Intrinsic value of Oil-Dri of America - ODC

Previous Close

$38.47

  Intrinsic Value

$16.49

stock screener

  Rating & Target

str. sell

-57%

  Value-price divergence*

+170%

Previous close

$38.47

 
Intrinsic value

$16.49

 
Up/down potential

-57%

 
Rating

str. sell

 
Value-price divergence*

+170%

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

We calculate the intrinsic value of ODC 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 0.3

 

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, %
  0.38
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  262
  267
  273
  280
  288
  297
  307
  317
  328
  341
  354
  368
  383
  398
  415
  433
  452
  472
  494
  516
  540
  565
  591
  619
  648
  679
  712
  746
  782
  820
  859
Variable operating expenses, $m
 
  252
  258
  264
  272
  280
  289
  299
  309
  321
  333
  345
  359
  374
  390
  407
  425
  444
  464
  485
  507
  531
  555
  582
  609
  638
  669
  701
  735
  770
  807
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
  247
  252
  258
  264
  272
  280
  289
  299
  309
  321
  333
  345
  359
  374
  390
  407
  425
  444
  464
  485
  507
  531
  555
  582
  609
  638
  669
  701
  735
  770
  807
Operating income, $m
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
EBITDA, $m
  27
  25
  26
  26
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  63
  66
  70
  73
  77
  80
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
Earnings before tax, $m
  14
  15
  15
  15
  15
  16
  16
  17
  17
  18
  18
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
Tax expense, $m
  0
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
Net income, $m
  14
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  29
  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
  205
  179
  184
  188
  194
  199
  206
  213
  221
  229
  237
  247
  257
  268
  279
  291
  304
  317
  331
  347
  362
  379
  397
  416
  435
  456
  478
  501
  525
  550
  577
Adjusted assets (=assets-cash), $m
  176
  179
  184
  188
  194
  199
  206
  213
  221
  229
  237
  247
  257
  268
  279
  291
  304
  317
  331
  347
  362
  379
  397
  416
  435
  456
  478
  501
  525
  550
  577
Revenue / Adjusted assets
  1.489
  1.492
  1.484
  1.489
  1.485
  1.492
  1.490
  1.488
  1.484
  1.489
  1.494
  1.490
  1.490
  1.485
  1.487
  1.488
  1.487
  1.489
  1.492
  1.487
  1.492
  1.491
  1.489
  1.488
  1.490
  1.489
  1.490
  1.489
  1.490
  1.491
  1.489
Average production assets, $m
  87
  88
  90
  93
  95
  98
  101
  105
  108
  112
  117
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  270
  284
Working capital, $m
  60
  35
  36
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  112
Total debt, $m
  15
  14
  16
  18
  21
  24
  27
  30
  34
  38
  42
  47
  52
  57
  62
  68
  75
  81
  88
  95
  103
  111
  120
  129
  139
  149
  160
  171
  183
  195
  208
Total liabilities, $m
  89
  88
  90
  92
  95
  98
  101
  104
  108
  112
  116
  121
  126
  131
  136
  142
  149
  155
  162
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  269
  282
Total equity, $m
  116
  92
  94
  96
  99
  102
  105
  109
  113
  117
  121
  126
  131
  137
  143
  149
  155
  162
  169
  177
  185
  194
  203
  212
  222
  233
  244
  256
  268
  281
  295
Total liabilities and equity, $m
  205
  180
  184
  188
  194
  200
  206
  213
  221
  229
  237
  247
  257
  268
  279
  291
  304
  317
  331
  346
  362
  379
  397
  415
  435
  456
  478
  501
  525
  550
  577
Debt-to-equity ratio
  0.129
  0.150
  0.170
  0.190
  0.210
  0.230
  0.250
  0.280
  0.300
  0.320
  0.350
  0.370
  0.390
  0.420
  0.440
  0.460
  0.480
  0.500
  0.520
  0.540
  0.560
  0.580
  0.590
  0.610
  0.620
  0.640
  0.650
  0.670
  0.680
  0.690
  0.710
Adjusted equity ratio
  0.494
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
Depreciation, amort., depletion, $m
  12
  10
  10
  10
  10
  11
  11
  11
  12
  12
  13
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  25
  26
  27
  28
Funds from operations, $m
  31
  20
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  27
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  44
  46
  48
  51
  53
  55
  58
Change in working capital, $m
  6
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  25
  20
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  50
  53
Maintenance CAPEX, $m
  0
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -27
New CAPEX, $m
  -11
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -18
  -11
  -11
  -11
  -12
  -13
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -20
  -22
  -23
  -23
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -37
  -38
  -40
Free cash flow, $m
  7
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  9
  9
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  13
Issuance/(repayment) of debt, $m
  -3
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
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  
  -2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Total cash flow (excl. dividends), $m
  4
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
Retained Cash Flow (-), $m
  -5
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
Prev. year cash balance distribution, $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
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
 
