Intrinsic value of Ultralife - ULBI

Previous Close

$7.32

  Intrinsic Value

$41.84

stock screener

  Rating & Target

str. buy

+472%

Previous close

$7.32

 
Intrinsic value

$41.84

 
Up/down potential

+472%

 
Rating

str. buy

We calculate the intrinsic value of ULBI 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, %
  14.70
  13.73
  12.86
  12.07
  11.36
  10.73
  10.15
  9.64
  9.18
  8.76
  8.38
  8.04
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
Revenue, $m
  98
  112
  126
  141
  157
  174
  192
  210
  229
  250
  270
  292
  315
  338
  363
  388
  415
  442
  470
  500
  531
  563
  597
  632
  668
  706
  746
  788
  831
  876
Variable operating expenses, $m
  18
  20
  22
  24
  27
  30
  32
  35
  38
  41
  42
  45
  48
  52
  56
  60
  64
  68
  72
  77
  82
  87
  92
  97
  103
  109
  115
  121
  128
  135
Fixed operating expenses, $m
  65
  67
  68
  70
  71
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
  108
  110
  113
  115
  118
  120
  123
Total operating expenses, $m
  83
  87
  90
  94
  98
  103
  107
  111
  116
  121
  123
  128
  133
  139
  145
  151
  157
  163
  169
  176
  183
  190
  198
  205
  213
  222
  230
  239
  248
  258
Operating income, $m
  15
  25
  35
  47
  59
  72
  85
  99
  114
  129
  148
  164
  181
  200
  218
  238
  258
  279
  301
  324
  348
  373
  399
  427
  455
  485
  516
  549
  583
  619
EBITDA, $m
  19
  29
  40
  52
  64
  77
  91
  105
  120
  136
  152
  169
  187
  205
  225
  244
  265
  287
  309
  333
  357
  383
  410
  438
  467
  497
  529
  562
  597
  634
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
Earnings before tax, $m
  15
  25
  35
  46
  58
  71
  84
  98
  112
  127
  146
  162
  179
  197
  215
  235
  255
  276
  297
  320
  344
  368
  394
  421
  449
  478
  509
  541
  575
  610
Tax expense, $m
  4
  7
  10
  13
  16
  19
  23
  26
  30
  34
  39
  44
  48
  53
  58
  63
  69
  74
  80
  86
  93
  99
  106
  114
  121
  129
  137
  146
  155
  165
Net income, $m
  11
  18
  26
  34
  43
  52
  61
  71
  82
  93
  106
  118
  131
  144
  157
  171
  186
  201
  217
  234
  251
  269
  288
  307
  328
  349
  372
  395
  420
  445

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
  106
  121
  136
  153
  170
  188
  207
  227
  248
  270
  293
  316
  341
  366
  393
  420
  449
  478
  509
  541
  575
  610
  646
  684
  723
  764
  807
  852
  899
  948
Adjusted assets (=assets-cash), $m
  106
  121
  136
  153
  170
  188
  207
  227
  248
  270
  293
  316
  341
  366
  393
  420
  449
  478
  509
  541
  575
  610
  646
  684
  723
  764
  807
  852
  899
  948
Revenue / Adjusted assets
  0.925
  0.926
  0.926
  0.922
  0.924
  0.926
  0.928
  0.925
  0.923
  0.926
  0.922
  0.924
  0.924
  0.923
  0.924
  0.924
  0.924
  0.925
  0.923
  0.924
  0.923
  0.923
  0.924
  0.924
  0.924
  0.924
  0.924
  0.925
  0.924
  0.924
Average production assets, $m
  25
  28
  31
  35
  39
  44
  48
  53
  57
  62
  68
  73
  79
  85
  91
  97
  104
  110
  118
  125
  133
  141
  149
  158
  167
  177
  187
  197
  208
  219
Working capital, $m
  33
  38
  43
  48
  54
  59
  65
  72
  78
  85
  92
  100
  107
  115
  124
  132
  141
  151
  160
  171
  181
  192
  204
  215
  228
  241
  254
  269
  283
  299
Total debt, $m
  3
  5
  8
  11
  15
  18
  22
  26
  30
  34
  39
  43
  48
  53
  58
  63
  69
  74
  80
  86
  93
  100
  107
  114
  122
  130
  138
  147
  156
  165
Total liabilities, $m
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  56
  61
  66
  71
  76
  81
  87
  92
  98
  104
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
Total equity, $m
  86
  97
  110
  123
  137
  152
  167
  184
  200
  218
  236
  255
  275
  295
  317
  339
  362
  386
  411
  437
  464
  492
  521
  552
  584
  617
  652
  688
  726
  765
Total liabilities and equity, $m
  106
  120
  136
  152
  170
  188
  207
  228
  248
  270
  292
  316
  341
  366
  393
  420
  449
  478
  509
  541
  575
  610
  646
  684
  724
  765
  808
  853
  900
  948
Debt-to-equity ratio
  0.030
  0.050
  0.080
  0.090
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.190
  0.200
  0.200
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.220
Adjusted equity ratio
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  18
  26
  34
  43
  52
  61
  71
  82
  93
  106
  118
  131
  144
  157
  171
  186
  201
  217
  234
  251
  269
  288
  307
  328
  349
  372
  395
  420
  445
Depreciation, amort., depletion, $m
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
Funds from operations, $m
  15
  23
  31
  39
  48
  57
  67
  78
  89
  100
  111
  123
  136
  150
  164
  178
  193
  209
  225
  242
  260
  279
  298
  318
  339
  361
  385
  409
  434
  461
Change in working capital, $m
  4
  5
  5
  5
  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
Cash from operations, $m
  11
  18
  26
  34
  43
  52
  61
  71
  82
  93
  104
  116
  129
  142
  155
  169
  184
  199
  215
  232
  249
  268
  287
  306
  327
  348
  371
  395
  419
  445
Maintenance CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
New CAPEX, $m
  -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
  -10
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -4
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -22
  -22
  -23
  -25
  -25
Free cash flow, $m
  6
  13
  20
  28
  36
  45
  54
  63
  74
  84
  94
  106
  118
  130
  143
  157
  171
  185
  201
  217
  233
  250
  268
  287
  307
  327
  349
  371
  395
  419
Issuance/(repayment) of debt, $m
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
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  
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
Total cash flow (excl. dividends), $m
  9
  16
  23
  31
  39
  48
  58
  67
  78
  88
  99
  110
  123
  135
  148
  162
  176
  191
  207
  223
  240
  257
  275
  295
  315
  335
  357
  380
  404
  429
Retained Cash Flow (-), $m
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
Prev. year cash balance distribution, $m
  4
  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
  2
  4
  11
  18
  25
  34
  42
  51
  61
  71
  80
  91
  103
  115
  127
  140
  153
  167
  182
  197
  213
  229
  246
  264
  283
  302
  322
  344
  366
  389
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
  2
  4
  9
  15
  20
  24
  28
  32
  35
  37
  38
  39
  39
  38
  37
  36
  33
  31
  28
  25
  22
  19
  16
  13
  11
  9
  7
  5
  4
  3
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

