Intrinsic value of Armstrong Flooring - AFI

Previous Close

$19.81

  Intrinsic Value

$4.75

stock screener

  Rating & Target

str. sell

-76%

Previous close

$19.81

 
Intrinsic value

$4.75

 
Up/down potential

-76%

 
Rating

str. sell

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

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 0.5

 

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, %
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  1,167
  1,203
  1,243
  1,286
  1,332
  1,382
  1,436
  1,493
  1,555
  1,620
  1,689
  1,762
  1,840
  1,922
  2,009
  2,100
  2,197
  2,299
  2,407
  2,521
  2,640
  2,766
  2,899
  3,038
  3,185
  3,340
  3,502
  3,673
  3,853
  4,041
Variable operating expenses, $m
  1,148
  1,183
  1,222
  1,264
  1,310
  1,359
  1,411
  1,468
  1,527
  1,591
  1,653
  1,724
  1,800
  1,881
  1,966
  2,056
  2,150
  2,250
  2,356
  2,467
  2,584
  2,707
  2,837
  2,974
  3,117
  3,269
  3,428
  3,595
  3,770
  3,955
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
  1,148
  1,183
  1,222
  1,264
  1,310
  1,359
  1,411
  1,468
  1,527
  1,591
  1,653
  1,724
  1,800
  1,881
  1,966
  2,056
  2,150
  2,250
  2,356
  2,467
  2,584
  2,707
  2,837
  2,974
  3,117
  3,269
  3,428
  3,595
  3,770
  3,955
Operating income, $m
  19
  20
  20
  21
  22
  23
  25
  26
  27
  29
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
EBITDA, $m
  102
  105
  109
  112
  116
  121
  125
  131
  136
  142
  148
  154
  161
  168
  176
  184
  192
  201
  210
  220
  231
  242
  253
  266
  278
  292
  306
  321
  337
  353
Interest expense (income), $m
  2
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  35
  37
  39
  42
  45
  47
Earnings before tax, $m
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
  30
  31
  32
  32
  33
  34
  35
  36
  38
  39
Tax expense, $m
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  6
  7
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
Net income, $m
  10
  11
  11
  11
  11
  11
  12
  12
  12
  13
  17
  18
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  27
  28

