Intrinsic value of Willdan Group - WLDN

Previous Close

$21.20

  Intrinsic Value

$44.20

stock screener

  Rating & Target

str. buy

+108%

Previous close

$21.20

 
Intrinsic value

$44.20

 
Up/down potential

+108%

 
Rating

str. buy

We calculate the intrinsic value of WLDN 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  54.81
  16.90
  15.71
  14.64
  13.68
  12.81
  12.03
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.21
  6.98
  6.79
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
Revenue, $m
  209
  244
  283
  324
  368
  416
  466
  518
  574
  632
  693
  756
  822
  891
  962
  1,036
  1,114
  1,194
  1,277
  1,364
  1,454
  1,548
  1,645
  1,747
  1,853
  1,963
  2,078
  2,198
  2,323
  2,453
  2,590
Variable operating expenses, $m
 
  228
  263
  301
  342
  386
  432
  480
  531
  585
  641
  697
  758
  822
  887
  956
  1,027
  1,101
  1,178
  1,258
  1,341
  1,428
  1,518
  1,611
  1,709
  1,811
  1,917
  2,027
  2,143
  2,263
  2,389
Fixed operating expenses, $m
 
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
Total operating expenses, $m
  197
  230
  265
  303
  344
  388
  434
  482
  533
  587
  644
  700
  761
  825
  890
  959
  1,030
  1,104
  1,181
  1,261
  1,344
  1,431
  1,521
  1,615
  1,713
  1,815
  1,921
  2,031
  2,147
  2,267
  2,393
Operating income, $m
  12
  15
  18
  21
  24
  28
  32
  36
  40
  44
  49
  56
  61
  66
  72
  77
  83
  90
  96
  103
  109
  117
  124
  132
  140
  148
  157
  166
  176
  186
  197
EBITDA, $m
  15
  18
  21
  24
  28
  32
  36
  40
  45
  49
  54
  59
  65
  70
  76
  82
  88
  95
  102
  109
  116
  124
  131
  140
  148
  157
  167
  176
  186
  197
  208
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
Earnings before tax, $m
  11
  15
  17
  20
  23
  26
  30
  33
  37
  41
  45
  52
  56
  61
  65
  71
  76
  81
  87
  93
  99
  105
  112
  119
  126
  133
  141
  149
  158
  167
  176
Tax expense, $m
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
Net income, $m
  8
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  38
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  82
  87
  92
  97
  103
  109
  115
  122
  129

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  23
  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
  108
  99
  115
  132
  150
  169
  189
  211
  233
  257
  282
  307
  334
  362
  391
  421
  453
  485
  519
  555
  591
  629
  669
  710
  753
  798
  845
  894
  945
  998
  1,053
Adjusted assets (=assets-cash), $m
  85
  99
  115
  132
  150
  169
  189
  211
  233
  257
  282
  307
  334
  362
  391
  421
  453
  485
  519
  555
  591
  629
  669
  710
  753
  798
  845
  894
  945
  998
  1,053
Revenue / Adjusted assets
  2.459
  2.465
  2.461
  2.455
  2.453
  2.462
  2.466
  2.455
  2.464
  2.459
  2.457
  2.463
  2.461
  2.461
  2.460
  2.461
  2.459
  2.462
  2.461
  2.458
  2.460
  2.461
  2.459
  2.461
  2.461
  2.460
  2.459
  2.459
  2.458
  2.458
  2.460
Average production assets, $m
  9
  10
  12
  13
  15
  17
  19
  21
  24
  26
  28
  31
  34
  37
  39
  42
  46
  49
  52
  56
  60
  63
  67
  72
  76
  80
  85
  90
  95
  101
  106
Working capital, $m
  24
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
Total debt, $m
  7
  12
  22
  33
  44
  56
  69
  83
  97
  112
  128
  144
  161
  179
  197
  217
  237
  257
  279
  301
  324
  349
  374
  400
  427
  456
  486
  516
  549
  583
  618
Total liabilities, $m
  58
  63
  73
  84
  95
  107
  120
  134
  148
  163
  179
  195
  212
  230
  248
  268
  288
  308
  330
  352
  375
  400
  425
  451
  478
  507
  537
  567
  600
  634
  669
Total equity, $m
  50
  36
  42
  48
  55
  62
  69
  77
  85
  94
  103
  112
  122
  132
  143
  154
  165
  177
  190
  202
  216
  230
  244
  259
  275
  291
  308
  326
  345
  364
  384
Total liabilities and equity, $m
  108
  99
  115
  132
  150
  169
  189
  211
  233
  257
  282
  307
  334
  362
  391
  422
  453
  485
  520
  554
  591
  630
  669
  710
  753
  798
  845
  893
  945
  998
  1,053
Debt-to-equity ratio
  0.140
  0.330
  0.520
  0.680
  0.810
  0.910
  1.000
  1.080
  1.140
  1.200
  1.240
  1.290
  1.320
  1.350
  1.380
  1.410
  1.430
  1.450
  1.470
  1.490
  1.500
  1.520
  1.530
  1.540
  1.550
  1.560
  1.570
  1.580
  1.590
  1.600
  1.610
Adjusted equity ratio
  0.318
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  38
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  82
  87
  92
  97
  103
  109
  115
  122
  129
Depreciation, amort., depletion, $m
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
Funds from operations, $m
  29
  14
  16
  18
  21
  23
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  60
  65
  69
  74
  79
  84
  89
  95
  100
  106
  112
  119
  126
  133
  140
Change in working capital, $m
  7
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  22
  13
  15
  17
  20
  22
  25
  27
  30
  33
  37
  39
  43
  47
  50
  54
  58
  63
  67
  72
  77
  81
  87
  92
  98
  104
  110
  116
  123
  130
  137
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
Cash from investing activities, $m
  -11
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -15
  -17
Free cash flow, $m
  11
  11
  12
  14
  16
  18
  21
  23
  26
  29
  31
  34
  37
  40
  43
  47
  51
  54
  58
  62
  67
  71
  76
  81
  86
  91
  96
  102
  108
  114
  120
Issuance/(repayment) of debt, $m
  -4
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -5
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
Total cash flow (excl. dividends), $m
  6
  20
  22
  25
  28
  31
  34
  37
  40
  44
  47
  50
  54
  58
  62
  66
  71
  75
  80
  85
  90
  95
  101
  107
  113
  119
  126
  133
  140
  148
  156
Retained Cash Flow (-), $m
  -12
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
Prev. year cash balance distribution, $m
 
