Intrinsic value of AAON, Inc. - AAON

Previous Close

$42.80

  Intrinsic Value

$17.37

stock screener

  Rating & Target

str. sell

-59%

Previous close

$42.80

 
Intrinsic value

$17.37

 
Up/down potential

-59%

 
Rating

str. sell

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

Revenue (in 0001), $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 2.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  468
  504
  541
  579
  619
  661
  704
  749
  796
  845
  896
  949
  1,004
  1,061
  1,121
  1,184
  1,250
  1,318
  1,390
  1,465
  1,543
  1,625
  1,711
  1,801
  1,895
  1,994
  2,098
  2,206
  2,320
  2,439
Variable operating expenses, $m
  382
  410
  438
  469
  500
  532
  566
  601
  638
  676
  699
  740
  783
  828
  875
  924
  975
  1,029
  1,085
  1,143
  1,204
  1,268
  1,336
  1,406
  1,479
  1,556
  1,637
  1,722
  1,810
  1,903
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
  382
  410
  438
  469
  500
  532
  566
  601
  638
  676
  699
  740
  783
  828
  875
  924
  975
  1,029
  1,085
  1,143
  1,204
  1,268
  1,336
  1,406
  1,479
  1,556
  1,637
  1,722
  1,810
  1,903
Operating income, $m
  87
  94
  102
  111
  120
  129
  138
  148
  158
  169
  197
  208
  220
  233
  246
  260
  274
  289
  305
  322
  339
  357
  376
  395
  416
  438
  461
  484
  509
  535
EBITDA, $m
  122
  131
  141
  151
  161
  172
  183
  195
  207
  219
  233
  246
  261
  276
  291
  308
  325
  342
  361
  381
  401
  422
  445
  468
  492
  518
  545
  573
  603
  634
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
Earnings before tax, $m
  87
  94
  102
  110
  119
  127
  137
  146
  156
  166
  194
  205
  216
  229
  241
  255
  269
  283
  298
  314
  331
  348
  367
  386
  406
  427
  449
  472
  496
  521
Tax expense, $m
  23
  25
  28
  30
  32
  34
  37
  39
  42
  45
  52
  55
  58
  62
  65
  69
  73
  76
  81
  85
  89
  94
  99
  104
  110
  115
  121
  127
  134
  141
Net income, $m
  63
  69
  74
  80
  87
  93
  100
  107
  114
  122
  141
  149
  158
  167
  176
  186
  196
  207
  218
  230
  242
  254
  268
  282
  296
  312
  328
  344
  362
  380

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  333
  358
  384
  412
  440
  469
  500
  532
  565
  600
  636
  674
  713
  754
  796
  841
  888
  936
  987
  1,040
  1,096
  1,154
  1,215
  1,279
  1,346
  1,416
  1,490
  1,567
  1,647
  1,732
Adjusted assets (=assets-cash), $m
  333
  358
  384
  412
  440
  469
  500
  532
  565
  600
  636
  674
  713
  754
  796
  841
  888
  936
  987
  1,040
  1,096
  1,154
  1,215
  1,279
  1,346
  1,416
  1,490
  1,567
  1,647
  1,732
Revenue / Adjusted assets
  1.405
  1.408
  1.409
  1.405
  1.407
  1.409
  1.408
  1.408
  1.409
  1.408
  1.409
  1.408
  1.408
  1.407
  1.408
  1.408
  1.408
  1.408
  1.408
  1.409
  1.408
  1.408
  1.408
  1.408
  1.408
  1.408
  1.408
  1.408
  1.409
  1.408
Average production assets, $m
  166
  178
  191
  205
  219
  234
  249
  265
  282
  299
  317
  336
  355
  376
  397
  419
  442
  467
  492
  519
  546
  575
  606
  638
  671
  706
  743
  781
  821
  863
Working capital, $m
  98
  105
  113
  121
  129
  138
  147
  157
  166
  177
  187
  198
  210
  222
  234
  247
  261
  276
  290
  306
  323
  340
  358
  376
  396
  417
  438
  461
  485
  510
Total debt, $m
  5
  10
  15
  20
  26
  32
  38
  44
  51
  58
  65
  72
  80
  88
  96
  105
  114
  124
  134
  144
  155
  167
  179
  191
  204
  218
  233
  248
  264
  281
Total liabilities, $m
  66
  71
  76
  81
  87
  92
  99
  105
  111
  118
  125
  133
  140
  148
  157
  166
  175
  184
  194
  205
  216
  227
  239
  252
  265
  279
  293
  309
  325
  341
Total equity, $m
  267
  287
  309
  330
  353
  377
  402
  427
  454
  482
  511
  541
  572
  605
  640
  675
  713
  752
  793
  835
  880
  927
  976
  1,027
  1,081
  1,137
  1,196
  1,258
  1,323
  1,391
Total liabilities and equity, $m
  333
  358
  385
  411
  440
  469
  501
  532
  565
  600
  636
  674
  712
  753
  797
  841
  888
  936
  987
  1,040
  1,096
  1,154
  1,215
  1,279
  1,346
  1,416
  1,489
  1,567
  1,648
  1,732
Debt-to-equity ratio
  0.020
  0.030
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.150
  0.150
  0.160
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
  0.180
  0.190
  0.190
  0.190
  0.190
  0.200
  0.200
  0.200
Adjusted equity ratio
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803
  0.803

