Intrinsic value of AgroFresh Solutions - AGFS

Previous Close

$6.27

  Intrinsic Value

$1.66

stock screener

  Rating & Target

str. sell

-73%

Previous close

$6.27

 
Intrinsic value

$1.66

 
Up/down potential

-73%

 
Rating

str. sell

We calculate the intrinsic value of AGFS 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 0.3

 

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, %
  -2.44
  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
  160
  163
  167
  171
  176
  181
  187
  194
  201
  208
  216
  224
  234
  243
  254
  265
  276
  288
  301
  315
  330
  345
  361
  378
  396
  415
  435
  455
  477
  501
  525
Variable operating expenses, $m
 
  176
  180
  185
  190
  196
  202
  209
  217
  225
  233
  243
  253
  263
  274
  286
  299
  312
  326
  341
  356
  373
  390
  409
  428
  448
  470
  492
  516
  541
  567
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
  197
  176
  180
  185
  190
  196
  202
  209
  217
  225
  233
  243
  253
  263
  274
  286
  299
  312
  326
  341
  356
  373
  390
  409
  428
  448
  470
  492
  516
  541
  567
Operating income, $m
  -37
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
EBITDA, $m
  6
  29
  30
  31
  32
  32
  34
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
Interest expense (income), $m
  0
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  57
  60
Earnings before tax, $m
  -99
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
Tax expense, $m
  13
  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
Net income, $m
  -112
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  77
  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
  966
  907
  928
  951
  978
  1,008
  1,040
  1,076
  1,114
  1,155
  1,200
  1,247
  1,298
  1,352
  1,409
  1,470
  1,534
  1,602
  1,674
  1,751
  1,831
  1,916
  2,005
  2,100
  2,199
  2,304
  2,414
  2,530
  2,652
  2,781
  2,916
Adjusted assets (=assets-cash), $m
  889
  907
  928
  951
  978
  1,008
  1,040
  1,076
  1,114
  1,155
  1,200
  1,247
  1,298
  1,352
  1,409
  1,470
  1,534
  1,602
  1,674
  1,751
  1,831
  1,916
  2,005
  2,100
  2,199
  2,304
  2,414
  2,530
  2,652
  2,781
  2,916
Revenue / Adjusted assets
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
Average production assets, $m
  808
  824
  843
  864
  889
  916
  945
  977
  1,012
  1,050
  1,090
  1,133
  1,179
  1,228
  1,280
  1,335
  1,394
  1,456
  1,521
  1,590
  1,663
  1,741
  1,822
  1,908
  1,998
  2,093
  2,193
  2,299
  2,409
  2,526
  2,649
Working capital, $m
  74
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
Total debt, $m
  408
  405
  420
  436
  455
  475
  498
  522
  549
  578
  608
  641
  676
  714
  753
  796
  840
  887
  937
  990
  1,046
  1,105
  1,167
  1,232
  1,301
  1,374
  1,450
  1,530
  1,615
  1,704
  1,798
Total liabilities, $m
  631
  628
  643
  659
  678
  698
  721
  745
  772
  801
  831
  864
  899
  937
  976
  1,019
  1,063
  1,110
  1,160
  1,213
  1,269
  1,328
  1,390
  1,455
  1,524
  1,597
  1,673
  1,753
  1,838
  1,927
  2,021
Total equity, $m
  335
  278
  285
  292
  300
  309
  319
  330
  342
  355
  368
  383
  398
  415
  433
  451
  471
  492
  514
  537
  562
  588
  616
  645
  675
  707
  741
  777
  814
  854
  895
Total liabilities and equity, $m
  966
  906
  928
  951
  978
  1,007
  1,040
  1,075
  1,114
  1,156
  1,199
  1,247
  1,297
  1,352
  1,409
  1,470
  1,534
  1,602
  1,674
  1,750
  1,831
  1,916
  2,006
  2,100
  2,199
  2,304
  2,414
  2,530
  2,652
  2,781
  2,916
Debt-to-equity ratio
  1.218
  1.460
  1.470
  1.490
  1.510
  1.540
  1.560
  1.580
  1.610
  1.630
  1.650
  1.670
  1.700
  1.720
  1.740
  1.760
  1.780
  1.800
  1.820
  1.840
  1.860
  1.880
  1.900
  1.910
  1.930
  1.940
  1.960
  1.970
  1.980
  2.000
  2.010
Adjusted equity ratio
  0.290
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -112
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
Depreciation, amort., depletion, $m
  43
  42
  43
  45
  46
  47
  49
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  137
Funds from operations, $m
  28
  15
  16
  16
  16
  17
  17
  17
  18
  18
  18
  19
  19
  20
  20
  21
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
Change in working capital, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
Cash from operations, $m
  30
  15
  15
  16
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  31
  33
Maintenance CAPEX, $m
  0
  -42
  -42
  -43
  -45
  -46
  -47
  -49
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
New CAPEX, $m
  -6
  -16
  -19
  -22
  -24
  -27
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -105
  -111
  -117
  -123
Cash from investing activities, $m
  -7
  -58
  -61
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -110
  -115
  -121
  -128
  -134
  -141
  -147
  -155
  -163
  -171
  -180
  -188
  -198
  -208
  -218
  -229
  -241
  -253
Free cash flow, $m
  23
  -43
  -46
  -49
  -53
  -57
  -60
  -64
  -68
  -72
  -77
  -81
  -86
  -91
  -96
  -101
  -107
  -112
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -171
  -180
  -189
  -199
  -209
  -220
Issuance/(repayment) of debt, $m
  -4
  12
  14
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  69
  73
  76
  80
  85
  89
  94
Issuance/(repurchase) of shares, $m
  -1
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  74
  78
  82
  86
  91
  95
  100
  106
  111
  117
  123
  130
  137
  144
Cash from financing (excl. dividends), $m  
  -6
  44
  48
  53
  57
  61
  65
  69
  73
  78
  82
  87
  92
  97
  103
  108
  115
  121
  128
  135
  142
  150
  157
  165
  175
  184
  193
  203
  215
  226
  238
Total cash flow (excl. dividends), $m
  20
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
Retained Cash Flow (-), $m
  109
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -95
  -100
  -106
  -111
  -117
  -123
  -130
  -137
  -144
Prev. year cash balance distribution, $m
 
