Intrinsic value of EnPro Industries - NPO

Previous Close

$92.72

  Intrinsic Value

$47.94

stock screener

  Rating & Target

sell

-48%

Previous close

$92.72

 
Intrinsic value

$47.94

 
Up/down potential

-48%

 
Rating

sell

We calculate the intrinsic value of NPO 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, %
  -1.33
  17.40
  16.16
  15.04
  14.04
  13.14
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
Revenue, $m
  1,188
  1,395
  1,620
  1,864
  2,125
  2,405
  2,701
  3,014
  3,344
  3,689
  4,051
  4,429
  4,822
  5,232
  5,659
  6,102
  6,563
  7,042
  7,540
  8,057
  8,595
  9,154
  9,736
  10,342
  10,973
  11,630
  12,315
  13,029
  13,775
  14,553
  15,366
Variable operating expenses, $m
 
  1,348
  1,563
  1,795
  2,044
  2,309
  2,592
  2,890
  3,203
  3,532
  3,877
  4,216
  4,591
  4,981
  5,387
  5,809
  6,248
  6,704
  7,178
  7,670
  8,182
  8,715
  9,269
  9,846
  10,446
  11,072
  11,724
  12,404
  13,114
  13,854
  14,628
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
  1,192
  1,348
  1,563
  1,795
  2,044
  2,309
  2,592
  2,890
  3,203
  3,532
  3,877
  4,216
  4,591
  4,981
  5,387
  5,809
  6,248
  6,704
  7,178
  7,670
  8,182
  8,715
  9,269
  9,846
  10,446
  11,072
  11,724
  12,404
  13,114
  13,854
  14,628
Operating income, $m
  -5
  47
  58
  69
  82
  95
  109
  124
  140
  157
  174
  213
  231
  251
  272
  293
  315
  338
  362
  387
  413
  439
  467
  496
  527
  558
  591
  625
  661
  699
  738
EBITDA, $m
  52
  111
  129
  149
  170
  192
  216
  241
  267
  295
  324
  354
  385
  418
  452
  488
  524
  563
  602
  644
  687
  732
  778
  826
  877
  929
  984
  1,041
  1,101
  1,163
  1,228
Interest expense (income), $m
  41
  41
  53
  65
  79
  94
  109
  126
  144
  162
  181
  202
  223
  245
  268
  292
  317
  343
  370
  398
  427
  457
  488
  521
  555
  590
  627
  665
  706
  747
  791
Earnings before tax, $m
  -69
  6
  5
  4
  3
  1
  0
  -2
  -3
  -5
  -7
  11
  9
  6
  4
  1
  -2
  -5
  -8
  -11
  -14
  -17
  -21
  -24
  -28
  -32
  -36
  -40
  -44
  -49
  -53
Tax expense, $m
  -29
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  3
  2
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -40
  4
  4
  3
  2
  1
  0
  -2
  -3
  -5
  -7
  8
  6
  4
  3
  1
  -2
  -5
  -8
  -11
  -14
  -17
  -21
  -24
  -28
  -32
  -36
  -40
  -44
  -49
  -53

