Intrinsic value of Servotronics - SVT

Previous Close

$11.39

  Intrinsic Value

$2.73

stock screener

  Rating & Target

str. sell

-76%

Previous close

$11.39

 
Intrinsic value

$2.73

 
Up/down potential

-76%

 
Rating

str. sell

We calculate the intrinsic value of SVT 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, %
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
Revenue, $m
  48
  55
  63
  71
  80
  89
  99
  109
  119
  130
  142
  154
  166
  179
  193
  207
  221
  237
  252
  269
  286
  303
  322
  341
  361
  382
  404
  427
  450
  475
Variable operating expenses, $m
  45
  51
  58
  66
  74
  82
  91
  101
  111
  121
  132
  143
  154
  166
  179
  192
  205
  219
  234
  249
  265
  281
  298
  316
  335
  354
  374
  395
  417
  441
Fixed operating expenses, $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 operating expenses, $m
  45
  51
  58
  66
  74
  82
  91
  101
  111
  121
  132
  143
  154
  166
  179
  192
  205
  219
  234
  249
  265
  281
  298
  316
  335
  354
  374
  395
  417
  441
Operating income, $m
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
EBITDA, $m
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
Interest expense (income), $m
  72
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
Tax expense, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
Net income, $m
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21

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
  44
  51
  58
  65
  73
  82
  91
  100
  110
  120
  131
  142
  153
  165
  177
  190
  204
  218
  232
  247
  263
  279
  296
  314
  332
  351
  371
  392
  414
  437
Adjusted assets (=assets-cash), $m
  44
  51
  58
  65
  73
  82
  91
  100
  110
  120
  131
  142
  153
  165
  177
  190
  204
  218
  232
  247
  263
  279
  296
  314
  332
  351
  371
  392
  414
  437
Revenue / Adjusted assets
  1.091
  1.078
  1.086
  1.092
  1.096
  1.085
  1.088
  1.090
  1.082
  1.083
  1.084
  1.085
  1.085
  1.085
  1.090
  1.089
  1.083
  1.087
  1.086
  1.089
  1.087
  1.086
  1.088
  1.086
  1.087
  1.088
  1.089
  1.089
  1.087
  1.087
Average production assets, $m
  12
  14
  16
  18
  20
  23
  25
  28
  31
  33
  36
  39
  43
  46
  49
  53
  57
  61
  65
  69
  73
  78
  82
  87
  92
  98
  103
  109
  115
  122
Working capital, $m
  20
  23
  26
  30
  33
  37
  41
  45
  50
  54
  59
  64
  69
  74
  80
  86
  92
  98
  105
  111
  119
  126
  134
  142
  150
  159
  168
  177
  187
  197
Total debt, $m
  5
  7
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  73
  78
  83
  88
  93
  99
  105
Total liabilities, $m
  11
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  48
  52
  55
  59
  63
  66
  71
  75
  79
  84
  89
  94
  99
  105
  111
Total equity, $m
  33
  38
  43
  49
  55
  61
  68
  75
  82
  90
  98
  106
  114
  123
  133
  142
  152
  163
  173
  185
  196
  208
  221
  234
  248
  263
  277
  293
  309
  327
Total liabilities and equity, $m
  44
  51
  58
  66
  74
  82
  91
  100
  110
  120
  131
  142
  153
  165
  178
  190
  204
  218
  232
  248
  262
  279
  296
  313
  332
  352
  371
  392
  414
  438
Debt-to-equity ratio
  0.160
  0.180
  0.200
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
Adjusted equity ratio
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
Funds from operations, $m
  3
  4
  4
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
Change in working capital, $m
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
Cash from operations, $m
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Cash from investing activities, $m
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -16
Free cash flow, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
Issuance/(repayment) of debt, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Issuance/(repurchase) of shares, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  4
  4
  4
  4
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Total cash flow (excl. dividends), $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
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
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
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
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  92.3
  86.8
  82.2
  78.4
  75.3
  72.7
  70.5
  68.7
  67.3
  66.1
  65.2
  64.5
  64.0
  63.6
  63.5
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4

