Intrinsic value of FutureFuel - FF

Previous Close

$14.49

  Intrinsic Value

$16.16

stock screener

  Rating & Target

hold

+12%

Previous close

$14.49

 
Intrinsic value

$16.16

 
Up/down potential

+12%

 
Rating

hold

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
  258
  264
  271
  278
  287
  296
  306
  317
  329
  341
  355
  369
  385
  401
  418
  437
  456
  477
  498
  521
  545
  571
  598
  626
  656
  687
  720
  755
  791
  830
Variable operating expenses, $m
 
  198
  202
  208
  214
  220
  227
  235
  243
  252
  262
  272
  283
  295
  308
  321
  335
  350
  366
  382
  400
  418
  438
  458
  480
  503
  527
  552
  579
  607
  637
Fixed operating expenses, $m
 
  25
  25
  26
  26
  27
  28
  29
  29
  30
  31
  31
  32
  33
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  46
  47
  48
  49
  50
Total operating expenses, $m
  217
  223
  227
  234
  240
  247
  255
  264
  272
  282
  293
  303
  315
  328
  342
  356
  371
  387
  403
  420
  439
  458
  479
  500
  523
  547
  573
  599
  627
  656
  687
Operating income, $m
  37
  36
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  57
  60
  63
  66
  70
  74
  78
  82
  87
  92
  97
  102
  108
  114
  121
  128
  135
  143
EBITDA, $m
  48
  47
  48
  49
  51
  52
  54
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  90
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  161
  170
  179
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
Earnings before tax, $m
  41
  36
  36
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  59
  62
  65
  68
  72
  75
  79
  84
  88
  93
  98
  104
  109
  115
  122
  128
Tax expense, $m
  -15
  10
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
Net income, $m
  56
  26
  26
  27
  28
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  58
  61
  64
  68
  72
  76
  80
  84
  89
  94

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
  229
  234
  240
  247
  254
  262
  271
  281
  291
  302
  314
  327
  341
  355
  371
  387
  404
  422
  441
  462
  483
  506
  529
  554
  581
  609
  638
  669
  701
  735
Adjusted assets (=assets-cash), $m
  224
  229
  234
  240
  247
  254
  262
  271
  281
  291
  302
  314
  327
  341
  355
  371
  387
  404
  422
  441
  462
  483
  506
  529
  554
  581
  609
  638
  669
  701
  735
Revenue / Adjusted assets
  1.129
  1.127
  1.128
  1.129
  1.126
  1.130
  1.130
  1.129
  1.128
  1.131
  1.129
  1.131
  1.128
  1.129
  1.130
  1.127
  1.129
  1.129
  1.130
  1.129
  1.128
  1.128
  1.128
  1.130
  1.130
  1.129
  1.128
  1.129
  1.129
  1.128
  1.129
Average production assets, $m
  123
  125
  128
  131
  135
  139
  143
  148
  153
  159
  165
  172
  179
  186
  194
  202
  211
  221
  231
  241
  252
  264
  276
  289
  303
  317
  333
  349
  365
  383
  402
Working capital, $m
  261
  -45
  -46
  -47
  -48
  -50
  -52
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -99
  -104
  -109
  -114
  -120
  -125
  -131
  -138
  -144
Total debt, $m
  0
  4
  9
  14
  20
  26
  33
  41
  50
  59
  69
  79
  90
  102
  115
  128
  142
  157
  173
  190
  208
  227
  246
  267
  289
  312
  337
  362
  389
  417
  447
Total liabilities, $m
  196
  200
  205
  210
  216
  222
  229
  237
  246
  255
  265
  275
  286
  298
  311
  324
  338
  353
  369
  386
  404
  423
  442
  463
  485
  508
  533
  558
  585
  613
  643
Total equity, $m
  333
  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 liabilities and equity, $m
  529
  229
  234
  240
  247
  254
  262
  271
  281
  291
  303
  314
  327
  341
  355
  370
  386
  403
  422
  441
  462
  483
  505
  529
  554
  581
  609
  638
  669
  701
  735
Debt-to-equity ratio
  0.000
  0.140
  0.290
  0.460
  0.640
  0.830
  1.020
  1.220
  1.420
  1.620
  1.820
  2.010
  2.210
  2.400
  2.590
  2.770
  2.950
  3.120
  3.290
  3.450
  3.600
  3.750
  3.900
  4.040
  4.170
  4.300
  4.420
  4.540
  4.650
  4.760
  4.870
Adjusted equity ratio
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  26
  26
  27
  28
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  58
  61
  64
  68
  72
  76
  80
  84
  89
  94
Depreciation, amort., depletion, $m
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
Funds from operations, $m
  113
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  78
  82
  86
  91
  95
  100
  106
  111
  117
  123
  130
Change in working capital, $m
  22
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
Cash from operations, $m
  91
  38
  39
  40
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  111
  117
  123
  130
  137
Maintenance CAPEX, $m
  0
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
New CAPEX, $m
  -5
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
Cash from investing activities, $m
  -35
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -22
  -23
  -25
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -44
  -46
  -48
  -51
  -54
Free cash flow, $m
  56
  25
  25
  25
  26
  26
  27
  28
  29
  30
  31
  32
  33
  35
  37
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
  71
  75
  79
  84
Issuance/(repayment) of debt, $m
  0
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
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
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
Total cash flow (excl. dividends), $m
  55
  29
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  67
  70
  74
  78
  82
  87
  92
  97
  102
  107
  113
Retained Cash Flow (-), $m
  61
  -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
Prev. year cash balance distribution, $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
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
 