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  112
  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
  1,546
  1,684
  1,957
  2,251
  2,567
  2,904
  3,262
  3,640
  4,038
  4,456
  4,892
  5,348
  5,824
  6,319
  6,834
  7,370
  7,927
  8,505
  9,106
  9,731
  10,380
  11,056
  11,759
  12,490
  13,252
  14,046
  14,873
  15,736
  16,636
  17,576
  18,557
Adjusted assets (=assets-cash), $m
  1,434
  1,684
  1,957
  2,251
  2,567
  2,904
  3,262
  3,640
  4,038
  4,456
  4,892
  5,348
  5,824
  6,319
  6,834
  7,370
  7,927
  8,505
  9,106
  9,731
  10,380
  11,056
  11,759
  12,490
  13,252
  14,046
  14,873
  15,736
  16,636
  17,576
  18,557
Revenue / Adjusted assets
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
Average production assets, $m
  398
  467
  543
  624
  712
  806
  905
  1,010
  1,120
  1,236
  1,357
  1,484
  1,615
  1,753
  1,896
  2,044
  2,199
  2,359
  2,526
  2,699
  2,879
  3,067
  3,262
  3,465
  3,676
  3,896
  4,125
  4,365
  4,615
  4,875
  5,147
Working capital, $m
  222
  174
  203
  233
  266
  301
  338
  377
  418
  461
  506
  554
  603
  654
  707
  763
  820
  880
  942
  1,007
  1,074
  1,144
  1,217
  1,293
  1,372
  1,454
  1,539
  1,629
  1,722
  1,819
  1,921
Total debt, $m
  747
  909
  1,127
  1,363
  1,616
  1,886
  2,173
  2,476
  2,794
  3,129
  3,479
  3,844
  4,225
  4,622
  5,034
  5,463
  5,909
  6,373
  6,854
  7,354
  7,875
  8,416
  8,979
  9,565
  10,175
  10,811
  11,473
  12,164
  12,886
  13,638
  14,424
Total liabilities, $m
  1,188
  1,349
  1,567
  1,803
  2,056
  2,326
  2,613
  2,916
  3,234
  3,569
  3,919
  4,284
  4,665
  5,062
  5,474
  5,903
  6,349
  6,813
  7,294
  7,794
  8,315
  8,856
  9,419
  10,005
  10,615
  11,251
  11,913
  12,604
  13,326
  14,078
  14,864
Total equity, $m
  359
  335
  389
  448
  511
  578
  649
  724
  804
  887
  974
  1,064
  1,159
  1,258
  1,360
  1,467
  1,577
  1,692
  1,812
  1,936
  2,066
  2,200
  2,340
  2,486
  2,637
  2,795
  2,960
  3,131
  3,311
  3,498
  3,693
Total liabilities and equity, $m
  1,547
  1,684
  1,956
  2,251
  2,567
  2,904
  3,262
  3,640
  4,038
  4,456
  4,893
  5,348
  5,824
  6,320
  6,834
  7,370
  7,926
  8,505
  9,106
  9,730
  10,381
  11,056
  11,759
  12,491
  13,252
  14,046
  14,873
  15,735
  16,637
  17,576
  18,557
Debt-to-equity ratio
  2.081
  2.710
  2.900
  3.040
  3.160
  3.260
  3.350
  3.420
  3.480
  3.530
  3.570
  3.610
  3.650
  3.680
  3.700
  3.730
  3.750
  3.770
  3.780
  3.800
  3.810
  3.830
  3.840
  3.850
  3.860
  3.870
  3.880
  3.880
  3.890
  3.900
  3.910
Adjusted equity ratio
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -40
  4
  4
  3
  2
  1
  0
  -2
  -3
  -5
  -7
  8
  6
  4
  3
  1
  -2
  -5
  -8
  -11
  -14
  -17
  -21
  -24
  -28
  -32
  -36
  -40
  -44
  -49
  -53
