Intrinsic value of American Electric Technologies - AETI

Previous Close

$1.63

  Intrinsic Value

$2.84

stock screener

  Rating & Target

str. buy

+74%

  Value-price divergence*

+148%

Previous close

$1.63

 
Intrinsic value

$2.84

 
Up/down potential

+74%

 
Rating

str. buy

 
Value-price divergence*

+148%

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

We calculate the intrinsic value of AETI 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 0.0

 

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, %
  -22.45
  18.20
  16.88
  15.69
  14.62
  13.66
  12.79
  12.02
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
Revenue, $m
  38
  45
  52
  61
  70
  79
  89
  100
  111
  123
  136
  149
  162
  176
  191
  206
  222
  239
  256
  274
  293
  312
  332
  353
  375
  397
  421
  446
  471
  498
  526
Variable operating expenses, $m
 
  25
  29
  34
  38
  44
  49
  55
  62
  68
  75
  82
  90
  98
  106
  114
  123
  132
  142
  152
  162
  173
  184
  195
  207
  220
  233
  247
  261
  276
  291
Fixed operating expenses, $m
 
  26
  26
  27
  28
  28
  29
  30
  30
  31
  32
  33
  34
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
Total operating expenses, $m
  45
  51
  55
  61
  66
  72
  78
  85
  92
  99
  107
  115
  124
  132
  141
  150
  160
  170
  181
  192
  203
  215
  227
  239
  252
  266
  281
  296
  311
  327
  343
Operating income, $m
  -7
  -6
  -3
  0
  4
  7
  11
  15
  19
  24
  29
  34
  39
  44
  50
  56
  62
  69
  76
  83
  90
  97
  105
  114
  122
  131
  141
  151
  161
  172
  183
EBITDA, $m
  -6
  -4
  -1
  2
  5
  9
  13
  18
  22
  27
  32
  38
  43
  49
  55
  62
  68
  75
  82
  90
  98
  106
  114
  123
  132
  142
  152
  162
  173
  185
  197
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
Earnings before tax, $m
  -7
  -6
  -3
  0
  3
  6
  10
  14
  18
  23
  27
  32
  37
  42
  48
  54
  60
  66
  72
  79
  86
  93
  101
  109
  117
  126
  135
  144
  154
  165
  175
Tax expense, $m
  0
  0
  0
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
Net income, $m
  -7
  -6
  -3
  0
  2
  5
  7
  10
  13
  16
  20
  23
  27
  31
  35
  39
  43
  48
  53
  58
  63
  68
  74
  80
  86
  92
  99
  105
  113
  120
  128

