Intrinsic value of National Presto Industries - NPK

Previous Close

$99.35

  Intrinsic Value

$78.23

stock screener

  Rating & Target

sell

-21%

  Value-price divergence*

+33%

Previous close

$99.35

 
Intrinsic value

$78.23

 
Up/down potential

-21%

 
Rating

sell

 
Value-price divergence*

+33%

*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 0.7

 

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
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
Revenue, $m
  342
  366
  392
  418
  445
  473
  503
  534
  566
  599
  634
  670
  708
  748
  789
  833
  878
  925
  975
  1,026
  1,081
  1,137
  1,197
  1,259
  1,324
  1,393
  1,465
  1,540
  1,619
  1,701
  1,788
Variable operating expenses, $m
 
  301
  322
  343
  365
  389
  413
  438
  464
  492
  520
  549
  580
  612
  646
  682
  719
  757
  798
  840
  885
  931
  980
  1,031
  1,084
  1,141
  1,199
  1,261
  1,325
  1,393
  1,464
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
  301
  322
  343
  365
  389
  413
  438
  464
  492
  520
  549
  580
  612
  646
  682
  719
  757
  798
  840
  885
  931
  980
  1,031
  1,084
  1,141
  1,199
  1,261
  1,325
  1,393
  1,464
Operating income, $m
  63
  65
  70
  75
  80
  85
  90
  96
  101
  107
  114
  121
  128
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
  279
  293
  308
  324
EBITDA, $m
  78
  78
  84
  89
  95
  101
  108
  114
  121
  128
  136
  143
  152
  160
  169
  178
  188
  198
  209
  220
  231
  243
  256
  269
  283
  298
  313
  330
  346
  364
  383
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
Earnings before tax, $m
  63
  65
  70
  74
  79
  84
  89
  95
  100
  106
  112
  119
  126
  133
  140
  148
  156
  164
  173
  182
  191
  201
  211
  222
  234
  246
  258
  271
  285
  299
  315
Tax expense, $m
  21
  18
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
Net income, $m
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
  126
  133
  139
  147
  154
  162
  171
  179
  188
  198
  208
  219
  230

