Intrinsic value of United-Guardian - UG

Previous Close

$19.00

  Intrinsic Value

$354.63

stock screener

  Rating & Target

str. buy

+999%

Previous close

$19.00

 
Intrinsic value

$354.63

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of UG 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 2016), $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
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -21.43
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  11
  18
  27
  41
  59
  83
  114
  154
  202
  260
  328
  407
  498
  600
  714
  839
  976
  1,125
  1,284
  1,454
  1,635
  1,826
  2,027
  2,238
  2,459
  2,690
  2,931
  3,182
  3,442
  3,714
  3,996
Variable operating expenses, $m
 
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  260
  305
  355
  409
  467
  529
  595
  665
  738
  815
  895
  979
  1,067
  1,158
  1,253
  1,352
  1,454
Fixed operating expenses, $m
 
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
Total operating expenses, $m
  7
  9
  13
  18
  24
  33
  45
  60
  77
  98
  123
  152
  185
  222
  264
  309
  359
  414
  472
  534
  600
  670
  743
  820
  900
  985
  1,073
  1,164
  1,259
  1,358
  1,460
Operating income, $m
  3
  8
  14
  23
  34
  50
  69
  94
  125
  161
  205
  255
  313
  377
  450
  529
  616
  711
  812
  920
  1,035
  1,156
  1,284
  1,418
  1,559
  1,705
  1,858
  2,018
  2,183
  2,356
  2,535
EBITDA, $m
  3
  8
  14
  23
  35
  50
  70
  96
  126
  164
  208
  259
  317
  383
  456
  537
  625
  721
  824
  933
  1,050
  1,173
  1,303
  1,439
  1,581
  1,730
  1,885
  2,047
  2,215
  2,390
  2,571
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
Earnings before tax, $m
  4
  8
  14
  23
  34
  49
  69
  94
  124
  161
  204
  254
  311
  376
  448
  527
  614
  708
  808
  916
  1,030
  1,151
  1,278
  1,412
  1,552
  1,698
  1,850
  2,008
  2,173
  2,345
  2,523
Tax expense, $m
  1
  2
  4
  6
  9
  13
  19
  25
  34
  43
  55
  69
  84
  101
  121
  142
  166
  191
  218
  247
  278
  311
  345
  381
  419
  458
  499
  542
  587
  633
  681
Net income, $m
  3
  6
  10
  16
  25
  36
  50
  68
  91
  117
  149
  185
  227
  274
  327
  385
  448
  517
  590
  669
  752
  840
  933
  1,031
  1,133
  1,239
  1,350
  1,466
  1,587
  1,712
  1,842

