Intrinsic value of Acco Brands Corporation - ACCO

Previous Close

$8.83

  Intrinsic Value

$21.18

stock screener

  Rating & Target

str. buy

+140%

Previous close

$8.83

 
Intrinsic value

$21.18

 
Up/down potential

+140%

 
Rating

str. buy

We calculate the intrinsic value of ACCO 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 0.9

 

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, %
  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
  1,980
  2,025
  2,077
  2,136
  2,201
  2,272
  2,349
  2,433
  2,523
  2,620
  2,723
  2,834
  2,952
  3,077
  3,209
  3,350
  3,499
  3,656
  3,823
  3,998
  4,184
  4,379
  4,585
  4,802
  5,031
  5,272
  5,525
  5,792
  6,072
  6,367
Variable operating expenses, $m
  1,789
  1,826
  1,870
  1,918
  1,972
  2,030
  2,094
  2,164
  2,238
  2,319
  2,255
  2,346
  2,444
  2,547
  2,657
  2,774
  2,897
  3,027
  3,165
  3,310
  3,464
  3,626
  3,796
  3,976
  4,165
  4,364
  4,574
  4,795
  5,027
  5,271
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
  1,789
  1,826
  1,870
  1,918
  1,972
  2,030
  2,094
  2,164
  2,238
  2,319
  2,255
  2,346
  2,444
  2,547
  2,657
  2,774
  2,897
  3,027
  3,165
  3,310
  3,464
  3,626
  3,796
  3,976
  4,165
  4,364
  4,574
  4,795
  5,027
  5,271
Operating income, $m
  191
  199
  208
  218
  229
  241
  255
  269
  285
  301
  469
  488
  508
  529
  552
  576
  602
  629
  658
  688
  720
  754
  789
  826
  866
  907
  951
  997
  1,045
  1,096
EBITDA, $m
  382
  391
  401
  412
  425
  439
  454
  470
  487
  506
  526
  547
  570
  594
  620
  647
  676
  706
  738
  772
  808
  845
  885
  927
  971
  1,018
  1,067
  1,118
  1,172
  1,229
Interest expense (income), $m
  50
  48
  50
  52
  55
  58
  62
  66
  70
  75
  80
  85
  91
  97
  104
  111
  118
  126
  134
  143
  152
  162
  172
  183
  195
  207
  219
  233
  247
  262
  277
Earnings before tax, $m
  143
  149
  156
  163
  171
  179
  189
  199
  210
  221
  383
  397
  411
  426
  442
  458
  476
  495
  515
  536
  558
  581
  606
  632
  659
  688
  718
  750
  783
  818
Tax expense, $m
  39
  40
  42
  44
  46
  48
  51
  54
  57
  60
  103
  107
  111
  115
  119
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  194
  202
  211
  221
Net income, $m
  105
  109
  114
  119
  125
  131
  138
  145
  153
  161
  280
  289
  300
  311
  322
  335
  348
  361
  376
  391
  407
  424
  442
  461
  481
  502
  524
  547
  572
  597

