Intrinsic value of National Holdings - NHLD

Previous Close

$3.14

  Intrinsic Value

$66.18

stock screener

  Rating & Target

str. buy

+999%

Previous close

$3.14

 
Intrinsic value

$66.18

 
Up/down potential

+999%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as NHLD.

We calculate the intrinsic value of NHLD 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, %
  9.20
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  190
  207
  225
  244
  264
  284
  305
  327
  350
  373
  398
  423
  450
  478
  506
  537
  568
  601
  635
  670
  708
  747
  787
  830
  874
  921
  970
  1,021
  1,074
  1,130
  1,189
Variable operating expenses, $m
 
  71
  77
  83
  90
  97
  104
  111
  119
  127
  135
  143
  152
  161
  171
  181
  191
  202
  214
  226
  238
  251
  265
  279
  294
  310
  327
  344
  362
  381
  400
Fixed operating expenses, $m
 
  123
  125
  128
  131
  134
  137
  140
  143
  146
  149
  152
  156
  159
  163
  166
  170
  174
  178
  181
  185
  190
  194
  198
  202
  207
  211
  216
  221
  226
  231
Total operating expenses, $m
  182
  194
  202
  211
  221
  231
  241
  251
  262
  273
  284
  295
  308
  320
  334
  347
  361
  376
  392
  407
  423
  441
  459
  477
  496
  517
  538
  560
  583
  607
  631
Operating income, $m
  8
  14
  23
  33
  43
  53
  64
  76
  88
  101
  114
  128
  143
  158
  173
  190
  207
  225
  243
  263
  284
  306
  328
  352
  378
  404
  432
  461
  492
  524
  558
EBITDA, $m
  9
  16
  26
  35
  46
  56
  68
  79
  91
  104
  117
  131
  146
  161
  177
  193
  211
  229
  248
  268
  289
  311
  334
  358
  384
  410
  438
  468
  499
  532
  566
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Earnings before tax, $m
  17
  14
  23
  33
  42
  53
  64
  75
  87
  99
  112
  127
  141
  156
  171
  187
  204
  222
  240
  260
  280
  302
  324
  348
  373
  399
  426
  455
  486
  518
  551
Tax expense, $m
  4
  4
  6
  9
  11
  14
  17
  20
  23
  27
  30
  34
  38
  42
  46
  51
  55
  60
  65
  70
  76
  82
  88
  94
  101
  108
  115
  123
  131
  140
  149
Net income, $m
  13
  10
  17
  24
  31
  39
  47
  55
  64
  73
  82
  93
  103
  114
  125
  137
  149
  162
  176
  190
  205
  220
  237
  254
  272
  291
  311
  332
  355
  378
  402

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  31
  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
  64
  61
  67
  72
  78
  84
  90
  97
  104
  111
  118
  125
  133
  142
  150
  159
  168
  178
  188
  199
  210
  221
  233
  246
  259
  273
  287
  303
  318
  335
  352
Adjusted assets (=assets-cash), $m
  33
  61
  67
  72
  78
  84
  90
  97
  104
  111
  118
  125
  133
  142
  150
  159
  168
  178
  188
  199
  210
  221
  233
  246
  259
  273
  287
  303
  318
  335
  352
Revenue / Adjusted assets
  5.758
  3.393
  3.358
  3.389
  3.385
  3.381
  3.389
  3.371
  3.365
  3.360
  3.373
  3.384
  3.383
  3.366
  3.373
  3.377
  3.381
  3.376
  3.378
  3.367
  3.371
  3.380
  3.378
  3.374
  3.375
  3.374
  3.380
  3.370
  3.377
  3.373
  3.378
Average production assets, $m
  6
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  56
  59
  63
  66
  69
  73
  77
  81
Working capital, $m
  19
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
Total debt, $m
  0
  3
  5
  8
  10
  13
  16
  19
  22
  25
  28
  32
  35
  39
  43
  47
  51
  55
  60
  65
  70
  75
  80
  86
  92
  98
  105
  112
  119
  126
  134
Total liabilities, $m
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
  111
  117
  124
  130
  137
  144
  152
  160
Total equity, $m
  39
  34
  37
  40
  43
  46
  49
  53
  57
  60
  64
  69
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
  128
  135
  142
  149
  157
  165
  174
  183
  193
Total liabilities and equity, $m
  65
  62
  67
  73
  78
  84
  90
  97
  104
  110
  117
  126
  133
  141
  150
  159
  168
  178
  188
  199
  210
  221
  234
  246
  259
  273
  287
  302
  318
  335
  353
Debt-to-equity ratio
  0.000
  0.080
  0.140
  0.190
  0.240
  0.280
  0.320
  0.350
  0.380
  0.410
  0.440
  0.460
  0.480
  0.500
  0.520
  0.540
  0.550
  0.570
  0.580
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.680
  0.680
  0.690
  0.700
Adjusted equity ratio
  0.242
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  10
  17
  24
  31
  39
  47
  55
  64
  73
  82
  93
  103
  114
  125
  137
  149
  162
  176
  190
  205
  220
  237
  254
  272
  291
  311
  332
  355
  378
  402
Depreciation, amort., depletion, $m
  1
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Funds from operations, $m
  -4
  13
  19
  26
  34
  42
  50
  58
  67
  76
  86
  95
  106
  117
  128
  140
  153
  166
  180
  194
  210
  225
  242
  260
  278
  298
  318
  339
  362
  386
  410
Change in working capital, $m
  -7
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Cash from operations, $m
  3
  13
  20
  27
  35
  42
  51
  59
  68
  77
  87
  97
  107
  118
  130
  142
  154
  168
  181
  196
  211
  227
  244
  262
  280
  300
  320
  342
  364
  388
  413
Maintenance CAPEX, $m
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Cash from investing activities, $m
  -1
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
Free cash flow, $m
  2
  11
  17
  24
  32
  39
  47
  56
  64
  73
  83
  92
  102
  113
  124
  136
  149
  161
  175
  189
  204
  220
  236
  253
  272
  291
  311
  332
  354
  377
  401
Issuance/(repayment) of debt, $m
  0
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  0
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Total cash flow (excl. dividends), $m
  2
  13
  20
  27
  34
  42
  50
  58
  67
  76
  86
  96
  106
  117
  128
  140
  153
  166
  180
  194
  209
  225
  242
  259
  278
  297
  317
  338
  361
  385
  409
Retained Cash Flow (-), $m
  -13
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Prev. year cash balance distribution, $m
 