  19
  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
 
  33
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  81
  86
  92
  97
  103
  109
  115
  121
  128
  135
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
 
  32
  15
  16
  17
  18
  19
  20
  20
  20
  20
  19
  19
  18
  17
  16
  15
  14
  12
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
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

Willdan Group, Inc. is a holding company. The Company provides professional technical and consulting services to utilities, private industry and public agencies at all levels of government, primarily in California and New York. It operates through four segments: Energy Efficiency Services, Engineering Services, Public Finance Services and Homeland Security Services. The Energy Efficiency Services segment provides energy efficiency consulting services to utilities, state agencies, municipalities, private industry and non-profit organizations. The Engineering Services segment offers a range of engineering and planning services to its public and private sector clients. The Public Finance Services segment provides support for the various financing techniques employed by public agencies to finance their operations and infrastructure. The Homeland Security Services segment provides national preparedness, homeland security consulting, public safety and emergency response services.

FINANCIAL RATIOS  of  Willdan Group (WLDN)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 0.8
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 8.9
Growth Rates
Sales Growth Rate 54.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 6%
Total Debt to Equity 14%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. 12.1%
Return On Total Capital 15.8%
Ret/ On T. Cap. - 3 Yr. Avg. 20.2%
Return On Equity 18.2%
Return On Equity - 3 Yr. Avg. 22%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 50.2%
Gross Margin - 3 Yr. Avg. 60%
EBITDA Margin 6.7%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 5.7%
Oper. Margin - 3 Yr. Avg. 6.1%
Pre-Tax Margin 5.3%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 3.8%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 27.3%
Eff/ Tax Rate - 3 Yr. Avg. 19.2%
Payout Ratio 0%

WLDN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WLDN stock intrinsic value calculation we used $209 million for the last fiscal year's total revenue generated by Willdan Group. The default revenue input number comes from 2016 income statement of Willdan Group. 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 WLDN stock valuation model: a) initial revenue growth rate of 16.9% 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 WLDN is calculated based on our internal credit rating of Willdan Group, 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 Willdan Group.
    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 WLDN stock the variable cost ratio is equal to 93.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2 million in the base year in the intrinsic value calculation for WLDN 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 Willdan Group.

Corporate tax rate of 27% is the nominal tax rate for Willdan Group. 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 WLDN 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 WLDN are equal to 4.1%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Willdan Group 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 WLDN is equal to 2.4%. 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 Willdan Group - 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 8.881 million for Willdan Group 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 Willdan Group at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Willdan Selected for Expanded Data Centers Offering   [Feb-05-18 08:00AM  Business Wire]
▶ 5 Top Stocks with Solid Net Profit Margin   [Dec-27-17 08:59AM  Zacks]
▶ Willdan posts 3Q profit   [Nov-06-17 05:39AM  Associated Press]
▶ 3 Stocks That Turned $8,000 Into $125,000 in 5 Years   [Oct-09-17 01:12PM  Motley Fool]
▶ Did Willdan Group Inc (WLDN) Create Value For Shareholders?   [Oct-03-17 04:26PM  Simply Wall St.]
▶ Should You Buy Willdan Group Inc (WLDN)?   [Sep-19-17 01:03PM  Simply Wall St.]
▶ Willdan buys data analytics firm Integral Analytics for $30 million   [Aug-04-17 04:40PM  American City Business Journals]
▶ Willdan Group Reports Second Quarter 2017 Financial Results   [Aug-03-17 04:07PM  Business Wire]
▶ 5 Stocks to Buy on New Analyst Coverage   [Jul-19-17 09:46AM  Zacks]
▶ ETFs with exposure to Willdan Group, Inc. : June 16, 2017   [Jun-16-17 04:26PM  Capital Cube]
▶ Willdan Set to Join Russell 3000 Index   [Jun-13-17 08:00AM  Business Wire]
▶ ETFs with exposure to Willdan Group, Inc. : May 12, 2017   [May-12-17 04:42PM  Capital Cube]
▶ Willdan posts 1Q profit   [May-05-17 05:03AM  Associated Press]
▶ Willdan Group Reports First Quarter 2017 Financial Results   [May-04-17 04:21PM  Business Wire]
▶ Stocks Try To Pare Losses; This Sector Is Bucking The Sell-Off   [Mar-14-17 01:31PM  Investor's Business Daily]
▶ Willdan posts 4Q profit   [Mar-09-17 06:57PM  Associated Press]
▶ Willdan Announces New Board Appointments   [04:05PM  Business Wire]
▶ Willdan Announces Expanded Credit Facility   [Jan-23-17 07:48PM  Business Wire]
▶ How Genocea Biosciences Inc (GNCA) Stacks Up Against Its Peers   [Dec-17-16 04:14PM  at Insider Monkey]
Financial statements of WLDN
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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