Intrinsic value of Astec Industries - ASTE

Previous Close

$53.77

  Intrinsic Value

$29.17

stock screener

  Rating & Target

sell

-46%

Previous close

$53.77

 
Intrinsic value

$29.17

 
Up/down potential

-46%

 
Rating

sell

We calculate the intrinsic value of ASTE 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 1.2

 

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, %
  16.68
  2.70
  2.93
  3.14
  3.32
  3.49
  3.64
  3.78
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
Revenue, $m
  1,147
  1,178
  1,212
  1,251
  1,292
  1,337
  1,386
  1,438
  1,494
  1,554
  1,618
  1,686
  1,758
  1,835
  1,916
  2,001
  2,092
  2,188
  2,289
  2,395
  2,507
  2,626
  2,751
  2,882
  3,020
  3,166
  3,319
  3,480
  3,649
  3,827
  4,014
Variable operating expenses, $m
 
  912
  938
  968
  1,000
  1,034
  1,072
  1,112
  1,155
  1,202
  1,251
  1,299
  1,355
  1,413
  1,476
  1,542
  1,612
  1,685
  1,763
  1,845
  1,932
  2,023
  2,119
  2,220
  2,327
  2,439
  2,557
  2,681
  2,811
  2,948
  3,093
Fixed operating expenses, $m
 
  180
  185
  190
  194
  199
  204
  209
  214
  220
  225
  231
  237
  243
  249
  255
  261
  268
  274
  281
  288
  296
  303
  311
  318
  326
  334
  343
  351
  360
  369
Total operating expenses, $m
  1,060
  1,092
  1,123
  1,158
  1,194
  1,233
  1,276
  1,321
  1,369
  1,422
  1,476
  1,530
  1,592
  1,656
  1,725
  1,797
  1,873
  1,953
  2,037
  2,126
  2,220
  2,319
  2,422
  2,531
  2,645
  2,765
  2,891
  3,024
  3,162
  3,308
  3,462
Operating income, $m
  87
  86
  89
  93
  98
  104
  110
  117
  125
  133
  142
  156
  167
  179
  191
  205
  219
  234
  251
  269
  287
  307
  328
  351
  375
  400
  427
  456
  486
  518
  552
EBITDA, $m
  112
  112
  116
  121
  126
  132
  140
  147
  156
  166
  176
  187
  199
  212
  226
  241
  257
  275
  293
  313
  333
  356
  379
  404
  431
  459
  488
  520
  553
  589
  626
Interest expense (income), $m
  1
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  20
  21
  23
  25
  27
  29
  32
  34
  37
  39
  42
Earnings before tax, $m
  87
  86
  89
  92
  96
  101
  107
  113
  120
  127
  135
  149
  158
  169
  180
  192
  205
  219
  234
  250
  268
  286
  305
  326
  348
  371
  396
  422
  450
  479
  510
Tax expense, $m
  32
  23
  24
  25
  26
  27
  29
  30
  32
  34
  37
  40
  43
  46
  49
  52
  55
  59
  63
  68
  72
  77
  82
  88
  94
  100
  107
  114
  121
  129
  138
Net income, $m
  55
  63
  65
  67
  70
  74
  78
  82
  87
  93
  99
  108
  116
  123
  131
  140
  150
  160
  171
  183
  195
  209
  223
  238
  254
  271
  289
  308
  328
  350
  373

