Intrinsic value of ARC Group Worldwide - ARCW

Previous Close

$2.20

  Intrinsic Value

$0.40

stock screener

  Rating & Target

str. sell

-82%

Previous close

$2.20

 
Intrinsic value

$0.40

 
Up/down potential

-82%

 
Rating

str. sell

We calculate the intrinsic value of ARCW 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 2017), $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
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.32
  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
  99
  101
  103
  106
  109
  112
  116
  120
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  195
  204
  213
  223
  234
  245
  257
  269
  282
  295
  310
  325
Variable operating expenses, $m
 
  101
  103
  106
  109
  112
  116
  120
  124
  129
  133
  138
  144
  150
  156
  163
  170
  177
  185
  194
  203
  212
  222
  232
  243
  255
  267
  280
  294
  308
  323
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
  113
  101
  103
  106
  109
  112
  116
  120
  124
  129
  133
  138
  144
  150
  156
  163
  170
  177
  185
  194
  203
  212
  222
  232
  243
  255
  267
  280
  294
  308
  323
Operating income, $m
  -13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
EBITDA, $m
  -3
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Interest expense (income), $m
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
Earnings before tax, $m
  -17
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Tax expense, $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
Net income, $m
  -10
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  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
Total assets, $m
  100
  101
  103
  106
  109
  112
  116
  120
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  195
  204
  213
  223
  234
  245
  257
  269
  282
  295
  310
  325
Adjusted assets (=assets-cash), $m
  99
  101
  103
  106
  109
  112
  116
  120
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  195
  204
  213
  223
  234
  245
  257
  269
  282
  295
  310
  325
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
  22
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
Working capital, $m
  12
  14
  15
  15
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
Total debt, $m
  48
  48
  50
  51
  53
  56
  58
  60
  63
  66
  69
  73
  76
  80
  84
  89
  93
  98
  103
  109
  115
  121
  127
  134
  141
  149
  157
  165
  174
  183
  193
Total liabilities, $m
  65
  65
  67
  68
  70
  73
  75
  77
  80
  83
  86
  90
  93
  97
  101
  106
  110
  115
  120
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  200
  210
Total equity, $m
  35
  36
  37
  38
  39
  40
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
Total liabilities and equity, $m
  100
  101
  104
  106
  109
  113
  116
  119
  124
  129
  133
  139
  144
  150
  157
  164
  170
  178
  186
  195
  204
  214
  223
  234
  245
  257
  269
  282
  296
  310
  325
Debt-to-equity ratio
  1.371
  1.350
  1.360
  1.370
  1.380
  1.400
  1.410
  1.420
  1.440
  1.450
  1.470
  1.480
  1.490
  1.510
  1.520
  1.530
  1.540
  1.560
  1.570
  1.580
  1.590
  1.600
  1.610
  1.620
  1.630
  1.640
  1.650
  1.650
  1.660
  1.670
  1.680
Adjusted equity ratio
  0.343
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -10
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Depreciation, amort., depletion, $m
  10
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Funds from operations, $m
  7
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
Change in working capital, $m
  4
  0
  0
  0
  0
  0
  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
Cash from operations, $m
  3
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
New CAPEX, $m
  -7
  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
  -3
Cash from investing activities, $m
  4
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -14
  -14
  -15
  -15
  -16
  -16
Free cash flow, $m
  7
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
Issuance/(repayment) of debt, $m
  -9
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
Issuance/(repurchase) of shares, $m
  0
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
Cash from financing (excl. dividends), $m  
  -10
  4
  6
  6
  6
  6
  6
  8
  8
  8
  8
  8
  9
  10
  10
  10
  12
  12
  12
  13
  14
  15
  15
  17
  17
  19
  19
  20
  22
  22
  24
Total cash flow (excl. dividends), $m
  -3
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
Retained Cash Flow (-), $m
  8
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
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
 
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Discount rate, %
 
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
  43.22
PV of cash for distribution, $m
 
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  92.0
  84.6
  77.6
  71.0
  64.9
  59.1
  53.8
  48.9
  44.4
  40.3
  36.8
  33.6
  30.7
  28.0
  25.4
  23.1
  21.0
  19.0
  17.3
  15.6
  14.1
  12.8
  11.5
  10.4
  9.4
  8.5
  7.6
  6.9
  6.2
  5.6

ARC Group Worldwide, Inc. is a manufacturing company. The Company has two segments: Precision Components Group, 3DMT Group. It provides a set of manufacturing solutions, from design and prototyping through production. Through the Company's product offering, it provides its customers with a prototyping and production solution for both precision metal and plastic fabrication. The Precision Components Group companies provide fabricated metal components using processes, consisting of metal injection molding, precision metal stamping and hermetic sealing. The 3DMT Group focuses on rapid prototyping, short-run production and rapid tooling.

