Intrinsic value of Global Brass&Copper Holdings - BRSS

Previous Close

$34.20

  Intrinsic Value

$27.57

stock screener

  Rating & Target

hold

-19%

Previous close

$34.20

 
Intrinsic value

$27.57

 
Up/down potential

-19%

 
Rating

hold

We calculate the intrinsic value of BRSS 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 0.7

 

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, %
  -11.09
  11.50
  10.85
  10.27
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.20
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
Revenue, $m
  1,339
  1,493
  1,655
  1,825
  2,003
  2,188
  2,381
  2,583
  2,792
  3,010
  3,236
  3,471
  3,716
  3,970
  4,234
  4,509
  4,794
  5,092
  5,402
  5,724
  6,061
  6,412
  6,778
  7,160
  7,560
  7,977
  8,413
  8,869
  9,346
  9,845
  10,367
Variable operating expenses, $m
 
  1,409
  1,562
  1,723
  1,890
  2,065
  2,248
  2,438
  2,635
  2,841
  3,055
  3,276
  3,507
  3,746
  3,996
  4,255
  4,524
  4,805
  5,098
  5,402
  5,720
  6,051
  6,396
  6,757
  7,134
  7,528
  7,939
  8,369
  8,820
  9,291
  9,784
Fixed operating expenses, $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
Total operating expenses, $m
  1,263
  1,409
  1,562
  1,723
  1,890
  2,065
  2,248
  2,438
  2,635
  2,841
  3,055
  3,276
  3,507
  3,746
  3,996
  4,255
  4,524
  4,805
  5,098
  5,402
  5,720
  6,051
  6,396
  6,757
  7,134
  7,528
  7,939
  8,369
  8,820
  9,291
  9,784
Operating income, $m
  75
  84
  93
  102
  112
  123
  134
  145
  157
  169
  182
  195
  209
  223
  238
  254
  270
  287
  304
  322
  341
  361
  382
  403
  426
  449
  474
  499
  526
  554
  584
EBITDA, $m
  90
  100
  111
  123
  134
  147
  160
  173
  187
  202
  217
  233
  249
  267
  284
  303
  322
  342
  363
  384
  407
  430
  455
  481
  507
  535
  565
  595
  627
  661
  696
Interest expense (income), $m
  27
  26
  26
  31
  35
  40
  45
  51
  56
  62
  68
  74
  80
  87
  94
  101
  109
  116
  124
  133
  142
  151
  161
  170
  181
  192
  203
  215
  228
  241
  254
Earnings before tax, $m
  49
  58
  66
  72
  77
  83
  88
  94
  101
  107
  114
  122
  129
  137
  144
  153
  161
  170
  180
  189
  199
  210
  221
  233
  245
  257
  270
  284
  299
  314
  329
Tax expense, $m
  16
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  69
  73
  77
  81
  85
  89
Net income, $m
  32
  42
  49
  52
  56
  60
  65
  69
  74
  78
  83
  89
  94
  100
  105
  112
  118
  124
  131
  138
  146
  153
  161
  170
  179
  188
  197
  207
  218
  229
  241

