Intrinsic value of Armstrong Flooring - AFI

Previous Close

$14.50

  Intrinsic Value

$5.96

stock screener

  Rating & Target

str. sell

-59%

Previous close

$14.50

 
Intrinsic value

$5.96

 
Up/down potential

-59%

 
Rating

str. sell

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

We calculate the intrinsic value of AFI 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, %
  0.34
  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
  1,193
  1,217
  1,245
  1,277
  1,313
  1,353
  1,396
  1,444
  1,495
  1,551
  1,610
  1,674
  1,742
  1,814
  1,891
  1,973
  2,059
  2,151
  2,247
  2,350
  2,458
  2,571
  2,692
  2,818
  2,952
  3,092
  3,240
  3,396
  3,560
  3,732
  3,913
Variable operating expenses, $m
 
  1,231
  1,260
  1,292
  1,329
  1,369
  1,413
  1,461
  1,513
  1,569
  1,630
  1,694
  1,763
  1,836
  1,914
  1,996
  2,084
  2,176
  2,274
  2,378
  2,487
  2,602
  2,724
  2,852
  2,987
  3,129
  3,279
  3,437
  3,602
  3,777
  3,960
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
  1,174
  1,231
  1,260
  1,292
  1,329
  1,369
  1,413
  1,461
  1,513
  1,569
  1,630
  1,694
  1,763
  1,836
  1,914
  1,996
  2,084
  2,176
  2,274
  2,378
  2,487
  2,602
  2,724
  2,852
  2,987
  3,129
  3,279
  3,437
  3,602
  3,777
  3,960
Operating income, $m
  19
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
EBITDA, $m
  66
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  78
  82
  86
  90
  94
  99
  104
  109
Interest expense (income), $m
  2
  3
  3
  4
  5
  6
  8
  9
  10
  12
  14
  15
  17
  19
  22
  24
  26
  29
  32
  35
  38
  41
  44
  48
  52
  56
  60
  65
  69
  74
  80
Earnings before tax, $m
  12
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -82
  -87
  -93
  -99
  -105
  -112
  -119
  -127
Tax expense, $m
  4
  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
Net income, $m
  9
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -82
  -87
  -93
  -99
  -105
  -112
  -119
  -127

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  31
  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
  904
  890
  911
  934
  960
  989
  1,021
  1,056
  1,094
  1,134
  1,178
  1,224
  1,274
  1,327
  1,383
  1,443
  1,506
  1,573
  1,644
  1,719
  1,798
  1,881
  1,969
  2,062
  2,159
  2,262
  2,370
  2,484
  2,604
  2,730
  2,863
Adjusted assets (=assets-cash), $m
  873
  890
  911
  934
  960
  989
  1,021
  1,056
  1,094
  1,134
  1,178
  1,224
  1,274
  1,327
  1,383
  1,443
  1,506
  1,573
  1,644
  1,719
  1,798
  1,881
  1,969
  2,062
  2,159
  2,262
  2,370
  2,484
  2,604
  2,730
  2,863
Revenue / Adjusted assets
  1.367
  1.367
  1.367
  1.367
  1.368
  1.368
  1.367
  1.367
  1.367
  1.368
  1.367
  1.368
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
Average production assets, $m
  266
  271
  278
  285
  293
  302
  311
  322
  333
  346
  359
  373
  388
  405
  422
  440
  459
  480
  501
  524
  548
  573
  600
  628
  658
  690
  723
  757
  794
  832
  873
Working capital, $m
  242
  215
  220
  226
  232
  239
  247
  256
  265
  274
  285
  296
  308
  321
  335
  349
  364
  381
  398
  416
  435
  455
  476
  499
  522
  547
  573
  601
  630
  661
  693
Total debt, $m
  21
  27
  33
  41
  49
  59
  69
  80
  92
  105
  119
  134
  150
  167
  185
  204
  225
  246
  269
  293
  318
  345
  373
  403
  434
  467
  502
  538
  577
  617
  660
Total liabilities, $m
  281
  286
  292
  300
  308
  318
  328
  339
  351
  364
  378
  393
  409
  426
  444
  463
  484
  505
  528
  552
  577
  604
  632
  662
  693
  726
  761
  797
  836
  876
  919
Total equity, $m
  624
  604
  618
  634
  652
  672
  694
  717
  743
  770
  800
  831
  865
  901
  939
  980
  1,023
  1,068
  1,116
  1,167
  1,221
  1,277
  1,337
  1,400
  1,466
  1,536
  1,609
  1,687
  1,768
  1,854
  1,944
Total liabilities and equity, $m
  905
  890
  910
  934
  960
  990
  1,022
  1,056
  1,094
  1,134
  1,178
  1,224
  1,274
  1,327
  1,383
  1,443
  1,507
  1,573
  1,644
  1,719
  1,798
  1,881
  1,969
  2,062
  2,159
  2,262
  2,370
  2,484
  2,604
  2,730
  2,863
Debt-to-equity ratio
  0.034
  0.040
  0.050
  0.060
  0.080
  0.090
  0.100
  0.110
  0.120
  0.140
  0.150
  0.160
  0.170
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
Adjusted equity ratio
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679
  0.679