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
  2,840
  2,906
  2,980
  3,064
  3,157
  3,259
  3,370
  3,490
  3,620
  3,759
  3,907
  4,066
  4,235
  4,414
  4,605
  4,806
  5,020
  5,246
  5,485
  5,737
  6,002
  6,283
  6,578
  6,890
  7,218
  7,563
  7,927
  8,309
  8,712
  9,135
Adjusted assets (=assets-cash), $m
  2,840
  2,906
  2,980
  3,064
  3,157
  3,259
  3,370
  3,490
  3,620
  3,759
  3,907
  4,066
  4,235
  4,414
  4,605
  4,806
  5,020
  5,246
  5,485
  5,737
  6,002
  6,283
  6,578
  6,890
  7,218
  7,563
  7,927
  8,309
  8,712
  9,135
Revenue / Adjusted assets
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
Average production assets, $m
  1,043
  1,067
  1,095
  1,126
  1,160
  1,197
  1,238
  1,282
  1,330
  1,381
  1,435
  1,493
  1,555
  1,621
  1,691
  1,765
  1,844
  1,927
  2,015
  2,107
  2,205
  2,308
  2,416
  2,531
  2,651
  2,778
  2,912
  3,052
  3,200
  3,355
Working capital, $m
  259
  265
  272
  280
  288
  298
  308
  319
  331
  343
  357
  371
  387
  403
  420
  439
  458
  479
  501
  524
  548
  574
  601
  629
  659
  691
  724
  759
  795
  834
Total debt, $m
  922
  969
  1,023
  1,083
  1,150
  1,223
  1,302
  1,388
  1,481
  1,581
  1,687
  1,801
  1,922
  2,051
  2,187
  2,332
  2,485
  2,647
  2,818
  2,999
  3,190
  3,391
  3,603
  3,826
  4,061
  4,309
  4,569
  4,844
  5,132
  5,436
Total liabilities, $m
  2,037
  2,083
  2,137
  2,197
  2,264
  2,337
  2,416
  2,503
  2,595
  2,695
  2,802
  2,915
  3,036
  3,165
  3,301
  3,446
  3,599
  3,761
  3,932
  4,113
  4,304
  4,505
  4,717
  4,940
  5,175
  5,423
  5,683
  5,958
  6,246
  6,550
Total equity, $m
  804
  822
  843
  867
  893
  922
  954
  988
  1,024
  1,064
  1,106
  1,151
  1,198
  1,249
  1,303
  1,360
  1,421
  1,485
  1,552
  1,623
  1,699
  1,778
  1,862
  1,950
  2,043
  2,140
  2,243
  2,352
  2,465
  2,585
Total liabilities and equity, $m
  2,841
  2,905
  2,980
  3,064
  3,157
  3,259
  3,370
  3,491
  3,619
  3,759
  3,908
  4,066
  4,234
  4,414
  4,604
  4,806
  5,020
  5,246
  5,484
  5,736
  6,003
  6,283
  6,579
  6,890
  7,218
  7,563
  7,926
  8,310
  8,711
  9,135
Debt-to-equity ratio
  1.150
  1.180
  1.210
  1.250
  1.290
  1.330
  1.370
  1.410
  1.450
  1.490
  1.530
  1.570
  1.600
  1.640
  1.680
  1.710
  1.750
  1.780
  1.820
  1.850
  1.880
  1.910
  1.940
  1.960
  1.990
  2.010
  2.040
  2.060
  2.080
  2.100
Adjusted equity ratio
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  105
  109
  114
  119
  125
  131
  138
  145
  153
  161
  280
  289
  300
  311
  322
  335
  348
  361
  376
  391
  407
  424
  442
  461
  481
  502
  524
  547
  572
  597
Depreciation, amort., depletion, $m
  191
  192
  193
  194
  196
  197
  199
  201
  203
  205
  57
  60
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
  134
Funds from operations, $m
  296
  301
  307
  313
  320
  328
  337
  346
  356
  366
  337
  349
  362
  375
  390
  405
  421
  438
  456
  475
  495
  516
  539
  562
  587
  613
  640
  669
  699
  731
Change in working capital, $m
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
Cash from operations, $m
  291
  295
  300
  306
  312
  319
  326
  335
  344
  353
  323
  334
  346
  359
  372
  387
  402
  417
  434
  452
  471
  491
  512
  534
  557
  581
  607
  634
  663
  693
Maintenance CAPEX, $m
  -41
  -42
  -43
  -44
  -45
  -46
  -48
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -127
New CAPEX, $m
  -21
  -24
  -27
  -31
  -34
  -37
  -41
  -44
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -88
  -93
  -98
  -103
  -109
  -114
  -120
  -127
  -134
  -141
  -148
  -155
Cash from investing activities, $m
  -62
  -66
  -70
  -75
  -79
  -83
  -89
  -93
  -99
  -104
  -110
  -115
  -122
  -128
  -135
  -141
  -148
  -156
  -165
  -173
  -182
  -191
  -201
  -210
  -221
  -233
  -245
  -257
  -270
  -282
Free cash flow, $m
  229
  229
  230
  231
  233
  235
  238
  241
  245
  249
  214
  219
  225
  231
  238
  245
  253
  261
  270
  279
  289
  300
  311
  323
  335
  349
  363
  378
  393
  410
Issuance/(repayment) of debt, $m
  40
  47
  54
  60
  67
  73
  80
  86
  93
  100
  107
  114
  121
  129
  137
  145
  153
  162
  171
  181
  191
  201
  212
  223
  235
  248
  261
  274
  289
  303
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  
  40
  47
  54
  60
  67
  73
  80
  86
  93
  100
  107
  114
  121
  129
  137
  145
  153
  162
  171
  181
  191
  201
  212
  223
  235
  248
  261
  274
  289
  303
Total cash flow (excl. dividends), $m
  269
  276
  284
  291
  299
  308
  318
  327
  338
  349
  320
  333
  346
  360
  374
  390
  406
  423
  441
  460
  480
  501
  523
  546
  571
  596
  623
  652
  682
  713
Retained Cash Flow (-), $m
  -14
  -18
  -21
  -24
  -26
  -29
  -31
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -68
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
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
  255
  258
  262
  268
  273
  279
  286
  293
  301
  310
  278
  288
  298
  309
  320
  333
  345
  359
  373
  389
  405
  422
  439
  458
  478
  499
  521
  544
  568
  593
Discount rate, %
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
  238
  222
  208
  193
  179
  164
  149
  134
  120
  106
  81
  70
  60
  51
  42
  35
  28
  22
  17
  13
  10
  7
  5
  4
  2
  2
  1
  1
  0
  0
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