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  63
  69
  74
  80
  87
  93
  100
  107
  114
  122
  141
  149
  158
  167
  176
  186
  196
  207
  218
  230
  242
  254
  268
  282
  296
  312
  328
  344
  362
  380
Depreciation, amort., depletion, $m
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  89
  93
  98
Funds from operations, $m
  98
  105
  112
  120
  128
  136
  144
  153
  162
  172
  177
  188
  198
  210
  221
  234
  246
  260
  274
  288
  304
  320
  337
  354
  372
  392
  412
  433
  455
  479
Change in working capital, $m
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  91
  98
  105
  112
  119
  127
  135
  144
  152
  162
  167
  177
  187
  198
  209
  221
  233
  245
  259
  273
  287
  303
  319
  335
  353
  371
  390
  410
  432
  454
Maintenance CAPEX, $m
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -93
New CAPEX, $m
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
Cash from investing activities, $m
  -29
  -32
  -33
  -36
  -37
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -60
  -64
  -67
  -71
  -74
  -78
  -83
  -87
  -91
  -95
  -101
  -105
  -111
  -117
  -122
  -129
  -135
Free cash flow, $m
  62
  66
  71
  77
  82
  88
  93
  99
  106
  112
  115
  122
  129
  137
  145
  153
  162
  171
  180
  190
  201
  211
  223
  235
  247
  260
  274
  288
  303
  318
Issuance/(repayment) of debt, $m
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
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
Cash from financing (excl. dividends), $m  
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
Total cash flow (excl. dividends), $m
  66
  71
  77
  82
  88
  93
  99
  106
  112
  119
  122
  129
  137
  145
  153
  162
  171
  181
  190
  201
  212
  223
  235
  247
  260
  274
  288
  303
  318
  335
Retained Cash Flow (-), $m
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
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
  47
  51
  55
  60
  65
  70
  75
  80
  86
  91
  93
  99
  105
  112
  119
  126
  134
  141
  150
  158
  167
  176
  186
  196
  206
  217
  229
  241
  254
  267
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
  45
  47
  48
  49
  50
  51
  51
  50
  49
  48
  44
  42
  40
  38
  35
  32
  29
  26
  23
  20
  17
  15
  12
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  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, Inc. (AAON)

Valuation Ratios
P/E Ratio 42.5
Price to Sales 5.9
Price to Book 10.9
Price to Tangible Book
Price to Cash Flow 35.2
Price to Free Cash Flow 60.9
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 $434 million for the last fiscal year's total revenue generated by AAON, Inc.. The default revenue input number comes from 0001 income statement of AAON, Inc.. 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 7.9% 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 AAON is calculated based on our internal credit rating of AAON, Inc., 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, Inc..
    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 81.8%.

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 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 5.4% for AAON, Inc..

Corporate tax rate of 27% is the nominal tax rate for AAON, Inc.. 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 35.4%.

Life of production assets of 8.8 years is the average useful life of capital assets used in AAON, Inc. 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 20.9%. 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 - $247.499 million for AAON, Inc. - 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 51.991 million for AAON, Inc. 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, Inc. at the current share price and the inputted number of shares is $2.2 billion.

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