  333
  29
  30
  31
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  58
  61
  64
  68
  71
  75
  79
  84
  88
  93
  98
  103
  109
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
 
  319
  26
  26
  25
  25
  24
  23
  22
  22
  21
  19
  18
  17
  16
  15
  13
  12
  11
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  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
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FutureFuel Corp. is the holding company of FutureFuel Chemical Company. FutureFuel Chemical Company manufactures diversified chemical products, bio-based products consisting of biofuels, and bio-based specialty chemical products. FutureFuel Chemical Company conducts its operations through two segments: chemicals and biofuels. The chemicals segment manufactures a diversified listing of chemical products that are sold to third-party customers. The biofuels segment primarily produces and sells biodiesel and petrodiesel blends to its customers. The biofuels segment also involves the buying, selling and shipping of refined petroleum products on common carrier pipelines. Custom chemicals manufacturing involves producing various products for strategic customers, generally under long-term contracts. Its products also include a family of acetal-based solvents, including diethoxymethane, dimethoxymethane, dibutoxymethane, glycerol formal and phenol sulfonic acid.

FINANCIAL RATIOS  of  FutureFuel (FF)

Valuation Ratios
P/E Ratio 11.3
Price to Sales 2.5
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow 7.4
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 $253 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 76.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $24 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 48.4%.

Life of production assets of 11.1 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 -17.4%. 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 - $333 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 43.75 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.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ FutureFuel posts 3Q profit   [Nov-09-17 05:49PM  Associated Press]
▶ ETFs with exposure to FutureFuel Corp. : October 23, 2017   [Oct-23-17 10:37AM  Capital Cube]
▶ ETFs with exposure to FutureFuel Corp. : October 10, 2017   [Oct-10-17 11:25AM  Capital Cube]
▶ All You Need To Know About FutureFuel Corps (FF) Risks   [Sep-20-17 02:15PM  Simply Wall St.]
▶ FutureFuel posts 2Q profit   [Aug-09-17 10:10PM  Associated Press]
▶ ETFs with exposure to FutureFuel Corp. : July 12, 2017   [Jul-12-17 02:31PM  Capital Cube]
▶ 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]
Financial statements 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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