Intrinsic value of Altra Industrial Motion - AIMC

Previous Close

$35.60

  Intrinsic Value

$37.75

stock screener

  Rating & Target

hold

+6%

Previous close

$35.60

 
Intrinsic value

$37.75

 
Up/down potential

+6%

 
Rating

hold

We calculate the intrinsic value of AIMC 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 1.0

 

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, %
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  932
  989
  1,049
  1,112
  1,177
  1,245
  1,316
  1,390
  1,467
  1,548
  1,632
  1,720
  1,812
  1,909
  2,010
  2,116
  2,227
  2,343
  2,465
  2,592
  2,726
  2,866
  3,013
  3,168
  3,329
  3,499
  3,677
  3,863
  4,059
  4,264
Variable operating expenses, $m
  742
  786
  831
  879
  928
  979
  1,033
  1,089
  1,147
  1,208
  1,236
  1,303
  1,373
  1,446
  1,522
  1,603
  1,686
  1,774
  1,867
  1,963
  2,065
  2,171
  2,282
  2,399
  2,521
  2,650
  2,784
  2,926
  3,074
  3,229
Fixed operating expenses, $m
  98
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  125
  127
  130
  133
  136
  139
  142
  145
  148
  152
  155
  158
  162
  165
  169
  173
  177
  180
  184
Total operating expenses, $m
  840
  886
  933
  984
  1,035
  1,088
  1,145
  1,203
  1,264
  1,327
  1,358
  1,428
  1,500
  1,576
  1,655
  1,739
  1,825
  1,916
  2,012
  2,111
  2,217
  2,326
  2,440
  2,561
  2,686
  2,819
  2,957
  3,103
  3,254
  3,413
Operating income, $m
  92
  103
  116
  129
  142
  156
  171
  186
  203
  220
  274
  293
  313
  333
  355
  378
  402
  427
  453
  481
  510
  541
  573
  607
  643
  680
  720
  761
  805
  851
EBITDA, $m
  154
  167
  181
  196
  211
  227
  244
  261
  280
  299
  319
  340
  362
  386
  410
  436
  463
  491
  521
  552
  585
  620
  656
  694
  734
  776
  821
  867
  916
  968
Interest expense (income), $m
  7
  15
  17
  19
  20
  22
  25
  27
  29
  31
  34
  37
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
Earnings before tax, $m
  77
  87
  97
  108
  120
  132
  144
  157
  171
  186
  238
  254
  270
  288
  307
  326
  347
  368
  391
  415
  440
  466
  494
  523
  554
  586
  620
  656
  694
  733
Tax expense, $m
  21
  23
  26
  29
  32
  36
  39
  42
  46
  50
  64
  68
  73
  78
  83
  88
  94
  99
  106
  112
  119
  126
  133
  141
  150
  158
  167
  177
  187
  198
Net income, $m
  56
  63
  71
  79
  87
  96
  105
  115
  125
  136
  173
  185
  197
  210
  224
  238
  253
  269
  285
  303
  321
  340
  361
  382
  404
  428
  453
  479
  506
  535

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
  978
  1,038
  1,101
  1,167
  1,235
  1,306
  1,380
  1,458
  1,539
  1,624
  1,712
  1,805
  1,902
  2,003
  2,109
  2,220
  2,337
  2,459
  2,586
  2,720
  2,861
  3,008
  3,162
  3,324
  3,493
  3,671
  3,858
  4,054
  4,259
  4,475
Adjusted assets (=assets-cash), $m
  978
  1,038
  1,101
  1,167
  1,235
  1,306
  1,380
  1,458
  1,539
  1,624
  1,712
  1,805
  1,902
  2,003
  2,109
  2,220
  2,337
  2,459
  2,586
  2,720
  2,861
  3,008
  3,162
  3,324
  3,493
  3,671
  3,858
  4,054
  4,259
  4,475
Revenue / Adjusted assets
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.954
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
  0.953
Average production assets, $m
  385
  409
  433
  459
  486
  514
  543
  574
  606
  639
  674
  710
  749
  788
  830
  874
  920
  968
  1,018
  1,071
  1,126
  1,184
  1,245
  1,308
  1,375
  1,445
  1,518
  1,596
  1,676
  1,761
Working capital, $m
  174
  185
  196
  208
  220
  233
  246
  260
  274
  289
  305
  322
  339
  357
  376
  396
  416
  438
  461
  485
  510
  536
  564
  592
  623
  654
  688
  722
  759
  797
Total debt, $m
  308
  343
  379
  416
  455
  495
  537
  582
  628
  676
  726
  779
  834
  892
  952
  1,015
  1,082
  1,151
  1,224
  1,300
  1,380
  1,463
  1,551
  1,643
  1,740
  1,841
  1,947
  2,059
  2,176
  2,298
Total liabilities, $m
  556
  591
  627
  664
  703
  743
  785
  830
  876
  924
  974
  1,027
  1,082
  1,140
  1,200
  1,263
  1,330
  1,399
  1,472
  1,548
  1,628
  1,711
  1,799
  1,891
  1,988
  2,089
  2,195
  2,307
  2,423
  2,546
Total equity, $m
  421
  447
  475
  503
  532
  563
  595
  628
  663
  700
  738
  778
  820
  863
  909
  957
  1,007
  1,060
  1,115
  1,172
  1,233
  1,296
  1,363
  1,433
  1,506
  1,582
  1,663
  1,747
  1,836
  1,929
Total liabilities and equity, $m
  977
  1,038
  1,102
  1,167
  1,235
  1,306
  1,380
  1,458
  1,539
  1,624
  1,712
  1,805
  1,902
  2,003
  2,109
  2,220
  2,337
  2,459
  2,587
  2,720
  2,861
  3,007
  3,162
  3,324
  3,494
  3,671
  3,858
  4,054
  4,259
  4,475
Debt-to-equity ratio
  0.730
  0.770
  0.800
  0.830
  0.850
  0.880
  0.900
  0.930
  0.950
  0.970
  0.980
  1.000
  1.020
  1.030
  1.050
  1.060
  1.070
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.160
  1.170
  1.180
  1.190
  1.190
Adjusted equity ratio
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431
  0.431

