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Materion

NYSE:MTRN
Snowflake Description

Flawless balance sheet with moderate growth potential.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
MTRN
NYSE
$1B
Market Cap
  1. Home
  2. US
  3. Materials
Last updated 2018/04/23 00:04
Company description

Materion Corporation manufactures and sells advanced engineered materials used in consumer electronics, industrial components, defense, medical, automotive electronics, telecommunications infrastructure, energy, commercial aerospace, science, services, and appliance markets worldwide. More info.


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3 Month History
MTRN
Industry
5yr Volatility vs Market

Value

 Is Materion undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Materion to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Materion is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Materion's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Materion's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Materion is overvalued based on earnings compared to the US Metals and Mining industry average.
  • Materion is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Materion's expected growth come at a high price?
  • Materion is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Materion's assets?
  • Materion is overvalued based on assets compared to the US Metals and Mining industry average.
X
Value checks
We assess Materion's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Metals and Mining industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Metals and Mining industry average (and greater than 0)? (1 check)
  5. Materion has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (256.78%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Materion is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$190

Terminal Value

Terminal Value = FCF2022 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $76 × (1 + 2.47%) ÷ (10.15% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$1,015

Present value of terminal value:
$626

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$816 = $190 + $626

Value = Total value / Shares Outstanding ($816 / 20)

Discount to Share Price

Value per share:
$40.48

Current discount (share price of $54.5): -34.62%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 10.15% = 2.47% + (1.021 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($1,098,401,175).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

1.021 = 1.017 (1 + (1- 2.7%) (0.33%))

Levered Beta used in calculation = 1.021



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Materion expected to perform in the next 1 to 3 years based on estimates from 3 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
49.3%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Materion expected to grow at an attractive rate?
  • Materion's earnings growth is expected to exceed the low risk savings rate of 4.5%.
Growth vs Market Checks
  • Materion's earnings growth is expected to exceed the US market average.
  • Materion's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Materion's earnings are expected to grow significantly at over 20% yearly.
  • Materion's revenue is expected to grow by 5.5% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Materion is not expected to efficiently use shareholders’ funds in the future (Return on Equity less than 20%).
X
Future performance checks
We assess Materion's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Materion has a total score of 3/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Materion performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Materion's growth in the last year to its industry (Metals and Mining).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Materion's year on year earnings growth rate was negative over the past 5 years and the most recent earnings are below average.
  • Materion's 1-year earnings growth is negative, it can't be compared to the 5-year average.
  • Materion's 1-year earnings growth is negative, it can't be compared to the US Metals and Mining industry average.
Earnings and Revenue History
Materion's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Materion has not efficiently used shareholders’ funds last year (Return on Equity less than 20%).
  • Materion used its assets less efficiently than the US Metals and Mining industry average last year based on Return on Assets.
  • Materion's use of capital has not improved over the past 3 years (Return on Capital Employed).
X
Past performance checks
We assess Materion's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Metals and Mining industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Materion has a total score of 0/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Materion's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Materion's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Materion is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Materion's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Materion's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • High level of physical assets or inventory.
  • Debt is covered by short term assets, assets are 114x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Materion's level of debt (0.7%) compared to net worth is satisfactory (less than 40%).
  • The level of debt compared to net worth has been reduced over the past 5 years (22.8% vs 0.7% today).
  • Debt is well covered by operating cash flow (1881.1%, greater than 20% of total debt).
  • Interest payments on debt are well covered by earnings (EBIT is 19.6x coverage).
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Financial health checks
We assess Materion's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Materion has a total score of 6/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Materion's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0.73%
Current annual income from Materion dividends. Estimated to be 0.73% next year.
If you bought $2,000 of Materion shares you are expected to receive $15 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Materion's dividend is below the low risk savings rate (1.42%).
  • Materion's dividend is below the markets top dividend payers (3.95%).
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Whilst dividend payments have been stable, Materion has been paying a dividend for less than 10 years.
  • Dividend payments have increased, but Materion only paid a dividend in the past 6 years.
Current Payout to shareholders
What portion of Materion's earnings are paid to the shareholders as a dividend.
  • Dividends paid are covered by net profit (1.4x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be thoroughly covered by net profit (6.8x coverage).
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Income/ dividend checks
We assess Materion's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Materion afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Materion has a total score of 2/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Materion's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Jugal Vijayvargiya, image provided by Google.
Jugal Vijayvargiya
AGE 49
TENURE AS CEO 1.1 years
CEO Bio