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -82
  -87
  -93
  -99
  -105
  -112
  -119
  -127
Depreciation, amort., depletion, $m
  47
  48
  50
  51
  52
  54
  56
  57
  60
  62
  64
  67
  69
  72
  75
  79
  82
  86
  89
  94
  98
  102
  107
  112
  118
  123
  129
  135
  142
  149
  156
Funds from operations, $m
  39
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  30
  30
  30
  30
  30
  30
  30
  29
  29
Change in working capital, $m
  -15
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
Cash from operations, $m
  54
  27
  26
  26
  25
  24
  24
  23
  22
  21
  21
  20
  19
  18
  17
  17
  16
  15
  14
  13
  12
  10
  9
  8
  7
  5
  4
  2
  1
  -1
  -3
Maintenance CAPEX, $m
  0
  -47
  -48
  -50
  -51
  -52
  -54
  -56
  -57
  -60
  -62
  -64
  -67
  -69
  -72
  -75
  -79
  -82
  -86
  -89
  -94
  -98
  -102
  -107
  -112
  -118
  -123
  -129
  -135
  -142
  -149
New CAPEX, $m
  -38
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
Cash from investing activities, $m
  -37
  -53
  -54
  -57
  -59
  -61
  -64
  -67
  -68
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -98
  -102
  -108
  -112
  -118
  -123
  -129
  -135
  -142
  -149
  -156
  -164
  -172
  -180
  -189
Free cash flow, $m
  17
  -26
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -50
  -54
  -58
  -63
  -67
  -72
  -77
  -82
  -88
  -94
  -100
  -106
  -113
  -120
  -128
  -135
  -144
  -152
  -162
  -171
  -181
  -192
Issuance/(repayment) of debt, $m
  10
  6
  7
  8
  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
Issuance/(repurchase) of shares, $m
  0
  29
  32
  36
  39
  42
  46
  50
  54
  58
  62
  67
  72
  77
  82
  88
  94
  100
  107
  114
  121
  128
  136
  145
  154
  163
  173
  183
  194
  205
  217
Cash from financing (excl. dividends), $m  
  65
  35
  39
  44
  47
  51
  56
  61
  66
  71
  76
  82
  88
  94
  100
  107
  114
  121
  130
  138
  146
  155
  164
  175
  185
  196
  208
  220
  232
  245
  260
Total cash flow (excl. dividends), $m
  81
  8
  10
  12
  13
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  67
Retained Cash Flow (-), $m
  0
  -29
  -32
  -36
  -39
  -42
  -46
  -50
  -54
  -58
  -62
  -67
  -72
  -77
  -82
  -88
  -94
  -100
  -107
  -114
  -121
  -128
  -136
  -145
  -154
  -163
  -173
  -183
  -194
  -205
  -217
Prev. year cash balance distribution, $m
 
  31
  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
 
  10
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -71
  -76
  -81
  -86
  -92
  -98
  -104
  -111
  -118
  -125
  -133
  -141
  -149
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
 
