Intrinsic value of National Presto Industries - NPK

Previous Close

$112.05

  Intrinsic Value

$75.32

stock screener

  Rating & Target

sell

-33%

  Value-price divergence*

-38%

Previous close

$112.05

 
Intrinsic value

$75.32

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence*

-38%

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

We calculate the intrinsic value of NPK 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 0.8

 

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, %
  -3.93
  10.60
  10.04
  9.54
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
Revenue, $m
  342
  378
  416
  456
  497
  540
  585
  632
  681
  731
  783
  838
  895
  953
  1,015
  1,078
  1,145
  1,214
  1,286
  1,361
  1,439
  1,521
  1,606
  1,696
  1,789
  1,886
  1,988
  2,095
  2,206
  2,323
  2,445
Variable operating expenses, $m
 
  311
  342
  374
  408
  444
  480
  519
  558
  600
  643
  686
  732
  781
  831
  883
  937
  994
  1,053
  1,114
  1,178
  1,245
  1,315
  1,388
  1,465
  1,544
  1,628
  1,715
  1,806
  1,902
  2,002
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
  279
  311
  342
  374
  408
  444
  480
  519
  558
  600
  643
  686
  732
  781
  831
  883
  937
  994
  1,053
  1,114
  1,178
  1,245
  1,315
  1,388
  1,465
  1,544
  1,628
  1,715
  1,806
  1,902
  2,002
Operating income, $m
  63
  67
  74
  82
  89
  97
  105
  113
  122
  131
  141
  152
  162
  173
  184
  195
  207
  220
  233
  247
  261
  276
  291
  307
  324
  342
  360
  380
  400
  421
  443
EBITDA, $m
  78
  75
  82
  90
  98
  107
  116
  125
  134
  144
  155
  166
  177
  188
  201
  213
  226
  240
  254
  269
  284
  301
  317
  335
  353
  373
  393
  414
  436
  459
  483
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
Earnings before tax, $m
  63
  67
  74
  81
  88
  96
  104
  112
  120
  129
  138
  149
  159
  169
  180
  191
  202
  214
  227
  240
  254
  268
  283
  298
  315
  332
  350
  368
  388
  408
  429
Tax expense, $m
  21
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  43
  46
  48
  52
  55
  58
  61
  65
  69
  72
  76
  81
  85
  90
  94
  99
  105
  110
  116
Net income, $m
  45
  49
  54
  59
  64
  70
  76
  82
  88
  94
  101
  109
  116
  123
  131
  139
  148
  157
  166
  175
  185
  196
  207
  218
  230
  242
  255
  269
  283
  298
  313

