Intrinsic value of Kimball International Cl B - KBAL

Previous Close

$16.43

  Intrinsic Value

$12.81

stock screener

  Rating & Target

sell

-22%

  Value-price divergence*

-42%

Previous close

$16.43

 
Intrinsic value

$12.81

 
Up/down potential

-22%

 
Rating

sell

 
Value-price divergence*

-42%

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

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 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 0.6

 

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, %
  5.66
  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
  635
  648
  663
  680
  699
  720
  743
  768
  796
  825
  857
  891
  927
  966
  1,007
  1,050
  1,096
  1,145
  1,196
  1,251
  1,308
  1,369
  1,433
  1,500
  1,571
  1,646
  1,725
  1,807
  1,895
  1,986
  2,083
Variable operating expenses, $m
 
  343
  351
  360
  370
  381
  393
  407
  421
  437
  453
  471
  490
  511
  532
  555
  580
  606
  633
  662
  692
  724
  758
  794
  831
  871
  912
  956
  1,002
  1,051
  1,102
Fixed operating expenses, $m
 
  280
  287
  294
  301
  309
  317
  325
  333
  341
  349
  358
  367
  376
  386
  395
  405
  415
  426
  436
  447
  459
  470
  482
  494
  506
  519
  532
  545
  559
  573
Total operating expenses, $m
  602
  623
  638
  654
  671
  690
  710
  732
  754
  778
  802
  829
  857
  887
  918
  950
  985
  1,021
  1,059
  1,098
  1,139
  1,183
  1,228
  1,276
  1,325
  1,377
  1,431
  1,488
  1,547
  1,610
  1,675
Operating income, $m
  34
  25
  25
  26
  28
  30
  33
  37
  42
  48
  54
  61
  70
  78
  88
  99
  111
  124
  138
  153
  169
  186
  205
  225
  246
  269
  294
  320
  347
  377
  408
EBITDA, $m
  49
  35
  35
  36
  38
  41
  45
  49
  54
  60
  67
  75
  83
  93
  103
  115
  127
  141
  156
  171
  188
  207
  226
  247
  270
  294
  319
  347
  376
  407
  440
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
Earnings before tax, $m
  33
  25
  25
  26
  27
  30
  33
  37
  41
  47
  53
  60
  68
  76
  86
  97
  108
  121
  134
  149
  165
  182
  200
  219
  240
  263
  287
  312
  339
  368
  399
Tax expense, $m
  12
  7
  7
  7
  7
  8
  9
  10
  11
  13
  14
  16
  18
  21
  23
  26
  29
  33
  36
  40
  44
  49
  54
  59
  65
  71
  77
  84
  92
  99
  108
Net income, $m
  21
  18
  18
  19
  20
  22
  24
  27
  30
  34
  39
  44
  49
  56
  63
  71
  79
  88
  98
  109
  120
  133
  146
  160
  175
  192
  209
  228
  248
  269
  291

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  48
  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
  274
  230
  236
  242
  249
  256
  264
  273
  283
  294
  305
  317
  330
  344
  358
  374
  390
  407
  426
  445
  466
  487
  510
  534
  559
  586
  614
  643
  674
  707
  741
Adjusted assets (=assets-cash), $m
  226
  230
  236
  242
  249
  256
  264
  273
  283
  294
  305
  317
  330
  344
  358
  374
  390
  407
  426
  445
  466
  487
  510
  534
  559
  586
  614
  643
  674
  707
  741
Revenue / Adjusted assets
  2.810
  2.817
  2.809
  2.810
  2.807
  2.813
  2.814
  2.813
  2.813
  2.806
  2.810
  2.811
  2.809
  2.808
  2.813
  2.807
  2.810
  2.813
  2.808
  2.811
  2.807
  2.811
  2.810
  2.809
  2.810
  2.809
  2.809
  2.810
  2.812
  2.809
  2.811
Average production assets, $m
  95
  97
  99
  102
  105
  108
  111
  115
  119
  124
  129
  134
  139
  145
  151
  157
  164
  172
  179
  188
  196
  205
  215
  225
  236
  247
  259
  271
  284
  298
  312
Working capital, $m
  53
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
Total debt, $m
  0
  3
  5
  9
  13
  17
  21
  26
  31
  37
  43
  50
  57
  65
  73
  81
  90
  100
  110
  120
  132
  143
  156
  169
  183
  198
  213
  229
  246
  264
  283
Total liabilities, $m
  124
  127
  129
  133
  137
  141
  145
  150
  155
  161
  167
  174
  181
  189
  197
  205
  214
  224
  234
  244
  256
  267
  280
  293
  307
  322
  337
  353
  370
  388
  407
Total equity, $m
  150
  104
  106
  109
  112
  116
  119
  123
  128
  132
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  252
  264
  277
  290
  304
  319
  334
Total liabilities and equity, $m
  274
  231
  235
  242
  249
  257
  264
  273
  283
  293
  305
  317
  330
  344
  359
  374
  390
  408
  426
  445
  466
  487
  510
  534
  559
  586
  614
  643
  674
  707
  741
Debt-to-equity ratio
  0.000
  0.020
  0.050
  0.080
  0.110
  0.140
  0.180
  0.210
  0.250
  0.280
  0.320
  0.350
  0.380
  0.420
  0.450
  0.480
  0.510
  0.540
  0.570
  0.600
  0.630
  0.650
  0.680
  0.700
  0.730
  0.750
  0.770
  0.790
  0.810
  0.830
  0.850
Adjusted equity ratio
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  18
  18
  19
  20
  22
  24
  27
  30
  34
  39
  44
  49
  56
  63
  71
  79
  88
  98
  109
  120
  133
  146
  160
  175
  192
  209
  228
  248
  269
  291
Depreciation, amort., depletion, $m
  15
  10
  10
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  21
  23
  24
  25
  26
  27
  28
  30
  31
Funds from operations, $m
  54
  28
  28
  29
  31
  33
  35
  38
  42
  46
  51
  57
  63
  70
  78
  86
  95
  105
  116
  127
  140
  153
  167
  183
  199
  216
  235
  255
  276
  299
  323
Change in working capital, $m
  5
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  49
  28
  28
  29
  30
  32
  35
  38
  42
  46
  51
  57
  63
  70
  78
  86
  95
  105
  115
  127
  139
  153
  167
  182
  198
  216
  234
  254
  275
  298
  322
Maintenance CAPEX, $m
  0
  -10
  -10
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -24
  -25
  -26
  -27
  -28
  -30
New CAPEX, $m
  -16
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from investing activities, $m
  -17
  -12
  -12
  -13
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -23
  -23
  -25
  -26
  -28
  -29
  -31
  -31
  -34
  -35
  -37
  -38
  -40
  -42
  -44
Free cash flow, $m
  32
  16
  16
  16
  17
  19
  21
  23
  26
  30
  34
  39
  44
  50
  57
  64
  72
  81
  91
  101
  112
  124
  137
  150
  165
  181
  198
  216
  235
  256
  278
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
Issuance/(repurchase) of shares, $m
  -11
  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  
  -11
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
Total cash flow (excl. dividends), $m
  21
  19
  19
  20
  21
  23
  25
  28
  32
  36
  40
  46
  51
  58
  65
  73
  81
  91
  101
  111
  123
  136
  149
  164
  179
  196
  213
  232
  252
  274
  296
Retained Cash Flow (-), $m
  -8
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
Prev. year cash balance distribution, $m
 
