Intrinsic value of Kimball International Cl B - KBAL

Previous Close

$17.92

  Intrinsic Value

$38.97

stock screener

  Rating & Target

str. buy

+117%

Previous close

$17.92

 
Intrinsic value

$38.97

 
Up/down potential

+117%

 
Rating

str. buy

We calculate the intrinsic value of KBAL 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 2017), $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 0.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.51
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  670
  698
  728
  760
  793
  829
  866
  906
  948
  992
  1,038
  1,087
  1,139
  1,193
  1,251
  1,311
  1,374
  1,441
  1,511
  1,585
  1,662
  1,744
  1,830
  1,920
  2,014
  2,114
  2,218
  2,328
  2,443
  2,564
  2,692
Variable operating expenses, $m
 
  220
  229
  239
  250
  261
  273
  285
  299
  312
  327
  343
  359
  376
  394
  413
  433
  454
  476
  499
  524
  549
  576
  605
  634
  666
  699
  733
  770
  808
  848
Fixed operating expenses, $m
 
  422
  433
  444
  455
  466
  478
  490
  502
  515
  527
  541
  554
  568
  582
  597
  612
  627
  643
  659
  675
  692
  709
  727
  745
  764
  783
  802
  823
  843
  864
Total operating expenses, $m
  613
  642
  662
  683
  705
  727
  751
  775
  801
  827
  854
  884
  913
  944
  976
  1,010
  1,045
  1,081
  1,119
  1,158
  1,199
  1,241
  1,285
  1,332
  1,379
  1,430
  1,482
  1,535
  1,593
  1,651
  1,712
Operating income, $m
  57
  56
  66
  77
  89
  102
  116
  131
  147
  165
  184
  204
  226
  250
  275
  301
  330
  360
  393
  427
  464
  503
  544
  588
  635
  684
  736
  792
  851
  913
  980
EBITDA, $m
  73
  73
  83
  95
  108
  121
  136
  152
  170
  189
  209
  230
  253
  278
  304
  333
  363
  395
  429
  465
  503
  544
  588
  634
  683
  734
  789
  848
  909
  975
  1,044
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
Earnings before tax, $m
  58
  56
  66
  76
  88
  101
  114
  129
  146
  163
  182
  202
  223
  246
  271
  297
  325
  355
  387
  421
  457
  496
  536
  580
  626
  675
  726
  781
  839
  901
  966
Tax expense, $m
  20
  15
  18
  21
  24
  27
  31
  35
  39
  44
  49
  54
  60
  66
  73
  80
  88
  96
  105
  114
  123
  134
  145
  157
  169
  182
  196
  211
  227
  243
  261
Net income, $m
  38
  41
  48
  56
  64
  74
  84
  94
  106
  119
  133
  147
  163
  180
  198
  217
  237
  259
  283
  307
  334
  362
  392
  423
  457
  492
  530
  570
  613
  658
  705

