Intrinsic value of Euro Tech Holdings - CLWT

Previous Close

$3.30

  Intrinsic Value

$20.38

stock screener

  Rating & Target

str. buy

+518%

  Value-price divergence*

0%

Previous close

$3.30

 
Intrinsic value

$20.38

 
Up/down potential

+518%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of CLWT 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, %
  22.22
  22.20
  20.48
  18.93
  17.54
  16.28
  15.16
  14.14
  13.23
  12.40
  11.66
  11.00
  10.40
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
Revenue, $m
  22
  27
  32
  39
  45
  53
  61
  69
  78
  88
  98
  109
  121
  132
  145
  158
  171
  185
  200
  215
  231
  247
  264
  282
  300
  319
  339
  360
  381
  404
  427
Variable operating expenses, $m
 
  21
  25
  30
  35
  41
  47
  53
  60
  68
  76
  84
  93
  102
  111
  121
  132
  142
  154
  165
  177
  190
  203
  217
  231
  245
  261
  277
  293
  310
  328
Fixed operating expenses, $m
 
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
Total operating expenses, $m
  23
  27
  31
  36
  42
  48
  54
  60
  67
  75
  84
  92
  101
  110
  119
  130
  141
  151
  163
  175
  187
  200
  213
  228
  242
  256
  272
  289
  305
  322
  341
Operating income, $m
  -1
  0
  1
  2
  4
  5
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  72
  76
  81
  86
EBITDA, $m
  -1
  0
  1
  2
  4
  5
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  72
  76
  81
  86
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
Earnings before tax, $m
  -1
  0
  1
  2
  4
  5
  7
  8
  10
  12
  14
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  68
  73
  77
  82
Tax expense, $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
Net income, $m
  0
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  17
  19
  21
  23
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  56
  60

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4
  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
  23
  23
  28
  33
  39
  45
  52
  60
  68
  76
  85
  94
  104
  114
  125
  136
  148
  160
  173
  186
  199
  213
  228
  243
  259
  276
  293
  311
  329
  349
  369
Adjusted assets (=assets-cash), $m
  19
  23
  28
  33
  39
  45
  52
  60
  68
  76
  85
  94
  104
  114
  125
  136
  148
  160
  173
  186
  199
  213
  228
  243
  259
  276
  293
  311
  329
  349
  369
Revenue / Adjusted assets
  1.158
  1.174
  1.143
  1.182
  1.154
  1.178
  1.173
  1.150
  1.147
  1.158
  1.153
  1.160
  1.163
  1.158
  1.160
  1.162
  1.155
  1.156
  1.156
  1.156
  1.161
  1.160
  1.158
  1.160
  1.158
  1.156
  1.157
  1.158
  1.158
  1.158
  1.157
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
  4
  1
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
Total debt, $m
  1
  2
  3
  5
  7
  10
  12
  15
  18
  21
  24
  28
  31
  35
  39
  43
  47
  52
  56
  61
  66
  72
  77
  83
  88
  94
  101
  107
  114
  121
  129
Total liabilities, $m
  8
  9
  10
  12
  14
  17
  19
  22
  25
  28
  31
  35
  38
  42
  46
  50
  54
  59
  63
  68
  73
  79
  84
  90
  95
  101
  108
  114
  121
  128
  136
Total equity, $m
  15
  15
  18
  21
  25
  29
  33
  38
  43
  48
  54
  60
  66
  72
  79
  86
  93
  101
  109
  117
  126
  135
  144
  154
  164
  174
  185
  196
  208
  220
  233
Total liabilities and equity, $m
  23
  24
  28
  33
  39
  46
  52
  60
  68
  76
  85
  95
  104
  114
  125
  136
  147
  160
  172
  185
  199
  214
  228
  244
  259
  275
  293
  310
  329
  348
  369
Debt-to-equity ratio
  0.067
  0.110
  0.190
  0.250
  0.300
  0.340
  0.370
  0.400
  0.420
  0.440
  0.450
  0.460
  0.480
  0.490
  0.490
  0.500
  0.510
  0.510
  0.520
  0.520
  0.530
  0.530
  0.530
  0.540
  0.540
  0.540
  0.540
  0.550
  0.550
  0.550
  0.550
Adjusted equity ratio
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  17
  19
  21
  23
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  56
  60
Depreciation, amort., depletion, $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
Funds from operations, $m
  1
  0
  1
  2
  3
  4
  5
  6
  8
  9
  11
  12
  14
  16
  17
  19
  21
  23
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  56
  60
Change in working capital, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  0
  0
  1
  1
  2
  3
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  59
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
  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 investing activities, $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
Free cash flow, $m
  0
  0
  1
  1
  2
  3
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  59
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
Issuance/(repurchase) of shares, $m
  0
  3
  2
  2
  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
Cash from financing (excl. dividends), $m  
  1
  5
  4
  4
  3
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
Total cash flow (excl. dividends), $m
  1
  4
  5
  5
  6
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  59
  63
  66
Retained Cash Flow (-), $m
  0
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Prev. year cash balance distribution, $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
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
 
