Intrinsic value of Hardinge - HDNG

Previous Close

$13.60

  Intrinsic Value

$2.93

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

-107%

Previous close

$13.60

 
Intrinsic value

$2.93

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

-107%

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

We calculate the intrinsic value of HDNG 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, %
  -7.30
  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
  292
  298
  305
  313
  321
  331
  342
  353
  366
  380
  394
  410
  426
  444
  463
  483
  504
  526
  550
  575
  602
  629
  659
  690
  722
  757
  793
  831
  871
  913
  958
Variable operating expenses, $m
 
  272
  278
  286
  294
  302
  312
  323
  334
  347
  360
  373
  389
  405
  422
  440
  459
  480
  501
  524
  548
  574
  601
  629
  659
  690
  723
  758
  794
  833
  873
Fixed operating expenses, $m
 
  24
  24
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
Total operating expenses, $m
  289
  296
  302
  311
  319
  328
  339
  350
  362
  376
  389
  403
  420
  437
  454
  473
  493
  515
  537
  561
  586
  613
  641
  670
  701
  733
  767
  803
  840
  880
  921
Operating income, $m
  3
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  6
  7
  8
  8
  9
  10
  12
  13
  14
  15
  17
  19
  20
  22
  24
  26
  29
  31
  34
  36
EBITDA, $m
  12
  11
  11
  12
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  46
  49
  52
  56
  60
  64
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
Earnings before tax, $m
  3
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  4
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
Tax expense, $m
  2
  1
  1
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
Net income, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  14
  15
  16
  17
  19

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  28
  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
  298
  276
  282
  289
  297
  306
  316
  327
  339
  351
  365
  379
  394
  411
  428
  447
  466
  487
  509
  532
  556
  582
  609
  638
  668
  700
  734
  769
  806
  845
  886
Adjusted assets (=assets-cash), $m
  270
  276
  282
  289
  297
  306
  316
  327
  339
  351
  365
  379
  394
  411
  428
  447
  466
  487
  509
  532
  556
  582
  609
  638
  668
  700
  734
  769
  806
  845
  886
Revenue / Adjusted assets
  1.081
  1.080
  1.082
  1.083
  1.081
  1.082
  1.082
  1.080
  1.080
  1.083
  1.079
  1.082
  1.081
  1.080
  1.082
  1.081
  1.082
  1.080
  1.081
  1.081
  1.083
  1.081
  1.082
  1.082
  1.081
  1.081
  1.080
  1.081
  1.081
  1.080
  1.081
Average production assets, $m
  87
  89
  91
  93
  96
  99
  102
  105
  109
  113
  117
  122
  127
  132
  138
  144
  150
  157
  164
  171
  179
  188
  196
  206
  215
  226
  236
  248
  260
  272
  285
Working capital, $m
  128
  105
  108
  110
  113
  117
  121
  125
  129
  134
  139
  145
  150
  157
  163
  170
  178
  186
  194
  203
  212
  222
  233
  243
  255
  267
  280
  293
  308
  322
  338
Total debt, $m
  6
  6
  9
  13
  17
  22
  27
  32
  38
  45
  52
  59
  67
  76
  85
  94
  104
  115
  126
  138
  151
  164
  178
  193
  208
  225
  242
  260
  279
  299
  320
Total liabilities, $m
  142
  142
  145
  149
  153
  158
  163
  168
  174
  181
  188
  195
  203
  212
  221
  230
  240
  251
  262
  274
  287
  300
  314
  329
  344
  361
  378
  396
  415
  435
  456
Total equity, $m
  156
  134
  137
  140
  144
  149
  153
  159
  164
  170
  177
  184
  191
  199
  208
  217
  226
  236
  247
  258
  270
  282
  296
  309
  324
  340
  356
  373
  391
  410
  430
Total liabilities and equity, $m
  298
  276
  282
  289
  297
  307
  316
  327
  338
  351
  365
  379
  394
  411
  429
  447
  466
  487
  509
  532
  557
  582
  610
  638
  668
  701
  734
  769
  806
  845
  886
Debt-to-equity ratio
  0.038
  0.040
  0.070
  0.090
  0.120
  0.150
  0.170
  0.200
  0.230
  0.260
  0.290
  0.320
  0.350
  0.380
  0.410
  0.430
  0.460
  0.490
  0.510
  0.530
  0.560
  0.580
  0.600
  0.620
  0.640
  0.660
  0.680
  0.700
  0.710
  0.730
  0.750
Adjusted equity ratio
  0.474
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  14
  15
  16
  17
  19
Depreciation, amort., depletion, $m
  9
  9
  9
  10
  10
  10
  10
  11
  11
  12
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
Funds from operations, $m
  -1
  11
  11
  11
  11
  12
  12
  12
  13
  14
  14
  15
  16
  17
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  39
  41
  44
  46
Change in working capital, $m
  -6
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
Cash from operations, $m
  5
  9
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  27
  29
  31
Maintenance CAPEX, $m
  0
  -8
  -9
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
New CAPEX, $m
  -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
  -13
  -13
Cash from investing activities, $m
  -2
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
Free cash flow, $m
  3
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
Issuance/(repayment) of debt, $m
  -5
  3
  3
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
Issuance/(repurchase) of shares, $m
  0
  1
  2
  2
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  2
  2
  1
  1
Cash from financing (excl. dividends), $m  
  -5
  4
  5
  6
  7
  8
  8
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  19
  20
  20
  21
  21
  22
Total cash flow (excl. dividends), $m
  -4
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
Retained Cash Flow (-), $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
Prev. year cash balance distribution, $m
 
