Intrinsic value of Rex American Resources - REX

Previous Close

$93.76

  Intrinsic Value

$339.56

stock screener

  Rating & Target

str. buy

+262%

  Value-price divergence*

+109%

Previous close

$93.76

 
Intrinsic value

$339.56

 
Up/down potential

+262%

 
Rating

str. buy

 
Value-price divergence*

+109%

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

We calculate the intrinsic value of REX 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 2017), $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 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.13
  13.00
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  454
  513
  576
  642
  711
  784
  860
  940
  1,023
  1,109
  1,199
  1,292
  1,390
  1,490
  1,595
  1,704
  1,818
  1,935
  2,058
  2,186
  2,318
  2,457
  2,601
  2,752
  2,909
  3,073
  3,244
  3,423
  3,610
  3,806
  4,011
Variable operating expenses, $m
 
  257
  288
  321
  356
  392
  430
  470
  511
  555
  600
  646
  695
  745
  798
  852
  909
  968
  1,029
  1,093
  1,159
  1,228
  1,301
  1,376
  1,454
  1,536
  1,622
  1,712
  1,805
  1,903
  2,005
Fixed operating expenses, $m
 
  186
  190
  195
  200
  205
  210
  215
  221
  226
  232
  237
  243
  250
  256
  262
  269
  275
  282
  289
  297
  304
  312
  319
  327
  336
  344
  353
  361
  370
  380
Total operating expenses, $m
  404
  443
  478
  516
  556
  597
  640
  685
  732
  781
  832
  883
  938
  995
  1,054
  1,114
  1,178
  1,243
  1,311
  1,382
  1,456
  1,532
  1,613
  1,695
  1,781
  1,872
  1,966
  2,065
  2,166
  2,273
  2,385
Operating income, $m
  50
  71
  98
  126
  156
  187
  220
  255
  291
  329
  368
  409
  451
  496
  542
  590
  640
  692
  747
  803
  863
  924
  989
  1,057
  1,127
  1,201
  1,278
  1,359
  1,444
  1,533
  1,626
EBITDA, $m
  70
  94
  123
  154
  187
  222
  258
  296
  336
  378
  421
  466
  513
  562
  612
  665
  720
  778
  838
  900
  965
  1,033
  1,104
  1,178
  1,256
  1,337
  1,422
  1,510
  1,603
  1,701
  1,803
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  29
Earnings before tax, $m
  57
  71
  97
  125
  154
  185
  217
  251
  287
  324
  362
  402
  444
  487
  533
  580
  629
  680
  734
  789
  847
  908
  971
  1,038
  1,107
  1,179
  1,255
  1,335
  1,418
  1,505
  1,596
Tax expense, $m
  17
  19
  26
  34
  42
  50
  59
  68
  77
  87
  98
  109
  120
  132
  144
  157
  170
  184
  198
  213
  229
  245
  262
  280
  299
  318
  339
  360
  383
  406
  431
Net income, $m
  32
  52
  71
  91
  113
  135
  159
  183
  209
  236
  264
  294
  324
  356
  389
  423
  459
  497
  536
  576
  619
  663
  709
  757
  808
  861
  916
  974
  1,035
  1,099
  1,165