  35
  9
  9
  9
  9
  9
  8
  8
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
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
 
  34
  8
  8
  7
  7
  6
  6
  5
  5
  4
  4
  4
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
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
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Oil-Dri Corporation of America develops, manufactures, and markets sorbent products in the United States and internationally. It provides agricultural and horticultural products, including granular and powdered mineral absorbent products for crop protection chemical carriers, drying agents, bulk processing aids, growing media components, and seed enhancement media under the Agsorb, Verge, Flo-Fre, and Terra-Green brands. The company also offers animal health and nutrition products, such as enterosorbents and animal feed pellet binders for the livestock feed industry under the Amlan, Calibrin, ConditionAde, Pel-Unite, and Pel-Unite Plus brands; and sports products for use on baseball, softball, football, and soccer fields under the Pro’s Choice brand. In addition, it provides bleaching clay and purification aid products for bleaching, purification, and filtration applications under the Pure-Flo, Perform, Select, and Ultra-Clear brands; cat litter products, including coarse and scoopable products under the Cat’s Pride and Jonny Cat brands; and industrial and automotive sorbent products from clay, polypropylene, and recycled cotton materials to absorb oil, grease, water, and other types of spills under the Oil-Dri brand. The company’s customers include mass merchandisers, wholesale clubs, drugstore chains, pet specialty retail outlets, dollar stores, retail grocery stores, distributors of industrial cleanup and automotive products, environmental service companies, and sports field product users; processors and refiners of edible oils, petroleum-based oils, and biodiesel fuel; manufacturers of animal feed and agricultural chemicals; distributors of animal health and nutrition products; and marketers of consumer products. Oil-Dri Corporation of America was founded in 1941 and is based in Chicago, Illinois.

FINANCIAL RATIOS  of  Oil-Dri of America (ODC)

Valuation Ratios
P/E Ratio 19.9
Price to Sales 1.1
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 19.9
Growth Rates
Sales Growth Rate 0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.3%
Cap. Spend. - 3 Yr. Gr. Rate 1.9%
Financial Strength
Quick Ratio 10
Current Ratio 0.1
LT Debt to Equity 10.3%
Total Debt to Equity 12.9%
Interest Coverage 15
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.5%
Return On Equity 12.3%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 29.4%
Gross Margin - 3 Yr. Avg. 25%
EBITDA Margin 10.3%
EBITDA Margin - 3 Yr. Avg. 9.6%
Operating Margin 5.7%
Oper. Margin - 3 Yr. Avg. 5.3%
Pre-Tax Margin 5.3%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 5.3%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 16.2%
Payout Ratio 42.9%

ODC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ODC stock intrinsic value calculation we used $262 million for the last fiscal year's total revenue generated by Oil-Dri of America. The default revenue input number comes from 2016 income statement of Oil-Dri of America. 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 ODC stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for ODC is calculated based on our internal credit rating of Oil-Dri of America, 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 Oil-Dri of America.
    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 ODC stock the variable cost ratio is equal to 94.3%.

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 ODC 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 5.9% for Oil-Dri of America.

Corporate tax rate of 27% is the nominal tax rate for Oil-Dri of America. 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 ODC 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 ODC are equal to 33%.

Life of production assets of 10 years is the average useful life of capital assets used in Oil-Dri of America 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 ODC is equal to 13%. 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 - $116 million for Oil-Dri of America - 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 7.202 million for Oil-Dri of America 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 Oil-Dri of America at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Oil-Dri posts 3Q profit   [Jun-07-17 04:11PM  Associated Press]
▶ Amlan International Launches New Educational Website   [Mar-22-17 04:04PM  GlobeNewswire]
▶ Oil-Dri posts 2Q profit   [04:08PM  Associated Press]
▶ Oil-Dri Board of Directors Declares Quarterly Dividends   [Dec-13-16 04:19PM  Marketwired]
▶ Why Mylan, Boeing, Suncor, and More Are Making Headlines   [Oct-08-16 01:59AM  at Insider Monkey]
▶ Katherine Heigl now going to bat for Cat's Pride kitty litter   [Mar-11-16 03:55PM  at bizjournals.com]
▶ The Top 5 Micro Cap Basic Material Stocks for 2016 (GURE,ODC)   [Jan-27-16 06:12AM  at Investopedia]
Stock chart of ODC Financial statements of ODC
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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