Ultralife Corporation offers products and services ranging from power solutions to communications and electronics systems. The Company designs and manufactures power and communications systems, including rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems. The Company's segments include Battery & Energy Products, Communications Systems and Corporate. The Battery & Energy Products segment includes lithium 9-volt, cylindrical, thin cell and other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes radio frequency (RF) amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications, and communications and electronics systems design.

FINANCIAL RATIOS  of  Ultralife (ULBI)

Valuation Ratios
P/E Ratio 28
Price to Sales 1.4
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 16
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate 0%
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 4.8%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 6%
Return On Equity - 3 Yr. Avg. 2.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 30.5%
Gross Margin - 3 Yr. Avg. 29.8%
EBITDA Margin 8.5%
EBITDA Margin - 3 Yr. Avg. 5.5%
Operating Margin 3.7%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 4.9%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 8.3%
Payout Ratio 0%

ULBI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ULBI stock intrinsic value calculation we used $85.531 million for the last fiscal year's total revenue generated by Ultralife. The default revenue input number comes from 0001 income statement of Ultralife. 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 ULBI stock valuation model: a) initial revenue growth rate of 14.7% 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 ULBI is calculated based on our internal credit rating of Ultralife, 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 Ultralife.
    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 ULBI stock the variable cost ratio is equal to 18.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $64 million in the base year in the intrinsic value calculation for ULBI 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 Ultralife.

Corporate tax rate of 27% is the nominal tax rate for Ultralife. 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 ULBI 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 ULBI are equal to 25%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Ultralife 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 ULBI is equal to 34.1%. 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 - $79.203 million for Ultralife - 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 15.946 million for Ultralife 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 Ultralife at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Ultralife: 3Q Earnings Snapshot   [Nov-01-18 10:16AM  Associated Press]
▶ Ultralife: 2Q Earnings Snapshot   [Aug-02-18 07:55AM  Associated Press]
▶ Ultralife: 1Q Earnings Snapshot   [May-03-18 10:58AM  Associated Press]
▶ Ultralife posts 4Q profit   [Feb-08-18 09:59AM  Associated Press]
▶ ETFs with exposure to Ultralife Corp. : November 30, 2017   [Nov-30-17 02:33PM  Capital Cube]
▶ ETFs with exposure to Ultralife Corp. : November 2, 2017   [Nov-02-17 12:40PM  Capital Cube]
▶ Ultralife posts 3Q profit   [09:38AM  Associated Press]
▶ ETFs with exposure to Ultralife Corp. : October 18, 2017   [Oct-18-17 10:03AM  Capital Cube]
▶ ETFs with exposure to Ultralife Corp. : June 26, 2017   [Jun-26-17 05:07PM  Capital Cube]
▶ ETFs with exposure to Ultralife Corp. : June 8, 2017   [Jun-08-17 01:59PM  Capital Cube]
▶ Ultralife posts 1Q profit   [May-04-17 08:34AM  Associated Press]
▶ ETFs with exposure to Ultralife Corp. : April 20, 2017   [Apr-20-17 02:34PM  Capital Cube]
▶ Ultralife posts 4Q profit   [Feb-09-17 09:19AM  Associated Press]
▶ ETFs with exposure to Ultralife Corp. : January 20, 2017   [Jan-20-17 02:17PM  Capital Cube]
▶ Insiders Invest in Ultralife   [Nov-16-16 03:25PM  GuruFocus.com]

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