Intrinsic value of Xerium Technologies - XRM

Previous Close

$4.82

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$4.82

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of XRM 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, %
  -1.26
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  471
  480
  491
  504
  518
  534
  551
  570
  590
  612
  636
  661
  688
  716
  747
  779
  813
  849
  887
  928
  970
  1,015
  1,063
  1,113
  1,165
  1,221
  1,279
  1,341
  1,405
  1,473
  1,545
Variable operating expenses, $m
 
  436
  446
  457
  470
  484
  499
  516
  534
  554
  575
  591
  615
  641
  668
  697
  727
  760
  794
  830
  868
  909
  951
  996
  1,043
  1,092
  1,145
  1,200
  1,258
  1,319
  1,383
Fixed operating expenses, $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
Total operating expenses, $m
  437
  436
  446
  457
  470
  484
  499
  516
  534
  554
  575
  591
  615
  641
  668
  697
  727
  760
  794
  830
  868
  909
  951
  996
  1,043
  1,092
  1,145
  1,200
  1,258
  1,319
  1,383
Operating income, $m
  34
  45
  46
  47
  49
  50
  52
  54
  56
  59
  61
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
  141
  148
  155
  162
EBITDA, $m
  67
  79
  80
  82
  85
  87
  90
  93
  97
  100
  104
  108
  113
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
  241
  253
Interest expense (income), $m
  29
  29
  18
  19
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
Earnings before tax, $m
  -12
  16
  28
  29
  29
  30
  31
  32
  33
  34
  35
  42
  44
  45
  46
  48
  50
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
Tax expense, $m
  10
  4
  8
  8
  8
  8
  8
  9
  9
  9
  10
  11
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
Net income, $m
  -22
  11
  20
  21
  21
  22
  23
  23
  24
  25
  26
  31
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  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
  542
  540
  552
  566
  582
  600
  619
  640
  663
  688
  714
  743
  773
  805
  839
  875
  913
  954
  997
  1,042
  1,090
  1,141
  1,194
  1,250
  1,309
  1,372
  1,437
  1,506
  1,579
  1,656
  1,736
Adjusted assets (=assets-cash), $m
  529
  540
  552
  566
  582
  600
  619
  640
  663
  688
  714
  743
  773
  805
  839
  875
  913
  954
  997
  1,042
  1,090
  1,141
  1,194
  1,250
  1,309
  1,372
  1,437
  1,506
  1,579
  1,656
  1,736
Revenue / Adjusted assets
  0.890
  0.889
  0.889
  0.890
  0.890
  0.890
  0.890
  0.891
  0.890
  0.890
  0.891
  0.890
  0.890
  0.889
  0.890
  0.890
  0.890
  0.890
  0.890
  0.891
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.889
  0.890
Average production assets, $m
  295
  301
  308
  316
  324
  334
  345
  357
  370
  383
  398
  414
  430
  448
  467
  488
  509
  532
  555
  581
  607
  636
  665
  697
  729
  764
  801
  839
  880
  922
  967
Working capital, $m
  57
  61
  62
  64
  66
  68
  70
  72
  75
  78
  81
  84
  87
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
Total debt, $m
  508
  305
  316
  329
  343
  359
  376
  395
  416
  438
  462
  487
  514
  543
  574
  607
  641
  678
  716
  757
  800
  846
  894
  944
  997
  1,053
  1,113
  1,175
  1,240
  1,309
  1,381
Total liabilities, $m
  689
  486
  497
  510
  524
  540
  557
  576
  597
  619
  643
  668
  695
  724
  755
  788
  822
  859
  897
  938
  981
  1,027
  1,075
  1,125
  1,178
  1,234
  1,294
  1,356
  1,421
  1,490
  1,562
Total equity, $m
  -147
  54
  55
  57
  58
  60
  62
  64
  66
  69
  71
  74
  77
  80
  84
  88
  91
  95
  100
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
Total liabilities and equity, $m
  542
  540
  552
  567
  582
  600
  619
  640
  663
  688
  714
  742
  772
  804
  839
  876
  913
  954
  997
  1,042
  1,090
  1,141
  1,194
  1,250
  1,309
  1,371
  1,438
  1,507
  1,579
  1,656
  1,736
Debt-to-equity ratio
  -3.456
  5.650
  5.720
  5.800
  5.890
  5.980
  6.080
  6.170
  6.270
  6.370
  6.470
  6.560
  6.660
  6.750
  6.840
  6.930
  7.020
  7.100
  7.180
  7.260
  7.340
  7.410
  7.480
  7.550
  7.620
  7.680
  7.740
  7.800
  7.850
  7.910
  7.960
Adjusted equity ratio
  -0.289
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -22
  11
  20
  21
  21
  22
  23
  23
  24
  25
  26
  31
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
Depreciation, amort., depletion, $m
  33
  34
  34
  35
  36
  37
  38
  39
  40
  42
  43
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
Funds from operations, $m
  47
  45
  55
  56
  57
  59
  61
  62
  64
  66
  69
  69
  72
  75
  78
  81
  84
  87
  91
  95
  99
  103
  107
  112
  117
  122
  128
  133
  139
  146
  153
Change in working capital, $m
  10
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Cash from operations, $m
  37
  44
  53
  54
  56
  57
  58
  60
  62
  64
  66
  66
  69
  71
  74
  77
  79
  83
  86
  89
  93
  97
  101
  106
  110
  115
  120
  126
  131
  137
  143
Maintenance CAPEX, $m
  0
  -28
  -28
  -29
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
New CAPEX, $m
  -14
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -43
  -45
Cash from investing activities, $m
  -30
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -118
  -125
  -131
Free cash flow, $m
  7
  11
  18
  18
  17
  17
  16
  16
  16
  15
  15
  13
  13
  13
  13
  13
  13
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
Issuance/(repayment) of debt, $m
  23
  -190
  11
  13
  14
  16
  17
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  51
  53
  56
  59
  62
  65
  69
  72
Issuance/(repurchase) of shares, $m
  0
  190
  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  
  -2
  0
  11
  13
  14
  16
  17
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  51
  53
  56
  59
  62
  65
  69
  72
Total cash flow (excl. dividends), $m
  3
  10
  30
  31
  32
  33
  34
  35
  36
  38
  39
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
Retained Cash Flow (-), $m
  34
  -201
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
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
 
