Intrinsic value of American Superconductor - AMSC

Previous Close

$4.37

  Intrinsic Value

$0.78

stock screener

  Rating & Target

str. sell

-82%

Previous close

$4.37

 
Intrinsic value

$0.78

 
Up/down potential

-82%

 
Rating

str. sell

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

We calculate the intrinsic value of AMSC 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 2017), $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 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -21.88
  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
  75
  77
  78
  80
  83
  85
  88
  91
  94
  97
  101
  105
  110
  114
  119
  124
  129
  135
  141
  148
  154
  162
  169
  177
  186
  194
  204
  213
  224
  235
  246
Variable operating expenses, $m
 
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Fixed operating expenses, $m
 
  59
  61
  62
  64
  66
  67
  69
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
Total operating expenses, $m
  103
  106
  109
  111
  115
  118
  121
  125
  129
  132
  136
  141
  145
  150
  155
  160
  165
  171
  177
  184
  190
  196
  204
  211
  219
  227
  235
  244
  253
  263
  273
Operating income, $m
  -28
  -30
  -31
  -31
  -32
  -33
  -33
  -34
  -34
  -35
  -35
  -35
  -36
  -36
  -36
  -36
  -36
  -36
  -36
  -36
  -35
  -35
  -34
  -34
  -33
  -32
  -31
  -30
  -29
  -28
  -26
EBITDA, $m
  -20
  -22
  -22
  -23
  -23
  -24
  -24
  -24
  -24
  -24
  -24
  -24
  -24
  -24
  -23
  -23
  -22
  -21
  -21
  -20
  -19
  -18
  -16
  -15
  -13
  -11
  -10
  -7
  -5
  -3
  0
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
Earnings before tax, $m
  -26
  -30
  -31
  -31
  -32
  -33
  -33
  -34
  -35
  -35
  -35
  -36
  -36
  -36
  -37
  -37
  -37
  -37
  -37
  -37
  -37
  -36
  -36
  -35
  -35
  -34
  -34
  -33
  -32
  -31
  -29
Tax expense, $m
  1
  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
  -27
  -30
  -31
  -31
  -32
  -33
  -33
  -34
  -35
  -35
  -35
  -36
  -36
  -36
  -37
  -37
  -37
  -37
  -37
  -37
  -37
  -36
  -36
  -35
  -35
  -34
  -34
  -33
  -32
  -31
  -29