ACCO Brands Corporation is engaged in designing, marketing and manufacturing of branded business, academic and selected consumer products. The Company operates through three segments: ACCO Brands North America, ACCO Brands International and Computer Products Group. The Company's brands include Artline, AT-A-GLANCE, Derwent, Esselte, Five Star, GBC, Hilroy, Kensington, Leitz, Marbig, Mead, NOBO, Quartet, Rapid, Rexel, Swingline, Tilibra and Wilson Jones. The Company's ACCO Brands North America and ACCO Brands International design, market, source, manufacture and sell traditional office products, academic supplies and calendar products. ACCO Brands North America consists of the United States and Canada, and ACCO Brands International consists of the rest of the world, primarily Northern Europe, Australia, Brazil and Mexico. Its Computer Products Group designs, sources, distributes, markets and sells accessories for laptop and desktop computers and tablets.

FINANCIAL RATIOS  of  Acco Brands Corporation (ACCO)

Valuation Ratios
P/E Ratio 9.9
Price to Sales 0.6
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 6.5
Growth Rates
Sales Growth Rate 3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -32.1%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 88.4%
Total Debt to Equity 98.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 14.9%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 33.1%
Gross Margin - 3 Yr. Avg. 32%
EBITDA Margin 14.6%
EBITDA Margin - 3 Yr. Avg. 14.5%
Operating Margin 10.7%
Oper. Margin - 3 Yr. Avg. 10.6%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 8.3%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 23.2%
Eff/ Tax Rate - 3 Yr. Avg. 30.1%
Payout Ratio 0%

ACCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACCO stock intrinsic value calculation we used $1941 million for the last fiscal year's total revenue generated by Acco Brands Corporation. The default revenue input number comes from 0001 income statement of Acco Brands Corporation. 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 ACCO 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 7.3%, whose default value for ACCO is calculated based on our internal credit rating of Acco Brands Corporation, 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 Acco Brands Corporation.
    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 ACCO stock the variable cost ratio is equal to 90.5%.

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 ACCO 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 Acco Brands Corporation.

Corporate tax rate of 27% is the nominal tax rate for Acco Brands Corporation. 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 ACCO 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 ACCO are equal to 52.7%.

Life of production assets of 25.1 years is the average useful life of capital assets used in Acco Brands Corporation 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 ACCO is equal to 13.1%. 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 - $789.7 million for Acco Brands Corporation - 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 102.207 million for Acco Brands Corporation 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 Acco Brands Corporation at the current share price and the inputted number of shares is $0.9 billion.

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