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  99
  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
  314
  224
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  366
  383
  401
  421
  441
  462
  485
  509
  533
  560
  587
  616
  646
  678
  712
  747
  784
  823
  864
Adjusted assets (=assets-cash), $m
  215
  224
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  366
  383
  401
  421
  441
  462
  485
  509
  533
  560
  587
  616
  646
  678
  712
  747
  784
  823
  864
Revenue / Adjusted assets
  3.116
  3.116
  3.111
  3.115
  3.110
  3.117
  3.115
  3.113
  3.118
  3.119
  3.117
  3.115
  3.112
  3.115
  3.120
  3.114
  3.116
  3.119
  3.115
  3.114
  3.118
  3.114
  3.118
  3.117
  3.118
  3.118
  3.115
  3.116
  3.116
  3.115
  3.116
Average production assets, $m
  87
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  186
  195
  204
  214
  225
  236
  248
  260
  273
  286
  300
  315
  331
  347
Working capital, $m
  83
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
Total debt, $m
  4
  6
  12
  18
  25
  32
  39
  47
  55
  64
  74
  83
  94
  105
  116
  128
  141
  154
  168
  183
  198
  215
  232
  250
  269
  289
  309
  331
  354
  379
  404
Total liabilities, $m
  138
  140
  146
  152
  159
  166
  173
  181
  189
  198
  208
  217
  228
  239
  250
  262
  275
  288
  302
  317
  332
  349
  366
  384
  403
  423
  443
  465
  488
  513
  538
Total equity, $m
  176
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
  151
  159
  166
  174
  183
  192
  201
  211
  221
  232
  244
  256
  268
  282
  296
  310
  326
Total liabilities and equity, $m
  314
  224
  234
  244
  255
  266
  278
  291
  304
  318
  334
  349
  366
  383
  401
  421
  441
  462
  485
  509
  533
  560
  587
  616
  647
  679
  711
  747
  784
  823
  864
Debt-to-equity ratio
  0.023
  0.070
  0.130
  0.190
  0.260
  0.320
  0.370
  0.430
  0.480
  0.540
  0.590
  0.630
  0.680
  0.720
  0.770
  0.810
  0.850
  0.880
  0.920
  0.950
  0.990
  1.020
  1.050
  1.080
  1.100
  1.130
  1.150
  1.180
  1.200
  1.220
  1.240
Adjusted equity ratio
  0.358
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  41
  48
  56
  64
  74
  84
  94
  106
  119
  133
  147
  163
  180
  198
  217
  237
  259
  283
  307
  334
  362
  392
  423
  457
  492
  530
  570
  613
  658
  705
Depreciation, amort., depletion, $m
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  50
  53
  56
  58
  61
  64
Funds from operations, $m
  75
  58
  65
  74
  83
  93
  104
  116
  129
  143
  157
  173
  190
  208
  228
  248
  270
  294
  319
  345
  373
  403
  435
  469
  505
  543
  583
  626
  671
  719
  770
Change in working capital, $m
  10
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  65
  58
  66
  74
  84
  94
  105
  117
  130
  143
  158
  174
  191
  209
  229
  249
  271
  295
  320
  347
  375
  405
  437
  471
  507
  545
  585
  628
  673
  721
  772
Maintenance CAPEX, $m
  0
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -56
  -58
  -61
New CAPEX, $m
  -13
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
Cash from investing activities, $m
  -36
  -20
  -21
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -42
  -43
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -63
  -67
  -71
  -74
  -77
Free cash flow, $m
  29
  38
  45
  53
  61
  70
  80
  91
  103
  115
  129
  143
  158
  175
  193
  212
  232
  254
  276
  301
  327
  355
  384
  415
  449
  484
  521
  561
  603
  647
  694
Issuance/(repayment) of debt, $m
  0
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Issuance/(repurchase) of shares, $m
  -8
  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
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Total cash flow (excl. dividends), $m
  24
  44
  51
  59
  68
  78
  88
  99
  111
  124
  138
  153
  169
  186
  204
  224
  245
  267
  291
  316
  343
  371
  401
  433
  468
  504
  542
  583
  626
  671
  720
Retained Cash Flow (-), $m
  -26
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
Prev. year cash balance distribution, $m
 
  95
  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
 
  136
  48
  55
  64
  73
  83
  94
  106
  119
  132
  147
  163
  179
  197
  216
  237
  259
  282
  307
  333
  361
  391
  423
  456
  492
  529
  569
  612
  657
  704
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
 
  130
  44
  48
  53
  57
  60
  64
  66
  68
  69
  70
  69
  68
  66
  64
  60
  56
  52
  47
  42
  37
  32
  28
  23
  19
  15
  12
  9
  7
  5
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
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Kimball International, Inc. creates design driven furnishings. The Company sells a portfolio of furniture products and services under three brands, which include Kimball Office, National Office Furniture, and Kimball Hospitality. The Company's portfolio offers solutions for the workplace, learning, healing, and hospitality environments. The Company, through its brands, offers various products, which include modern and classic desks, credenzas, seating, tables, collaborative workstations, panel systems, filing and storage units, accessories/accents, headboards, desks, tables, dressers, entertainment centers, chests, wall panels, upholstered seating, task seating, cabinets, and vanities with a mix of wood, metal, stone, laminate, finish, and fabric options. The Company also offers several products designed specifically for the healthcare market, such as patient room and lounge seating and casegoods.