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  189
  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
  454
  299
  336
  375
  415
  458
  502
  549
  597
  648
  700
  755
  811
  870
  931
  995
  1,061
  1,130
  1,201
  1,276
  1,353
  1,434
  1,519
  1,606
  1,698
  1,794
  1,894
  1,998
  2,108
  2,222
  2,341
Adjusted assets (=assets-cash), $m
  265
  299
  336
  375
  415
  458
  502
  549
  597
  648
  700
  755
  811
  870
  931
  995
  1,061
  1,130
  1,201
  1,276
  1,353
  1,434
  1,519
  1,606
  1,698
  1,794
  1,894
  1,998
  2,108
  2,222
  2,341
Revenue / Adjusted assets
  1.713
  1.716
  1.714
  1.712
  1.713
  1.712
  1.713
  1.712
  1.714
  1.711
  1.713
  1.711
  1.714
  1.713
  1.713
  1.713
  1.713
  1.712
  1.714
  1.713
  1.713
  1.713
  1.712
  1.714
  1.713
  1.713
  1.713
  1.713
  1.713
  1.713
  1.713
Average production assets, $m
  187
  211
  237
  264
  292
  322
  354
  386
  420
  456
  493
  531
  571
  613
  656
  700
  747
  795
  846
  898
  953
  1,010
  1,069
  1,131
  1,196
  1,263
  1,333
  1,407
  1,484
  1,564
  1,648
Working capital, $m
  204
  17
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  107
  113
  119
  126
  132
Total debt, $m
  0
  15
  30
  47
  65
  83
  102
  122
  143
  164
  187
  210
  235
  260
  286
  314
  342
  372
  403
  435
  468
  503
  539
  577
  616
  657
  700
  745
  792
  841
  893
Total liabilities, $m
  114
  129
  144
  161
  179
  197
  216
  236
  257
  278
  301
  324
  349
  374
  400
  428
  456
  486
  517
  549
  582
  617
  653
  691
  730
  771
  814
  859
  906
  955
  1,007
Total equity, $m
  340
  171
  192
  214
  237
  261
  286
  313
  340
  369
  399
  430
  462
  496
  531
  567
  605
  644
  685
  727
  771
  818
  866
  916
  968
  1,023
  1,080
  1,139
  1,201
  1,266
  1,335
Total liabilities and equity, $m
  454
  300
  336
  375
  416
  458
  502
  549
  597
  647
  700
  754
  811
  870
  931
  995
  1,061
  1,130
  1,202
  1,276
  1,353
  1,435
  1,519
  1,607
  1,698
  1,794
  1,894
  1,998
  2,107
  2,221
  2,342
Debt-to-equity ratio
  0.000
  0.090
  0.160
  0.220
  0.270
  0.320
  0.360
  0.390
  0.420
  0.450
  0.470
  0.490
  0.510
  0.520
  0.540
  0.550
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
Adjusted equity ratio
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  32
  52
  71
  91
  113
  135
  159
  183
  209
  236
  264
  294
  324
  356
  389
  423
  459
  497
  536
  576
  619
  663
  709
  757
  808
  861
  916
  974
  1,035
  1,099
  1,165
Depreciation, amort., depletion, $m
  20
  23
  25
  28
  31
  35
  38
  42
  45
  49
  53
  57
  61
  66
  71
  75
  80
  86
  91
  97
  102
  109
  115
  122
  129
  136
  143
  151
  160
  168
  177
Funds from operations, $m
  74
  74
  96
  120
  144
  170
  197
  225
  254
  285
  317
  351
  386
  422
  459
  499
  540
  582
  627
  673
  721
  771
  824
  879
  937
  997
  1,060
  1,125
  1,194
  1,267
  1,342
Change in working capital, $m
  5
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
Cash from operations, $m
  69
  73
  94
  117
  142
  167
  194
  222
  252
  282
  314
  348
  382
  418
  456
  495
  536
  578
  622
  669
  717
  767
  819
  874
  931
  991
  1,054
  1,120
  1,188
  1,260
  1,336
Maintenance CAPEX, $m
  0
  -20
  -23
  -25
  -28
  -31
  -35
  -38
  -42
  -45
  -49
  -53
  -57
  -61
  -66
  -71
  -75
  -80
  -86
  -91
  -97
  -102
  -109
  -115
  -122
  -129
  -136
  -143
  -151
  -160
  -168
New CAPEX, $m
  -14
  -24
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -74
  -77
  -80
  -84
Cash from investing activities, $m
  -8
  -44
  -49
  -52
  -57
  -61
  -66
  -71
  -76
  -80
  -86
  -91
  -97
  -102
  -109
  -116
  -122
  -128
  -136
  -143
  -152
  -159
  -168
  -177
  -187
  -196
  -206
  -217
  -228
  -240
  -252
Free cash flow, $m
  61
  28
  46
  65
  85
  106
  128
  152
  176
  202
  228
  256
  285
  316
  347
  380
  414
  449
  487
  525
  565
  608
  651
  697
  745
  795
  848
  903
  960
  1,020
  1,083
Issuance/(repayment) of debt, $m
  0
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
Issuance/(repurchase) of shares, $m
  -5
  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  
  -9
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
Total cash flow (excl. dividends), $m
  53
  43
  62
  81
  102
  124
  147
  172
  197
  223
  251
  280
  310
  341
  373
  407
  442
  479
  517
  557
  599
  642
  688
  735
  785
  837
  891
  948
  1,007
  1,069
  1,135
Retained Cash Flow (-), $m
  -29
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
Prev. year cash balance distribution, $m
 
  189
  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
 
  212
  41
  59
  79
  100
  122
  145
  169
  195
  221
  249
  277
  307
  338
  371
  405
  440
  477
  515
  555
  596
  640
  685
  732
  782
  834
  888
  945
  1,004
  1,067
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
 
