Intrinsic value of NCI Building Systems - NCS

Previous Close

$16.75

  Intrinsic Value

$13.23

stock screener

  Rating & Target

sell

-21%

Previous close

$16.75

 
Intrinsic value

$13.23

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of NCS 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  5.04
  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
  1,770
  1,805
  1,847
  1,894
  1,948
  2,007
  2,072
  2,142
  2,218
  2,301
  2,389
  2,483
  2,584
  2,692
  2,806
  2,927
  3,055
  3,191
  3,334
  3,486
  3,646
  3,815
  3,993
  4,181
  4,379
  4,588
  4,807
  5,038
  5,281
  5,537
  5,806
Variable operating expenses, $m
 
  1,686
  1,724
  1,768
  1,818
  1,872
  1,932
  1,998
  2,068
  2,144
  2,226
  2,299
  2,392
  2,491
  2,597
  2,709
  2,828
  2,953
  3,086
  3,227
  3,375
  3,531
  3,696
  3,870
  4,054
  4,246
  4,450
  4,664
  4,889
  5,125
  5,374
Fixed operating expenses, $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
Total operating expenses, $m
  1,661
  1,686
  1,724
  1,768
  1,818
  1,872
  1,932
  1,998
  2,068
  2,144
  2,226
  2,299
  2,392
  2,491
  2,597
  2,709
  2,828
  2,953
  3,086
  3,227
  3,375
  3,531
  3,696
  3,870
  4,054
  4,246
  4,450
  4,664
  4,889
  5,125
  5,374
Operating income, $m
  110
  119
  123
  126
  130
  134
  139
  144
  150
  156
  163
  185
  192
  200
  209
  218
  227
  237
  248
  259
  271
  284
  297
  311
  326
  341
  357
  375
  393
  412
  432
EBITDA, $m
  151
  161
  164
  168
  173
  178
  184
  190
  197
  205
  212
  221
  230
  239
  249
  260
  272
  284
  296
  310
  324
  339
  355
  372
  389
  408
  427
  448
  470
  492
  516
Interest expense (income), $m
  28
  28
  29
  30
  31
  33
  35
  37
  39
  41
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  79
  84
  89
  94
  100
  106
  112
  118
  125
  133
  140
Earnings before tax, $m
  83
  92
  94
  96
  99
  102
  105
  108
  111
  115
  119
  139
  143
  148
  154
  159
  165
  171
  178
  185
  192
  200
  208
  217
  226
  236
  246
  256
  267
  279
  291
Tax expense, $m
  28
  25
  25
  26
  27
  27
  28
  29
  30
  31
  32
  37
  39
  40
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  64
  66
  69
  72
  75
  79
Net income, $m
  55
  67
  69
  70
  72
  74
  76
  79
  81
  84
  87
  101
  105
  108
  112
  116
  120
  125
  130
  135
  140
  146
  152
  158
  165
  172
  179
  187
  195
  204
  213

