Intrinsic value of Andersons - ANDE

Previous Close

$35.00

  Intrinsic Value

$6.21

stock screener

  Rating & Target

str. sell

-82%

Previous close

$35.00

 
Intrinsic value

$6.21

 
Up/down potential

-82%

 
Rating

str. sell

We calculate the intrinsic value of ANDE 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 1.0

 

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, %
  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
  3,760
  3,846
  3,945
  4,056
  4,179
  4,314
  4,461
  4,620
  4,791
  4,975
  5,172
  5,382
  5,605
  5,843
  6,095
  6,362
  6,645
  6,943
  7,259
  7,593
  7,945
  8,316
  8,707
  9,120
  9,554
  10,011
  10,492
  10,998
  11,531
  12,091
Variable operating expenses, $m
  2,857
  2,923
  2,997
  3,081
  3,174
  3,277
  3,388
  3,508
  3,638
  3,777
  3,914
  4,073
  4,242
  4,422
  4,612
  4,814
  5,028
  5,255
  5,494
  5,746
  6,012
  6,293
  6,589
  6,901
  7,230
  7,576
  7,940
  8,323
  8,726
  9,150
Fixed operating expenses, $m
  966
  987
  1,009
  1,031
  1,054
  1,077
  1,100
  1,125
  1,149
  1,175
  1,201
  1,227
  1,254
  1,282
  1,310
  1,339
  1,368
  1,398
  1,429
  1,460
  1,492
  1,525
  1,559
  1,593
  1,628
  1,664
  1,701
  1,738
  1,776
  1,815
Total operating expenses, $m
  3,823
  3,910
  4,006
  4,112
  4,228
  4,354
  4,488
  4,633
  4,787
  4,952
  5,115
  5,300
  5,496
  5,704
  5,922
  6,153
  6,396
  6,653
  6,923
  7,206
  7,504
  7,818
  8,148
  8,494
  8,858
  9,240
  9,641
  10,061
  10,502
  10,965
Operating income, $m
  -63
  -63
  -61
  -56
  -49
  -39
  -27
  -13
  4
  23
  57
  82
  109
  140
  173
  209
  248
  291
  337
  386
  440
  497
  559
  625
  696
  771
  851
  937
  1,028
  1,126
EBITDA, $m
  44
  46
  51
  59
  69
  82
  98
  116
  138
  162
  189
  219
  252
  288
  327
  370
  417
  467
  521
  579
  642
  709
  780
  857
  938
  1,025
  1,118
  1,216
  1,321
  1,433
Interest expense (income), $m
  21
  27
  28
  30
  32
  34
  36
  39
  42
  45
  48
  52
  56
  60
  65
  69
  74
  79
  85
  91
  97
  104
  111
  118
  126
  134
  142
  151
  161
  171
  181
Earnings before tax, $m
  -90
  -92
  -91
  -88
  -83
  -76
  -66
  -55
  -41
  -25
  5
  26
  49
  75
  103
  135
  169
  206
  246
  289
  336
  387
  441
  499
  562
  628
  700
  776
  857
  944
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  7
  13
  20
  28
  36
  46
  56
  66
  78
  91
  104
  119
  135
  152
  170
  189
  210
  232
  255
Net income, $m
  -90
  -92
  -91
  -88
  -83
  -76
  -66
  -55
  -41
  -25
  4
  19
  36
  55
  75
  98
  123
  150
  179
  211
  245
  282
  322
  364
  410
  459
  511
  567
  626
  689

