Intrinsic value of NL Industries - NL

Previous Close

$13.95

  Intrinsic Value

$3.80

stock screener

  Rating & Target

str. sell

-73%

Previous close

$13.95

 
Intrinsic value

$3.80

 
Up/down potential

-73%

 
Rating

str. sell

We calculate the intrinsic value of NL 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
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, %
  0.00
  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
  109
  111
  114
  117
  120
  124
  128
  132
  137
  142
  147
  153
  159
  166
  173
  180
  188
  196
  205
  215
  225
  235
  246
  257
  270
  283
  296
  310
  325
  341
  358
Variable operating expenses, $m
 
  111
  114
  116
  120
  123
  127
  131
  136
  141
  146
  149
  155
  162
  168
  176
  183
  192
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  317
  333
  349
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
  110
  111
  114
  116
  120
  123
  127
  131
  136
  141
  146
  149
  155
  162
  168
  176
  183
  192
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  317
  333
  349
Operating income, $m
  -1
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
EBITDA, $m
  3
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
Earnings before tax, $m
  14
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  1
  1
  1
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
Tax expense, $m
  -3
  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
  15
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  1
  1
  1
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  93
  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
  385
  298
  305
  313
  322
  331
  342
  354
  366
  380
  394
  410
  427
  444
  463
  483
  504
  527
  550
  576
  602
  630
  659
  690
  723
  757
  794
  832
  872
  914
  959
Adjusted assets (=assets-cash), $m
  292
  298
  305
  313
  322
  331
  342
  354
  366
  380
  394
  410
  427
  444
  463
  483
  504
  527
  550
  576
  602
  630
  659
  690
  723
  757
  794
  832
  872
  914
  959
Revenue / Adjusted assets
  0.373
  0.372
  0.374
  0.374
  0.373
  0.375
  0.374
  0.373
  0.374
  0.374
  0.373
  0.373
  0.372
  0.374
  0.374
  0.373
  0.373
  0.372
  0.373
  0.373
  0.374
  0.373
  0.373
  0.372
  0.373
  0.374
  0.373
  0.373
  0.373
  0.373
  0.373
Average production assets, $m
  34
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
Working capital, $m
  93
  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 debt, $m
  0
  4
  9
  15
  21
  28
  35
  44
  53
  62
  73
  84
  96
  108
  121
  136
  151
  166
  183
  201
  220
  240
  260
  282
  306
  330
  356
  383
  411
  441
  473
Total liabilities, $m
  207
  211
  216
  222
  228
  235
  242
  251
  260
  269
  280
  291
  303
  315
  328
  343
  358
  373
  390
  408
  427
  447
  467
  489
  513
  537
  563
  590
  618
  648
  680
Total equity, $m
  178
  87
  89
  91
  94
  96
  100
  103
  107
  111
  115
  119
  124
  129
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  231
  242
  254
  266
  279
Total liabilities and equity, $m
  385
  298
  305
  313
  322
  331
  342
  354
  367
  380
  395
  410
  427
  444
  463
  484
  505
  526
  550
  575
  602
  630
  659
  690
  723
  757
  794
  832
  872
  914
  959
Debt-to-equity ratio
  0.000
  0.050
  0.100
  0.160
  0.220
  0.290
  0.360
  0.430
  0.490
  0.560
  0.630
  0.700
  0.770
  0.840
  0.900
  0.960
  1.030
  1.090
  1.140
  1.200
  1.250
  1.310
  1.360
  1.410
  1.450
  1.500
  1.540
  1.580
  1.620
  1.660
  1.690
Adjusted equity ratio
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  1
  1
  1
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
Depreciation, amort., depletion, $m
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Funds from operations, $m
  32
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  1
  1
  1
Change in working capital, $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
Cash from operations, $m
  28
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  1
  1
  1
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -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
New CAPEX, $m
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from investing activities, $m
  -31
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
Free cash flow, $m
  -3
  2
  2
  2
  2
  1
  1
  1
  1
  0
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
Issuance/(repayment) of debt, $m
  1
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
Issuance/(repurchase) of shares, $m
  0
  2
  2
  2
  3
  3
  4
  4
  5
  5
  5
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
Cash from financing (excl. dividends), $m  
  0
  6
  7
  8
  9
  10
  12
  12
  14
  15
  15
  15
  16
  18
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
Total cash flow (excl. dividends), $m
  -3
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
Retained Cash Flow (-), $m
  -28
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
Prev. year cash balance distribution, $m
 
  93
  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
 
  99
  7
  7
  8
  8
  9
  9
  9
  10
  10
  9
  10
  11
  11
  12
  13
  13
  14
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  19
  20
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
 
  95
  6
  6
  6
  6
  6
  6
  6
  6
  5
  4
  4
  4
  4
  4
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.5
  98.8
  98.1
  97.3
  96.4
  95.5
  94.4
  93.3
  92.2
  91.0
  90.2
  89.4
  88.5
  87.6
  86.6
  85.6
  84.5
  83.4
  82.2
  81.0
  79.8
  78.6
  77.3
  76.0
  74.7
  73.4
  72.0
  70.7
  69.4
  68.0

