Intrinsic value of Lindsay - LNN

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$85.40

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of LNN 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 0.9

 

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, %
  -7.86
  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
  516
  526
  538
  552
  568
  585
  604
  624
  647
  671
  696
  724
  753
  785
  818
  853
  891
  930
  972
  1,016
  1,063
  1,112
  1,164
  1,219
  1,277
  1,337
  1,401
  1,469
  1,540
  1,614
  1,693
Variable operating expenses, $m
 
  323
  330
  339
  348
  358
  369
  382
  395
  410
  425
  434
  451
  470
  490
  511
  534
  557
  582
  609
  637
  666
  697
  730
  765
  801
  840
  880
  922
  967
  1,014
Fixed operating expenses, $m
 
  173
  178
  182
  187
  191
  196
  201
  206
  211
  216
  222
  227
  233
  239
  245
  251
  257
  264
  270
  277
  284
  291
  298
  306
  313
  321
  329
  337
  346
  354
Total operating expenses, $m
  482
  496
  508
  521
  535
  549
  565
  583
  601
  621
  641
  656
  678
  703
  729
  756
  785
  814
  846
  879
  914
  950
  988
  1,028
  1,071
  1,114
  1,161
  1,209
  1,259
  1,313
  1,368
Operating income, $m
  34
  30
  31
  32
  33
  36
  38
  42
  46
  50
  55
  69
  75
  82
  89
  97
  106
  116
  126
  137
  149
  162
  176
  190
  206
  223
  241
  260
  280
  301
  324
EBITDA, $m
  51
  49
  49
  51
  53
  55
  59
  62
  67
  72
  77
  83
  90
  98
  106
  115
  124
  135
  146
  158
  171
  185
  200
  215
  232
  250
  269
  290
  311
  334
  359
Interest expense (income), $m
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
Earnings before tax, $m
  29
  25
  25
  26
  28
  30
  32
  35
  39
  43
  47
  60
  66
  72
  79
  86
  95
  103
  113
  123
  134
  146
  159
  173
  187
  203
  220
  237
  256
  276
  297
Tax expense, $m
  9
  7
  7
  7
  7
  8
  9
  9
  10
  11
  13
  16
  18
  19
  21
  23
  26
  28
  30
  33
  36
  39
  43
  47
  51
  55
  59
  64
  69
  75
  80
Net income, $m
  20
  18
  19
  19
  20
  22
  23
  26
  28
  31
  34
  44
  48
  52
  58
  63
  69
  75
  82
  90
  98
  107
  116
  126
  137
  148
  160
  173
  187
  202
  217

