Intrinsic value of Rex American Resources - REX

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$87.58

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$87.58

 
Intrinsic value

$365.41

 
Up/down potential

+317%

 
Rating

str. buy

 
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*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
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
Revenue, $m
  454
  518
  585
  657
  733
  813
  897
  985
  1,077
  1,172
  1,272
  1,375
  1,483
  1,594
  1,711
  1,831
  1,957
  2,087
  2,223
  2,364
  2,511
  2,664
  2,824
  2,990
  3,163
  3,344
  3,533
  3,730
  3,936
  4,152
  4,377
Variable operating expenses, $m
 
  259
  293
  329
  367
  407
  449
  492
  538
  586
  636
  688
  741
  797
  855
  916
  978
  1,044
  1,112
  1,182
  1,256
  1,332
  1,412
  1,495
  1,582
  1,672
  1,766
  1,865
  1,968
  2,076
  2,188
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
  445
  483
  524
  567
  612
  659
  707
  759
  812
  868
  925
  984
  1,047
  1,111
  1,178
  1,247
  1,319
  1,394
  1,471
  1,553
  1,636
  1,724
  1,814
  1,909
  2,008
  2,110
  2,218
  2,329
  2,446
  2,568
Operating income, $m
  50
  73
  103
  134
  167
  202
  239
  277
  318
  360
  404
  450
  498
  548
  600
  654
  710
  768
  829
  893
  959
  1,028
  1,100
  1,176
  1,254
  1,337
  1,423
  1,513
  1,607
  1,705
  1,809
EBITDA, $m
  70
  96
  128
  163
  199
  238
  278
  321
  365
  412
  460
  511
  563
  618
  675
  734
  796
  861
  927
  997
  1,070
  1,146
  1,225
  1,308
  1,394
  1,484
  1,579
  1,677
  1,781
  1,889
  2,002
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
Earnings before tax, $m
  57
  73
  102
  133
  165
  199
  236
  273
  313
  355
  398
  443
  490
  539
  590
  643
  698
  755
  815
  877
  942
  1,010
  1,081
  1,155
  1,232
  1,313
  1,397
  1,485
  1,578
  1,675
  1,776
Tax expense, $m
  17
  20
  28
  36
  45
  54
  64
  74
  85
  96
  107
  120
  132
  145
  159
  173
  188
  204
  220
  237
  254
  273
  292
  312
  333
  354
  377
  401
  426
  452
  480
Net income, $m
  32
  53
  74
  97
  121
  146
  172
  200
  229
  259
  290
  323
  358
  393
  430
  469
  509
  551
  595
  640
  688
  737
  789
  843
  899
  958
  1,020
  1,084
  1,152
  1,223
  1,297

