Intrinsic value of Unique Fabricating - UFAB

Previous Close

$7.16

  Intrinsic Value

$9.60

stock screener

  Rating & Target

buy

+34%

  Value-price divergence*

-64%

Previous close

$7.16

 
Intrinsic value

$9.60

 
Up/down potential

+34%

 
Rating

buy

 
Value-price divergence*

-64%

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

We calculate the intrinsic value of UFAB 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 0.1

 

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, %
  18.88
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  170
  204
  242
  283
  328
  377
  429
  485
  544
  606
  672
  741
  813
  888
  966
  1,047
  1,132
  1,220
  1,312
  1,407
  1,506
  1,608
  1,715
  1,826
  1,942
  2,062
  2,187
  2,318
  2,454
  2,596
  2,744
Variable operating expenses, $m
 
  188
  222
  260
  301
  345
  392
  443
  496
  553
  612
  672
  737
  805
  876
  950
  1,027
  1,107
  1,190
  1,276
  1,365
  1,459
  1,555
  1,656
  1,761
  1,870
  1,984
  2,102
  2,226
  2,354
  2,489
Fixed operating expenses, $m
 
  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
  2
Total operating expenses, $m
  158
  189
  223
  261
  302
  346
  393
  444
  497
  554
  613
  673
  738
  806
  877
  951
  1,028
  1,109
  1,192
  1,278
  1,367
  1,461
  1,557
  1,658
  1,763
  1,872
  1,986
  2,104
  2,228
  2,356
  2,491
Operating income, $m
  12
  15
  19
  22
  27
  31
  36
  41
  47
  52
  58
  68
  74
  81
  88
  96
  104
  112
  120
  129
  138
  148
  158
  168
  179
  190
  202
  214
  226
  240
  253
EBITDA, $m
  18
  23
  27
  32
  37
  42
  48
  55
  62
  69
  76
  84
  93
  101
  110
  120
  129
  139
  150
  161
  172
  184
  196
  209
  222
  236
  251
  266
  281
  298
  315
Interest expense (income), $m
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
Earnings before tax, $m
  10
  13
  15
  18
  22
  25
  29
  33
  38
  42
  47
  55
  60
  65
  71
  77
  83
  90
  96
  103
  110
  118
  126
  134
  142
  151
  160
  169
  179
  190
  200
Tax expense, $m
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
Net income, $m
  7
  9
  11
  13
  16
  18
  21
  24
  27
  31
  34
  40
  44
  48
  52
  56
  61
  65
  70
  75
  81
  86
  92
  98
  104
  110
  117
  124
  131
  138
  146

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  123
  146
  174
  203
  236
  271
  308
  348
  391
  435
  482
  532
  583
  637
  693
  752
  813
  876
  942
  1,010
  1,081
  1,155
  1,231
  1,311
  1,394
  1,480
  1,570
  1,664
  1,762
  1,864
  1,970
Adjusted assets (=assets-cash), $m
  122
  146
  174
  203
  236
  271
  308
  348
  391
  435
  482
  532
  583
  637
  693
  752
  813
  876
  942
  1,010
  1,081
  1,155
  1,231
  1,311
  1,394
  1,480
  1,570
  1,664
  1,762
  1,864
  1,970
Revenue / Adjusted assets
  1.393
  1.397
  1.391
  1.394
  1.390
  1.391
  1.393
  1.394
  1.391
  1.393
  1.394
  1.393
  1.395
  1.394
  1.394
  1.392
  1.392
  1.393
  1.393
  1.393
  1.393
  1.392
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
Average production assets, $m
  42
  50
  60
  70
  81
  93
  106
  120
  134
  150
  166
  183
  201
  219
  239
  259
  280
  301
  324
  347
  372
  397
  424
  451
  480
  509
  540
  573
  606
  641
  678
Working capital, $m
  27
  34
  40
  47
  54
  62
  71
  80
  90
  100
  111
  122
  134
  146
  159
  173
  187
  201
  216
  232
  248
  265
  283
  301
  320
  340
  361
  382
  405
  428
  453
Total debt, $m
  51
  64
  80
  98
  117
  138
  160
  183
  208
  235
  263
  292
  322
  354
  387
  422
  457
  495
  534
  574
  616
  659
  704
  751
  800
  851
  904
  960
  1,017
  1,078
  1,140
Total liabilities, $m
  72
  86
  102
  120
  139
  160
  182
  205
  230
  257
  285
  314
  344
  376
  409
  444
  479
  517
  556
  596
  638
  681
  726
  773
  822
  873
  926
  982
  1,039
  1,100
  1,162
Total equity, $m
  50
  60
  71
  83
  97
  111
  126
  143
  160
  178
  198
  218
  239
  261
  284
  308
  333
  359
  386
  414
  443
  473
  505
  537
  572
  607
  644
  682
  722
  764
  808
Total liabilities and equity, $m
  122
  146
  173
  203
  236
  271
  308
  348
  390
  435
  483
  532
  583
  637
  693
  752
  812
  876
  942
  1,010
  1,081
  1,154
  1,231
  1,310
  1,394
  1,480
  1,570
  1,664
  1,761
  1,864
  1,970
Debt-to-equity ratio
  1.020
  1.070
  1.130
  1.180
  1.210
  1.240
  1.260
  1.280
  1.300
  1.320
  1.330
  1.340
  1.350
  1.350
  1.360
  1.370
  1.370
  1.380
  1.380
  1.390
  1.390
  1.390
  1.400
  1.400
  1.400
  1.400
  1.400
  1.410
  1.410
  1.410
  1.410
Adjusted equity ratio
  0.402
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  9
  11
  13
  16
  18
  21
  24
  27
  31
  34
  40
  44
  48
  52
  56
  61
  65
  70
  75
  81
  86
  92
  98
  104
  110
  117
  124
  131
  138
  146
Depreciation, amort., depletion, $m
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  17
  18
  20
  22
  24
  25
  27
  29
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  62
Funds from operations, $m
  5
  17
  20
  23
  26
  30
  34
  38
  43
  47
  52
  57
  62
  68
  74
  80
  86
  93
  100
  107
  114
  122
  130
  139
  147
  156
  166
  176
  186
  197
  208
Change in working capital, $m
  -3
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
Cash from operations, $m
  8
  11
  13
  16
  19
  22
  25
  29
  33
  37
  41
  45
  50
  55
  61
  66
  72
  78
  85
  91
  98
  105
  113
  120
  128
  137
  145
  154
  164
  173
  184
Maintenance CAPEX, $m
  0
  -4
  -5
  -5
  -6
  -7
  -8
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
New CAPEX, $m
  -3
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
Cash from investing activities, $m
  -22
  -12
  -14
  -15
  -17
  -19
  -21
  -24
  -26
  -27
  -30
  -32
  -35
  -37
  -39
  -42
  -45
  -47
  -50
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -77
  -81
  -86
  -90
  -95
Free cash flow, $m
  -14
  -1
  -1
  0
  1
  2
  4
  5
  7
  9
  12
  13
  16
  19
  21
  25
  28
  31
  35
  38
  42
  46
  50
  54
  59
  63
  68
  73
  78
  83
  89
Issuance/(repayment) of debt, $m
  20
  14
  16
  18
  19
  21
  22
  24
  25
  26
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
Issuance/(repurchase) of shares, $m
  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
Cash from financing (excl. dividends), $m  
  20
  15
  16
  18
  19
  21
  22
  24
  25
  26
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
Total cash flow (excl. dividends), $m
  6
  14
  15
  18
  20
  23
  26
  29
  32
  36
  39
  42
  46
  50
  55
  59
  64
  68
  73
  79
  84
  89
  95
  101
  108
  114
  121
  128
  136
  143
  151
Retained Cash Flow (-), $m
  -2
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
Prev. year cash balance distribution, $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 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
  4
  6
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  32
  35
  39
  42
  46
  51
  55
  59
  64
  69
  74
  79
  84
  90
  95
  102
  108
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  4
  4
  4
  5
  6
  6
  6
  6
  7
  6
  6
  6
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8
  98.8