FINANCIAL RATIOS  of  Kimball International Cl B (KBAL)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 1
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 10.3
Price to Free Cash Flow 12.9
Growth Rates
Sales Growth Rate 5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.8%
Cap. Spend. - 3 Yr. Gr. Rate -17.5%
Financial Strength
Quick Ratio 25
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 2.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.9%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital 23%
Ret/ On T. Cap. - 3 Yr. Avg. 14.8%
Return On Equity 23.3%
Return On Equity - 3 Yr. Avg. 14.8%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 33.3%
Gross Margin - 3 Yr. Avg. 32.3%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 8.3%
Operating Margin 8.5%
Oper. Margin - 3 Yr. Avg. 5.5%
Pre-Tax Margin 8.7%
Pre-Tax Margin - 3 Yr. Avg. 5.6%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 4.1%
Effective Tax Rate 34.5%
Eff/ Tax Rate - 3 Yr. Avg. 36.6%
Payout Ratio 23.7%

KBAL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KBAL stock intrinsic value calculation we used $670 million for the last fiscal year's total revenue generated by Kimball International Cl B. The default revenue input number comes from 2017 income statement of Kimball International Cl B. 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 KBAL stock valuation model: a) initial revenue growth rate of 4.2% 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 KBAL is calculated based on our internal credit rating of Kimball International Cl B, 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 Kimball International Cl B.
    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 KBAL stock the variable cost ratio is equal to 31.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $412 million in the base year in the intrinsic value calculation for KBAL 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 Kimball International Cl B.

Corporate tax rate of 27% is the nominal tax rate for Kimball International Cl B. 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 KBAL 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 KBAL are equal to 12.9%.

Life of production assets of 5.4 years is the average useful life of capital assets used in Kimball International Cl B 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 KBAL is equal to -1.8%. 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 - $176 million for Kimball International Cl B - 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 37.343 million for Kimball International Cl B 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 Kimball International Cl B at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Kimball International to Present to Investors   [Nov-13-17 02:18PM  GlobeNewswire]
▶ Kimball International posts 1Q profit   [Nov-01-17 06:32PM  Associated Press]
▶ Kimball International, Inc. Declares Dividend   [Aug-29-17 04:05PM  GlobeNewswire]
▶ Kimball International posts 4Q profit   [Aug-04-17 12:11AM  Associated Press]
▶ Kimball International posts 3Q profit   [05:02AM  Associated Press]
▶ Kimball International, Inc. Declares Dividend   [Apr-25-17 04:05PM  GlobeNewswire]
▶ Kimball International, Inc. Declares Dividend   [Feb-07-17 04:05PM  GlobeNewswire]
▶ Kimball International posts 2Q profit   [Feb-01-17 05:54PM  Associated Press]
▶ Is Kimball International Inc (KBAL) A Good Stock to Buy?   [Dec-12-16 06:47PM  at Insider Monkey]
▶ Kimball International to Present at Investor Conferences   [Sep-14-16 01:47PM  GlobeNewswire]
▶ INVESTIndiana announces executive presentation schedule   [Sep-06-16 10:00AM  GlobeNewswire]
▶ Kimball International posts 4Q profit   [Aug-02-16 07:03PM  AP]
▶ Kimball International Appoints Chief Compliance Officer   [Jul-15-16 03:00PM  GlobeNewswire]
Financial statements of KBAL
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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