Intrinsic value of Lindsay - LNN

Previous Close

$90.74

  Intrinsic Value

$111.43

stock screener

  Rating & Target

buy

+23%

  Value-price divergence*

+73%

Previous close

$90.74

 
Intrinsic value

$111.43

 
Up/down potential

+23%

 
Rating

buy

 
Value-price divergence*

+73%

*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 1.0

 

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, %
  -7.86
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  516
  556
  598
  642
  687
  734
  782
  833
  886
  941
  998
  1,058
  1,120
  1,185
  1,253
  1,323
  1,397
  1,474
  1,555
  1,639
  1,727
  1,820
  1,916
  2,017
  2,123
  2,234
  2,350
  2,472
  2,600
  2,733
  2,874
Variable operating expenses, $m
 
  341
  366
  392
  419
  447
  476
  507
  539
  571
  606
  634
  671
  710
  750
  793
  837
  883
  932
  982
  1,035
  1,090
  1,148
  1,208
  1,272
  1,338
  1,408
  1,481
  1,557
  1,637
  1,722
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
  514
  544
  574
  606
  638
  672
  708
  745
  782
  822
  856
  898
  943
  989
  1,038
  1,088
  1,140
  1,196
  1,252
  1,312
  1,374
  1,439
  1,506
  1,578
  1,651
  1,729
  1,810
  1,894
  1,983
  2,076
Operating income, $m
  34
  42
  55
  68
  81
  95
  110
  125
  142
  159
  176
  202
  222
  242
  263
  286
  309
  334
  360
  387
  416
  446
  477
  511
  546
  582
  621
  662
  705
  750
  798
EBITDA, $m
  51
  61
  74
  88
  103
  118
  134
  150
  167
  186
  204
  224
  245
  266
  289
  313
  338
  364
  392
  421
  451
  483
  517
  552
  589
  628
  669
  713
  758
  806
  857
Interest expense (income), $m
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
Earnings before tax, $m
  29
  37
  49
  61
  74
  87
  101
  115
  130
  146
  163
  188
  206
  225
  245
  266
  288
  312
  336
  362
  388
  417
  447
  478
  511
  546
  582
  621
  661
  704
  749
Tax expense, $m
  9
  10
  13
  16
  20
  23
  27
  31
  35
  39
  44
  51
  56
  61
  66
  72
  78
  84
  91
  98
  105
  113
  121
  129
  138
  147
  157
  168
  179
  190
  202
Net income, $m
  20
  27
  36
  44
  54
  63
  74
  84
  95
  107
  119
  137
  150
  164
  179
  194
  211
  227
  245
  264
  284
  304
  326
  349
  373
  398
  425
  453
  483
  514
  547

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
  417
  449
  481
  515
  550
  587
  625
  665
  706
  749
  794
  840
  889
  940
  993
  1,048
  1,106
  1,166
  1,230
  1,296
  1,365
  1,437
  1,513
  1,593
  1,676
  1,763
  1,854
  1,950
  2,051
  2,156
Adjusted assets (=assets-cash), $m
  387
  417
  449
  481
  515
  550
  587
  625
  665
  706
  749
  794
  840
  889
  940
  993
  1,048
  1,106
  1,166
  1,230
  1,296
  1,365
  1,437
  1,513
  1,593
  1,676
  1,763
  1,854
  1,950
  2,051
  2,156
Revenue / Adjusted assets
  1.333
  1.333
  1.332
  1.335
  1.334
  1.335
  1.332
  1.333
  1.332
  1.333
  1.332
  1.332
  1.333
  1.333
  1.333
  1.332
  1.333
  1.333
  1.334
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
Average production assets, $m
  128
  138
  148
  159
  170
  182
  194
  207
  220
  233
  248
  262
  278
  294
  311
  328
  347
  366
  386
  407
  428
  451
  475
  500
  527
  554
  583
  613
  645
  678
  713
Working capital, $m
  189
  95
  102
  110
  117
  125
  134
  142
  152
  161
  171
  181
  192
  203
  214
  226
  239
  252
  266
  280
  295
  311
  328
  345
  363
  382
  402
  423
  445
  467
  491
Total debt, $m
  117
  136
  155
  175
  195
  217
  239
  262
  286
  312
  338
  365
  394
  423
  454
  487
  520
  556
  593
  631
  671
  714
  758
  804
  853
  903
  956
  1,012
  1,071
  1,132
  1,196
Total liabilities, $m
  236
  255
  274
  294
  314
  336
  358
  381
  405
  431
  457
  484
  513
  542
  573
  606
  639
  675
  712
  750
  790
  833
  877
  923
  972
  1,022
  1,075
  1,131
  1,190
  1,251
  1,315
Total equity, $m
  252
  163
  175
  188
  201
  215
  229
  244
  259
  275
  292
  310
  328
  347
  367
  387
  409
  431
  455
  480
  505
  532
  561
  590
  621
  654
  688
  723
  761
  800
  841
Total liabilities and equity, $m
  488
  418
  449
  482
  515
  551
  587
  625
  664
  706
  749
  794
  841
  889
  940
  993
  1,048
  1,106
  1,167
  1,230
  1,295
  1,365
  1,438
  1,513
  1,593
  1,676
  1,763
  1,854
  1,951
  2,051
  2,156
Debt-to-equity ratio
  0.464
  0.830
  0.880
  0.930
  0.970
  1.010
  1.040
  1.080
  1.110
  1.130
  1.160
  1.180
  1.200
  1.220
  1.240
  1.260
  1.270
  1.290
  1.300
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.410
  1.420
  1.420
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
  27
  36
  44
  54
  63
  74
  84
  95
  107
  119
  137
  150
  164
  179
  194
  211
  227
  245
  264
  284
  304
  326
  349
  373
  398
  425
  453
  483
  514
  547
Depreciation, amort., depletion, $m
  17
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
Funds from operations, $m
  32
  46
  56
  65
  75
  86
  97
  109
  121
  134
  147
  159
  173
  189
  205
  222
  239
  258
  277
  298
  319
  342
  365
  390
  417
  444
  473
  504
  536
  570
  606
Change in working capital, $m
  -1
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  33
  39
  48
  58
  68
  78
  89
  100
  112
  124
  137
  149
  163
  178
  193
  209
  227
  244
  263
  283
  304
  326
  349
  373
  398
  425
  453
  483
  514
  547
  582
Maintenance CAPEX, $m
  0
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -53
  -56
New CAPEX, $m
  -12
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
Cash from investing activities, $m
  -10
  -21
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -44
  -45
  -48
  -50
  -53
  -56
  -58
  -61
  -64
  -67
  -72
  -75
  -78
  -83
  -86
  -91
Free cash flow, $m
  23
  19
  27
  35
  43
  52
  62
  72
  82
  93
  104
  113
  126
  139
  152
  166
  181
  197
  213
  230
  248
  267
  288
  309
  331
  354
  379
  405
  432
  461
  491
Issuance/(repayment) of debt, $m
  0
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
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
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
Total cash flow (excl. dividends), $m
  -26
  37
  46
  55
  64
  74
  84
  95
  106
  118
  130
  141
  154
  168
  183
  199
  215
  232
  250
  269
  289
  310
  332
  355
  379
  405
  432
  460
  490
  522
  555
Retained Cash Flow (-), $m
  37
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
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
 
