Intrinsic value of AAON - AAON

Previous Close

$36.10

  Intrinsic Value

$21.07

stock screener

  Rating & Target

sell

-42%

Previous close

$36.10

 
Intrinsic value

$21.07

 
Up/down potential

-42%

 
Rating

sell

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

We calculate the intrinsic value of AAON 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, %
  6.96
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  384
  417
  451
  487
  524
  563
  603
  645
  688
  733
  780
  829
  879
  932
  988
  1,045
  1,105
  1,168
  1,233
  1,301
  1,373
  1,447
  1,526
  1,607
  1,693
  1,782
  1,876
  1,974
  2,077
  2,185
  2,298
Variable operating expenses, $m
 
  284
  307
  331
  356
  383
  410
  438
  468
  498
  530
  564
  598
  634
  672
  711
  751
  794
  839
  885
  934
  984
  1,037
  1,093
  1,151
  1,212
  1,276
  1,342
  1,412
  1,486
  1,562
Fixed operating expenses, $m
 
  45
  46
  47
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
  69
  70
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
  92
Total operating expenses, $m
  304
  329
  353
  378
  405
  433
  461
  490
  522
  553
  586
  622
  657
  695
  734
  775
  816
  861
  908
  955
  1,006
  1,058
  1,113
  1,171
  1,231
  1,294
  1,360
  1,428
  1,500
  1,576
  1,654
Operating income, $m
  80
  88
  98
  108
  119
  130
  142
  154
  167
  180
  193
  207
  222
  238
  254
  271
  288
  307
  326
  346
  367
  389
  412
  437
  462
  489
  517
  546
  577
  609
  643
EBITDA, $m
  93
  102
  113
  125
  137
  149
  162
  176
  190
  204
  220
  236
  252
  269
  287
  306
  326
  346
  368
  390
  414
  438
  464
  491
  519
  549
  580
  613
  647
  683
  721
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  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
Earnings before tax, $m
  80
  88
  98
  108
  119
  130
  141
  153
  165
  178
  192
  206
  220
  235
  251
  268
  285
  303
  322
  342
  363
  385
  407
  431
  456
  483
  510
  539
  569
  601
  635
Tax expense, $m
  27
  24
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  59
  64
  68
  72
  77
  82
  87
  92
  98
  104
  110
  116
  123
  130
  138
  146
  154
  162
  171
Net income, $m
  53
  64
  72
  79
  87
  95
  103
  112
  121
  130
  140
  150
  161
  172
  183
  196
  208
  221
  235
  250
  265
  281
  297
  315
  333
  352
  372
  394
  416
  439
  463