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11
  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
  15
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  260
  305
  355
  409
  467
  529
  595
  664
  737
  814
  894
  978
  1,066
  1,157
  1,252
  1,350
  1,453
Adjusted assets (=assets-cash), $m
  4
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  260
  305
  355
  409
  467
  529
  595
  664
  737
  814
  894
  978
  1,066
  1,157
  1,252
  1,350
  1,453
Revenue / Adjusted assets
  2.750
  3.000
  2.700
  2.733
  2.810
  2.767
  2.714
  2.750
  2.767
  2.766
  2.756
  2.750
  2.751
  2.752
  2.746
  2.751
  2.749
  2.751
  2.749
  2.749
  2.748
  2.750
  2.750
  2.749
  2.751
  2.751
  2.750
  2.750
  2.749
  2.751
  2.750
Average production assets, $m
  1
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  45
  55
  65
  76
  89
  102
  117
  132
  149
  166
  184
  204
  224
  245
  267
  290
  313
  338
  364
Working capital, $m
  13
  3
  5
  7
  11
  15
  21
  28
  37
  47
  60
  74
  91
  109
  130
  153
  178
  205
  234
  265
  298
  332
  369
  407
  448
  490
  533
  579
  627
  676
  727
Total debt, $m
  0
  1
  1
  3
  4
  7
  9
  13
  17
  23
  29
  36
  44
  54
  64
  75
  88
  101
  116
  131
  148
  165
  183
  202
  223
  244
  265
  288
  312
  337
  362
Total liabilities, $m
  1
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  45
  55
  65
  76
  89
  102
  117
  132
  149
  166
  184
  203
  224
  245
  266
  289
  313
  338
  363
Total equity, $m
  14
  5
  7
  11
  16
  23
  31
  42
  55
  71
  89
  111
  136
  164
  195
  229
  266
  307
  350
  397
  446
  498
  553
  610
  671
  734
  799
  868
  939
  1,013
  1,090
Total liabilities and equity, $m
  15
  7
  9
  15
  21
  31
  41
  56
  73
  95
  119
  148
  181
  219
  260
  305
  355
  409
  467
  529
  595
  664
  737
  813
  895
  979
  1,065
  1,157
  1,252
  1,351
  1,453
Debt-to-equity ratio
  0.000
  0.130
  0.200
  0.240
  0.270
  0.290
  0.300
  0.310
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  6
  10
  16
  25
  36
  50
  68
  91
  117
  149
  185
  227
  274
  327
  385
  448
  517
  590
  669
  752
  840
  933
  1,031
  1,133
  1,239
  1,350
  1,466
  1,587
  1,712
  1,842
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  4
  5
  5
  6
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
  27
  29
  31
  34
  36
Funds from operations, $m
  1
  6
  11
  17
  25
  37
  51
  70
  92
  120
  152
  189
  232
  280
  333
  392
  457
  527
  602
  682
  767
  857
  952
  1,051
  1,155
  1,264
  1,377
  1,495
  1,618
  1,746
  1,878
Change in working capital, $m
  -1
  1
  2
  2
  3
  4
  6
  7
  9
  11
  12
  14
  16
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  38
  40
  42
  44
  46
  47
  49
  51
Cash from operations, $m
  2
  5
  9
  14
  22
  32
  46
  63
  84
  109
  139
  175
  215
  261
  313
  370
  432
  500
  573
  651
  734
  822
  915
  1,013
  1,115
  1,222
  1,333
  1,449
  1,570
  1,696
  1,827
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -5
  -6
  -8
  -9
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -27
  -29
  -31
  -34
New CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Cash from investing activities, $m
  0
  -1
  -1
  -1
  -2
  -3
  -4
  -5
  -5
  -7
  -8
  -10
  -12
  -14
  -15
  -17
  -20
  -22
  -25
  -27
  -29
  -32
  -35
  -37
  -40
  -43
  -46
  -50
  -53
  -56
  -60
Free cash flow, $m
  2
  4
  8
  13
  20
  30
  42
  58
  78
  102
  131
  164
  203
  247
  297
  352
  412
  477
  548
  624
  704
  790
  880
  975
  1,074
  1,178
  1,287
  1,400
  1,518
  1,640
  1,767
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
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  
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Total cash flow (excl. dividends), $m
  2
  5
  9
  14
  22
  32
  45
  62
  82
  107
  137
  172
  212
  257
  307
  363
  424
  491
  563
  639
  721
  807
  898
  994
  1,094
  1,199
  1,309
  1,423
  1,541
  1,665
  1,793
Retained Cash Flow (-), $m
  1
  -2
  -3
  -4
  -5
  -7
  -9
  -11
  -13
  -16
  -19
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -60
  -63
  -66
  -68
  -71
  -74
  -77
Prev. year cash balance distribution, $m
 
  11
  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
 
  14
  6
  10
  17
  25
  37
  51
  69
  92
  118
  150
  187
  229
  276
  329
  387
  450
  519
  593
  672
  755
  844
  937
  1,034
  1,136
  1,243
  1,354
  1,470
  1,591
  1,716
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
 
  13
  6
  9
  14
  20
  27
  34
  43
  53
  62
  71
  80
  87
  93
  97
  98
  98
  96
  91
  85
  78
  70
  61
  53
  44
  36
  29
  23
  17
  13
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

United-Guardian, Inc. manufactures and markets cosmetic ingredients, personal care products, pharmaceuticals, medical lubricants, healthcare products and specialty industrial products. The Company also conducts research and product development, primarily related to the development of cosmetic and personal care products. Its research and development department also modifies, refines, and expands the uses for existing products. Its products are separated into approximately four distinct product categories, such as personal care products (including cosmetic ingredients), pharmaceuticals, medical products and industrial products. Its personal care products are marketed globally by approximately six marketing partners. The products are sold directly to marketing partners, which in turn resell those products to its customers for use in the manufacture or compounding of the customers' personal care and cosmetic products.

