Intrinsic value of Transcat - TRNS

Previous Close

$19.96

  Intrinsic Value

$12.86

stock screener

  Rating & Target

sell

-36%

Previous close

$19.96

 
Intrinsic value

$12.86

 
Up/down potential

-36%

 
Rating

sell

We calculate the intrinsic value of TRNS 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, %
  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
  158
  162
  166
  171
  176
  182
  188
  194
  202
  209
  218
  227
  236
  246
  257
  268
  280
  292
  306
  320
  334
  350
  366
  384
  402
  421
  442
  463
  485
  509
Variable operating expenses, $m
  145
  148
  152
  156
  161
  166
  171
  177
  184
  190
  194
  202
  210
  219
  229
  239
  249
  260
  272
  285
  298
  312
  327
  342
  358
  376
  394
  413
  433
  454
Fixed operating expenses, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
Total operating expenses, $m
  149
  152
  156
  160
  165
  171
  176
  182
  189
  195
  199
  207
  215
  224
  235
  245
  255
  266
  278
  291
  304
  318
  334
  349
  365
  383
  401
  420
  441
  462
Operating income, $m
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  19
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
EBITDA, $m
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
  40
  42
  45
  47
  49
  52
  54
  57
  60
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
Earnings before tax, $m
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
Tax expense, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Net income, $m
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30

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
  99
  101
  104
  107
  110
  113
  117
  121
  126
  131
  136
  141
  147
  154
  160
  167
  175
  183
  191
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
Adjusted assets (=assets-cash), $m
  99
  101
  104
  107
  110
  113
  117
  121
  126
  131
  136
  141
  147
  154
  160
  167
  175
  183
  191
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
Revenue / Adjusted assets
  1.596
  1.604
  1.596
  1.598
  1.600
  1.611
  1.607
  1.603
  1.603
  1.595
  1.603
  1.610
  1.605
  1.597
  1.606
  1.605
  1.600
  1.596
  1.602
  1.600
  1.598
  1.598
  1.598
  1.600
  1.602
  1.601
  1.601
  1.602
  1.601
  1.601
Average production assets, $m
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
Working capital, $m
  21
  22
  22
  23
  24
  25
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  66
  69
Total debt, $m
  24
  25
  26
  27
  29
  31
  32
  34
  37
  39
  41
  44
  47
  50
  53
  56
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  107
  113
  120
  127
Total liabilities, $m
  46
  48
  49
  50
  52
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  142
  149
Total equity, $m
  52
  54
  55
  57
  58
  60
  62
  64
  67
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  161
  168
Total liabilities and equity, $m
  98
  102
  104
  107
  110
  113
  117
  121
  126
  130
  136
  141
  147
  153
  160
  168
  175
  183
  191
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  317
Debt-to-equity ratio
  0.450
  0.460
  0.480
  0.490
  0.500
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.680
  0.690
  0.700
  0.710
  0.720
  0.720
  0.730
  0.740
  0.750
  0.750
Adjusted equity ratio
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
Depreciation, amort., depletion, $m
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Funds from operations, $m
  14
  14
  14
  15
  15
  15
  16
  17
  17
  18
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
Change in working capital, $m
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Cash from operations, $m
  13
  13
  14
  14
  14
  15
  15
  16
  16
  17
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  40
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
Cash from investing activities, $m
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -17
Free cash flow, $m
  9
  9
  9
  9
  9
  9
  9
  9
  10
  10
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
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  
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
Total cash flow (excl. dividends), $m
  10
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
Retained Cash Flow (-), $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
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
  9
  9
  9
  9
  9
  9
  9
  9
  10
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
Discount rate, %
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
  8
  8
  7
  7
  6
  6
  6
  5
  5
  5
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
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
  100.0
  100.0

Transcat, Inc. is a provider of calibration and laboratory instrument services and a distributor of professional grade test, measurement and control instrumentation. The Company conducts its business through two segments: service (Service) and distribution (Distribution). Through the Service segment, the Company offers calibration, repair, inspection, analytical qualifications, preventative maintenance and other related services, a majority of which are processed through its asset management system, CalTrak (CalTrak). Through its Distribution segment, the Company markets, sells and rents national brand instruments to customers around the globe. The Company is focused on providing its services and products to the life science industries, which include pharmaceutical, biotechnology, medical device manufacturing and other Food and Drug Administration (FDA)-regulated businesses.