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  72
  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
  1,051
  999
  1,022
  1,048
  1,077
  1,110
  1,146
  1,185
  1,227
  1,273
  1,321
  1,374
  1,429
  1,489
  1,552
  1,619
  1,690
  1,765
  1,844
  1,928
  2,017
  2,110
  2,209
  2,313
  2,422
  2,537
  2,659
  2,787
  2,921
  3,063
  3,211
Adjusted assets (=assets-cash), $m
  979
  999
  1,022
  1,048
  1,077
  1,110
  1,146
  1,185
  1,227
  1,273
  1,321
  1,374
  1,429
  1,489
  1,552
  1,619
  1,690
  1,765
  1,844
  1,928
  2,017
  2,110
  2,209
  2,313
  2,422
  2,537
  2,659
  2,787
  2,921
  3,063
  3,211
Revenue / Adjusted assets
  1.808
  1.807
  1.807
  1.807
  1.809
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.807
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
Average production assets, $m
  256
  260
  266
  273
  280
  289
  298
  308
  319
  331
  344
  358
  372
  388
  404
  421
  440
  459
  480
  502
  525
  549
  575
  602
  631
  661
  692
  725
  761
  797
  836
Working capital, $m
  218
  148
  151
  155
  160
  165
  170
  176
  182
  189
  196
  204
  212
  221
  230
  240
  251
  262
  273
  286
  299
  313
  327
  343
  359
  376
  394
  413
  433
  454
  476
Total debt, $m
  388
  403
  420
  440
  463
  488
  515
  545
  577
  612
  649
  689
  731
  776
  824
  875
  930
  987
  1,047
  1,111
  1,179
  1,250
  1,325
  1,404
  1,488
  1,576
  1,668
  1,765
  1,868
  1,976
  2,089
Total liabilities, $m
  746
  761
  778
  798
  821
  846
  873
  903
  935
  970
  1,007
  1,047
  1,089
  1,134
  1,182
  1,233
  1,288
  1,345
  1,405
  1,469
  1,537
  1,608
  1,683
  1,762
  1,846
  1,934
  2,026
  2,123
  2,226
  2,334
  2,447
Total equity, $m
  305
  238
  243
  249
  256
  264
  273
  282
  292
  303
  314
  327
  340
  354
  369
  385
  402
  420
  439
  459
  480
  502
  526
  550
  576
  604
  633
  663
  695
  729
  764
Total liabilities and equity, $m
  1,051
  999
  1,021
  1,047
  1,077
  1,110
  1,146
  1,185
  1,227
  1,273
  1,321
  1,374
  1,429
  1,488
  1,551
  1,618
  1,690
  1,765
  1,844
  1,928
  2,017
  2,110
  2,209
  2,312
  2,422
  2,538
  2,659
  2,786
  2,921
  3,063
  3,211
Debt-to-equity ratio
  1.272
  1.700
  1.730
  1.770
  1.810
  1.850
  1.890
  1.930
  1.980
  2.020
  2.060
  2.110
  2.150
  2.190
  2.230
  2.270
  2.310
  2.350
  2.390
  2.420
  2.460
  2.490
  2.520
  2.550
  2.580
  2.610
  2.640
  2.660
  2.690
  2.710
  2.730
Adjusted equity ratio
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  67
  69
  70
  72
  74
  76
  79
  81
  84
  87
  101
  105
  108
  112
  116
  120
  125
  130
  135
  140
  146
  152
  158
  165
  172
  179
  187
  195
  204
  213
Depreciation, amort., depletion, $m
  41
  41
  42
  42
  43
  44
  45
  46
  47
  48
  50
  36
  38
  39
  41
  43
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  81
  84
Funds from operations, $m
  17
  108
  110
  113
  115
  118
  121
  125
  128
  132
  137
  137
  142
  147
  153
  159
  165
  171
  178
  186
  193
  202
  210
  219
  229
  239
  249
  260
  272
  284
  297
Change in working capital, $m
  -45
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Cash from operations, $m
  62
  105
  107
  109
  111
  113
  116
  119
  122
  126
  129
  130
  134
  139
  144
  149
  154
  160
  167
  173
  180
  188
  195
  204
  212
  222
  231
  241
  252
  263
  275
Maintenance CAPEX, $m
  0
  -26
  -26
  -27
  -28
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
New CAPEX, $m
  -22
  -4
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
Cash from investing activities, $m
  -10
  -30
  -32
  -34
  -36
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -90
  -94
  -99
  -103
  -108
  -114
  -120
Free cash flow, $m
  52
  75
  75
  75
  76
  76
  77
  79
  80
  82
  83
  81
  83
  86
  88
  91
  93
  96
  99
  103
  106
  110
  114
  119
  123
  128
  133
  138
  144
  150
  156
Issuance/(repayment) of debt, $m
  -12
  15
  18
  20
  22
  25
  27
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
  71
  75
  79
  83
  88
  93
  97
  102
  108
  113
Issuance/(repurchase) of shares, $m
  -42
  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  
  -52
  15
  18
  20
  22
  25
  27
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
  71
  75
  79
  83
  88
  93
  97
  102
  108
  113
Total cash flow (excl. dividends), $m
  0
  90
  92
  95
  98
  101
  105
  108
  112
  116
  121
  121
  126
  131
  136
  142
  147
  154
  160
  167
  174
  182
  189
  198
  207
  216
  225
  236
  246
  257
  269
Retained Cash Flow (-), $m
  -24
  -5
  -5
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
Prev. year cash balance distribution, $m
 