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  111
  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
  418
  340
  374
  409
  446
  485
  525
  567
  611
  656
  703
  752
  803
  856
  911
  968
  1,028
  1,090
  1,154
  1,222
  1,292
  1,365
  1,442
  1,522
  1,606
  1,693
  1,785
  1,880
  1,981
  2,085
  2,195
Adjusted assets (=assets-cash), $m
  307
  340
  374
  409
  446
  485
  525
  567
  611
  656
  703
  752
  803
  856
  911
  968
  1,028
  1,090
  1,154
  1,222
  1,292
  1,365
  1,442
  1,522
  1,606
  1,693
  1,785
  1,880
  1,981
  2,085
  2,195
Revenue / Adjusted assets
  1.114
  1.112
  1.112
  1.115
  1.114
  1.113
  1.114
  1.115
  1.115
  1.114
  1.114
  1.114
  1.115
  1.113
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
Average production assets, $m
  56
  62
  68
  75
  82
  89
  96
  104
  112
  120
  128
  137
  147
  156
  166
  177
  188
  199
  211
  223
  236
  249
  263
  278
  293
  309
  326
  344
  362
  381
  401
Working capital, $m
  277
  183
  202
  221
  241
  262
  284
  307
  330
  355
  380
  406
  434
  462
  492
  523
  555
  589
  624
  660
  698
  738
  779
  822
  868
  915
  964
  1,016
  1,070
  1,127
  1,186
Total debt, $m
  0
  7
  15
  22
  31
  39
  48
  57
  67
  77
  87
  98
  109
  121
  133
  146
  159
  173
  187
  202
  218
  234
  251
  268
  287
  306
  326
  348
  370
  393
  417
Total liabilities, $m
  67
  75
  83
  90
  99
  107
  116
  125
  135
  145
  155
  166
  177
  189
  201
  214
  227
  241
  255
  270
  286
  302
  319
  336
  355
  374
  394
  416
  438
  461
  485
Total equity, $m
  350
  265
  291
  319
  348
  378
  409
  442
  476
  511
  548
  586
  626
  667
  710
  754
  800
  849
  899
  952
  1,006
  1,064
  1,123
  1,186
  1,251
  1,319
  1,390
  1,465
  1,543
  1,624
  1,710
Total liabilities and equity, $m
  417
  340
  374
  409
  447
  485
  525
  567
  611
  656
  703
  752
  803
  856
  911
  968
  1,027
  1,090
  1,154
  1,222
  1,292
  1,366
  1,442
  1,522
  1,606
  1,693
  1,784
  1,881
  1,981
  2,085
  2,195
Debt-to-equity ratio
  0.000
  0.030
  0.050
  0.070
  0.090
  0.100
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
Adjusted equity ratio
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  45
  49
  54
  59
  64
  70
  76
  82
  88
  94
  101
  109
  116
  123
  131
  139
  148
  157
  166
  175
  185
  196
  207
  218
  230
  242
  255
  269
  283
  298
  313
Depreciation, amort., depletion, $m
  15
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
Funds from operations, $m
  66
  57
  62
  68
  74
  80
  86
  93
  100
  107
  115
  122
  130
  139
  148
  157
  166
  176
  187
  198
  209
  221
  233
  246
  259
  273
  288
  303
  319
  336
  354
Change in working capital, $m
  0
  18
  18
  19
  20
  21
  22
  23
  24
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
Cash from operations, $m
  66
  39
  44
  48
  54
  59
  65
  70
  76
  83
  89
  96
  103
  110
  118
  126
  134
  143
  152
  161
  171
  181
  191
  202
  214
  226
  238
  251
  265
  279
  294
Maintenance CAPEX, $m
  0
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
New CAPEX, $m
  -7
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -61
  -12
  -12
  -14
  -14
  -15
  -16
  -18
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
Free cash flow, $m
  5
  27
  31
  35
  39
  44
  48
  53
  58
  63
  69
  74
  80
  86
  92
  99
  106
  113
  120
  128
  136
  144
  153
  161
  171
  181
  191
  201
  212
  224
  236
Issuance/(repayment) of debt, $m
  0
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
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
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  6
  34
  39
  43
  48
  52
  57
  62
  68
  73
  79
  85
  91
  98
  105
  112
  119
  126
  134
  143
  151
  160
  169
  179
  189
  200
  211
  222
  235
  247
  260
Retained Cash Flow (-), $m
  -11
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
Prev. year cash balance distribution, $m
 
  111
  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
 
  120
  12
  15
  19
  22
  26
  30
  34
  38
  43
  47
  52
  57
  62
  67
  72
  78
  84
  90
  96
  103
  110
  117
  124
  132
  140
  148
  157
  165
  175
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
 
