Intrinsic value of AdvanSix - ASIX

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$25.16

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$25.16

 
Intrinsic value

$12.52

 
Up/down potential

-50%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of ASIX 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 0.8

 

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, %
  -10.31
  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
  1,192
  1,216
  1,244
  1,276
  1,312
  1,351
  1,395
  1,443
  1,494
  1,549
  1,609
  1,672
  1,740
  1,813
  1,889
  1,971
  2,057
  2,149
  2,245
  2,348
  2,455
  2,569
  2,689
  2,816
  2,949
  3,090
  3,237
  3,393
  3,557
  3,729
  3,910
Variable operating expenses, $m
 
  834
  853
  875
  900
  927
  957
  989
  1,024
  1,062
  1,103
  1,145
  1,192
  1,241
  1,294
  1,350
  1,409
  1,471
  1,538
  1,607
  1,681
  1,759
  1,841
  1,928
  2,019
  2,116
  2,217
  2,323
  2,435
  2,553
  2,677
Fixed operating expenses, $m
 
  336
  345
  353
  362
  371
  380
  390
  400
  410
  420
  430
  441
  452
  463
  475
  487
  499
  512
  524
  537
  551
  565
  579
  593
  608
  623
  639
  655
  671
  688
Total operating expenses, $m
  1,138
  1,170
  1,198
  1,228
  1,262
  1,298
  1,337
  1,379
  1,424
  1,472
  1,523
  1,575
  1,633
  1,693
  1,757
  1,825
  1,896
  1,970
  2,050
  2,131
  2,218
  2,310
  2,406
  2,507
  2,612
  2,724
  2,840
  2,962
  3,090
  3,224
  3,365
Operating income, $m
  54
  46
  46
  47
  50
  53
  58
  63
  70
  77
  86
  97
  108
  119
  132
  146
  162
  178
  196
  216
  237
  259
  283
  309
  336
  366
  397
  431
  466
  504
  545
EBITDA, $m
  94
  87
  88
  91
  94
  99
  105
  112
  120
  129
  140
  151
  164
  178
  194
  211
  229
  248
  270
  292
  317
  343
  371
  401
  433
  467
  503
  541
  582
  626
  672
Interest expense (income), $m
  2
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
Earnings before tax, $m
  54
  36
  36
  37
  39
  42
  45
  50
  56
  62
  69
  79
  89
  99
  110
  123
  137
  152
  168
  185
  204
  224
  246
  269
  294
  321
  350
  380
  413
  447
  484
Tax expense, $m
  20
  10
  10
  10
  11
  11
  12
  14
  15
  17
  19
  21
  24
  27
  30
  33
  37
  41
  45
  50
  55
  61
  66
  73
  79
  87
  94
  103
  111
  121
  131
Net income, $m
  34
  27
  26
  27
  28
  30
  33
  37
  41
  45
  51
  58
  65
  72
  81
  90
  100
  111
  122
  135
  149
  164
  180
  197
  215
  234
  255
  277
  301
  326
  353

