Intrinsic value of Haynes International - HAYN

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$36.16

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$36.16

 
Intrinsic value

$7.71

 
Up/down potential

-79%

 
Rating

str. sell

 
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 HAYN 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 0.4

 

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, %
  -16.80
  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
  406
  414
  424
  435
  447
  460
  475
  491
  509
  528
  548
  570
  593
  617
  644
  671
  701
  732
  765
  800
  836
  875
  916
  959
  1,004
  1,052
  1,103
  1,156
  1,211
  1,270
  1,332
Variable operating expenses, $m
 
  192
  196
  201
  207
  213
  220
  227
  235
  244
  254
  263
  274
  285
  297
  310
  324
  338
  353
  369
  386
  404
  423
  443
  464
  486
  509
  534
  559
  586
  615
Fixed operating expenses, $m
 
  224
  230
  236
  242
  248
  254
  260
  267
  274
  280
  287
  295
  302
  309
  317
  325
  333
  342
  350
  359
  368
  377
  386
  396
  406
  416
  427
  437
  448
  459
Total operating expenses, $m
  402
  416
  426
  437
  449
  461
  474
  487
  502
  518
  534
  550
  569
  587
  606
  627
  649
  671
  695
  719
  745
  772
  800
  829
  860
  892
  925
  961
  996
  1,034
  1,074
Operating income, $m
  4
  -2
  -3
  -2
  -2
  -1
  1
  4
  7
  10
  14
  19
  25
  30
  37
  44
  52
  61
  70
  80
  91
  103
  116
  130
  145
  160
  177
  195
  215
  235
  257
EBITDA, $m
  26
  20
  20
  21
  22
  24
  27
  30
  34
  38
  43
  49
  56
  63
  71
  80
  89
  99
  110
  122
  135
  149
  164
  180
  197
  216
  235
  256
  279
  302
  328
Interest expense (income), $m
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
Earnings before tax, $m
  4
  -2
  -3
  -3
  -3
  -2
  -1
  1
  4
  7
  10
  15
  19
  25
  30
  37
  44
  52
  60
  69
  79
  90
  102
  115
  128
  143
  158
  175
  193
  212
  232
Tax expense, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  7
  8
  10
  12
  14
  16
  19
  21
  24
  28
  31
  35
  38
  43
  47
  52
  57
  63
Net income, $m
  5
  -2
  -3
  -3
  -3
  -2
  -1
  1
  3
  5
  7
  11
  14
  18
  22
  27
  32
  38
  44
  51
  58
  66
  74
  84
  93
  104
  115
  128
  141
  154
  169

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  59
  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
  650
  603
  617
  633
  650
  670
  692
  715
  741
  768
  798
  829
  863
  899
  937
  977
  1,020
  1,065
  1,113
  1,164
  1,217
  1,274
  1,333
  1,396
  1,462
  1,532
  1,605
  1,682
  1,763
  1,849
  1,939
Adjusted assets (=assets-cash), $m
  591
  603
  617
  633
  650
  670
  692
  715
  741
  768
  798
  829
  863
  899
  937
  977
  1,020
  1,065
  1,113
  1,164
  1,217
  1,274
  1,333
  1,396
  1,462
  1,532
  1,605
  1,682
  1,763
  1,849
  1,939
Revenue / Adjusted assets
  0.687
  0.687
  0.687
  0.687
  0.688
  0.687
  0.686
  0.687
  0.687
  0.688
  0.687
  0.688
  0.687
  0.686
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
Average production assets, $m
  199
  203
  208
  213
  219
  226
  233
  241
  249
  259
  269
  279
  290
  303
  315
  329
  343
  359
  375
  392
  410
  429
  449
  470
  492
  516
  540
  566
  594
  622
  653
Working capital, $m
  311
  207
  212
  217
  223
  230
  238
  246
  254
  264
  274
  285
  296
  309
  322
  336
  350
  366
  382
  400
  418
  438
  458
  480
  502
  526
  551
  578
  606
  635
  666
Total debt, $m
  9
  16
  24
  33
  43
  55
  67
  81
  95
  111
  128
  146
  165
  186
  208
  231
  255
  281
  309
  338
  369
  401
  435
  471
  509
  549
  591
  636
  682
  731
  783
Total liabilities, $m
  338
  346
  354
  363
  373
  385
  397
  411
  425
  441
  458
  476
  495
  516
  538
  561
  585
  611
  639
  668
  699
  731
  765
  801
  839
  879
  921
  966
  1,012
  1,061
  1,113
Total equity, $m
  311
  257
  263
  269
  277
  285
  295
  305
  316
  327
  340
  353
  368
  383
  399
  416
  435
  454
  474
  496
  519
  543
  568
  595
  623
  653
  684
  717
  751
  788
  826
Total liabilities and equity, $m
  649
  603
  617
  632
  650
  670
  692
  716
  741
  768
  798
  829
  863
  899
  937
  977
  1,020
  1,065
  1,113
  1,164
  1,218
  1,274
  1,333
  1,396
  1,462
  1,532
  1,605
  1,683
  1,763
  1,849
  1,939
Debt-to-equity ratio
  0.029
  0.060
  0.090
  0.120
  0.160
  0.190
  0.230
  0.260
  0.300
  0.340
  0.380
  0.410
  0.450
  0.490
  0.520
  0.550
  0.590
  0.620
  0.650
  0.680
  0.710
  0.740
  0.770
  0.790
  0.820
  0.840
  0.860
  0.890
  0.910
  0.930
  0.950
Adjusted equity ratio
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  -2
  -3
  -3
  -3
  -2
  -1
  1
  3
  5
  7
  11
  14
  18
  22
  27
  32
  38
  44
  51
  58
  66
  74
  84
  93
  104
  115
  128
  141
  154
  169
Depreciation, amort., depletion, $m
  22
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
Funds from operations, $m
  62
  20
  20
  20
  21
  23
  25
  27
  30
  33
  37
  41
  45
  51
  56
  62
  69
  76
  84
  93
  102
  112
  123
  134
  146
  160
  174
  188
  204
  221
  239
Change in working capital, $m
  8
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
Cash from operations, $m
  54
  23
  15
  15
  15
  16
  17
  19
  21
  24
  27
  30
  34
  38
  43
  48
  54
  61
  68
  75
  84
  93
  102
  113
  124
  136
  148
  162
  177
  192
  209
Maintenance CAPEX, $m
  0
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -64
  -67
New CAPEX, $m
  -32
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
Cash from investing activities, $m
  -32
  -25
  -27
  -27
  -29
  -31
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -46
  -48
  -49
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -93
  -97
Free cash flow, $m
  22
  -2
  -12
  -13
  -14
  -14
  -14
  -14
  -13
  -12
  -11
  -10
  -8
  -5
  -2
  1
  5
  9
  13
  18
  24
  30
  36
  43
  51
  59
  68
  78
  88
  99
  111
Issuance/(repayment) of debt, $m
  0
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
Issuance/(repurchase) of shares, $m
  0
  0
  10
  11
  11
  11
  11
  10
  9
  8
  7
  5
  3
  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
  7
  18
  20
  21
  22
  23
  24
  24
  24
  24
  23
  22
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
Total cash flow (excl. dividends), $m
  21
  5
  -4
  -4
  -4
  -3
  -2
  0
  1
  3
  6
  9
  12
  15
  20
  24
  29
  35
  41
  47
  54
  62
  70
  79
  89
  99
  110
  122
  135
  148
  163
Retained Cash Flow (-), $m
  31
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
Prev. year cash balance distribution, $m
 