NL Industries, Inc. is a holding company. The Company operates in the component products industry through its subsidiary, CompX International Inc. (CompX). The Company operates in the chemicals industry through its non-controlling interest in Kronos Worldwide, Inc. (Kronos). The Company, through Compx, manufactures engineered components that are sold to a range of industries, including recreational transportation (including boats), postal, office and institutional furniture, cabinetry, tool storage, healthcare, gas stations and vending equipment. Kronos is a global producer and marketer of value-added titanium dioxide pigments (TiO2), a base industrial product used in imparting whiteness, brightness and opacity to a range of customer applications and end use markets, including coatings, plastics, paper, inks, food, cosmetics, and other industrial and consumer products. Kronos has production facilities in Europe and North America.

FINANCIAL RATIOS  of  NL Industries (NL)

Valuation Ratios
P/E Ratio 45.3
Price to Sales 6.2
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 24.3
Price to Free Cash Flow 27.2
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
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 4.1%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 2.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 32.1%
Gross Margin - 3 Yr. Avg. 31.1%
EBITDA Margin 16.5%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin -0.9%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin 12.8%
Pre-Tax Margin - 3 Yr. Avg. -0.1%
Net Profit Margin 13.8%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate -21.4%
Eff/ Tax Rate - 3 Yr. Avg. 15.9%
Payout Ratio 0%

NL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NL stock intrinsic value calculation we used $109 million for the last fiscal year's total revenue generated by NL Industries. The default revenue input number comes from 2016 income statement of NL Industries. 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 NL 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 NL is calculated based on our internal credit rating of NL Industries, 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 NL Industries.
    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 NL 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 NL 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 NL Industries.

Corporate tax rate of 27% is the nominal tax rate for NL Industries. 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 NL 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 NL are equal to 30.7%.

Life of production assets of 15.1 years is the average useful life of capital assets used in NL Industries 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 NL is equal to 0%. 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 - $178 million for NL Industries - 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 47.519 million for NL Industries 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 NL Industries at the current share price and the inputted number of shares is $0.7 billion.

RELATED COMPANIES Price Int.Val. Rating
CIX CompX Internat 14.33 11.54  hold
VHI Valhi 6.16 1.39  str.sell
EML Eastern 27.75 12.16  str.sell
NNBR NN 29.05 11.04  str.sell
ROLL RBC Bearings 128.38 44.70  str.sell
TKR Timken 55.50 2.97  str.sell
KRO Kronos Worldwi 28.47 0.83  str.sell
SYNL Synalloy 13.15 2.51  str.sell
ALLE Allegion 85.80 17.67  str.sell

COMPANY NEWS

▶ This Wild Roller Coaster Stock Is Not for Widows or Orphans   [Dec-07-17 12:00PM  TheStreet.com]
▶ NL Industries posts 3Q profit   [Nov-08-17 07:43PM  Associated Press]
▶ NL REPORTS THIRD QUARTER 2017 RESULTS   [04:19PM  GlobeNewswire]
▶ When Should You Buy NL Industries Inc (NL)?   [Oct-28-17 08:41PM  Simply Wall St.]
▶ NL Industries posts 2Q profit   [Aug-07-17 08:01PM  Associated Press]
▶ NL REPORTS SECOND QUARTER 2017 RESULTS   [06:05PM  GlobeNewswire]
▶ ETFs with exposure to NL Industries, Inc. : June 2, 2017   [Jun-02-17 02:21PM  Capital Cube]
▶ NL Industries posts 1Q profit   [05:24AM  Associated Press]
▶ NL REPORTS FIRST QUARTER 2017 RESULTS   [May-08-17 04:21PM  GlobeNewswire]
▶ Court rules New Jersey not liable in $80M Superfund cleanup   [Mar-27-17 06:04PM  Associated Press]
▶ NL Industries posts 4Q profit   [Mar-10-17 04:48PM  Associated Press]
▶ NL REPORTS FOURTH QUARTER 2016 RESULTS   [04:24PM  GlobeNewswire]
▶ NL REPORTS THIRD QUARTER 2016 RESULTS   [04:26PM  GlobeNewswire]
▶ NL Reports Second Quarter 2016 Results   [04:41PM  GlobeNewswire]
▶ NL REPORTS FIRST QUARTER 2016 RESULTS   [05:04PM  GlobeNewswire]
▶ NL Reports Fourth Quarter 2015 Results   [04:27PM  GlobeNewswire]
▶ NL Reports Third Quarter 2015 Results   [04:26PM  GlobeNewswire]
▶ 10-Q for NL Industries, Inc.   [Aug-09  08:13PM  at Company Spotlight]
▶ NL REPORTS SECOND QUARTER 2015 RESULTS   [05:05PM  GlobeNewswire]
▶ 10-Q for NL Industries, Inc.   [May-11  08:12PM  at Company Spotlight]
Financial statements of NL
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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