Intrinsic value of FutureFuel - FF

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$14.74

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of FF 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, %
  -15.67
  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
  253
  306
  313
  321
  330
  340
  351
  363
  376
  390
  405
  421
  438
  456
  476
  496
  518
  541
  565
  591
  618
  647
  677
  709
  742
  778
  815
  854
  895
  938
  984
Variable operating expenses, $m
 
  241
  246
  253
  260
  268
  276
  286
  296
  307
  319
  331
  345
  359
  374
  390
  407
  426
  445
  465
  486
  509
  533
  558
  584
  612
  641
  672
  704
  739
  774
Fixed operating expenses, $m
 
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
Total operating expenses, $m
  217
  258
  264
  271
  279
  287
  296
  306
  317
  328
  341
  353
  368
  382
  398
  415
  432
  452
  472
  492
  514
  538
  562
  588
  615
  644
  673
  705
  738
  774
  810
Operating income, $m
  37
  48
  49
  50
  52
  53
  55
  57
  59
  62
  64
  67
  70
  74
  77
  81
  85
  89
  94
  99
  104
  109
  115
  121
  127
  134
  141
  149
  157
  165
  174
EBITDA, $m
  48
  58
  59
  61
  63
  65
  67
  69
  72
  75
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  131
  137
  145
  152
  160
  168
  177
  187
  196
  207
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
Earnings before tax, $m
  41
  48
  49
  50
  51
  53
  55
  57
  59
  61
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  101
  106
  111
  117
  123
  129
  136
  143
  151
  159
  167
Tax expense, $m
  -15
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
Net income, $m
  56
  35
  36
  36
  37
  39
  40
  41
  43
  45
  46
  48
  50
  53
  55
  58
  61
  63
  67
  70
  73
  77
  81
  85
  90
  94
  99
  104
  110
  116
  122

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  305
  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
  529
  265
  271
  278
  286
  295
  304
  315
  326
  338
  351
  365
  380
  395
  412
  430
  449
  469
  490
  512
  536
  560
  587
  614
  643
  674
  706
  740
  776
  813
  853
Adjusted assets (=assets-cash), $m
  224
  265
  271
  278
  286
  295
  304
  315
  326
  338
  351
  365
  380
  395
  412
  430
  449
  469
  490
  512
  536
  560
  587
  614
  643
  674
  706
  740
  776
  813
  853
Revenue / Adjusted assets
  1.129
  1.155
  1.155
  1.155
  1.154
  1.153
  1.155
  1.152
  1.153
  1.154
  1.154
  1.153
  1.153
  1.154
  1.155
  1.153
  1.154
  1.154
  1.153
  1.154
  1.153
  1.155
  1.153
  1.155
  1.154
  1.154
  1.154
  1.154
  1.153
  1.154
  1.154
Average production assets, $m
  123
  129
  131
  135
  139
  143
  147
  152
  158
  164
  170
  177
  184
  192
  200
  208
  217
  227
  237
  248
  260
  272
  284
  298
  312
  327
  342
  359
  376
  394
  413
Working capital, $m
  261
  84
  85
  88
  90
  93
  96
  99
  103
  106
  111
  115
  120
  125
  130
  135
  141
  148
  154
  161
  169
  177
  185
  193
  203
  212
  222
  233
  244
  256
  269
Total debt, $m
  0
  2
  4
  7
  9
  13
  16
  20
  24
  28
  33
  38
  44
  49
  55
  62
  69
  76
  84
  92
  100
  110
  119
  129
  140
  151
  163
  175
  188
  202
  216
Total liabilities, $m
  196
  97
  99
  102
  104
  108
  111
  115
  119
  123
  128
  133
  139
  144
  150
  157
  164
  171
  179
  187
  195
  205
  214
  224
  235
  246
  258
  270
  283
  297
  311
Total equity, $m
  333
  168
  172
  177
  182
  187
  193
  200
  207
  215
  223
  232
  241
  251
  262
  273
  285
  298
  311
  325
  340
  356
  372
  390
  408
  428
  448
  470
  493
  516
  542
Total liabilities and equity, $m
  529
  265
  271
  279
  286
  295
  304
  315
  326
  338
  351
  365
  380
  395
  412
  430
  449
  469
  490
  512
  535
  561
  586
  614
  643
  674
  706
  740
  776
  813
  853
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.040
  0.050
  0.070
  0.080
  0.100
  0.120
  0.130
  0.150
  0.160
  0.180
  0.200
  0.210
  0.230
  0.240
  0.260
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
Adjusted equity ratio
  0.125
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635
  0.635

