Intrinsic value of Neenah Paper - NP

Previous Close

$92.90

  Intrinsic Value

$68.39

stock screener

  Rating & Target

sell

-26%

Previous close

$92.90

 
Intrinsic value

$68.39

 
Up/down potential

-26%

 
Rating

sell

We calculate the intrinsic value of NP 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, %
  6.08
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  942
  991
  1,042
  1,096
  1,153
  1,212
  1,274
  1,339
  1,407
  1,478
  1,554
  1,632
  1,715
  1,802
  1,893
  1,988
  2,088
  2,194
  2,304
  2,420
  2,542
  2,669
  2,803
  2,944
  3,092
  3,247
  3,410
  3,581
  3,760
  3,948
  4,146
Variable operating expenses, $m
 
  752
  790
  831
  873
  918
  964
  1,013
  1,064
  1,118
  1,175
  1,227
  1,289
  1,354
  1,422
  1,494
  1,570
  1,649
  1,732
  1,819
  1,910
  2,006
  2,107
  2,213
  2,324
  2,440
  2,563
  2,691
  2,826
  2,967
  3,116
Fixed operating expenses, $m
 
  118
  121
  124
  127
  130
  133
  137
  140
  144
  147
  151
  155
  159
  162
  167
  171
  175
  179
  184
  188
  193
  198
  203
  208
  213
  219
  224
  230
  235
  241
Total operating expenses, $m
  827
  870
  911
  955
  1,000
  1,048
  1,097
  1,150
  1,204
  1,262
  1,322
  1,378
  1,444
  1,513
  1,584
  1,661
  1,741
  1,824
  1,911
  2,003
  2,098
  2,199
  2,305
  2,416
  2,532
  2,653
  2,782
  2,915
  3,056
  3,202
  3,357
Operating income, $m
  114
  121
  131
  141
  152
  164
  176
  189
  202
  217
  232
  255
  271
  289
  308
  327
  348
  370
  393
  417
  443
  470
  498
  528
  560
  593
  629
  666
  705
  746
  789
EBITDA, $m
  146
  157
  168
  180
  193
  206
  220
  235
  250
  267
  284
  302
  321
  341
  363
  385
  409
  434
  460
  487
  517
  547
  580
  614
  650
  687
  727
  769
  813
  860
  909
Interest expense (income), $m
  10
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  70
Earnings before tax, $m
  103
  112
  120
  130
  140
  150
  161
  173
  185
  198
  211
  233
  248
  264
  281
  299
  318
  337
  358
  380
  404
  428
  454
  482
  510
  541
  573
  607
  642
  680
  719
Tax expense, $m
  30
  30
  33
  35
  38
  41
  43
  47
  50
  53
  57
  63
  67
  71
  76
  81
  86
  91
  97
  103
  109
  116
  123
  130
  138
  146
  155
  164
  173
  184
  194
Net income, $m
  73
  81
  88
  95
  102
  110
  118
  126
  135
  144
  154
  170
  181
  193
  205
  218
  232
  246
  262
  278
  295
  313
  332
  352
  373
  395
  418
  443
  469
  496
  525

