total operating expenses, $m
  756
  786
  805
  825
  847
  870
  894
  918
  945
  972
  1,001
  1,031
  1,063
  1,095
  1,130
  1,165
  1,203
  1,242
  1,282
  1,324
  1,367
  1,412
  1,460
  1,510
  1,560
  1,614
  1,670
  1,727
  1,788
  1,851
  1,916
Operating income, $m
  125
  112
  114
  117
  122
  129
  137
  147
  159
  173
  188
  205
  223
  244
  267
  291
  318
  347
  378
  412
  448
  486
  528
  572
  619
  669
  723
  780
  841
  906
  974
EBITDA, $m
  146
  133
  135
  139
  144
  152
  161
  172
  184
  199
  215
  233
  253
  275
  298
  324
  353
  383
  416
  451
  489
  529
  573
  619
  669
  721
  778
  837
  901
  968
  1,040
Interest expense (income), $m
  28
  28
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
Earnings before tax, $m
  102
  84
  94
  97
  101
  107
  114
  123
  134
  146
  160
  176
  193
  212
  233
  256
  281
  308
  337
  368
  402
  438
  476
  518
  562
  609
  660
  714
  771
  832
  896
Tax expense, $m
  19
  23
  25
  26
  27
  29
  31
  33
  36
  39
  43
  47
  52
  57
  63
  69
  76
  83
  91
  99
  108
  118
  129
  140
  152
  165
  178
  193
  208
  225
  242
Net income, $m
  83
  62
  69
  71
  74
  78
  83
  90
  98
  107
  117
  128
  141
  155
  170
  187
  205
  224
  246
  269
  293
  319
  348
  378
  410
  445
  482
  521
  563
  607
  654

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  480
  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
  1,017
  548
  560
  575
  591
  609
  628
  650
  673
  698
  725
  753
  784
  816
  851
  888
  927
  968
  1,011
  1,057
  1,106
  1,157
  1,211
  1,268
  1,328
  1,391
  1,458
  1,528
  1,602
  1,679
  1,761
Adjusted assets (=assets-cash), $m
  537
  548
  560
  575
  591
  609
  628
  650
  673
  698
  725
  753
  784
  816
  851
  888
  927
  968
  1,011
  1,057
  1,106
  1,157
  1,211
  1,268
  1,328
  1,391
  1,458
  1,528
  1,602
  1,679
  1,761
Revenue / Adjusted assets
  1.641
  1.641
  1.641
  1.640
  1.640
  1.640
  1.642
  1.640
  1.640
  1.640
  1.640
  1.641
  1.640
  1.642
  1.640
  1.641
  1.641
  1.640
  1.642
  1.641
  1.641
  1.641
  1.642
  1.641
  1.642
  1.641
  1.641
  1.641
  1.641
  1.641
  1.641
Average production assets, $m
  159
  162
  165
  170
  174
  180
  186
  192
  199
  206
  214
  223
  232
  241
  251
  262
  274
  286
  299
  312
  327
  342
  358
  375
  392
  411
  431
  451
  473
  496
  520
Working capital, $m
  582
  104
  107
  109
  112
  116
  120
  124
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  193
  201
  211
  220
  231
  241
  253
  265
  278
  291
  305
  320
  335
Total debt, $m
  491
  349
  360
  373
  388
  404
  421
  441
  462
  484
  508
  534
  561
  591
  622
  655
  690
  727
  766
  808
  851
  897
  946
  997
  1,051
  1,108
  1,168
  1,231
  1,298
  1,368
  1,441
Total liabilities, $m
  635
  493
  504
  517
  532
  548
  565
  585
  606
  628
  652
  678
  705
  735
  766
  799
  834
  871
  910
  952
  995
  1,041
  1,090
  1,141
  1,195
  1,252
  1,312
  1,375
  1,442
  1,512
  1,585
Total equity, $m
  382
  55
  56
  57
  59
  61
  63
  65
  67
  70
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
Total liabilities and equity, $m
  1,017
  548
  560
  574
  591
  609
  628
  650
  673
  698
  724
  753
  783
  817
  851
  888
  927
  968
  1,011
  1,058
  1,106
  1,157
  1,211
  1,268
  1,328
  1,391
  1,458
  1,528
  1,602
  1,680
  1,761
Debt-to-equity ratio
  1.285
  6.370
  6.430
  6.490
  6.560
  6.630
  6.710
  6.780
  6.860
  6.940
  7.010
  7.090
  7.160
  7.240
  7.310
  7.380
  7.450
  7.510
  7.580
  7.640
  7.700
  7.760
  7.810
  7.860
  7.920
  7.970
  8.010
  8.060
  8.100
  8.140
  8.180
Adjusted equity ratio
  -0.182
  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
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  83
  62
  69
  71
  74
  78
  83
  90
  98
  107
  117
  128
  141
  155
  170
  187
  205
  224
  246
  269
  293
  319
  348
  378
  410
  445
  482
  521
  563
  607
  654
Depreciation, amort., depletion, $m
  21
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
Funds from operations, $m
  139
  82
  90
  92
  96
  101
  107
  114
  123
  133
  144
  156
  170
  185
  202
  220
  240
  261
  284
  308
  334
  363
  393
  425
  460
  497
  536
  578
  623
  670
  720
Change in working capital, $m
  1
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
Cash from operations, $m
  138
  80
  87
  89
  93
  97
  103
  110
  119
  128
  139
  151
  164
  179
  195
  213
  232
  253
  275
  299
  325
  353
  383
  415
  449
  485
  524
  565
  608
  655
  705
Maintenance CAPEX, $m
  0
  -20
  -20
  -21
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
New CAPEX, $m
  -23
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -52
  -54
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -79
  -83
  -87
Free cash flow, $m
  116
  57
  63
  64
  67
  70
  75
  81
  87
  96
  105
  115
  127
  140
  155
  170
  187
  206
  226
  248
  271
  297
  324
  352
  383
  416
  452
  489
  530
  572
  618
Issuance/(repayment) of debt, $m
  0
  -142
  11
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
Issuance/(repurchase) of shares, $m
  -19
  91
  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  
  -27
  -51
  11
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
Total cash flow (excl. dividends), $m
  87
  6
  74
  77
  81
  86
  92
  100
  108
  118
  129
  141
  155
  170
  186
  203
  222
  243
  265
  289
  315
  343
  372
  404
  437
  473
  512
  553
  596
  642
  691
Retained Cash Flow (-), $m
  -70
  -153
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Prev. year cash balance distribution, $m
 
