Stock Analysis

Is There An Opportunity With Ingram Micro Holding Corporation's (NYSE:INGM) 38% Undervaluation?

NYSE:INGM
Source: Shutterstock
Advertisement

Key Insights

  • Ingram Micro Holding's estimated fair value is US$32.99 based on 2 Stage Free Cash Flow to Equity
  • Ingram Micro Holding's US$20.43 share price signals that it might be 38% undervalued
  • The US$24.31 analyst price target for INGM is 26% less than our estimate of fair value

Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Ingram Micro Holding Corporation (NYSE:INGM) as an investment opportunity by estimating the company's future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. There's really not all that much to it, even though it might appear quite complex.

Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.

The Model

We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) forecast

2026202720282029203020312032203320342035
Levered FCF ($, Millions) US$560.3mUS$667.6mUS$630.0mUS$612.1mUS$605.3mUS$606.0mUS$611.8mUS$621.3mUS$633.5mUS$647.8m
Growth Rate Estimate SourceAnalyst x5Analyst x4Analyst x1Est @ -2.84%Est @ -1.11%Est @ 0.11%Est @ 0.96%Est @ 1.55%Est @ 1.97%Est @ 2.26%
Present Value ($, Millions) Discounted @ 9.7% US$511US$555US$477US$423US$381US$348US$320US$296US$275US$257

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$3.8b

After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.9%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 9.7%.

Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = US$648m× (1 + 2.9%) ÷ (9.7%– 2.9%) = US$9.9b

Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$9.9b÷ ( 1 + 9.7%)10= US$3.9b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$7.7b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$20.4, the company appears quite undervalued at a 38% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.

dcf
NYSE:INGM Discounted Cash Flow July 31st 2025

Important Assumptions

We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Ingram Micro Holding as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 9.7%, which is based on a levered beta of 1.562. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

View our latest analysis for Ingram Micro Holding

SWOT Analysis for Ingram Micro Holding

Strength
  • Debt is well covered by earnings.
  • Dividends are covered by earnings and cash flows.
Weakness
  • Earnings declined over the past year.
  • Dividend is low compared to the top 25% of dividend payers in the Electronic market.
Opportunity
  • Annual earnings are forecast to grow faster than the American market.
  • Good value based on P/E ratio and estimated fair value.
Threat
  • Debt is not well covered by operating cash flow.
  • Annual revenue is forecast to grow slower than the American market.

Looking Ahead:

Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Ingram Micro Holding, there are three relevant items you should further examine:

  1. Risks: You should be aware of the 1 warning sign for Ingram Micro Holding we've uncovered before considering an investment in the company.
  2. Future Earnings: How does INGM's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.

New: AI Stock Screener & Alerts

Our new AI Stock Screener scans the market every day to uncover opportunities.

• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies

Or build your own from over 50 metrics.

Explore Now for Free

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

About NYSE:INGM

Ingram Micro Holding

Through its subsidiaries, distributes information technology products, cloud, and other services in North America, Europe, the Middle East, Africa, the Asia-Pacific, Latin America, and internationally.

Undervalued with moderate growth potential.

Advertisement