Intrinsic value of Lindsay - LNN

Previous Close

$86.27

  Intrinsic Value

$52.65

stock screener

  Rating & Target

sell

-39%

  Value-price divergence*

-53%

Previous close

$86.27

 
Intrinsic value

$52.65

 
Up/down potential

-39%

 
Rating

sell

 
Value-price divergence*

-53%

*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
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  516
  529
  543
  560
  577
  597
  618
  641
  665
  691
  719
  748
  780
  814
  849
  887
  926
  968
  1,013
  1,060
  1,109
  1,161
  1,216
  1,274
  1,335
  1,399
  1,466
  1,537
  1,612
  1,690
  1,773
Variable operating expenses, $m
 
  325
  333
  343
  354
  365
  378
  391
  406
  422
  438
  448
  467
  487
  509
  531
  555
  580
  607
  635
  664
  696
  728
  763
  800
  838
  878
  921
  966
  1,013
  1,062
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
  498
  511
  525
  541
  556
  574
  592
  612
  633
  654
  670
  694
  720
  748
  776
  806
  837
  871
  905
  941
  980
  1,019
  1,061
  1,106
  1,151
  1,199
  1,250
  1,303
  1,359
  1,416
Operating income, $m
  34
  31
  33
  35
  37
  40
  44
  48
  53
  58
  64
  78
  85
  93
  102
  111
  121
  131
  142
  155
  168
  182
  197
  212
  229
  247
  267
  287
  309
  332
  356
EBITDA, $m
  51
  50
  51
  54
  57
  60
  64
  69
  74
  80
  87
  94
  101
  110
  119
  129
  140
  151
  163
  176
  190
  205
  222
  239
  257
  276
  297
  319
  342
  366
  393
Interest expense (income), $m
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
Earnings before tax, $m
  29
  26
  27
  29
  31
  34
  37
  41
  45
  50
  56
  69
  76
  83
  91
  99
  108
  118
  129
  140
  152
  165
  179
  194
  209
  226
  244
  263
  284
  305
  328
Tax expense, $m
  9
  7
  7
  8
  8
  9
  10
  11
  12
  14
  15
  19
  20
  22
  24
  27
  29
  32
  35
  38
  41
  45
  48
  52
  57
  61
  66
  71
  77
  82
  89
Net income, $m
  20
  19
  20
  21
  23
  25
  27
  30
  33
  37
  41
  51
  55
  61
  66
  72
  79
  86
  94
  102
  111
  120
  131
  141
  153
  165
  178
  192
  207
  223
  240