  203
  37
  52
  65
  77
  89
  98
  106
  112
  116
  118
  118
  117
  114
  109
  103
  96
  88
  79
  70
  62
  53
  45
  37
  30
  24
  19
  15
  11
  8
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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Rex American Resources Corporation is a holding company. As of January 31, 2017, the Company had invested in three ethanol production entities. It operates through alternative energy segment. As of January 31, 2017, the Company's ethanol investments include One Earth Energy, LLC (One Earth), NuGen Energy, LLC (NuGen) and Big River Resources, LLC (Big River). One Earth has its ethanol production facility in Gibson City, Illinois. NuGen operates an ethanol producing facility in Marion, South Dakota. Big River is a holding company for various entities, including Big River Resources West Burlington, LLC, which operates an ethanol plant in West Burlington, Iowa. Big River has interest in Big River United Energy, LLC, which operates an ethanol production facility located in Dyersville, Iowa. Big River has interest in an ethanol production facility, which is located in Boyceville, Wisconsin.

FINANCIAL RATIOS  of  Rex American Resources (REX)

Valuation Ratios
P/E Ratio 19.2
Price to Sales 1.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow 11.2
Growth Rates
Sales Growth Rate 4.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.7%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.4%
Ret/ On Assets - 3 Yr. Avg. 11.5%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 14.6%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 15.6%
Gross Margin - 3 Yr. Avg. 17.4%
EBITDA Margin 17%
EBITDA Margin - 3 Yr. Avg. 21.1%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 13.9%
Pre-Tax Margin 12.6%
Pre-Tax Margin - 3 Yr. Avg. 17.1%
Net Profit Margin 7%
Net Profit Margin - 3 Yr. Avg. 9.8%
Effective Tax Rate 29.8%
Eff/ Tax Rate - 3 Yr. Avg. 30.5%
Payout Ratio 0%

REX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REX stock intrinsic value calculation we used $454 million for the last fiscal year's total revenue generated by Rex American Resources. The default revenue input number comes from 2017 income statement of Rex American Resources. 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 REX stock valuation model: a) initial revenue growth rate of 13% 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 REX is calculated based on our internal credit rating of Rex American Resources, 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 Rex American Resources.
    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 REX stock the variable cost ratio is equal to 50%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $181 million in the base year in the intrinsic value calculation for REX 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 Rex American Resources.

Corporate tax rate of 27% is the nominal tax rate for Rex American Resources. 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 REX 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 REX are equal to 41.1%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Rex American Resources 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 REX is equal to 3.3%. 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 - $340 million for Rex American Resources - 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 6.739 million for Rex American Resources 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 Rex American Resources at the current share price and the inputted number of shares is $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ REX posts 2Q profit   [Aug-31-17 08:04PM  Associated Press]
▶ REX American sees 2Q profit tumble, stock price falls   [Aug-30-17 04:36PM  American City Business Journals]
▶ Anglo American appoints Chambers as next chairman   [Jun-07-17 03:31AM  Reuters]
▶ REX posts 1Q profit   [May-24-17 07:04AM  Associated Press]
▶ Here are REX American Resources 3 highest-paid executives   [May-12-17 07:20AM  American City Business Journals]
▶ Dayton ethanol company plans up to $30M in plant expansions   [Apr-03-17 06:25AM  at bizjournals.com]
▶ Dayton ethanol company plans up to $30M in plant expansions   [06:25AM  American City Business Journals]
▶ REX posts 4Q profit   [07:24AM  Associated Press]
▶ Why The Ethanol Industry Should Fear President Trump   [Jan-22-17 06:27PM  at Forbes]
▶ Is Schnitzer Steel Industries, Inc. (SCHN) A Good Stock To Buy?   [Dec-08-16 01:29PM  at Insider Monkey]
▶ [$$] Overheard: For This Company, Trumps a Gas   [12:54AM  at The Wall Street Journal]
▶ For This Company, Trump's a Gas   [Nov-30-16 02:24PM  at The Wall Street Journal]
▶ REX profit drops in 1Q   [Jun-02-16 03:28PM  at bizjournals.com]
▶ Has Your Equity Fund Loaded Up on Debt?   [May-17-16 03:00PM  Morningstar]
▶ Dayton energy company plans new plant in Wyoming   [Apr-29-16 03:25PM  at bizjournals.com]
Financial statements of REX
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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