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
  905
  933
  964
  997
  1,034
  1,072
  1,114
  1,159
  1,206
  1,256
  1,310
  1,367
  1,427
  1,491
  1,558
  1,630
  1,705
  1,784
  1,868
  1,956
  2,048
  2,146
  2,249
  2,357
  2,471
  2,591
  2,717
  2,850
  2,989
  3,135
Adjusted assets (=assets-cash), $m
  905
  933
  964
  997
  1,034
  1,072
  1,114
  1,159
  1,206
  1,256
  1,310
  1,367
  1,427
  1,491
  1,558
  1,630
  1,705
  1,784
  1,868
  1,956
  2,048
  2,146
  2,249
  2,357
  2,471
  2,591
  2,717
  2,850
  2,989
  3,135
Revenue / Adjusted assets
  1.290
  1.289
  1.289
  1.290
  1.288
  1.289
  1.289
  1.288
  1.289
  1.290
  1.289
  1.289
  1.289
  1.289
  1.289
  1.288
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
Average production assets, $m
  470
  485
  501
  518
  537
  557
  579
  602
  626
  653
  681
  710
  741
  775
  810
  846
  886
  927
  970
  1,016
  1,064
  1,115
  1,168
  1,224
  1,284
  1,346
  1,411
  1,480
  1,553
  1,629
Working capital, $m
  206
  213
  220
  228
  236
  245
  254
  264
  275
  287
  299
  312
  326
  340
  356
  372
  389
  407
  426
  446
  467
  490
  513
  538
  564
  591
  620
  650
  682
  715
Total debt, $m
  96
  106
  118
  131
  144
  159
  174
  191
  209
  228
  248
  269
  292
  316
  341
  368
  396
  425
  457
  490
  525
  561
  600
  640
  683
  728
  775
  825
  877
  932
Total liabilities, $m
  339
  350
  361
  374
  388
  402
  418
  434
  452
  471
  491
  513
  535
  559
  584
  611
  639
  669
  700
  733
  768
  805
  843
  884
  927
  972
  1,019
  1,069
  1,121
  1,176
Total equity, $m
  566
  583
  602
  623
  646
  670
  696
  724
  754
  785
  819
  854
  892
  932
  974
  1,018
  1,065
  1,115
  1,167
  1,222
  1,280
  1,341
  1,406
  1,473
  1,544
  1,619
  1,698
  1,781
  1,868
  1,960
Total liabilities and equity, $m
  905
  933
  963
  997
  1,034
  1,072
  1,114
  1,158
  1,206
  1,256
  1,310
  1,367
  1,427
  1,491
  1,558
  1,629
  1,704
  1,784
  1,867
  1,955
  2,048
  2,146
  2,249
  2,357
  2,471
  2,591
  2,717
  2,850
  2,989
  3,136
Debt-to-equity ratio
  0.170
  0.180
  0.200
  0.210
  0.220
  0.240
  0.250
  0.260
  0.280
  0.290
  0.300
  0.310
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
Adjusted equity ratio
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  11
  11
  11
  11
  11
  12
  12
  12
  13
  17
  18
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  27
  28
Depreciation, amort., depletion, $m
  83
  86
  88
  91
  94
  97
  101
  105
  109
  113
  112
  116
  122
  127
  133
  139
  145
  152
  159
  167
  174
  183
  192
  201
  210
  221
  231
  243
  255
  267
Funds from operations, $m
  93
  96
  99
  102
  105
  109
  113
  117
  121
  126
  129
  134
  140
  145
  152
  158
  165
  172
  180
  188
  196
  205
  215
  224
  235
  246
  257
  269
  282
  295
Change in working capital, $m
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
Cash from operations, $m
  88
  90
  92
  94
  97
  100
  103
  107
  110
  114
  117
  121
  126
  131
  136
  142
  148
  154
  161
  168
  175
  183
  191
  200
  209
  218
  228
  239
  250
  262
Maintenance CAPEX, $m
  -75
  -77
  -79
  -82
  -85
  -88
  -91
  -95
  -99
  -103
  -107
  -112
  -116
  -122
  -127
  -133
  -139
  -145
  -152
  -159
  -167
  -174
  -183
  -192
  -201
  -210
  -221
  -231
  -243
  -255
New CAPEX, $m
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
Cash from investing activities, $m
  -88
  -92
  -95
  -99
  -104
  -108
  -113
  -118
  -124
  -129
  -135
  -142
  -147
  -155
  -162
  -170
  -178
  -186
  -195
  -205
  -215
  -225
  -236
  -248
  -260
  -272
  -286
  -300
  -315
  -331
Free cash flow, $m
  0
  -2
  -4
  -5
  -7
  -8
  -10
  -11
  -13
  -15
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -42
  -45
  -48
  -51
  -54
  -58
  -61
  -65
  -69
Issuance/(repayment) of debt, $m
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
Issuance/(repurchase) of shares, $m
  5
  7
  9
  10
  11
  13
  14
  16
  17
  19
  16
  18
  20
  21
  23
  25
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
Cash from financing (excl. dividends), $m  
  15
  18
  21
  23
  25
  28
  30
  33
  35
  38
  36
  39
  43
  45
  48
  52
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  100
  106
  112
  118
Total cash flow (excl. dividends), $m
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
  40
  43
  45
  47
  49
Retained Cash Flow (-), $m
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
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
  -1
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -8
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
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
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  99.0
  97.7
  96.2
  94.5
  92.7
  90.7
  88.7
  86.5
  84.4
  82.1
  80.3
  78.5
  76.6
  74.7
  72.7
  70.7
  68.8
  66.8
  64.8
  62.8
  60.9
  59.0
  57.1
  55.2
  53.4
  51.6
  49.8
  48.1
  46.5
  44.8

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.

FINANCIAL RATIOS  of  Armstrong Flooring (AFI)

Valuation Ratios
P/E Ratio 61.4
Price to Sales 0.5
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 10.2
Price to Free Cash Flow 34.5
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 $1133.7 million for the last fiscal year's total revenue generated by Armstrong Flooring. The default revenue input number comes from 0001 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 2.9% 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 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 98.4%.

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 5.4% 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 40.3%.

Life of production assets of 6.1 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 - $550 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 25.772 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 $0.5 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Armstrong Flooring, Inc. to Host Earnings Call   [Aug-07-18 09:00AM  ACCESSWIRE]
▶ Armstrong Flooring: 2Q Earnings Snapshot   [07:46AM  Associated Press]
▶ Should You Buy Armstrong Flooring Inc (NYSE:AFI) Now?   [May-08-18 11:15AM  Simply Wall St.]
▶ Armstrong Flooring: 1Q Earnings Snapshot   [08:06AM  Associated Press]
▶ Armstrong Flooring reports 4Q loss   [07:13AM  Associated Press]
▶ 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]

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