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
  397
  408
  420
  433
  448
  463
  480
  499
  518
  539
  562
  585
  610
  637
  665
  695
  727
  760
  795
  832
  871
  912
  956
  1,001
  1,049
  1,100
  1,153
  1,209
  1,268
  1,330
Adjusted assets (=assets-cash), $m
  387
  397
  408
  420
  433
  448
  463
  480
  499
  518
  539
  562
  585
  610
  637
  665
  695
  727
  760
  795
  832
  871
  912
  956
  1,001
  1,049
  1,100
  1,153
  1,209
  1,268
  1,330
Revenue / Adjusted assets
  1.333
  1.332
  1.331
  1.333
  1.333
  1.333
  1.335
  1.335
  1.333
  1.334
  1.334
  1.331
  1.333
  1.334
  1.333
  1.334
  1.332
  1.331
  1.333
  1.333
  1.333
  1.333
  1.333
  1.333
  1.334
  1.334
  1.333
  1.333
  1.333
  1.333
  1.333
Average production assets, $m
  128
  131
  135
  139
  143
  148
  153
  159
  165
  171
  178
  186
  193
  202
  211
  220
  230
  240
  251
  263
  275
  288
  302
  316
  331
  347
  364
  381
  400
  419
  440
Working capital, $m
  189
  90
  93
  96
  99
  102
  106
  110
  114
  118
  123
  128
  133
  139
  145
  152
  158
  166
  173
  181
  190
  199
  208
  218
  228
  239
  251
  263
  276
  289
  303
Total debt, $m
  117
  123
  130
  137
  145
  154
  164
  174
  185
  197
  210
  224
  238
  253
  270
  287
  305
  324
  344
  366
  389
  412
  437
  464
  492
  521
  552
  584
  619
  654
  692
Total liabilities, $m
  236
  242
  249
  256
  264
  273
  283
  293
  304
  316
  329
  343
  357
  372
  389
  406
  424
  443
  463
  485
  508
  531
  556
  583
  611
  640
  671
  703
  738
  773
  811
Total equity, $m
  252
  155
  159
  164
  169
  175
  181
  187
  195
  202
  210
  219
  228
  238
  248
  259
  271
  283
  296
  310
  324
  340
  356
  373
  390
  409
  429
  450
  472
  495
  519
Total liabilities and equity, $m
  488
  397
  408
  420
  433
  448
  464
  480
  499
  518
  539
  562
  585
  610
  637
  665
  695
  726
  759
  795
  832
  871
  912
  956
  1,001
  1,049
  1,100
  1,153
  1,210
  1,268
  1,330
Debt-to-equity ratio
  0.464
  0.800
  0.820
  0.840
  0.860
  0.880
  0.910
  0.930
  0.950
  0.980
  1.000
  1.020
  1.040
  1.060
  1.090
  1.110
  1.130
  1.140
  1.160
  1.180
  1.200
  1.210
  1.230
  1.240
  1.260
  1.270
  1.290
  1.300
  1.310
  1.320
  1.330
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
  19
  20
  21
  23
  25
  27
  30
  33
  37
  41
  51
  55
  61
  66
  72
  79
  86
  94
  102
  111
  120
  131
  141
  153
  165
  178
  192
  207
  223
  240
Depreciation, amort., depletion, $m
  17
  19
  19
  19
  20
  20
  20
  21
  21
  22
  22
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
Funds from operations, $m
  32
  38
  39
  40
  42
  45
  48
  51
  55
  59
  63
  66
  71
  77
  84
  91
  98
  106
  115
  124
  134
  144
  155
  167
  180
  194
  208
  224
  240
  257
  276
Change in working capital, $m
  -1
  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
  14
Cash from operations, $m
  33
  35
  36
  38
  39
  42
  44
  47
  50
  54
  58
  61
  66
  72
  78
  84
  91
  99
  107
  116
  125
  135
  146
  158
  170
  183
  197
  212
  227
  244
  262
Maintenance CAPEX, $m
  0
  -11
  -11
  -11
  -11
  -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
  -35
New CAPEX, $m
  -12
  -3
  -4
  -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
  -19
  -19
  -20
Cash from investing activities, $m
  -10
  -14
  -15
  -15
  -15
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -46
  -48
  -51
  -52
  -55
Free cash flow, $m
  23
  22
  22
  22
  24
  25
  27
  29
  31
  34
  37
  39
  43
  47
  52
  57
  63
  69
  76
  83
  91
  100
  109
  118
  129
  140
  151
  164
  177
  192
  207
Issuance/(repayment) of debt, $m
  0
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
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
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
Total cash flow (excl. dividends), $m
  -26
  28
  29
  30
  32
  34
  36
  39
  42
  46
  50
  52
  57
  63
  68
  75
  81
  89
  96
  105
  114
  124
  134
  145
  157
  169
  182
  196
  211
  227
  244
Retained Cash Flow (-), $m
  37
  -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
  -24
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
 
  125
  24
  25
  26
  28
  30
  32
  35
  38
  42
  44
  48
  53
  58
  64
  70
  76
  83
  91
  99
  108
  118
  128
  139
  150
  163
  176
  190
  204
  220
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
 
  120
  22
  22
  22
  22
  22
  22
  22
  22
  22
  21
  20
  20
  19
  19
  18
  17
  15
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  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 45.9
Price to Sales 1.8
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 27.8
Price to Free Cash Flow 43.7
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 2.5% 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

▶ 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]
Stock chart of LNN 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.

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