Intrinsic value of American Outdoor Brands Corporation - AOBC

Previous Close

$9.57

  Intrinsic Value

$7.61

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  Rating & Target

sell

-21%

Previous close

$9.57

 
Intrinsic value

$7.61

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of AOBC 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 0.5

 

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, %
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  625
  644
  665
  688
  713
  740
  769
  800
  832
  867
  904
  943
  985
  1,029
  1,076
  1,125
  1,176
  1,231
  1,289
  1,350
  1,414
  1,481
  1,552
  1,627
  1,705
  1,788
  1,875
  1,967
  2,063
  2,164
Variable operating expenses, $m
  260
  268
  276
  285
  295
  305
  316
  328
  341
  355
  353
  369
  385
  402
  420
  440
  460
  481
  504
  527
  552
  579
  607
  636
  666
  699
  733
  769
  806
  846
Fixed operating expenses, $m
  341
  349
  357
  364
  372
  381
  389
  398
  406
  415
  424
  434
  443
  453
  463
  473
  484
  494
  505
  516
  527
  539
  551
  563
  575
  588
  601
  614
  628
  642
Total operating expenses, $m
  601
  617
  633
  649
  667
  686
  705
  726
  747
  770
  777
  803
  828
  855
  883
  913
  944
  975
  1,009
  1,043
  1,079
  1,118
  1,158
  1,199
  1,241
  1,287
  1,334
  1,383
  1,434
  1,488
Operating income, $m
  23
  28
  33
  39
  46
  54
  64
  74
  85
  97
  126
  141
  157
  174
  192
  212
  233
  256
  280
  306
  334
  363
  395
  428
  463
  501
  541
  584
  629
  677
EBITDA, $m
  75
  80
  87
  94
  103
  112
  123
  135
  148
  162
  178
  195
  213
  233
  254
  276
  300
  326
  354
  383
  414
  448
  483
  521
  561
  603
  648
  696
  746
  800
Interest expense (income), $m
  8
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  41
  43
  45
  48
  50
  53
Earnings before tax, $m
  12
  16
  21
  26
  33
  40
  48
  58
  68
  79
  108
  121
  136
  152
  169
  187
  207
  228
  251
  275
  301
  329
  358
  390
  423
  458
  496
  536
  579
  624
Tax expense, $m
  3
  4
  6
  7
  9
  11
  13
  16
  18
  21
  29
  33
  37
  41
  46
  51
  56
  62
  68
  74
  81
  89
  97
  105
  114
  124
  134
  145
  156
  168
Net income, $m
  9
  12
  15
  19
  24
  29
  35
  42
  50
  58
  79
  89
  99
  111
  123
  137
  151
  167
  183
  201
  220
  240
  262
  284
  309
  335
  362
  391
  422
  455

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
  766
  790
  816
  845
  875
  908
  943
  981
  1,021
  1,064
  1,109
  1,158
  1,209
  1,263
  1,320
  1,380
  1,444
  1,511
  1,581
  1,656
  1,735
  1,817
  1,904
  1,996
  2,093
  2,194
  2,301
  2,413
  2,531
  2,655
Adjusted assets (=assets-cash), $m
  766
  790
  816
  845
  875
  908
  943
  981
  1,021
  1,064
  1,109
  1,158
  1,209
  1,263
  1,320
  1,380
  1,444
  1,511
  1,581
  1,656
  1,735
  1,817
  1,904
  1,996
  2,093
  2,194
  2,301
  2,413
  2,531
  2,655
Revenue / Adjusted assets
  0.816
  0.815
  0.815
  0.814
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.814
  0.815
  0.815
  0.815
  0.815
  0.814
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
  0.815
Average production assets, $m
  317
  327
  337
  349
  362
  375
  390
  405
  422
  440
  458
  478
  499
  522
  545
  570
  596
  624
  653
  684
  717
  751
  787
  825
  865
  907
  951
  997
  1,046
  1,097
Working capital, $m
  131
  135
  139
  144
  149
  155
  161
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  257
  269
  282
  295
  310
  324
  340
  356
  374
  392
  411
  431
  452
Total debt, $m
  218
  228
  239
  252
  265
  279
  294
  311
  328
  347
  366
  387
  409
  433
  457
  483
  511
  540
  571
  603
  637
  673
  710
  750
  792
  836
  882
  931
  982
  1,035
Total liabilities, $m
  332
  342
  353
  366
  379
  393
  408
  425
  442
  461
  480
  501
  523
  547
  571
  598
  625
  654
  685
  717
  751
  787
  825
  864
  906
  950
  996
  1,045
  1,096
  1,150
Total equity, $m
  435
  448
  463
  479
  496
  515
  535
  556
  579
  603
  629
  656
  685
  716
  748
  782
  818
  857
  897
  939
  984
  1,030
  1,080
  1,132
  1,186
  1,244
  1,305
  1,368
  1,435
  1,505
Total liabilities and equity, $m
  767
  790
  816
  845
  875
  908
  943
  981
  1,021
  1,064
  1,109
  1,157
  1,208
  1,263
  1,319
  1,380
  1,443
  1,511
  1,582
  1,656
  1,735
  1,817
  1,905
  1,996
  2,092
  2,194
  2,301
  2,413
  2,531
  2,655
Debt-to-equity ratio
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.600
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.680
  0.680
  0.690
Adjusted equity ratio
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  12
  15
  19
  24
  29
  35
  42
  50
  58
  79
  89
  99
  111
  123
  137
  151
  167
  183
  201
  220
  240
  262
  284
  309
  335
  362
  391
  422
  455
Depreciation, amort., depletion, $m
  51
  53
  54
  55
  57
  58
  60
  61
  63
  65
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  81
  84
  88
  93
  97
  102
  107
  112
  118
  123
Funds from operations, $m
  60
  64
  69
  74
  80
  87
  95
  104
  113
  123
  130
  142
  155
  169
  185
  201
  218
  237
  257
  278
  300
  324
  350
  377
  406
  437
  469
  503
  540
  578
Change in working capital, $m
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
Cash from operations, $m
  57
  60
  64
  69
  75
  82
  89
  97
  106
  116
  122
  134
  147
  160
  175
  191
  207
  225
  245
  265
  287
  310
  335
  361
  389
  419
  451
  484
  520
  557
Maintenance CAPEX, $m
  -35
  -36
  -37
  -38
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -84
  -88
  -93
  -97
  -102
  -107
  -112
  -118
New CAPEX, $m
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
Cash from investing activities, $m
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -65
  -68
  -72
  -75
  -78
  -83
  -86
  -90
  -95
  -99
  -104
  -109
  -115
  -120
  -126
  -133
  -139
  -146
  -153
  -161
  -169
Free cash flow, $m
  13
  15
  17
  20
  23
  27
  32
  38
  44
  51
  54
  63
  72
  82
  93
  104
  117
  131
  145
  161
  178
  196
  215
  235
  257
  280
  305
  331
  359
  389
Issuance/(repayment) of debt, $m
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
Issuance/(repurchase) of shares, $m
  4
  2
  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  
  13
  12
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
Total cash flow (excl. dividends), $m
  26
  27
  28
  32
  37
  42
  48
  54
  61
  69
  74
  84
  94
  105
  117
  130
  145
  160
  176
  193
  212
  231
  252
  275
  299
  324
  351
  380
  410
  442
Retained Cash Flow (-), $m
  -12
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -70
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
  13
  13
  13
  16
  19
  23
  28
  33
  39
  45
  48
  56
  65
  75
  85
  96
  108
  122
  136
  151
  167
  184
  203
  223
  244
  267
  291
  316
  343
  372
Discount rate, %
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
  13
  12
  11
  13
  14
  16
  18
  19
  21
  22
  21
  21
  22
  22
  21
  20
  19
  18
  16
  15
  13
  11
  9
  8
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  99.3
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9

