Intrinsic value of Taylor Devices - TAYD

Previous Close

$12.32

  Intrinsic Value

$10.04

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  Rating & Target

hold

-18%

Previous close

$12.32

 
Intrinsic value

$10.04

 
Up/down potential

-18%

 
Rating

hold

We calculate the intrinsic value of TAYD 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 0.0

 

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, %
  -27.78
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
Revenue, $m
  26
  30
  35
  40
  46
  51
  57
  64
  71
  78
  85
  93
  101
  109
  118
  127
  137
  146
  156
  167
  178
  189
  201
  214
  227
  240
  254
  269
  284
  300
  317
Variable operating expenses, $m
 
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  70
  76
  82
  88
  94
  101
  108
  116
  123
  131
  139
  148
  157
  166
  176
  186
  197
  208
  219
Fixed operating expenses, $m
 
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  10
Total operating expenses, $m
  23
  26
  29
  33
  38
  42
  46
  50
  55
  60
  65
  71
  77
  83
  89
  95
  101
  109
  116
  124
  131
  139
  148
  157
  166
  175
  186
  196
  207
  218
  229
Operating income, $m
  3
  4
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  27
  29
  32
  35
  37
  40
  43
  47
  50
  53
  57
  61
  65
  69
  73
  78
  82
  87
EBITDA, $m
  4
  4
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  27
  29
  32
  35
  37
  40
  43
  47
  50
  53
  57
  61
  65
  69
  73
  78
  82
  87
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Earnings before tax, $m
  3
  4
  6
  7
  8
  10
  12
  14
  15
  17
  20
  22
  24
  26
  29
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  76
  81
  86
Tax expense, $m
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
Net income, $m
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  46
  49
  52
  56
  59
  62

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4
  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
  37
  39
  44
  51
  58
  65
  73
  81
  90
  99
  108
  118
  128
  139
  150
  161
  173
  186
  199
  212
  226
  240
  256
  271
  288
  305
  323
  341
  360
  381
  402
Adjusted assets (=assets-cash), $m
  33
  39
  44
  51
  58
  65
  73
  81
  90
  99
  108
  118
  128
  139
  150
  161
  173
  186
  199
  212
  226
  240
  256
  271
  288
  305
  323
  341
  360
  381
  402
Revenue / Adjusted assets
  0.788
  0.769
  0.795
  0.784
  0.793
  0.785
  0.781
  0.790
  0.789
  0.788
  0.787
  0.788
  0.789
  0.784
  0.787
  0.789
  0.792
  0.785
  0.784
  0.788
  0.788
  0.788
  0.785
  0.790
  0.788
  0.787
  0.786
  0.789
  0.789
  0.787
  0.789
Average production assets, $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
Working capital, $m
  22
  15
  18
  20
  23
  26
  29
  32
  35
  39
  43
  46
  50
  55
  59
  64
  68
  73
  78
  84
  89
  95
  101
  107
  113
  120
  127
  134
  142
  150
  158
Total debt, $m
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
Total liabilities, $m
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
Total equity, $m
  33
  34
  39
  45
  51
  57
  64
  71
  79
  87
  95
  104
  113
  122
  132
  142
  152
  163
  175
  186
  199
  211
  225
  238
  253
  268
  284
  300
  317
  335
  353
Total liabilities and equity, $m
  37
  39
  44
  51
  58
  65
  73
  81
  90
  99
  108
  118
  129
  139
  150
  162
  173
  185
  199
  212
  226
  240
  256
  271
  288
  305
  323
  341
  361
  381
  402
Debt-to-equity ratio
  0.000
  0.020
  0.040
  0.050
  0.060
  0.070
  0.080
  0.080
  0.090
  0.090
  0.100
  0.100
  0.100
  0.100
  0.110
  0.110
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
Adjusted equity ratio
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  46
  49
  52
  56
  59
  62
Depreciation, amort., depletion, $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
Funds from operations, $m
  -6
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  46
  49
  52
  56
  59
  62
Change in working capital, $m
  -5
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
Cash from operations, $m
  -1
  1
  2
  3
  3
  4
  6
  7
  8
  9
  11
  12
  13
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
Maintenance CAPEX, $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
New CAPEX, $m
  -2
  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 investing activities, $m
  -2
  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
Free cash flow, $m
  -3
  1
  2
  3
  3
  4
  6
  7
  8
  9
  11
  12
  13
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Issuance/(repurchase) of shares, $m
  0
  2
  1
  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
Cash from financing (excl. dividends), $m  
  0
  3
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Total cash flow (excl. dividends), $m
  -3
  3
  4
  4
  4
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  25
  28
  30
  32
  34
  37
  39
  42
  45
  47
  50
  53
  57
Retained Cash Flow (-), $m
  -3
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
Prev. year cash balance distribution, $m
 
  4
  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
 
  2
  -2
  -2
  -2
  -1
  0
  0
  1
  2
  3
  5
  6
  7
  8
  10
  11
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
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
 