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  44
  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
  257
  231
  250
  270
  291
  312
  334
  358
  382
  407
  433
  460
  488
  517
  548
  580
  613
  648
  684
  722
  761
  803
  846
  891
  939
  988
  1,040
  1,095
  1,152
  1,212
  1,274
Adjusted assets (=assets-cash), $m
  213
  231
  250
  270
  291
  312
  334
  358
  382
  407
  433
  460
  488
  517
  548
  580
  613
  648
  684
  722
  761
  803
  846
  891
  939
  988
  1,040
  1,095
  1,152
  1,212
  1,274
Revenue / Adjusted assets
  1.803
  1.805
  1.804
  1.804
  1.801
  1.804
  1.805
  1.802
  1.801
  1.801
  1.801
  1.802
  1.801
  1.803
  1.803
  1.802
  1.803
  1.802
  1.803
  1.802
  1.804
  1.802
  1.804
  1.804
  1.803
  1.804
  1.804
  1.803
  1.803
  1.803
  1.804
Average production assets, $m
  108
  117
  127
  137
  147
  158
  169
  181
  193
  206
  219
  233
  247
  262
  278
  294
  311
  328
  347
  366
  386
  407
  429
  452
  476
  501
  527
  555
  584
  614
  646
Working capital, $m
  102
  63
  68
  74
  79
  85
  91
  97
  104
  111
  118
  125
  133
  141
  149
  158
  167
  176
  186
  197
  207
  219
  230
  243
  256
  269
  283
  298
  314
  330
  347
Total debt, $m
  0
  4
  9
  14
  18
  24
  29
  34
  40
  46
  52
  59
  66
  73
  80
  88
  95
  104
  112
  122
  131
  141
  151
  162
  173
  185
  198
  211
  224
  239
  254
Total liabilities, $m
  51
  55
  60
  65
  69
  75
  80
  85
  91
  97
  103
  110
  117
  124
  131
  139
  146
  155
  163
  173
  182
  192
  202
  213
  224
  236
  249
  262
  275
  290
  305
Total equity, $m
  206
  176
  191
  206
  221
  238
  254
  272
  290
  309
  329
  350
  371
  394
  417
  441
  466
  493
  520
  549
  579
  611
  644
  678
  714
  752
  792
  833
  877
  922
  970
Total liabilities and equity, $m
  257
  231
  251
  271
  290
  313
  334
  357
  381
  406
  432
  460
  488
  518
  548
  580
  612
  648
  683
  722
  761
  803
  846
  891
  938
  988
  1,041
  1,095
  1,152
  1,212
  1,275
Debt-to-equity ratio
  0.000
  0.020
  0.050
  0.070
  0.080
  0.100
  0.110
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
Adjusted equity ratio
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  53
  64
  72
  79
  87
  95
  103
  112
  121
  130
  140
  150
  161
  172
  183
  196
  208
  221
  235
  250
  265
  281
  297
  315
  333
  352
  372
  394
  416
  439
  463
Depreciation, amort., depletion, $m
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
  32
  33
  35
  37
  40
  42
  44
  46
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
Funds from operations, $m
  55
  79
  87
  95
  104
  114
  123
  133
  144
  155
  166
  178
  191
  203
  217
  231
  246
  261
  277
  294
  311
  330
  349
  369
  390
  413
  436
  460
  486
  513
  541
Change in working capital, $m
  -9
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
Cash from operations, $m
  64
  74
  82
  90
  99
  108
  117
  127
  137
  148
  159
  171
  183
  195
  209
  222
  237
  252
  267
  284
  301
  319
  337
  357
  378
  399
  422
  446
  470
  497
  524
Maintenance CAPEX, $m
  0
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -33
  -35
  -37
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -70
  -74
New CAPEX, $m
  -27
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
Cash from investing activities, $m
  -17
  -22
  -24
  -25
  -26
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
  -78
  -82
  -86
  -92
  -96
  -100
  -106
Free cash flow, $m
  47
  51
  58
  65
  72
  79
  87
  95
  103
  112
  121
  131
  141
  151
  161
  173
  184
  197
  209
  223
  237
  251
  266
  282
  299
  317
  335
  354
  375
  396
  418
Issuance/(repayment) of debt, $m
  0
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Issuance/(repurchase) of shares, $m
  -17
  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  
  -18
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Total cash flow (excl. dividends), $m
  29
  56
  62
  69
  77
  84
  92
  101
  109
  118
  127
  137
  147
  158
  169
  180
  192
  205
  218
  232
  246
  261
  277
  293
  310
  329
  348
  367
  388
  410
  433
Retained Cash Flow (-), $m
  -27
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -45
  -48
Prev. year cash balance distribution, $m
 
  44
  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
 
  86
  48
  54
  61
  68
  75
  83
  91
  99
  108
  117
  126
  135
  146
  156
  167
  178
  190
  203
  216
  230
  244
  259
  274
  291
  308
  326
  345
  365
  386
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
 
  82
  44
  47
  50
  53
  55
  56
  57
  57
  56
  55
  54
  52
  49
  46
  42
  39
  35
  31
  27
  24
  20
  17
  14
  11
  9
  7
  5
  4
  3
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

AAON, Inc. is engaged in the engineering, manufacturing, marketing and sale of air conditioning and heating equipment consisting of standard, semi-custom and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps and coils. Its products serve the commercial and industrial new construction and replacement markets. Its rooftop and condensing unit markets consist of units installed on commercial or industrial structures of less than 10 stories in height. Its air handling units, self-contained units, geothermal/water-source heat pumps, chillers, packaged outdoor mechanical rooms and coils are applicable to all sizes of commercial and industrial buildings. The replacement market consists of products installed to replace existing units/components that are worn or damaged.

