Intrinsic value of National Holdings - NHLD

Previous Close

$2.68

  Intrinsic Value

$4.39

stock screener

  Rating & Target

str. buy

+64%

  Value-price divergence*

-83%

Previous close

$2.68

 
Intrinsic value

$4.39

 
Up/down potential

+64%

 
Rating

str. buy

 
Value-price divergence*

-83%

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

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

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

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 0.0

 

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, %
  6.75
  23.80
  21.92
  20.23
  18.71
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
Revenue, $m
  174
  215
  263
  316
  375
  440
  511
  587
  669
  757
  850
  948
  1,051
  1,160
  1,273
  1,392
  1,515
  1,644
  1,777
  1,916
  2,061
  2,211
  2,367
  2,529
  2,698
  2,873
  3,056
  3,246
  3,443
  3,649
  3,864
Variable operating expenses, $m
 
  215
  262
  315
  374
  439
  509
  585
  667
  755
  847
  944
  1,047
  1,155
  1,268
  1,386
  1,509
  1,637
  1,770
  1,909
  2,053
  2,202
  2,358
  2,519
  2,687
  2,862
  3,043
  3,233
  3,430
  3,635
  3,849
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
  177
  215
  262
  315
  374
  439
  509
  585
  667
  755
  847
  944
  1,047
  1,155
  1,268
  1,386
  1,509
  1,637
  1,770
  1,909
  2,053
  2,202
  2,358
  2,519
  2,687
  2,862
  3,043
  3,233
  3,430
  3,635
  3,849
Operating income, $m
  -2
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
EBITDA, $m
  -1
  1
  2
  2
  3
  3
  3
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
Earnings before tax, $m
  -2
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
Tax expense, $m
  4
  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
Net income, $m
  -6
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  24
  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
  61
  46
  56
  67
  80
  94
  109
  125
  142
  161
  181
  202
  224
  247
  271
  296
  322
  350
  378
  407
  438
  470
  503
  538
  574
  611
  650
  690
  732
  776
  822
Adjusted assets (=assets-cash), $m
  37
  46
  56
  67
  80
  94
  109
  125
  142
  161
  181
  202
  224
  247
  271
  296
  322
  350
  378
  407
  438
  470
  503
  538
  574
  611
  650
  690
  732
  776
  822
Revenue / Adjusted assets
  4.703
  4.674
  4.696
  4.716
  4.688
  4.681
  4.688
  4.696
  4.711
  4.702
  4.696
  4.693
  4.692
  4.696
  4.697
  4.703
  4.705
  4.697
  4.701
  4.708
  4.705
  4.704
  4.706
  4.701
  4.700
  4.702
  4.702
  4.704
  4.704
  4.702
  4.701
Average production assets, $m
  7
  8
  10
  12
  14
  16
  19
  22
  25
  28
  31
  35
  39
  43
  47
  51
  56
  61
  66
  71
  76
  82
  88
  94
  100
  106
  113
  120
  127
  135
  143
Working capital, $m
  3
  -22
  -26
  -32
  -37
  -44
  -51
  -59
  -67
  -76
  -85
  -95
  -105
  -116
  -127
  -139
  -152
  -164
  -178
  -192
  -206
  -221
  -237
  -253
  -270
  -287
  -306
  -325
  -344
  -365
  -386
Total debt, $m
  0
  6
  15
  25
  37
  49
  63
  77
  93
  110
  128
  146
  166
  187
  209
  231
  255
  280
  305
  332
  359
  388
  418
  449
  481
  515
  550
  586
  624
  663
  704
Total liabilities, $m
  35
  41
  50
  60
  72
  84
  98
  112
  128
  145
  163
  181
  201
  222
  244
  266
  290
  315
  340
  367
  394
  423
  453
  484
  516
  550
  585
  621
  659
  698
  739
Total equity, $m
  26
  5
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  78
  82
Total liabilities and equity, $m
  61
  46
  56
  67
  80
  93
  109
  124
  142
  161
  181
  201
  223
  247
  271
  296
  322
  350
  378
  408
  438
  470
  503
  538
  573
  611
  650
  690
  732
  776
  821
Debt-to-equity ratio
  0.000
  1.360
  2.730
  3.790
  4.610
  5.260
  5.780
  6.200
  6.540
  6.830
  7.060
  7.260
  7.430
  7.580
  7.710
  7.820
  7.910
  8.000
  8.070
  8.140
  8.200
  8.260
  8.300
  8.350
  8.390
  8.430
  8.460
  8.490
  8.520
  8.550
  8.570
Adjusted equity ratio
  0.054
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
Funds from operations, $m
  -5
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Change in working capital, $m
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
Cash from operations, $m
  -2
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
New CAPEX, $m
  0
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Cash from investing activities, $m
  0
  -1
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -17
  -18
Free cash flow, $m
  -2
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
Issuance/(repayment) of debt, $m
  0
  6
  9
  10
  11
  12
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
Issuance/(repurchase) of shares, $m
  0
  2
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
Cash from financing (excl. dividends), $m  
  0
  8
  10
  11
  12
  14
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  40
  43
  45
  46
  49
  51
  53
Total cash flow (excl. dividends), $m
  -3
  12
  14
  15
  17
  19
  20
  22
  24
  25
  27
  27
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
Retained Cash Flow (-), $m
  19
  -3
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
Prev. year cash balance distribution, $m
 
