Intrinsic value of Flexible Solutions International - FSI

Previous Close

$1.70

  Intrinsic Value

$0.26

stock screener

  Rating & Target

str. sell

-85%

Previous close

$1.70

 
Intrinsic value

$0.26

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of FSI 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, %
  0.00
  25.00
  23.00
  21.20
  19.58
  18.12
  16.81
  15.63
  14.57
  13.61
  12.75
  11.97
  11.28
  10.65
  10.08
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
Revenue, $m
  16
  20
  25
  30
  36
  42
  49
  57
  65
  74
  83
  93
  104
  115
  127
  139
  151
  165
  178
  193
  208
  223
  239
  256
  273
  291
  310
  329
  349
  371
  393
Variable operating expenses, $m
 
  18
  22
  26
  31
  37
  43
  50
  57
  65
  73
  82
  91
  101
  111
  121
  133
  144
  156
  169
  182
  195
  209
  224
  239
  255
  271
  288
  306
  324
  343
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
  13
  18
  22
  26
  31
  37
  43
  50
  57
  65
  73
  82
  91
  101
  111
  121
  133
  144
  156
  169
  182
  195
  209
  224
  239
  255
  271
  288
  306
  324
  343
Operating income, $m
  3
  3
  3
  4
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
EBITDA, $m
  4
  4
  4
  5
  6
  7
  9
  10
  11
  13
  15
  16
  18
  20
  22
  24
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
Earnings before tax, $m
  3
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  27
  28
  30
  33
  35
  37
  39
  42
  44
  47
Tax expense, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
Net income, $m
  2
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  15
  16
  20
  24
  29
  34
  40
  46
  53
  60
  68
  76
  84
  93
  103
  113
  123
  134
  145
  157
  169
  181
  194
  208
  222
  236
  252
  267
  284
  301
  319
Adjusted assets (=assets-cash), $m
  13
  16
  20
  24
  29
  34
  40
  46
  53
  60
  68
  76
  84
  93
  103
  113
  123
  134
  145
  157
  169
  181
  194
  208
  222
  236
  252
  267
  284
  301
  319
Revenue / Adjusted assets
  1.231
  1.250
  1.250
  1.250
  1.241
  1.235
  1.225
  1.239
  1.226
  1.233
  1.221
  1.224
  1.238
  1.237
  1.233
  1.230
  1.228
  1.231
  1.228
  1.229
  1.231
  1.232
  1.232
  1.231
  1.230
  1.233
  1.230
  1.232
  1.229
  1.233
  1.232
Average production assets, $m
  4
  5
  6
  7
  9
  11
  12
  14
  16
  19
  21
  23
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  93
  98
Working capital, $m
  7
  6
  8
  9
  11
  13
  15
  18
  20
  23
  26
  29
  33
  36
  40
  43
  47
  52
  56
  60
  65
  70
  75
  80
  85
  91
  97
  103
  109
  116
  123
Total debt, $m
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
Total liabilities, $m
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
Total equity, $m
  12
  12
  15
  19
  22
  26
  31
  36
  41
  46
  52
  58
  65
  72
  79
  87
  95
  103
  111
  120
  130
  139
  149
  160
  170
  182
  193
  206
  218
  231
  245
Total liabilities and equity, $m
  15
  16
  20
  25
  29
  34
  40
  47
  53
  60
  68
  76
  85
  94
  103
  113
  123
  134
  144
  156
  169
  181
  194
  208
  221
  237
  251
  268
  284
  301
  319
Debt-to-equity ratio
  0.083
  0.140
  0.170
  0.190
  0.210
  0.220
  0.240
  0.240
  0.250
  0.260
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
Adjusted equity ratio
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  15
  16
  17
  19
  20
Funds from operations, $m
  1
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  21
  23
  24
  26
  28
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
Change in working capital, $m
  -1
  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 operations, $m
  2
  2
  2
  3
  3
  4
  5
  5
  6
  7
  9
  10
  11
  12
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -19
New CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Cash from investing activities, $m
  0
  -2
  -2
  -2
  -2
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -20
  -20
  -21
  -22
  -25
Free cash flow, $m
  2
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  8
  9
  10
  11
  13
  14
  15
  16
  17
  19
  20
  21
  23
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Issuance/(repurchase) of shares, $m
  -2
  1
  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
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2
  2
  2
  2
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Total cash flow (excl. dividends), $m
  0
  1
  1
  2
  2
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
Retained Cash Flow (-), $m
  0
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
Prev. year cash balance distribution, $m
 