Mr. Jugal K. Vijayvargiya has been the Chief Executive Officer and President of Materion Corporation since March 03, 2017. Mr. Vijayvargiya had an extensive 26-year international career with Delphi Automotive PLC, a leading global technology solutions provider to the automotive and transportation sectors. He served as Senior Vice President and President of Delphi Electronics & Safety at Delphi Automotive PLC since February 2012 until February 21, 2017. He served as an Executive Officer of Delphi. He led Electronics & Safety operations in 14 countries, designing and manufacturing sophisticated automotive electronics and systems. Mr. Vijayvargiya served as the Vice President of The Infotainment & Driver Interface Product Business Unit (PBU) for Delphi E&S since August 2009. He served as the General Director of the Controls & Security PBU since 2006. Earlier, he served as a Global Business Line Executive (BLE) for Body Security & Mechatronics of Delphi Electrical/Electronic Architecture. He began his Delphi career with E&S in 1986. Following several engineering assignments, he transferred to Troy, Mich. in 1996 and progressed through various sales positions. He served as Director of Program Management and became Product Line Manager of Audio Systems in 2002. He moved to Germany in 2003 to direct the integration of one of Delphi's corporate acquisitions. He has been a Director of Materion Corporation since March 03, 2017. Mr. Vijayvargiya received a bachelor's degree in electrical engineering and a master's degree from the Ohio State University.

CEO Compensation
  • Materion has a new CEO, we can't show their compensation history.
Management Team Tenure

Average tenure and age of the Materion management team in years:

4.2
Average Tenure
54.3
Average Age
  • The tenure for the Materion management team is about average.
Management Team

Joseph Kelley

TITLE
Chief Financial Officer and Vice President of Finance
COMPENSATION
$1M
AGE
44
TENURE
3.3 yrs

Greg Chemnitz

TITLE
Vice President
COMPENSATION
$1M
AGE
59
TENURE
10.6 yrs

Jugal Vijayvargiya

TITLE
Chief Executive Officer
AGE
49
TENURE
1.1 yrs

Marc Rands

TITLE
Vice President of Global Operations
TENURE
0.3 yrs

Ian Tribick

TITLE
Chief Technology & Marketing Officer
TENURE
0.7 yrs

Steve Shamrock

TITLE
Vice President of Investor Relations & Corporate Controller
TENURE
1.3 yrs

Stephen Freeman

TITLE
President of International Business Development
TENURE
12.1 yrs

Mike Anderson

TITLE
President of Beryllium Products
AGE
65

Al Lubrano

TITLE
President & CEO of Technical Materials Inc

Alex Boulton

TITLE
President of Brush Resources Inc
Board of Directors Tenure

Average tenure and age of the Materion board of directors in years:

9.4
Average Tenure
61.8
Average Age
  • The tenure for the Materion board of directors is about average.
Board of Directors