  25
  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
 
  25
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
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
 
  24
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.2
  98.0
  96.7
  95.1
  93.4
  91.5
  89.6
  87.7
  85.8
  83.9
  82.3
  80.7
  79.1
  77.6
  76.2
  74.9
  73.6
  72.5
  71.4
  70.4
  69.4
  68.6
  67.9
  67.2
  66.7
  66.2
  65.8
  65.5
  65.3
  65.1

Hardinge Inc., together with its subsidiaries, designs, manufactures, and distributes machine tools in North America, Europe, and Asia. The company operates through two segments, Metalcutting Machine Solutions, and Aftermarket Tooling and Accessories. It offers computer controlled metalcutting turning machines, grinding machines, machining centers, collets, chucks, index fixtures, and other industrial products, as well as engineers and supplies high precision, standard, and specialty workholding devices, and other machine tool accessories. It also provides post-sale support services, such as operation and maintenance training, in-field maintenance, and in-field repair. It serves aerospace, automotive, communications, computer, construction equipment, defense, energy, farm equipment, medical equipment, recreational equipment, and transportation industries, as well as small and medium-sized independent job shops. The company sells its products through distributors, agents, and manufacturers' representatives. Hardinge Inc. was founded in 1890 and is headquartered in Elmira, New York.

FINANCIAL RATIOS  of  Hardinge (HDNG)

Valuation Ratios
P/E Ratio 175.3
Price to Sales 0.6
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 35.1
Price to Free Cash Flow 58.4
Growth Rates
Sales Growth Rate -7.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 9
Current Ratio 0.1
LT Debt to Equity 1.9%
Total Debt to Equity 3.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.3%
Ret/ On Assets - 3 Yr. Avg. 0.4%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0.4%
Return On Equity 0.6%
Return On Equity - 3 Yr. Avg. 0.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 33.6%
Gross Margin - 3 Yr. Avg. 33.1%
EBITDA Margin 4.1%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. 0.9%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. 0.7%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 0.2%
Effective Tax Rate 66.7%
Eff/ Tax Rate - 3 Yr. Avg. -2.8%
Payout Ratio 100%

HDNG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HDNG stock intrinsic value calculation we used $292 million for the last fiscal year's total revenue generated by Hardinge. The default revenue input number comes from 2016 income statement of Hardinge. 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 HDNG 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 HDNG is calculated based on our internal credit rating of Hardinge, 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 Hardinge.
    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 HDNG stock the variable cost ratio is equal to 91.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $23 million in the base year in the intrinsic value calculation for HDNG 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 Hardinge.

Corporate tax rate of 27% is the nominal tax rate for Hardinge. 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 HDNG 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 HDNG are equal to 29.8%.

Life of production assets of 10.4 years is the average useful life of capital assets used in Hardinge 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 HDNG is equal to 35.3%. 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 - $156 million for Hardinge - 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 12.712 million for Hardinge 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 Hardinge at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
HURC Hurco 34.30 29.62  hold
KMT Kennametal 33.40 2.11  str.sell
LECO Lincoln Electr 85.56 38.35  str.sell

COMPANY NEWS

▶ Hardinge posts 2Q profit   [Aug-03-17 10:30PM  Associated Press]
▶ Hardinge Reports Second Quarter 2017 Results   [06:30AM  Business Wire]
▶ ETFs with exposure to Hardinge, Inc. : June 26, 2017   [Jun-26-17 04:06PM  Capital Cube]
▶ Investor Network: Hardinge Inc. to Host Earnings Call   [May-05-17 09:15AM  Accesswire]
▶ Hardinge reports 1Q loss   [06:37AM  Associated Press]
▶ Hardinge Reports First Quarter 2017 Results   [06:30AM  Business Wire]
▶ Hardinge Inc. Declares Quarterly Cash Dividend   [May-03-17 04:41PM  Business Wire]
▶ Hardinge posts 4Q profit   [09:22AM  Associated Press]
▶ Hardinge Reports Third Quarter 2016 Results   [06:55AM  GlobeNewswire]
▶ Hardinge Inc. Declares Quarterly Cash Dividend   [Oct-31-16 09:25AM  GlobeNewswire]
▶ Hardinge Reports Second Quarter 2016 Results   [06:55AM  GlobeNewswire]
▶ Hardinge Inc. Declares Quarterly Cash Dividend   [Aug-03-16 05:13PM  GlobeNewswire]
▶ Hardinge Reports First Quarter 2016 Results   [06:55AM  GlobeNewswire]
▶ Hardinge Inc. Declares Quarterly Cash Dividend   [May-09-16 04:15PM  GlobeNewswire]
▶ Hardinge Inc. Declares Quarterly Cash Dividend   [Feb-09-16 04:31PM  GlobeNewswire]
▶ Perfect Stocks Based on Book Value   [Dec-23  11:03PM  at Investopedia]
▶ Hedge Funds Are Buying Hardinge Inc. (HDNG)   [Dec-02  05:47PM  at Insider Monkey]
▶ How Is Smart Money Trading Xenon Pharmaceuticals Inc (XENE)?   [Nov-24  01:07PM  at Insider Monkey]
Stock chart of HDNG Financial statements of HDNG
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.