Intrinsic value of American Vanguard - AVD

Previous Close

$18.95

  Intrinsic Value

$6.32

stock screener

  Rating & Target

str. sell

-67%

Previous close

$18.95

 
Intrinsic value

$6.32

 
Up/down potential

-67%

 
Rating

str. sell

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
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  312
  333
  355
  378
  402
  427
  453
  480
  508
  537
  568
  600
  633
  668
  705
  743
  783
  824
  868
  914
  962
  1,012
  1,064
  1,120
  1,177
  1,238
  1,301
  1,368
  1,438
  1,511
  1,588
Variable operating expenses, $m
 
  203
  216
  230
  245
  260
  276
  292
  309
  327
  346
  365
  386
  407
  429
  452
  477
  502
  529
  556
  586
  616
  648
  682
  717
  754
  793
  833
  876
  920
  967
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
  311
  326
  343
  361
  379
  398
  417
  437
  458
  480
  503
  527
  552
  577
  604
  633
  662
  693
  724
  758
  792
  829
  867
  907
  949
  993
  1,038
  1,086
  1,135
  1,187
Operating income, $m
  21
  23
  29
  35
  41
  48
  55
  63
  71
  79
  88
  97
  106
  116
  127
  138
  150
  163
  176
  189
  204
  219
  235
  252
  270
  289
  309
  330
  353
  376
  401
EBITDA, $m
  37
  40
  47
  54
  62
  70
  79
  87
  97
  106
  117
  128
  139
  151
  163
  176
  190
  205
  220
  236
  253
  271
  290
  310
  331
  353
  376
  400
  426
  453
  482
Interest expense (income), $m
  2
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
Earnings before tax, $m
  19
  21
  27
  33
  39
  45
  52
  59
  66
  74
  82
  91
  100
  109
  119
  130
  141
  153
  165
  178
  192
  206
  222
  238
  255
  273
  291
  311
  332
  355
  378
Tax expense, $m
  6
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  69
  74
  79
  84
  90
  96
  102
Net income, $m
  13
  15
  19
  24
  28
  33
  38
  43
  48
  54
  60
  66
  73
  80
  87
  95
  103
  111
  121
  130
  140
  151
  162
  174
  186
  199
  213
  227
  243
  259
  276

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
  451
  481
  512
  544
  578
  613
  649
  687
  727
  768
  812
  857
  904
  953
  1,005
  1,059
  1,115
  1,175
  1,236
  1,301
  1,369
  1,440
  1,515
  1,593
  1,675
  1,761
  1,851
  1,946
  2,045
  2,149
Adjusted assets (=assets-cash), $m
  422
  451
  481
  512
  544
  578
  613
  649
  687
  727
  768
  812
  857
  904
  953
  1,005
  1,059
  1,115
  1,175
  1,236
  1,301
  1,369
  1,440
  1,515
  1,593
  1,675
  1,761
  1,851
  1,946
  2,045
  2,149
Revenue / Adjusted assets
  0.739
  0.738
  0.738
  0.738
  0.739
  0.739
  0.739
  0.740
  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
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
Average production assets, $m
  175
  186
  199
  211
  225
  239
  253
  268
  284
  300
  317
  335
  354
  373
  394
  415
  437
  461
  485
  511
  538
  566
  595
  626
  658
  692
  727
  765
  804
  845
  888
Working capital, $m
  130
  130
  139
  148
  157
  167
  177
  188
  199
  210
  222
  235
  248
  261
  275
  290
  306
  322
  339
  357
  376
  396
  416
  438
  460
  484
  509
  535
  562
  591
  621
Total debt, $m
  41
  51
  62
  73
  84
  96
  108
  121
  134
  148
  163
  178
  194
  210
  228
  246
  265
  285
  305
  327
  350
  374
  399
  425
  452
  481
  511
  543
  576
  611
  647
Total liabilities, $m
  148
  158
  169
  180
  191
  203
  215
  228
  241
  255
  270
  285
  301
  317
  335
  353
  372
  392
  412
  434
  457
  481
  506
  532
  559
  588
  618
  650
  683
  718
  754
Total equity, $m
  282
  293
  312
  332
  353
  375
  398
  421
  446
  472
  499
  527
  556
  587
  619
  652
  687
  724
  762
  802
  845
  889
  935
  983
  1,034
  1,087
  1,143
  1,201
  1,263
  1,327
  1,394
Total liabilities and equity, $m
  430
  451
  481
  512
  544
  578
  613
  649
  687
  727
  769
  812
  857
  904
  954
  1,005
  1,059
  1,116
  1,174
  1,236
  1,302
  1,370
  1,441
  1,515
  1,593
  1,675
  1,761
  1,851
  1,946
  2,045
  2,148
Debt-to-equity ratio
  0.145
  0.180
  0.200
  0.220
  0.240
  0.260
  0.270
  0.290
  0.300
  0.310
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.410
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
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
  15
  19
  24
  28
  33
  38
  43
  48
  54
  60
  66
  73
  80
  87
  95
  103
  111
  121
  130
  140
  151
  162
  174
  186
  199
  213
  227
  243
  259
  276
Depreciation, amort., depletion, $m
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
  57
  60
  63
  67
  70
  74
  77
  81
Funds from operations, $m
  55
  33
  38
  43
  49
  55
  61
  68
  74
  82
  89
  97
  105
  114
  123
  133
  143
  154
  165
  177
  189
  203
  216
  231
  246
  262
  280
  297
  316
  336
  357
Change in working capital, $m
  9
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Cash from operations, $m
  46
  24
  29
  34
  39
  45
  51
  57
  63
  70
  77
  85
  92
  100
  109
  118
  127
  137
  148
  159
  171
  183
  196
  209
  224
  239
  255
  271
  289
  308
  327
Maintenance CAPEX, $m
  0
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -67
  -70
  -74
  -77
New CAPEX, $m
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
Cash from investing activities, $m
  -14
  -28
  -29
  -31
  -32
  -35
  -36
  -38
  -41
  -42
  -45
  -47
  -50
  -51
  -54
  -57
  -60
  -63
  -66
  -71
  -74
  -77
  -81
  -86
  -89
  -94
  -98
  -104
  -109
  -115
  -120
Free cash flow, $m
  32
  -4
  0
  3
  7
  11
  15
  19
  23
  28
  32
  38
  43
  48
  54
  61
  67
  74
  81
  89
  97
  106
  115
  124
  134
  145
  156
  168
  180
  193
  207
Issuance/(repayment) of debt, $m
  -28
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
Issuance/(repurchase) of shares, $m
  0
  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
Cash from financing (excl. dividends), $m  
  -28
  13
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
Total cash flow (excl. dividends), $m
  3
  10
  10
  14
  18
  22
  27
  31
  36
  42
  47
  53
  59
  65
  72
  79
  86
  94
  102
  111
  120
  129
  139
  150
  161
  173
  186
  199
  213
  228
  243
Retained Cash Flow (-), $m
  -14
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
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
 
