Intrinsic value of National Holdings - NHLD

Previous Close

$4.15

  Intrinsic Value

$15.28

stock screener

  Rating & Target

str. buy

+268%

Previous close

$4.15

 
Intrinsic value

$15.28

 
Up/down potential

+268%

 
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
  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
  190
  194
  198
  203
  209
  215
  222
  230
  238
  247
  256
  267
  277
  289
  301
  314
  328
  343
  358
  374
  391
  410
  429
  449
  470
  492
  516
  541
  567
  594
  623
Variable operating expenses, $m
 
  60
  62
  63
  65
  67
  69
  71
  74
  77
  80
  82
  86
  89
  93
  97
  101
  106
  110
  115
  121
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
Fixed operating expenses, $m
 
  129
  132
  136
  139
  143
  146
  150
  154
  157
  161
  165
  169
  174
  178
  182
  187
  192
  197
  201
  206
  212
  217
  222
  228
  234
  239
  245
  252
  258
  264
Total operating expenses, $m
  182
  189
  194
  199
  204
  210
  215
  221
  228
  234
  241
  247
  255
  263
  271
  279
  288
  298
  307
  316
  327
  338
  349
  360
  373
  386
  398
  412
  427
  441
  456
Operating income, $m
  8
  4
  4
  4
  5
  6
  7
  9
  11
  13
  16
  19
  22
  26
  30
  35
  40
  45
  51
  57
  64
  72
  80
  88
  97
  107
  117
  129
  141
  153
  167
EBITDA, $m
  9
  5
  5
  5
  6
  7
  8
  10
  12
  14
  17
  20
  23
  27
  31
  36
  41
  46
  52
  58
  65
  73
  81
  89
  98
  108
  119
  130
  142
  155
  168
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
Earnings before tax, $m
  17
  4
  4
  4
  5
  6
  7
  9
  10
  13
  15
  19
  22
  26
  30
  34
  39
  45
  50
  57
  63
  71
  79
  87
  96
  106
  116
  127
  139
  152
  165
Tax expense, $m
  4
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  26
  29
  31
  34
  38
  41
  45
Net income, $m
  13
  3
  3
  3
  4
  4
  5
  6
  8
  9
  11
  14
  16
  19
  22
  25
  29
  33
  37
  41
  46
  52
  57
  63
  70
  77
  85
  93
  101
  111
  120

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
  34
  34
  35
  36
  37
  39
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  98
  103
  108
Adjusted assets (=assets-cash), $m
  33
  34
  34
  35
  36
  37
  39
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  98
  103
  108
Revenue / Adjusted assets
  5.758
  5.706
  5.824
  5.800
  5.806
  5.811
  5.692
  5.750
  5.805
  5.744
  5.689
  5.804
  5.771
  5.780
  5.788
  5.709
  5.754
  5.814
  5.774
  5.754
  5.750
  5.775
  5.797
  5.756
  5.732
  5.721
  5.733
  5.755
  5.786
  5.767
  5.769
Average production assets, $m
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
Working capital, $m
  19
  -12
  -12
  -13
  -13
  -14
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
Total debt, $m
  0
  1
  1
  2
  3
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  27
  29
  31
  34
  37
  40
  43
  46
  50
  53
  57
Total liabilities, $m
  26
  26
  26
  27
  28
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
Total equity, $m
  39
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Total liabilities and equity, $m
  65
  34
  34
  36
  37
  37
  38
  40
  41
  43
  45
  46
  49
  50
  53
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
  103
  108
Debt-to-equity ratio
  0.000
  0.060
  0.130
  0.210
  0.290
  0.370
  0.460
  0.550
  0.630
  0.720
  0.810
  0.900
  0.990
  1.070
  1.160
  1.240
  1.320
  1.400
  1.470
  1.540
  1.610
  1.680
  1.740
  1.810
  1.870
  1.920
  1.980
  2.030
  2.080
  2.130
  2.180
Adjusted equity ratio
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  3
  3
  3
  4
  4
  5
  6
  8
  9
  11
  14
  16
  19
  22
  25
  29
  33
  37
  41
  46
  52
  57
  63
  70
  77
  85
  93
  101
  111
  120
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
Funds from operations, $m
  -4
  4
  4
  4
  5
  5
  6
  7
  9
  10
  12
  14
  17
  20
  23
  26
  29
  33
  38
  42
  47
  53
  58
  65
  71
  78
  86
  94
  103
  112
  122
Change in working capital, $m
  -7
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
Cash from operations, $m
  3
  4
  4
  5
  5
  6
  7
  8
  9
  11
  13
  15
  17
  20
  23
  27
  30
  34
  39
  43
  48
  54
  60
  66
  73
  80
  88
  96
  104
  114
  124
Maintenance CAPEX, $m
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -1
  0
  0
  0
  -1
  -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
Free cash flow, $m
  2
  4
  4
  4
  4
  5
  6
  7
  8
  10
  12
  14
  16
  19
  22
  26
  29
  33
  37
  42
  47
  52
  58
  64
  71
  78
  86
  94
  102
  112
  121
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
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
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
Total cash flow (excl. dividends), $m
  2
  4
  4
  5
  5
  6
  7
  8
  10
  11
  13
  15
  18
  21
  24
  27
  31
  35
  39
  44
  49
  55
  61
  67
  74
  81
  89
  97
  106
  115
  125
Retained Cash Flow (-), $m
  -13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Prev. year cash balance distribution, $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
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
 
  35
  4
  4
  5
  6
  7
  8
  9
  11
  13
  15
  17
  20
  23
  27
  30
  34
  39
  43
  48
  54
  60
  66
  73
  80
  88
  96
  105
  114
  124
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
 
  34
  4
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  8
  7
  7
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
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 4
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 17.2
Price to Free Cash Flow 25.8
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 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 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 31.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $126 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 2.9%.

Life of production assets of 11.5 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 -6.3%. 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 12.021 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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