Intrinsic value of Huttig Building Products - HBP

Previous Close

$7.38

  Intrinsic Value

$7.51

stock screener

  Rating & Target

hold

+2%

  Value-price divergence*

-15%

Previous close

$7.38

 
Intrinsic value

$7.51

 
Up/down potential

+2%

 
Rating

hold

 
Value-price divergence*

-15%

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

We calculate the intrinsic value of HBP 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 0.2

 

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, %
  8.18
  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
  714
  728
  745
  764
  786
  809
  836
  864
  895
  928
  964
  1,002
  1,042
  1,086
  1,132
  1,181
  1,232
  1,287
  1,345
  1,406
  1,471
  1,539
  1,611
  1,687
  1,767
  1,851
  1,939
  2,032
  2,130
  2,234
  2,342
Variable operating expenses, $m
 
  620
  635
  651
  669
  690
  712
  736
  762
  790
  821
  852
  887
  924
  963
  1,004
  1,048
  1,095
  1,144
  1,196
  1,251
  1,309
  1,370
  1,435
  1,503
  1,574
  1,649
  1,729
  1,812
  1,900
  1,992
Fixed operating expenses, $m
 
  87
  89
  92
  94
  96
  99
  101
  104
  106
  109
  112
  114
  117
  120
  123
  126
  129
  133
  136
  139
  143
  146
  150
  154
  158
  162
  166
  170
  174
  178
Total operating expenses, $m
  691
  707
  724
  743
  763
  786
  811
  837
  866
  896
  930
  964
  1,001
  1,041
  1,083
  1,127
  1,174
  1,224
  1,277
  1,332
  1,390
  1,452
  1,516
  1,585
  1,657
  1,732
  1,811
  1,895
  1,982
  2,074
  2,170
Operating income, $m
  23
  21
  21
  22
  23
  24
  25
  27
  29
  32
  34
  38
  41
  45
  49
  53
  58
  63
  68
  74
  80
  87
  94
  102
  110
  119
  128
  138
  149
  160
  172
EBITDA, $m
  27
  25
  25
  26
  27
  28
  30
  31
  34
  36
  39
  42
  46
  49
  53
  58
  63
  68
  74
  80
  86
  93
  101
  109
  117
  126
  136
  146
  157
  169
  181
Interest expense (income), $m
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
Earnings before tax, $m
  21
  19
  19
  19
  20
  21
  22
  24
  26
  28
  31
  34
  37
  41
  44
  48
  53
  57
  62
  68
  73
  80
  86
  94
  101
  109
  118
  127
  137
  148
  159
Tax expense, $m
  8
  5
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  22
  23
  25
  27
  30
  32
  34
  37
  40
  43
Net income, $m
  16
  14
  14
  14
  15
  15
  16
  18
  19
  21
  22
  25
  27
  30
  32
  35
  38
  42
  45
  49
  54
  58
  63
  68
  74
  80
  86
  93
  100
  108
  116