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  27
  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
  100
  74
  76
  78
  80
  83
  85
  88
  92
  95
  99
  102
  107
  111
  116
  121
  126
  132
  138
  144
  150
  157
  165
  173
  181
  189
  198
  208
  218
  228
  240
Adjusted assets (=assets-cash), $m
  73
  74
  76
  78
  80
  83
  85
  88
  92
  95
  99
  102
  107
  111
  116
  121
  126
  132
  138
  144
  150
  157
  165
  173
  181
  189
  198
  208
  218
  228
  240
Revenue / Adjusted assets
  1.027
  1.041
  1.026
  1.026
  1.038
  1.024
  1.035
  1.034
  1.022
  1.021
  1.020
  1.029
  1.028
  1.027
  1.026
  1.025
  1.024
  1.023
  1.022
  1.028
  1.027
  1.032
  1.024
  1.023
  1.028
  1.026
  1.030
  1.024
  1.028
  1.031
  1.025
Average production assets, $m
  48
  48
  50
  51
  52
  54
  56
  57
  60
  62
  64
  67
  69
  72
  75
  78
  82
  86
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  142
  149
  156
Working capital, $m
  24
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
Total debt, $m
  1
  1
  2
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  20
  23
  25
  28
  31
  34
  38
  41
  45
  49
  53
  57
  62
  67
  72
  77
  83
  89
Total liabilities, $m
  40
  40
  41
  42
  43
  44
  46
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
Total equity, $m
  60
  35
  36
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  102
  106
  112
Total liabilities and equity, $m
  100
  75
  77
  78
  80
  83
  86
  88
  92
  95
  99
  103
  107
  111
  116
  120
  126
  131
  137
  144
  150
  157
  165
  172
  180
  189
  198
  208
  218
  228
  240
Debt-to-equity ratio
  0.017
  0.020
  0.050
  0.080
  0.100
  0.140
  0.170
  0.200
  0.230
  0.260
  0.300
  0.330
  0.360
  0.390
  0.420
  0.450
  0.480
  0.510
  0.540
  0.560
  0.590
  0.610
  0.640
  0.660
  0.680
  0.700
  0.720
  0.740
  0.760
  0.780
  0.800
Adjusted equity ratio
  0.452
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -27
  -30
  -31
  -31
  -32
  -33
  -33
  -34
  -35
  -35
  -35
  -36
  -36
  -36
  -37
  -37
  -37
  -37
  -37
  -37
  -37
  -36
  -36
  -35
  -35
  -34
  -34
  -33
  -32
  -31
  -29
Depreciation, amort., depletion, $m
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Funds from operations, $m
  -4
  -22
  -22
  -23
  -23
  -24
  -24
  -24
  -24
  -25
  -25
  -25
  -24
  -24
  -24
  -24
  -23
  -22
  -22
  -21
  -20
  -19
  -18
  -16
  -15
  -13
  -12
  -10
  -8
  -5
  -3
Change in working capital, $m
  7
  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 operations, $m
  -11
  -22
  -22
  -23
  -23
  -24
  -24
  -24
  -24
  -24
  -25
  -24
  -24
  -24
  -24
  -23
  -23
  -22
  -22
  -21
  -20
  -19
  -18
  -16
  -15
  -13
  -11
  -10
  -7
  -5
  -3
Maintenance CAPEX, $m
  0
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Cash from investing activities, $m
  0
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -14
  -14
  -15
  -15
  -16
  -16
  -18
  -19
  -19
  -20
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -32
Free cash flow, $m
  -11
  -31
  -32
  -32
  -33
  -34
  -35
  -36
  -36
  -37
  -37
  -38
  -38
  -39
  -39
  -39
  -40
  -40
  -40
  -40
  -40
  -40
  -40
  -39
  -39
  -39
  -38
  -38
  -37
  -36
  -35
Issuance/(repayment) of debt, $m
  -3
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Issuance/(repurchase) of shares, $m
  0
  31
  31
  32
  33
  34
  35
  35
  36
  37
  37
  38
  38
  39
  39
  39
  39
  40
  40
  40
  40
  40
  39
  39
  39
  38
  38
  37
  36
  36
  35
Cash from financing (excl. dividends), $m  
  -1
  32
  32
  33
  34
  35
  36
  37
  38
  39
  39
  40
  40
  41
  42
  42
  42
  43
  43
  43
  44
  44
  43
  43
  43
  43
  43
  42
  41
  42
  41
Total cash flow (excl. dividends), $m
  -13
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
Retained Cash Flow (-), $m
  24
  -31
  -31
  -32
  -33
  -34
  -35
  -35
  -36
  -37
  -37
  -38
  -38
  -39
  -39
  -39
  -39
  -40
  -40
  -40
  -40
  -40
  -39
  -39
  -39
  -38
  -38
  -37
  -36
  -36
  -35
Prev. year cash balance distribution, $m
 
  26
  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
 
  -4
  -31
  -31
  -32
  -33
  -33
  -34
  -35
  -35
  -35
  -36
  -36
  -36
  -37
  -37
  -37
  -37
  -37
  -37
  -36
  -36
  -36
  -35
  -35
  -34
  -33
  -32
  -31
  -30
  -29
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
 
  -4
  -28
  -27
  -26
  -25
  -24
  -23
  -22
  -20
  -19
  -17
  -15
  -14
  -12
  -11
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  60.9
  36.9
  22.4
  13.5
  8.2
  5.0
  3.1
  1.9
  1.2
  0.7
  0.5
  0.3
  0.2
  0.1
  0.1
  0.1
  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

