Intrinsic value of Fuling Global - FORK

Previous Close

$4.05

  Intrinsic Value

$7.50

stock screener

  Rating & Target

str. buy

+85%

Previous close

$4.05

 
Intrinsic value

$7.50

 
Up/down potential

+85%

 
Rating

str. buy

We calculate the intrinsic value of FORK 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 0.1

 

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, %
  15.38
  24.00
  22.10
  20.39
  18.85
  17.47
  16.22
  15.10
  14.09
  13.18
  12.36
  11.62
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.10
  5.99
  5.89
Revenue, $m
  105
  130
  159
  191
  227
  267
  311
  357
  408
  462
  519
  579
  642
  709
  779
  851
  927
  1,006
  1,088
  1,174
  1,263
  1,355
  1,451
  1,551
  1,654
  1,762
  1,874
  1,991
  2,112
  2,239
  2,371
Variable operating expenses, $m
 
  118
  144
  173
  206
  242
  281
  323
  369
  418
  469
  524
  581
  642
  705
  770
  839
  911
  985
  1,062
  1,143
  1,226
  1,313
  1,403
  1,497
  1,595
  1,696
  1,802
  1,912
  2,026
  2,146
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
  96
  118
  144
  173
  206
  242
  281
  323
  369
  418
  469
  524
  581
  642
  705
  770
  839
  911
  985
  1,062
  1,143
  1,226
  1,313
  1,403
  1,497
  1,595
  1,696
  1,802
  1,912
  2,026
  2,146
Operating income, $m
  9
  12
  15
  18
  22
  25
  30
  34
  39
  44
  49
  55
  61
  67
  74
  81
  88
  96
  103
  112
  120
  129
  138
  147
  157
  167
  178
  189
  201
  213
  225
EBITDA, $m
  12
  14
  17
  20
  24
  28
  33
  38
  43
  49
  55
  61
  68
  75
  82
  90
  98
  106
  115
  124
  133
  143
  153
  163
  174
  186
  198
  210
  223
  236
  250
Interest expense (income), $m
  1
  1
  1
  2
  2
  3
  4
  5
  6
  6
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
Earnings before tax, $m
  10
  12
  14
  16
  19
  22
  26
  29
  33
  37
  42
  46
  51
  56
  62
  67
  73
  79
  86
  92
  99
  106
  113
  121
  129
  137
  146
  155
  164
  174
  184
Tax expense, $m
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
Net income, $m
  8
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  34
  37
  41
  45
  49
  53
  58
  62
  67
  72
  77
  83
  88
  94
  100
  107
  113
  120
  127
  134

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  94
  109
  133
  160
  191
  224
  260
  300
  342
  387
  435
  485
  538
  594
  653
  714
  777
  843
  912
  984
  1,058
  1,136
  1,216
  1,300
  1,387
  1,477
  1,571
  1,669
  1,771
  1,877
  1,987
Adjusted assets (=assets-cash), $m
  88
  109
  133
  160
  191
  224
  260
  300
  342
  387
  435
  485
  538
  594
  653
  714
  777
  843
  912
  984
  1,058
  1,136
  1,216
  1,300
  1,387
  1,477
  1,571
  1,669
  1,771
  1,877
  1,987
Revenue / Adjusted assets
  1.193
  1.193
  1.195
  1.194
  1.188
  1.192
  1.196
  1.190
  1.193
  1.194
  1.193
  1.194
  1.193
  1.194
  1.193
  1.192
  1.193
  1.193
  1.193
  1.193
  1.194
  1.193
  1.193
  1.193
  1.193
  1.193
  1.193
  1.193
  1.193
  1.193
  1.193
Average production assets, $m
  6
  7
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  33
  37
  40
  44
  48
  52
  57
  61
  66
  70
  75
  81
  86
  92
  97
  104
  110
  116
  123
Working capital, $m
  6
  25
  30
  36
  43
  51
  59
  68
  77
  88
  99
  110
  122
  135
  148
  162
  176
  191
  207
  223
  240
  257
  276
  295
  314
  335
  356
  378
  401
  425
  450
Total debt, $m
  21
  24
  35
  47
  60
  75
  91
  109
  127
  147
  169
  191
  215
  239
  265
  292
  320
  350
  380
  412
  445
  479
  515
  552
  590
  630
  672
  715
  760
  807
  856
Total liabilities, $m
  45
  48
  59
  71
  84
  99
  115
  133
  151
  171
  193
  215
  239
  263
  289
  316
  344
  374
  404
  436
  469
  503
  539
  576
  614
  654
  696
  739
  784
  831
  880
Total equity, $m
  49
  61
  74
  89
  106
  125
  145
  167
  190
  215
  242
  270
  300
  331
  363
  397
  433
  470
  508
  548
  590
  633
  677
  724
  772
  823
  875
  930
  986
  1,045
  1,107
Total liabilities and equity, $m
  94
  109
  133
  160
  190
  224
  260
  300
  341
  386
  435
  485
  539
  594
  652
  713
  777
  844
  912
  984
  1,059
  1,136
  1,216
  1,300
  1,386
  1,477
  1,571
  1,669
  1,770
  1,876
  1,987
Debt-to-equity ratio
  0.429
  0.400
  0.470
  0.530
  0.570
  0.600
  0.630
  0.650
  0.670
  0.680
  0.700
  0.710
  0.720
  0.720
  0.730
  0.730
  0.740
  0.740
  0.750
  0.750
  0.750
  0.760
  0.760
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
Adjusted equity ratio
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  34
  37
  41
  45
  49
  53
  58
  62
  67
  72
  77
  83
  88
  94
  100
  107
  113
  120
  127
  134
Depreciation, amort., depletion, $m
  3
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
Funds from operations, $m
  -1
  10
  12
  14
  16
  19
  22
  25
  28
  32
  36
  40
  44
  49
  53
  58
  63
  68
  74
  79
  85
  91
  98
  104
  111
  119
  126
  134
  142
  150
  159
Change in working capital, $m
  -6
  5
  5
  6
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  5
  5
  6
  8
  10
  12
  14
  16
  19
  22
  25
  28
  32
  36
  40
  44
  49
  53
  58
  63
  68
  74
  80
  86
  92
  98
  105
  112
  119
  126
  134
Maintenance CAPEX, $m
  0
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
New CAPEX, $m
  -6
  -1
  -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
Cash from investing activities, $m
  -24
  -2
  -2
  -4
  -4
  -4
  -5
  -5
  -7
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -29
  -30
Free cash flow, $m
  -19
  3
  3
  4
  6
  7
  9
  11
  13
  15
  17
  20
  23
  26
  29
  32
  36
  40
  43
  47
  52
  56
  61
  65
  70
  75
  81
  86
  92
  98
  104
Issuance/(repayment) of debt, $m
  8
  9
  11
  12
  13
  15
  16
  17
  19
  20
  21
  22
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
Issuance/(repurchase) of shares, $m
  0
  3
  3
  3
  3
  2
  1
  1
  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  
  8
  12
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
Total cash flow (excl. dividends), $m
  -12
  15
  17
  20
  22
  24
  26
  28
  31
  35
  38
  42
  46
  50
  55
  59
  64
  69
  74
  79
  85
  90
  96
  102
  109
  115
  122
  129
  137
  145
  153
Retained Cash Flow (-), $m
  -6
  -12
  -13
  -15
  -17
  -19
  -20
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -62
Prev. year cash balance distribution, $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 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
  4
  5
  5
  6
  6
  7
  8
  10
  12
  14
  17
  19
  22
  25
  29
  32
  36
  39
  43
  47
  51
  56
  60
  65
  70
  75
  80
  86
  91
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
 
