Intrinsic value of American Woodmark - AMWD

Previous Close

$98.85

  Intrinsic Value

$117.08

stock screener

  Rating & Target

hold

+18%

  Value-price divergence*

+26%

Previous close

$98.85

 
Intrinsic value

$117.08

 
Up/down potential

+18%

 
Rating

hold

 
Value-price divergence*

+26%

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

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 1.6

 

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, %
  8.76
  7.40
  7.16
  6.94
  6.75
  6.57
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
Revenue, $m
  1,030
  1,106
  1,185
  1,268
  1,353
  1,442
  1,535
  1,631
  1,731
  1,836
  1,945
  2,058
  2,177
  2,300
  2,429
  2,564
  2,705
  2,852
  3,006
  3,167
  3,336
  3,513
  3,698
  3,891
  4,094
  4,306
  4,529
  4,763
  5,007
  5,264
  5,533
Variable operating expenses, $m
 
  906
  971
  1,038
  1,108
  1,181
  1,257
  1,336
  1,418
  1,504
  1,593
  1,686
  1,783
  1,884
  1,990
  2,100
  2,215
  2,336
  2,462
  2,594
  2,732
  2,877
  3,028
  3,187
  3,353
  3,527
  3,709
  3,901
  4,101
  4,311
  4,532
Fixed operating expenses, $m
 
  82
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
Total operating expenses, $m
  922
  988
  1,055
  1,124
  1,196
  1,272
  1,350
  1,431
  1,515
  1,604
  1,695
  1,791
  1,891
  1,994
  2,103
  2,216
  2,334
  2,458
  2,587
  2,722
  2,863
  3,011
  3,166
  3,328
  3,498
  3,675
  3,861
  4,057
  4,261
  4,475
  4,700
Operating income, $m
  108
  118
  131
  143
  157
  171
  185
  200
  216
  232
  250
  268
  286
  306
  327
  348
  371
  395
  419
  445
  473
  501
  532
  563
  596
  631
  668
  706
  747
  789
  834
EBITDA, $m
  127
  139
  152
  167
  182
  197
  213
  230
  248
  266
  286
  306
  327
  349
  372
  396
  421
  447
  475
  504
  535
  566
  600
  635
  672
  711
  752
  794
  839
  887
  936
Interest expense (income), $m
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
Earnings before tax, $m
  109
  117
  129
  141
  154
  168
  181
  196
  211
  227
  243
  260
  278
  297
  317
  338
  359
  382
  406
  431
  457
  485
  513
  544
  576
  609
  644
  681
  720
  761
  803
Tax expense, $m
  38
  32
  35
  38
  42
  45
  49
  53
  57
  61
  66
  70
  75
  80
  86
  91
  97
  103
  110
  116
  123
  131
  139
  147
  155
  164
  174
  184
  194
  205
  217
Net income, $m
  71
  86
  94
  103
  113
  122
  132
  143
  154
  166
  178
  190
  203
  217
  231
  247
  262
  279
  296
  315
  334
  354
  375
  397
  420
  445
  470
  497
  525
  555
  586