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  35
  39
  46
  53
  60
  69
  77
  87
  97
  107
  118
  129
  141
  153
  166
  179
  193
  207
  222
  238
  254
  271
  288
  306
  325
  345
  366
  387
  409
  433
  457
Adjusted assets (=assets-cash), $m
  33
  39
  46
  53
  60
  69
  77
  87
  97
  107
  118
  129
  141
  153
  166
  179
  193
  207
  222
  238
  254
  271
  288
  306
  325
  345
  366
  387
  409
  433
  457
Revenue / Adjusted assets
  1.152
  1.154
  1.130
  1.151
  1.167
  1.145
  1.156
  1.149
  1.144
  1.150
  1.153
  1.155
  1.149
  1.150
  1.151
  1.151
  1.150
  1.155
  1.153
  1.151
  1.154
  1.151
  1.153
  1.154
  1.154
  1.151
  1.150
  1.152
  1.152
  1.150
  1.151
Average production assets, $m
  8
  9
  11
  13
  15
  17
  19
  21
  23
  26
  29
  31
  34
  37
  40
  44
  47
  50
  54
  58
  62
  66
  70
  74
  79
  84
  89
  94
  99
  105
  111
Working capital, $m
  3
  4
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  42
Total debt, $m
  6
  7
  10
  14
  18
  22
  27
  32
  37
  42
  48
  53
  60
  66
  72
  79
  86
  94
  102
  110
  118
  126
  135
  145
  155
  165
  175
  186
  198
  210
  222
Total liabilities, $m
  20
  20
  23
  27
  31
  35
  40
  45
  50
  55
  61
  66
  73
  79
  85
  92
  99
  107
  115
  123
  131
  139
  148
  158
  168
  178
  188
  199
  211
  223
  235
Total equity, $m
  16
  19
  22
  26
  29
  33
  38
  42
  47
  52
  57
  63
  68
  74
  80
  87
  94
  101
  108
  115
  123
  131
  140
  149
  158
  167
  177
  188
  198
  210
  222
Total liabilities and equity, $m
  36
  39
  45
  53
  60
  68
  78
  87
  97
  107
  118
  129
  141
  153
  165
  179
  193
  208
  223
  238
  254
  270
  288
  307
  326
  345
  365
  387
  409
  433
  457
Debt-to-equity ratio
  0.375
  0.370
  0.470
  0.550
  0.620
  0.670
  0.720
  0.750
  0.780
  0.810
  0.830
  0.850
  0.870
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
  0.990
  1.000
  1.000
  1.000
Adjusted equity ratio
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  -6
  -3
  0
  2
  5
  7
  10
  13
  16
  20
  23
  27
  31
  35
  39
  43
  48
  53
  58
  63
  68
  74
  80
  86
  92
  99
  105
  113
  120
  128
Depreciation, amort., depletion, $m
  1
  1
  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
Funds from operations, $m
  -8
  -5
  -2
  1
  4
  7
  10
  13
  16
  20
  23
  27
  31
  36
  40
  45
  49
  54
  59
  65
  71
  76
  82
  89
  95
  102
  110
  117
  125
  133
  142
Change in working capital, $m
  -1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  -7
  -5
  -2
  1
  3
  6
  9
  12
  15
  19
  22
  26
  30
  34
  39
  43
  48
  53
  58
  63
  69
  75
  81
  87
  94
  101
  108
  115
  123
  131
  140
Maintenance CAPEX, $m
  0
  -1
  -1
  -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
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
Cash from investing activities, $m
  0
  -2
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
Free cash flow, $m
  -7
  -8
  -5
  -2
  0
  2
  5
  7
  10
  13
  17
  20
  23
  27
  31
  35
  39
  44
  48
  53
  58
  63
  68
  74
  80
  86
  92
  99
  106
  113
  121
Issuance/(repayment) of debt, $m
  0
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  13
Issuance/(repurchase) of shares, $m
  0
  9
  6
  4
  2
  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  
  0
  12
  9
  8
  6
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  13
Total cash flow (excl. dividends), $m
  -6
  4
  5
  5
  5
  6
  9
  12
  15
  19
  22
  26
  30
  33
  38
  42
  46
  51
  56
  61
  66
  72
  77
  83
  90
  96
  103
  110
  117
  125
  133
Retained Cash Flow (-), $m
  7
  -9
  -6
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
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
 
  -4
  -2
  1
  2
  2
  5
  8
  11
  14
  17
  20
  24
  28
  31
  35
  40
  44
  49
  53
  58
  64
  69
  75
  80
  87
  93
  100
  107
  114
  121
Discount rate, %
 
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
 
  -4
  -1
  1
  1
  2
  3
  4
  5
  6
  6
  6
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  62.8
  46.0
  39.0
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6
  36.6

American Electric Technologies, Inc. is a provider of power delivery solutions to the global energy industry. The Company serves a range of markets, such as power generation and distribution, oil and gas, and marine and industrial. It provides power delivery solutions for the power generation and distribution market sectors. It works with turbine manufacturers, engine-generator manufacturers and dealers, engineering, procurement and construction (EPC) firms, and high voltage service companies to provide electric power delivery products and solutions. It designs, manufactures, commissions and maintains its equipment for implementation in base-load, peaking power, cogeneration and substation transmission facilities across the world. It provides power delivery solutions for the upstream, midstream and downstream oil and natural gas sectors. Its industrial markets include non-oil and gas industrial markets, such as steel, paper, heavy commercial, and other non-oil and gas applications.

