Intrinsic value of Industrial Services of America - IDSA

Previous Close

$1.56

  Intrinsic Value

$0.37

stock screener

  Rating & Target

str. sell

-76%

Previous close

$1.56

 
Intrinsic value

$0.37

 
Up/down potential

-76%

 
Rating

str. sell

We calculate the intrinsic value of IDSA 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, %
  -19.57
  40.00
  36.50
  33.35
  30.52
  27.96
  25.67
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.89
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
Revenue, $m
  37
  52
  71
  94
  123
  157
  198
  245
  298
  358
  424
  497
  576
  662
  754
  852
  956
  1,066
  1,181
  1,302
  1,429
  1,561
  1,699
  1,843
  1,992
  2,147
  2,309
  2,476
  2,651
  2,832
  3,020
Variable operating expenses, $m
 
  62
  84
  112
  146
  187
  235
  291
  354
  425
  504
  591
  685
  787
  896
  1,013
  1,137
  1,267
  1,405
  1,549
  1,699
  1,857
  2,020
  2,191
  2,369
  2,553
  2,745
  2,944
  3,152
  3,367
  3,591
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
  39
  62
  84
  112
  146
  187
  235
  291
  354
  425
  504
  591
  685
  787
  896
  1,013
  1,137
  1,267
  1,405
  1,549
  1,699
  1,857
  2,020
  2,191
  2,369
  2,553
  2,745
  2,944
  3,152
  3,367
  3,591
Operating income, $m
  -3
  -10
  -13
  -18
  -23
  -30
  -37
  -46
  -56
  -68
  -80
  -94
  -109
  -125
  -142
  -161
  -181
  -201
  -223
  -246
  -270
  -295
  -321
  -348
  -377
  -406
  -436
  -468
  -501
  -535
  -571
EBITDA, $m
  -1
  -10
  -13
  -18
  -23
  -30
  -37
  -46
  -56
  -68
  -80
  -94
  -109
  -125
  -142
  -161
  -181
  -201
  -223
  -246
  -270
  -295
  -321
  -348
  -377
  -406
  -436
  -468
  -501
  -535
  -571
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
Earnings before tax, $m
  -3
  -10
  -14
  -18
  -24
  -31
  -38
  -48
  -58
  -70
  -83
  -97
  -113
  -129
  -147
  -167
  -187
  -209
  -231
  -255
  -280
  -306
  -333
  -361
  -390
  -421
  -452
  -485
  -520
  -555
  -592
Tax expense, $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
Net income, $m
  -3
  -10
  -14
  -18
  -24
  -31
  -38
  -48
  -58
  -70
  -83
  -97
  -113
  -129
  -147
  -167
  -187
  -209
  -231
  -255
  -280
  -306
  -333
  -361
  -390
  -421
  -452
  -485
  -520
  -555
  -592