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  202
  206
  211
  216
  222
  229
  236
  244
  253
  263
  273
  283
  295
  307
  320
  334
  349
  364
  380
  398
  416
  435
  456
  477
  500
  524
  549
  575
  603
  632
  663
Adjusted assets (=assets-cash), $m
  202
  206
  211
  216
  222
  229
  236
  244
  253
  263
  273
  283
  295
  307
  320
  334
  349
  364
  380
  398
  416
  435
  456
  477
  500
  524
  549
  575
  603
  632
  663
Revenue / Adjusted assets
  3.535
  3.534
  3.531
  3.537
  3.541
  3.533
  3.542
  3.541
  3.538
  3.529
  3.531
  3.541
  3.532
  3.537
  3.538
  3.536
  3.530
  3.536
  3.539
  3.533
  3.536
  3.538
  3.533
  3.537
  3.534
  3.532
  3.532
  3.534
  3.532
  3.535
  3.532
Average production assets, $m
  21
  21
  22
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
Working capital, $m
  80
  82
  84
  86
  89
  91
  94
  98
  101
  105
  109
  113
  118
  123
  128
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
  241
  252
  265
Total debt, $m
  56
  59
  62
  65
  69
  74
  78
  84
  89
  95
  102
  109
  116
  124
  133
  142
  151
  161
  172
  183
  195
  208
  221
  235
  249
  265
  281
  298
  316
  335
  355
Total liabilities, $m
  132
  134
  137
  140
  144
  149
  153
  159
  164
  170
  177
  184
  191
  199
  208
  217
  226
  236
  247
  258
  270
  283
  296
  310
  324
  340
  356
  373
  391
  410
  430
Total equity, $m
  71
  72
  74
  76
  78
  80
  83
  86
  89
  92
  96
  99
  104
  108
  112
  117
  122
  128
  134
  140
  146
  153
  160
  167
  175
  184
  193
  202
  212
  222
  233
Total liabilities and equity, $m
  203
  206
  211
  216
  222
  229
  236
  245
  253
  262
  273
  283
  295
  307
  320
  334
  348
  364
  381
  398
  416
  436
  456
  477
  499
  524
  549
  575
  603
  632
  663
Debt-to-equity ratio
  0.789
  0.810
  0.840
  0.860
  0.890
  0.920
  0.950
  0.970
  1.000
  1.040
  1.070
  1.100
  1.120
  1.150
  1.180
  1.210
  1.240
  1.260
  1.290
  1.310
  1.340
  1.360
  1.380
  1.400
  1.420
  1.440
  1.460
  1.480
  1.490
  1.510
  1.530
Adjusted equity ratio
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  14
  14
  14
  15
  15
  16
  18
  19
  21
  22
  25
  27
  30
  32
  35
  38
  42
  45
  49
  54
  58
  63
  68
  74
  80
  86
  93
  100
  108
  116
Depreciation, amort., depletion, $m
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Funds from operations, $m
  3
  17
  18
  18
  19
  20
  21
  22
  24
  25
  27
  29
  31
  34
  37
  40
  43
  47
  51
  55
  59
  64
  70
  75
  81
  87
  94
  101
  109
  117
  125
Change in working capital, $m
  -14
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Cash from operations, $m
  17
  16
  16
  16
  16
  17
  18
  19
  20
  21
  23
  25
  27
  29
  32
  34
  37
  41
  44
  48
  52
  57
  61
  66
  72
  78
  84
  91
  98
  105
  113
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
New CAPEX, $m
  -4
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  -21
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -11
  -12
Free cash flow, $m
  -4
  13
  12
  12
  13
  13
  14
  15
  16
  17
  18
  20
  22
  24
  26
  28
  31
  34
  37
  41
  45
  49
  53
  58
  63
  68
  74
  80
  87
  94
  101
Issuance/(repayment) of debt, $m
  5
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
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  
  4
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
Total cash flow (excl. dividends), $m
  0
  16
  15
  16
  17
  18
  19
  20
  21
  23
  25
  27
  29
  32
  34
  37
  41
  44
  48
  52
  57
  61
  66
  72
  78
  84
  90
  97
  105
  113
  121
Retained Cash Flow (-), $m
  -18
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
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
 
  14
  14
  14
  14
  15
  16
  17
  18
  20
  21
  23
  25
  27
  30
  33
  36
  39
  42
  46
  50
  55
  59
  64
  70
  75
  81
  88
  95
  102
  110
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  14
  12
  12
  11
  11
  11
  11
  10
  10
  10
  9
  9
  8
  8
  7
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
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Huttig Building Products, Inc. is a domestic distributor of millwork, building materials and wood products used principally in residential construction and in home improvement, remodeling and repair work. The Company purchases from manufacturers and distributes its products through approximately 26 wholesale distribution centers serving over 41 states. The Company's distribution centers sell principally to building materials dealers, national buying groups, home centers and industrial users, including makers of manufactured homes. The Company's products are organized into three categories: millwork, which includes doors, windows, molding, stair parts and columns; general building products, which include composite decking, connectors, fasteners, house wrap, roofing products and insulation, and wood products, which include engineered wood products, such as floor systems, as well as wood panels and lumber.