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  766
  802
  844
  888
  933
  981
  1,031
  1,084
  1,139
  1,197
  1,258
  1,322
  1,389
  1,459
  1,533
  1,610
  1,691
  1,776
  1,866
  1,959
  2,058
  2,161
  2,270
  2,384
  2,503
  2,629
  2,761
  2,899
  3,045
  3,197
  3,357
Adjusted assets (=assets-cash), $m
  763
  802
  844
  888
  933
  981
  1,031
  1,084
  1,139
  1,197
  1,258
  1,322
  1,389
  1,459
  1,533
  1,610
  1,691
  1,776
  1,866
  1,959
  2,058
  2,161
  2,270
  2,384
  2,503
  2,629
  2,761
  2,899
  3,045
  3,197
  3,357
Revenue / Adjusted assets
  1.235
  1.236
  1.235
  1.234
  1.236
  1.235
  1.236
  1.235
  1.235
  1.235
  1.235
  1.234
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
  1.235
Average production assets, $m
  421
  442
  465
  489
  514
  540
  568
  597
  627
  659
  693
  728
  765
  804
  844
  887
  931
  978
  1,028
  1,079
  1,134
  1,190
  1,250
  1,313
  1,379
  1,448
  1,521
  1,597
  1,677
  1,761
  1,849
Working capital, $m
  128
  133
  140
  147
  154
  162
  171
  179
  189
  198
  208
  219
  230
  241
  254
  266
  280
  294
  309
  324
  341
  358
  376
  394
  414
  435
  457
  480
  504
  529
  556
Total debt, $m
  221
  242
  266
  290
  316
  342
  371
  400
  431
  463
  497
  533
  571
  610
  651
  695
  740
  788
  838
  890
  945
  1,003
  1,064
  1,128
  1,195
  1,265
  1,339
  1,417
  1,498
  1,583
  1,673
Total liabilities, $m
  427
  449
  473
  497
  523
  549
  578
  607
  638
  670
  704
  740
  778
  817
  858
  902
  947
  995
  1,045
  1,097
  1,152
  1,210
  1,271
  1,335
  1,402
  1,472
  1,546
  1,624
  1,705
  1,790
  1,880
Total equity, $m
  338
  353
  371
  391
  411
  432
  454
  477
  501
  527
  553
  582
  611
  642
  674
  708
  744
  782
  821
  862
  905
  951
  999
  1,049
  1,102
  1,157
  1,215
  1,276
  1,340
  1,407
  1,477
Total liabilities and equity, $m
  765
  802
  844
  888
  934
  981
  1,032
  1,084
  1,139
  1,197
  1,257
  1,322
  1,389
  1,459
  1,532
  1,610
  1,691
  1,777
  1,866
  1,959
  2,057
  2,161
  2,270
  2,384
  2,504
  2,629
  2,761
  2,900
  3,045
  3,197
  3,357
Debt-to-equity ratio
  0.654
  0.690
  0.720
  0.740
  0.770
  0.790
  0.820
  0.840
  0.860
  0.880
  0.900
  0.920
  0.930
  0.950
  0.970
  0.980
  0.990
  1.010
  1.020
  1.030
  1.040
  1.060
  1.070
  1.080
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.130
Adjusted equity ratio
  0.439
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  73
  81
  88
  95
  102
  110
  118
  126
  135
  144
  154
  170
  181
  193
  205
  218
  232
  246
  262
  278
  295
  313
  332
  352
  373
  395
  418
  443
  469
  496
  525
Depreciation, amort., depletion, $m
  32
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  47
  50
  52
  55
  58
  60
  64
  67
  70
  74
  77
  81
  85
  90
  94
  99
  104
  109
  114
  120
Funds from operations, $m
  105
  117
  125
  133
  142
  152
  161
  172
  183
  194
  206
  217
  231
  245
  260
  276
  292
  310
  328
  348
  368
  390
  413
  437
  462
  489
  517
  547
  578
  610
  645
Change in working capital, $m
  -11
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Cash from operations, $m
  116
  111
  118
  126
  135
  144
  153
  163
  174
  185
  196
  207
  220
  233
  248
  263
  279
  296
  314
  332
  352
  373
  395
  418
  442
  468
  495
  524
  554
  585
  619
Maintenance CAPEX, $m
  0
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -60
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -109
  -114
New CAPEX, $m
  -69
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
Cash from investing activities, $m
  -68
  -48
  -52
  -54
  -57
  -59
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -107
  -113
  -119
  -124
  -131
  -137
  -144
  -151
  -159
  -167
  -175
  -184
  -193
  -202
Free cash flow, $m
  48
  62
  67
  72
  78
  84
  90
  97
  104
  112
  120
  127
  135
  145
  155
  165
  177
  188
  201
  214
  228
  242
  258
  274
  291
  309
  328
  349
  370
  392
  416
Issuance/(repayment) of debt, $m
  -10
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  78
  81
  85
  90
Issuance/(repurchase) of shares, $m
  -16
  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  
  -26
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  78
  81
  85
  90
Total cash flow (excl. dividends), $m
  21
  84
  90
  96
  103
  111
  118
  127
  135
  144
  154
  162
  173
  184
  196
  209
  222
  236
  251
  266
  283
  300
  319
  338
  358
  380
  402
  426
  451
  478
  506
Retained Cash Flow (-), $m
  -26
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
Prev. year cash balance distribution, $m
 
  2
  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
 
  69
  72
  77
  83
  90
  96
  103
  111
  119
  127
  134
  143
  153
  164
  175
  186
  199
  211
  225
  240
  255
  271
  288
  306
  324
  344
  365
  387
  411
  435
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  66
  65
  66
  67
  67
  67
  66
  65
  63
  61
  58
  55
  51
  48
  44
  39
  35
  31
  27
  23
  20
  16
  13
  11
  8
  6
  5
  4
  3
  2
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

Neenah Paper, Inc. is a materials company focused in niche markets. The Company has two primary businesses: technical products, and fine paper and packaging. The technical products business is an international producer of transportation, water and other filtration media, digital transfer materials, tape and abrasive backings, labels and other performance-oriented substrates. The fine paper and packaging business is a supplier of high-end printing and specialty papers and packaging in North America. Technical products manufacturing facilities are located near Munich, Germany, in Bolton, England, Eerbeekse Beek, Netherlands, Munising, Michigan and Pittsfield, Massachusetts. In addition, certain technical products are manufactured along with fine paper and packaging products in shared facilities located in upstate New York and Quakertown, Pennsylvania.

