Intrinsic value of TAT Technologies Ltd. - TATT

Previous Close

$5.74

  Intrinsic Value

$2.47

stock screener

  Rating & Target

str. sell

-57%

Previous close

$5.74

 
Intrinsic value

$2.47

 
Up/down potential

-57%

 
Rating

str. sell

We calculate the intrinsic value of TATT 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 0.1

 

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, %
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.45
  5.40
  5.36
  5.32
  5.29
Revenue, $m
  119
  132
  145
  159
  173
  188
  203
  220
  237
  254
  272
  291
  311
  331
  352
  375
  398
  422
  447
  473
  500
  528
  558
  589
  621
  655
  690
  728
  766
  807
Variable operating expenses, $m
  102
  113
  124
  136
  149
  162
  175
  189
  203
  218
  234
  250
  267
  285
  303
  322
  342
  362
  384
  406
  429
  454
  479
  506
  534
  563
  593
  625
  658
  693
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
  112
  123
  135
  147
  160
  173
  187
  201
  215
  230
  247
  263
  280
  299
  317
  336
  356
  377
  399
  421
  445
  470
  495
  523
  551
  581
  611
  643
  677
  712
Operating income, $m
  6
  8
  10
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  75
  79
  84
  89
  94
EBITDA, $m
  11
  13
  15
  17
  19
  22
  24
  27
  30
  32
  35
  38
  42
  45
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  93
  98
  104
  110
  117
  123
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
Earnings before tax, $m
  6
  8
  9
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  77
  82
  87
Tax expense, $m
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  19
  20
  21
  22
  23
Net income, $m
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  60
  63

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
  124
  137
  151
  165
  180
  196
  212
  229
  247
  265
  284
  304
  324
  346
  368
  391
  415
  440
  466
  493
  522
  551
  582
  615
  649
  684
  721
  759
  800
  842
Adjusted assets (=assets-cash), $m
  124
  137
  151
  165
  180
  196
  212
  229
  247
  265
  284
  304
  324
  346
  368
  391
  415
  440
  466
  493
  522
  551
  582
  615
  649
  684
  721
  759
  800
  842
Revenue / Adjusted assets
  0.960
  0.964
  0.960
  0.964
  0.961
  0.959
  0.958
  0.961
  0.960
  0.958
  0.958
  0.957
  0.960
  0.957
  0.957
  0.959
  0.959
  0.959
  0.959
  0.959
  0.958
  0.958
  0.959
  0.958
  0.957
  0.958
  0.957
  0.959
  0.958
  0.958
Average production assets, $m
  24
  27
  30
  32
  35
  38
  42
  45
  48
  52
  56
  59
  63
  68
  72
  76
  81
  86
  91
  96
  102
  108
  114
  120
  127
  134
  141
  148
  156
  165
Working capital, $m
  54
  60
  66
  73
  79
  86
  93
  101
  108
  116
  125
  133
  142
  152
  161
  172
  182
  193
  205
  217
  229
  242
  256
  270
  285
  300
  316
  333
  351
  370
Total debt, $m
  3
  5
  8
  11
  14
  18
  21
  25
  28
  32
  36
  40
  45
  49
  54
  59
  64
  69
  74
  80
  86
  92
  99
  106
  113
  120
  128
  136
  145
  153
Total liabilities, $m
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  92
  98
  104
  110
  116
  122
  129
  136
  144
  151
  159
  168
  177
Total equity, $m
  98
  108
  119
  131
  143
  155
  168
  181
  195
  209
  224
  240
  256
  273
  291
  309
  328
  348
  368
  390
  412
  436
  460
  486
  512
  540
  569
  600
  632
  665
Total liabilities and equity, $m
  124
  137
  151
  166
  181
  196
  213
  229
  247
  265
  284
  304
  324
  346
  368
  391
  415
  440
  466
  494
  522
  552
  582
  615
  648
  684
  720
  759
  800
  842
Debt-to-equity ratio
  0.030
  0.050
  0.070
  0.090
  0.100
  0.110
  0.130
  0.140
  0.150
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
Adjusted equity ratio
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  60
  63
Depreciation, amort., depletion, $m
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
Funds from operations, $m
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  39
  42
  45
  48
  51
  55
  58
  62
  65
  69
  74
  78
  82
  87
  92
Change in working capital, $m
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
Cash from operations, $m
  4
  5
  6
  7
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  39
  42
  45
  48
  51
  55
  58
  62
  65
  69
  74
Maintenance CAPEX, $m
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
New CAPEX, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
Cash from investing activities, $m
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -33
  -34
  -35
Free cash flow, $m
  -3
  -2
  -1
  -1
  0
  1
  2
  3
  4
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  38
Issuance/(repayment) of debt, $m
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Issuance/(repurchase) of shares, $m
  5
  5
  4
  3
  3
  2
  1
  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  
  8
  8
  7
  6
  6
  5
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Total cash flow (excl. dividends), $m
  5
  5
  6
  6
  6
  6
  7
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
Retained Cash Flow (-), $m
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -33
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
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  10
  11
  12
  13
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
  -4
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  92.3
  86.5
  82.1
  78.9
  76.6
  75.1
  74.3
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0
  74.0

TAT Technologies Ltd. provides a range of services and products to the commercial and military aerospace, and ground defense sectors through its Gedera facility in Israel, and through its subsidiary in the United States, Limco-Piedmont Inc. (Limco-Piedmont), which operates through Limco Airepair Inc. (Limco). It operates in four segments: original equipment manufacturing (OEM) of heat transfer products and aviation accessories components, which it operates through its Gedera facility; heat transfer services and products, which it operates through its Limco subsidiary; maintenance, repair and overhaul (MRO) services for aviation components, especially in the area of landing gear and auxiliary power unitsmaintenance, repair and overhaul (MRO) services for aviation components, which it operates through its Piedmont Aviation Component Services LLC (Piedmont) subsidiary, and overhaul and coating of jet engine components, which it operates through its subsidiary, Turbochrome Ltd.

FINANCIAL RATIOS  of  TAT Technologies Ltd. (TATT)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.5
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 11.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 2.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 19.8%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin 8.3%
EBITDA Margin - 3 Yr. Avg. 7.9%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 4.2%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 2.7%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 55.6%
Payout Ratio 0%

TATT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TATT stock intrinsic value calculation we used $107 million for the last fiscal year's total revenue generated by TAT Technologies Ltd.. The default revenue input number comes from 0001 income statement of TAT Technologies Ltd.. 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 TATT stock valuation model: a) initial revenue growth rate of 11.2% 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 TATT is calculated based on our internal credit rating of TAT Technologies Ltd., 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 TAT Technologies Ltd..
    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 TATT stock the variable cost ratio is equal to 86%.

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 TATT 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 TAT Technologies Ltd..

Corporate tax rate of 27% is the nominal tax rate for TAT Technologies Ltd.. 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 TATT 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 TATT are equal to 20.4%.

Life of production assets of 5.7 years is the average useful life of capital assets used in TAT Technologies Ltd. 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 TATT is equal to 45.8%. 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 - $88.574 million for TAT Technologies Ltd. - 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 8.875 million for TAT Technologies Ltd. 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 TAT Technologies Ltd. at the current share price and the inputted number of shares is $0.1 billion.

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