Intrinsic value of Unique Fabricating - UFAB

Previous Close

$8.60

  Intrinsic Value

$8.00

stock screener

  Rating & Target

hold

-7%

  Value-price divergence*

+104%

Previous close

$8.60

 
Intrinsic value

$8.00

 
Up/down potential

-7%

 
Rating

hold

 
Value-price divergence*

+104%

*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
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
Revenue, $m
  170
  182
  195
  208
  221
  235
  250
  265
  281
  298
  315
  333
  352
  372
  392
  414
  436
  460
  484
  510
  537
  565
  595
  626
  658
  692
  728
  765
  805
  846
  889
Variable operating expenses, $m
 
  168
  179
  191
  204
  216
  230
  244
  258
  273
  289
  302
  319
  337
  356
  375
  396
  417
  439
  463
  487
  513
  540
  568
  597
  628
  660
  694
  730
  767
  806
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
  169
  180
  192
  205
  217
  231
  245
  259
  274
  290
  303
  320
  338
  357
  376
  397
  419
  441
  465
  489
  515
  542
  570
  599
  630
  662
  696
  732
  769
  808
Operating income, $m
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  30
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  63
  66
  69
  73
  77
  81
EBITDA, $m
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  46
  49
  52
  54
  57
  60
  64
  67
  71
  74
  78
  82
  86
  91
  96
  101
Interest expense (income), $m
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
Earnings before tax, $m
  10
  11
  11
  12
  13
  14
  15
  16
  18
  19
  20
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
Tax expense, $m
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
Net income, $m
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47

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
  131
  140
  149
  159
  169
  179
  190
  202
  214
  226
  239
  253
  267
  282
  297
  313
  330
  348
  366
  386
  406
  427
  449
  473
  497
  523
  549
  578
  607
  638
Adjusted assets (=assets-cash), $m
  122
  131
  140
  149
  159
  169
  179
  190
  202
  214
  226
  239
  253
  267
  282
  297
  313
  330
  348
  366
  386
  406
  427
  449
  473
  497
  523
  549
  578
  607
  638
Revenue / Adjusted assets
  1.393
  1.389
  1.393
  1.396
  1.390
  1.391
  1.397
  1.395
  1.391
  1.393
  1.394
  1.393
  1.391
  1.393
  1.390
  1.394
  1.393
  1.394
  1.391
  1.393
  1.391
  1.392
  1.393
  1.394
  1.391
  1.392
  1.392
  1.393
  1.393
  1.394
  1.393
Average production assets, $m
  42
  45
  48
  51
  55
  58
  62
  66
  69
  74
  78
  82
  87
  92
  97
  102
  108
  114
  120
  126
  133
  140
  147
  155
  163
  171
  180
  189
  199
  209
  220
Working capital, $m
  27
  30
  32
  34
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  93
  98
  103
  109
  114
  120
  126
  133
  140
  147
Total debt, $m
  51
  55
  60
  66
  72
  78
  84
  90
  97
  104
  111
  119
  127
  135
  144
  153
  163
  173
  183
  194
  206
  217
  230
  243
  257
  271
  286
  302
  319
  336
  354
Total liabilities, $m
  72
  77
  82
  88
  94
  100
  106
  112
  119
  126
  133
  141
  149
  157
  166
  175
  185
  195
  205
  216
  228
  239
  252
  265
  279
  293
  308
  324
  341
  358
  376
Total equity, $m
  50
  54
  57
  61
  65
  69
  74
  78
  83
  88
  93
  98
  104
  109
  115
  122
  128
  135
  143
  150
  158
  166
  175
  184
  194
  204
  214
  225
  237
  249
  262
Total liabilities and equity, $m
  122
  131
  139
  149
  159
  169
  180
  190
  202
  214
  226
  239
  253
  266
  281
  297
  313
  330
  348
  366
  386
  405
  427
  449
  473
  497
  522
  549
  578
  607
  638
Debt-to-equity ratio
  1.020
  1.030
  1.050
  1.080
  1.100
  1.120
  1.140
  1.160
  1.170
  1.190
  1.200
  1.210
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.280
  1.290
  1.300
  1.310
  1.310
  1.320
  1.330
  1.330
  1.340
  1.340
  1.350
  1.350
  1.350
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
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47
Depreciation, amort., depletion, $m
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
Funds from operations, $m
  5
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  43
  45
  47
  49
  52
  55
  58
  60
  64
  67
Change in working capital, $m
  -3
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
Cash from operations, $m
  8
  13
  14
  14
  15
  16
  17
  18
  19
  21
  22
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
New CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from investing activities, $m
  -22
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -25
  -27
  -28
  -30
Free cash flow, $m
  -14
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
Issuance/(repayment) of debt, $m
  20
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  20
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
Total cash flow (excl. dividends), $m
  6
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
Retained Cash Flow (-), $m
  -2
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
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
 
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
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
 
  7
  7
  7
  6
  6
  6
  5
  5
  5
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
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  100.0

Unique Fabricating, Inc. is a United States-based company, which is engaged in the engineering and manufacturing of components for customers in the automotive and industrial appliance market. The Company offers various solutions, which consist of multi-material foam, rubber and plastic components. The Company’s fabricating capabilities include foam fabricating; foam die cutting; multi-layer die cutting; precision high-speed cutting; kiss cutting; fusion molding; vacuum forming; twin-sheet thermoforming; compression molding precision original equipment manufacturing (OEM) parts; non-metallic materials die cutting/fabrication; sound control parts, and soundproofing materials. It uses its manufacturing processes to manufacture a range of products, including air management products, heating ventilating and air conditioning (HVAC), seals, fender stuffers, air ducts, acoustical insulation, door water shields, gas tank pads, light gaskets, topper pads, mirror gaskets and glove box liners.

FINANCIAL RATIOS  of  Unique Fabricating (UFAB)

Valuation Ratios
P/E Ratio 11.9
Price to Sales 0.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 16.7
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 7.1% 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 9.756 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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▶ 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]
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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