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  14
  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
  905
  909
  930
  953
  980
  1,010
  1,043
  1,078
  1,117
  1,158
  1,202
  1,250
  1,301
  1,355
  1,412
  1,473
  1,538
  1,606
  1,678
  1,755
  1,835
  1,920
  2,010
  2,105
  2,204
  2,309
  2,420
  2,536
  2,658
  2,787
  2,922
Adjusted assets (=assets-cash), $m
  891
  909
  930
  953
  980
  1,010
  1,043
  1,078
  1,117
  1,158
  1,202
  1,250
  1,301
  1,355
  1,412
  1,473
  1,538
  1,606
  1,678
  1,755
  1,835
  1,920
  2,010
  2,105
  2,204
  2,309
  2,420
  2,536
  2,658
  2,787
  2,922
Revenue / Adjusted assets
  1.338
  1.338
  1.338
  1.339
  1.339
  1.338
  1.337
  1.339
  1.338
  1.338
  1.339
  1.338
  1.337
  1.338
  1.338
  1.338
  1.337
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
  1.338
Average production assets, $m
  552
  563
  576
  591
  607
  626
  646
  668
  692
  717
  745
  774
  806
  839
  875
  913
  953
  995
  1,040
  1,087
  1,137
  1,190
  1,245
  1,304
  1,365
  1,430
  1,499
  1,571
  1,647
  1,726
  1,810
Working capital, $m
  9
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Total debt, $m
  265
  278
  295
  313
  334
  357
  382
  409
  439
  471
  506
  542
  582
  624
  668
  715
  765
  818
  874
  933
  995
  1,061
  1,131
  1,204
  1,281
  1,362
  1,448
  1,538
  1,632
  1,732
  1,837
Total liabilities, $m
  690
  703
  720
  738
  759
  782
  807
  834
  864
  896
  931
  967
  1,007
  1,049
  1,093
  1,140
  1,190
  1,243
  1,299
  1,358
  1,420
  1,486
  1,556
  1,629
  1,706
  1,787
  1,873
  1,963
  2,057
  2,157
  2,262
Total equity, $m
  215
  205
  210
  215
  222
  228
  236
  244
  252
  262
  272
  282
  294
  306
  319
  333
  347
  363
  379
  397
  415
  434
  454
  476
  498
  522
  547
  573
  601
  630
  660
Total liabilities and equity, $m
  905
  908
  930
  953
  981
  1,010
  1,043
  1,078
  1,116
  1,158
  1,203
  1,249
  1,301
  1,355
  1,412
  1,473
  1,537
  1,606
  1,678
  1,755
  1,835
  1,920
  2,010
  2,105
  2,204
  2,309
  2,420
  2,536
  2,658
  2,787
  2,922
Debt-to-equity ratio
  1.233
  1.360
  1.400
  1.450
  1.510
  1.560
  1.620
  1.680
  1.740
  1.800
  1.860
  1.920
  1.980
  2.040
  2.090
  2.150
  2.200
  2.250
  2.300
  2.350
  2.400
  2.450
  2.490
  2.530
  2.570
  2.610
  2.650
  2.680
  2.720
  2.750
  2.780
Adjusted equity ratio
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  34
  27
  26
  27
  28
  30
  33
  37
  41
  45
  51
  58
  65
  72
  81
  90
  100
  111
  122
  135
  149
  164
  180
  197
  215
  234
  255
  277
  301
  326
  353
Depreciation, amort., depletion, $m
  40
  41
  42
  43
  44
  46
  47
  49
  50
  52
  54
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
Funds from operations, $m
  139
  68
  69
  70
  73
  76
  80
  85
  91
  97
  105
  112
  121
  131
  142
  154
  167
  181
  196
  212
  229
  247
  267
  288
  311
  335
  361
  388
  417
  448
  481
Change in working capital, $m
  25
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  114
  92
  69
  70
  73
  76
  80
  85
  91
  97
  105
  113
  122
  132
  142
  154
  167
  181
  196
  212
  229
  248
  268
  289
  312
  336
  361
  389
  418
  449
  482
Maintenance CAPEX, $m
  0
  -39
  -40
  -41
  -42
  -43
  -44
  -45
  -47
  -49
  -51
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
New CAPEX, $m
  -84
  -11
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -29
  -31
  -33
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
  -80
  -84
Cash from investing activities, $m
  -86
  -50
  -53
  -56
  -59
  -61
  -64
  -67
  -71
  -75
  -79
  -81
  -86
  -90
  -95
  -100
  -104
  -109
  -115
  -120
  -127
  -133
  -140
  -147
  -154
  -161
  -169
  -178
  -187
  -196
  -206
Free cash flow, $m
  28
  42
  16
  15
  15
  15
  16
  18
  20
  23
  27
  31
  36
  41
  48
  55
  63
  72
  81
  92
  103
  115
  128
  143
  158
  175
  192
  211
  231
  253
  276
Issuance/(repayment) of debt, $m
  208
  13
  16
  18
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  86
  90
  95
  100
  105
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -13
  13
  16
  18
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  86
  90
  95
  100
  105
Total cash flow (excl. dividends), $m
  14
  55
  32
  33
  35
  38
  41
  45
  50
  55
  61
  67
  75
  83
  92
  102
  113
  125
  137
  151
  165
  181
  198
  216
  235
  256
  278
  301
  326
  353
  381
Retained Cash Flow (-), $m
  264
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
Prev. year cash balance distribution, $m
 
