Intrinsic value of Astec Industries - ASTE

Previous Close

$46.25

  Intrinsic Value

$17.35

stock screener

  Rating & Target

str. sell

-62%

Previous close

$46.25

 
Intrinsic value

$17.35

 
Up/down potential

-62%

 
Rating

str. sell

We calculate the intrinsic value of ASTE 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 1.1

 

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, %
  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
  4.91
  4.92
Revenue, $m
  1,224
  1,267
  1,312
  1,362
  1,415
  1,471
  1,532
  1,596
  1,664
  1,736
  1,813
  1,893
  1,979
  2,069
  2,165
  2,266
  2,372
  2,484
  2,601
  2,725
  2,856
  2,994
  3,138
  3,290
  3,451
  3,619
  3,796
  3,982
  4,177
  4,383
Variable operating expenses, $m
  1,131
  1,170
  1,212
  1,257
  1,306
  1,358
  1,413
  1,472
  1,534
  1,600
  1,663
  1,737
  1,816
  1,899
  1,986
  2,079
  2,176
  2,279
  2,387
  2,501
  2,620
  2,747
  2,879
  3,019
  3,166
  3,320
  3,483
  3,653
  3,833
  4,021
Fixed operating expenses, $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 operating expenses, $m
  1,131
  1,170
  1,212
  1,257
  1,306
  1,358
  1,413
  1,472
  1,534
  1,600
  1,663
  1,737
  1,816
  1,899
  1,986
  2,079
  2,176
  2,279
  2,387
  2,501
  2,620
  2,747
  2,879
  3,019
  3,166
  3,320
  3,483
  3,653
  3,833
  4,021
Operating income, $m
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  150
  156
  163
  171
  179
  187
  196
  205
  215
  225
  236
  247
  259
  271
  285
  299
  313
  328
  345
  362
EBITDA, $m
  128
  132
  137
  142
  147
  153
  160
  166
  173
  181
  189
  197
  206
  216
  226
  236
  247
  259
  271
  284
  298
  312
  327
  343
  360
  377
  396
  415
  435
  457
Interest expense (income), $m
  1
  0
  1
  2
  3
  4
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  50
  53
  57
Earnings before tax, $m
  93
  96
  99
  102
  105
  109
  113
  117
  121
  126
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  206
  215
  224
  234
  244
  255
  267
  279
  291
  305
Tax expense, $m
  25
  26
  27
  27
  28
  29
  30
  32
  33
  34
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
Net income, $m
  68
  70
  72
  74
  77
  79
  82
  85
  89
  92
  101
  105
  109
  113
  118
  123
  128
  133
  138
  144
  150
  157
  164
  171
  178
  186
  195
  203
  213
  222

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
  919
  951
  985
  1,022
  1,062
  1,105
  1,150
  1,198
  1,249
  1,303
  1,361
  1,422
  1,486
  1,554
  1,625
  1,701
  1,781
  1,865
  1,953
  2,046
  2,144
  2,247
  2,356
  2,470
  2,590
  2,717
  2,850
  2,989
  3,136
  3,290
Adjusted assets (=assets-cash), $m
  919
  951
  985
  1,022
  1,062
  1,105
  1,150
  1,198
  1,249
  1,303
  1,361
  1,422
  1,486
  1,554
  1,625
  1,701
  1,781
  1,865
  1,953
  2,046
  2,144
  2,247
  2,356
  2,470
  2,590
  2,717
  2,850
  2,989
  3,136
  3,290
Revenue / Adjusted assets
  1.332
  1.332
  1.332
  1.333
  1.332
  1.331
  1.332
  1.332
  1.332
  1.332
  1.332
  1.331
  1.332
  1.331
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
  1.332
Average production assets, $m
  266
  275
  285
  296
  307
  319
  332
  346
  361
  377
  393
  411
  429
  449
  470
  492
  515
  539
  564
  591
  620
  650
  681
  714
  749
  785
  824
  864
  906
  951
Working capital, $m
  342
  353
  366
  380
  395
  410
  427
  445
  464
  484
  506
  528
  552
  577
  604
  632
  662
  693
  726
  760
  797
  835
  876
  918
  963
  1,010
  1,059
  1,111
  1,165
  1,223
Total debt, $m
  11
  18
  26
  35
  44
  53
  64
  75
  87
  99
  112
  126
  141
  156
  173
  190
  208
  227
  248
  269
  291
  315
  340
  366
  394
  423
  453
  485
  519
  554
Total liabilities, $m
  210
  218
  226
  234
  243
  253
  263
  274
  286
  298
  312
  326
  340
  356
  372
  389
  408
  427
  447
  469
  491
  515
  540
  566
  593
  622
  653
  685
  718
  754
Total equity, $m
  709
  733
  760
  788
  819
  852
  886
  924
  963
  1,005
  1,049
  1,096
  1,146
  1,198
  1,253
  1,311
  1,373
  1,438
  1,506
  1,578
  1,653
  1,733
  1,817
  1,905
  1,997
  2,095
  2,197
  2,305
  2,418
  2,537
Total liabilities and equity, $m
  919
  951
  986
  1,022
  1,062
  1,105
  1,149
  1,198
  1,249
  1,303
  1,361
  1,422
  1,486
  1,554
  1,625
  1,700
  1,781
  1,865
  1,953
  2,047
  2,144
  2,248
  2,357
  2,471
  2,590
  2,717
  2,850
  2,990
  3,136
  3,291
Debt-to-equity ratio
  0.020
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.160
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
Adjusted equity ratio
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771
  0.771

