Intrinsic value of Real Industry - RELY

Previous Close

$0.51

  Intrinsic Value

$0.13

stock screener

  Rating & Target

str. sell

-74%

Previous close

$0.51

 
Intrinsic value

$0.13

 
Up/down potential

-74%

 
Rating

str. sell

We calculate the intrinsic value of RELY 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 0.0

 

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, %
  9.08
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  1,250
  1,363
  1,480
  1,602
  1,728
  1,860
  1,997
  2,139
  2,287
  2,441
  2,601
  2,767
  2,940
  3,121
  3,308
  3,504
  3,708
  3,921
  4,143
  4,375
  4,618
  4,871
  5,136
  5,413
  5,703
  6,006
  6,324
  6,656
  7,004
  7,369
  7,752
Variable operating expenses, $m
 
  1,366
  1,483
  1,605
  1,732
  1,864
  2,001
  2,143
  2,291
  2,444
  2,604
  2,766
  2,939
  3,119
  3,307
  3,503
  3,707
  3,920
  4,142
  4,374
  4,616
  4,869
  5,134
  5,411
  5,701
  6,004
  6,321
  6,654
  7,002
  7,367
  7,749
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
  1,315
  1,366
  1,483
  1,605
  1,732
  1,864
  2,001
  2,143
  2,291
  2,444
  2,604
  2,766
  2,939
  3,119
  3,307
  3,503
  3,707
  3,920
  4,142
  4,374
  4,616
  4,869
  5,134
  5,411
  5,701
  6,004
  6,321
  6,654
  7,002
  7,367
  7,749
Operating income, $m
  -66
  -4
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -3
  -3
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
EBITDA, $m
  -17
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
Interest expense (income), $m
  32
  34
  36
  41
  46
  51
  57
  63
  69
  75
  81
  88
  95
  103
  110
  118
  126
  135
  144
  154
  163
  174
  184
  196
  207
  220
  232
  246
  260
  275
  290
Earnings before tax, $m
  -104
  -37
  -39
  -44
  -49
  -55
  -60
  -66
  -72
  -78
  -85
  -87
  -94
  -101
  -109
  -117
  -125
  -134
  -143
  -152
  -162
  -172
  -182
  -194
  -205
  -217
  -230
  -243
  -257
  -272
  -287
Tax expense, $m
  -1
  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
Net income, $m
  -103
  -37
  -39
  -44
  -49
  -55
  -60
  -66
  -72
  -78
  -85
  -87
  -94
  -101
  -109
  -117
  -125
  -134
  -143
  -152
  -162
  -172
  -182
  -194
  -205
  -217
  -230
  -243
  -257
  -272
  -287