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  83
  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
  844
  782
  805
  830
  857
  887
  920
  954
  992
  1,031
  1,074
  1,119
  1,167
  1,217
  1,271
  1,328
  1,388
  1,452
  1,519
  1,589
  1,664
  1,742
  1,825
  1,912
  2,004
  2,101
  2,202
  2,309
  2,421
  2,539
  2,664
Adjusted assets (=assets-cash), $m
  761
  782
  805
  830
  857
  887
  920
  954
  992
  1,031
  1,074
  1,119
  1,167
  1,217
  1,271
  1,328
  1,388
  1,452
  1,519
  1,589
  1,664
  1,742
  1,825
  1,912
  2,004
  2,101
  2,202
  2,309
  2,421
  2,539
  2,664
Revenue / Adjusted assets
  1.507
  1.506
  1.506
  1.507
  1.508
  1.507
  1.507
  1.507
  1.506
  1.507
  1.507
  1.507
  1.506
  1.508
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
Average production assets, $m
  197
  201
  207
  214
  221
  229
  237
  246
  256
  266
  277
  288
  301
  314
  328
  342
  358
  374
  391
  410
  429
  449
  470
  493
  516
  541
  567
  595
  624
  654
  686
Working capital, $m
  408
  342
  352
  363
  375
  388
  402
  417
  433
  451
  469
  489
  510
  532
  556
  580
  607
  634
  664
  695
  727
  761
  798
  836
  876
  918
  962
  1,009
  1,058
  1,110
  1,164
Total debt, $m
  11
  8
  14
  20
  27
  34
  42
  51
  60
  70
  80
  91
  103
  116
  129
  143
  158
  174
  190
  208
  226
  245
  266
  287
  310
  334
  359
  385
  413
  442
  473
Total liabilities, $m
  196
  193
  199
  205
  212
  219
  227
  236
  245
  255
  265
  276
  288
  301
  314
  328
  343
  359
  375
  393
  411
  430
  451
  472
  495
  519
  544
  570
  598
  627
  658
Total equity, $m
  648
  589
  606
  625
  646
  668
  692
  719
  747
  777
  809
  842
  879
  917
  957
  1,000
  1,045
  1,093
  1,144
  1,197
  1,253
  1,312
  1,374
  1,440
  1,509
  1,582
  1,658
  1,739
  1,823
  1,912
  2,006
Total liabilities and equity, $m
  844
  782
  805
  830
  858
  887
  919
  955
  992
  1,032
  1,074
  1,118
  1,167
  1,218
  1,271
  1,328
  1,388
  1,452
  1,519
  1,590
  1,664
  1,742
  1,825
  1,912
  2,004
  2,101
  2,202
  2,309
  2,421
  2,539
  2,664
Debt-to-equity ratio
  0.017
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
Adjusted equity ratio
  0.749
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  63
  65
  67
  70
  74
  78
  82
  87
  93
  99
  108
  116
  123
  131
  140
  150
  160
  171
  183
  195
  209
  223
  238
  254
  271
  289
  308
  328
  350
  373
Depreciation, amort., depletion, $m
  25
  26
  26
  27
  28
  29
  30
  31
  32
  33
  34
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
  74
Funds from operations, $m
  172
  88
  91
  94
  98
  103
  107
  113
  119
  126
  133
  139
  148
  157
  167
  177
  188
  200
  213
  227
  241
  257
  273
  291
  309
  329
  350
  372
  395
  420
  446
Change in working capital, $m
  37
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
Cash from operations, $m
  135
  79
  81
  83
  86
  89
  93
  98
  103
  108
  114
  120
  127
  135
  143
  152
  162
  173
  184
  196
  209
  223
  237
  253
  269
  287
  305
  325
  346
  369
  392
Maintenance CAPEX, $m
  0
  -21
  -22
  -22
  -23
  -24
  -25
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
New CAPEX, $m
  -27
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
Cash from investing activities, $m
  -66
  -26
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -40
  -42
  -43
  -45
  -48
  -50
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -81
  -84
  -89
  -93
  -97
  -102
Free cash flow, $m
  69
  53
  53
  55
  56
  58
  60
  63
  67
  70
  75
  78
  84
  89
  96
  102
  110
  118
  126
  136
  146
  156
  168
  180
  193
  206
  221
  237
  253
  271
  290
Issuance/(repayment) of debt, $m
  0
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
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  
  -2
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
Total cash flow (excl. dividends), $m
  66
  58
  59
  61
  63
  65
  68
  72
  76
  80
  85
  89
  95
  102
  109
  116
  125
  134
  143
  153
  164
  176
  188
  201
  215
  230
  246
  263
  281
  300
  320
Retained Cash Flow (-), $m
  -40
  -16
  -17
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -76
  -80
  -85
  -89
  -94
Prev. year cash balance distribution, $m
 
  75
  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
 
  118
  42
  42
  42
  43
  44
  46
  48
  50
  53
  56
  59
  64
  68
  74
  79
  86
  93
  100
  108
  116
  126
  136
  146
  158
  170
  183
  196
  211
  227
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
 
  113
  38
  36
  35
  33
  32
  31
  30
  29
  28
  26
  25
  24
  23
  22
  20
  19
  17
  15
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
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

Astec Industries, Inc. designs, engineers, manufactures and markets equipment and components used primarily in road building and related construction activities. Its segments include Infrastructure Group, Aggregate and Mining Group and Energy Group. The Infrastructure Group segment is made up of five business units, including Astec, Inc., Roadtec, Inc., Carlson Paving Products, Inc., Astec Mobile Machinery GmbH and Astec Australia Pty Ltd. Its Aggregate and Mining Group consists of eight business units that are focused on designing and manufacturing heavy processing equipment, as well as servicing and supplying parts for the aggregate, metallic mining, recycling, ports and bulk handling markets. Its Energy Group includes five business units focused on supplying heavy equipment, such as heaters, drilling rigs, concrete plants, wood chippers and grinders, pump trailers, storage equipment and related parts to the oil and gas, construction and water well industries.

FINANCIAL RATIOS  of  Astec Industries (ASTE)

Valuation Ratios
P/E Ratio 22.5
Price to Sales 1.1
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 11.5
Growth Rates
Sales Growth Rate 16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.6%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 10
Current Ratio 0
LT Debt to Equity 0.5%
Total Debt to Equity 1.7%
Interest Coverage 88
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 8.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 23.1%
Gross Margin - 3 Yr. Avg. 22.5%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin 7.6%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.4%
Payout Ratio 16.4%

ASTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASTE stock intrinsic value calculation we used $1147 million for the last fiscal year's total revenue generated by Astec Industries. The default revenue input number comes from 2016 income statement of Astec Industries. 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 ASTE stock valuation model: a) initial revenue growth rate of 2.7% 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 ASTE is calculated based on our internal credit rating of Astec Industries, 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 Astec Industries.
    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 ASTE stock the variable cost ratio is equal to 77.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $176 million in the base year in the intrinsic value calculation for ASTE 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 9.5% for Astec Industries.

Corporate tax rate of 27% is the nominal tax rate for Astec Industries. 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 ASTE 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 ASTE are equal to 17.1%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Astec Industries 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 ASTE is equal to 29%. 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 - $648 million for Astec Industries - 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 23.149 million for Astec Industries 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 Astec Industries at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Astec Industries reports 3Q loss   [08:17AM  Associated Press]
▶ New Strong Sell Stocks for October 5th   [Oct-05-17 08:18AM  Zacks]
▶ Astec Industries misses Street 2Q forecasts   [Jul-25-17 04:55PM  Associated Press]
▶ Astec Industries misses Street 2Q forecasts   [07:18AM  Associated Press]
▶ Snap Returns To The Top Of Short-Seller Favorites   [Jun-06-17 04:05PM  Benzinga]
▶ Astec Industries misses 1Q profit forecasts   [Apr-25-17 08:16AM  Associated Press]
Financial statements of ASTE
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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