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  101
  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
  488
  395
  404
  414
  426
  439
  453
  468
  485
  503
  522
  543
  565
  589
  614
  640
  668
  698
  729
  762
  797
  834
  873
  914
  958
  1,003
  1,051
  1,102
  1,155
  1,211
  1,270
Adjusted assets (=assets-cash), $m
  387
  395
  404
  414
  426
  439
  453
  468
  485
  503
  522
  543
  565
  589
  614
  640
  668
  698
  729
  762
  797
  834
  873
  914
  958
  1,003
  1,051
  1,102
  1,155
  1,211
  1,270
Revenue / Adjusted assets
  1.333
  1.332
  1.332
  1.333
  1.333
  1.333
  1.333
  1.333
  1.334
  1.334
  1.333
  1.333
  1.333
  1.333
  1.332
  1.333
  1.334
  1.332
  1.333
  1.333
  1.334
  1.333
  1.333
  1.334
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
Average production assets, $m
  128
  131
  134
  137
  141
  145
  150
  155
  160
  166
  173
  180
  187
  195
  203
  212
  221
  231
  241
  252
  264
  276
  289
  302
  317
  332
  348
  364
  382
  400
  420
Working capital, $m
  189
  90
  92
  94
  97
  100
  103
  107
  111
  115
  119
  124
  129
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  208
  218
  229
  240
  251
  263
  276
  289
Total debt, $m
  117
  122
  127
  134
  141
  149
  157
  167
  177
  188
  200
  212
  226
  240
  255
  271
  289
  307
  326
  346
  367
  390
  414
  439
  465
  493
  522
  553
  586
  620
  656
Total liabilities, $m
  236
  241
  246
  253
  260
  268
  276
  286
  296
  307
  319
  331
  345
  359
  374
  390
  408
  426
  445
  465
  486
  509
  533
  558
  584
  612
  641
  672
  705
  739
  775
Total equity, $m
  252
  154
  158
  162
  166
  171
  177
  183
  189
  196
  204
  212
  220
  230
  239
  250
  261
  272
  284
  297
  311
  325
  341
  357
  374
  391
  410
  430
  450
  472
  495
Total liabilities and equity, $m
  488
  395
  404
  415
  426
  439
  453
  469
  485
  503
  523
  543
  565
  589
  613
  640
  669
  698
  729
  762
  797
  834
  874
  915
  958
  1,003
  1,051
  1,102
  1,155
  1,211
  1,270
Debt-to-equity ratio
  0.464
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.940
  0.960
  0.980
  1.000
  1.020
  1.050
  1.070
  1.090
  1.110
  1.130
  1.150
  1.160
  1.180
  1.200
  1.210
  1.230
  1.250
  1.260
  1.270
  1.290
  1.300
  1.310
  1.320
Adjusted equity ratio
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  18
  19
  19
  20
  22
  23
  26
  28
  31
  34
  44
  48
  52
  58
  63
  69
  75
  82
  90
  98
  107
  116
  126
  137
  148
  160
  173
  187
  202
  217
Depreciation, amort., depletion, $m
  17
  18
  19
  19
  19
  20
  20
  20
  21
  21
  22
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
Funds from operations, $m
  32
  37
  37
  38
  40
  41
  43
  46
  49
  52
  56
  59
  63
  69
  74
  81
  87
  95
  102
  111
  120
  130
  140
  151
  163
  176
  189
  203
  218
  235
  252
Change in working capital, $m
  -1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
Cash from operations, $m
  33
  32
  35
  36
  37
  38
  40
  43
  45
  48
  52
  54
  58
  63
  69
  74
  81
  88
  95
  103
  112
  121
  131
  142
  153
  165
  178
  192
  206
  222
  238
Maintenance CAPEX, $m
  0
  -11
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
New CAPEX, $m
  -12
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
Cash from investing activities, $m
  -10
  -14
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -46
  -48
  -50
  -52
Free cash flow, $m
  23
  19
  21
  21
  22
  22
  24
  25
  27
  29
  32
  33
  36
  40
  44
  49
  54
  60
  66
  72
  79
  87
  95
  104
  114
  124
  135
  146
  159
  172
  186
Issuance/(repayment) of debt, $m
  0
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
Issuance/(repurchase) of shares, $m
  -49
  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  
  -49
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
Total cash flow (excl. dividends), $m
  -26
  24
  27
  28
  29
  30
  32
  34
  37
  40
  44
  45
  50
  54
  59
  65
  71
  78
  85
  93
  101
  110
  119
  129
  140
  152
  164
  177
  191
  206
  222
Retained Cash Flow (-), $m
  37
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Prev. year cash balance distribution, $m
 
  101
  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
 
  122
  23
  24
  24
  25
  27
  28
  31
  33
  36
  37
  41
  45
  50
  55
  60
  66
  73
  80
  87
  95
  104
  113
  123
  134
  145
  157
  170
  184
  199
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
 