  2
  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
 
  1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  0
  0
  1
  1
  2
  2
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
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
 
  1
  -1
  -1
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  95.9
  92.8
  90.6
  89.2
  88.5
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3
  88.3

Flexible Solutions International, Inc. develops, manufactures and markets specialty chemicals, which slow the evaporation of water. The Company operates through two segments: Energy and water conservation products (EWCP), and Biodegradable polymers (BCPAs). The Company's Energy and water conservation products segment consists of liquid swimming pool blanket, which saves energy and water by inhibiting evaporation from the pool surface, and food-safe powdered form of the active ingredient within the liquid blanket, which is designed to be used in still or slow moving drinking water sources. The Company's Biodegradable polymers products are used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. In addition to the water conservation products, the Company also manufactures and markets water-soluble chemicals utilizing thermal polyaspartate biopolymers (TPAs).

FINANCIAL RATIOS  of  Flexible Solutions International (FSI)

Valuation Ratios
P/E Ratio 9.7
Price to Sales 1.2
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 9.7
Growth Rates
Sales Growth Rate 0%
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 NaN
Current Ratio 0
LT Debt to Equity 8.3%
Total Debt to Equity 8.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.8%
Ret/ On Assets - 3 Yr. Avg. 9.4%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 10.3%
Return On Equity 16.7%
Return On Equity - 3 Yr. Avg. 11.4%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 43.8%
Gross Margin - 3 Yr. Avg. 37.5%
EBITDA Margin 25%
EBITDA Margin - 3 Yr. Avg. 18.8%
Operating Margin 18.8%
Oper. Margin - 3 Yr. Avg. 12.5%
Pre-Tax Margin 18.8%
Pre-Tax Margin - 3 Yr. Avg. 12.5%
Net Profit Margin 12.5%
Net Profit Margin - 3 Yr. Avg. 8.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 44.4%
Payout Ratio 0%

FSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FSI stock intrinsic value calculation we used $16 million for the last fiscal year's total revenue generated by Flexible Solutions International. The default revenue input number comes from 2016 income statement of Flexible Solutions International. 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 FSI stock valuation model: a) initial revenue growth rate of 25% 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 FSI is calculated based on our internal credit rating of Flexible Solutions International, 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 Flexible Solutions International.
    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 FSI stock the variable cost ratio is equal to 87.5%.

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 FSI 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 Flexible Solutions International.

Corporate tax rate of 27% is the nominal tax rate for Flexible Solutions International. 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 FSI 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 FSI are equal to 25%.

Life of production assets of 4 years is the average useful life of capital assets used in Flexible Solutions International 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 FSI is equal to 31.3%. 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 - $12 million for Flexible Solutions International - 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 11.495 million for Flexible Solutions International 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 Flexible Solutions International at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ FSI Announces Third Quarter, 2017 Financial Results   [Nov-14-17 04:00PM  ACCESSWIRE]
▶ FSI Announces Second Quarter, 2017 Financial Results   [Aug-14-17 04:00PM  ACCESSWIRE]
▶ FSI Announces an Increase in Second Quarter Revenue   [Jul-19-17 09:30AM  Accesswire]
▶ FSI Announces First Quarter, 2017 Financial Results   [May-15-17 04:00PM  Accesswire]
▶ FSI Announces WaterSavr(TM) Sale to Brazil   [May-10-17 10:00AM  Accesswire]
▶ FSI Announces a Decrease in First Quarter Revenue   [Apr-27-17 04:00PM  Accesswire]
▶ 6 Stocks Trading Below Peter Lynch Value   [Apr-06-17 03:44PM  GuruFocus.com]
▶ FSI Fire at Taber Alberta Plant   [Feb-13-17 12:05AM  Accesswire]
▶ 7 Undervalued Stocks With Rising Prices   [Feb-07-17 06:31PM  GuruFocus.com]
▶ FSI Announces Second Quarter, 2016 Financial Results   [Aug-12-16 04:00PM  Accesswire]
▶ FSI Announces a Decrease in Second Quarter Revenue   [Jul-20-16 09:00AM  Accesswire]
▶ FSI Announces First Quarter 2016 Financial Results   [May-12-16 04:00PM  Accesswire]
▶ FSI Announces an Increase in First Quarter Revenue   [Apr-12-16 09:00AM  Accesswire]
▶ 10-Q for Flexible Solutions International, Inc.   [Aug-16  08:12PM  at Company Spotlight]
▶ 10-Q for Flexible Solutions International, Inc.   [May-17  08:11PM  at Company Spotlight]
Financial statements of FSI
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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