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
  329
  351
  375
  399
  425
  451
  479
  508
  538
  569
  602
  636
  671
  709
  747
  788
  830
  875
  921
  970
  1,021
  1,074
  1,130
  1,189
  1,250
  1,315
  1,382
  1,453
  1,527
  1,605
Adjusted assets (=assets-cash), $m
  307
  329
  351
  375
  399
  425
  451
  479
  508
  538
  569
  602
  636
  671
  709
  747
  788
  830
  875
  921
  970
  1,021
  1,074
  1,130
  1,189
  1,250
  1,315
  1,382
  1,453
  1,527
  1,605
Revenue / Adjusted assets
  1.114
  1.112
  1.117
  1.115
  1.115
  1.113
  1.115
  1.115
  1.114
  1.113
  1.114
  1.113
  1.113
  1.115
  1.113
  1.115
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.115
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
  1.114
Average production assets, $m
  56
  60
  64
  69
  73
  78
  82
  88
  93
  98
  104
  110
  116
  123
  129
  137
  144
  152
  160
  168
  177
  187
  196
  207
  217
  228
  240
  253
  265
  279
  293
Working capital, $m
  277
  178
  190
  203
  216
  230
  244
  259
  274
  291
  307
  325
  344
  363
  383
  404
  426
  449
  473
  498
  524
  552
  580
  611
  642
  676
  710
  747
  785
  825
  867
Total debt, $m
  0
  5
  10
  15
  20
  26
  32
  38
  44
  51
  58
  65
  73
  80
  89
  97
  106
  116
  125
  136
  146
  158
  169
  182
  195
  208
  223
  237
  253
  270
  287
Total liabilities, $m
  67
  73
  78
  83
  88
  94
  100
  106
  112
  119
  126
  133
  141
  148
  157
  165
  174
  184
  193
  204
  214
  226
  237
  250
  263
  276
  291
  305
  321
  338
  355
Total equity, $m
  350
  256
  274
  292
  311
  331
  352
  373
  396
  419
  443
  469
  495
  523
  552
  582
  614
  647
  681
  718
  756
  795
  837
  881
  926
  974
  1,024
  1,077
  1,132
  1,190
  1,250
Total liabilities and equity, $m
  417
  329
  352
  375
  399
  425
  452
  479
  508
  538
  569
  602
  636
  671
  709
  747
  788
  831
  874
  922
  970
  1,021
  1,074
  1,131
  1,189
  1,250
  1,315
  1,382
  1,453
  1,528
  1,605
Debt-to-equity ratio
  0.000
  0.020
  0.040
  0.050
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.150
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
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
  48
  51
  54
  58
  61
  65
  69
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
  126
  133
  139
  147
  154
  162
  171
  179
  188
  198
  208
  219
  230
Depreciation, amort., depletion, $m
  15
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
Funds from operations, $m
  66
  61
  65
  69
  73
  78
  83
  88
  93
  98
  104
  109
  115
  122
  128
  135
  142
  150
  158
  166
  175
  184
  194
  204
  214
  225
  236
  249
  261
  274
  288
Change in working capital, $m
  0
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
Cash from operations, $m
  66
  49
  53
  56
  60
  64
  68
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
  127
  134
  141
  149
  156
  165
  173
  182
  192
  202
  212
  223
  234
  246
Maintenance CAPEX, $m
  0
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
New CAPEX, $m
  -7
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from investing activities, $m
  -61
  -15
  -16
  -17
  -18
  -20
  -21
  -21
  -23
  -24
  -26
  -27
  -28
  -29
  -32
  -33
  -34
  -37
  -38
  -40
  -43
  -44
  -47
  -49
  -52
  -54
  -58
  -60
  -64
  -67
  -70
Free cash flow, $m
  5
  34
  36
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  95
  101
  106
  112
  118
  124
  130
  137
  144
  152
  159
  168
  176
Issuance/(repayment) of debt, $m
  0
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
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
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
Total cash flow (excl. dividends), $m
  6
  38
  41
  44
  47
  51
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  151
  158
  167
  175
  184
  193
Retained Cash Flow (-), $m
  -11
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
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
 
  132
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  83
  88
  93
  98
  103
  108
  114
  120
  126
  133
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
 
  127
  22
  23
  23
  24
  24
  24
  24
  24
  23
  22
  21
  20
  19
  17
  16
  15
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  100.0
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National Presto Industries, Inc. operates through two business segments: the Housewares/Small Appliance segment and the Defense segment. The Housewares/Small Appliance segment designs, markets and distributes housewares and small electrical appliances, including pressure cookers and canners, kitchen electrics and comfort appliances. The Defense segment manufactures 40 millimeter (mm) ammunition, precision mechanical and electro-mechanical assemblies, and medium caliber cartridge cases; performs Load, Assemble and Pack (LAP) operations on ordnance-related products primarily for the United States Government and prime contractors; produces and sells a range of less lethal products and support accessories, and provides training for the use of less lethal products, and manufactures detonators, booster pellets, release cartridges, lead azide, and other military energetic devices and materials. The Company's Defense segment includes the operations of AMTEC Corporation.

FINANCIAL RATIOS  of  National Presto Industries (NPK)

Valuation Ratios
P/E Ratio 15.3
Price to Sales 2
Price to Book 2
Price to Tangible Book
Price to Cash Flow 10.5
Price to Free Cash Flow 11.7
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 7.1% 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 4.5 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 6.965 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 $0.7 billion.

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COMPANY NEWS

▶ Defense And Aerospace Stocks To Watch And Industry News   [Aug-29-17 09:50AM  Investor's Business Daily]
▶ 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]
Financial statements 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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