  117
  21
  21
  20
  20
  19
  19
  19
  19
  19
  18
  18
  17
  17
  16
  15
  14
  13
  12
  11
  10
  9
  7
  6
  5
  4
  3
  3
  2
  1
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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Lindsay Corporation, together with its subsidiaries, provides water management and road infrastructure products and services in the United States and internationally. The company’s Irrigation segment manufactures and markets center pivot, lateral move irrigation systems, and irrigation controls under the Zimmatic brand; hose reel travelers under the Perrot and Greenfield brands; and chemical injection systems, variable rate irrigation systems, flow meters, weather stations, soil moisture sensors, and remote monitoring and control systems under the GrowSmart brand. This segment also offers repair and replacement parts for irrigation systems and controls; water pumping stations and controls for agriculture, golf, landscape, and municipal markets under the Watertronics brand; filtration solutions for groundwater, agriculture, industrial, and heat transfer markets under the LAKOS brand; and M2M communication technology solutions, data acquisition and management systems, and custom electronic equipment under the Elecsys brand. Its Infrastructure segment provides Quickchange moveable barrier systems that help in highway reconstruction, paving and resurfacing, road widening, median and shoulder construction, and tunnels and bridge repairs; and re-directive and non-re-directive crash cushions, which are used to enhance highway safety at locations, such as toll booths, freeway off-ramps, medians and roadside barrier ends, bridge supports, utility poles, and other fixed roadway hazards. This segment also offers specialty barrier products; road marking and road safety equipment; and railroad signals and structures, and diameter steel tubing products, as well as outsourced manufacturing and production services for other companies. The company serves departments of transportation, municipal transportation road agencies, roadway contractors, subcontractors, distributors, and dealers. Lindsay Corporation was founded in 1954 and is headquartered in Omaha, Nebraska.

FINANCIAL RATIOS  of  Lindsay (LNN)

Valuation Ratios
P/E Ratio 45.4
Price to Sales 1.8
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 27.5
Price to Free Cash Flow 43.2
Growth Rates
Sales Growth Rate -7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 1.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 46.4%
Total Debt to Equity 46.4%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8.5%
Return On Equity 7.4%
Return On Equity - 3 Yr. Avg. 9.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 28.9%
Gross Margin - 3 Yr. Avg. 28.1%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 12.2%
Operating Margin 6.6%
Oper. Margin - 3 Yr. Avg. 9.4%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 31%
Eff/ Tax Rate - 3 Yr. Avg. 36.6%
Payout Ratio 60%

LNN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LNN stock intrinsic value calculation we used $516 million for the last fiscal year's total revenue generated by Lindsay. The default revenue input number comes from 2016 income statement of Lindsay. 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 LNN 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 LNN is calculated based on our internal credit rating of Lindsay, 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 Lindsay.
    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 LNN stock the variable cost ratio is equal to 61.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $169 million in the base year in the intrinsic value calculation for LNN 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 4.3% for Lindsay.

Corporate tax rate of 27% is the nominal tax rate for Lindsay. 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 LNN 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 LNN are equal to 24.8%.

Life of production assets of 12.1 years is the average useful life of capital assets used in Lindsay 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 LNN is equal to 17.1%. 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 - $252 million for Lindsay - 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 10.525 million for Lindsay 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 Lindsay at the current share price and the inputted number of shares is $0.9 billion.


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COMPANY NEWS

▶ ETFs with exposure to Lindsay Corp. : June 15, 2017   [Jun-15-17 02:27PM  Capital Cube]
▶ Lindsay Corp. Value Analysis (NYSE:LNN) : May 19, 2017   [May-19-17 02:32PM  Capital Cube]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [Apr-28-17 05:00PM  Business Wire]
▶ ETFs with exposure to Lindsay Corp. : April 7, 2017   [Apr-07-17 05:01PM  Capital Cube]
▶ Lindsay tops Street 2Q forecasts   [06:54AM  Associated Press]
▶ Is Lindsay Corporation (LNN) A Good Stock To Buy?   [Dec-14-16 08:49AM  at Insider Monkey]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [Dec-02-16 06:45AM  Business Wire]
▶ Infrastructure-As-A-Service Gets Real In Maine   [Jul-28-16 09:50AM  at Forbes]
▶ Lindsay Corporation Increases Cash Dividend   [Jul-21-16 06:45AM  Business Wire]
Stock chart of LNN Financial statements of LNN Annual reports of LNN
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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