Intrinsic value of Columbus McKinnon - CMCO

Previous Close

$30.83

  Intrinsic Value

$23.82

stock screener

  Rating & Target

sell

-23%

  Value-price divergence*

-57%

Previous close

$30.83

 
Intrinsic value

$23.82

 
Up/down potential

-23%

 
Rating

sell

 
Value-price divergence*

-57%

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

We calculate the intrinsic value of CMCO 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, %
  2.93
  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
  597
  609
  623
  639
  657
  677
  699
  722
  748
  776
  806
  838
  872
  908
  946
  987
  1,030
  1,076
  1,125
  1,176
  1,230
  1,287
  1,347
  1,410
  1,477
  1,547
  1,621
  1,699
  1,781
  1,868
  1,958
Variable operating expenses, $m
 
  551
  563
  577
  593
  610
  629
  650
  673
  697
  723
  734
  764
  796
  829
  865
  903
  943
  986
  1,030
  1,078
  1,128
  1,180
  1,236
  1,294
  1,356
  1,421
  1,489
  1,561
  1,637
  1,716
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
  557
  551
  563
  577
  593
  610
  629
  650
  673
  697
  723
  734
  764
  796
  829
  865
  903
  943
  986
  1,030
  1,078
  1,128
  1,180
  1,236
  1,294
  1,356
  1,421
  1,489
  1,561
  1,637
  1,716
Operating income, $m
  41
  58
  60
  62
  64
  67
  69
  72
  75
  79
  83
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  167
  174
  183
  191
  200
  210
  220
  231
  242
EBITDA, $m
  62
  85
  87
  89
  91
  94
  97
  101
  104
  108
  112
  117
  121
  126
  132
  137
  143
  150
  157
  164
  171
  179
  187
  196
  206
  215
  226
  236
  248
  260
  273
Interest expense (income), $m
  8
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  48
Earnings before tax, $m
  32
  49
  50
  52
  54
  56
  58
  60
  62
  65
  68
  88
  91
  95
  98
  102
  106
  111
  115
  120
  125
  131
  136
  142
  149
  155
  162
  170
  177
  186
  194
Tax expense, $m
  12
  13
  14
  14
  14
  15
  16
  16
  17
  18
  18
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
Net income, $m
  20
  36
  37
  38
  39
  41
  42
  44
  46
  47
  50
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  52
  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
  773
  735
  752
  772
  793
  817
  844
  873
  904
  937
  973
  1,012
  1,053
  1,096
  1,143
  1,192
  1,244
  1,300
  1,358
  1,420
  1,485
  1,554
  1,627
  1,703
  1,784
  1,869
  1,958
  2,052
  2,151
  2,256
  2,365
Adjusted assets (=assets-cash), $m
  721
  735
  752
  772
  793
  817
  844
  873
  904
  937
  973
  1,012
  1,053
  1,096
  1,143
  1,192
  1,244
  1,300
  1,358
  1,420
  1,485
  1,554
  1,627
  1,703
  1,784
  1,869
  1,958
  2,052
  2,151
  2,256
  2,365
Revenue / Adjusted assets
  0.828
  0.829
  0.828
  0.828
  0.828
  0.829
  0.828
  0.827
  0.827
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
Average production assets, $m
  116
  118
  121
  124
  127
  131
  136
  140
  145
  151
  156
  163
  169
  176
  184
  192
  200
  209
  218
  228
  239
  250
  261
  274
  287
  300
  315
  330
  346
  362
  380
Working capital, $m
  140
  133
  136
  140
  144
  148
  153
  158
  164
  170
  176
  183
  191
  199
  207
  216
  226
  236
  246
  257
  269
  282
  295
  309
  323
  339
  355
  372
  390
  409
  429
Total debt, $m
  268
  234
  244
  256
  270
  285
  301
  319
  338
  358
  380
  404
  429
  456
  485
  515
  548
  582
  618
  656
  696
  738
  783
  830
  880
  932
  987
  1,045
  1,106
  1,170
  1,238
Total liabilities, $m
  487
  453
  463
  475
  489
  504
  520
  538
  557
  577
  599
  623
  648
  675
  704
  734
  767
  801
  837
  875
  915
  957
  1,002
  1,049
  1,099
  1,151
  1,206
  1,264
  1,325
  1,389
  1,457
Total equity, $m
  286
  282
  289
  296
  305
  314
  324
  335
  347
  360
  374
  388
  404
  421
  439
  458
  478
  499
  522
  545
  570
  597
  625
  654
  685
  718
  752
  788
  826
  866
  908
Total liabilities and equity, $m
  773
  735
  752
  771
  794
  818
  844
  873
  904
  937
  973
  1,011
  1,052
  1,096
  1,143
  1,192
  1,245
  1,300
  1,359
  1,420
  1,485
  1,554
  1,627
  1,703
  1,784
  1,869
  1,958
  2,052
  2,151
  2,255
  2,365
Debt-to-equity ratio
  0.937
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.950
  0.970
  1.000
  1.020
  1.040
  1.060
  1.080
  1.110
  1.130
  1.150
  1.170
  1.180
  1.200
  1.220
  1.240
  1.250
  1.270
  1.280
  1.300
  1.310
  1.330
  1.340
  1.350
  1.360
Adjusted equity ratio
  0.325
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  36
  37
  38
  39
  41
  42
  44
  46
  47
  50
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142
Depreciation, amort., depletion, $m
  21
  27
  27
  27
  27
  28
  28
  28
  29
  29
  30
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Funds from operations, $m
  53
  62
  64
  65
  66
  68
  70
  72
  74
  77
  79
  77
  80
  83
  86
  90
  94
  97
  102
  106
  110
  115
  120
  126
  131
  137
  144
  150
  157
  164
  172
Change in working capital, $m
  0
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
Cash from operations, $m
  53
  60
  60
  61
  62
  64
  65
  67
  69
  71
  73
  70
  73
  75
  78
  81
  84
  87
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  146
  152
Maintenance CAPEX, $m
  0
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
New CAPEX, $m
  -22
  -2
  -3
  -3
  -3
  -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
  -18
Cash from investing activities, $m
  -203
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -45
  -47
Free cash flow, $m
  -150
  48
  48
  49
  49
  50
  50
  51
  52
  54
  55
  52
  53
  55
  56
  58
  60
  63
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  106
Issuance/(repayment) of debt, $m
  141
  9
  10
  12
  13
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
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  
  140
  9
  10
  12
  13
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
Total cash flow (excl. dividends), $m
  -8
  57
  59
  61
  62
  65
  67
  69
  72
  74
  77
  75
  78
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
  158
  165
  173
Retained Cash Flow (-), $m
  -17
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
Prev. year cash balance distribution, $m
 
