Intrinsic value of American Woodmark - AMWD

Previous Close

$86.15

  Intrinsic Value

$121.69

stock screener

  Rating & Target

buy

+41%

Previous close

$86.15

 
Intrinsic value

$121.69

 
Up/down potential

+41%

 
Rating

buy

We calculate the intrinsic value of AMWD 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 1.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
Revenue, $m
  1,121
  1,215
  1,313
  1,415
  1,521
  1,631
  1,746
  1,865
  1,989
  2,117
  2,251
  2,391
  2,536
  2,687
  2,845
  3,009
  3,181
  3,360
  3,548
  3,743
  3,948
  4,161
  4,385
  4,619
  4,864
  5,120
  5,389
  5,670
  5,965
  6,274
Variable operating expenses, $m
  917
  994
  1,074
  1,158
  1,244
  1,334
  1,428
  1,526
  1,627
  1,732
  1,842
  1,956
  2,074
  2,198
  2,327
  2,462
  2,602
  2,749
  2,902
  3,062
  3,229
  3,404
  3,587
  3,778
  3,979
  4,189
  4,408
  4,638
  4,880
  5,132
Fixed operating expenses, $m
  83
  85
  86
  88
  90
  92
  94
  96
  99
  101
  103
  105
  107
  110
  112
  115
  117
  120
  122
  125
  128
  131
  134
  137
  140
  143
  146
  149
  152
  156
Total operating expenses, $m
  1,000
  1,079
  1,160
  1,246
  1,334
  1,426
  1,522
  1,622
  1,726
  1,833
  1,945
  2,061
  2,181
  2,308
  2,439
  2,577
  2,719
  2,869
  3,024
  3,187
  3,357
  3,535
  3,721
  3,915
  4,119
  4,332
  4,554
  4,787
  5,032
  5,288
Operating income, $m
  121
  137
  153
  169
  187
  205
  223
  243
  263
  285
  307
  330
  354
  379
  406
  433
  462
  492
  523
  556
  591
  627
  664
  704
  746
  789
  835
  883
  933
  986
EBITDA, $m
  133
  149
  166
  184
  203
  222
  242
  263
  285
  307
  331
  355
  381
  408
  436
  465
  495
  527
  561
  596
  632
  671
  711
  753
  797
  844
  892
  943
  997
  1,053
Interest expense (income), $m
  1
  1
  1
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  37
  39
Earnings before tax, $m
  120
  135
  150
  166
  183
  200
  218
  237
  256
  276
  298
  320
  343
  367
  392
  418
  446
  474
  504
  536
  569
  603
  640
  677
  717
  759
  803
  849
  897
  947
Tax expense, $m
  32
  36
  41
  45
  49
  54
  59
  64
  69
  75
  80
  86
  93
  99
  106
  113
  120
  128
  136
  145
  154
  163
  173
  183
  194
  205
  217
  229
  242
  256
Net income, $m
  88
  99
  110
  121
  133
  146
  159
  173
  187
  202
  217
  233
  250
  268
  286
  305
  325
  346
  368
  391
  415
  440
  467
  495
  524
  554
  586
  620
  655
  692

