Intrinsic value of Alamo Group, Inc. - ALG

Previous Close

$110.97

  Intrinsic Value

$60.84

stock screener

  Rating & Target

sell

-45%

Previous close

$110.97

 
Intrinsic value

$60.84

 
Up/down potential

-45%

 
Rating

sell

We calculate the intrinsic value of ALG 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 1.3

 

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, %
  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
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
Revenue, $m
  1,062
  1,118
  1,177
  1,239
  1,303
  1,370
  1,441
  1,515
  1,593
  1,674
  1,760
  1,850
  1,944
  2,042
  2,146
  2,254
  2,368
  2,488
  2,613
  2,745
  2,883
  3,029
  3,181
  3,341
  3,509
  3,685
  3,870
  4,064
  4,268
  4,482
Variable operating expenses, $m
  924
  972
  1,022
  1,075
  1,130
  1,187
  1,248
  1,312
  1,378
  1,448
  1,508
  1,585
  1,665
  1,750
  1,839
  1,932
  2,029
  2,132
  2,239
  2,352
  2,471
  2,595
  2,726
  2,863
  3,007
  3,158
  3,316
  3,482
  3,657
  3,840
Fixed operating expenses, $m
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  60
Total operating expenses, $m
  956
  1,004
  1,055
  1,109
  1,165
  1,222
  1,284
  1,349
  1,416
  1,487
  1,547
  1,625
  1,706
  1,792
  1,882
  1,976
  2,074
  2,178
  2,286
  2,400
  2,520
  2,645
  2,777
  2,915
  3,060
  3,213
  3,372
  3,539
  3,715
  3,900
Operating income, $m
  107
  114
  122
  130
  139
  148
  157
  167
  177
  188
  212
  224
  237
  250
  264
  279
  294
  310
  327
  345
  364
  383
  404
  426
  449
  473
  498
  524
  552
  582
EBITDA, $m
  138
  147
  155
  164
  174
  184
  194
  205
  217
  229
  242
  256
  270
  285
  300
  317
  334
  352
  371
  391
  412
  434
  458
  482
  508
  535
  563
  593
  624
  657
Interest expense (income), $m
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
Earnings before tax, $m
  101
  107
  114
  121
  128
  136
  145
  153
  162
  172
  195
  206
  217
  229
  241
  254
  267
  282
  297
  312
  329
  347
  365
  384
  404
  426
  448
  472
  497
  523
Tax expense, $m
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  89
  94
  99
  104
  109
  115
  121
  127
  134
  141
Net income, $m
  73
  78
  83
  88
  94
  100
  106
  112
  119
  126
  142
  150
  158
  167
  176
  185
  195
  206
  217
  228
  240
  253
  266
  280
  295
  311
  327
  344
  362
  381

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
  760
  800
  842
  886
  932
  980
  1,031
  1,084
  1,139
  1,198
  1,259
  1,323
  1,390
  1,461
  1,535
  1,613
  1,694
  1,780
  1,869
  1,964
  2,063
  2,166
  2,275
  2,390
  2,510
  2,636
  2,768
  2,907
  3,053
  3,206
Adjusted assets (=assets-cash), $m
  760
  800
  842
  886
  932
  980
  1,031
  1,084
  1,139
  1,198
  1,259
  1,323
  1,390
  1,461
  1,535
  1,613
  1,694
  1,780
  1,869
  1,964
  2,063
  2,166
  2,275
  2,390
  2,510
  2,636
  2,768
  2,907
  3,053
  3,206
Revenue / Adjusted assets
  1.397
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.399
  1.397
  1.398
  1.398
  1.399
  1.398
  1.398
  1.397
  1.398
  1.398
  1.398
  1.398
  1.397
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
Average production assets, $m
  195
  206
  217
  228
  240
  252
  265
  279
  293
  308
  324
  340
  358
  376
  395
  415
  436
  458
  481
  505
  531
  557
  585
  615
  646
  678
  712
  748
  785
  825
Working capital, $m
  335
  352
  371
  390
  410
  432
  454
  477
  502
  527
  554
  583
  612
  643
  676
  710
  746
  784
  823
  865
  908
  954
  1,002
  1,052
  1,105
  1,161
  1,219
  1,280
  1,344
  1,412
Total debt, $m
  97
  109
  121
  134
  148
  162
  177
  193
  209
  227
  245
  264
  284
  305
  327
  350
  374
  400
  426
  454
  484
  514
  547
  581
  616
  654
  693
  734
  778
  823
Total liabilities, $m
  226
  238
  250
  263
  277
  291
  306
  322
  338
  356
  374
  393
  413
  434
  456
  479
  503
  529
  555
  583
  613
  643
  676
  710
  745
  783
  822
  863
  907
  952
Total equity, $m
  534
  562
  592
  623
  655
  689
  725
  762
  801
  842
  885
  930
  977
  1,027
  1,079
  1,134
  1,191
  1,251
  1,314
  1,380
  1,450
  1,523
  1,600
  1,680
  1,764
  1,853
  1,946
  2,044
  2,146
  2,254
Total liabilities and equity, $m
  760
  800
  842
  886
  932
  980
  1,031
  1,084
  1,139
  1,198
  1,259
  1,323
  1,390
  1,461
  1,535
  1,613
  1,694
  1,780
  1,869
  1,963
  2,063
  2,166
  2,276
  2,390
  2,509
  2,636
  2,768
  2,907
  3,053
  3,206
Debt-to-equity ratio
  0.180
  0.190
  0.200
  0.220
  0.230
  0.240
  0.240
  0.250
  0.260
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
  0.370
Adjusted equity ratio
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  73
  78
  83
  88
  94
  100
  106
  112
  119
  126
  142
  150
  158
  167
  176
  185
  195
  206
  217
  228
  240
  253
  266
  280
  295
  311
  327
  344
  362
  381
Depreciation, amort., depletion, $m
  31
  32
  33
  34
  35
  36
  38
  39
  40
  41
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
  69
  72
  76
Funds from operations, $m
  105
  110
  116
  122
  129
  136
  143
  151
  159
  167
  172
  181
  191
  201
  212
  223
  235
  248
  261
  274
  289
  304
  320
  337
  354
  373
  393
  413
  435
  457
Change in working capital, $m
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  41
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
Cash from operations, $m
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  145
  153
  162
  170
  179
  189
  199
  210
  221
  233
  245
  258
  272
  286
  302
  318
  334
  352
  370
  390
Maintenance CAPEX, $m
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -69
  -72
New CAPEX, $m
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -39
Cash from investing activities, $m
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -76
  -79
  -83
  -87
  -91
  -96
  -101
  -107
  -111
Free cash flow, $m
  61
  64
  68
  72
  76
  80
  85
  89
  94
  99
  101
  107
  113
  119
  126
  133
  140
  148
  156
  165
  174
  183
  193
  203
  214
  226
  238
  251
  264
  278
Issuance/(repayment) of debt, $m
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
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  
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
Total cash flow (excl. dividends), $m
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  119
  126
  133
  140
  148
  156
  164
  173
  183
  193
  203
  214
  225
  237
  250
  263
  277
  292
  308
  324
Retained Cash Flow (-), $m
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -89
  -93
  -98
  -102
  -108
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
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  76
  81
  86
  91
  96
  101
  107
  113
  120
  126
  133
  141
  149
  157
  166
  175
  184
  194
  205
  216
Discount rate, %
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
  43
  44
  44
  44
  43
  43
  42
  41
  39
  37
  34
  32
  30
  28
  25
  23
  20
  18
  16
  13
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
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

