Intrinsic value of American Vanguard - AVD

Previous Close

$19.70

  Intrinsic Value

$2.50

stock screener

  Rating & Target

str. sell

-87%

  Value-price divergence*

-30%

Previous close

$19.70

 
Intrinsic value

$2.50

 
Up/down potential

-87%

 
Rating

str. sell

 
Value-price divergence*

-30%

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

We calculate the intrinsic value of AVD 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 0.6

 

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, %
  7.96
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  312
  321
  331
  342
  354
  367
  380
  395
  411
  428
  446
  465
  485
  506
  529
  553
  578
  605
  633
  662
  694
  727
  761
  798
  836
  877
  919
  964
  1,011
  1,060
  1,112
Variable operating expenses, $m
 
  196
  202
  208
  215
  223
  232
  241
  250
  261
  271
  283
  295
  308
  322
  337
  352
  368
  385
  403
  422
  443
  464
  486
  509
  534
  560
  587
  616
  646
  677
Fixed operating expenses, $m
 
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
  181
  185
  190
  195
  200
  205
  210
  215
  220
Total operating expenses, $m
  292
  304
  312
  321
  331
  342
  354
  366
  378
  392
  405
  421
  436
  453
  470
  489
  508
  528
  549
  571
  594
  619
  645
  671
  699
  729
  760
  792
  826
  861
  897
Operating income, $m
  21
  18
  19
  21
  22
  25
  27
  30
  33
  36
  40
  44
  48
  53
  58
  64
  70
  77
  84
  91
  99
  108
  117
  127
  137
  148
  160
  172
  186
  200
  215
EBITDA, $m
  37
  34
  36
  38
  41
  43
  46
  50
  54
  58
  63
  68
  73
  79
  86
  92
  100
  108
  116
  125
  135
  145
  156
  168
  180
  193
  207
  222
  237
  254
  272
Interest expense (income), $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
Earnings before tax, $m
  19
  16
  17
  19
  20
  22
  24
  27
  30
  33
  36
  40
  44
  49
  54
  59
  64
  70
  77
  84
  92
  100
  108
  117
  127
  137
  148
  160
  173
  186
  200
Tax expense, $m
  6
  4
  5
  5
  6
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  47
  50
  54
Net income, $m
  13
  12
  13
  14
  15
  16
  18
  20
  22
  24
  27
  29
  32
  36
  39
  43
  47
  51
  56
  61
  67
  73
  79
  86
  93
  100
  108
  117
  126
  136
  146

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  430
  434
  448
  463
  479
  496
  515
  535
  556
  579
  603
  629
  656
  685
  716
  748
  782
  818
  856
  896
  939
  983
  1,030
  1,080
  1,132
  1,186
  1,244
  1,304
  1,368
  1,435
  1,505
Adjusted assets (=assets-cash), $m
  422
  434
  448
  463
  479
  496
  515
  535
  556
  579
  603
  629
  656
  685
  716
  748
  782
  818
  856
  896
  939
  983
  1,030
  1,080
  1,132
  1,186
  1,244
  1,304
  1,368
  1,435
  1,505
Revenue / Adjusted assets
  0.739
  0.740
  0.739
  0.739
  0.739
  0.740
  0.738
  0.738
  0.739
  0.739
  0.740
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.740
  0.739
  0.739
  0.739
  0.740
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
Average production assets, $m
  175
  179
  185
  191
  198
  205
  213
  221
  230
  239
  249
  260
  271
  283
  296
  309
  323
  338
  354
  370
  388
  406
  426
  446
  467
  490
  514
  539
  565
  593
  622
Working capital, $m
  130
  126
  129
  134
  138
  143
  149
  155
  161
  167
  174
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  284
  298
  312
  327
  343
  359
  377
  395
  415
  435
Total debt, $m
  41
  45
  50
  55
  61
  67
  74
  81
  88
  96
  105
  114
  123
  133
  144
  156
  168
  180
  194
  208
  222
  238
  255
  272
  290
  309
  330
  351
  373
  397
  421
Total liabilities, $m
  148
  152
  157
  162
  168
  174
  181
  188
  195
  203
  212
  221
  230
  240
  251
  263
  275
  287
  301
  315
  329
  345
  362
  379
  397
  416
  437
  458
  480
  504
  528
Total equity, $m
  282
  282
  291
  300
  311
  322
  334
  347
  361
  376
  391
  408
  426
  445
  464
  485
  508
  531
  556
  582
  609
  638
  669
  701
  734
  770
  807
  846
  888
  931
  977
Total liabilities and equity, $m
  430
  434
  448
  462
  479
  496
  515
  535
  556
  579
  603
  629
  656
  685
  715
  748
  783
  818
  857
  897
  938
  983
  1,031
  1,080
  1,131
  1,186
  1,244
  1,304
  1,368
  1,435
  1,505
Debt-to-equity ratio
  0.145
  0.160
  0.170
  0.180
  0.200
  0.210
  0.220
  0.230
  0.240
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.430
  0.430
Adjusted equity ratio
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  12
  13
  14
  15
  16
  18
  20
  22
  24
  27
  29
  32
  36
  39
  43
  47
  51
  56
  61
  67
  73
  79
  86
  93
  100
  108
  117
  126
  136
  146
Depreciation, amort., depletion, $m
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
Funds from operations, $m
  55
  28
  30
  31
  33
  35
  37
  40
  43
  46
  49
  53
  57
  61
  66
  71
  77
  82
  89
  95
  102
  110
  118
  126
  136
  145
  155
  166
  178
  190
  203
Change in working capital, $m
  9
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
Cash from operations, $m
  46
  25
  26
  27
  28
  30
  32
  34
  37
  39
  42
  46
  49
  53
  57
  62
  67
  72
  78
  84
  90
  97
  104
  112
  121
  129
  139
  149
  159
  171
  183
Maintenance CAPEX, $m
  0
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
New CAPEX, $m
  -11
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
Cash from investing activities, $m
  -14
  -21
  -22
  -23
  -25
  -25
  -27
  -28
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -66
  -69
  -72
  -75
  -80
  -83
Free cash flow, $m
  32
  4
  4
  4
  4
  5
  5
  6
  8
  9
  10
  12
  14
  16
  19
  21
  24
  27
  31
  35
  39
  43
  48
  53
  58
  64
  70
  77
  84
  91
  99
Issuance/(repayment) of debt, $m
  -28
  4
  5
  5
  6
  6
  7
  7
  7
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
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  
  -28
  4
  5
  5
  6
  6
  7
  7
  7
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
Total cash flow (excl. dividends), $m
  3
  8
  8
  9
  10
  11
  12
  13
  15
  17
  19
  21
  24
  26
  29
  33
  36
  40
  44
  49
  54
  59
  64
  70
  76
  83
  90
  98
  106
  115
  124
Retained Cash Flow (-), $m
  -14
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -46
Prev. year cash balance distribution, $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
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
 