Unique Fabricating, Inc. engineers and manufactures multi-material foam, rubber, and plastic components utilized in noise, vibration, and harshness (NVH), acoustical management, water and air sealing, decorative, and other functional applications. It supplies die cut non-metallic materials and components, which are used in applications, such as air and water sealing, insulation, NVH performance, and BSR conditions; thermoformed and compression molded products, including HVAC air ducts, door watershields, evaporator liners, console bin mats, fender insulators, and others; and fusion molded products comprising exterior mirror seals, cowl-to-hood seals, cowl-to-fender seals, and other products for NVH management and body sealing applications. The company sells its products to original equipment manufacturers and suppliers in the automotive, appliance, water heater and heating, ventilation, and air conditioning industries in North America. Unique Fabricating, Inc. was founded in 1975 and is headquartered in Auburn Hills, Michigan.

FINANCIAL RATIOS  of  Unique Fabricating (UFAB)

Valuation Ratios
P/E Ratio 9.9
Price to Sales 0.4
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 13.9
Growth Rates
Sales Growth Rate 18.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 98%
Total Debt to Equity 102%
Interest Coverage 6
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 7.5%
Return On Total Capital 7.8%
Ret/ On T. Cap. - 3 Yr. Avg. 7.1%
Return On Equity 14.3%
Return On Equity - 3 Yr. Avg. 15.8%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 23.5%
Gross Margin - 3 Yr. Avg. 24%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 10.5%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 7.3%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 5.4%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. 3.6%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 33.8%
Payout Ratio 85.7%

UFAB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UFAB stock intrinsic value calculation we used $170 million for the last fiscal year's total revenue generated by Unique Fabricating. The default revenue input number comes from 2017 income statement of Unique Fabricating. 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 UFAB stock valuation model: a) initial revenue growth rate of 20% 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 7.8%, whose default value for UFAB is calculated based on our internal credit rating of Unique Fabricating, 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 Unique Fabricating.
    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 UFAB stock the variable cost ratio is equal to 92.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1 million in the base year in the intrinsic value calculation for UFAB 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 4.9% for Unique Fabricating.

Corporate tax rate of 27% is the nominal tax rate for Unique Fabricating. 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 UFAB 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 UFAB are equal to 24.7%.

Life of production assets of 11 years is the average useful life of capital assets used in Unique Fabricating 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 UFAB is equal to 16.5%. 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 - $50 million for Unique Fabricating - 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 9.82 million for Unique Fabricating 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 Unique Fabricating at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ New Strong Sell Stocks for August 22nd   [Aug-22-17 09:14AM  Zacks]
▶ New Strong Sell Stocks for August 18th   [Aug-18-17 09:29AM  Zacks]
▶ Unique Fabricating misses Street 2Q forecasts   [Aug-07-17 10:29PM  Associated Press]
▶ Unique Fabricating posts 1Q profit   [May-10-17 07:30AM  Associated Press]
▶ Unique Fabricating posts 4Q profit   [07:42AM  Associated Press]
▶ Do Hedge Funds Love VIVUS, Inc. (VVUS)?   [12:37AM  at Insider Monkey]
▶ Unique Fabricating, Inc. Acquires Intasco   [May-02-16 08:00AM  PR Newswire]
Stock chart of UFAB Financial statements of UFAB
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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