  62
  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
 
  32
  -32
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -109
  -114
  -120
  -127
Discount rate, %
 
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
 
  29
  -27
  -25
  -24
  -22
  -20
  -19
  -17
  -15
  -13
  -12
  -10
  -9
  -7
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  88.8
  78.6
  69.3
  61.0
  53.5
  46.8
  40.8
  35.5
  30.8
  26.7
  23.1
  20.0
  17.2
  14.8
  12.8
  11.0
  9.4
  8.0
  6.9
  5.9
  5.0
  4.3
  3.7
  3.1
  2.6
  2.3
  1.9
  1.6
  1.4
  1.2

AgroFresh Solutions, Inc., formerly Boulevard Acquisition Corp., is a developer of agricultural technologies that preserve the freshness and value of fresh produce, including apples, pears, kiwifruit, avocados and bananas, as well as flowers. The Company's principal product, The SmartFresh Quality System (SmartFresh), regulates the post-harvest ripening effects of ethylene, the naturally occurring plant hormone that triggers ripening in certain fruits and vegetables, through technology. SmartFresh is naturally biodegradable and leaves no detectable residue, which has significant consumer appeal. SmartFresh allows growers and packers to deliver just harvested freshness on a year-round basis. An integral part of the SmartFresh sales process is the AgroFresh Whole Product offering, which is a direct service model that provides customers with on-site applications of SmartFresh at their storage facilities combined with advisory services. The Company operates in approximately 40 countries.

FINANCIAL RATIOS  of  AgroFresh Solutions (AGFS)

Valuation Ratios
P/E Ratio -2.8
Price to Sales 2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 10.5
Price to Free Cash Flow 13.1
Growth Rates
Sales Growth Rate -2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 500%
Cap. Spend. - 3 Yr. Gr. Rate 43.1%
Financial Strength
Quick Ratio 5
Current Ratio 0.1
LT Debt to Equity 117.3%
Total Debt to Equity 121.8%
Interest Coverage 0
Management Effectiveness
Return On Assets -10.9%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital -14%
Ret/ On T. Cap. - 3 Yr. Avg. 0.2%
Return On Equity -28.8%
Return On Equity - 3 Yr. Avg. -4.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 62.5%
Gross Margin - 3 Yr. Avg. 60.9%
EBITDA Margin -35%
EBITDA Margin - 3 Yr. Avg. 6%
Operating Margin -23.1%
Oper. Margin - 3 Yr. Avg. 2.5%
Pre-Tax Margin -61.9%
Pre-Tax Margin - 3 Yr. Avg. -15.4%
Net Profit Margin -70%
Net Profit Margin - 3 Yr. Avg. -23.9%
Effective Tax Rate -13.1%
Eff/ Tax Rate - 3 Yr. Avg. 23.5%
Payout Ratio 0%

AGFS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AGFS stock intrinsic value calculation we used $160 million for the last fiscal year's total revenue generated by AgroFresh Solutions. The default revenue input number comes from 2016 income statement of AgroFresh Solutions. 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 AGFS 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 8.4%, whose default value for AGFS is calculated based on our internal credit rating of AgroFresh Solutions, 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 AgroFresh Solutions.
    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 AGFS stock the variable cost ratio is equal to 108.1%.

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 AGFS 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 AgroFresh Solutions.

Corporate tax rate of 27% is the nominal tax rate for AgroFresh Solutions. 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 AGFS 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 AGFS are equal to 504.7%.

Life of production assets of 19.4 years is the average useful life of capital assets used in AgroFresh Solutions 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 AGFS is equal to 7.5%. 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 - $335 million for AgroFresh Solutions - 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 50.338 million for AgroFresh Solutions 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 AgroFresh Solutions at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ RipeLock Quality System Available in Key Food Stores   [Oct-19-17 09:56AM  GlobeNewswire]
▶ AgroFreshs Receives Favorable Ruling in MirTech Lawsuit   [Jul-06-17 08:00AM  Business Wire]
▶ These 3 Stocks Could Have Doubled Your Money This Year   [Jun-15-17 04:05PM  Motley Fool]
▶ AgroFresh Solutions Outlines a Growth Strategy   [Mar-10-17 11:44AM  Motley Fool]
▶ Is AgroFresh Solutions Inc (AGFS) A Good Stock To Buy?   [Dec-12-16 01:45AM  Insider Monkey]
▶ AgroFresh Introduces Novel Sensor Technology   [Sep-07-16 04:15PM  PR Newswire]
▶ AgroFresh Solutions Inc.'s Stress-Free Quarter   [Aug-11-16 10:36AM  at Motley Fool]
▶ AgroFresh Names New Chief Executive Officer   [Jul-14-16 06:00AM  PR Newswire]
▶ Five ways to ignite your banana sales   [Jun-20-16 07:00AM  PR Newswire]
Financial statements of AGFS
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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