  -1
  -9
  -6
  -3
  1
  4
  8
  12
  16
  20
  25
  29
  34
  40
  45
  51
  57
  64
  70
  78
  85
  93
  102
  111
  120
  130
  141
  152
  164
  176
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
 
  -1
  -8
  -5
  -2
  0
  3
  5
  7
  9
  11
  12
  13
  13
  13
  13
  13
  12
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  100
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4

American Vanguard Corporation operates as a holding company. The Company conducts its business through its subsidiaries, AMVAC Chemical Corporation (AMVAC), GemChem, Inc. (GemChem), 2110 Davie Corporation (DAVIE), Quimica Amvac de Mexico S.A. de C.V. (AMVAC M), AMVAC Mexico Sociedad de Responsabilidad Limitada (AMVAC M Srl), AMVAC de Costa Rica Sociedad de Responsabilidad Limitada (AMVAC CR Srl), AMVAC Switzerland GmbH (AMVAC S), AMVAC do Brasil Representacoes Ltda (AMVAC B), AMVAC C.V. (AMVAC CV), AMVAC Netherlands BV (AMVAC BV), Envance Technologies, LLC (Envance), AMVAC Singapore Pte, Ltd (AMVAC Sgpr) and Huifeng AMVAC Innovation Co. Limited (Hong Kong JV). AMVAC is a specialty chemical manufacturer that develops and markets products for agricultural, commercial and consumer uses. It manufactures and formulates chemicals, such as insecticides, fungicides, herbicides, molluscicides and soil fumigants for crops, turf and ornamental plants, and human and animal health protection.

FINANCIAL RATIOS  of  American Vanguard (AVD)

Valuation Ratios
P/E Ratio 42.8
Price to Sales 1.8
Price to Book 2
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow 15.9
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 6.8% 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 29.784 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.

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COMPANY NEWS

▶ American Vanguard Declares Quarterly Dividend   [Dec-12-17 09:00AM  Business Wire]
▶ American Vanguard misses 3Q profit forecasts   [Nov-02-17 06:46PM  Associated Press]
▶ American Vanguard Completes Acquisition of Grupo Agricenter   [Oct-30-17 09:00AM  Business Wire]
▶ American Vanguard Completes Acquisition of OHP, Inc.   [Oct-03-17 09:00AM  Business Wire]
▶ American Vanguard Declares Quarterly Dividend   [Sep-18-17 04:15PM  Business Wire]
▶ 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]
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.

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