FINANCIAL RATIOS  of  Huttig Building Products (HBP)

Valuation Ratios
P/E Ratio 11.8
Price to Sales 0.3
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow 14.6
Growth Rates
Sales Growth Rate 8.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 77.5%
Total Debt to Equity 78.9%
Interest Coverage 12
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 10%
Return On Total Capital 14%
Ret/ On T. Cap. - 3 Yr. Avg. 14.4%
Return On Equity 25.8%
Return On Equity - 3 Yr. Avg. 33.3%
Asset Turnover 3.8
Profitability Ratios
Gross Margin 21.1%
Gross Margin - 3 Yr. Avg. 20.3%
EBITDA Margin 3.8%
EBITDA Margin - 3 Yr. Avg. 2.7%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 2.2%
Effective Tax Rate 38.1%
Eff/ Tax Rate - 3 Yr. Avg. -34.5%
Payout Ratio 0%

HBP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HBP stock intrinsic value calculation we used $714 million for the last fiscal year's total revenue generated by Huttig Building Products. The default revenue input number comes from 2016 income statement of Huttig Building Products. 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 HBP 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 5.3%, whose default value for HBP is calculated based on our internal credit rating of Huttig Building Products, 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 Huttig Building Products.
    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 HBP stock the variable cost ratio is equal to 85.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $85 million in the base year in the intrinsic value calculation for HBP 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 3.8% for Huttig Building Products.

Corporate tax rate of 27% is the nominal tax rate for Huttig Building Products. 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 HBP 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 HBP are equal to 2.9%.

Life of production assets of 7.3 years is the average useful life of capital assets used in Huttig Building Products 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 HBP is equal to 11.3%. 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 - $71 million for Huttig Building Products - 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 26.076 million for Huttig Building Products 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 Huttig Building Products at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
BCC Boise Cascade 34.80 17.90  sell
BMCH BMC Stock Hold 20.25 3.07  str.sell
BLDR Builders First 17.37 13.58  hold
TREX Trex 86.62 74.25  hold
DOOR Masonite Inter 67.65 4.40  str.sell
HD Home Depot 164.22 103.28  sell

COMPANY NEWS

▶ Huttig posts 2Q profit   [Aug-01-17 10:48PM  Associated Press]
▶ Huttig Appoints West Region Vice President   [Jul-10-17 04:00PM  GlobeNewswire]
▶ Huttig Announces Strategic Partnership   [May-30-17 04:00PM  GlobeNewswire]
▶ Huttig Announces Made in the USA Fastener Selection   [May-09-17 11:00AM  GlobeNewswire]
▶ Huttig reports 1Q loss   [May-01-17 05:14PM  Associated Press]
▶ Huttig Announces Partnership with Duchesne   [11:00AM  GlobeNewswire]
▶ Huttig Announces National Distribution Agreement   [Apr-28-17 01:00PM  GlobeNewswire]
▶ Huttig reports 4Q loss   [Mar-01-17 06:08PM  Associated Press]
▶ Huttig posts lower profit as sales rise   [04:30PM  at bizjournals.com]
▶ Huttig posts lower profit as sales rise   [04:30PM  American City Business Journals]
▶ Huttig Hires New General Manager for Dallas   [05:30PM  GlobeNewswire]
▶ CFO Moves: Molson Coors Brewing, Visteon, Huttig Building Products   [Mar-31-16 05:37PM  at The Wall Street Journal]
▶ Huttig names new CFO   [08:25AM  at bizjournals.com]
▶ Huttig Appoints Chief Financial Officer   [01:05AM  Marketwired]
▶ Huttig Appoints New Board Member   [03:00PM  Marketwired]
▶ Huttig board shake-up amid conflict with former parent company   [Dec-04  05:50PM  at bizjournals.com]
▶ Huttigs profit, sales rise in Q3   [Oct-29  06:35PM  at bizjournals.com]
Financial statements of HBP
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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