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
  2,205
  2,256
  2,314
  2,379
  2,451
  2,530
  2,616
  2,710
  2,810
  2,918
  3,033
  3,156
  3,287
  3,427
  3,575
  3,731
  3,897
  4,072
  4,258
  4,453
  4,660
  4,877
  5,107
  5,349
  5,603
  5,871
  6,154
  6,451
  6,763
  7,092
Adjusted assets (=assets-cash), $m
  2,205
  2,256
  2,314
  2,379
  2,451
  2,530
  2,616
  2,710
  2,810
  2,918
  3,033
  3,156
  3,287
  3,427
  3,575
  3,731
  3,897
  4,072
  4,258
  4,453
  4,660
  4,877
  5,107
  5,349
  5,603
  5,871
  6,154
  6,451
  6,763
  7,092
Revenue / Adjusted assets
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
  1.705
Average production assets, $m
  955
  977
  1,002
  1,030
  1,061
  1,096
  1,133
  1,173
  1,217
  1,264
  1,314
  1,367
  1,424
  1,484
  1,548
  1,616
  1,688
  1,764
  1,844
  1,929
  2,018
  2,112
  2,212
  2,316
  2,427
  2,543
  2,665
  2,794
  2,929
  3,071
Working capital, $m
  147
  150
  154
  158
  163
  168
  174
  180
  187
  194
  202
  210
  219
  228
  238
  248
  259
  271
  283
  296
  310
  324
  340
  356
  373
  390
  409
  429
  450
  472
Total debt, $m
  521
  553
  589
  629
  674
  723
  777
  835
  898
  965
  1,037
  1,114
  1,195
  1,282
  1,374
  1,472
  1,575
  1,684
  1,800
  1,922
  2,050
  2,186
  2,329
  2,479
  2,638
  2,805
  2,981
  3,166
  3,361
  3,565
Total liabilities, $m
  1,374
  1,405
  1,442
  1,482
  1,527
  1,576
  1,630
  1,688
  1,751
  1,818
  1,890
  1,966
  2,048
  2,135
  2,227
  2,325
  2,428
  2,537
  2,653
  2,774
  2,903
  3,039
  3,182
  3,332
  3,491
  3,658
  3,834
  4,019
  4,213
  4,418
Total equity, $m
  831
  850
  872
  897
  924
  954
  986
  1,022
  1,059
  1,100
  1,144
  1,190
  1,239
  1,292
  1,348
  1,407
  1,469
  1,535
  1,605
  1,679
  1,757
  1,839
  1,925
  2,016
  2,112
  2,214
  2,320
  2,432
  2,550
  2,674
Total liabilities and equity, $m
  2,205
  2,255
  2,314
  2,379
  2,451
  2,530
  2,616
  2,710
  2,810
  2,918
  3,034
  3,156
  3,287
  3,427
  3,575
  3,732
  3,897
  4,072
  4,258
  4,453
  4,660
  4,878
  5,107
  5,348
  5,603
  5,872
  6,154
  6,451
  6,763
  7,092
Debt-to-equity ratio
  0.630
  0.650
  0.670
  0.700
  0.730
  0.760
  0.790
  0.820
  0.850
  0.880
  0.910
  0.940
  0.960
  0.990
  1.020
  1.050
  1.070
  1.100
  1.120
  1.140
  1.170
  1.190
  1.210
  1.230
  1.250
  1.270
  1.280
  1.300
  1.320
  1.330
Adjusted equity ratio
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -90
  -92
  -91
  -88
  -83
  -76
  -66
  -55
  -41
  -25
  4
  19
  36
  55
  75
  98
  123
  150
  179
  211
  245
  282
  322
  364
  410
  459
  511
  567
  626
  689
Depreciation, amort., depletion, $m
  107
  110
  112
  115
  118
  121
  125
  129
  134
  138
  131
  137
  142
  148
  155
  162
  169
  176
  184
  193
  202
  211
  221
  232
  243
  254
  266
  279
  293
  307
Funds from operations, $m
  17
  18
  21
  27
  35
  46
  59
  74
  92
  113
  135
  156
  178
  203
  230
  260
  292
  327
  364
  404
  447
  494
  543
  596
  653
  713
  777
  846
  919
  996
Change in working capital, $m
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Cash from operations, $m
  15
  15
  17
  22
  30
  40
  53
  68
  86
  106
  128
  147
  170
  194
  220
  249
  281
  315
  352
  391
  434
  479
  528
  580
  636
  695
  759
  826
  898
  974
Maintenance CAPEX, $m
  -94
  -95
  -98
  -100
  -103
  -106
  -110
  -113
  -117
  -122
  -126
  -131
  -137
  -142
  -148
  -155
  -162
  -169
  -176
  -184
  -193
  -202
  -211
  -221
  -232
  -243
  -254
  -266
  -279
  -293
New CAPEX, $m
  -18
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -44
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -135
  -142
Cash from investing activities, $m
  -112
  -117
  -123
  -128
  -134
  -140
  -147
  -153
  -161
  -169
  -176
  -184
  -194
  -202
  -212
  -223
  -234
  -245
  -256
  -269
  -282
  -296
  -310
  -326
  -342
  -359
  -376
  -395
  -414
  -435
Free cash flow, $m
  -97
  -103
  -105
  -106
  -104
  -100
  -94
  -86
  -75
  -62
  -49
  -37
  -24
  -9
  8
  27
  47
  70
  95
  122
  151
  183
  217
  254
  294
  336
  382
  431
  483
  539
Issuance/(repayment) of debt, $m
  26
  32
  36
  41
  45
  49
  54
  58
  63
  67
  72
  77
  82
  87
  92
  98
  103
  109
  115
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
  205
Issuance/(repurchase) of shares, $m
  106
  111
  113
  113
  110
  106
  99
  90
  79
  66
  40
  27
  13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  132
  143
  149
  154
  155
  155
  153
  148
  142
  133
  112
  104
  95
  87
  92
  98
  103
  109
  115
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
  205
Total cash flow (excl. dividends), $m
  36
  39
  43
  47
  51
  55
  59
  63
  67
  71
  63
  67
  71
  78
  100
  124
  151
  179
  210
  244
  280
  319
  360
  405
  452
  503
  558
  616
  678
  744
Retained Cash Flow (-), $m
  -106
  -111
  -113
  -113
  -110
  -106
  -99
  -90
  -79
  -66
  -43
  -46
  -49
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
  -112
  -118
  -124
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
  7
  8
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Cash available for distribution, $m
  -70
  -71
  -69
  -65
  -59
  -51
  -40
  -27
  -12
  5
  19
  21
  22
  25
  44
  65
  88
  113
  141
  170
  202
  237
  274
  314
  356
  402
  452
  504
  560
  620
Discount rate, %
  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
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
  -66
  -61
  -54
  -47
  -38
  -29
  -20
  -12
  -5
  2
  5
  5
  4
  4
  5
  6
  6
  6
  6
  5
  4
  3
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  90.2
  81.2
  73.2
  66.1
  59.9
  54.7
  50.4
  46.8
  44.0
  41.8
  40.6
  39.8
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5
  39.5