Depreciation, amort., depletion, $m
  57
  65
  72
  80
  88
  97
  106
  116
  127
  138
  149
  141
  154
  167
  181
  195
  209
  225
  241
  257
  274
  292
  311
  330
  350
  371
  393
  416
  439
  464
  490
Funds from operations, $m
  56
  69
  75
  83
  90
  98
  106
  115
  124
  133
  142
  149
  160
  171
  183
  195
  208
  220
  233
  246
  260
  275
  290
  306
  322
  339
  357
  376
  395
  416
  437
Change in working capital, $m
  -9
  26
  28
  30
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
  97
  102
Cash from operations, $m
  65
  43
  47
  52
  57
  63
  69
  76
  82
  90
  97
  102
  111
  120
  130
  140
  150
  160
  171
  182
  193
  205
  217
  230
  243
  257
  271
  286
  302
  318
  335
Maintenance CAPEX, $m
  0
  -38
  -44
  -52
  -59
  -68
  -77
  -86
  -96
  -107
  -118
  -129
  -141
  -154
  -167
  -181
  -195
  -209
  -225
  -241
  -257
  -274
  -292
  -311
  -330
  -350
  -371
  -393
  -416
  -439
  -464
New CAPEX, $m
  -40
  -70
  -76
  -82
  -88
  -94
  -99
  -105
  -110
  -116
  -121
  -127
  -132
  -137
  -143
  -149
  -154
  -160
  -167
  -173
  -180
  -187
  -195
  -203
  -211
  -220
  -229
  -239
  -250
  -261
  -272
Cash from investing activities, $m
  -61
  -108
  -120
  -134
  -147
  -162
  -176
  -191
  -206
  -223
  -239
  -256
  -273
  -291
  -310
  -330
  -349
  -369
  -392
  -414
  -437
  -461
  -487
  -514
  -541
  -570
  -600
  -632
  -666
  -700
  -736
Free cash flow, $m
  4
  -65
  -73
  -81
  -90
  -98
  -107
  -115
  -124
  -133
  -142
  -154
  -162
  -171
  -180
  -189
  -199
  -210
  -221
  -232
  -244
  -257
  -270
  -284
  -298
  -313
  -329
  -346
  -363
  -382
  -401
Issuance/(repayment) of debt, $m
  73
  201
  218
  236
  253
  270
  287
  303
  319
  334
  350
  365
  381
  397
  413
  429
  446
  463
  482
  500
  520
  541
  563
  586
  610
  636
  663
  691
  721
  753
  786
Issuance/(repurchase) of shares, $m
  -30
  45
  51
  56
  61
  66
  71
  77
  82
  88
  94
  83
  88
  94
  100
  106
  113
  120
  127
  135
  143
  152
  161
  170
  180
  190
  200
  212
  223
  236
  249
Cash from financing (excl. dividends), $m  
  40
  246
  269
  292
  314
  336
  358
  380
  401
  422
  444
  448
  469
  491
  513
  535
  559
  583
  609
  635
  663
  693
  724
  756
  790
  826
  863
  903
  944
  989
  1,035
Total cash flow (excl. dividends), $m
  26
  182
  196
  210
  224
  238
  251
  264
  277
  290
  302
  294
  307
  320
  333
  346
  359
  373
  388
  403
  419
  436
  454
  472
  492
  512
  534
  557
  581
  607
  634
Retained Cash Flow (-), $m
  101
  -49
  -54
  -59
  -63
  -67
  -71
  -77
  -82
  -88
  -94
  -91
  -95
  -99
  -103
  -107
  -113
  -120
  -127
  -135
  -143
  -152
  -161
  -170
  -180
  -190
  -200
  -212
  -223
  -236
  -249
Prev. year cash balance distribution, $m
 
