Intrinsic value of Federal Signal - FSS

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$15.38

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$15.38

 
Intrinsic value

$2,252

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of FSS 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 0.9

 

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, %
  -7.81
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  708
  1,133
  1,750
  2,617
  3,798
  5,358
  7,366
  9,887
  12,983
  16,706
  21,101
  26,202
  32,035
  38,612
  45,941
  54,019
  62,837
  72,383
  82,641
  93,595
  105,229
  117,526
  130,476
  144,066
  158,292
  173,151
  188,646
  204,782
  221,570
  239,026
  257,170
Variable operating expenses, $m
 
  250
  373
  546
  781
  1,093
  1,493
  1,996
  2,614
  3,357
  4,234
  5,228
  6,392
  7,704
  9,166
  10,778
  12,538
  14,442
  16,489
  18,675
  20,996
  23,450
  26,033
  28,745
  31,583
  34,548
  37,640
  40,859
  44,209
  47,692
  51,312
Fixed operating expenses, $m
 
  510
  523
  536
  550
  563
  578
  592
  607
  622
  637
  653
  670
  686
  704
  721
  739
  758
  777
  796
  816
  836
  857
  879
  901
  923
  946
  970
  994
  1,019
  1,045
Total operating expenses, $m
  651
  760
  896
  1,082
  1,331
  1,656
  2,071
  2,588
  3,221
  3,979
  4,871
  5,881
  7,062
  8,390
  9,870
  11,499
  13,277
  15,200
  17,266
  19,471
  21,812
  24,286
  26,890
  29,624
  32,484
  35,471
  38,586
  41,829
  45,203
  48,711
  52,357
Operating income, $m
  57
  373
  854
  1,535
  2,467
  3,702
  5,295
  7,299
  9,762
  12,727
  16,229
  20,321
  24,973
  30,222
  36,071
  42,519
  49,560
  57,183
  65,375
  74,124
  83,417
  93,241
  103,585
  114,443
  125,808
  137,680
  150,060
  162,953
  176,367
  190,315
  204,813
EBITDA, $m
  76
  402
  886
  1,572
  2,509
  3,752
  5,355
  7,372
  9,850
  12,833
  16,358
  20,451
  25,132
  30,414
  36,299
  42,788
  49,872
  57,542
  65,786
  74,589
  83,940
  93,824
  104,233
  115,158
  126,594
  138,540
  150,997
  163,970
  177,468
  191,503
  206,091
Interest expense (income), $m
  1
  2
  7
  15
  26
  40
  59
  84
  115
  153
  198
  252
  315
  386
  467
  557
  656
  764
  881
  1,007
  1,141
  1,284
  1,435
  1,593
  1,760
  1,934
  2,117
  2,307
  2,504
  2,710
  2,924
Earnings before tax, $m
  57
  370
  847
  1,520
  2,441
  3,662
  5,236
  7,215
  9,647
  12,574
  16,031
  20,068
  24,658
  29,835
  35,604
  41,962
  48,904
  56,419
  64,494
  73,118
  82,276
  91,957
  102,150
  112,849
  124,048
  135,746
  147,943
  160,646
  173,863
  187,605
  201,889
Tax expense, $m
  18
  100
  229
  410
  659
  989
  1,414
  1,948
  2,605
  3,395
  4,328
  5,418
  6,658
  8,056
  9,613
  11,330
  13,204
  15,233
  17,413
  19,742
  22,214
  24,828
  27,581
  30,469
  33,493
  36,651
  39,945
  43,374
  46,943
  50,653
  54,510
Net income, $m
  44
  270
  618
  1,110
  1,782
  2,673
  3,822
  5,267
  7,042
  9,179
  11,703
  14,650
  18,001
  21,780
  25,991
  30,633
  35,700
  41,186
  47,081
  53,376
  60,061
  67,128
  74,570
  82,380
  90,555
  99,094
  107,998
  117,272
  126,920
  136,952
  147,379