FINANCIAL RATIOS  of  Transcat (TRNS)

Valuation Ratios
P/E Ratio 28.1
Price to Sales 1
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow 46.8
Growth Rates
Sales Growth Rate 18%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 60.5%
Total Debt to Equity 62.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 7.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 12.2%
Return On Equity - 3 Yr. Avg. 11.9%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 24.3%
Gross Margin - 3 Yr. Avg. 23.8%
EBITDA Margin 9.7%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 5.6%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 4.9%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 3.5%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.7%
Payout Ratio 0%

TRNS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRNS stock intrinsic value calculation we used $155.141 million for the last fiscal year's total revenue generated by Transcat. The default revenue input number comes from 0001 income statement of Transcat. 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 TRNS 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 4.9%, whose default value for TRNS is calculated based on our internal credit rating of Transcat, 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 Transcat.
    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 TRNS stock the variable cost ratio is equal to 91.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4 million in the base year in the intrinsic value calculation for TRNS 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 Transcat.

Corporate tax rate of 27% is the nominal tax rate for Transcat. 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 TRNS 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 TRNS are equal to 23.2%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Transcat 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 TRNS is equal to 13.5%. 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 - $51.348 million for Transcat - 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 7.2 million for Transcat 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 Transcat at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ How Financially Strong Is Transcat Inc (NASDAQ:TRNS)?   [Nov-12-18 10:50AM  Simply Wall St.]
▶ Transcat Acquires Angels Instrumentation Inc.   [Sep-04-18 07:00AM  Business Wire]
▶ Transcat, Inc. to Present at Intellisight 2018 Conference   [Aug-06-18 04:15PM  Business Wire]
▶ Transcat, Inc. to Host Earnings Call   [Jul-25-18 09:00AM  ACCESSWIRE]
▶ Should You Buy Transcat Inc (NASDAQ:TRNS) At US$020.85?   [Jun-21-18 09:43AM  Simply Wall St.]
▶ Transcat, Inc. to Host Earnings Call   [May-23-18 08:00AM  ACCESSWIRE]
▶ 5 Breakout Stocks Offering Impressive Returns   [Feb-05-18 07:57AM  Zacks]
▶ Transcat, Inc. to Host Earnings Call   [Jan-30-18 08:30AM  ACCESSWIRE]
▶ ETFs with exposure to Transcat, Inc. : December 27, 2017   [Dec-27-17 11:57AM  Capital Cube]
▶ ETFs with exposure to Transcat, Inc. : December 15, 2017   [Dec-15-17 02:11PM  Capital Cube]
▶ ETFs with exposure to Transcat, Inc. : November 28, 2017   [Nov-28-17 01:16PM  Capital Cube]
▶ ETFs with exposure to Transcat, Inc. : November 17, 2017   [Nov-17-17 01:08PM  Capital Cube]
▶ ETFs with exposure to Transcat, Inc. : November 7, 2017   [Nov-07-17 10:48AM  Capital Cube]
▶ Transcat, Inc. to Present at Southwest IDEAS Conference   [Nov-02-17 04:15PM  Business Wire]
▶ Transcat, Inc. to Host Earnings Call   [Oct-25-17 07:15AM  ACCESSWIRE]
▶ Is It Time To Buy Transcat Inc (TRNS)?   [Oct-23-17 07:36AM  Simply Wall St.]
▶ ETFs with exposure to Transcat, Inc. : October 2, 2017   [Oct-02-17 11:08AM  Capital Cube]
▶ Transcat, Inc. to Present at Midwest IDEAS Conference   [Aug-17-17 04:15PM  Business Wire]
▶ ETFs with exposure to Transcat, Inc. : June 26, 2017   [Jun-26-17 05:04PM  Capital Cube]
▶ Transcat, Inc. to Present at East Coast IDEAS Conference   [May-08-17 04:15PM  Business Wire]
▶ ETFs with exposure to Transcat, Inc. : April 19, 2017   [Apr-19-17 02:39PM  Capital Cube]
▶ Transcat Reports Fourth Quarter and Fiscal 2016 Results   [May-17-16 04:15PM  GlobeNewswire]

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