Intrinsic value of Acme United - ACU

Previous Close

$24.92

  Intrinsic Value

$15.41

stock screener

  Rating & Target

sell

-38%

  Value-price divergence*

-65%

Previous close

$24.92

 
Intrinsic value

$15.41

 
Up/down potential

-38%

 
Rating

sell

 
Value-price divergence*

-65%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ACU 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 2016), $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
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.64
  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
  125
  128
  130
  134
  138
  142
  146
  151
  157
  162
  169
  175
  183
  190
  198
  207
  216
  225
  235
  246
  257
  269
  282
  295
  309
  324
  339
  356
  373
  391
  410
Variable operating expenses, $m
 
  118
  121
  124
  128
  131
  136
  140
  145
  151
  156
  162
  169
  176
  183
  191
  200
  208
  218
  228
  238
  249
  261
  273
  286
  300
  314
  329
  345
  362
  379
Fixed operating expenses, $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 operating expenses, $m
  116
  118
  121
  124
  128
  131
  136
  140
  145
  151
  156
  162
  169
  176
  183
  191
  200
  208
  218
  228
  238
  249
  261
  273
  286
  300
  314
  329
  345
  362
  379
Operating income, $m
  8
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
EBITDA, $m
  10
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
Earnings before tax, $m
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Tax expense, $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
Net income, $m
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  92
  88
  90
  92
  95
  98
  101
  104
  108
  112
  116
  121
  126
  131
  136
  142
  148
  155
  162
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  269
  282
Adjusted assets (=assets-cash), $m
  86
  88
  90
  92
  95
  98
  101
  104
  108
  112
  116
  121
  126
  131
  136
  142
  148
  155
  162
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  269
  282
Revenue / Adjusted assets
  1.453
  1.455
  1.444
  1.457
  1.453
  1.449
  1.446
  1.452
  1.454
  1.446
  1.457
  1.446
  1.452
  1.450
  1.456
  1.458
  1.459
  1.452
  1.451
  1.456
  1.452
  1.454
  1.454
  1.453
  1.451
  1.453
  1.449
  1.453
  1.451
  1.454
  1.454
Average production assets, $m
  21
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
Working capital, $m
  52
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Total debt, $m
  33
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  70
  74
  78
  82
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
Total liabilities, $m
  46
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Total equity, $m
  46
  41
  42
  43
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
  131
Total liabilities and equity, $m
  92
  88
  90
  92
  95
  97
  101
  104
  108
  112
  116
  121
  125
  131
  136
  142
  148
  155
  162
  170
  177
  185
  194
  203
  213
  223
  234
  245
  256
  269
  282
Debt-to-equity ratio
  0.717
  0.830
  0.840
  0.850
  0.860
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.950
  0.960
  0.970
  0.980
  0.990
  0.990
  1.000
  1.010
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
Adjusted equity ratio
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
Depreciation, amort., depletion, $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Funds from operations, $m
  9
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
Change in working capital, $m
  0
  1
  1
  1
  1
  2
  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
Cash from operations, $m
  9
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
New CAPEX, $m
  -2
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  -9
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -8
  -8
  -8
  -8
  -9
Free cash flow, $m
  0
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
Issuance/(repayment) of debt, $m
  7
  1
  1
  1
  1
  2
  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
Issuance/(repurchase) of shares, $m
  -3
  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  
  4
  1
  1
  1
  1
  2
  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
Total cash flow (excl. dividends), $m
  4
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
Retained Cash Flow (-), $m
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Prev. year cash balance distribution, $m
 
  6
  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
 
  11
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
Discount rate, %
 
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
 
  10
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  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
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Acme United Corporation is a supplier of cutting, measuring, first aid and sharpening products to the school, home, office, hardware, sporting goods and industrial markets. The Company operates in three segments: United States (including Asian operations), Canada and Europe. Its operations in the United States, Canada and Europe are involved in product development, marketing, sales, administrative and distribution activities. Its product offerings across various segments include scissors, shears, knives, rulers, pencil sharpeners, and related products, which are sold primarily to wholesale, contract and retail stationery distributors, office supply super stores, mass market retailers, industrial distributors, school supply distributors, drug store retailers, sporting goods stores, hardware chains and wholesale florists. It markets and sells in various brands, such as Westcott brand, First Aid Only, PhysiciansCare and Pac-Kit brands.

FINANCIAL RATIOS  of  Acme United (ACU)

Valuation Ratios
P/E Ratio 13.8
Price to Sales 0.7
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 11.8
Growth Rates
Sales Growth Rate 13.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -16.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 71.7%
Total Debt to Equity 71.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 7.8%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 13.5%
Return On Equity - 3 Yr. Avg. 13.1%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 36.8%
Gross Margin - 3 Yr. Avg. 36.2%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. 8.8%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 7%
Pre-Tax Margin 6.4%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 27.4%
Payout Ratio 16.7%

ACU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACU stock intrinsic value calculation we used $125 million for the last fiscal year's total revenue generated by Acme United. The default revenue input number comes from 2016 income statement of Acme United. 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 ACU 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 5.9%, whose default value for ACU is calculated based on our internal credit rating of Acme United, 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 Acme United.
    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 ACU stock the variable cost ratio is equal to 92.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ACU 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 3.5% for Acme United.

Corporate tax rate of 27% is the nominal tax rate for Acme United. 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 ACU 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 ACU are equal to 16.4%.

Life of production assets of 11.5 years is the average useful life of capital assets used in Acme United 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 ACU is equal to 36.8%. 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 - $46 million for Acme United - 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 3.372 million for Acme United 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 Acme United at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Camillus Knives Launches New Website   [Oct-13-17 04:51PM  GlobeNewswire]
▶ Acme United Corporation Board Approves Cash Dividend   [Sep-19-17 02:47PM  GlobeNewswire]
▶ ETFs with exposure to Acme United Corp. : June 9, 2017   [Jun-09-17 01:13PM  Capital Cube]
▶ ETFs with exposure to Acme United Corp. : May 23, 2017   [May-23-17 12:23PM  Capital Cube]
▶ Top Ranked Growth Stocks to Buy for March 23rd   [Mar-23-17 07:03AM  Zacks]
▶ Acme United Corporation Board Approves Cash Dividend   [Mar-20-17 12:18PM  Business Wire]
▶ Top Ranked Momentum Stocks to Buy for March 8th   [Mar-08-17 10:41AM  Zacks]
▶ Acme United Corporation Receives GOOD DESIGN Award   [Jan-10-17 11:20AM  Business Wire]
▶ Acme United Corporation Board Approves Cash Dividend   [Dec-19-16 01:04PM  Business Wire]
▶ Acme United Corporation Board Approves Cash Dividend   [Sep-20-16 09:04AM  Business Wire]
▶ Acme United Corporation Board Approves Cash Dividend   [Jun-17-16 09:37AM  Business Wire]
▶ Acme United Corporation Announces $50 Million Bank Facility   [May-06-16 02:53PM  Business Wire]
▶ Acme United Corporation Board Approves Cash Dividend   [Mar-18-16 09:00AM  Business Wire]
▶ Acme United Corporation Receives Good Design Award   [Jan-15-16 02:59PM  Business Wire]
Financial statements of ACU
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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