FINANCIAL RATIOS  of  AAON (AAON)

Valuation Ratios
P/E Ratio 35.9
Price to Sales 4.9
Price to Book 9.2
Price to Tangible Book
Price to Cash Flow 29.7
Price to Free Cash Flow 51.4
Growth Rates
Sales Growth Rate 7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.6%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
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 21.6%
Ret/ On Assets - 3 Yr. Avg. 20.5%
Return On Total Capital 27.5%
Ret/ On T. Cap. - 3 Yr. Avg. 26.5%
Return On Equity 27.5%
Return On Equity - 3 Yr. Avg. 26.5%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 30.7%
Gross Margin - 3 Yr. Avg. 30.5%
EBITDA Margin 24.2%
EBITDA Margin - 3 Yr. Avg. 23.3%
Operating Margin 20.8%
Oper. Margin - 3 Yr. Avg. 20%
Pre-Tax Margin 20.8%
Pre-Tax Margin - 3 Yr. Avg. 19.9%
Net Profit Margin 13.8%
Net Profit Margin - 3 Yr. Avg. 13%
Effective Tax Rate 33.8%
Eff/ Tax Rate - 3 Yr. Avg. 34.8%
Payout Ratio 24.5%

AAON stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AAON stock intrinsic value calculation we used $384 million for the last fiscal year's total revenue generated by AAON. The default revenue input number comes from 2016 income statement of AAON. 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 AAON stock valuation model: a) initial revenue growth rate of 8.6% 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 AAON is calculated based on our internal credit rating of AAON, 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 AAON.
    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 AAON stock the variable cost ratio is equal to 68%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $44 million in the base year in the intrinsic value calculation for AAON 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 AAON.

Corporate tax rate of 27% is the nominal tax rate for AAON. 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 AAON 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 AAON are equal to 28.1%.

Life of production assets of 8.3 years is the average useful life of capital assets used in AAON 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 AAON is equal to 15.1%. 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 - $206 million for AAON - 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 52.589 million for AAON 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 AAON at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ AAON Announces Tax Reform Bonus for Employees   [Jan-02-18 03:15PM  GlobeNewswire]
▶ ETFs with exposure to AAON, Inc. : December 29, 2017   [Dec-29-17 11:23AM  Capital Cube]
▶ ETFs with exposure to AAON, Inc. : December 18, 2017   [Dec-18-17 02:15PM  Capital Cube]
▶ New Strong Sell Stocks for November 16th   [Nov-16-17 09:45AM  Zacks]
▶ ETFs with exposure to AAON, Inc. : November 13, 2017   [Nov-13-17 11:30AM  Capital Cube]
▶ AAON Announces Semi-Annual Cash Dividend   [Nov-07-17 07:00AM  GlobeNewswire]
▶ New Strong Sell Stocks for November 6th   [Nov-06-17 08:09AM  Zacks]
▶ Aaon posts 3Q profit   [Nov-02-17 09:47AM  Associated Press]
▶ ETFs with exposure to AAON, Inc. : November 1, 2017   [Nov-01-17 11:45AM  Capital Cube]
▶ ETFs with exposure to AAON, Inc. : August 7, 2017   [Aug-07-17 04:15PM  Capital Cube]
▶ Aaon posts 2Q profit   [Aug-04-17 01:47AM  Associated Press]
▶ AAON Reports Second Quarter Sales and Earnings   [Aug-03-17 07:00AM  GlobeNewswire]
▶ ETFs with exposure to AAON, Inc. : July 7, 2017   [Jul-07-17 02:22PM  Capital Cube]
▶ ETFs with exposure to AAON, Inc. : June 19, 2017   [Jun-19-17 02:48PM  Capital Cube]
▶ Workiva Simplifies SOX Compliance for AAON   [May-31-17 09:03AM  Business Wire]
▶ New Strong Sell Stocks for May 11th   [May-11-17 09:14AM  Zacks]
▶ Aaon posts 1Q profit   [May-04-17 09:36AM  Associated Press]
▶ AAON, Inc. Value Analysis (NASDAQ:AAON) : April 24, 2017   [Apr-24-17 03:02PM  Capital Cube]
▶ Aaon posts 4Q profit   [Feb-23-17 09:53AM  Associated Press]
▶ AAON Is a Stock With Room to Grow   [Feb-10-17 07:19AM  TheStreet.com]
▶ Here is What Hedge Funds Think About Banner Corporation (BANR)   [Dec-05-16 08:17AM  at Insider Monkey]
Financial statements of AAON
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