FINANCIAL RATIOS  of  Neenah Paper (NP)

Valuation Ratios
P/E Ratio 21.3
Price to Sales 1.7
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 13.4
Price to Free Cash Flow 33.1
Growth Rates
Sales Growth Rate 6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 43.8%
Cap. Spend. - 3 Yr. Gr. Rate 15.2%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 65.1%
Total Debt to Equity 65.4%
Interest Coverage 11
Management Effectiveness
Return On Assets 10.6%
Ret/ On Assets - 3 Yr. Avg. 9.9%
Return On Total Capital 13.3%
Ret/ On T. Cap. - 3 Yr. Avg. 12.3%
Return On Equity 22.5%
Return On Equity - 3 Yr. Avg. 21.4%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 22.8%
Gross Margin - 3 Yr. Avg. 21.7%
EBITDA Margin 15.4%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 10.9%
Pre-Tax Margin - 3 Yr. Avg. 10%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 7.2%
Effective Tax Rate 29.1%
Eff/ Tax Rate - 3 Yr. Avg. 24%
Payout Ratio 30.1%

NP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NP stock intrinsic value calculation we used $942 million for the last fiscal year's total revenue generated by Neenah Paper. The default revenue input number comes from 2016 income statement of Neenah Paper. 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 NP stock valuation model: a) initial revenue growth rate of 5.2% 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 4.9%, whose default value for NP is calculated based on our internal credit rating of Neenah Paper, 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 Neenah Paper.
    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 NP stock the variable cost ratio is equal to 75.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $115 million in the base year in the intrinsic value calculation for NP 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 4.4% for Neenah Paper.

Corporate tax rate of 27% is the nominal tax rate for Neenah Paper. 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 NP 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 NP are equal to 44.6%.

Life of production assets of 15.4 years is the average useful life of capital assets used in Neenah Paper 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 NP is equal to 13.4%. 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 - $338 million for Neenah Paper - 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 16.878 million for Neenah Paper 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 Neenah Paper at the current share price and the inputted number of shares is $1.6 billion.

RELATED COMPANIES Price Int.Val. Rating
VRTV Veritiv 28.60 19.96  sell
UFS Domtar 51.05 25.71  sell
GLT Glatfelter 23.01 14.05  sell
CLW Clearwater Pap 50.25 37.94  hold

COMPANY NEWS

▶ Neenah posts 3Q profit   [Nov-07-17 07:52PM  Associated Press]
▶ Neenah Reports Third Quarter 2017 Results   [04:35PM  PR Newswire]
▶ Neenah Declares Quarterly Dividend   [Nov-01-17 04:45PM  PR Newswire]
▶ Neenah Completes Purchase of Coldenhove   [04:15PM  PR Newswire]
▶ Neenah posts 2Q profit   [Aug-03-17 03:40PM  Associated Press]
▶ Neenah Reports Second Quarter 2017 Results   [Aug-02-17 04:30PM  PR Newswire]
▶ Neenah Declares Quarterly Dividend   [Aug-01-17 04:30PM  PR Newswire]
▶ ETFs with exposure to Neenah Paper, Inc. : July 24, 2017   [Jul-24-17 05:39PM  Capital Cube]
▶ ETFs with exposure to Neenah Paper, Inc. : July 14, 2017   [Jul-14-17 03:54PM  Capital Cube]
▶ ETFs with exposure to Neenah Paper, Inc. : June 26, 2017   [Jun-26-17 04:31PM  Capital Cube]
▶ New Strong Sell Stocks for June 12th   [Jun-12-17 10:25AM  Zacks]
▶ New Strong Sell Stocks for June 8th   [Jun-08-17 10:48AM  Zacks]
▶ Neenah posts 1Q profit   [May-10-17 06:10PM  Associated Press]
▶ Neenah Reports First Quarter 2017 Results   [05:00PM  PR Newswire]
▶ Neenah to Report First Quarter Earnings on May 10, 2017   [Apr-27-17 05:00PM  PR Newswire]
▶ ETFs with exposure to Neenah Paper, Inc. : April 25, 2017   [Apr-25-17 03:42PM  Capital Cube]
▶ Neenah posts 4Q profit   [Feb-15-17 07:50PM  Associated Press]
▶ Neenah Paper Declares Quarterly Dividend   [04:30PM  PR Newswire]
▶ Hedge Funds Are Betting On Neenah Paper, Inc. (NP)   [Dec-10-16 08:32AM  at Insider Monkey]
Financial statements of NP
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.