  72
  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
 
  157
  87
  89
  91
  94
  96
  99
  102
  105
  109
  109
  112
  117
  121
  126
  131
  136
  141
  147
  153
  159
  166
  173
  180
  188
  196
  205
  214
  224
  234
Discount rate, %
 
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
 
  147
  76
  72
  68
  64
  59
  55
  50
  46
  41
  35
  31
  27
  23
  20
  17
  14
  11
  9
  7
  5
  4
  3
  2
  2
  1
  1
  0
  0
  0
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

NCI Building Systems, Inc. is a manufacturer and marketer of metal products in North America. The Company's operating segments include Engineered building systems, Metal components and Metal coil coating. The Engineered building systems segment is engaged in the manufacturing of main frames and long bay systems, and engineering and drafting. The Metal components segment's products include metal roof and wall panels, doors, metal partitions, metal trim, insulated metal panel (IMP) products and other related accessories. The Company manufactures and distributes a range of metal products for the non-residential construction market. It operates in the United States, Mexico, Canada and China. The Company provides metal coil coating services, and designs, engineers, manufactures and markets metal components and engineered building systems. It also provides metal coil coating services for commercial and construction applications, servicing both internal and external customers.

FINANCIAL RATIOS  of  NCI Building Systems (NCS)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 0.6
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 18.5
Price to Free Cash Flow 28.6
Growth Rates
Sales Growth Rate 5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.8%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 127.2%
Total Debt to Equity 127.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 8%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 18.8%
Return On Equity - 3 Yr. Avg. 14.7%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 23.5%
Gross Margin - 3 Yr. Avg. 24.3%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 7.9%
Operating Margin 6.2%
Oper. Margin - 3 Yr. Avg. 5.5%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 3.7%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate 33.7%
Eff/ Tax Rate - 3 Yr. Avg. 34.2%
Payout Ratio 0%

NCS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCS stock intrinsic value calculation we used $1770 million for the last fiscal year's total revenue generated by NCI Building Systems. The default revenue input number comes from 2017 income statement of NCI Building Systems. 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 NCS 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 6.6%, whose default value for NCS is calculated based on our internal credit rating of NCI Building Systems, 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 NCI Building Systems.
    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 NCS stock the variable cost ratio is equal to 93.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NCS 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 7.1% for NCI Building Systems.

Corporate tax rate of 27% is the nominal tax rate for NCI Building Systems. 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 NCS 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 NCS are equal to 14.4%.

Life of production assets of 9.9 years is the average useful life of capital assets used in NCI Building Systems 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 NCS is equal to 8.2%. 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 - $305 million for NCI Building Systems - 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 67.358 million for NCI Building Systems 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 NCI Building Systems at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

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▶ 3 Stocks Gain on Thursday   [04:06PM  GuruFocus.com]
▶ NCI Building beats 4Q profit forecasts   [Dec-06-17 04:45PM  Associated Press]
▶ NCI Building Systems Announces Board Succession Plan   [Sep-29-17 12:38PM  PR Newswire]
▶ NCI Building Systems to Attend Two Investor Conferences   [Sep-11-17 04:36PM  PR Newswire]
▶ Why NCI Building Systems Inc's Shares Plunged 22% Today   [Sep-07-17 02:37PM  Motley Fool]
▶ NCI Building posts 3Q profit   [Sep-06-17 11:57PM  Associated Press]
▶ NCI Building posts 2Q profit   [04:37PM  Associated Press]
Financial statements of NCS
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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