  115
  11
  13
  15
  17
  19
  20
  21
  22
  22
  22
  22
  22
  21
  20
  18
  17
  15
  14
  12
  11
  9
  8
  6
  5
  4
  3
  2
  2
  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 Presto Industries, Inc. provides housewares and small appliances, defense, and absorbent products primarily in North America. The company operates through three segments: Housewares/Small Appliance, Defense, and Absorbent Products. The Housewares/Small Appliance segment designs, markets, and distributes housewares and small electrical appliances, including pressure cookers and canners; heat control single thermostatic control line of skillets, griddles, woks, and multi-purpose cookers; deep fryers; waffle makers; pizza ovens; slicer/shredders; electric heaters; hot air, oil, and microwave corn poppers; dehydrators; rice cookers; microwave bacon cookers; coffeemakers and coffeemaker accessories; electric tea kettles; electric knife sharpeners; kitchen gadgets; and timers. This segment sells its products directly to retailers, as well as through independent distributors. The Defense segment manufactures and sells 40mm ammunition, precision mechanical and electro-mechanical assemblies, and medium caliber cartridge cases; less lethal products and support accessories; and detonators, booster pellets, release cartridges, lead azide, and other military energetic devices and materials. This segment also performs load, assemble, and pack operations on ordnance-related products primarily for the United States Department of Defense (DOD) and DOD prime contractors; and provides training for the use of less lethal products. The Absorbent Products segment manufactures and sells private label and branded adult incontinence products. This segment sells its products to distributors and other absorbent product manufacturers. The company was founded in 1905 and is based in Eau Claire, Wisconsin.

FINANCIAL RATIOS  of  National Presto Industries (NPK)

Valuation Ratios
P/E Ratio 17.3
Price to Sales 2.3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 11.8
Price to Free Cash Flow 13.2
Growth Rates
Sales Growth Rate -3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate -34.5%
Financial Strength
Quick Ratio NaN
Current Ratio 1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.2%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 13.1%
Ret/ On T. Cap. - 3 Yr. Avg. 11.1%
Return On Equity 13.1%
Return On Equity - 3 Yr. Avg. 11.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 25.1%
Gross Margin - 3 Yr. Avg. 24.5%
EBITDA Margin 22.8%
EBITDA Margin - 3 Yr. Avg. 21.4%
Operating Margin 18.4%
Oper. Margin - 3 Yr. Avg. 16.5%
Pre-Tax Margin 18.4%
Pre-Tax Margin - 3 Yr. Avg. 16.5%
Net Profit Margin 13.2%
Net Profit Margin - 3 Yr. Avg. 10.7%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 33.1%
Payout Ratio 77.8%

NPK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NPK stock intrinsic value calculation we used $342 million for the last fiscal year's total revenue generated by National Presto Industries. The default revenue input number comes from 2016 income statement of National Presto 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 NPK stock valuation model: a) initial revenue growth rate of 10.6% 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 NPK is calculated based on our internal credit rating of National Presto 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 National Presto 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 NPK stock the variable cost ratio is equal to 82.2%.

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 NPK 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 Presto Industries.

Corporate tax rate of 27% is the nominal tax rate for National Presto 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 NPK 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 NPK are equal to 16.4%.

Life of production assets of 10 years is the average useful life of capital assets used in National Presto 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 NPK is equal to 48.5%. 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 - $350 million for National Presto 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 6.819 million for National Presto 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 National Presto Industries at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ National Presto posts 1Q profit   [Apr-28-17 04:30PM  Associated Press]
▶ Is Intellia Therapeutics Inc (NTLA) A Good Stock To Buy?   [Dec-12-16 08:33PM  Insider Monkey]
▶ Hedge Funds Are Crazy About Monster Worldwide, Inc. (MWW)   [Nov-27  08:59AM  at Insider Monkey]
▶ 10-Q for National Presto Industries, Inc.   [Aug-16  08:12PM  at Company Spotlight]
▶ 10-Q for National Presto Industries, Inc.   [May-17  08:11PM  at Company Spotlight]
▶ 10-K for National Presto Industries, Inc.   [May-04  08:12PM  at Company Spotlight]
▶ First Quarter 2015 Sales and Earnings   [May-01  04:19PM  at noodls]
▶ 2014 Sales and Earnings and 2015 Dividend   [Feb-13  04:13PM  at noodls]
▶ 10-Q for National Presto Industries, Inc.   [Nov-09  07:09PM  Company Spotlight]
▶ Lamperd Less Lethal Expands into Asia   [Sep-10  08:00AM  Accesswire]
▶ 5 Low PEmg Companies For The Defensive Investor - March 2014   [Mar-30  04:00AM  at Seeking Alpha]
Stock chart of NPK Financial statements of NPK Annual reports of NPK
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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