  10
  -20
  -21
  -21
  -21
  -22
  -22
  -22
  -22
  -21
  -21
  -20
  -19
  -18
  -17
  -16
  -14
  -13
  -12
  -10
  -9
  -8
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
Current shareholders' claim on cash, %
  100
  93.5
  86.9
  80.3
  73.8
  67.6
  61.6
  55.8
  50.4
  45.4
  40.6
  36.3
  32.3
  28.7
  25.3
  22.4
  19.7
  17.2
  15.1
  13.2
  11.5
  10.0
  8.7
  7.5
  6.5
  5.6
  4.8
  4.1
  3.6
  3.1
  2.6

Armstrong Flooring, Inc. produces flooring products for use primarily in the construction and renovation of residential, commercial and institutional buildings. The Company designs, manufactures, sources and sells resilient and wood flooring products in North America and the Pacific Rim. It operates through two segments: Resilient Flooring and Wood Flooring. The Resilient Flooring segment designs, manufactures, sources and sells a range of floor coverings primarily for homes and commercial buildings under various brands, including the Armstrong brand. The Wood Flooring segment designs, manufactures, sources and sells branded hardwood flooring products, including the Armstrong and Bruce brands, for use in residential construction and renovation, with some commercial applications in stores, restaurants and high-end offices. It sells products through independent wholesale flooring distributors re-selling its products to retailers, builders, contractors, installers and others.


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FINANCIAL RATIOS  of  Armstrong Flooring (AFI)

Valuation Ratios
P/E Ratio 45
Price to Sales 0.3
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 25.3
Growth Rates
Sales Growth Rate 0.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -38.7%
Cap. Spend. - 3 Yr. Gr. Rate -9.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 3.4%
Total Debt to Equity 3.4%
Interest Coverage 7
Management Effectiveness
Return On Assets 1.2%
Ret/ On Assets - 3 Yr. Avg. -0.9%
Return On Total Capital 1.4%
Ret/ On T. Cap. - 3 Yr. Avg. -1.4%
Return On Equity 1.4%
Return On Equity - 3 Yr. Avg. -1.4%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 19.3%
Gross Margin - 3 Yr. Avg. 17.7%
EBITDA Margin 5.1%
EBITDA Margin - 3 Yr. Avg. 4.2%
Operating Margin 1.6%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. 0.3%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. 0.2%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 39.7%
Payout Ratio 555.6%

AFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AFI stock intrinsic value calculation we used $1193 million for the last fiscal year's total revenue generated by Armstrong Flooring. The default revenue input number comes from 2016 income statement of Armstrong Flooring. 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 AFI 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 4.3%, whose default value for AFI is calculated based on our internal credit rating of Armstrong Flooring, 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 Armstrong Flooring.
    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 AFI stock the variable cost ratio is equal to 101.2%.

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 AFI 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 12.9% for Armstrong Flooring.

Corporate tax rate of 27% is the nominal tax rate for Armstrong Flooring. 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 AFI 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 AFI are equal to 22.3%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Armstrong Flooring 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 AFI is equal to 17.7%. 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 - $624 million for Armstrong Flooring - 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 26.197 million for Armstrong Flooring 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 Armstrong Flooring at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
AWI Armstrong Worl 60.45 18.41  str.sell
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LOW Lowe's 96.93 69.99  sell

COMPANY NEWS

▶ Armstrong Flooring reports 3Q loss   [Nov-06-17 08:13AM  Associated Press]
▶ Armstrong Flooring posts 2Q profit   [Aug-07-17 11:57PM  Associated Press]
▶ Armstrong Flooring reports 1Q loss   [May-08-17 07:14AM  Associated Press]
▶ Armstrong Flooring reports 4Q loss   [07:20AM  Associated Press]
▶ The Top 15 Spin-Offs Of 2016   [Jan-05-17 03:48PM  at Forbes]
▶ Is Armstrong Flooring Inc (AFI) A Good Stock To Buy?   [Dec-09-16 02:48AM  at Insider Monkey]
▶ [$$] Armstrong Flooring's Solid Footings for Growth   [Jun-25-16 12:01AM  at Barrons.com]
▶ [$$] Why Armstrong World's Ceilings Are Looking Up   [May-21-16 12:01AM  at Barrons.com]
Financial statements of AFI
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