Intrinsic value of American Superconductor - AMSC

Previous Close

$3.47

  Intrinsic Value

$1.55

stock screener

  Rating & Target

str. sell

-55%

  Value-price divergence*

+62%

Previous close

$3.47

 
Intrinsic value

$1.55

 
Up/down potential

-55%

 
Rating

str. sell

 
Value-price divergence*

+62%

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

We calculate the intrinsic value of AMSC 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, %
  35.21
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  96
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  230
  241
  253
  266
  279
  292
  307
  322
  338
  354
  372
Variable operating expenses, $m
 
  172
  179
  186
  194
  202
  211
  220
  230
  240
  251
  262
  275
  287
  301
  315
  330
  346
  362
  380
  398
  418
  438
  459
  482
  505
  530
  556
  584
  613
  643
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
  172
  179
  186
  194
  202
  211
  220
  230
  240
  251
  262
  275
  287
  301
  315
  330
  346
  362
  380
  398
  418
  438
  459
  482
  505
  530
  556
  584
  613
  643
Operating income, $m
  -20
  -73
  -75
  -79
  -82
  -85
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -121
  -127
  -133
  -139
  -146
  -153
  -160
  -168
  -176
  -185
  -194
  -203
  -213
  -224
  -235
  -246
  -258
  -271
EBITDA, $m
  -12
  -67
  -70
  -72
  -75
  -79
  -82
  -86
  -89
  -93
  -98
  -102
  -107
  -112
  -117
  -123
  -128
  -135
  -141
  -148
  -155
  -162
  -170
  -179
  -187
  -197
  -206
  -216
  -227
  -238
  -250
Interest expense (income), $m
  1
  0
  0
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
Earnings before tax, $m
  -21
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
  -162
  -170
  -178
  -187
  -197
  -207
  -217
  -228
  -240
  -252
  -265
  -279
  -293
Tax expense, $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
Net income, $m
  -23
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
  -162
  -170
  -178
  -187
  -197
  -207
  -217
  -228
  -240
  -252
  -265
  -279
  -293

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  39
  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
  135
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  230
  241
  253
  266
  279
  292
  307
  322
  338
  354
  372
Adjusted assets (=assets-cash), $m
  96
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  230
  241
  253
  266
  279
  292
  307
  322
  338
  354
  372
Revenue / Adjusted assets
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
Average production assets, $m
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  94
  98
  103
  107
  113
  118
  124
  130
  136
  143
  150
  157
  165
  173
  181
  190
  199
  209
Working capital, $m
  42
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
Total debt, $m
  4
  3
  5
  7
  9
  11
  14
  17
  19
  22
  26
  29
  32
  36
  40
  44
  48
  53
  58
  63
  68
  74
  80
  86
  92
  99
  106
  114
  122
  130
  139
Total liabilities, $m
  52
  50
  52
  54
  56
  58
  61
  64
  66
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
  161
  169
  177
  186
Total equity, $m
  84
  50
  52
  54
  56
  58
  61
  64
  66
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
  161
  169
  177
  186
Total liabilities and equity, $m
  136
  100
  104
  108
  112
  116
  122
  128
  132
  138
  146
  152
  158
  166
  174
  182
  190
  200
  210
  220
  230
  242
  254
  266
  278
  292
  306
  322
  338
  354
  372
Debt-to-equity ratio
  0.048
  0.060
  0.090
  0.130
  0.160
  0.200
  0.230
  0.260
  0.290
  0.320
  0.350
  0.380
  0.410
  0.430
  0.460
  0.480
  0.510
  0.530
  0.550
  0.570
  0.590
  0.610
  0.630
  0.650
  0.660
  0.680
  0.690
  0.710
  0.720
  0.730
  0.750
Adjusted equity ratio
  0.469
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -23
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
  -162
  -170
  -178
  -187
  -197
  -207
  -217
  -228
  -240
  -252
  -265
  -279
  -293
Depreciation, amort., depletion, $m
  8
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
Funds from operations, $m
  -1
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -112
  -117
  -123
  -129
  -136
  -143
  -150
  -157
  -165
  -174
  -183
  -192
  -202
  -212
  -223
  -234
  -246
  -259
  -272
Change in working capital, $m
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  -5
  -67
  -70
  -74
  -77
  -80
  -84
  -88
  -93
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -136
  -143
  -150
  -158
  -166
  -175
  -183
  -193
  -203
  -213
  -224
  -235
  -247
  -260
  -273
Maintenance CAPEX, $m
  0
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
New CAPEX, $m
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Cash from investing activities, $m
  5
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -10
  -12
  -12
  -13
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -18
  -19
  -21
  -21
  -22
  -24
  -24
  -25
  -27
  -28
  -30
Free cash flow, $m
  0
  -75
  -78
  -82
  -85
  -89
  -94
  -98
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -159
  -167
  -176
  -184
  -194
  -204
  -214
  -225
  -236
  -248
  -261
  -274
  -288
  -303
Issuance/(repayment) of debt, $m
  -4
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
Issuance/(repurchase) of shares, $m
  22
  75
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  137
  144
  151
  158
  166
  175
  184
  193
  203
  213
  224
  235
  247
  260
  273
  287
  302
Cash from financing (excl. dividends), $m  
  18
  77
  80
  83
  87
  91
  96
  101
  105
  110
  116
  121
  128
  134
  141
  148
  155
  163
  171
  180
  189
  199
  209
  219
  230
  242
  254
  268
  281
  295
  311
Total cash flow (excl. dividends), $m
  19
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
Retained Cash Flow (-), $m
  -4
  -75
  -78
  -81
  -85
  -89
  -93
  -98
  -102
  -107
  -113
  -118
  -124
  -130
  -137
  -144
  -151
  -158
  -166
  -175
  -184
  -193
  -203
  -213
  -224
  -235
  -247
  -260
  -273
  -287
  -302
Prev. year cash balance distribution, $m
 