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
  385
  417
  451
  486
  522
  560
  599
  640
  682
  727
  773
  820
  870
  922
  976
  1,033
  1,092
  1,153
  1,217
  1,285
  1,355
  1,428
  1,505
  1,585
  1,669
  1,757
  1,849
  1,946
  2,047
  2,153
Adjusted assets (=assets-cash), $m
  385
  417
  451
  486
  522
  560
  599
  640
  682
  727
  773
  820
  870
  922
  976
  1,033
  1,092
  1,153
  1,217
  1,285
  1,355
  1,428
  1,505
  1,585
  1,669
  1,757
  1,849
  1,946
  2,047
  2,153
Revenue / Adjusted assets
  2.912
  2.914
  2.911
  2.912
  2.914
  2.913
  2.915
  2.914
  2.916
  2.912
  2.912
  2.916
  2.915
  2.914
  2.915
  2.913
  2.913
  2.914
  2.915
  2.913
  2.914
  2.914
  2.914
  2.914
  2.914
  2.914
  2.915
  2.914
  2.914
  2.914
Average production assets, $m
  119
  129
  139
  150
  161
  173
  185
  198
  211
  224
  239
  253
  269
  285
  302
  319
  337
  356
  376
  397
  418
  441
  465
  490
  516
  543
  571
  601
  632
  665
Working capital, $m
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
Total debt, $m
  28
  41
  55
  70
  85
  101
  117
  134
  152
  170
  189
  209
  230
  251
  274
  297
  322
  347
  374
  402
  431
  462
  494
  527
  562
  599
  637
  677
  719
  763
Total liabilities, $m
  160
  173
  187
  202
  217
  233
  249
  266
  284
  302
  321
  341
  362
  384
  406
  430
  454
  480
  506
  534
  564
  594
  626
  659
  694
  731
  769
  810
  852
  896
Total equity, $m
  225
  243
  263
  284
  305
  327
  350
  374
  399
  424
  451
  479
  508
  539
  570
  603
  638
  673
  711
  750
  791
  834
  879
  926
  975
  1,026
  1,080
  1,136
  1,196
  1,257
Total liabilities and equity, $m
  385
  416
  450
  486
  522
  560
  599
  640
  683
  726
  772
  820
  870
  923
  976
  1,033
  1,092
  1,153
  1,217
  1,284
  1,355
  1,428
  1,505
  1,585
  1,669
  1,757
  1,849
  1,946
  2,048
  2,153
Debt-to-equity ratio
  0.120
  0.170
  0.210
  0.250
  0.280
  0.310
  0.330
  0.360
  0.380
  0.400
  0.420
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.520
  0.530
  0.540
  0.540
  0.550
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.600
  0.610
Adjusted equity ratio
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  88
  99
  110
  121
  133
  146
  159
  173
  187
  202
  217
  233
  250
  268
  286
  305
  325
  346
  368
  391
  415
  440
  467
  495
  524
  554
  586
  620
  655
  692
Depreciation, amort., depletion, $m
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  52
  54
  57
  60
  63
  67
Funds from operations, $m
  100
  111
  124
  136
  150
  163
  178
  193
  208
  224
  241
  259
  277
  296
  316
  337
  359
  382
  406
  431
  457
  485
  513
  544
  575
  608
  643
  680
  718
  758
Change in working capital, $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
  1
  1
  1
  1
  1
Cash from operations, $m
  100
  111
  123
  136
  149
  163
  177
  192
  208
  224
  241
  258
  277
  296
  316
  337
  359
  382
  405
  430
  457
  484
  513
  543
  575
  608
  643
  679
  717
  758
Maintenance CAPEX, $m
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -63
New CAPEX, $m
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
Cash from investing activities, $m
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -32
  -33
  -35
  -36
  -39
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -79
  -82
  -87
  -91
  -96
Free cash flow, $m
  79
  89
  100
  111
  123
  135
  148
  161
  175
  189
  204
  220
  236
  253
  271
  289
  309
  329
  350
  372
  395
  420
  445
  472
  500
  529
  560
  592
  626
  662
Issuance/(repayment) of debt, $m
  12
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  23
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
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  
  12
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  23
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
Total cash flow (excl. dividends), $m
  91
  103
  114
  126
  138
  151
  164
  178
  193
  208
  223
  240
  257
  275
  293
  313
  333
  354
  377
  400
  425
  450
  477
  505
  535
  566
  598
  632
  668
  706
Retained Cash Flow (-), $m
  -19
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
Prev. year cash balance distribution, $m
  146
  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
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
Cash available for distribution, $m
  219
  84
  95
  106
  117
  129
  141
  154
  168
  182
  197
  212
  228
  244
  262
  280
  299
  319
  339
  361
  384
  407
  432
  458
  486
  514
  544
  576
  609
  644
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
  210
  77
  82
  87
  91
  94
  96
  96
  96
  95
  93
  90
  87
  82
  77
  71
  65
  59
  52
  46
  40
  34
  28
  23
  19
  15
  12
  9
  7
  5
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
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American Woodmark Corporation manufactures and distributes kitchen cabinets and vanities for the remodeling and new home construction markets. The Company offers framed stock cabinets in approximately 500 different cabinet lines, ranging in price from relatively inexpensive to medium-priced styles. Styles vary by design and color from natural wood finishes to low-pressure laminate surfaces. The product offering of stock cabinets includes approximately 90 door designs in over 20 colors. Stock cabinets consist of cabinet interiors of varying dimensions and construction options, and a maple, oak, cherry, or hickory front frame, door and/or drawer front. The Company's products are sold under the brand names of American Woodmark, Simply Woodmark, Timberlake, Shenandoah Cabinetry, Shenandoah Value Series and Waypoint Living Spaces. The Company's primary raw materials used include hard maple, soft maple, oak, cherry, and hickory lumber and plywood.

FINANCIAL RATIOS  of  American Woodmark (AMWD)

Valuation Ratios
P/E Ratio 19.7
Price to Sales 1.4
Price to Book 4
Price to Tangible Book
Price to Cash Flow 18.2
Price to Free Cash Flow 25.4
Growth Rates
Sales Growth Rate 8.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24.1%
Cap. Spend. - 3 Yr. Gr. Rate 22.4%
Financial Strength
Quick Ratio 115
Current Ratio 0
LT Debt to Equity 4.3%
Total Debt to Equity 4.8%
Interest Coverage 110
Management Effectiveness
Return On Assets 14.8%
Ret/ On Assets - 3 Yr. Avg. 12.9%
Return On Total Capital 21.1%
Ret/ On T. Cap. - 3 Yr. Avg. 19.2%
Return On Equity 22.4%
Return On Equity - 3 Yr. Avg. 20.9%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 21.8%
Gross Margin - 3 Yr. Avg. 20.5%
EBITDA Margin 12.5%
EBITDA Margin - 3 Yr. Avg. 10.8%
Operating Margin 10.5%
Oper. Margin - 3 Yr. Avg. 9%
Pre-Tax Margin 10.6%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 6.9%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 34.9%
Eff/ Tax Rate - 3 Yr. Avg. 34.7%
Payout Ratio 0%

AMWD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMWD stock intrinsic value calculation we used $1030 million for the last fiscal year's total revenue generated by American Woodmark. The default revenue input number comes from 2017 income statement of American Woodmark. 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 AMWD stock valuation model: a) initial revenue growth rate of 8.8% 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 AMWD is calculated based on our internal credit rating of American Woodmark, 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 Woodmark.
    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 AMWD stock the variable cost ratio is equal to 81.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $81 million in the base year in the intrinsic value calculation for AMWD 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 American Woodmark.

Corporate tax rate of 27% is the nominal tax rate for American Woodmark. 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 AMWD stock is equal to 0.3%.

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 AMWD are equal to 10.6%.

Life of production assets of 10 years is the average useful life of capital assets used in American Woodmark 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 AMWD is equal to 0.2%. 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 - $352 million for American Woodmark - 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 16 million for American Woodmark 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 Woodmark at the current share price and the inputted number of shares is $1.4 billion.

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