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  35
  36
  36
  37
  39
  40
  41
  43
  45
  46
  48
  50
  53
  55
  58
  61
  63
  67
  70
  73
  77
  81
  85
  90
  94
  99
  104
  110
  116
  122
Depreciation, amort., depletion, $m
  11
  10
  10
  11
  11
  11
  12
  12
  13
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
Funds from operations, $m
  113
  45
  46
  47
  48
  50
  52
  53
  55
  58
  60
  62
  65
  68
  71
  74
  78
  81
  85
  90
  94
  99
  104
  109
  114
  120
  126
  133
  140
  147
  155
Change in working capital, $m
  22
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Cash from operations, $m
  91
  42
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
  111
  116
  122
  129
  135
  142
Maintenance CAPEX, $m
  0
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
New CAPEX, $m
  -5
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
Cash from investing activities, $m
  -35
  -13
  -13
  -13
  -15
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -21
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -43
  -45
  -48
  -50
Free cash flow, $m
  56
  30
  31
  31
  32
  32
  33
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
Issuance/(repayment) of debt, $m
  0
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
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  
  -1
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Total cash flow (excl. dividends), $m
  55
  32
  33
  34
  34
  35
  36
  37
  38
  40
  41
  43
  45
  46
  49
  51
  53
  56
  58
  61
  64
  67
  71
  74
  78
  82
  86
  91
  96
  101
  106
Retained Cash Flow (-), $m
  61
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -24
  -25
Prev. year cash balance distribution, $m
 
  229
  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
 
  257
  29
  29
  29
  30
  30
  31
  31
  32
  33
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  77
  81
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
 
  247
  27
  25
  24
  23
  22
  21
  20
  18
  17
  16
  15
  14
  13
  12
  10
  9
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  1
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
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FutureFuel Corp., through its subsidiaries, manufactures and sells diversified chemical products, bio-based products, and bio-based specialty chemical products in the United States and internationally. It operates in two segments, Chemicals and Biofuels. The Chemicals segment manufactures and sells custom chemicals, including agrochemicals and intermediates, detergent additives, biocides intermediates, specialty polymers, dyes, stabilizers, and chemicals intermediates; and chemicals used in consumer products consisting of cosmetics and personal care products, specialty polymers, and specialty products used in the fuels industry. This segment also offers performance chemicals, such as polymer modifiers that enhance stain resistance and dye-ability to nylon and polyester fibers; various small-volume specialty chemicals and solvents for a range of applications; and a family of acetal based solvents, including diethoxymethane, dimethoxymethane, dibutoxymethane, glycerol formal, and phenol sulfonic acid. Its chemical products are used in various markets and end uses comprising detergent, agrochemical, automotive, oil and gas, coatings, nutrition, and polymer additives. The Biofuels segment produces and sells biodiesel. It also sells petrodiesel in blends; and engages in buying, selling, and shipping refined petroleum products on common carrier pipelines. This segment markets its biodiesel products directly to customers through railcars, tank trucks, and barges in the United States. The company was formerly known as Viceroy Acquisition Corporation and changed its name to FutureFuel Corp. in October 2006. FutureFuel Corp. was incorporated in 2005 and is headquartered in Clayton, Missouri.

FINANCIAL RATIOS  of  FutureFuel (FF)

Valuation Ratios
P/E Ratio 11.5
Price to Sales 2.5
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 7.5
Growth Rates
Sales Growth Rate -15.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.6%
Cap. Spend. - 3 Yr. Gr. Rate -23.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 14.3%
Return On Equity 15.4%
Return On Equity - 3 Yr. Avg. 14.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 18.6%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin 20.6%
EBITDA Margin - 3 Yr. Avg. 21.1%
Operating Margin 14.2%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 16.2%
Pre-Tax Margin - 3 Yr. Avg. 17.7%
Net Profit Margin 22.1%
Net Profit Margin - 3 Yr. Avg. 17.7%
Effective Tax Rate -36.6%
Eff/ Tax Rate - 3 Yr. Avg. -1.4%
Payout Ratio 17.9%

FF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FF stock intrinsic value calculation we used $300 million for the last fiscal year's total revenue generated by FutureFuel. The default revenue input number comes from 2016 income statement of FutureFuel. 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 FF 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 4.3%, whose default value for FF is calculated based on our internal credit rating of FutureFuel, 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 FutureFuel.
    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 FF stock the variable cost ratio is equal to 78.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17 million in the base year in the intrinsic value calculation for FF 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 FutureFuel.

Corporate tax rate of 27% is the nominal tax rate for FutureFuel. 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 FF 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 FF are equal to 42%.

Life of production assets of 12.6 years is the average useful life of capital assets used in FutureFuel 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 FF is equal to 27.3%. 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 - $394 million for FutureFuel - 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 42.222 million for FutureFuel 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 FutureFuel at the current share price and the inputted number of shares is $0.6 billion.


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COMPANY NEWS

▶ ETFs with exposure to FutureFuel Corp. : June 19, 2017   [Jun-19-17 03:20PM  Capital Cube]
▶ FutureFuel Corp. Value Analysis (NYSE:FF) : May 19, 2017   [May-19-17 02:26PM  Capital Cube]
▶ FutureFuel posts 1Q profit   [May-09-17 05:24PM  Associated Press]
▶ ETFs with exposure to FutureFuel Corp. : April 25, 2017   [Apr-25-17 03:33PM  Capital Cube]
▶ FutureFuel posts 4Q profit   [Mar-16-17 04:16PM  Associated Press]
▶ FutureFuel Releases 2016 Results   [04:01PM  GlobeNewswire]
▶ Is FutureFuel Corp. (FF) Worthy of Your Portfolio?   [Dec-10-16 03:36PM  at Insider Monkey]
▶ 2 chemical stocks to buy and 2 to sell   [Nov-27-16 08:04AM  at MarketWatch]
Stock chart of FF Financial statements of FF Annual reports of FF
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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