American Superconductor Corporation (AMSC) is a provider of megawatt-scale solutions. The Company operates through two segments: Wind and Grid. Through the Company's Windtec Solutions brand, the Wind business segment enables manufacturers to field wind turbines. Through the Company's Gridtec Solutions, the Grid business segment enables electric utilities and renewable energy project developers to connect, transmit and distribute power. AMSC supplies power electronics and control systems, licenses its engineered wind turbine designs and provides customer support services to wind turbine manufacturers. The Company provides a range of power electronics and software-based control systems. AMSC provides transmission planning services that enable it to identify power grid congestion and other risks. The Company also sells grid interconnection solutions for wind farms and solar power plants, power quality systems, and transmission and distribution cable systems.

FINANCIAL RATIOS  of  American Superconductor (AMSC)

Valuation Ratios
P/E Ratio -2.4
Price to Sales 0.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow -5.8
Price to Free Cash Flow -5.3
Growth Rates
Sales Growth Rate -21.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 27
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 1.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -23%
Ret/ On Assets - 3 Yr. Avg. -23.6%
Return On Total Capital -36.2%
Ret/ On T. Cap. - 3 Yr. Avg. -36.1%
Return On Equity -37.5%
Return On Equity - 3 Yr. Avg. -38.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 14.7%
Gross Margin - 3 Yr. Avg. 13.9%
EBITDA Margin -24%
EBITDA Margin - 3 Yr. Avg. -30%
Operating Margin -37.3%
Oper. Margin - 3 Yr. Avg. -43.8%
Pre-Tax Margin -34.7%
Pre-Tax Margin - 3 Yr. Avg. -41.9%
Net Profit Margin -36%
Net Profit Margin - 3 Yr. Avg. -43%
Effective Tax Rate -3.8%
Eff/ Tax Rate - 3 Yr. Avg. -4.5%
Payout Ratio 0%

AMSC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMSC stock intrinsic value calculation we used $75 million for the last fiscal year's total revenue generated by American Superconductor. The default revenue input number comes from 2017 income statement of American Superconductor. 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 AMSC 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 AMSC is calculated based on our internal credit rating of American Superconductor, 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 American Superconductor.
    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 AMSC stock the variable cost ratio is equal to 61.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $58 million in the base year in the intrinsic value calculation for AMSC 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 3.5% for American Superconductor.

Corporate tax rate of 27% is the nominal tax rate for American Superconductor. 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 AMSC 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 AMSC are equal to 63.3%.

Life of production assets of 5.9 years is the average useful life of capital assets used in American Superconductor 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 AMSC is equal to -2.7%. 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 - $60 million for American Superconductor - 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 19.195 million for American Superconductor 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 American Superconductor at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ AMSC Acquires Infinia Technology Corporation   [Sep-26-17 04:05PM  GlobeNewswire]
▶ American Superconductor posts 1Q loss   [Aug-08-17 11:10PM  Associated Press]
▶ American Superconductor posts 4Q loss   [May-25-17 08:50AM  Associated Press]
▶ AMSC Prices $16 Million Public Offering of Common Stock   [May-05-17 09:00AM  GlobeNewswire]
▶ AMSC Announces Proposed Public Offering of Common Stock   [May-04-17 04:01PM  GlobeNewswire]
▶ AMSC stock plummets after drop-off in orders leads to 'revenue shortfall'   [Apr-27-17 03:32PM  American City Business Journals]
▶ AMSC Announces Preliminary Financial Results   [Apr-26-17 04:15PM  GlobeNewswire]
▶ Moving Massachusetts Facility   [Apr-04-17 12:00PM  GlobeNewswire]
▶ American Superconductor posts 3Q loss   [Feb-06-17 08:45AM  Associated Press]
▶ Five Cheap Industrial Stocks that Captured Smart Moneys Attention   [Oct-09-16 04:39PM  at Insider Monkey]
▶ Beyond Brexit, Analysts See Huge Upside in 7 Stocks Under $10   [Jun-26-16 10:40AM  at 24/7 Wall St.]
Financial statements of AMSC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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