FINANCIAL RATIOS  of  American Electric Technologies (AETI)

Valuation Ratios
P/E Ratio -1.9
Price to Sales 0.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -1.9
Price to Free Cash Flow -1.7
Growth Rates
Sales Growth Rate -22.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.5
LT Debt to Equity 25%
Total Debt to Equity 37.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -18.9%
Ret/ On Assets - 3 Yr. Avg. -12.5%
Return On Total Capital -27.5%
Ret/ On T. Cap. - 3 Yr. Avg. -18%
Return On Equity -35.9%
Return On Equity - 3 Yr. Avg. -22%
Asset Turnover 1
Profitability Ratios
Gross Margin 2.6%
Gross Margin - 3 Yr. Avg. 8.6%
EBITDA Margin -15.8%
EBITDA Margin - 3 Yr. Avg. -6.5%
Operating Margin -18.4%
Oper. Margin - 3 Yr. Avg. -9.8%
Pre-Tax Margin -18.4%
Pre-Tax Margin - 3 Yr. Avg. -8.7%
Net Profit Margin -18.4%
Net Profit Margin - 3 Yr. Avg. -11.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -16.7%
Payout Ratio 0%

AETI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AETI stock intrinsic value calculation we used $38 million for the last fiscal year's total revenue generated by American Electric Technologies. The default revenue input number comes from 2016 income statement of American Electric Technologies. 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 AETI stock valuation model: a) initial revenue growth rate of 18.2% 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 7.1%, whose default value for AETI is calculated based on our internal credit rating of American Electric Technologies, 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 American Electric Technologies.
    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 AETI stock the variable cost ratio is equal to 55.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $25 million in the base year in the intrinsic value calculation for AETI 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 American Electric Technologies.

Corporate tax rate of 27% is the nominal tax rate for American Electric Technologies. 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 AETI 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 AETI are equal to 21.1%.

Life of production assets of 8 years is the average useful life of capital assets used in American Electric Technologies 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 AETI is equal to 7.9%. 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 - $16 million for American Electric Technologies - 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 8.894 million for American Electric Technologies 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 American Electric Technologies at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ AETI Announces 61% quarterly revenue growth   [Aug-08-17 07:00AM  GlobeNewswire]
▶ AETI reports discussions with Director Casey Crenshaw   [Jun-12-17 07:00AM  GlobeNewswire]
▶ AETI Announces Q1 results   [May-15-17 07:00AM  GlobeNewswire]
▶ AETI Announces Q4 and FY2016 Results   [07:00AM  GlobeNewswire]
▶ M&I Electric celebrates 70 year anniversary   [Nov-17-16 02:00PM  GlobeNewswire]
▶ AETI Announces Q3 2016 Results   [07:00AM  GlobeNewswire]
▶ AETI Announces Q2 2016 Results   [07:00AM  GlobeNewswire]
▶ AETI Announces Q1 2016 Results   [07:00AM  GlobeNewswire]
▶ AETI announces 2015 Q4 and year-end results   [07:00AM  GlobeNewswire]
▶ AETI Announces New $8.5 Million Credit Facility   [Jan-05-16 08:00AM  GlobeNewswire]
▶ AETI Announces Third Quarter Results   [07:00AM  GlobeNewswire]
▶ 10-Q for American Electric Technologies, Inc.   [Aug-15  08:10PM  at Company Spotlight]
▶ AEP awaiting industry-altering Clean Power Plan   [10:30AM  at bizjournals.com]
▶ 10-Q for American Electric Technologies, Inc.   [May-17  08:11PM  at Company Spotlight]
Financial statements of AETI
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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