  36
  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
 
  -37
  -76
  -80
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -155
  -162
  -171
  -179
  -188
  -198
  -208
  -218
  -229
  -241
  -253
  -266
  -280
  -294
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -36
  -70
  -69
  -69
  -67
  -66
  -64
  -63
  -60
  -58
  -55
  -52
  -48
  -45
  -41
  -37
  -34
  -30
  -26
  -23
  -19
  -16
  -14
  -11
  -9
  -7
  -5
  -4
  -3
  -2
Current shareholders' claim on cash, %
  100
  31.0
  9.6
  3.0
  0.9
  0.3
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

American Superconductor Corporation provides megawatt-scale solutions worldwide. The company operates through two segments, Wind and Grid. The Wind segment designs wind turbine systems and licenses these designs to third parties under the Windtec Solutions brand. It supplies power electronics and software-based control systems, and provides customer support services to wind turbine manufacturers. This segment’s design portfolio comprises a range of drivetrains and power ratings of 2 megawatts. The Grid segment offers products and services that enable electric utilities and renewable energy project developers to connect, transmit, and distribute power under the Gridtec Solutions brand. It provides transmission planning services, which identify power grid congestion, poor power quality, and other risks; grid interconnection solutions for wind farms and solar power plants, power quality systems, and transmission and distribution cable systems; resilient electric grid systems, which provide protection against the adverse effects that follow the loss of critical substation facilities in urban areas; and ship protection systems, which reduce a naval ship’s magnetic signature. This segment also offers flexible alternating current transmission system, a system that consists of power electronics and other static components used for controlling power flow and voltage in the AC transmission system; and standalone fault current limiters, which act as surge protectors for the power grid. American Superconductor Corporation was founded in 1987 and is headquartered in Devens, Massachusetts.

FINANCIAL RATIOS  of  American Superconductor (AMSC)

Valuation Ratios
P/E Ratio -2.1
Price to Sales 0.5
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow -9.8
Price to Free Cash Flow -8.1
Growth Rates
Sales Growth Rate 35.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 13
Current Ratio 0
LT Debt to Equity 1.2%
Total Debt to Equity 4.8%
Interest Coverage -20
Management Effectiveness
Return On Assets -16.3%
Ret/ On Assets - 3 Yr. Avg. -25.5%
Return On Total Capital -26.1%
Ret/ On T. Cap. - 3 Yr. Avg. -38%
Return On Equity -28%
Return On Equity - 3 Yr. Avg. -42.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 22.9%
Gross Margin - 3 Yr. Avg. 13.4%
EBITDA Margin -12.5%
EBITDA Margin - 3 Yr. Avg. -39.1%
Operating Margin -20.8%
Oper. Margin - 3 Yr. Avg. -50%
Pre-Tax Margin -21.9%
Pre-Tax Margin - 3 Yr. Avg. -52.1%
Net Profit Margin -24%
Net Profit Margin - 3 Yr. Avg. -53.2%
Effective Tax Rate -9.5%
Eff/ Tax Rate - 3 Yr. Avg. -3.8%
Payout Ratio 0%

AMSC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMSC stock intrinsic value calculation we used $96 million for the last fiscal year's total revenue generated by American Superconductor. The default revenue input number comes from 2016 income statement of American Superconductor. 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 AMSC stock valuation model: a) initial revenue growth rate of 3.8% 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 4.3%, whose default value for AMSC is calculated based on our internal credit rating of American Superconductor, 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 Superconductor.
    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 AMSC stock the variable cost ratio is equal to 172.9%.

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 AMSC 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 16.7% for American Superconductor.

Corporate tax rate of 27% is the nominal tax rate for American Superconductor. 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 AMSC 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 AMSC are equal to 56.3%.

Life of production assets of 10 years is the average useful life of capital assets used in American Superconductor 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 AMSC is equal to 6.3%. 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 - $84 million for American Superconductor - 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 13.576 million for American Superconductor 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 Superconductor at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ American Superconductor posts 1Q loss   [Aug-08-17 11:10PM  Associated Press]
▶ American Superconductor posts 4Q loss   [May-25-17 08:50AM  Associated Press]
▶ AMSC Prices $16 Million Public Offering of Common Stock   [May-05-17 09:00AM  GlobeNewswire]
▶ AMSC Announces Proposed Public Offering of Common Stock   [May-04-17 04:01PM  GlobeNewswire]
▶ AMSC stock plummets after drop-off in orders leads to 'revenue shortfall'   [Apr-27-17 03:32PM  American City Business Journals]
▶ AMSC Announces Preliminary Financial Results   [Apr-26-17 04:15PM  GlobeNewswire]
▶ Moving Massachusetts Facility   [Apr-04-17 12:00PM  GlobeNewswire]
▶ American Superconductor posts 3Q loss   [Feb-06-17 08:45AM  Associated Press]
▶ Five Cheap Industrial Stocks that Captured Smart Moneys Attention   [Oct-09-16 04:39PM  at Insider Monkey]
▶ Beyond Brexit, Analysts See Huge Upside in 7 Stocks Under $10   [Jun-26-16 10:40AM  at 24/7 Wall St.]
Stock chart of AMSC Financial statements of AMSC
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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