Intrinsic value of Visteon Corporation - VC

Previous Close

$74.89

  Intrinsic Value

$97.12

stock screener

  Rating & Target

buy

+30%

Previous close

$74.89

 
Intrinsic value

$97.12

 
Up/down potential

+30%

 
Rating

buy

We calculate the intrinsic value of VC 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 2.1

 

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
  3,044
  3,114
  3,194
  3,284
  3,383
  3,492
  3,611
  3,740
  3,879
  4,028
  4,187
  4,357
  4,538
  4,730
  4,934
  5,150
  5,379
  5,621
  5,877
  6,147
  6,432
  6,732
  7,049
  7,383
  7,734
  8,104
  8,494
  8,904
  9,335
  9,788
Variable operating expenses, $m
  1,878
  1,921
  1,970
  2,025
  2,086
  2,153
  2,225
  2,304
  2,389
  2,480
  2,565
  2,669
  2,780
  2,898
  3,023
  3,155
  3,296
  3,444
  3,601
  3,766
  3,941
  4,125
  4,319
  4,523
  4,739
  4,965
  5,204
  5,455
  5,719
  5,997
Fixed operating expenses, $m
  995
  1,017
  1,040
  1,063
  1,086
  1,110
  1,134
  1,159
  1,185
  1,211
  1,237
  1,265
  1,292
  1,321
  1,350
  1,380
  1,410
  1,441
  1,473
  1,505
  1,538
  1,572
  1,607
  1,642
  1,678
  1,715
  1,753
  1,791
  1,831
  1,871
Total operating expenses, $m
  2,873
  2,938
  3,010
  3,088
  3,172
  3,263
  3,359
  3,463
  3,574
  3,691
  3,802
  3,934
  4,072
  4,219
  4,373
  4,535
  4,706
  4,885
  5,074
  5,271
  5,479
  5,697
  5,926
  6,165
  6,417
  6,680
  6,957
  7,246
  7,550
  7,868
Operating income, $m
  171
  176
  184
  196
  211
  230
  252
  276
  305
  336
  384
  423
  465
  511
  561
  615
  673
  736
  804
  876
  953
  1,035
  1,124
  1,217
  1,317
  1,424
  1,537
  1,657
  1,785
  1,920
EBITDA, $m
  265
  272
  282
  297
  315
  336
  361
  389
  421
  457
  496
  539
  586
  637
  693
  752
  817
  886
  960
  1,040
  1,124
  1,215
  1,312
  1,414
  1,524
  1,640
  1,764
  1,895
  2,034
  2,181
Interest expense (income), $m
  14
  22
  23
  25
  28
  30
  33
  36
  39
  43
  47
  51
  55
  60
  65
  71
  76
  82
  89
  95
  103
  110
  118
  126
  135
  145
  154
  165
  175
  187
  199
Earnings before tax, $m
  149
  152
  159
  169
  181
  197
  216
  237
  262
  289
  333
  367
  405
  446
  491
  539
  591
  648
  708
  773
  843
  917
  997
  1,082
  1,173
  1,270
  1,372
  1,482
  1,598
  1,721
Tax expense, $m
  40
  41
  43
  46
  49
  53
  58
  64
  71
  78
  90
  99
  109
  120
  132
  146
  160
  175
  191
  209
  228
  248
  269
  292
  317
  343
  371
  400
  431
  465
Net income, $m
  109
  111
  116
  123
  132
  144
  157
  173
  191
  211
  243
  268
  296
  326
  358
  393
  432
  473
  517
  564
  615
  670
  728
  790
  856
  927
  1,002
  1,082
  1,166
  1,257