  480
  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
 
  333
  73
  76
  79
  84
  90
  98
  106
  116
  126
  138
  152
  166
  182
  200
  219
  239
  261
  285
  310
  338
  367
  398
  431
  467
  505
  546
  589
  634
  683
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
 
  319
  67
  66
  65
  65
  66
  66
  66
  66
  66
  66
  65
  63
  61
  59
  56
  52
  48
  44
  39
  35
  30
  26
  22
  18
  15
  12
  9
  7
  5
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Plantronics, Inc. (Plantronics) is engaged in the design, manufacture, and distribution of headsets for business and consumer applications, and other specialty products for the hearing impaired. The Company is a global designer, manufacturer and marketer of communications headsets, telephone headset systems, other communication endpoints and accessories for the business and consumer markets. The Company develops communication products for offices and contact centers, mobile devices, cordless phones, and computers and gaming consoles. Its product categories include Enterprise, which includes corded and cordless communication headsets, audio processors, and telephone systems, and Consumer, which includes Bluetooth and corded products for mobile device applications, personal computer (PC) and gaming headsets, and specialty products marketed for hearing impaired individuals. It offers its products under two brands: Plantronics and Clarity.

FINANCIAL RATIOS  of  Plantronics (PLT)

Valuation Ratios
P/E Ratio 18.7
Price to Sales 1.8
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 13.5
Growth Rates
Sales Growth Rate 2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.8%
Cap. Spend. - 3 Yr. Gr. Rate -14.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 128.5%
Total Debt to Equity 128.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 10.8%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 9.9%
Ret/ On T. Cap. - 3 Yr. Avg. 11.3%
Return On Equity 23.9%
Return On Equity - 3 Yr. Avg. 17.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 50.1%
Gross Margin - 3 Yr. Avg. 51.4%
EBITDA Margin 17.1%
EBITDA Margin - 3 Yr. Avg. 16.5%
Operating Margin 14.2%
Oper. Margin - 3 Yr. Avg. 14.7%
Pre-Tax Margin 11.6%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin 9.4%
Net Profit Margin - 3 Yr. Avg. 10.1%
Effective Tax Rate 18.6%
Eff/ Tax Rate - 3 Yr. Avg. 19.5%
Payout Ratio 24.1%

PLT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PLT stock intrinsic value calculation we used $881 million for the last fiscal year's total revenue generated by Plantronics. The default revenue input number comes from 2017 income statement of Plantronics. 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 PLT 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 PLT is calculated based on our internal credit rating of Plantronics, 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 Plantronics.
    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 PLT stock the variable cost ratio is equal to 29.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $511 million in the base year in the intrinsic value calculation for PLT 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 5.7% for Plantronics.

Corporate tax rate of 27% is the nominal tax rate for Plantronics. 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 PLT 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 PLT are equal to 18%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Plantronics 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 PLT is equal to 11.6%. 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 - $382 million for Plantronics - 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 33.954 million for Plantronics 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 Plantronics at the current share price and the inputted number of shares is $1.6 billion.

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COMPANY NEWS

▶ ETFs with exposure to Plantronics, Inc. : August 28, 2017   [Aug-28-17 06:14PM  Capital Cube]
▶ Plantronics misses Street 1Q forecasts   [Jul-27-17 05:04PM  Associated Press]
▶ ETFs with exposure to Plantronics, Inc. : May 15, 2017   [May-15-17 04:23PM  Capital Cube]
▶ Story Stocks from Briefing.com   [May-01-17 12:39PM  Briefing.com]
▶ Plantronics tops 4Q profit forecasts   [08:20AM  Associated Press]
▶ What Makes a Competitive Advantage Durable?   [Mar-27-17 06:16PM  GuruFocus.com]
▶ Plantronics BackBeat PRO 2 Wins Prestigious iF Design Award   [Mar-14-17 08:00AM  GlobeNewswire]
▶ [$$] Finding Big Value in Small Stocks   [Feb-11-17 12:01AM  at Barrons.com]
▶ Should You Avoid Plantronics, Inc. (PLT)?   [Dec-09-16 11:11AM  at Insider Monkey]
▶ Voyager 5200 UC Named 2017 CES Innovation Award Honoree   [Dec-07-16 08:00AM  GlobeNewswire]
▶ Have Hedge Funds Found A Winner In New Relic Inc (NEWR)?   [Nov-28-16 10:44PM  at Insider Monkey]
▶ 2 tools that can help you get more done   [Nov-09-16 11:10AM  at bizjournals.com]
Financial statements of PLT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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