  4
  2
  2
  2
  2
  3
  4
  5
  6
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  54
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
 
  4
  1
  2
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  5
  5
  4
  4
  4
  4
  3
  3
  3
  2
  2
  1
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  75.7
  62.1
  54.6
  50.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9
  49.9

Euro Tech Holdings Company Limited engages in marketing and trading water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies, and related automation systems in Hong Kong and the People’s Republic of China. The company operates in two segments, Trading and Manufacturing, and Engineering. It offers analytical instruments, such as chromatographs, mass spectrometers, flow injector analyzers, automated sample preparation workstations, and atomic spectrometers; environmental monitoring instruments comprising air and water quality monitoring instruments; sample pre-treatment equipment; and general purpose laboratory instruments consisting of water quality monitoring and analysis equipment. The company also provides general testing and measuring equipment comprising multi-channel digital and analogue recorders, signal amplifiers, and calibration equipment for energy conservation, renewable energy equipment, power quality analyzers, continuous emissions monitoring systems, and air pollution control systems to power plants, railway and aero-space industries, utilities, educational institutions, and telecommunications companies. In addition, it offers process control systems, including sensors, temperature gauges, pressure gauges, power and energy consumption meters, flow meters, valves, temperature and pressure transmitters and control devices, and temperature and pressure calibrators, as well as moisture, power, energy, and harmonic analyzers; systems engineering services; and maintenance, installation assistance, and calibration services. Further, the company develops, produces, sells, and services environmental equipment, including the development of modern laboratory analyzers, on-line measuring equipment, and other analyzers for chemicals. It primarily serves commercial customers, and governmental agencies or instrumentalities. The company was founded in 1971 and is headquartered in Hong Kong, Hong Kong.

FINANCIAL RATIOS  of  Euro Tech Holdings (CLWT)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.3
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 22.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 6.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -1.5%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -2.2%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -2.2%
Asset Turnover 1
Profitability Ratios
Gross Margin 22.7%
Gross Margin - 3 Yr. Avg. 23.8%
EBITDA Margin -4.5%
EBITDA Margin - 3 Yr. Avg. -7%
Operating Margin -4.5%
Oper. Margin - 3 Yr. Avg. -7%
Pre-Tax Margin -4.5%
Pre-Tax Margin - 3 Yr. Avg. -7%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -1.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CLWT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLWT stock intrinsic value calculation we used $22 million for the last fiscal year's total revenue generated by Euro Tech Holdings. The default revenue input number comes from 2016 income statement of Euro Tech 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 CLWT stock valuation model: a) initial revenue growth rate of 22.2% 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 4.3%, whose default value for CLWT is calculated based on our internal credit rating of Euro Tech 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 Euro Tech 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 CLWT stock the variable cost ratio is equal to 77.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for CLWT 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 Euro Tech Holdings.

Corporate tax rate of 27% is the nominal tax rate for Euro Tech 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 CLWT 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 CLWT are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Euro Tech 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 CLWT is equal to 4.5%. 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 - $15 million for Euro Tech 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 2.126 million for Euro Tech 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 Euro Tech Holdings at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Investors Are Buying Up These 5 Stocks Today   [Jul-08-16 12:27PM  Insider Monkey]
▶ Investors Are Buying Up These 5 Stocks Today   [12:27PM  at Insider Monkey]
▶ EURO TECH HOLDINGS CO LTD Financials   [01:04PM  EDGAR Online Financials]
▶ Why Euro Tech Holdings (CLWT) Stock Is Soaring Today   [Jul-21  01:15PM  at TheStreet]
▶ Euro Tech Holdings subsidiary awarded 3 contracts valued at $2.3M   [Mar-25  06:06AM  theflyonthewall.com]
▶ Trading The Euro, Gold And Silver In View Of Europe's Woes   [Oct-24-11 11:40AM  at Seeking Alpha]
▶ Euro Tech Holdings announces stock buyback of up to 300,000 shares   [Aug-01-11 08:08AM  theflyonthewall.com]
▶ Emerging Market ADRs: Winners and Losers   [Oct-25-10 03:40PM  at TheStreet.com]
▶ Emerging Market ADRs: Winners and Losers   [Oct-11-10 10:39AM  at TheStreet.com]
▶ China BAK, Euro Tech: Early Volume Plays   [Feb-09-10 10:01AM  at TheStreet.com]
▶ Flotek, Sunrise: Midday Volume Plays   [Dec-28-09 02:02PM  at TheStreet.com]
▶ Euro Tech Volume Spikes on IPO Rumor   [Nov-30-09 11:36AM  at TheStreet.com]
▶ Euro Tech: Pump Up the Volume   [Oct-08-09 11:58AM  at TheStreet.com]
▶ Taking the Waste out of Wastewater   [Sep-02-08 10:07AM  at BusinessWeek]
Stock chart of CLWT Financial statements of CLWT
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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