  8
  0
  -1
  -1
  0
  0
  0
  1
  2
  3
  4
  6
  8
  10
  12
  14
  17
  20
  23
  26
  30
  34
  38
  43
  48
  53
  59
  65
  71
  78
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
 
  8
  0
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  3
  3
  3
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
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 Vanguard Corporation, through its subsidiaries, develops, manufactures, and markets specialty chemicals for agricultural, commercial, and consumer uses in the United States and internationally. The company manufactures and formulates chemicals, including insecticides, fungicides, herbicides, molluscicides, growth regulators, and soil fumigants in liquid, powder, and granular forms for crops, turf and ornamental plants, and human and animal health protection. American Vanguard Corporation distributes its products through national distribution companies and buying groups or co-operatives in the United States; and through sales offices and sales force executives internationally. The company was founded in 1969 and is headquartered in Newport Beach, California.

FINANCIAL RATIOS  of  American Vanguard (AVD)

Valuation Ratios
P/E Ratio 44.5
Price to Sales 1.9
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 12.6
Price to Free Cash Flow 16.5
Growth Rates
Sales Growth Rate 8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -75%
Cap. Spend. - 3 Yr. Gr. Rate -6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 14.5%
Total Debt to Equity 14.5%
Interest Coverage 11
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. 3.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 41%
Gross Margin - 3 Yr. Avg. 39.4%
EBITDA Margin 11.9%
EBITDA Margin - 3 Yr. Avg. 9.6%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin 6.1%
Pre-Tax Margin - 3 Yr. Avg. 3.5%
Net Profit Margin 4.2%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 17.9%
Payout Ratio 7.7%

AVD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVD stock intrinsic value calculation we used $312 million for the last fiscal year's total revenue generated by American Vanguard. The default revenue input number comes from 2016 income statement of American Vanguard. 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 AVD stock valuation model: a) initial revenue growth rate of 2.9% 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 AVD is calculated based on our internal credit rating of American Vanguard, 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 Vanguard.
    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 AVD stock the variable cost ratio is equal to 60.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $105 million in the base year in the intrinsic value calculation for AVD 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 3.7% for American Vanguard.

Corporate tax rate of 27% is the nominal tax rate for American Vanguard. 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 AVD 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 AVD are equal to 55.9%.

Life of production assets of 10.9 years is the average useful life of capital assets used in American Vanguard 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 AVD is equal to 39.1%. 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 - $282 million for American Vanguard - 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 28.196 million for American Vanguard 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 Vanguard at the current share price and the inputted number of shares is $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
FMC FMC 82.63 2.73  str.sell
SYT Syngenta ADR 91.88 33.64  str.sell
HWKN Hawkins 37.35 30.61  sell
ACET Aceto 15.93 46.73  str.buy
MON Monsanto 116.87 151.09  buy

COMPANY NEWS

▶ American Vanguard beats 2Q profit forecasts   [Jul-31-17 09:33PM  Associated Press]
▶ Who are Monsanto's main competitors?   [Jun-27-17 10:39AM  Investopedia]
▶ American Vanguard Declares Quarterly Dividend   [Jun-08-17 09:00AM  Business Wire]
▶ American Vanguard meets 1Q profit forecasts   [May-04-17 06:08PM  Associated Press]
▶ US, EU clear Chinese takeover of Syngenta   [06:00AM  Associated Press]
▶ American Vanguard Announces New Head of Regulatory Affairs   [Mar-21-17 04:05PM  Business Wire]
▶ American Vanguard meets 4Q profit forecasts   [Mar-06-17 04:33PM  Associated Press]
▶ Deere: A Bummer of an Upgrade   [Nov-28-16 11:55AM  at Barrons.com]
▶ [$$] American Vanguard Plants a Comeback   [Nov-12-16 12:01AM  at Barrons.com]
▶ American Vanguard Declares Quarterly Dividend   [Oct-11-16 04:05PM  Business Wire]
▶ Zika, Miami And Innovative Alternatives To Pesticides   [Aug-11-16 06:30AM  at Forbes]
▶ American Vanguard Declares Quarterly Dividend   [Jun-13-16 09:00AM  Business Wire]
Stock chart of AVD Financial statements of AVD
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.