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  88
  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
  583
  552
  612
  675
  740
  809
  880
  955
  1,032
  1,113
  1,196
  1,283
  1,374
  1,468
  1,565
  1,667
  1,772
  1,882
  1,997
  2,116
  2,241
  2,370
  2,506
  2,647
  2,795
  2,949
  3,110
  3,279
  3,455
  3,639
  3,833
Adjusted assets (=assets-cash), $m
  495
  552
  612
  675
  740
  809
  880
  955
  1,032
  1,113
  1,196
  1,283
  1,374
  1,468
  1,565
  1,667
  1,772
  1,882
  1,997
  2,116
  2,241
  2,370
  2,506
  2,647
  2,795
  2,949
  3,110
  3,279
  3,455
  3,639
  3,833
Revenue / Adjusted assets
  2.705
  2.705
  2.704
  2.704
  2.707
  2.705
  2.706
  2.705
  2.705
  2.704
  2.706
  2.705
  2.705
  2.704
  2.705
  2.705
  2.705
  2.706
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
  2.705
Average production assets, $m
  122
  136
  151
  166
  182
  199
  217
  235
  254
  274
  295
  316
  338
  361
  385
  410
  436
  463
  492
  521
  552
  583
  617
  652
  688
  726
  766
  807
  850
  896
  943
Working capital, $m
  270
  209
  232
  255
  280
  306
  333
  362
  391
  421
  453
  486
  520
  556
  593
  631
  671
  713
  756
  801
  849
  898
  949
  1,002
  1,058
  1,117
  1,178
  1,242
  1,308
  1,378
  1,451
Total debt, $m
  316
  321
  375
  431
  490
  552
  616
  683
  753
  825
  901
  979
  1,060
  1,145
  1,233
  1,324
  1,419
  1,518
  1,621
  1,729
  1,841
  1,957
  2,079
  2,206
  2,339
  2,478
  2,623
  2,775
  2,933
  3,100
  3,273
Total liabilities, $m
  492
  497
  551
  607
  666
  728
  792
  859
  929
  1,001
  1,077
  1,155
  1,236
  1,321
  1,409
  1,500
  1,595
  1,694
  1,797
  1,905
  2,017
  2,133
  2,255
  2,382
  2,515
  2,654
  2,799
  2,951
  3,109
  3,276
  3,449
Total equity, $m
  91
  55
  61
  67
  74
  81
  88
  95
  103
  111
  120
  128
  137
  147
  157
  167
  177
  188
  200
  212
  224
  237
  251
  265
  279
  295
  311
  328
  345
  364
  383
Total liabilities and equity, $m
  583
  552
  612
  674
  740
  809
  880
  954
  1,032
  1,112
  1,197
  1,283
  1,373
  1,468
  1,566
  1,667
  1,772
  1,882
  1,997
  2,117
  2,241
  2,370
  2,506
  2,647
  2,794
  2,949
  3,110
  3,279
  3,454
  3,640
  3,832
Debt-to-equity ratio
  3.473
  5.810
  6.120
  6.390
  6.620
  6.820
  7.000
  7.160
  7.300
  7.420
  7.530
  7.630
  7.720
  7.800
  7.880
  7.940
  8.010
  8.070
  8.120
  8.170
  8.210
  8.260
  8.300
  8.340
  8.370
  8.400
  8.430
  8.460
  8.490
  8.520
  8.540
Adjusted equity ratio
  0.006
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  32
  42
  49
  52
  56
  60
  65
  69
  74
  78
  83
  89
  94
  100
  105
  112
  118
  124
  131
  138
  146
  153
  161
  170
  179
  188
  197
  207
  218
  229
  241
Depreciation, amort., depletion, $m
  15
  17
  18
  20
  22
  24
  26
  28
  31
  33
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  78
  82
  86
  91
  96
  101
  107
  112
Funds from operations, $m
  111
  59
  67
  72
  78
  84
  91
  97
  104
  111
  119
  126
  134
  143
  151
  160
  170
  179
  190
  200
  211
  223
  235
  247
  261
  274
  289
  304
  319
  336
  353
Change in working capital, $m
  16
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
Cash from operations, $m
  95
  37
  44
  49
  53
  58
  64
  69
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
  146
  155
  164
  174
  184
  194
  205
  216
  228
  240
  252
  266
  280
Maintenance CAPEX, $m
  0
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -33
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -69
  -73
  -78
  -82
  -86
  -91
  -96
  -101
  -107
New CAPEX, $m
  -34
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -48
Cash from investing activities, $m
  -34
  -28
  -31
  -33
  -36
  -39
  -42
  -44
  -47
  -50
  -54
  -56
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -88
  -93
  -98
  -102
  -108
  -114
  -120
  -126
  -132
  -139
  -146
  -155
Free cash flow, $m
  61
  9
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  72
  76
  81
  86
  91
  96
  101
  107
  113
  119
  126
Issuance/(repayment) of debt, $m
  315
  10
  54
  57
  59
  62
  64
  67
  70
  72
  75
  78
  81
  85
  88
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
Issuance/(repurchase) of shares, $m
  0
  5
  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  
  -53
  15
  54
  57
  59
  62
  64
  67
  70
  72
  75
  78
  81
  85
  88
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
Total cash flow (excl. dividends), $m
  8
  23
  67
  72
  77
  82
  87
  92
  98
  103
  109
  115
  122
  128
  135
  142
  150
  158
  166
  175
  183
  193
  203
  213
  224
  235
  246
  259
  272
  285
  299
Retained Cash Flow (-), $m
  -35
  -47
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
Prev. year cash balance distribution, $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
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
 