  48
  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
 
  65
  17
  17
  18
  19
  21
  24
  27
  31
  35
  40
  46
  52
  58
  66
  74
  83
  92
  103
  114
  126
  139
  153
  168
  184
  201
  219
  238
  259
  281
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
 
  62
  15
  15
  15
  15
  16
  16
  17
  18
  18
  19
  19
  20
  20
  19
  19
  18
  17
  16
  14
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Kimball International, Inc. manufactures and sells furniture products in the United States and internationally. It offers furniture solutions, including desks, credenzas, seating, tables, collaborative workstations, panel systems, filing and storage units, and accessories/accents under the Kimball Office and National Office Furniture brand names for collaborative and open work space areas, conference and meeting/huddle rooms, training rooms, private offices, learning areas, lobby/reception areas, and dining/café areas with a mix of wood, metal, laminate, paint, and fabric options. The company also provides 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 under the Kimball Hospitality brand name for hotel properties and mixed use developments. In addition, it offers patient room and lounge seating and casegoods for the healthcare market. The company markets and sells its products through sales representatives to end users, office furniture dealers, wholesalers, brokers, designers, purchasing companies, and catalog houses. The company was formerly known as The Jasper Corporation and changed its name to Kimball International, Inc. in July 1974. Kimball International, Inc. was incorporated in 1939 and is headquartered in Jasper, Indiana.

FINANCIAL RATIOS  of  Kimball International Cl B (KBAL)

Valuation Ratios
P/E Ratio 29.3
Price to Sales 1
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 12.6
Price to Free Cash Flow 18.7
Growth Rates
Sales Growth Rate 5.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -51.5%
Cap. Spend. - 3 Yr. Gr. Rate -11.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.8%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 14.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 14.4%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 2.4
Profitability Ratios
Gross Margin 32.1%
Gross Margin - 3 Yr. Avg. 31.4%
EBITDA Margin 7.6%
EBITDA Margin - 3 Yr. Avg. 6.8%
Operating Margin 5.2%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 5.2%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 3.3%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 36.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.4%
Payout Ratio 38.1%

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 $635 million for the last fiscal year's total revenue generated by Kimball International Cl B. The default revenue input number comes from 2016 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 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 52.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $273 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 15%.

Life of production assets of 10 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 0.8%. 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 - $150 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 36.133 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 $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
HNI HNI 35.16 41.49  hold
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KNL Knoll Inc. 17.91 31.97  str.buy
SCS Steelcase 13.15 17.98  buy
HOFT Hooker Furnitu 42.70 251.01  str.buy
FLXS Flexsteel Indu 54.13 40.24  sell
LZB La-Z-Boy 31.85 14.23  str.sell
BSET Bassett Furnit 36.40 31.34  hold
FBHS Fortune Brands 63.89 75.79  hold

COMPANY NEWS

▶ 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]
▶ Coverage initiated on Kimball by Sidoti   [Apr-20-16 02:06PM  Briefing.com]
Stock chart of KBAL 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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