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  63
  71
  79
  87
  96
  105
  115
  125
  136
  173
  185
  197
  210
  224
  238
  253
  269
  285
  303
  321
  340
  361
  382
  404
  428
  453
  479
  506
  535
Depreciation, amort., depletion, $m
  62
  64
  65
  67
  69
  71
  73
  75
  77
  79
  45
  47
  50
  53
  55
  58
  61
  65
  68
  71
  75
  79
  83
  87
  92
  96
  101
  106
  112
  117
Funds from operations, $m
  118
  127
  136
  146
  156
  167
  178
  190
  202
  215
  218
  233
  247
  263
  279
  296
  314
  333
  353
  374
  396
  419
  444
  469
  496
  524
  554
  585
  618
  653
Change in working capital, $m
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
Cash from operations, $m
  108
  116
  125
  134
  144
  154
  165
  176
  188
  200
  203
  216
  230
  245
  260
  277
  294
  312
  330
  350
  371
  393
  416
  440
  466
  493
  521
  550
  581
  614
Maintenance CAPEX, $m
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -112
New CAPEX, $m
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -85
Cash from investing activities, $m
  -47
  -50
  -52
  -55
  -58
  -60
  -63
  -67
  -70
  -73
  -78
  -81
  -85
  -90
  -95
  -99
  -104
  -109
  -115
  -121
  -126
  -133
  -140
  -147
  -154
  -162
  -169
  -178
  -187
  -197
Free cash flow, $m
  61
  67
  73
  80
  87
  94
  101
  109
  117
  126
  125
  135
  145
  155
  166
  177
  190
  202
  216
  230
  245
  260
  276
  294
  312
  331
  351
  372
  394
  418
Issuance/(repayment) of debt, $m
  32
  34
  36
  37
  39
  41
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  97
  101
  106
  111
  117
  123
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  
  32
  34
  36
  37
  39
  41
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  97
  101
  106
  111
  117
  123
Total cash flow (excl. dividends), $m
  93
  101
  109
  117
  125
  134
  144
  153
  163
  174
  176
  187
  200
  213
  226
  241
  256
  272
  288
  306
  324
  344
  364
  386
  408
  432
  457
  483
  511
  540
Retained Cash Flow (-), $m
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -89
  -93
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
  68
  75
  82
  89
  96
  104
  112
  120
  129
  138
  137
  147
  158
  169
  181
  193
  206
  219
  233
  248
  264
  280
  298
  316
  335
  355
  377
  399
  423
  447
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  65
  67
  69
  70
  70
  69
  68
  67
  64
  62
  54
  51
  47
  43
  39
  35
  31
  27
  23
  19
  16
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Current shareholders' claim on cash, %
  100.0
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  100.0
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  100.0
  100.0
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  100.0
  100.0
  100.0
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  100.0

Altra Industrial Motion Corp. is a designer, producer and marketer of a range of mechanical power transmission (MPT) components. The Company operates through three segments: Couplings, Clutches and Brakes; Electromagnetic Clutches and Brakes, and Gearing. It manufactures a range of couplings suitable for various industrial and specialty applications. The Electromagnetic Clutches and Brakes segment products include brakes and clutches that are used to electronically slow, stop, engage or disengage equipment utilizing electromagnetic friction type connections. The Gearing segment product lines include vertical and horizontal gear drives, speed reducers and increasers, high-speed compressor drives, enclosed custom gear drives, various enclosed gear drive and gear motor configurations, and open gearing products, such as spur, helical, worm and miter/bevel gears. Its products are used to control and transmit power and torque in virtually any industrial application involving movement.

FINANCIAL RATIOS  of  Altra Industrial Motion (AIMC)

Valuation Ratios
P/E Ratio 38.7
Price to Sales 1.4
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 12.6
Price to Free Cash Flow 16.7
Growth Rates
Sales Growth Rate -5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.4%
Cap. Spend. - 3 Yr. Gr. Rate -7.5%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 115.2%
Total Debt to Equity 130.7%
Interest Coverage 6
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 9.5%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 31.3%
Gross Margin - 3 Yr. Avg. 30.7%
EBITDA Margin 10%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 4.8%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 3.5%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 26.5%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
Payout Ratio 48%

AIMC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AIMC stock intrinsic value calculation we used $876.737 million for the last fiscal year's total revenue generated by Altra Industrial Motion. The default revenue input number comes from 0001 income statement of Altra Industrial Motion. 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 AIMC stock valuation model: a) initial revenue growth rate of 6.3% 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 5.4%, whose default value for AIMC is calculated based on our internal credit rating of Altra Industrial Motion, 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 Altra Industrial Motion.
    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 AIMC stock the variable cost ratio is equal to 79.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $96 million in the base year in the intrinsic value calculation for AIMC 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 Altra Industrial Motion.

Corporate tax rate of 27% is the nominal tax rate for Altra Industrial Motion. 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 AIMC 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 AIMC are equal to 41.3%.

Life of production assets of 15 years is the average useful life of capital assets used in Altra Industrial Motion 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 AIMC is equal to 18.7%. 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 - $396.705 million for Altra Industrial Motion - 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 29.388 million for Altra Industrial Motion 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 Altra Industrial Motion at the current share price and the inputted number of shares is $1.0 billion.

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