  127
  33
  42
  51
  60
  70
  80
  91
  102
  113
  123
  136
  149
  163
  178
  193
  209
  226
  244
  263
  283
  303
  325
  348
  372
  398
  425
  453
  483
  514
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
 
  121
  31
  37
  42
  47
  51
  54
  57
  58
  59
  59
  58
  57
  55
  52
  49
  46
  42
  38
  33
  29
  25
  21
  18
  14
  12
  9
  7
  5
  4
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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Lindsay Corporation, along with its subsidiaries, provides a range of water management and road infrastructure products and services. The Company operates through two segments: Irrigation Segment and Infrastructure Segment. The Irrigation Segment includes the manufacture and marketing of center pivot, lateral move, and hose reel irrigation systems, which are used primarily in the agricultural industry. The Infrastructure Segment includes the manufacture and marketing of moveable barriers, specialty barriers, crash cushions and end terminals, road marking and road safety equipment, large diameter steel tubing, and railroad signals and structures. It also manufactures and markets hose reel travelers under the Perrot and Greenfield brands in Europe and South Africa. It produces or markets chemical injection systems, variable rate irrigation systems, flow meters, weather stations, soil moisture sensors, and remote monitoring and control systems, which it sells under its GrowSmart brand.

FINANCIAL RATIOS  of  Lindsay (LNN)

Valuation Ratios
P/E Ratio 48.2
Price to Sales 1.9
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 29.2
Price to Free Cash Flow 45.9
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 7.8% 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 10.741 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 $1.0 billion.

RELATED COMPANIES Price Int.Val. Rating
DE Deere 128.52 155.23  buy
ARTW Art's Way 2.30 1.00  str.sell
AGCO AGCO 71.74 61.75  hold
TTC Toro 62.18 32.54  sell
VMI Valmont Indust 161.35 62.38  str.sell

COMPANY NEWS

▶ ETFs with exposure to Lindsay Corp. : October 18, 2017   [Oct-18-17 09:50AM  Capital Cube]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [Oct-12-17 04:15PM  Business Wire]
▶ Lindsay misses Street 4Q forecasts   [06:52AM  Associated Press]
▶ Lindsay Corp. Value Analysis (NYSE:LNN) : August 23, 2017   [Aug-23-17 05:42PM  Capital Cube]
▶ Lindsay Corporation Increases Cash Dividend   [Jul-19-17 06:45AM  Business Wire]
▶ ETFs with exposure to Lindsay Corp. : July 4, 2017   [Jul-04-17 03:05PM  Capital Cube]
▶ Lindsay tops Street 3Q forecasts   [Jun-29-17 09:57PM  Associated Press]
▶ 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]
Financial statements 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.

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.