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
  2,047
  2,094
  2,148
  2,208
  2,275
  2,349
  2,429
  2,515
  2,608
  2,709
  2,816
  2,930
  3,052
  3,181
  3,318
  3,463
  3,617
  3,780
  3,952
  4,134
  4,325
  4,527
  4,740
  4,965
  5,201
  5,450
  5,712
  5,988
  6,278
  6,583
Adjusted assets (=assets-cash), $m
  2,047
  2,094
  2,148
  2,208
  2,275
  2,349
  2,429
  2,515
  2,608
  2,709
  2,816
  2,930
  3,052
  3,181
  3,318
  3,463
  3,617
  3,780
  3,952
  4,134
  4,325
  4,527
  4,740
  4,965
  5,201
  5,450
  5,712
  5,988
  6,278
  6,583
Revenue / Adjusted assets
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
  1.487
Average production assets, $m
  463
  473
  485
  499
  514
  531
  549
  568
  590
  612
  636
  662
  690
  719
  750
  783
  818
  854
  893
  934
  978
  1,023
  1,071
  1,122
  1,176
  1,232
  1,291
  1,353
  1,419
  1,488
Working capital, $m
  167
  171
  176
  181
  186
  192
  199
  206
  213
  222
  230
  240
  250
  260
  271
  283
  296
  309
  323
  338
  354
  370
  388
  406
  425
  446
  467
  490
  513
  538
Total debt, $m
  435
  471
  512
  559
  610
  667
  728
  795
  866
  943
  1,025
  1,113
  1,207
  1,306
  1,411
  1,523
  1,641
  1,766
  1,898
  2,038
  2,185
  2,340
  2,504
  2,676
  2,858
  3,049
  3,250
  3,461
  3,684
  3,918
Total liabilities, $m
  1,572
  1,608
  1,649
  1,696
  1,747
  1,804
  1,865
  1,932
  2,003
  2,080
  2,162
  2,250
  2,344
  2,443
  2,548
  2,660
  2,778
  2,903
  3,035
  3,175
  3,322
  3,477
  3,641
  3,813
  3,995
  4,186
  4,387
  4,598
  4,821
  5,055
Total equity, $m
  475
  486
  498
  512
  528
  545
  563
  584
  605
  628
  653
  680
  708
  738
  770
  804
  839
  877
  917
  959
  1,003
  1,050
  1,100
  1,152
  1,207
  1,264
  1,325
  1,389
  1,456
  1,527
Total liabilities and equity, $m
  2,047
  2,094
  2,147
  2,208
  2,275
  2,349
  2,428
  2,516
  2,608
  2,708
  2,815
  2,930
  3,052
  3,181
  3,318
  3,464
  3,617
  3,780
  3,952
  4,134
  4,325
  4,527
  4,741
  4,965
  5,202
  5,450
  5,712
  5,987
  6,277
  6,582
Debt-to-equity ratio
  0.920
  0.970
  1.030
  1.090
  1.160
  1.220
  1.290
  1.360
  1.430
  1.500
  1.570
  1.640
  1.700
  1.770
  1.830
  1.900
  1.960
  2.010
  2.070
  2.120
  2.180
  2.230
  2.280
  2.320
  2.370
  2.410
  2.450
  2.490
  2.530
  2.570
Adjusted equity ratio
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  109
  111
  116
  123
  132
  144
  157
  173
  191
  211
  243
  268
  296
  326
  358
  393
  432
  473
  517
  564
  615
  670
  728
  790
  856
  927
  1,002
  1,082
  1,166
  1,257
Depreciation, amort., depletion, $m
  94
  96
  98
  100
  103
  106
  109
  113
  116
  120
  112
  116
  121
  126
  132
  137
  143
  150
  157
  164
  172
  180
  188
  197
  206
  216
  226
  237
  249
  261
Funds from operations, $m
  203
  207
  214
  224
  235
  250
  267
  286
  307
  332
  355
  384
  417
  452
  490
  531
  575
  623
  674
  728
  787
  849
  916
  987
  1,063
  1,143
  1,228
  1,319
  1,415
  1,518
Change in working capital, $m
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
Cash from operations, $m
  199
  203
  210
  219
  230
  244
  260
  279
  300
  323
  346
  375
  407
  441
  478
  519
  562
  609
  660
  713
  771
  833
  899
  969
  1,043
  1,123
  1,207
  1,297
  1,392
  1,493
Maintenance CAPEX, $m
  -79
  -81
  -83
  -85
  -88
  -90
  -93
  -96
  -100
  -103
  -107
  -112
  -116
  -121
  -126
  -132
  -137
  -143
  -150
  -157
  -164
  -172
  -180
  -188
  -197
  -206
  -216
  -226
  -237
  -249
New CAPEX, $m
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
Cash from investing activities, $m
  -89
  -92
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -131
  -138
  -144
  -150
  -157
  -165
  -172
  -180
  -189
  -198
  -207
  -218
  -228
  -239
  -250
  -262
  -275
  -288
  -303
  -318
Free cash flow, $m
  110
  111
  114
  120
  127
  137
  149
  163
  179
  197
  215
  238
  263
  291
  321
  354
  390
  429
  471
  516
  564
  616
  671
  730
  793
  860
  932
  1,008
  1,089
  1,175
Issuance/(repayment) of debt, $m
  30
  36
  41
  46
  51
  56
  61
  66
  72
  77
  82
  88
  93
  99
  105
  112
  118
  125
  132
  139
  147
  155
  164
  172
  182
  191
  201
  212
  223
  234
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  
  30
  36
  41
  46
  51
  56
  61
  66
  72
  77
  82
  88
  93
  99
  105
  112
  118
  125
  132
  139
  147
  155
  164
  172
  182
  191
  201
  212
  223
  234
Total cash flow (excl. dividends), $m
  140
  148
  156
  166
  179
  193
  210
  229
  251
  274
  297
  325
  356
  390
  427
  466
  508
  554
  603
  655
  711
  771
  834
  902
  974
  1,051
  1,133
  1,219
  1,311
  1,409
Retained Cash Flow (-), $m
  -10
  -11
  -12
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
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
  130
  137
  143
  152
  163
  176
  192
  209
  229
  251
  272
  299
  328
  360
  395
  432
  473
  516
  563
  613
  667
  724
  785
  850
  920
  993
  1,072
  1,155
  1,244
  1,338
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
  124
  125
  125
  125
  126
  128
  129
  131
  132
  132
  129
  128
  125
  121
  116
  110
  103
  95
  87
  78
  69
  60
  51
  43
  36
  29
  23
  18
  14
  10
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