  24
  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
 
  34
  13
  14
  16
  17
  19
  20
  21
  22
  23
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
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
 
  32
  12
  12
  13
  13
  13
  13
  13
  13
  12
  12
  11
  10
  9
  8
  8
  7
  6
  5
  4
  4
  3
  2
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  50.9
  44.1
  38.2
  33.0
  28.5
  24.7
  21.3
  18.5
  16.0
  13.9
  12.5
  11.1
  9.9
  8.8
  7.9
  7.0
  6.2
  5.6
  5.0
  4.4
  3.9
  3.5
  3.1
  2.8
  2.5
  2.2
  2.0
  1.7
  1.6
  1.4

National Holdings Corporation, through its subsidiaries, provides financial services in the United States. The company offers retail brokerage services, including purchases and sale of stocks, options, bonds, mutual funds, annuities, and various other securities for individual, corporate, and institutional clients. It also provides investment banking services, such as underwriting the sale of securities to the public in initial and follow-on offering, and arranging for the private placement of securities with investors; and corporate finance services comprising mergers and acquisitions, project financing, capital structure, and specific financing opportunities to micro, small, and mid-cap high growth companies. In addition, the company engages in trading securities that include making markets in micro and small-cap, NASDAQ, and other exchange listed stocks; and the provision of liquidity in the United States Treasury marketplace. Further, it provides asset management advisory services to retail clients; fixed insurance products, including life insurance, disability insurance, long-term care insurance, and fixed annuities; and tax preparation services to individuals, primarily in the middle and upper income tax brackets, as well as accounting services to small and midsize companies. Additionally, the company offers licensed mortgage brokerage services; and investment products and services, which comprise stocks, bonds, mutual funds, annuities, insurance, and managed money accounts. The company was formerly known as Olympic Cascade Financial Corporation and changed its name to National Holdings Corporation in March 2006. The company was founded in 1947 and is headquartered in New York, New York. National Holdings Corporation is a subsidiary of FBIO Acquisition, Inc.

FINANCIAL RATIOS  of  National Holdings (NHLD)

Valuation Ratios
P/E Ratio -5.6
Price to Sales 0.2
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -16.7
Price to Free Cash Flow -16.7
Growth Rates
Sales Growth Rate 6.7%
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
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -9.7%
Ret/ On Assets - 3 Yr. Avg. 10.1%
Return On Total Capital -16.9%
Ret/ On T. Cap. - 3 Yr. Avg. 15.1%
Return On Equity -16.9%
Return On Equity - 3 Yr. Avg. 15.1%
Asset Turnover 2.8
Profitability Ratios
Gross Margin 8%
Gross Margin - 3 Yr. Avg. 10.3%
EBITDA Margin -0.6%
EBITDA Margin - 3 Yr. Avg. 1.6%
Operating Margin -1.7%
Oper. Margin - 3 Yr. Avg. 0.9%
Pre-Tax Margin -1.1%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin -3.4%
Net Profit Margin - 3 Yr. Avg. 2.3%
Effective Tax Rate -200%
Eff/ Tax Rate - 3 Yr. Avg. -112.5%
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 $174 million for the last fiscal year's total revenue generated by National Holdings. The default revenue input number comes from 2016 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 23.8% 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 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 100%.

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 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 3.5% 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%.

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 3.7%.

Life of production assets of 13.5 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 -10%. 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 - $26 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 12.376 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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Stock chart of NHLD 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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