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  68
  70
  72
  74
  77
  79
  82
  85
  89
  92
  101
  105
  109
  113
  118
  123
  128
  133
  138
  144
  150
  157
  164
  171
  178
  186
  195
  203
  213
  222
Depreciation, amort., depletion, $m
  34
  35
  36
  37
  38
  40
  41
  42
  44
  45
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  79
  82
  86
  91
  95
Funds from operations, $m
  102
  105
  108
  112
  115
  119
  123
  128
  132
  137
  141
  146
  152
  158
  165
  172
  179
  187
  195
  203
  212
  222
  232
  242
  253
  265
  277
  290
  303
  317
Change in working capital, $m
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47
  49
  52
  55
  57
Cash from operations, $m
  91
  93
  95
  98
  100
  103
  106
  110
  113
  117
  119
  124
  128
  133
  138
  144
  149
  156
  162
  169
  176
  183
  191
  200
  209
  218
  228
  238
  249
  260
Maintenance CAPEX, $m
  -26
  -27
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -79
  -82
  -86
  -91
New CAPEX, $m
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -45
Cash from investing activities, $m
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -80
  -83
  -87
  -92
  -96
  -101
  -106
  -112
  -117
  -122
  -128
  -136
Free cash flow, $m
  57
  57
  58
  59
  59
  60
  61
  63
  64
  65
  65
  67
  68
  70
  73
  75
  77
  80
  83
  85
  88
  92
  95
  99
  102
  106
  111
  115
  120
  125
Issuance/(repayment) of debt, $m
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  30
  32
  34
  35
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  
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  30
  32
  34
  35
Total cash flow (excl. dividends), $m
  64
  65
  66
  67
  69
  70
  72
  74
  76
  78
  78
  81
  83
  86
  89
  92
  95
  99
  103
  107
  111
  115
  120
  125
  130
  135
  141
  147
  153
  160
Retained Cash Flow (-), $m
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -97
  -102
  -108
  -113
  -119
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
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
Cash available for distribution, $m
  42
  40
  39
  39
  38
  37
  37
  37
  36
  36
  34
  34
  34
  34
  34
  34
  34
  34
  35
  35
  35
  36
  36
  37
  37
  38
  39
  39
  40
  41
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
  40
  37
  34
  32
  29
  27
  25
  23
  21
  19
  16
  14
  13
  11
  10
  9
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  1
  0
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Current shareholders' claim on cash, %
  100.0
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  100.0
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  100.0
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  100.0
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  100.0
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Astec Industries, Inc. designs, engineers, manufactures and markets equipment and components used primarily in road building and related construction activities. Its segments include Infrastructure Group, Aggregate and Mining Group and Energy Group. The Infrastructure Group segment is made up of five business units, including Astec, Inc., Roadtec, Inc., Carlson Paving Products, Inc., Astec Mobile Machinery GmbH and Astec Australia Pty Ltd. Its Aggregate and Mining Group consists of eight business units that are focused on designing and manufacturing heavy processing equipment, as well as servicing and supplying parts for the aggregate, metallic mining, recycling, ports and bulk handling markets. Its Energy Group includes five business units focused on supplying heavy equipment, such as heaters, drilling rigs, concrete plants, wood chippers and grinders, pump trailers, storage equipment and related parts to the oil and gas, construction and water well industries.

FINANCIAL RATIOS  of  Astec Industries (ASTE)

Valuation Ratios
P/E Ratio 19.4
Price to Sales 0.9
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 9.9
Growth Rates
Sales Growth Rate 16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.6%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 10
Current Ratio 0
LT Debt to Equity 0.5%
Total Debt to Equity 1.7%
Interest Coverage 88
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 8.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 23.1%
Gross Margin - 3 Yr. Avg. 22.5%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin 7.6%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.4%
Payout Ratio 16.4%

ASTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASTE stock intrinsic value calculation we used $1185 million for the last fiscal year's total revenue generated by Astec Industries. The default revenue input number comes from 2017 income statement of Astec Industries. 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 ASTE stock valuation model: a) initial revenue growth rate of 3.3% 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 ASTE is calculated based on our internal credit rating of Astec Industries, 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 Astec Industries.
    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 ASTE stock the variable cost ratio is equal to 92.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ASTE 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 11% for Astec Industries.

Corporate tax rate of 27% is the nominal tax rate for Astec Industries. 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 ASTE 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 ASTE are equal to 21.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Astec Industries 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 ASTE is equal to 27.9%. 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 - $686 million for Astec Industries - 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 23 million for Astec Industries 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 Astec Industries at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ New Strong Sell Stocks for August 2nd   [Aug-02-18 07:23AM  Zacks]
▶ Astec Industries: 2Q Earnings Snapshot   [06:42AM  Associated Press]
▶ A Preview Of Astec Industries Q2 Earnings   [Jul-23-18 03:24PM  Benzinga]
▶ Some Familiar Names Among Short Sellers' Top Stocks   [May-15-18 02:07PM  Benzinga]
▶ Astec Industries: 1Q Earnings Snapshot   [07:18AM  Associated Press]
▶ Astec Industries misses 4Q profit forecasts   [08:19AM  Associated Press]
▶ Astec Industries reports 3Q loss   [08:17AM  Associated Press]
▶ New Strong Sell Stocks for October 5th   [Oct-05-17 08:18AM  Zacks]
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