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  27
  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
  646
  675
  733
  793
  856
  921
  989
  1,060
  1,133
  1,209
  1,288
  1,371
  1,456
  1,546
  1,639
  1,736
  1,837
  1,942
  2,052
  2,167
  2,287
  2,413
  2,544
  2,681
  2,825
  2,975
  3,132
  3,297
  3,469
  3,650
  3,839
Adjusted assets (=assets-cash), $m
  619
  675
  733
  793
  856
  921
  989
  1,060
  1,133
  1,209
  1,288
  1,371
  1,456
  1,546
  1,639
  1,736
  1,837
  1,942
  2,052
  2,167
  2,287
  2,413
  2,544
  2,681
  2,825
  2,975
  3,132
  3,297
  3,469
  3,650
  3,839
Revenue / Adjusted assets
  2.019
  2.019
  2.019
  2.020
  2.019
  2.020
  2.019
  2.018
  2.019
  2.019
  2.019
  2.018
  2.019
  2.019
  2.018
  2.018
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
  2.019
Average production assets, $m
  14
  15
  16
  18
  19
  20
  22
  24
  25
  27
  29
  30
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  56
  60
  63
  66
  70
  73
  77
  81
  85
Working capital, $m
  122
  106
  115
  125
  135
  145
  156
  167
  178
  190
  203
  216
  229
  243
  258
  273
  289
  306
  323
  341
  360
  380
  401
  422
  445
  468
  493
  519
  546
  575
  605
Total debt, $m
  357
  376
  429
  483
  539
  598
  659
  723
  789
  857
  928
  1,003
  1,080
  1,160
  1,244
  1,331
  1,422
  1,517
  1,616
  1,719
  1,827
  1,940
  2,058
  2,182
  2,311
  2,446
  2,588
  2,736
  2,891
  3,054
  3,224
Total liabilities, $m
  587
  607
  660
  714
  770
  829
  890
  954
  1,020
  1,088
  1,159
  1,234
  1,311
  1,391
  1,475
  1,562
  1,653
  1,748
  1,847
  1,950
  2,058
  2,171
  2,289
  2,413
  2,542
  2,677
  2,819
  2,967
  3,122
  3,285
  3,455
Total equity, $m
  58
  67
  73
  79
  86
  92
  99
  106
  113
  121
  129
  137
  146
  155
  164
  174
  184
  194
  205
  217
  229
  241
  254
  268
  282
  297
  313
  330
  347
  365
  384
Total liabilities and equity, $m
  645
  674
  733
  793
  856
  921
  989
  1,060
  1,133
  1,209
  1,288
  1,371
  1,457
  1,546
  1,639
  1,736
  1,837
  1,942
  2,052
  2,167
  2,287
  2,412
  2,543
  2,681
  2,824
  2,974
  3,132
  3,297
  3,469
  3,650
  3,839
Debt-to-equity ratio
  6.155
  5.580
  5.850
  6.090
  6.300
  6.490
  6.660
  6.820
  6.960
  7.090
  7.210
  7.310
  7.410
  7.510
  7.590
  7.670
  7.740
  7.810
  7.870
  7.930
  7.990
  8.040
  8.090
  8.140
  8.180
  8.220
  8.260
  8.300
  8.330
  8.370
  8.400
Adjusted equity ratio
  0.050
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -103
  -37
  -39
  -44
  -49
  -55
  -60
  -66
  -72
  -78
  -85
  -87
  -94
  -101
  -109
  -117
  -125
  -134
  -143
  -152
  -162
  -172
  -182
  -194
  -205
  -217
  -230
  -243
  -257
  -272
  -287
Depreciation, amort., depletion, $m
  49
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
Funds from operations, $m
  3
  -30
  -32
  -37
  -41
  -46
  -52
  -57
  -63
  -69
  -75
  -81
  -88
  -95
  -102
  -109
  -117
  -125
  -133
  -142
  -152
  -161
  -171
  -182
  -193
  -204
  -216
  -229
  -242
  -256
  -270
Change in working capital, $m
  -6
  9
  9
  10
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
Cash from operations, $m
  9
  -39
  -41
  -46
  -51
  -57
  -62
  -68
  -74
  -81
  -87
  -94
  -101
  -109
  -116
  -124
  -133
  -142
  -151
  -160
  -170
  -181
  -192
  -203
  -215
  -228
  -241
  -255
  -269
  -284
  -300
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
New CAPEX, $m
  -31
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -55
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -18
  -19
  -19
  -20
Free cash flow, $m
  -46
  -43
  -45
  -51
  -56
  -62
  -68
  -74
  -81
  -87
  -94
  -102
  -109
  -117
  -125
  -134
  -143
  -152
  -162
  -172
  -183
  -194
  -205
  -218
  -230
  -244
  -258
  -272
  -288
  -304
  -321
Issuance/(repayment) of debt, $m
  34
  21
  52
  54
  57
  59
  61
  63
  66
  69
  71
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  142
  148
  155
  163
  170
Issuance/(repurchase) of shares, $m
  0
  72
  45
  50
  56
  61
  67
  73
  79
  86
  93
  95
  103
  110
  118
  127
  135
  144
  154
  163
  174
  184
  196
  207
  220
  232
  246
  260
  275
  290
  306
Cash from financing (excl. dividends), $m  
  35
  93
  97
  104
  113
  120
  128
  136
  145
  155
  164
  169
  180
  190
  202
  214
  226
  239
  253
  266
  282
  297
  314
  330
  349
  367
  388
  408
  430
  453
  476
Total cash flow (excl. dividends), $m
  -11
  50
  52
  54
  56
  58
  60
  62
  65
  67
  70
  68
  71
  74
  77
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
Retained Cash Flow (-), $m
  106
  -72
  -45
  -50
  -56
  -61
  -67
  -73
  -79
  -86
  -93
  -95
  -103
  -110
  -118
  -127
  -135
  -144
  -154
  -163
  -174
  -184
  -196
  -207
  -220
  -232
  -246
  -260
  -275
  -290
  -306
Prev. year cash balance distribution, $m
 
