Intrinsic value of Quanex Building Products - NX

Previous Close

$20.80

  Intrinsic Value

$1.13

stock screener

  Rating & Target

str. sell

-95%

  Value-price divergence*

-94%

Previous close

$20.80

 
Intrinsic value

$1.13

 
Up/down potential

-95%

 
Rating

str. sell

 
Value-price divergence*

-94%

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

We calculate the intrinsic value of NX 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, %
  43.65
  27.70
  25.43
  23.39
  21.55
  19.89
  18.40
  17.06
  15.86
  14.77
  13.79
  12.92
  12.12
  11.41
  10.77
  10.19
  9.67
  9.21
  8.79
  8.41
  8.07
  7.76
  7.48
  7.24
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
Revenue, $m
  928
  1,185
  1,486
  1,834
  2,229
  2,673
  3,165
  3,705
  4,292
  4,926
  5,606
  6,330
  7,097
  7,907
  8,758
  9,651
  10,585
  11,559
  12,575
  13,632
  14,731
  15,875
  17,063
  18,297
  19,580
  20,914
  22,300
  23,742
  25,243
  26,805
  28,432
Variable operating expenses, $m
 
  1,133
  1,415
  1,741
  2,112
  2,528
  2,989
  3,495
  4,046
  4,640
  5,278
  5,935
  6,654
  7,414
  8,212
  9,049
  9,924
  10,838
  11,790
  12,781
  13,812
  14,884
  15,998
  17,156
  18,359
  19,609
  20,909
  22,261
  23,668
  25,133
  26,658
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
  892
  1,133
  1,415
  1,741
  2,112
  2,528
  2,989
  3,495
  4,046
  4,640
  5,278
  5,935
  6,654
  7,414
  8,212
  9,049
  9,924
  10,838
  11,790
  12,781
  13,812
  14,884
  15,998
  17,156
  18,359
  19,609
  20,909
  22,261
  23,668
  25,133
  26,658
Operating income, $m
  36
  52
  71
  93
  117
  145
  176
  209
  246
  286
  328
  395
  443
  493
  546
  602
  660
  721
  784
  850
  919
  990
  1,064
  1,141
  1,221
  1,305
  1,391
  1,481
  1,575
  1,672
  1,774
EBITDA, $m
  89
  117
  147
  181
  220
  264
  313
  366
  424
  486
  554
  625
  701
  781
  865
  953
  1,045
  1,142
  1,242
  1,346
  1,455
  1,568
  1,685
  1,807
  1,934
  2,065
  2,202
  2,345
  2,493
  2,647
  2,808
Interest expense (income), $m
  15
  24
  34
  46
  60
  76
  93
  113
  134
  158
  183
  210
  239
  269
  301
  335
  371
  408
  447
  487
  529
  573
  618
  665
  714
  765
  818
  874
  931
  991
  1,053
Earnings before tax, $m
  -6
  28
  37
  47
  58
  69
  83
  97
  112
  128
  145
  185
  204
  224
  245
  267
  290
  313
  338
  364
  390
  418
  446
  476
  507
  539
  573
  608
  644
  682
  721
Tax expense, $m
  -4
  8
  10
  13
  16
  19
  22
  26
  30
  35
  39
  50
  55
  61
  66
  72
  78
  85
  91
  98
  105
  113
  121
  129
  137
  146
  155
  164
  174
  184
  195
Net income, $m
  -2
  21
  27
  34
  42
  51
  60
  71
  82
  93
  106
  135
  149
  164
  179
  195
  211
  229
  247
  265
  285
  305
  326
  348
  370
  394
  418
  444
  470
  498
  526