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  51
  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
  643
  947
  1,463
  2,188
  3,175
  4,480
  6,159
  8,267
  10,855
  13,968
  17,643
  21,908
  26,785
  32,285
  38,412
  45,166
  52,539
  60,521
  69,098
  78,257
  87,984
  98,266
  109,093
  120,457
  132,351
  144,775
  157,731
  171,222
  185,259
  199,855
  215,025
Adjusted assets (=assets-cash), $m
  592
  947
  1,463
  2,188
  3,175
  4,480
  6,159
  8,267
  10,855
  13,968
  17,643
  21,908
  26,785
  32,285
  38,412
  45,166
  52,539
  60,521
  69,098
  78,257
  87,984
  98,266
  109,093
  120,457
  132,351
  144,775
  157,731
  171,222
  185,259
  199,855
  215,025
Revenue / Adjusted assets
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
  1.196
Average production assets, $m
  53
  85
  131
  196
  285
  402
  552
  742
  974
  1,253
  1,583
  1,965
  2,403
  2,896
  3,446
  4,051
  4,713
  5,429
  6,198
  7,020
  7,892
  8,814
  9,786
  10,805
  11,872
  12,986
  14,148
  15,359
  16,618
  17,927
  19,288
Working capital, $m
  175
  201
  310
  463
  672
  948
  1,304
  1,750
  2,298
  2,957
  3,735
  4,638
  5,670
  6,834
  8,132
  9,561
  11,122
  12,812
  14,627
  16,566
  18,625
  20,802
  23,094
  25,500
  28,018
  30,648
  33,390
  36,246
  39,218
  42,308
  45,519
Total debt, $m
  64
  212
  428
  732
  1,145
  1,692
  2,396
  3,279
  4,363
  5,668
  7,207
  8,994
  11,038
  13,342
  15,910
  18,740
  21,829
  25,173
  28,767
  32,605
  36,680
  40,989
  45,525
  50,286
  55,270
  60,476
  65,904
  71,557
  77,439
  83,554
  89,910
Total liabilities, $m
  249
  397
  613
  917
  1,330
  1,877
  2,581
  3,464
  4,548
  5,853
  7,392
  9,179
  11,223
  13,527
  16,095
  18,925
  22,014
  25,358
  28,952
  32,790
  36,865
  41,174
  45,710
  50,471
  55,455
  60,661
  66,089
  71,742
  77,624
  83,739
  90,095
Total equity, $m
  394
  550
  850
  1,271
  1,845
  2,603
  3,578
  4,803
  6,307
  8,115
  10,250
  12,729
  15,562
  18,757
  22,318
  26,241
  30,525
  35,162
  40,146
  45,467
  51,119
  57,093
  63,383
  69,985
  76,896
  84,115
  91,641
  99,480
  107,636
  116,116
  124,930
Total liabilities and equity, $m
  643
  947
  1,463
  2,188
  3,175
  4,480
  6,159
  8,267
  10,855
  13,968
  17,642
  21,908
  26,785
  32,284
  38,413
  45,166
  52,539
  60,520
  69,098
  78,257
  87,984
  98,267
  109,093
  120,456
  132,351
  144,776
  157,730
  171,222
  185,260
  199,855
  215,025
Debt-to-equity ratio
  0.162
  0.380
  0.500
  0.580
  0.620
  0.650
  0.670
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.710
  0.710
  0.710
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
Adjusted equity ratio
  0.579
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  270
  618
  1,110
  1,782
  2,673
  3,822
  5,267
  7,042
  9,179
  11,703
  14,650
  18,001
  21,780
  25,991
  30,633
  35,700
  41,186
  47,081
  53,376
  60,061
  67,128
  74,570
  82,380
  90,555
  99,094
  107,998
  117,272
  126,920
  136,952
  147,379
Depreciation, amort., depletion, $m
  19
  29
  32
  37
  43
  50
  60
  73
  88
  107
  129
  130
  159
  192
  228
  268
  312
  360
  410
  465
  523
