Intrinsic value of American Woodmark - AMWD

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$87.60

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$87.60

 
Intrinsic value

$261.33

 
Up/down potential

+198%

 
Rating

str. buy

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

We calculate the intrinsic value of AMWD 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 1.4

 

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, %
  14.79
  13.70
  12.83
  12.05
  11.34
  10.71
  10.14
  9.62
  9.16
  8.75
  8.37
  8.03
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.46
  5.41
Revenue, $m
  947
  1,077
  1,215
  1,361
  1,516
  1,678
  1,848
  2,026
  2,211
  2,405
  2,606
  2,816
  3,033
  3,259
  3,494
  3,739
  3,993
  4,257
  4,531
  4,817
  5,114
  5,424
  5,747
  6,084
  6,435
  6,801
  7,184
  7,583
  8,001
  8,437
  8,894
Variable operating expenses, $m
 
  732
  826
  926
  1,031
  1,141
  1,257
  1,378
  1,504
  1,635
  1,772
  1,915
  2,063
  2,216
  2,376
  2,542
  2,715
  2,894
  3,081
  3,275
  3,478
  3,688
  3,908
  4,137
  4,376
  4,625
  4,885
  5,157
  5,440
  5,737
  6,048
Fixed operating expenses, $m
 
  220
  226
  232
  237
  243
  249
  256
  262
  269
  275
  282
  289
  296
  304
  311
  319
  327
  335
  344
  352
  361
  370
  379
  389
  399
  409
  419
  429
  440
  451
Total operating expenses, $m
  854
  952
  1,052
  1,158
  1,268
  1,384
  1,506
  1,634
  1,766
  1,904
  2,047
  2,197
  2,352
  2,512
  2,680
  2,853
  3,034
  3,221
  3,416
  3,619
  3,830
  4,049
  4,278
  4,516
  4,765
  5,024
  5,294
  5,576
  5,869
  6,177
  6,499
Operating income, $m
  93
  124
  163
  204
  248
  294
  342
  393
  446
  501
  559
  619
  681
  747
  814
  885
  958
  1,035
  1,115
  1,198
  1,284
  1,375
  1,469
  1,567
  1,670
  1,778
  1,890
  2,008
  2,131
  2,260
  2,395
EBITDA, $m
  109
  124
  163
  204
  248
  294
  342
  393
  446
  501
  559
  619
  681
  747
  814
  885
  958
  1,035
  1,115
  1,198
  1,284
  1,375
  1,469
  1,567
  1,670
  1,778
  1,890
  2,008
  2,131
  2,260
  2,395
Interest expense (income), $m
  1
  1
  2
  3
  4
  6
  7
  8
  10
  11
  13
  15
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
Earnings before tax, $m
  92
  123
  161
  201
  243
  288
  335
  384
  436
  490
  546
  604
  665
  728
  794
  863
  934
  1,009
  1,086
  1,167
  1,251
  1,339
  1,431
  1,527
  1,627
  1,731
  1,841
  1,955
  2,075
  2,200
  2,332
Tax expense, $m
  33
  33
  43
  54
  66
  78
  90
  104
  118
  132
  147
  163
  180
  197
  214
  233
  252
  272
  293
  315
  338
  362
  386
  412
  439
  467
  497
  528
  560
  594
  630
Net income, $m
  59
  90
  117
  147
  178
  210
  245
  281
  318
  357
  398
  441
  485
  532
  580
  630
  682
  736
  793
  852
  913
  978
  1,044
  1,114
  1,187
  1,264
  1,344
  1,427
  1,515
  1,606
  1,702