Vinod Khilnani

TITLE
Non-Executive Chairman
COMPENSATION
$172K
AGE
65
TENURE
0.3 yrs

Jugal Vijayvargiya

TITLE
Chief Executive Officer
AGE
49
TENURE
1.1 yrs

Geoff Wild

TITLE
Independent Director
COMPENSATION
$157K
AGE
61
TENURE
6.8 yrs

Joe Keithley

TITLE
Independent Director
COMPENSATION
$150K
AGE
68
TENURE
21.3 yrs

N. Mohan Reddy

TITLE
Independent Director
COMPENSATION
$150K
AGE
63
TENURE
18.3 yrs

William Lawrence

TITLE
Independent Director
COMPENSATION
$165K
AGE
72
TENURE
14.7 yrs

Craig Shular

TITLE
Independent Director
COMPENSATION
$155K
AGE
64
TENURE
9.9 yrs

Darlene J. Solomon

TITLE
Independent Director
COMPENSATION
$153K
AGE
58
TENURE
6.8 yrs

Bob Toth

TITLE
Independent Director
COMPENSATION
$150K
AGE
56
TENURE
5.2 yrs
Recent Insider Trading
  • Materion insiders have only sold shares in the past 3 months.
Who owns this company?
X
Management checks
We assess Materion's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Materion has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

External News
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Simply Wall St News

Is Materion Corporation (NYSE:MTRN) Worth $51.9 Based On Its Intrinsic Value?

In this article I am going to calculate the intrinsic value of Materion Corporation (NYSE:MTRN) by projecting its future cash flows and then discounting them to today's value. … 5-year cash flow forecast 2018 2019 2020 2021 2022 Levered FCF ($, Millions) $28.88 $43.77 $69.50 $72.40 $74.80 Source Analyst x4 Analyst x3 Analyst x1 Analyst x1 Analyst x1 Present Value Discounted @ 10.1% $26.23 $36.11 $52.08 $49.28 $46.24 Present Value of 5-year Cash Flow (PVCF)= $210 The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. … Terminal Value (TV) = FCF2022 × (1 + g) ÷ (r – g) = $75 × (1 + 2.5%) ÷ (10.1% – 2.5%) = $1,005 Present Value of Terminal Value (PVTV) = TV / (1 + r)5 = $1,005 / ( 1 + 10.1%)5 = $621 The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is $831.

Simply Wall St -

Company Info

Map
Description

Materion Corporation manufactures and sells advanced engineered materials used in consumer electronics, industrial components, defense, medical, automotive electronics, telecommunications infrastructure, energy, commercial aerospace, science, services, and appliance markets worldwide. The company operates through Performance Alloys and Composites, Advanced Materials, and Precision Coatings segments. The Performance Alloys and Composites segment provides copper and nickel manufactured in plate, rod, bar, tube, wire product forms, and other customized shapes; thick precision strip products; beryllium hydroxide; and beryllium products, such as beryllium and aluminum metal matrix composites, beryllia ceramics, and bulk metallic glass materials. This segment also produces strip metal products with clad inlay and overlay metals consisting of precious and base metals electroplated systems, electron beam welded systems, contour profiled systems, and solder-coated metal systems. The Advanced Materials segment provides advanced chemicals, microelectronics packaging, precious metal, non-precious metal, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal pre-forms, high temperature braze materials, and ultra-fine wire. Its products are used in the consumer electronics, industrial components, and telecommunications infrastructure end markets. The Precision Coatings segment produces sputter-coated precision thin film coatings and optical filter materials. Materion Corporation distributes its products through a combination of company-owned facilities, and independent distributors and agents. The company was formerly known as Brush Engineered Materials Inc. and changed its name to Materion Corporation in 2011. Materion Corporation was founded in 1931 and is headquartered in Mayfield Heights, Ohio.

Details
Name: Materion Corporation
MTRN
Exchange: NYSE
Founded: 1931
$1,098,401,175
20,154,150
Website: http://www.materion.com
Address: Materion Corporation
6070 Parkland Boulevard,
Mayfield Heights,
Ohio, 44124,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NYSE MTRN Common Stock New York Stock Exchange US USD 02. Jan 1969
DB BEM Common Stock Deutsche Boerse AG DE EUR 02. Jan 1969
Number of employees
Current staff
Staff numbers
2,700
Materion employees.
Industry
Diversified Metals and Mining
Materials
Company Analysis and Financial Data Status
Area Date
Company Analysis updated: 2018/04/23 00:04
Last estimates confirmation: 2018/04/06
Last earnings update: 2017/12/31
Last annual earnings update: 2017/12/31


All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.

Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.