The Andersons, Inc. is a diversified company. The Company conducts business across North America in the grain, ethanol, plant nutrient and rail sectors. The Company also produces turf and cob products. The Company operates through segments, including Grain, Ethanol, Rail and Plant Nutrient. Its Grain business operates grain elevators in various states in the United States Corn Belt. Its Ethanol Group has ownership interests in over four Limited Liability Companies (the ethanol LLCs or LLCs). Its Plant Nutrient Group is a manufacturer, distributor and retailer of agricultural and related plant nutrients, corncob-based products, and pelleted lime and gypsum products in the United States Corn Belt, Florida and Puerto Rico. Its Rail Group leases, repairs and sells various types of railcars, locomotives and barges.

FINANCIAL RATIOS  of  Andersons (ANDE)

Valuation Ratios
P/E Ratio 82.3
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 24.7
Price to Free Cash Flow -8
Growth Rates
Sales Growth Rate -6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.3%
Cap. Spend. - 3 Yr. Gr. Rate 3.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 51.3%
Total Debt to Equity 61.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.1%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 1%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 1.6%
Return On Equity - 3 Yr. Avg. 4.8%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 8.8%
Gross Margin - 3 Yr. Avg. 8.8%
EBITDA Margin 3.2%
EBITDA Margin - 3 Yr. Avg. 3.7%
Operating Margin 0.5%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin 0.5%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 24.9%
Payout Ratio 141.7%

ANDE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANDE stock intrinsic value calculation we used $3686 million for the last fiscal year's total revenue generated by Andersons. The default revenue input number comes from 2017 income statement of Andersons. 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 ANDE 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 7.6%, whose default value for ANDE is calculated based on our internal credit rating of Andersons, 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 Andersons.
    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 ANDE stock the variable cost ratio is equal to 76%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $945 million in the base year in the intrinsic value calculation for ANDE 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 Andersons.

Corporate tax rate of 27% is the nominal tax rate for Andersons. 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 ANDE stock is equal to 0.2%.

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 ANDE are equal to 25.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Andersons 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 ANDE is equal to 3.9%. 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 - $815 million for Andersons - 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 28 million for Andersons 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 Andersons at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ The Andersons Names Valentine as Chief Financial Officer   [Jun-01-18 08:30AM  PR Newswire]
▶ Andersons: 1Q Earnings Snapshot   [May-07-18 06:06PM  Associated Press]
▶ Andersons posts 4Q profit   [Feb-14-18 05:25PM  Associated Press]
▶ Earnings Preview For Andersons   [09:29AM  Benzinga]
▶ Is The Andersons Inc (NASDAQ:ANDE) A Good Dividend Stock?   [Jan-24-18 07:33AM  Simply Wall St.]
▶ U.S. grain companies fear harm from new tax law   [Jan-10-18 07:05AM  Reuters]
▶ U.S. grain companies fear harm from new tax law   [Jan-09-18 07:52PM  Reuters]
▶ Andersons, Inc. to Host Earnings Call   [08:40AM  ACCESSWIRE]
▶ Andersons posts 3Q profit   [Nov-06-17 04:58PM  Associated Press]
▶ New Strong Sell Stocks for October 31st   [Oct-31-17 11:08AM  Zacks]
▶ The Andersons, Inc. 2017 Investor Day   [Sep-07-17 09:15AM  PR Newswire]
▶ What is next for the Andersons off Brice Road?   [Aug-18-17 12:29PM  American City Business Journals]
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