  8
  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
 
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Cash available for distribution, $m
 
  19
  17
  24
  31
  39
  47
  55
  64
  73
  82
  91
  102
  112
  124
  135
  148
  161
  174
  188
  203
  219
  235
  252
  270
  289
  309
  330
  352
  375
  400
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
 
  18
  16
  21
  26
  30
  34
  37
  40
  42
  43
  43
  43
  43
  42
  40
  38
  35
  32
  29
  26
  23
  20
  17
  14
  11
  9
  7
  5
  4
  3
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

National Holdings Corporation, through its subsidiaries, provides financial services. Through the Company's broker-dealer and investment advisory subsidiaries, it offers full service retail brokerage to individual, corporate and institutional clients; provides investment banking, merger and acquisition, and advisory services to micro, small and mid-cap high growth companies; engages in trading securities, including making markets in micro and small-cap National Association of Securities Dealers Automated Quotation (NASDAQ) and other exchange listed stocks, and provides liquidity in the United States Treasury marketplace. Its segments include brokerage and advisory services, and tax and accounting services. The brokerage and advisory services segment includes broker-dealer and investment advisory services, sale of insurance products and licensed mortgage brokerage services. The tax and accounting services segment includes tax preparation and small business accounting services.

FINANCIAL RATIOS  of  National Holdings (NHLD)

Valuation Ratios
P/E Ratio 3
Price to Sales 0.2
Price to Book 1
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 19.5
Growth Rates
Sales Growth Rate 9.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
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 20.8%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 40%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 40%
Return On Equity - 3 Yr. Avg. 7.7%
Asset Turnover 3
Profitability Ratios
Gross Margin 14.7%
Gross Margin - 3 Yr. Avg. 10.9%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 3.2%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 0.8%
Pre-Tax Margin 8.9%
Pre-Tax Margin - 3 Yr. Avg. 2.6%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. -58.8%
Payout Ratio 0%

NHLD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NHLD stock intrinsic value calculation we used $190 million for the last fiscal year's total revenue generated by National Holdings. The default revenue input number comes from 2017 income statement of National Holdings. 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 NHLD stock valuation model: a) initial revenue growth rate of 9.1% 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 NHLD is calculated based on our internal credit rating of National Holdings, 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 National Holdings.
    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 NHLD stock the variable cost ratio is equal to 34.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $120 million in the base year in the intrinsic value calculation for NHLD 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 5.4% for National Holdings.

Corporate tax rate of 27% is the nominal tax rate for National Holdings. 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 NHLD stock is equal to 0.3%.

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 NHLD are equal to 6.8%.

Life of production assets of 10 years is the average useful life of capital assets used in National Holdings 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 NHLD is equal to -4.6%. 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 - $39 million for National Holdings - 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 12 million for National Holdings 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 National Holdings at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of NHLD
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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