FINANCIAL RATIOS  of  ARC Group Worldwide (ARCW)

Valuation Ratios
P/E Ratio -4
Price to Sales 0.4
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 13.3
Price to Free Cash Flow -10
Growth Rates
Sales Growth Rate 5.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 133.3%
Cap. Spend. - 3 Yr. Gr. Rate 11.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 128.6%
Total Debt to Equity 137.1%
Interest Coverage -5
Management Effectiveness
Return On Assets -6.8%
Ret/ On Assets - 3 Yr. Avg. -2%
Return On Total Capital -11%
Ret/ On T. Cap. - 3 Yr. Avg. -4.3%
Return On Equity -25.6%
Return On Equity - 3 Yr. Avg. -10%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 10.1%
Gross Margin - 3 Yr. Avg. 16.8%
EBITDA Margin -4%
EBITDA Margin - 3 Yr. Avg. 6.6%
Operating Margin -14.1%
Oper. Margin - 3 Yr. Avg. -2.6%
Pre-Tax Margin -17.2%
Pre-Tax Margin - 3 Yr. Avg. -6.6%
Net Profit Margin -10.1%
Net Profit Margin - 3 Yr. Avg. -4.1%
Effective Tax Rate 17.6%
Eff/ Tax Rate - 3 Yr. Avg. 47.5%
Payout Ratio 0%

ARCW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARCW stock intrinsic value calculation we used $99 million for the last fiscal year's total revenue generated by ARC Group Worldwide. The default revenue input number comes from 2017 income statement of ARC Group Worldwide. 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 ARCW 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 10.5%, whose default value for ARCW is calculated based on our internal credit rating of ARC Group Worldwide, 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 ARC Group Worldwide.
    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 ARCW stock the variable cost ratio is equal to 100%.

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 ARCW 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 5.8% for ARC Group Worldwide.

Corporate tax rate of 27% is the nominal tax rate for ARC Group Worldwide. 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 ARCW 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 ARCW are equal to 21.7%.

Life of production assets of 3 years is the average useful life of capital assets used in ARC Group Worldwide 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 ARCW is equal to 14.1%. 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 - $35 million for ARC Group Worldwide - 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 18.209 million for ARC Group Worldwide 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 ARC Group Worldwide at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ ARC Group Worldwide Announces new Chief Financial Officer   [Nov-30-17 04:00PM  GlobeNewswire]
▶ ARC Group reports 1Q loss   [Nov-13-17 04:55PM  Associated Press]
▶ Is It Time To Buy ARC Group Worldwide Inc (ARCW)?   [Oct-11-17 12:14PM  Simply Wall St.]
▶ ARC Group reports 4Q loss   [Sep-26-17 09:54PM  Associated Press]
▶ ARC Group Worldwide Announces Sale of Non-Core Division   [Sep-18-17 04:15PM  GlobeNewswire]
▶ Is It Time To Buy ARC Group Worldwide Inc (ARCW)?   [Sep-14-17 08:25PM  Simply Wall St.]
▶ ARC Group reports 3Q loss   [May-15-17 04:20PM  Associated Press]
▶ ARC Group reports 2Q loss   [Feb-09-17 04:09PM  Associated Press]
▶ ARC Group Worldwide Announces New Senior Credit Facility   [Sep-29-16 05:07PM  Marketwired]
▶ What Hedge Funds Think of Firearms Stocks   [Jun-08-16 09:52AM  at Insider Monkey]
▶ Gun stocks rocked by concerns over a drop in demand   [Jun-06-16 01:41PM  at MarketWatch]
Financial statements of ARCW
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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