  3
  4
  4
  4
  4
  4
  4
  5
  6
  6
  7
  7
  7
  7
  7
  7
  7
  7
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  95.1
  91.2
  88.3
  86.3
  84.9
  84.1
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9

Fuling Global Inc. is a holding company, which operates through its subsidiaries in the People's Republic of China and the United States. The Company is a specialized production and distribution company for environmentally friendly plastic serviceware with customers from the United States and European countries. It conducts its operations in China and the United States through its subsidiary, Taizhou Fuling Plastics Co., Ltd., and its subsidiaries. Its products are exported to the United States and Europe, and are sold to fast food chains and wholesalers. Its customers are dealers, quick service restaurants, manufacturers and retailers. Its products consist of serviceware, which includes cutlery, drinking straws, cups and plates. It focuses on various biodegradable materials, including polybutylene succinate, polylactic acid and cellulose. Its primary product category is disposable cutlery, which includes forks, knives, spoons, general, and specialized and multipurpose utensils.

FINANCIAL RATIOS  of  Fuling Global (FORK)

Valuation Ratios
P/E Ratio 8
Price to Sales 0.6
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow -63.8
Growth Rates
Sales Growth Rate 15.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.3%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 2%
Total Debt to Equity 42.9%
Interest Coverage 11
Management Effectiveness
Return On Assets 10.4%
Ret/ On Assets - 3 Yr. Avg. 12.8%
Return On Total Capital 12.2%
Ret/ On T. Cap. - 3 Yr. Avg. 15.4%
Return On Equity 17.4%
Return On Equity - 3 Yr. Avg. 30.2%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 23.8%
Gross Margin - 3 Yr. Avg. 25.6%
EBITDA Margin 13.3%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 8.6%
Oper. Margin - 3 Yr. Avg. 9.8%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 10.1%
Net Profit Margin 7.6%
Net Profit Margin - 3 Yr. Avg. 8.3%
Effective Tax Rate 20%
Eff/ Tax Rate - 3 Yr. Avg. 14.1%
Payout Ratio 0%

FORK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FORK stock intrinsic value calculation we used $105 million for the last fiscal year's total revenue generated by Fuling Global. The default revenue input number comes from 2016 income statement of Fuling Global. 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 FORK stock valuation model: a) initial revenue growth rate of 24% 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 FORK is calculated based on our internal credit rating of Fuling Global, 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 Fuling Global.
    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 FORK 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 FORK 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 5.1% for Fuling Global.

Corporate tax rate of 27% is the nominal tax rate for Fuling Global. 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 FORK 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 FORK are equal to 5.2%.

Life of production assets of 1.8 years is the average useful life of capital assets used in Fuling Global 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 FORK is equal to 19%. 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 - $49 million for Fuling Global - 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 15.756 million for Fuling Global 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 Fuling Global at the current share price and the inputted number of shares is $0.1 billion.

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Financial statements of FORK
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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