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  229
  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
  501
  292
  313
  335
  357
  381
  405
  431
  457
  485
  514
  544
  575
  607
  641
  677
  714
  753
  794
  836
  881
  928
  976
  1,027
  1,081
  1,137
  1,196
  1,258
  1,322
  1,390
  1,461
Adjusted assets (=assets-cash), $m
  272
  292
  313
  335
  357
  381
  405
  431
  457
  485
  514
  544
  575
  607
  641
  677
  714
  753
  794
  836
  881
  928
  976
  1,027
  1,081
  1,137
  1,196
  1,258
  1,322
  1,390
  1,461
Revenue / Adjusted assets
  3.787
  3.788
  3.786
  3.785
  3.790
  3.785
  3.790
  3.784
  3.788
  3.786
  3.784
  3.783
  3.786
  3.789
  3.789
  3.787
  3.789
  3.788
  3.786
  3.788
  3.787
  3.786
  3.789
  3.789
  3.787
  3.787
  3.787
  3.786
  3.787
  3.787
  3.787
Average production assets, $m
  104
  111
  119
  127
  135
  144
  153
  163
  173
  184
  194
  206
  218
  230
  243
  256
  271
  285
  301
  317
  334
  351
  370
  389
  409
  431
  453
  476
  501
  526
  553
Working capital, $m
  237
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
Total debt, $m
  17
  26
  37
  49
  61
  74
  87
  101
  115
  130
  145
  161
  178
  196
  214
  234
  254
  275
  297
  320
  344
  369
  395
  423
  452
  482
  514
  547
  582
  619
  657
Total liabilities, $m
  149
  158
  169
  181
  193
  206
  219
  233
  247
  262
  277
  293
  310
  328
  346
  366
  386
  407
  429
  452
  476
  501
  527
  555
  584
  614
  646
  679
  714
  751
  789
Total equity, $m
  352
  134
  144
  154
  164
  175
  186
  198
  210
  223
  236
  250
  264
  279
  295
  311
  329
  346
  365
  385
  405
  427
  449
  473
  497
  523
  550
  579
  608
  639
  672
Total liabilities and equity, $m
  501
  292
  313
  335
  357
  381
  405
  431
  457
  485
  513
  543
  574
  607
  641
  677
  715
  753
  794
  837
  881
  928
  976
  1,028
  1,081
  1,137
  1,196
  1,258
  1,322
  1,390
  1,461
Debt-to-equity ratio
  0.048
  0.190
  0.260
  0.320
  0.370
  0.420
  0.470
  0.510
  0.550
  0.580
  0.620
  0.650
  0.670
  0.700
  0.730
  0.750
  0.770
  0.790
  0.810
  0.830
  0.850
  0.860
  0.880
  0.890
  0.910
  0.920
  0.930
  0.950
  0.960
  0.970
  0.980
Adjusted equity ratio
  0.452
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  71
  86
  94
  103
  113
  122
  132
  143
  154
  166
  178
  190
  203
  217
  231
  247
  262
  279
  296
  315
  334
  354
  375
  397
  420
  445
  470
  497
  525
  555
  586
Depreciation, amort., depletion, $m
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56
  59
  62
  65
  68
  72
  76
  80
  84
  88
  93
  97
  102
Funds from operations, $m
  75
  106
  116
  127
  138
  149
  161
  173
  186
  200
  214
  228
  244
  260
  276
  294
  312
  332
  352
  373
  395
  419
  443
  469
  496
  524
  554
  585
  618
  653
  689
Change in working capital, $m
  -2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
Cash from operations, $m
  77
  105
  116
  126
  137
  148
  160
  172
  185
  198
  212
  227
  242
  258
  275
  293
  311
  330
  350
  372
  394
  417
  441
  467
  494
  522
  552
  583
  616
  650
  686
Maintenance CAPEX, $m
  0
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -97
New CAPEX, $m
  -22
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
Cash from investing activities, $m
  -54
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -56
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -83
  -87
  -92
  -97
  -102
  -107
  -112
  -119
  -124
Free cash flow, $m
  23
  79
  87
  96
  105
  114
  124
  134
  145
  156
  168
  180
  192
  206
  220
  234
  249
  265
  282
  300
  318
  338
  358
  379
  402
  425
  450
  476
  503
  532
  562
Issuance/(repayment) of debt, $m
  -8
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
Issuance/(repurchase) of shares, $m
  -11
  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  
  -21
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
Total cash flow (excl. dividends), $m
  3
  90
  98
  107
  117
  127
  137
  148
  159
  171
  183
  196
  209
  223
  238
  253
  270
  286
  304
  323
  342
  363
  384
  407
  431
  455
  482
  509
  538
  568
  600
Retained Cash Flow (-), $m
  -71
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
Prev. year cash balance distribution, $m
 
  227
  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
 
  308
  89
  98
  107
  116
  126
  136
  147
  158
  170
  182
  195
  208
  222
  237
  252
  269
  285
  303
  322
  341
  362
  383
  406
  430
  455
  481
  508
  537
  568
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
 
  295
  81
  85
  88
  90
  91
  92
  92
  91
  89
  87
  83
  79
  75
  70
  64
  58
  53
  47
  41
  35
  30
  25
  21
  17
  13
  10
  8
  6
  4
Current shareholders' claim on cash, %
  100
  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

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 22.6
Price to Sales 1.6
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 20.8
Price to Free Cash Flow 29.2
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 7.4% 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 81.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $80 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 4.9% 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%.

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%.

Life of production assets of 5.4 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 1%. 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 16.469 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 $1.6 billion.

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Financial statements of AMWD
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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