  59
  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
 
  59
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  3
  7
  11
  15
  20
  26
  31
  38
  45
  52
  61
  70
  79
  89
  100
  112
  125
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
 
  56
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  3
  4
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  100.0
  97.5
  94.8
  92.1
  89.5
  87.2
  85.1
  83.3
  81.8
  80.6
  79.8
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5
  79.5

Haynes International, Inc. develops, manufactures, markets, and distributes nickel and cobalt-based alloys in sheet, coil, and plate forms in the United States, Europe, Asia, and internationally. The company offers high-temperature resistant alloys (HTA) and corrosion-resistant alloys (CRA). Its HTA products are used by manufacturers of equipment, including jet engines for the aerospace market; gas turbine engines for power generation and waste incineration; and industrial heating equipment. The company’s CRA products are used in various applications, such as chemical processing, power plant emissions control, and hazardous waste treatment. Its products also have applications in flue-gas desulfurization, oil and gas, waste incineration, industrial heat treating, automotive, instrumentation, biopharmaceuticals, and solar and nuclear fuel industries. In addition, the company produces products as seamless and welded tubulars, as well as in slab, bar, billet, and wire forms. It sells its products primarily through direct sales organizations, and network of independent distributors and sales agents. Haynes International, Inc. was founded in 1912 and is headquartered in Kokomo, Indiana.

FINANCIAL RATIOS  of  Haynes International (HAYN)

Valuation Ratios
P/E Ratio 90.3
Price to Sales 1.1
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 20.5
Growth Rates
Sales Growth Rate -16.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 68.4%
Cap. Spend. - 3 Yr. Gr. Rate -5.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 2.9%
Total Debt to Equity 2.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. 2.1%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. 3.8%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 11.8%
Gross Margin - 3 Yr. Avg. 13.8%
EBITDA Margin 6.4%
EBITDA Margin - 3 Yr. Avg. 8.2%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. 4%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin 1.2%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate -25%
Eff/ Tax Rate - 3 Yr. Avg. 10.4%
Payout Ratio 220%

HAYN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HAYN stock intrinsic value calculation we used $406 million for the last fiscal year's total revenue generated by Haynes International. The default revenue input number comes from 2016 income statement of Haynes 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 HAYN 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 HAYN is calculated based on our internal credit rating of Haynes 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 Haynes 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 HAYN stock the variable cost ratio is equal to 46.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $219 million in the base year in the intrinsic value calculation for HAYN 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 Haynes International.

Corporate tax rate of 27% is the nominal tax rate for Haynes 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 HAYN 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 HAYN are equal to 49%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Haynes 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 HAYN is equal to 50%. 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 - $311 million for Haynes 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 12.258 million for Haynes 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 Haynes International at the current share price and the inputted number of shares is $0.4 billion.


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COMPANY NEWS

▶ Story Stocks from Briefing.com   [May-15-17 12:41PM  Briefing.com]
▶ Haynes International reports 2Q loss   [May-05-17 05:02AM  Associated Press]
▶ 5 Material Stocks Ready To Jump On Earnings   [Apr-28-17 11:24AM  Benzinga]
▶ Haynes International reports 1Q loss   [Feb-02-17 06:14PM  Associated Press]
▶ Hedge Funds Are Crazy About Haynes International, Inc. (HAYN)   [Dec-12-16 04:26AM  at Insider Monkey]
▶ Here is What Hedge Funds Think About AeroVironment, Inc. (AVAV)   [Nov-29  02:58AM  at Insider Monkey]
Stock chart of HAYN Financial statements of HAYN Annual reports of HAYN
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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