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
  302
  342
  384
  428
  475
  524
  575
  628
  684
  742
  803
  866
  931
  999
  1,069
  1,142
  1,219
  1,298
  1,380
  1,466
  1,555
  1,648
  1,745
  1,847
  1,952
  2,062
  2,178
  2,298
  2,424
  2,555
Adjusted assets (=assets-cash), $m
  265
  302
  342
  384
  428
  475
  524
  575
  628
  684
  742
  803
  866
  931
  999
  1,069
  1,142
  1,219
  1,298
  1,380
  1,466
  1,555
  1,648
  1,745
  1,847
  1,952
  2,062
  2,178
  2,298
  2,424
  2,555
Revenue / Adjusted assets
  1.713
  1.715
  1.711
  1.711
  1.713
  1.712
  1.712
  1.713
  1.715
  1.713
  1.714
  1.712
  1.712
  1.712
  1.713
  1.713
  1.714
  1.712
  1.713
  1.713
  1.713
  1.713
  1.714
  1.713
  1.713
  1.713
  1.713
  1.713
  1.713
  1.713
  1.713
Average production assets, $m
  187
  213
  241
  270
  301
  334
  369
  405
  442
  482
  523
  565
  609
  655
  703
  753
  804
  858
  914
  972
  1,032
  1,095
  1,161
  1,229
  1,300
  1,374
  1,452
  1,533
  1,618
  1,706
  1,799
Working capital, $m
  204
  17
  19
  22
  24
  27
  30
  33
  36
  39
  42
  45
  49
  53
  56
  60
  65
  69
  73
  78
  83
  88
  93
  99
  104
  110
  117
  123
  130
  137
  144
Total debt, $m
  0
  16
  33
  51
  70
  90
  111
  133
  156
  180
  205
  231
  258
  286
  315
  346
  377
  410
  444
  479
  516
  555
  595
  637
  680
  725
  773
  822
  874
  928
  985
Total liabilities, $m
  114
  130
  147
  165
  184
  204
  225
  247
  270
  294
  319
  345
  372
  400
  429
  460
  491
  524
  558
  593
  630
  669
  709
  751
  794
  839
  887
  936
  988
  1,042
  1,099
Total equity, $m
  340
  172
  195
  219
  244
  271
  299
  328
  358
  390
  423
  458
  493
  531
  569
  609
  651
  695
  740
  787
  836
  887
  940
  995
  1,053
  1,113
  1,176
  1,241
  1,310
  1,381
  1,456
Total liabilities and equity, $m
  454
  302
  342
  384
  428
  475
  524
  575
  628
  684
  742
  803
  865
  931
  998
  1,069
  1,142
  1,219
  1,298
  1,380
  1,466
  1,556
  1,649
  1,746
  1,847
  1,952
  2,063
  2,177
  2,298
  2,423
  2,555
Debt-to-equity ratio
  0.000
  0.090
  0.170
  0.230
  0.290
  0.330
  0.370
  0.410
  0.440
  0.460
  0.480
  0.510
  0.520
  0.540
  0.550
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
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
  53
  74
  97
  121
  146
  172
  200
  229
  259
  290
  323
  358
  393
  430
  469
  509
  551
  595
  640
  688
  737
  789
  843
  899
  958
  1,020
  1,084
  1,152
  1,223
  1,297
Depreciation, amort., depletion, $m
  20
  23
  26
  29
  32
  36
  40
  44
  48
  52
  56
  61
  66
  70
  76
  81
  86
  92
  98
  104
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
Funds from operations, $m
  74
  76
  100
  126
  153
  181
  212
  243
  276
  311
  347
  384
  423
  464
  506
  550
  596
  643
  693
  745
  799
  855
  914
  975
  1,039
  1,106
  1,176
  1,249
  1,326
  1,406
  1,490
Change in working capital, $m
  5
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
Cash from operations, $m
  69
  71
  98
  123
  150
  179
  209
  240
  273
  307
  343
  381
  420
  460
  502
  546
  592
  639
  689
  740
  794
  850
  909
  970
  1,033
  1,100
  1,170
  1,243
  1,319
  1,399
  1,483
Maintenance CAPEX, $m
  0
  -20
  -23
  -26
  -29
  -32
  -36
  -40
  -44
  -48
  -52
  -56
  -61
  -66
  -70
  -76
  -81
  -86
  -92
  -98
  -104
  -111
  -118
  -125
  -132
  -140
  -148
  -156
  -165
  -174
  -183
New CAPEX, $m
  -14
  -26
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -66
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
Cash from investing activities, $m
  -8
  -46
  -51
  -56
  -60
  -65
  -70
  -76
  -82
  -87
  -93
  -99
  -105
  -112
  -118
  -126
  -133
  -140
  -148
  -156
  -164
  -174
  -184
  -193
  -203
  -214
  -226
  -237
  -250
  -263
  -276
Free cash flow, $m
  61
  24
  47
  68
  90
  114
  138
  164
  192
  221
  251
  282
  315
  349
  384
  421
  459
  499
  541
  584
  629
  676
  725
  777
  830
  886
  944
  1,006
  1,070
  1,136
  1,207
Issuance/(repayment) of debt, $m
  0
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  44
  45
  47
  49
  52
  54
  57
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
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  44
  45
  47
  49
  52
  54
  57
Total cash flow (excl. dividends), $m
  53
  40
  64
  86
  109
  134
  159
  187
  215
  245
  276
  308
  342
  377
  413
  451
  491
  532
  575
  619
  666
  715
  765
  818
  874
  931
  992
  1,055
  1,121
  1,191
  1,263
Retained Cash Flow (-), $m
  -29
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
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
 
  208
  42
  62
  84
  107
  132
  157
  184
  213
  242
  273
  306
  339
  374
  411
  449
  488
  530
  572
  617
  664
  712
  763
  816
  871
  929
  989
  1,053
  1,119
  1,188
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
 
  200
  38
  54
  69
  83
  95
  106
  115
  122
  127
  130
  130
  129
  126
  121
  114
  106
  98
  88
  78
  69
  59
  50
  42
  34
  27
  21
  16
  12
  9
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, through its subsidiaries, produces and sells ethanol. The company also offers dried distillers grains, modified distillers grains, and non-food grade corn oil. In addition, it provides dry distillers grains with solubles, which is used as a protein in animal feed. The company was formerly known as REX Stores Corporation and changed its name to REX American Resources Corporation in 2010. REX American Resources Corporation was founded in 1980 and is based in Dayton, Ohio.

FINANCIAL RATIOS  of  Rex American Resources (REX)

Valuation Ratios
P/E Ratio 18
Price to Sales 1.3
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 10.4
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 14% 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 6.81 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.


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COMPANY NEWS

▶ Dayton ethanol company plans up to $30M in plant expansions   [Apr-03-17 06:25AM  at bizjournals.com]
▶ 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]
Stock chart of REX 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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