  14
  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
 
  65
  28
  28
  29
  31
  34
  37
  41
  46
  51
  57
  63
  71
  79
  88
  98
  109
  121
  133
  147
  162
  178
  194
  213
  232
  253
  275
  298
  324
  350
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  61
  24
  22
  22
  21
  20
  20
  19
  19
  18
  17
  16
  15
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
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

AdvanSix Inc. manufactures and sells Nylon 6 polymer resins in the United States. The company’s products are used to produce engineered plastics, fibers, filaments, and films. It also provides caprolactam, ammonium sulfate fertilizers, and acetone, as well as other intermediate chemicals, such as phenol, alpha-methylstyrene, cyclohexanone, methyl ethyl ketoxime, cyclohexanol, sulfuric acid, ammonia, and carbon dioxide. The company was incorporated in 2016 and is based in Morris Plains, New Jersey. AdvanSix Inc. (NYSE:ASIX) operates independently of Honeywell International Inc. as of October 1, 2016.

FINANCIAL RATIOS  of  AdvanSix (ASIX)

Valuation Ratios
P/E Ratio 22.6
Price to Sales 0.6
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 25.6
Growth Rates
Sales Growth Rate -10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.4%
Cap. Spend. - 3 Yr. Gr. Rate 2.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 123.3%
Total Debt to Equity 123.3%
Interest Coverage 28
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 10.7%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 20.6%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 21.5%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 9.1%
Gross Margin - 3 Yr. Avg. 10.2%
EBITDA Margin 8.1%
EBITDA Margin - 3 Yr. Avg. 9.2%
Operating Margin 4.5%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 4.1%
Effective Tax Rate 37%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 0%

ASIX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASIX stock intrinsic value calculation we used $1192 million for the last fiscal year's total revenue generated by AdvanSix. The default revenue input number comes from 2016 income statement of AdvanSix. 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 ASIX 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 7%, whose default value for ASIX is calculated based on our internal credit rating of AdvanSix, 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 AdvanSix.
    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 ASIX stock the variable cost ratio is equal to 68.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $328 million in the base year in the intrinsic value calculation for ASIX 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 AdvanSix.

Corporate tax rate of 27% is the nominal tax rate for AdvanSix. 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 ASIX 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 ASIX are equal to 46.3%.

Life of production assets of 14.2 years is the average useful life of capital assets used in AdvanSix 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 ASIX is equal to -0.4%. 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 - $215 million for AdvanSix - 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 30.372 million for AdvanSix 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 AdvanSix at the current share price and the inputted number of shares is $0.8 billion.


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COMPANY NEWS

▶ ETFs with exposure to Advansix, Inc. : April 21, 2017   [Apr-21-17 02:45PM  Capital Cube]
▶ ETFs with exposure to Advansix, Inc. : April 5, 2017   [Apr-05-17 04:20PM  Capital Cube]
▶ AdvanSix Joins American Chemistry Council as Full Member   [Feb-17-17 10:30AM  Business Wire]
▶ ETFs with exposure to Advansix, Inc. : January 20, 2017   [Jan-20-17 12:50PM  Capital Cube]
Stock chart of ASIX Financial statements of ASIX
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