  2
  -1
  -2
  -1
  -1
  0
  0
  1
  1
  2
  2
  2
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  95.5
  92.9
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8

Taylor Devices, Inc. is engaged in the design, development, manufacture and marketing of shock absorption, rate control and energy storage devices for use in various types of machinery, equipment and structures. The Company's Seismic Dampers are designed to ameliorate the effects of earthquake tremors on structures. As of May 31, 2016, Fluidicshoks were small, extremely compact shock absorbers with up to 19,200 inch-pound capacities, produced in 15 standard sizes. As of May 31, 2016, crane and industrial buffers were larger versions of the Fluidicshoks with up to 60,000,000 inch-pound capacities, produced in over 60 standard sizes. Its Self-adjusting shock absorbers are designed for high cycle application in heavy industry. Its Liquid die springs are used as component parts of machinery and equipment. Its Vibration dampers are used by the aerospace and defense industries to control the response of electronics and optical systems subjected to air, ship, or spacecraft vibration.

FINANCIAL RATIOS  of  Taylor Devices (TAYD)

Valuation Ratios
P/E Ratio 21.2
Price to Sales 1.6
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -42.4
Price to Free Cash Flow -14.1
Growth Rates
Sales Growth Rate -27.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
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 5.4%
Ret/ On Assets - 3 Yr. Avg. 7.7%
Return On Total Capital 6.3%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 6.3%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 30.8%
Gross Margin - 3 Yr. Avg. 31%
EBITDA Margin 15.4%
EBITDA Margin - 3 Yr. Avg. 15.9%
Operating Margin 11.5%
Oper. Margin - 3 Yr. Avg. 12.6%
Pre-Tax Margin 11.5%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 8.4%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 33.3%
Payout Ratio 0%

TAYD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TAYD stock intrinsic value calculation we used $26 million for the last fiscal year's total revenue generated by Taylor Devices. The default revenue input number comes from 2017 income statement of Taylor Devices. 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 TAYD stock valuation model: a) initial revenue growth rate of 16.7% 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 4.3%, whose default value for TAYD is calculated based on our internal credit rating of Taylor Devices, 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 Taylor Devices.
    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 TAYD stock the variable cost ratio is equal to 69.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 million in the base year in the intrinsic value calculation for TAYD 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 Taylor Devices.

Corporate tax rate of 27% is the nominal tax rate for Taylor Devices. 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 TAYD 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 TAYD are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Taylor Devices 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 TAYD is equal to 50%. 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 - $33 million for Taylor Devices - 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 3.455 million for Taylor Devices 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 Taylor Devices at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Douglas Taylor plans to step down as CEO of Taylor Devices in 2018   [Dec-07-17 01:53PM  American City Business Journals]
▶ Taylor Devices Announces Strong First Quarter Results   [Oct-12-17 08:55AM  PR Newswire]
▶ Taylor Devices Announces First Quarter Results   [Oct-14-16 09:31AM  PR Newswire]
▶ Taylor Devices Announces Strong First Quarter Results   [Oct-07  09:59AM  PR Newswire]
▶ Taylor Devices planning $1.1M expansion   [Aug-28  08:35AM  at bizjournals.com]
▶ 10-Q for Taylor Devices, Inc.   [Apr-23  08:10PM  at Company Spotlight]
▶ Ingersoll-Rand Q4 EPS Beats, Outlook Falls Short   [Jan-30  01:29PM  at Investor's Business Daily]
▶ 10-Q for Taylor Devices, Inc.   [Jan-15  07:07PM  at Company Spotlight]
▶ Press Release January 13, 2015   [Jan-13  06:28PM  at noodls]
▶ Press Release October 14, 2014   [Oct-14  06:59PM  at noodls]
▶ Taylor Devices - Not A Bargain, Yet   [Jan-28  03:46PM  at Seeking Alpha]
▶ Taylor Devices Announces First Quarter Results   [Oct-10  10:01AM  PR Newswire]
▶ Congress Notified of $885 Million Indian Arms Deal   [Aug-08  10:00PM  at Motley Fool]
▶ Taylor Devices Stock Upgraded (TAYD)   [Jan-30  04:00AM  at TheStreet]
▶ 2Q profits up 85.9% at Taylor Devices   [Jan-14  10:50AM  at bizjournals.com]
▶ Big 1Q for Taylor Devices   [Oct-11-12 11:11AM  at bizjournals.com]
▶ Taylor Devices 4Q profit up 19.3% on record reveue   [Aug-29-12 09:56AM  at bizjournals.com]
▶ Capital Goods Sector Wrap   [Aug-06-12 04:35PM  at Fox Business]
▶ Capital Goods Sector Wrap   [May-24-12 05:54PM  at Fox Business]
▶ 3Q net income, revenues jump at Taylor Devices   [11:19AM  at bizjournals.com]
▶ Illinois Tool Works Inc. Fourth Quarter Earnings Sneak Peek   [Jan-26-12 12:25PM  Wall St. Cheat Sheet]
Financial statements of TAYD
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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