  -191
  28
  29
  30
  31
  32
  33
  34
  35
  36
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  70
  74
  77
Discount rate, %
 
  15.30
  16.07
  16.87
  17.71
  18.60
  19.53
  20.50
  21.53
  22.61
  23.74
  24.92
  26.17
  27.48
  28.85
  30.29
  31.81
  33.40
  35.07
  36.82
  38.66
  40.60
  42.63
  44.76
  46.99
  49.34
  51.81
  54.40
  57.12
  59.98
  62.98
PV of cash for distribution, $m
 
  -166
  21
  18
  16
  13
  11
  9
  7
  6
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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Current shareholders' claim on cash, %
  100
  50.0
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  50.0
  50.0
  50.0
  50.0
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  50.0
  50.0
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  50.0
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  50.0

Xerium Technologies, Inc. (Xerium) is a manufacturer and supplier of over two types of consumable products used in the production of paper: machine clothing and roll covers. The Company markets its products through brands, such as Huyck Wangner, Weavexx, Stowe Woodward, Mount Hope, Robec and Xibe. The Company operates in two segments: machine clothing and roll covers. Its machine clothing segment products include various types of industrial textiles used on paper-making machines and manufactures spreader rolls. Through its roll covers segment, it manufactures various types of roll covers, refurbishes previously installed roll covers, provides mechanical services for the internal mechanisms of rolls used on paper-making machines, and manufactures spreader rolls. In addition, its products are also installed in other industrial applications, such as non-woven and fiber cement machines.