  25
  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
 
  4
  7
  4
  0
  -3
  -7
  -11
  -15
  -19
  -23
  -27
  -32
  -37
  -42
  -47
  -52
  -57
  -63
  -69
  -75
  -81
  -87
  -94
  -101
  -109
  -116
  -124
  -132
  -141
  -150
Discount rate, %
 
  12.70
  13.34
  14.00
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.69
  21.72
  22.81
  23.95
  25.15
  26.40
  27.72
  29.11
  30.56
  32.09
  33.70
  35.38
  37.15
  39.01
  40.96
  43.01
  45.16
  47.41
  49.79
  52.27
PV of cash for distribution, $m
 
  3
  5
  2
  0
  -2
  -3
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  24.3
  12.4
  6.3
  3.1
  1.5
  0.8
  0.4
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Real Industry, Inc. is a holding company. The Company focuses on the operations of Real Alloy Holding, Inc. (Real Alloy), which is engaged in aluminum recycling. The Company's segments include Real Alloy North America (RANA) and Real Alloy Europe (RAEU). The RANA segment includes aluminum melting, processing, recycling and alloying activities conducted in approximately 20 facilities located in the United States, Canada and Mexico. The RAEU segment's operations primarily convert aluminum scrap, dross and other alloying agents, and deliver the recycled metal in ingot or molten form to customers from approximately six facilities located in Germany, Norway and Wales. Real Alloy's aluminum recycling operations include the processing of scrap aluminum and by-products, and the manufacturing of wrought, cast, and specification or foundry alloys. Real Alloy offers a range of products and services to wrought alloy processors, automotive original equipment manufacturers, foundries and casters.

FINANCIAL RATIOS  of  Real Industry (RELY)

Valuation Ratios
P/E Ratio -0.1
Price to Sales 0
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 1.7
Price to Free Cash Flow -0.7
Growth Rates
Sales Growth Rate 9.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.2%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 14
Current Ratio 0
LT Debt to Equity 612.1%
Total Debt to Equity 615.5%
Interest Coverage -2
Management Effectiveness
Return On Assets -10.6%
Ret/ On Assets - 3 Yr. Avg. -1.1%
Return On Total Capital -23.1%
Ret/ On T. Cap. - 3 Yr. Avg. -5.9%
Return On Equity -92.8%
Return On Equity - 3 Yr. Avg. -29.9%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 5.4%
Gross Margin - 3 Yr. Avg. 37.3%
EBITDA Margin -1.8%
EBITDA Margin - 3 Yr. Avg. -150.4%
Operating Margin -5.2%
Oper. Margin - 3 Yr. Avg. -201.8%
Pre-Tax Margin -8.3%
Pre-Tax Margin - 3 Yr. Avg. -154%
Net Profit Margin -8.2%
Net Profit Margin - 3 Yr. Avg. 97%
Effective Tax Rate 1%
Eff/ Tax Rate - 3 Yr. Avg. 41%
Payout Ratio 0%

RELY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RELY stock intrinsic value calculation we used $1250 million for the last fiscal year's total revenue generated by Real Industry. The default revenue input number comes from 2016 income statement of Real Industry. 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 RELY stock valuation model: a) initial revenue growth rate of 9% 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 12.7%, whose default value for RELY is calculated based on our internal credit rating of Real Industry, 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 Real Industry.
    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 RELY stock the variable cost ratio is equal to 100.3%.

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 RELY 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 9.5% for Real Industry.

Corporate tax rate of 27% is the nominal tax rate for Real Industry. 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 RELY 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 RELY are equal to 1.1%.

Life of production assets of 1.8 years is the average useful life of capital assets used in Real Industry 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 RELY is equal to 7.8%. 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 - $58 million for Real Industry - 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 29.8 million for Real Industry 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 Real Industry at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of RELY
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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