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  26
  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
  780
  963
  1,207
  1,490
  1,811
  2,171
  2,571
  3,009
  3,487
  4,002
  4,554
  5,142
  5,765
  6,423
  7,115
  7,840
  8,598
  9,390
  10,215
  11,074
  11,967
  12,896
  13,861
  14,864
  15,906
  16,989
  18,116
  19,287
  20,506
  21,775
  23,096
Adjusted assets (=assets-cash), $m
  754
  963
  1,207
  1,490
  1,811
  2,171
  2,571
  3,009
  3,487
  4,002
  4,554
  5,142
  5,765
  6,423
  7,115
  7,840
  8,598
  9,390
  10,215
  11,074
  11,967
  12,896
  13,861
  14,864
  15,906
  16,989
  18,116
  19,287
  20,506
  21,775
  23,096
Revenue / Adjusted assets
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
Average production assets, $m
  307
  392
  492
  607
  738
  885
  1,047
  1,226
  1,421
  1,631
  1,855
  2,095
  2,349
  2,617
  2,899
  3,195
  3,504
  3,826
  4,162
  4,512
  4,876
  5,255
  5,648
  6,056
  6,481
  6,922
  7,381
  7,859
  8,355
  8,872
  9,411
Working capital, $m
  90
  96
  120
  149
  181
  216
  256
  300
  348
  399
  454
  513
  575
  640
  709
  782
  857
  936
  1,019
  1,104
  1,193
  1,286
  1,382
  1,482
  1,586
  1,694
  1,806
  1,923
  2,045
  2,171
  2,303
Total debt, $m
  270
  370
  500
  651
  821
  1,013
  1,226
  1,459
  1,713
  1,987
  2,281
  2,593
  2,925
  3,275
  3,643
  4,029
  4,432
  4,854
  5,292
  5,749
  6,224
  6,719
  7,232
  7,765
  8,320
  8,896
  9,495
  10,119
  10,767
  11,442
  12,145
Total liabilities, $m
  413
  512
  642
  793
  963
  1,155
  1,368
  1,601
  1,855
  2,129
  2,423
  2,735
  3,067
  3,417
  3,785
  4,171
  4,574
  4,996
  5,434
  5,891
  6,366
  6,861
  7,374
  7,907
  8,462
  9,038
  9,637
  10,261
  10,909
  11,584
  12,287
Total equity, $m
  368
  451
  565
  697
  848
  1,016
  1,203
  1,408
  1,632
  1,873
  2,131
  2,406
  2,698
  3,006
  3,330
  3,669
  4,024
  4,395
  4,781
  5,183
  5,601
  6,035
  6,487
  6,956
  7,444
  7,951
  8,478
  9,026
  9,597
  10,191
  10,809
Total liabilities and equity, $m
  781
  963
  1,207
  1,490
  1,811
  2,171
  2,571
  3,009
  3,487
  4,002
  4,554
  5,141
  5,765
  6,423
  7,115
  7,840
  8,598
  9,391
  10,215
  11,074
  11,967
  12,896
  13,861
  14,863
  15,906
  16,989
  18,115
  19,287
  20,506
  21,775
  23,096
Debt-to-equity ratio
  0.734
  0.820
  0.890
  0.930
  0.970
  1.000
  1.020
  1.040
  1.050
  1.060
  1.070
  1.080
  1.080
  1.090
  1.090
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
Adjusted equity ratio
  0.454
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  21
  27
  34
  42
  51
  60
  71
  82
  93
  106
  135
  149
  164
  179
  195
  211
  229
  247
  265
  285
  305
  326
  348
  370
  394
  418
  444
  470
  498
  526
Depreciation, amort., depletion, $m
  53
  65
  76
  88
  103
  119
  137
  156
  178
  201
  226
  230
  258
  288
  319
  351
  385
  420
  457
  496
  536
  577
  621
  666
  712
  761
  811
  864
  918
  975
  1,034
Funds from operations, $m
  95
  86
  103
  122
  145
  170
  197
  227
  259
  294
  332
  365
  407
  451
  497
  546
  596
  649
  704
  761
  821
  882
  946
  1,013
  1,082
  1,154
  1,229
  1,307
  1,388
  1,473
  1,560
Change in working capital, $m
  9
  21
  24
  28
  32
  36
  40
  44
  48
  51
  55
  59
  62
  66
  69
  72
  76
  79
  82
  86
  89
  93
  96
  100
  104
  108
  112
  117
  122
  127
  132
Cash from operations, $m
  86
  111
  78
  94
  113
  134
  157
  183
  212
  243
  277
  307
  345
  386
  428
  474
  521
  570
  622
  676
  732
  790
  850
  913
  978
  1,046
  1,117
  1,190
  1,267
  1,346
  1,429
Maintenance CAPEX, $m
  0
  -34
  -43
  -54
  -67
  -81
  -97
  -115
  -135
  -156
  -179
  -204
  -230
  -258
  -288
  -319
  -351
  -385
  -420
  -457
  -496
  -536
  -577
  -621
  -666
  -712
  -761
  -811
  -864
  -918
  -975
New CAPEX, $m
  -37
  -85
  -100
  -115
  -131
  -147
  -163
  -179
  -194
  -210
  -225
  -240
  -254
  -268
  -282
  -295
  -309
  -323
  -336
  -350
  -364
  -378
  -393
  -409
  -425
  -441
  -459
  -477
  -497
  -517
  -538
Cash from investing activities, $m
  -282
  -119
  -143
  -169
  -198
  -228
  -260
  -294
  -329
  -366
  -404
  -444
  -484
  -526
  -570
  -614
  -660
  -708
  -756
  -807
  -860
  -914
  -970
  -1,030
  -1,091
  -1,153
  -1,220
  -1,288
  -1,361
  -1,435
  -1,513
Free cash flow, $m
  -196
  -8
  -65
  -75
  -85
  -94
  -103
  -111
  -117
  -123
  -128
  -137
  -139
  -141
  -141
  -140
  -139
  -137
  -135
  -132
  -128
  -124
  -120
  -116
  -112
  -107
  -103
  -98
  -94
  -89
  -85
Issuance/(repayment) of debt, $m
  210
  111
  130
  150
  171
  192
  213
  233
  254
  274
  294
  313
  332
  350
  368
  386
  403
  421
  439
  457
  475
  494
  513
  534
  554
  576
  599
  623
  648
  675
  703
Issuance/(repurchase) of shares, $m
  3
  0
  49
  57
  64
  71
  77
  83
  87
  90
  92
  99
  99
  98
  97
  94
  91
  87
  82
  77
  71
  65
  59
  52
  45
  38
  31
  23
  16
  8
  0
Cash from financing (excl. dividends), $m  
  201
  111
  179
  207
  235
  263
  290
  316
  341
  364
  386
  412
  431
  448
  465
  480
  494
  508
  521
  534
  546
  559
  572
  586
  599
  614
  630
  646
  664
  683
  703
Total cash flow (excl. dividends), $m
  7
  103
  66
  75
  86
  97
  110
  123
  137
  151
  166
  176
  192
  209
  227
  245
  264
  284
  304
  325
  347
  370
  393
  417
  443
  469
  496
  525
  555
  586
  618
Retained Cash Flow (-), $m
  27
  -98
  -115
  -132
  -150
  -169
  -187
  -205
  -223
  -241
  -258
  -275
  -292
  -308
  -324
  -339
  -355
  -370
  -386
  -402
  -418
  -435
  -452
  -469
  -488
  -507
  -527
  -548
  -570
  -594
  -618
Prev. year cash balance distribution, $m
 