FINANCIAL RATIOS  of  Xerium Technologies (XRM)

Valuation Ratios
P/E Ratio -3.5
Price to Sales 0.2
Price to Book -0.5
Price to Tangible Book
Price to Cash Flow 2.1
Price to Free Cash Flow 3.4
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -72.5%
Cap. Spend. - 3 Yr. Gr. Rate -20.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity -334.7%
Total Debt to Equity -345.6%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital -6%
Ret/ On T. Cap. - 3 Yr. Avg. -2.9%
Return On Equity 16.9%
Return On Equity - 3 Yr. Avg. 12.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 37.6%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 14.2%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin -2.5%
Pre-Tax Margin - 3 Yr. Avg. 1.2%
Net Profit Margin -4.7%
Net Profit Margin - 3 Yr. Avg. -2.3%
Effective Tax Rate -83.3%
Eff/ Tax Rate - 3 Yr. Avg. 63.8%
Payout Ratio 0%

XRM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XRM stock intrinsic value calculation we used $471 million for the last fiscal year's total revenue generated by Xerium Technologies. The default revenue input number comes from 2016 income statement of Xerium Technologies. 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 XRM stock valuation model: a) initial revenue growth rate of 2% 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 15.3%, whose default value for XRM is calculated based on our internal credit rating of Xerium Technologies, 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 Xerium Technologies.
    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 XRM stock the variable cost ratio is equal to 90.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for XRM 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 5.9% for Xerium Technologies.

Corporate tax rate of 27% is the nominal tax rate for Xerium Technologies. 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 XRM 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 XRM are equal to 62.6%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Xerium Technologies 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 XRM is equal to 12.7%. 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 - $-147 million for Xerium Technologies - 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 16.34 million for Xerium Technologies 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 Xerium Technologies at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Xerium Introduces Maximus Press Felt Technology Portfolio   [Oct-12-17 04:15PM  Business Wire]
▶ Xerium reports 2Q loss   [Jul-31-17 09:21PM  Associated Press]
▶ Xerium Reports Q2 2017 Results   [04:14PM  Business Wire]
▶ Xerium Technologies snags new CEO   [May-02-17 09:10AM  American City Business Journals]
▶ Xerium reports 1Q loss   [May-01-17 07:16AM  Associated Press]
▶ Xerium Reports Q1 2017 Results   [07:05AM  Business Wire]
▶ Xerium Announces Leadership Changes   [07:00AM  Business Wire]
▶ Xerium reports 4Q loss   [Mar-01-17 06:43PM  Associated Press]
▶ Xerium Reports Full Year and Q4 2016 Results   [05:12PM  Business Wire]
▶ Is Xerium Technologies, Inc. (XRM) A Good Stock To Buy?   [Dec-12-16 05:31PM  at Insider Monkey]
▶ Xerium Reports Q3 2016 Results   [Oct-27-16 04:29PM  Business Wire]
▶ Xerium CEO talks capacity, strategy shift   [Aug-03-16 03:05PM  at bizjournals.com]
▶ Xerium Reports Q2 2016 Results   [04:15PM  Business Wire]
▶ On heels of acquisition talks, Xerium moves to pay down debt   [Jul-19-16 05:00PM  at bizjournals.com]
▶ Xerium Introduces Impulse Shoe Press Belt Technology   [Jun-09-16 04:15PM  Business Wire]
▶ Xerium Reports Q1 2016 Results   [04:43PM  Business Wire]
▶ 7 Breakout Stocks Under $10 Set to Soar Higher   [Apr-27-16 07:57AM  at TheStreet]
▶ 10 investors who could gain big in a Xerium buyout   [Apr-05-16 09:45AM  at bizjournals.com]
▶ Xerium execs: Yes, we've had buyout interest   [Apr-04-16 01:10PM  at bizjournals.com]
▶ 5 Stocks Under $10 Set to Soar   [Mar-31-16 08:44AM  at TheStreet]
Financial statements of XRM
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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