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  200
  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
  466
  302
  341
  382
  426
  471
  519
  569
  621
  676
  732
  791
  852
  916
  982
  1,050
  1,122
  1,196
  1,273
  1,353
  1,437
  1,524
  1,614
  1,709
  1,807
  1,910
  2,018
  2,130
  2,247
  2,370
  2,498
Adjusted assets (=assets-cash), $m
  266
  302
  341
  382
  426
  471
  519
  569
  621
  676
  732
  791
  852
  916
  982
  1,050
  1,122
  1,196
  1,273
  1,353
  1,437
  1,524
  1,614
  1,709
  1,807
  1,910
  2,018
  2,130
  2,247
  2,370
  2,498
Revenue / Adjusted assets
  3.560
  3.566
  3.563
  3.563
  3.559
  3.563
  3.561
  3.561
  3.560
  3.558
  3.560
  3.560
  3.560
  3.558
  3.558
  3.561
  3.559
  3.559
  3.559
  3.560
  3.559
  3.559
  3.561
  3.560
  3.561
  3.561
  3.560
  3.560
  3.561
  3.560
  3.560
Average production assets, $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
  0
Working capital, $m
  210
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  37
  39
  42
  45
  49
  52
  55
  59
  63
  66
  71
  75
  79
  84
  88
  93
  99
  104
  110
  116
Total debt, $m
  24
  47
  74
  102
  132
  163
  196
  231
  266
  304
  343
  383
  425
  469
  514
  562
  611
  662
  715
  770
  827
  887
  950
  1,015
  1,083
  1,153
  1,227
  1,305
  1,385
  1,470
  1,558
Total liabilities, $m
  186
  208
  235
  263
  293
  324
  357
  392
  427
  465
  504
  544
  586
  630
  675
  723
  772
  823
  876
  931
  988
  1,048
  1,111
  1,176
  1,244
  1,314
  1,388
  1,466
  1,546
  1,631
  1,719
Total equity, $m
  281
  94
  106
  119
  133
  147
  162
  178
  194
  211
  228
  247
  266
  286
  306
  328
  350
  373
  397
  422
  448
  475
  504
  533
  564
  596
  630
  665
  701
  739
  779
Total liabilities and equity, $m
  467
  302
  341
  382
  426
  471
  519
  570
  621
  676
  732
  791
  852
  916
  981
  1,051
  1,122
  1,196
  1,273
  1,353
  1,436
  1,523
  1,615
  1,709
  1,808
  1,910
  2,018
  2,131
  2,247
  2,370
  2,498
Debt-to-equity ratio
  0.085
  0.500
  0.690
  0.860
  0.990
  1.110
  1.210
  1.300
  1.370
  1.440
  1.500
  1.550
  1.600
  1.640
  1.680
  1.710
  1.750
  1.770
  1.800
  1.820
  1.850
  1.870
  1.890
  1.900
  1.920
  1.940
  1.950
  1.960
  1.980
  1.990
  2.000
Adjusted equity ratio
  0.305
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  59
  90
  117
  147
  178
  210
  245
  281
  318
  357
  398
  441
  485
  532
  580
  630
  682
  736
  793
  852
  913
  978
  1,044
  1,114
  1,187
  1,264
  1,344
  1,427
  1,515
  1,606
  1,702
Depreciation, amort., depletion, $m
  16
  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
Funds from operations, $m
  63
  90
  117
  147
  178
  210
  245
  281
  318
  357
  398
  441
  485
  532
  580
  630
  682
  736
  793
  852
  913
  978
  1,044
  1,114
  1,187
  1,264
  1,344
  1,427
  1,515
  1,606
  1,702
Change in working capital, $m
  -9
  2
  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 operations, $m
  72
  88
  116
  145
  176
  208
  242
  278
  316
  355
  396
  438
  483
  529
  577
  627
  679
  733
  789
  848
  909
  973
  1,040
  1,110
  1,183
  1,259
  1,339
  1,422
  1,509
  1,601
  1,696
Maintenance CAPEX, $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
  0
New CAPEX, $m
  -29
  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 investing activities, $m
  -41
  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
Free cash flow, $m
  31
  88
  116
  145
  176
  208
  242
  278
  316
  355
  396
  438
  483
  529
  577
  627
  679
  733
  789
  848
  909
  973
  1,040
  1,110
  1,183
  1,259
  1,339
  1,422
  1,509
  1,601
  1,696
Issuance/(repayment) of debt, $m
  -3
  25
  27
  28
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
Issuance/(repurchase) of shares, $m
  -8
  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  
  -6
  25
  27
  28
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
Total cash flow (excl. dividends), $m
  25
  113
  142
  173
  205
  240
  275
  313
  352
  392
  435
  479
  525
  572
  622
  674
  728
  784
  842
  903
  967
  1,033
  1,103
  1,175
  1,251
  1,330
  1,413
  1,499
  1,590
  1,685
  1,784
Retained Cash Flow (-), $m
  -51
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
Prev. year cash balance distribution, $m
 
