Intrinsic value of Avalon Holdings - AWX

Previous Close

$2.15

  Intrinsic Value

$2.56

stock screener

  Rating & Target

hold

+19%

Previous close

$2.15

 
Intrinsic value

$2.56

 
Up/down potential

+19%

 
Rating

hold

We calculate the intrinsic value of AWX 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 0.0

 

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, %
  15.09
  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
  61
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
Variable operating expenses, $m
 
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
Fixed operating expenses, $m
 
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Total operating expenses, $m
  62
  63
  65
  66
  68
  70
  72
  75
  77
  80
  83
  87
  90
  94
  98
  102
  106
  112
  117
  122
  128
  133
  140
  146
  153
  160
  168
  176
  184
  193
  202
Operating income, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
EBITDA, $m
  3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Earnings before tax, $m
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Tax expense, $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
Net income, $m
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  68
  67
  69
  71
  73
  75
  77
  80
  83
  86
  89
  93
  96
  100
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  207
  217
Adjusted assets (=assets-cash), $m
  66
  67
  69
  71
  73
  75
  77
  80
  83
  86
  89
  93
  96
  100
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  207
  217
Revenue / Adjusted assets
  0.924
  0.925
  0.928
  0.915
  0.918
  0.920
  0.922
  0.925
  0.916
  0.919
  0.921
  0.925
  0.927
  0.930
  0.924
  0.927
  0.921
  0.924
  0.927
  0.923
  0.926
  0.923
  0.926
  0.923
  0.926
  0.924
  0.927
  0.926
  0.924
  0.923
  0.922
Average production assets, $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
Working capital, $m
  0
  -1
  -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
Total debt, $m
  12
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  56
  59
  63
  67
  71
  75
Total liabilities, $m
  29
  29
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
Total equity, $m
  39
  39
  40
  41
  42
  43
  45
  46
  48
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
Total liabilities and equity, $m
  68
  68
  69
  71
  73
  75
  78
  80
  83
  85
  89
  92
  97
  101
  104
  109
  114
  119
  125
  130
  136
  142
  149
  156
  163
  172
  179
  188
  197
  207
  217
Debt-to-equity ratio
  0.308
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.370
  0.380
  0.390
  0.400
  0.420
  0.430
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.580
  0.590
  0.590
  0.600
Adjusted equity ratio
  0.561
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Depreciation, amort., depletion, $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
Funds from operations, $m
  3
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Change in working capital, $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 operations, $m
  3
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
Maintenance CAPEX, $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
New CAPEX, $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
Cash from investing activities, $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
Free cash flow, $m
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
Issuance/(repayment) of debt, $m
  4
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Issuance/(repurchase) of shares, $m
  0
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
Cash from financing (excl. dividends), $m  
  1
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  6
  7
  7
  7
  7
  8
  8
  8
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
Total cash flow (excl. dividends), $m
  0
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
Retained Cash Flow (-), $m
  0
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Prev. year cash balance distribution, $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
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
 
  0
  -1
  -1
  -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
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  0
  -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
  0
  0
  0
Current shareholders' claim on cash, %
  100
  92.4
  85.0
  77.9
  71.2
  64.8
  58.8
  53.3
  48.1
  43.4
  39.0
  35.0
  31.4
  28.2
  25.2
  22.5
  20.1
  18.0
  16.0
  14.3
  12.7
  11.3
  10.1
  9.0
  8.0
  7.1
  6.3
  5.6
  5.0
  4.5
  4.0

Avalon Holdings Corporation provides waste management services to industrial, commercial, municipal and governmental customers in northeastern and midwestern United States markets, captive landfill management for an industrial customer and salt water injection well operations. The Company operates through two segments. The Company's waste management services segment includes waste disposal brokerage and management services, captive landfill management operations and salt water injection well operations. The golf and related operations segment includes the operation and management of over three golf courses and related clubhouses, a hotel, fitness centers, tennis courts, spa services, dining and banquet and conference facilities and a travel agency. Its subsidiary, American Waste Management Services, Inc., assists customers with managing and disposing of wastes at various treatment and disposal sites. Its golf courses are located in Warren, Ohio, Vienna, Ohio and Sharon, Pennsylvania.

FINANCIAL RATIOS  of  Avalon Holdings (AWX)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.1
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 15.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 28.2%
Total Debt to Equity 30.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -1.1%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -1.5%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -1.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 18%
Gross Margin - 3 Yr. Avg. 17.6%
EBITDA Margin 4.9%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. -2.5%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. -1.3%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -1.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

AWX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AWX stock intrinsic value calculation we used $61 million for the last fiscal year's total revenue generated by Avalon Holdings. The default revenue input number comes from 2016 income statement of Avalon Holdings. 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 AWX 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 5.3%, whose default value for AWX is calculated based on our internal credit rating of Avalon Holdings, 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 Avalon Holdings.
    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 AWX 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 $1 million in the base year in the intrinsic value calculation for AWX 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 Avalon Holdings.

Corporate tax rate of 27% is the nominal tax rate for Avalon Holdings. 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 AWX 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 AWX are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Avalon Holdings 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 AWX is equal to -1.6%. 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 - $39 million for Avalon Holdings - 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 3.803 million for Avalon Holdings 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 Avalon Holdings at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
WM Waste Manageme 85.37 33.86  str.sell
RSG Republic Servi 65.25 63.76  hold
ECOL US Ecology 49.80 18.49  str.sell
HCCI Heritage-Cryst 19.15 1.83  str.sell
CWST Casella Waste 21.00 0.40  str.sell

COMPANY NEWS

▶ Avalon Holdings Corp. Earnings Q3, 2015   [Nov-27  10:36AM  Capital Cube]
▶ 10-Q for Avalon Holdings Corp.   [Aug-09  08:13PM  at Company Spotlight]
▶ 10-Q for Avalon Holdings Corp.   [May-16  08:09PM  at Company Spotlight]
▶ 10-K for Avalon Holdings Corp.   [May-06  08:12PM  at Company Spotlight]
▶ 10-Q for Avalon Holdings Corp.   [Nov-15  07:07PM  Company Spotlight]
▶ Avalon Holdings (AWX) Downgraded From Hold to Sell   [Oct-13  09:18AM  TheStreet.com]
▶ Avalon Holdings Corp Stock Upgraded (AWX)   [Aug-29  11:11AM  at TheStreet]
▶ AVALON HOLDINGS CORP Files SEC form 8-K, Other Events   [Aug-05  06:01AM  EDGAR Online]
▶ AVALON HOLDINGS CORP Files SEC form 8-K, Other Events   [Oct-22  04:32PM  EDGAR Online]
▶ AVALON HOLDINGS CORP Files SEC form 8-K, Other Events   [Sep-19  05:17PM  EDGAR Online]
▶ AVALON HOLDINGS CORP Files SEC form 10-K, Annual Report   [Mar-15  06:06AM  EDGAR Online]
▶ Is Avalon Holdings Becoming A Growth Story?   [Mar-22-12 08:37AM  at Seeking Alpha]
▶ AVALON HOLDINGS CORP Files SEC form 8-K, Other Events   [Dec-15-11 04:16PM  EDGAR Online]
▶ Waste Management Inc. Third Quarter Earnings Sneak Peek   [Oct-24-11 12:35PM  Wall St. Cheat Sheet]
▶ Waste Connections, Inc. Third Quarter Earnings Sneak Peek   [Oct-13-11 12:03PM  Wall St. Cheat Sheet]
▶ Waste Management, Inc. Second Quarter Earnings Preview   [Jul-25-11 11:59AM  Wall St. Cheat Sheet]
Financial statements of AWX
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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