Servotronics, Inc. designs, manufactures and markets advanced technology products consisting primarily of control components and consumer products consisting of knives and various types of cutlery and other edged products. The Company's segments include Advanced Technology Group (ATG) and Consumer Products Group (CPG). ATG's operations involve the design, manufacture and marketing of servo-control components, which include torque motors, control valves and actuators, among others for government, commercial and industrial applications. CPG's operations involve the design, manufacture and marketing of a range of cutlery products, such as steak, carving, bread, butcher and paring knives for household use and for use in restaurants, institutions and private industry, as well as equipment and gear, including fixed and folding knives for hunting, fishing and camping. The Company sells knives and tools to the United States Government, related agencies and allied foreign governments.

FINANCIAL RATIOS  of  Servotronics (SVT)

Valuation Ratios
P/E Ratio 14
Price to Sales 0.7
Price to Book 1
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 27.9
Growth Rates
Sales Growth Rate 5.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 11.1%
Total Debt to Equity 14.8%
Interest Coverage 1
Management Effectiveness
Return On Assets 211.4%
Ret/ On Assets - 3 Yr. Avg. 125.4%
Return On Total Capital 6.7%
Ret/ On T. Cap. - 3 Yr. Avg. 4.5%
Return On Equity 7.7%
Return On Equity - 3 Yr. Avg. 5.4%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 25.6%
Gross Margin - 3 Yr. Avg. 23.9%
EBITDA Margin 192.3%
EBITDA Margin - 3 Yr. Avg. 136.5%
Operating Margin 7.7%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin 5.1%
Pre-Tax Margin - 3 Yr. Avg. 2.8%
Net Profit Margin 5.1%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 22.9%
Payout Ratio 0%

SVT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SVT stock intrinsic value calculation we used $41.444 million for the last fiscal year's total revenue generated by Servotronics. The default revenue input number comes from 0001 income statement of Servotronics. 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 SVT stock valuation model: a) initial revenue growth rate of 16% 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 SVT is calculated based on our internal credit rating of Servotronics, 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 Servotronics.
    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 SVT stock the variable cost ratio is equal to 92.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SVT 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 Servotronics.

Corporate tax rate of 27% is the nominal tax rate for Servotronics. 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 SVT 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 SVT are equal to 25.6%.

Life of production assets of 11.8 years is the average useful life of capital assets used in Servotronics 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 SVT is equal to 41.5%. 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 - $28.165 million for Servotronics - 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 2.583 million for Servotronics 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 Servotronics at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Is Servotronics Incs (NYSEMKT:SVT) 7.7% Worse Than Average?   [Oct-20-18 10:39AM  Simply Wall St.]
▶ Push to add women to WNY boards gains momentum   [May-11-18 02:55AM  American City Business Journals]
▶ Servotronics, Inc. Announces 2017 Operating Results   [Mar-23-18 05:32PM  PR Newswire]
▶ ETFs with exposure to Servotronics, Inc. : July 31, 2017   [Jul-31-17 05:12PM  Capital Cube]
▶ Servotronics, Inc. Announces 2016 Operating Results   [Mar-15-17 06:02PM  PR Newswire]
▶ 01/02/2016 Total Voting Rights   [Feb-01-16 06:10AM  at noodls]
▶ 10-Q for Servotronics, Inc.   [Aug-14  08:10PM  at Company Spotlight]
▶ 10-Q for Servotronics, Inc.   [May-15  08:09PM  at Company Spotlight]
▶ 10-K for Servotronics, Inc.   [May-02  08:09PM  at Company Spotlight]
▶ 29/04/2015 Transaction in Own Shares   [Apr-30  08:56AM  at noodls]
▶ 28/04/2015 Transaction in Own Shares   [Apr-29  05:41AM  at noodls]
▶ 27/04/2015 Transaction in Own Shares   [05:41AM  at noodls]
▶ 24/04/2015 Transaction in Own Shares   [Apr-27  08:26AM  at noodls]
▶ 23/04/2015 Transaction in Own Shares   [08:26AM  at noodls]
▶ 15/04/2015 Transaction in Own Shares   [Apr-16  10:10AM  at noodls]
▶ 14/04/2015 Transaction in Own Shares   [10:10AM  at noodls]

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