  198
  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
 
  300
  130
  160
  192
  225
  260
  297
  335
  375
  417
  460
  506
  553
  602
  653
  706
  761
  818
  878
  941
  1,006
  1,074
  1,146
  1,220
  1,298
  1,379
  1,464
  1,553
  1,647
  1,744
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
 
  288
  119
  139
  158
  175
  189
  201
  210
  216
  219
  219
  216
  210
  202
  192
  179
  166
  151
  135
  120
  104
  89
  75
  62
  50
  40
  31
  24
  18
  13
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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

American Woodmark Corporation manufactures and distributes kitchen cabinets and vanities for the remodeling and home construction markets in the United States. The company offers framed stock cabinets in approximately 500 various cabinet lines, which include 85 door designs in 21 colors. Its stock cabinets consist of interiors of various dimensions and construction options, as well as a maple, oak, cherry, or hickory front frame, door, and drawer front. The company also provides turnkey installation services to its direct builder customers through a network of seven service centers. It sells its products under the American Woodmark, Simply Woodmark, Timberlake, Shenandoah Cabinetry, Shenandoah Value Series, and Waypoint Living Spaces brand names. The company markets its products primarily through home centers, builders, and independent dealers and distributors. American Woodmark Corporation was founded in 1980 and is headquartered in Winchester, Virginia.

FINANCIAL RATIOS  of  American Woodmark (AMWD)

Valuation Ratios
P/E Ratio 24.1
Price to Sales 1.5
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 19.8
Price to Free Cash Flow 33.1
Growth Rates
Sales Growth Rate 14.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 45%
Cap. Spend. - 3 Yr. Gr. Rate 26.4%
Financial Strength
Quick Ratio 100
Current Ratio 0
LT Debt to Equity 7.8%
Total Debt to Equity 8.5%
Interest Coverage 93
Management Effectiveness
Return On Assets 13.8%
Ret/ On Assets - 3 Yr. Avg. 10.1%
Return On Total Capital 21.1%
Ret/ On T. Cap. - 3 Yr. Avg. 15.7%
Return On Equity 23.1%
Return On Equity - 3 Yr. Avg. 17.4%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 21.1%
Gross Margin - 3 Yr. Avg. 18.9%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 9%
Operating Margin 9.8%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 9.7%
Pre-Tax Margin - 3 Yr. Avg. 7%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 35.9%
Eff/ Tax Rate - 3 Yr. Avg. 36.8%
Payout Ratio 0%

AMWD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMWD stock intrinsic value calculation we used $947 million for the last fiscal year's total revenue generated by American Woodmark. The default revenue input number comes from 2016 income statement of American Woodmark. 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 AMWD stock valuation model: a) initial revenue growth rate of 13.7% 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 AMWD is calculated based on our internal credit rating of American Woodmark, 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 Woodmark.
    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 AMWD stock the variable cost ratio is equal to 68%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $215 million in the base year in the intrinsic value calculation for AMWD 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 4.3% for American Woodmark.

Corporate tax rate of 27% is the nominal tax rate for American Woodmark. 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 AMWD 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 AMWD are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in American Woodmark 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 AMWD is equal to 1.3%. 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 - $281 million for American Woodmark - 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 16.21 million for American Woodmark 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 Woodmark at the current share price and the inputted number of shares is $1.4 billion.


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Stock chart of AMWD Financial statements of AMWD Annual reports of AMWD
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