American Outdoor Brands Corporation, formerly Smith & Wesson Holding Corporation, is a manufacturer of firearms and a provider of accessory products for the shooting, hunting and outdoor enthusiast. The Company operates through two segments. The Firearms segment manufactures handgun and long gun products sold under the Smith & Wesson, M&P and Thompson/Center Arms brands, as well as providing forging, machining and precision plastic injection molding services. The Outdoor Products & Accessories segment provides shooting, hunting and outdoor accessories, including reloading, gunsmithing, gun cleaning supplies, tree saws, vault accessories, knives, laser sighting systems and tactical lighting products. Brands in Outdoor Products & Accessories include Crimson Trace, Caldwell Shooting Supplies, Wheeler Engineering, Lockdown Vault Accessories, BOG POD and Golden Rod Moisture Control, as well as knives and specialty tools under Schrade, Old Timer, Uncle Henry and Imperial.

FINANCIAL RATIOS  of  American Outdoor Brands Corporation (AOBC)

Valuation Ratios
P/E Ratio 4
Price to Sales 0.6
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 4.2
Price to Free Cash Flow 5.9
Growth Rates
Sales Growth Rate 24.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate -10.6%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 53.7%
Total Debt to Equity 55.5%
Interest Coverage 25
Management Effectiveness
Return On Assets 18.9%
Ret/ On Assets - 3 Yr. Avg. 16.7%
Return On Total Capital 23.4%
Ret/ On T. Cap. - 3 Yr. Avg. 20.5%
Return On Equity 36.5%
Return On Equity - 3 Yr. Avg. 33.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 41.5%
Gross Margin - 3 Yr. Avg. 39.2%
EBITDA Margin 27.6%
EBITDA Margin - 3 Yr. Avg. 25.6%
Operating Margin 22.1%
Oper. Margin - 3 Yr. Avg. 20.1%
Pre-Tax Margin 21.2%
Pre-Tax Margin - 3 Yr. Avg. 18.5%
Net Profit Margin 14.2%
Net Profit Margin - 3 Yr. Avg. 12.1%
Effective Tax Rate 33%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio 0%

AOBC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AOBC stock intrinsic value calculation we used $607 million for the last fiscal year's total revenue generated by American Outdoor Brands Corporation. The default revenue input number comes from 0001 income statement of American Outdoor Brands Corporation. 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 AOBC stock valuation model: a) initial revenue growth rate of 2.9% 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 4.9%, whose default value for AOBC is calculated based on our internal credit rating of American Outdoor Brands Corporation, 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 Outdoor Brands Corporation.
    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 AOBC stock the variable cost ratio is equal to 41.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $334 million in the base year in the intrinsic value calculation for AOBC 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 Outdoor Brands Corporation.

Corporate tax rate of 27% is the nominal tax rate for American Outdoor Brands Corporation. 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 AOBC 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 AOBC are equal to 50.7%.

Life of production assets of 8.9 years is the average useful life of capital assets used in American Outdoor Brands Corporation 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 AOBC is equal to 20.9%. 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 - $422.148 million for American Outdoor Brands Corporation - 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 54.558 million for American Outdoor Brands Corporation 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 Outdoor Brands Corporation at the current share price and the inputted number of shares is $0.5 billion.

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