  584
  648
  716
  786
  860
  937
  1,017
  1,101
  1,187
  1,277
Funds from operations, $m
  -15
  300
  650
  1,146
  1,824
  2,723
  3,882
  5,340
  7,131
  9,286
  11,831
  14,780
  18,160
  21,972
  26,219
  30,901
  36,012
  41,545
  47,491
  53,841
  60,584
  67,712
  75,218
  83,095
  91,341
  99,954
  108,935
  118,289
  128,020
  138,139
  148,656
Change in working capital, $m
  -40
  75
  109
  153
  209
  276
  355
  446
  548
  659
  778
  903
  1,032
  1,164
  1,297
  1,430
  1,561
  1,690
  1,816
  1,939
  2,059
  2,177
  2,292
  2,406
  2,518
  2,630
  2,742
  2,856
  2,972
  3,090
  3,211
Cash from operations, $m
  25
  225
  541
  993
  1,616
  2,447
  3,527
  4,894
  6,583
  8,627
  11,053
  13,877
  17,127
  20,807
  24,922
  29,471
  34,451
  39,855
  45,675
  51,902
  58,525
  65,535
  72,926
  80,690
  88,823
  97,324
  106,193
  115,433
  125,049
  135,049
  145,445
Maintenance CAPEX, $m
  0
  -4
  -6
  -9
  -13
  -19
  -27
  -37
  -49
  -64
  -83
  -105
  -130
  -159
  -192
  -228
  -268
  -312
  -360
  -410
  -465
  -523
  -584
  -648
  -716
  -786
  -860
  -937
  -1,017
  -1,101
  -1,187
New CAPEX, $m
  -6
  -32
  -46
  -65
  -89
  -117
  -151
  -189
  -232
  -279
  -330
  -383
  -437
  -493
  -550
  -606
  -661
  -716
  -769
  -822
  -873
  -922
  -971
  -1,019
  -1,067
  -1,114
  -1,162
  -1,210
  -1,259
  -1,309
  -1,361
Cash from investing activities, $m
  -17
  -36
  -52
  -74
  -102
  -136
  -178
  -226
  -281
  -343
  -413
  -488
  -567
  -652
  -742
  -834
  -929
  -1,028
  -1,129
  -1,232
  -1,338
  -1,445
  -1,555
  -1,667
  -1,783
  -1,900
  -2,022
  -2,147
  -2,276
  -2,410
  -2,548
Free cash flow, $m
  8
  189
  489
  919
  1,514
  2,311
  3,350
  4,668
  6,301
  8,283
  10,641
  13,390
  16,560
  20,155
  24,181
  28,637
  33,522
  38,827
  44,547
  50,670
  57,187
  64,090
  71,371
  79,023
  87,041
  95,424
  104,171
  113,285
  122,772
  132,639
  142,897
Issuance/(repayment) of debt, $m
  20
  149
  216
  304
  414
  547
  703
  883
  1,084
  1,304
  1,540
  1,787
  2,043
  2,304
  2,568
  2,830
  3,089
  3,344
  3,594
  3,838
  4,076
  4,308
  4,537
  4,761
  4,984
  5,206
  5,428
  5,653
  5,882
  6,116
  6,356
Issuance/(repurchase) of shares, $m
  -41
  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  
  -19
  149
  216
  304
  414
  547
  703
  883
  1,084
  1,304
  1,540
  1,787
  2,043
  2,304
  2,568
  2,830
  3,089
  3,344
  3,594
  3,838
  4,076
  4,308
  4,537
  4,761
  4,984
  5,206
  5,428
  5,653
  5,882
  6,116
  6,356
Total cash flow (excl. dividends), $m
  -13
  338
  706
  1,223
  1,928
  2,858
  4,053
  5,551
  7,386
  9,587
  12,180
  15,177
  18,603
  22,459
  26,748
  31,467
  36,611
  42,172
  48,140
  54,507
  61,263
  68,399
  75,908
  83,784
  92,025
  100,629
  109,599
  118,938
  128,654
  138,755
  149,253
Retained Cash Flow (-), $m
  12
  -206
  -300
  -421
  -573
  -758
  -975
  -1,225
  -1,504
  -1,809
  -2,135
  -2,478
  -2,833
  -3,195
  -3,560
  -3,924
  -4,284
  -4,637
  -4,983
  -5,321
  -5,651
  -5,974
  -6,291
  -6,602
  -6,911
  -7,218
  -7,527
  -7,839
  -8,156
  -8,480
  -8,814
Prev. year cash balance distribution, $m
 