  73
  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
 
  206
  142
  152
  161
  171
  180
  187
  195
  201
  208
  204
  212
  221
  230
  239
  247
  254
  261
  268
  276
  284
  293
  302
  312
  323
  334
  345
  358
  371
  385
Discount rate, %
 
  9.40
  9.87
  10.36
  10.88
  11.43
  12.00
  12.60
  13.23
  13.89
  14.58
  15.31
  16.08
  16.88
  17.73
  18.61
  19.54
  20.52
  21.54
  22.62
  23.75
  24.94
  26.19
  27.50
  28.87
  30.32
  31.83
  33.42
  35.09
  36.85
  38.69
PV of cash for distribution, $m
 
  188
  117
  113
  107
  99
  91
  82
  72
  62
  53
  42
  35
  29
  23
  18
  14
  11
  8
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.2
  94.7
  92.3
  90.1
  88.0
  86.1
  84.3
  82.6
  81.0
  79.5
  78.3
  77.2
  76.0
  75.0
  73.9
  72.9
  71.9
  71.0
  70.0
  69.1
  68.2
  67.3
  66.5
  65.6
  64.8
  63.9
  63.1
  62.3
  61.5
  60.8

EnPro Industries, Inc. is engaged in the designing, developing, manufacturing and marketing engineered industrial products. It operates through three segments. The Sealing Products segment includes three operating divisions: Garlock, which designs, manufactures and sells sealing products; Technetics, which designs, manufactures and sells metal seals and elastomeric seals, among others, and Stemco LP (Stemco), which designs, manufactures and sells heavy-duty truck wheel-end components and systems. The Engineered Products segment includes two industrial products businesses: GGB, which designs, manufactures and sells self-lubricating, non-rolling, metal polymer and engineered plastics, among others, and Compressor Products International, which designs, manufactures, sells and services components. The Power Systems segment includes Fairbanks Morse business, which designs, manufactures, sells and services heavy-duty, medium-speed diesel, natural gas and dual fuel reciprocating engines.

FINANCIAL RATIOS  of  EnPro Industries (NPO)

Valuation Ratios
P/E Ratio -49.5
Price to Sales 1.7
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 30.5
Price to Free Cash Flow 79.2
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.4%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 197.2%
Total Debt to Equity 208.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.1%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital -3.6%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity -9.8%
Return On Equity - 3 Yr. Avg. -3.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 33.2%
Gross Margin - 3 Yr. Avg. 33.4%
EBITDA Margin 2.4%
EBITDA Margin - 3 Yr. Avg. 6%
Operating Margin -0.3%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin -5.8%
Pre-Tax Margin - 3 Yr. Avg. -1.6%
Net Profit Margin -3.4%
Net Profit Margin - 3 Yr. Avg. -1.1%
Effective Tax Rate 42%
Eff/ Tax Rate - 3 Yr. Avg. 21.6%
Payout Ratio -45%

NPO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NPO stock intrinsic value calculation we used $1188 million for the last fiscal year's total revenue generated by EnPro Industries. The default revenue input number comes from 2016 income statement of EnPro 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 NPO stock valuation model: a) initial revenue growth rate of 17.4% 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 9.4%, whose default value for NPO is calculated based on our internal credit rating of EnPro 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 EnPro 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 NPO stock the variable cost ratio is equal to 96.9%.

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 NPO 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 5.8% for EnPro Industries.

Corporate tax rate of 27% is the nominal tax rate for EnPro 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 NPO 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 NPO are equal to 33.5%.

Life of production assets of 10.5 years is the average useful life of capital assets used in EnPro 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 NPO is equal to 12.5%. 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 - $359 million for EnPro 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 21.495 million for EnPro 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 EnPro Industries at the current share price and the inputted number of shares is $2.0 billion.

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COMPANY NEWS

▶ EnPro posts 3Q profit   [Oct-30-17 06:17PM  Associated Press]
▶ Is It Time To Sell EnPro Industries Inc (NPO)?   [06:01PM  Simply Wall St.]
▶ EnPro Industries Declares Regular Quarterly Dividend   [Oct-25-17 04:30PM  Business Wire]
▶ EnPro posts 2Q profit   [Jul-31-17 09:37PM  Associated Press]
▶ EnPro Industries Declares Regular Quarterly Dividend   [Jul-26-17 04:30PM  Business Wire]
▶ EnPro Industries Announces Acquisition of Qualiseal   [Jun-01-17 06:30AM  Business Wire]
▶ New Strong Sell Stocks for May 8th   [May-08-17 10:36AM  Zacks]
▶ EnPro posts 1Q profit   [May-01-17 06:34PM  Associated Press]
▶ EnPro Industries Declares Regular Quarterly Dividend   [Apr-26-17 04:30PM  Business Wire]
▶ New Strong Sell Stocks for April 7th   [Apr-07-17 10:47AM  Zacks]
Financial statements of NPO
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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