FINANCIAL RATIOS  of  United-Guardian (UG)

Valuation Ratios
P/E Ratio 29.1
Price to Sales 7.9
Price to Book 6.2
Price to Tangible Book
Price to Cash Flow 43.6
Price to Free Cash Flow 43.6
Growth Rates
Sales Growth Rate -21.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
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 19.4%
Ret/ On Assets - 3 Yr. Avg. 25.2%
Return On Total Capital 20.7%
Ret/ On T. Cap. - 3 Yr. Avg. 27.2%
Return On Equity 20.7%
Return On Equity - 3 Yr. Avg. 27.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 54.5%
Gross Margin - 3 Yr. Avg. 60.1%
EBITDA Margin 36.4%
EBITDA Margin - 3 Yr. Avg. 44.2%
Operating Margin 36.4%
Oper. Margin - 3 Yr. Avg. 39.2%
Pre-Tax Margin 36.4%
Pre-Tax Margin - 3 Yr. Avg. 44.2%
Net Profit Margin 27.3%
Net Profit Margin - 3 Yr. Avg. 31.3%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 29%
Payout Ratio 100%

UG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UG stock intrinsic value calculation we used $11 million for the last fiscal year's total revenue generated by United-Guardian. The default revenue input number comes from 2016 income statement of United-Guardian. 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 UG stock valuation model: a) initial revenue growth rate of 60% 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 UG is calculated based on our internal credit rating of United-Guardian, 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 United-Guardian.
    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 UG stock the variable cost ratio is equal to 36.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3 million in the base year in the intrinsic value calculation for UG 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 United-Guardian.

Corporate tax rate of 27% is the nominal tax rate for United-Guardian. 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 UG 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 UG are equal to 9.1%.

Life of production assets of 10 years is the average useful life of capital assets used in United-Guardian 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 UG is equal to 18.2%. 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 - $14 million for United-Guardian - 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 4.594 million for United-Guardian 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 United-Guardian at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ PSA Prepared for Electric Vehicle Disruption, Says CEO   [Sep-12-17 12:10PM  Bloomberg Video]
▶ United-Guardian posts 2Q profit   [Aug-09-17 03:25PM  Associated Press]
▶ United-Guardian Announces 20% Increase in Mid-Year Dividend   [May-19-17 09:00AM  GlobeNewswire]
▶ United-Guardian posts 1Q profit   [May-10-17 09:24AM  Associated Press]
▶ PSA Group CEO Says They Will Unleash Potential of Opel   [Mar-07-17 03:55AM  Bloomberg Video]
▶ Is Buying Opel a Good Deal for PSA Group?   [Mar-06-17 03:21AM  Bloomberg Video]
▶ JPMorgan's Stubbs Sees Job Concerns in GM's Opel Deal   [Feb-21-17 05:57AM  Bloomberg Video]
▶ 8 High-Yield Stocks With a Negative 1-Year Performance   [Feb-09-17 02:14PM  GuruFocus.com]
▶ United-Guardian Announces Year-End Dividend   [09:00AM  GlobeNewswire]
▶ United-Guardian Announces Mid-Year Dividend   [09:00AM  GlobeNewswire]
▶ Who are Procter & Gamble's (PG) main competitors? (PG, REV)   [Jan-26-16 11:06PM  at Investopedia]
▶ United-Guardian Announces Year-End Dividend   [09:00AM  GlobeNewswire]
▶ China's Weakness Doesn't Faze European Auto Outlook   [Aug-24  07:00AM  at Morningstar]
▶ Winners and Losers So Far in Europe's Bumper Week For Corporate Earnings   [Jul-29  10:43AM  at The Wall Street Journal]
Financial statements of UG
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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