  50
  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
 
  182
  406
  802
  1,354
  2,100
  3,078
  4,326
  5,882
  7,779
  10,045
  12,699
  15,770
  19,264
  23,188
  27,543
  32,327
  37,534
  43,157
  49,186
  55,612
  62,425
  69,617
  77,182
  85,114
  93,411
  102,072
  111,100
  120,498
  130,275
  140,439
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
 
  174
  371
  698
  1,115
  1,628
  2,234
  2,923
  3,676
  4,469
  5,266
  6,030
  6,730
  7,325
  7,785
  8,086
  8,215
  8,167
  7,948
  7,573
  7,067
  6,457
  5,776
  5,059
  4,335
  3,634
  2,978
  2,385
  1,864
  1,422
  1,057
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

Federal Signal Corporation designs and manufactures a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers primarily in the United States, Europe, and Canada. It operates in two segments, Environmental Solutions Group and Safety and Security Systems Group. The Environmental Solutions Group segment manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks, and water blasting equipment under the Elgin, Vactor, Guzzler, and Jetstream brand names. This segment also engages in the sale of parts, service and repair, equipment rentals, and training under the FS Solutions brand. The Safety and Security Systems Group segment provides systems and products for campus and community alerting, emergency vehicles, first responder interoperable communications, and industrial communications, as well as command and municipal networked security. This segment sells its products primarily under the Federal Signal, Federal Signal VAMA, and Victor brand names. The company sells its products through dealers, direct sales, and wholesalers and distributors, as well as independent foreign distributors. Federal Signal Corporation was founded in 1901 and is headquartered in Oak Brook, Illinois.

FINANCIAL RATIOS  of  Federal Signal (FSS)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 1.3
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 36.7
Price to Free Cash Flow 48.2
Growth Rates
Sales Growth Rate -7.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 51
Current Ratio 0
LT Debt to Equity 16%
Total Debt to Equity 16.2%
Interest Coverage 58
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 9.7%
Ret/ On T. Cap. - 3 Yr. Avg. 13.1%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 15.1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 25.8%
Gross Margin - 3 Yr. Avg. 27.4%
EBITDA Margin 10.9%
EBITDA Margin - 3 Yr. Avg. 12.8%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 11%
Pre-Tax Margin 8.1%
Pre-Tax Margin - 3 Yr. Avg. 10.6%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.1%
Payout Ratio 38.6%

FSS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FSS stock intrinsic value calculation we used $708 million for the last fiscal year's total revenue generated by Federal Signal. The default revenue input number comes from 2016 income statement of Federal Signal. 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 FSS stock valuation model: a) initial revenue growth rate of 60% 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 FSS is calculated based on our internal credit rating of Federal Signal, 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 Federal Signal.
    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 FSS stock the variable cost ratio is equal to 23.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $498 million in the base year in the intrinsic value calculation for FSS 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 Federal Signal.

Corporate tax rate of 27% is the nominal tax rate for Federal Signal. 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 FSS 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 FSS are equal to 7.5%.

Life of production assets of 15.1 years is the average useful life of capital assets used in Federal Signal 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 FSS is equal to 17.7%. 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 Federal Signal - 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 59.852 million for Federal Signal 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 Federal Signal at the current share price and the inputted number of shares is $0.9 billion.


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COMPANY NEWS

▶ Federal Signal beats 1Q profit forecasts   [Apr-27-17 08:54AM  Associated Press]
▶ Federal Signal meets 4Q profit forecasts   [08:51AM  Associated Press]
Stock chart of FSS Financial statements of FSS
Valuation of Stocks

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