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  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
  0
  0
  0
Total assets, $m
  21
  28
  38
  51
  67
  85
  107
  132
  161
  193
  229
  269
  311
  358
  408
  461
  517
  576
  639
  704
  773
  844
  919
  996
  1,077
  1,161
  1,248
  1,339
  1,433
  1,531
  1,632
Adjusted assets (=assets-cash), $m
  20
  28
  38
  51
  67
  85
  107
  132
  161
  193
  229
  269
  311
  358
  408
  461
  517
  576
  639
  704
  773
  844
  919
  996
  1,077
  1,161
  1,248
  1,339
  1,433
  1,531
  1,632
Revenue / Adjusted assets
  1.850
  1.857
  1.868
  1.843
  1.836
  1.847
  1.850
  1.856
  1.851
  1.855
  1.852
  1.848
  1.852
  1.849
  1.848
  1.848
  1.849
  1.851
  1.848
  1.849
  1.849
  1.850
  1.849
  1.850
  1.850
  1.849
  1.850
  1.849
  1.850
  1.850
  1.850
Average production assets, $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
Working capital, $m
  2
  6
  8
  10
  13
  17
  21
  26
  32
  39
  46
  54
  62
  71
  81
  92
  103
  115
  128
  141
  154
  169
  184
  199
  215
  232
  249
  267
  286
  306
  326
Total debt, $m
  6
  8
  12
  17
  24
  31
  40
  50
  61
  74
  89
  104
  122
  140
  160
  181
  204
  227
  252
  279
  306
  335
  364
  395
  428
  461
  496
  532
  570
  609
  650
Total liabilities, $m
  9
  11
  15
  20
  27
  34
  43
  53
  64
  77
  92
  107
  125
  143
  163
  184
  207
  230
  255
  282
  309
  338
  367
  398
  431
  464
  499
  535
  573
  612
  653
Total equity, $m
  12
  17
  23
  31
  40
  51
  64
  79
  97
  116
  137
  161
  187
  215
  245
  276
  310
  346
  383
  422
  464
  506
  551
  598
  646
  696
  749
  803
  860
  918
  979
Total liabilities and equity, $m
  21
  28
  38
  51
  67
  85
  107
  132
  161
  193
  229
  268
  312
  358
  408
  460
  517
  576
  638
  704
  773
  844
  918
  996
  1,077
  1,160
  1,248
  1,338
  1,433
  1,530
  1,632
Debt-to-equity ratio
  0.500
  0.490
  0.540
  0.570
  0.590
  0.610
  0.620
  0.630
  0.640
  0.640
  0.640
  0.650
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
Adjusted equity ratio
  0.550
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3
  -10
  -14
  -18
  -24
  -31
  -38
  -48
  -58
  -70
  -83
  -97
  -113
  -129
  -147
  -167
  -187
  -209
  -231
  -255
  -280
  -306
  -333
  -361
  -390
  -421
  -452
  -485
  -520
  -555
  -592
Depreciation, amort., depletion, $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
Funds from operations, $m
  -6
  -10
  -14
  -18
  -24
  -31
  -38
  -48
  -58
  -70
  -83
  -97
  -113
  -129
  -147
  -167
  -187
  -209
  -231
  -255
  -280
  -306
  -333
  -361
  -390
  -421
  -452
  -485
  -520
  -555
  -592
Change in working capital, $m
  -3
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
Cash from operations, $m
  -3
  -12
  -16
  -21
  -27
  -34
  -43
  -53
  -64
  -76
  -90
  -105
  -121
  -139
  -157
  -177
  -198
  -220
  -244
  -268
  -294
  -320
  -348
  -377
  -406
  -438
  -470
  -504
  -538
  -575
  -612
Maintenance CAPEX, $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
New CAPEX, $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 investing activities, $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
Free cash flow, $m
  -3
  -12
  -16
  -21
  -27
  -34
  -43
  -53
  -64
  -76
  -90
  -105
  -121
  -139
  -157
  -177
  -198
  -220
  -244
  -268
  -294
  -320
  -348
  -377
  -406
  -438
  -470
  -504
  -538
  -575
  -612
Issuance/(repayment) of debt, $m
  3
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  17
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
Issuance/(repurchase) of shares, $m
  0
  15
  20
  26
  33
  42
  52
  63
  75
  89
  104
  121
  138
  157
  177
  198
  221
  244
  269
  294
  321
  349
  378
  408
  439
  471
  505
  540
  576
  614
  653
Cash from financing (excl. dividends), $m  
  3
  18
  24
  31
  39
  49
  61
  73
  86
  102
  118
  137
  155
  176
  197
  219
  243
  268
  294
  320
  348
  378
  408
  439
  471
  505
  540
  576
  614
  653
  694
Total cash flow (excl. dividends), $m
  0
  6
  8
  10
  12
  15
  17
  20
  23
  26
  29
  32
  34
  37
  40
  42
  45
  47
  50
  52
  55
  57
  60
  62
  65
  67
  70
  73
  75
  78
  81
Retained Cash Flow (-), $m
  3
  -15
  -20
  -26
  -33
  -42
  -52
  -63
  -75
  -89
  -104
  -121
  -138
  -157
  -177
  -198
  -221
  -244
  -269
  -294
  -321
  -349
  -378
  -408
  -439
  -471
  -505
  -540
  -576
  -614
  -653
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
 