  59
  61
  66
  70
  75
  80
  85
  90
  95
  101
  107
  113
  119
  125
  132
  139
  147
  155
  163
  171
  180
  189
  199
  209
  219
  230
  242
  254
  267
  280
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  55
  53
  52
  51
  49
  47
  44
  41
  38
  34
  31
  27
  24
  21
  17
  15
  12
  10
  8
  6
  4
  3
  2
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3

Global Brass and Copper Holdings, Inc. is a converter, fabricator, processor and distributor of specialized non-ferrous products, including a range of sheet, strip, foil, rod, tube and fabricated metal component products. The Company operates through three segments: Olin Brass, Chase Brass and A.J. Oster. Its Olin Brass segment is engaged in manufacturing, fabricating and converting specialized copper and brass sheet, strip, foil, tube and fabricated products. The Chase Brass segment is engaged in manufacturing brass rod, including round, hexagonal and other shapes. The A.J. Oster segment is engaged in processing and distributing copper and copper-alloy sheet, strip and foil, operating six service centers in the United States, Puerto Rico and Mexico. Its products are used in a range of applications across markets, including the building and housing, munitions, automotive, transportation, coinage, industrial machinery and equipment, and general consumer end markets.

FINANCIAL RATIOS  of  Global Brass&Copper Holdings (BRSS)

Valuation Ratios
P/E Ratio 23.1
Price to Sales 0.6
Price to Book 8.1
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow 12.1
Growth Rates
Sales Growth Rate -11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 61.9%
Cap. Spend. - 3 Yr. Gr. Rate 5.5%
Financial Strength
Quick Ratio 18
Current Ratio 0.1
LT Debt to Equity 341.8%
Total Debt to Equity 347.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 10%
Return On Total Capital 7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 8.5%
Return On Equity 43.5%
Return On Equity - 3 Yr. Avg. 187.5%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 13.6%
Gross Margin - 3 Yr. Avg. 11.5%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 6.4%
Operating Margin 5.7%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 2.2%
Effective Tax Rate 32.7%
Eff/ Tax Rate - 3 Yr. Avg. 32.5%
Payout Ratio 9.4%

BRSS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BRSS stock intrinsic value calculation we used $1339 million for the last fiscal year's total revenue generated by Global Brass&Copper Holdings. The default revenue input number comes from 2016 income statement of Global Brass&Copper 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 BRSS stock valuation model: a) initial revenue growth rate of 11.5% 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 7.3%, whose default value for BRSS is calculated based on our internal credit rating of Global Brass&Copper 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 Global Brass&Copper 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 BRSS stock the variable cost ratio is equal to 94.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BRSS 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 8.2% for Global Brass&Copper Holdings.

Corporate tax rate of 27% is the nominal tax rate for Global Brass&Copper 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 BRSS 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 BRSS are equal to 9.1%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Global Brass&Copper 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 BRSS is equal to 14%. 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 - $91 million for Global Brass&Copper 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 21.905 million for Global Brass&Copper 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 Global Brass&Copper Holdings at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Global Brass and Copper posts 3Q profit   [Nov-06-17 05:38AM  Associated Press]
▶ Global Brass and Copper Holdings Acquires Alumet   [Nov-01-17 10:27AM  Business Wire]
▶ Global Brass and Copper posts 2Q profit   [02:34AM  Associated Press]
▶ Global Brass and Copper posts 1Q profit   [May-04-17 07:06PM  Associated Press]
▶ Top Ranked Value Stocks to Buy for April 21st   [Apr-21-17 10:16AM  Zacks]
▶ Spoiler Alert: Super Bug MRSA Has No Chance against Copper   [Apr-20-17 08:20AM  Business Wire]
▶ Top Ranked Value Stocks to Buy for April 10th   [Apr-10-17 10:14AM  Zacks]
▶ Sixth man helps keep Bellarmine athletes healthy   [Mar-21-17 08:20AM  Business Wire]
▶ Olin Brass Announces Complex Alloy Price Increase   [Feb-17-17 04:05PM  Business Wire]
Financial statements of BRSS
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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