Alamo Group Inc. is engaged in the design and manufacture of agricultural equipment and infrastructure maintenance equipment for governmental and industrial use. The Company operates in Industrial, Agricultural and European segments. The Company's products include tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, snow removal equipment, pothole patchers, zero turn radius mowers, agricultural implements and related aftermarket. As of December 31, 2016, the Company operated 24 plants in North America, Europe, Australia and Brazil. The Company sells its products through a network of independent dealers and distributors to Governmental end users, related independent contractors, as well as to the agricultural and commercial turf markets. It also offers replacement parts for each of its wholegoods lines. The Company's products are sold through various marketing organizations, and dealer and distributor networks.

FINANCIAL RATIOS  of  Alamo Group, Inc. (ALG)

Valuation Ratios
P/E Ratio 31.7
Price to Sales 1.5
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 16.7
Price to Free Cash Flow 19.2
Growth Rates
Sales Growth Rate -4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -6.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 18%
Total Debt to Equity 18%
Interest Coverage 11
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 7.8%
Return On Total Capital 8.3%
Ret/ On T. Cap. - 3 Yr. Avg. 8.7%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. 11.6%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 24.3%
Gross Margin - 3 Yr. Avg. 23.2%
EBITDA Margin 10.5%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 8%
Oper. Margin - 3 Yr. Avg. 7.7%
Pre-Tax Margin 7.3%
Pre-Tax Margin - 3 Yr. Avg. 7.4%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 35.5%
Eff/ Tax Rate - 3 Yr. Avg. 34.7%
Payout Ratio 10%

ALG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALG stock intrinsic value calculation we used $1009 million for the last fiscal year's total revenue generated by Alamo Group, Inc.. The default revenue input number comes from 0001 income statement of Alamo Group, 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 ALG stock valuation model: a) initial revenue growth rate of 5.3% 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 4.7%, whose default value for ALG is calculated based on our internal credit rating of Alamo Group, 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 Alamo Group, 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 ALG stock the variable cost ratio is equal to 87%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $31 million in the base year in the intrinsic value calculation for ALG 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 7.6% for Alamo Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Alamo Group, 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 ALG 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 ALG are equal to 18.4%.

Life of production assets of 10.9 years is the average useful life of capital assets used in Alamo Group, 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 ALG is equal to 31.5%. 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 - $507.371 million for Alamo Group, 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 11.694 million for Alamo Group, 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 Alamo Group, Inc. at the current share price and the inputted number of shares is $1.3 billion.

RELATED COMPANIES Price Int.Val. Rating
SPAR Spartan Motors 11.91 2.75  str.sell
LNN Lindsay Corpor 89.35 48.92  sell
AGCO AGCO Corporati 67.55 80.39  buy
ARTW Art's-Way 2.10 0.77  str.sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.