  -8
  -12
  -16
  -21
  -27
  -34
  -43
  -52
  -63
  -76
  -89
  -104
  -120
  -137
  -156
  -176
  -197
  -219
  -242
  -266
  -292
  -318
  -346
  -374
  -404
  -435
  -467
  -501
  -536
  -572
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  -8
  -10
  -12
  -15
  -17
  -19
  -21
  -23
  -24
  -24
  -24
  -23
  -22
  -20
  -18
  -16
  -14
  -11
  -9
  -7
  -6
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  46.0
  21.7
  10.4
  5.1
  2.6
  1.3
  0.7
  0.4
  0.2
  0.1
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Industrial Services of America, Inc. buys, processes and markets ferrous and non-ferrous metals, and other recyclable commodities. The Company operates through Recycling Segment. The Company's Recycling Segment collects, purchases, processes, and sells ferrous and non-ferrous scrap metal to steel mini-mills, integrated steel makers, foundries and refineries. It buys, dismantles and sells used auto parts. It purchases ferrous and non-ferrous scrap metal from industrial and commercial generators of steel, iron, aluminum, copper, stainless steel and other metals, and from scrap dealers and retail customers who deliver these materials to its facilities. It processes scrap metal through sorting, cutting and baling. Its non-ferrous scrap recycling operations consist of collecting, sorting and processing various grades of copper, aluminum, stainless steel and brass. Its used automobile yard purchases automobiles so that retail customers can locate and remove used parts for purchase.

FINANCIAL RATIOS  of  Industrial Services of America (IDSA)

Valuation Ratios
P/E Ratio -4.2
Price to Sales 0.3
Price to Book 1
Price to Tangible Book
Price to Cash Flow -4.2
Price to Free Cash Flow -4.2
Growth Rates
Sales Growth Rate -19.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 25%
Total Debt to Equity 50%
Interest Coverage 0
Management Effectiveness
Return On Assets -15%
Ret/ On Assets - 3 Yr. Avg. -11%
Return On Total Capital -18.2%
Ret/ On T. Cap. - 3 Yr. Avg. -15.6%
Return On Equity -22.2%
Return On Equity - 3 Yr. Avg. -24.9%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 2.7%
Gross Margin - 3 Yr. Avg. -1.3%
EBITDA Margin -2.7%
EBITDA Margin - 3 Yr. Avg. -6.8%
Operating Margin -5.4%
Oper. Margin - 3 Yr. Avg. -10.7%
Pre-Tax Margin -8.1%
Pre-Tax Margin - 3 Yr. Avg. -12%
Net Profit Margin -8.1%
Net Profit Margin - 3 Yr. Avg. -6.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

IDSA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IDSA stock intrinsic value calculation we used $37 million for the last fiscal year's total revenue generated by Industrial Services of America. The default revenue input number comes from 2016 income statement of Industrial Services of America. 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 IDSA stock valuation model: a) initial revenue growth rate of 40% 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 7.8%, whose default value for IDSA is calculated based on our internal credit rating of Industrial Services of America, 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 Industrial Services of America.
    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 IDSA stock the variable cost ratio is equal to 118.9%.

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 IDSA 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 Industrial Services of America.

Corporate tax rate of 27% is the nominal tax rate for Industrial Services of America. 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 IDSA 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 IDSA are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Industrial Services of America 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 IDSA is equal to 10.8%. 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 Industrial Services of America - 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 8.072 million for Industrial Services of America 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 Industrial Services of America at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ 10-Q for Industrial Services of America, Inc.   [Aug-16  08:12PM  at Company Spotlight]
▶ 10-K/A for Industrial Services of America, Inc.   [Jun-19  08:09PM  at Company Spotlight]
▶ INVESTKentucky Announces Executive Presentation Schedule   [May-26  09:53AM  GlobeNewswire]
▶ 10-Q for Industrial Services of America, Inc.   [May-17  08:11PM  at Company Spotlight]
▶ 10-K for Industrial Services of America, Inc.   [Apr-22  08:10PM  at Company Spotlight]
▶ 10-Q for Industrial Services of America, Inc.   [Nov-13  07:08PM  Company Spotlight]
Financial statements of IDSA
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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