Visteon Corporation is a global automotive supplier that designs, engineers and manufactures electronics products for original equipment vehicle manufacturer (OEM), including Ford, Mazda, Nissan/Renault, General Motors, Honda BMW and Daimler. The Company operates through Electronics segment. The Electronics segment provides vehicle cockpit electronics products to customers, including instrument clusters, information displays, infotainment, audio systems, telematics solutions and head up displays. It designs and manufacturers vehicle cockpit electronics components, modules and systems. It offers a range of information displays incorporating a sleek profile, craftsmanship and touch sensors, designed to deliver high performance for the automotive market. It offers a range of audio products, including audio head units, and analog and digital radios, which deliver consumer device connectivity. It offers an automotive-grade, integrated domain controller approach, called Smartcore.

FINANCIAL RATIOS  of  Visteon Corporation (VC)

Valuation Ratios
P/E Ratio 33
Price to Sales 0.8
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 20.6
Price to Free Cash Flow 54.9
Growth Rates
Sales Growth Rate -2.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -59.9%
Cap. Spend. - 3 Yr. Gr. Rate -22.5%
Financial Strength
Quick Ratio 24
Current Ratio 0.1
LT Debt to Equity 59%
Total Debt to Equity 65.2%
Interest Coverage 13
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. 14.8%
Return On Total Capital 6.2%
Ret/ On T. Cap. - 3 Yr. Avg. 49.4%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 75.2%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 14.7%
Gross Margin - 3 Yr. Avg. 13.7%
EBITDA Margin 8.2%
EBITDA Margin - 3 Yr. Avg. 8.9%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 5.1%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 20.5%
Effective Tax Rate 18.6%
Eff/ Tax Rate - 3 Yr. Avg. -5.6%
Payout Ratio 2314.7%

VC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VC stock intrinsic value calculation we used $2984 million for the last fiscal year's total revenue generated by Visteon Corporation. The default revenue input number comes from 0001 income statement of Visteon Corporation. 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 VC 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 VC is calculated based on our internal credit rating of Visteon Corporation, 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 Visteon Corporation.
    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 VC stock the variable cost ratio is equal to 61.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $974 million in the base year in the intrinsic value calculation for VC 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 Visteon Corporation.

Corporate tax rate of 27% is the nominal tax rate for Visteon Corporation. 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 VC 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 VC are equal to 15.2%.

Life of production assets of 5.7 years is the average useful life of capital assets used in Visteon Corporation 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 VC is equal to 5.5%. 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 - $465 million for Visteon Corporation - 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 28.248 million for Visteon Corporation 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 Visteon Corporation at the current share price and the inputted number of shares is $2.1 billion.

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