  15
  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
 
  20
  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
Discount rate, %
 
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
 
  19
  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
Current shareholders' claim on cash, %
  100
  100.0
  94.6
  89.8
  85.6
  82.0
  78.8
  76.0
  73.6
  71.5
  69.7
  68.0
  66.6
  65.3
  64.2
  63.3
  62.5
  61.7
  61.1
  60.6
  60.2
  59.8
  59.5
  59.3
  59.1
  58.9
  58.8
  58.7
  58.6
  58.6
  58.6

Quanex Building Products Corporation, together with its subsidiaries, provides components for the window and door industry worldwide. The company operates through two segments, Engineered Products and International Extrusion. It offers flexible insulating glass spacers; extruded vinyl profiles; window and door screens; and precision-formed metal and wood products, as well as solar panel sealants, wood flooring, trim moldings, vinyl decking, fencing, water retention barriers, hardware, conservatory roof components, kitchen and bath cabinet doors and components, solar edge tapes, and other products. The company sells its products to original equipment manufacturers in the residential new construction, and residential remodeling and replacement markets through sales representatives, direct sales force, distributors, and independent sales agents. Quanex Building Products Corporation is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Quanex Building Products (NX)

Valuation Ratios
P/E Ratio -355.9
Price to Sales 0.8
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 14.5
Growth Rates
Sales Growth Rate 43.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 23.3%
Cap. Spend. - 3 Yr. Gr. Rate -0.5%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 70.4%
Total Debt to Equity 73.4%
Interest Coverage 1
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.4%
Return On Equity -0.5%
Return On Equity - 3 Yr. Avg. 3.4%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 23.5%
Gross Margin - 3 Yr. Avg. 22.7%
EBITDA Margin 6.7%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 3.9%
Oper. Margin - 3 Yr. Avg. 3.4%
Pre-Tax Margin -0.6%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin -0.2%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate 66.7%
Eff/ Tax Rate - 3 Yr. Avg. 46.7%
Payout Ratio -250%

NX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NX stock intrinsic value calculation we used $928 million for the last fiscal year's total revenue generated by Quanex Building Products. The default revenue input number comes from 2016 income statement of Quanex Building Products. 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 NX stock valuation model: a) initial revenue growth rate of 27.7% 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 6.3%, whose default value for NX is calculated based on our internal credit rating of Quanex Building Products, 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 Quanex Building Products.
    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 NX stock the variable cost ratio is equal to 96.1%.

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 NX 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 9.2% for Quanex Building Products.

Corporate tax rate of 27% is the nominal tax rate for Quanex Building Products. 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 NX 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 NX are equal to 33.1%.

Life of production assets of 9.1 years is the average useful life of capital assets used in Quanex Building Products 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 NX is equal to 8.1%. 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 - $368 million for Quanex Building Products - 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 33.382 million for Quanex Building Products 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 Quanex Building Products at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Quanex posts 2Q profit   [May-30-17 04:23PM  Associated Press]
▶ Quanex reports 1Q loss   [Mar-06-17 05:20PM  Associated Press]
▶ Quanex Building Products Declares Quarterly Dividend   [Dec-05-16 04:15PM  GlobeNewswire]
▶ [$$] Picks to Play Better Housing Sales   [Aug-31-16 02:59PM  at Barrons.com]
▶ Quanex Building Products to Host Investor and Analyst Day   [May-16-16 04:15PM  GlobeNewswire]
Stock chart of NX Financial statements of NX Annual reports of NX
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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