  9
  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
 
  61
  52
  53
  54
  55
  57
  58
  60
  61
  63
  60
  63
  65
  67
  70
  73
  75
  78
  82
  85
  89
  92
  96
  101
  105
  110
  115
  120
  125
  131
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  57
  45
  43
  40
  37
  34
  32
  29
  26
  23
  19
  17
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  1
  1
  1
  1
  0
  0
  0
  0
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

Columbus McKinnon Corporation designs, manufactures, and markets material handling products for various commercial and industrial end-user markets in the United States, Europe, Canada, and internationally. The company offers electric chain, electric wire rope, lever tools and air-powered, and hand-operated hoists; hoist trolleys; winches; industrial crane systems, such as steel bridge, gantry, and jib cranes, and aluminum work station cranes, as well as chain hoists, overhead aluminum light rail workstations, and other crane components; and alloy and carbon steel chains. It also provides forged attachments, such as hooks, shackles, textile slings, clamps, logging tools, master links, Hammerloks, and load binders, as well as other securing devices; mechanical and electromechanical actuators and rotary unions; and below-the-hook special purpose lifters and tire shredders, as well as associated forgings. In addition, the company power and motion control systems, such as AC and DC drive systems, radio remote controls, push button pendant stations, brakes, and collision avoidance and power delivery subsystems; and elevator application-specific drive products. It offers its products through commercial distributors and end-users under the CM, Coffing, Chester, Duff-Norton, Electromotive Systems, Enrange, IMPULSE, M-FORCE, Mondel, OmniPulse, Pfaff, Quattro, Shaw-Box, Telemotive, Unified, STB, Yale, CES, Abell-Howe, and Washington Equipment. The company sells its products to various industries, including manufacturing, power generation and distribution, utilities, wind power, warehouses, commercial construction, oil and gas exploration and refining, petrochemical, marine, ship building, transportation and heavy duty trucking, agriculture, logging, and mining, as well as to the entertainment industry comprising permanent and traveling concerts, live theater, and sporting venues. Columbus McKinnon Corporation was founded in 1875 and is headquartered in Getzville, New York.

FINANCIAL RATIOS  of  Columbus McKinnon (CMCO)

Valuation Ratios
P/E Ratio 31
Price to Sales 1
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 20
Growth Rates
Sales Growth Rate 2.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.4%
Cap. Spend. - 3 Yr. Gr. Rate 8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 78.7%
Total Debt to Equity 93.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.9%
Return On Equity 7.2%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 31.3%
Gross Margin - 3 Yr. Avg. 31.2%
EBITDA Margin 10.2%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin 6.7%
Oper. Margin - 3 Yr. Avg. 8.5%
Pre-Tax Margin 5.4%
Pre-Tax Margin - 3 Yr. Avg. 6.3%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 30.9%
Payout Ratio 15%

CMCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMCO stock intrinsic value calculation we used $597 million for the last fiscal year's total revenue generated by Columbus McKinnon. The default revenue input number comes from 2016 income statement of Columbus McKinnon. 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 CMCO 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 6.8%, whose default value for CMCO is calculated based on our internal credit rating of Columbus McKinnon, 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 Columbus McKinnon.
    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 CMCO stock the variable cost ratio is equal to 90.5%.

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 CMCO 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 4.1% for Columbus McKinnon.

Corporate tax rate of 27% is the nominal tax rate for Columbus McKinnon. 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 CMCO 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 CMCO are equal to 19.4%.

Life of production assets of 12.5 years is the average useful life of capital assets used in Columbus McKinnon 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 CMCO is equal to 21.9%. 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 - $286 million for Columbus McKinnon - 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 20.081 million for Columbus McKinnon 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 Columbus McKinnon at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Buy These 5 Stocks on New Analyst Coverage   [Aug-03-17 08:10AM  Zacks]
▶ Columbus McKinnon posts 1Q profit   [Aug-01-17 10:58PM  Associated Press]
▶ Gurus' Holdings With Negative Performances   [Jun-29-17 04:12PM  GuruFocus.com]
▶ Columbus McKinnon reports 4Q loss   [May-31-17 06:57AM  Associated Press]
▶ New Strong Sell Stocks for January 30th   [Jan-30-17 09:20AM  Zacks]
▶ Columbus McKinnon posts 3Q profit   [06:51AM  Associated Press]
▶ Should You Avoid Columbus McKinnon Corp. (CMCO)?   [Dec-10-16 05:24PM  at Insider Monkey]
Stock chart of CMCO Financial statements of CMCO
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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