Intrinsic value of Atkore International Group - ATKR

Previous Close

$21.07

  Intrinsic Value

$2.53

stock screener

  Rating & Target

str. sell

-88%

Previous close

$21.07

 
Intrinsic value

$2.53

 
Up/down potential

-88%

 
Rating

str. sell

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

We calculate the intrinsic value of ATKR 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 2016), $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 1.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -11.91
  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
  1,523
  1,553
  1,589
  1,630
  1,676
  1,727
  1,782
  1,843
  1,909
  1,980
  2,056
  2,137
  2,224
  2,316
  2,414
  2,518
  2,629
  2,745
  2,869
  2,999
  3,137
  3,283
  3,436
  3,598
  3,768
  3,947
  4,136
  4,335
  4,544
  4,764
  4,996
Variable operating expenses, $m
 
  1,519
  1,554
  1,593
  1,638
  1,687
  1,741
  1,800
  1,864
  1,933
  2,006
  2,074
  2,158
  2,247
  2,343
  2,444
  2,551
  2,664
  2,784
  2,911
  3,044
  3,185
  3,334
  3,491
  3,656
  3,831
  4,014
  4,207
  4,410
  4,623
  4,848
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
  1,395
  1,519
  1,554
  1,593
  1,638
  1,687
  1,741
  1,800
  1,864
  1,933
  2,006
  2,074
  2,158
  2,247
  2,343
  2,444
  2,551
  2,664
  2,784
  2,911
  3,044
  3,185
  3,334
  3,491
  3,656
  3,831
  4,014
  4,207
  4,410
  4,623
  4,848
Operating income, $m
  129
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  63
  66
  69
  71
  75
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  128
  135
  141
  148
EBITDA, $m
  184
  91
  93
  96
  99
  102
  105
  108
  112
  116
  121
  126
  131
  136
  142
  148
  155
  161
  169
  176
  184
  193
  202
  211
  221
  232
  243
  255
  267
  280
  294
Interest expense (income), $m
  50
  49
  47
  49
  51
  53
  55
  58
  60
  63
  66
  70
  73
  77
  81
  86
  90
  95
  100
  106
  112
  118
  124
  131
  138
  146
  154
  162
  171
  180
  190
Earnings before tax, $m
  87
  -15
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -6
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -37
  -39
  -42
Tax expense, $m
  28
  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
Net income, $m
  59
  -15
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -6
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -37
  -39
  -42

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  200
  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
  1,165
  984
  1,007
  1,033
  1,062
  1,094
  1,130
  1,168
  1,210
  1,255
  1,303
  1,354
  1,409
  1,468
  1,530
  1,596
  1,666
  1,740
  1,818
  1,901
  1,988
  2,080
  2,177
  2,280
  2,388
  2,502
  2,621
  2,747
  2,880
  3,019
  3,166
Adjusted assets (=assets-cash), $m
  965
  984
  1,007
  1,033
  1,062
  1,094
  1,130
  1,168
  1,210
  1,255
  1,303
  1,354
  1,409
  1,468
  1,530
  1,596
  1,666
  1,740
  1,818
  1,901
  1,988
  2,080
  2,177
  2,280
  2,388
  2,502
  2,621
  2,747
  2,880
  3,019
  3,166
Revenue / Adjusted assets
  1.578
  1.578
  1.578
  1.578
  1.578
  1.579
  1.577
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
  1.578
Average production assets, $m
  480
  489
  501
  513
  528
  544
  561
  581
  601
  624
  648
  673
  700
  730
  760
  793
  828
  865
  904
  945
  988
  1,034
  1,082
  1,133
  1,187
  1,243
  1,303
  1,366
  1,431
  1,501
  1,574
Working capital, $m
  378
  183
  188
  192
  198
  204
  210
  217
  225
  234
  243
  252
  262
  273
  285
  297
  310
  324
  339
  354
  370
  387
  405
  425
  445
  466
  488
  512
  536
  562
  590
Total debt, $m
  630
  608
  628
  652
  678
  707
  739
  773
  811
  851
  894
  941
  990
  1,043
  1,099
  1,158
  1,221
  1,288
  1,358
  1,433
  1,511
  1,594
  1,682
  1,774
  1,871
  1,973
  2,081
  2,194
  2,314
  2,439
  2,571
Total liabilities, $m
  907
  886
  906
  930
  956
  985
  1,017
  1,051
  1,089
  1,129
  1,172
  1,219
  1,268
  1,321
  1,377
  1,436
  1,499
  1,566
  1,636
  1,711
  1,789
  1,872
  1,960
  2,052
  2,149
  2,251
  2,359
  2,472
  2,592
  2,717
  2,849
Total equity, $m
  257
  98
  101
  103
  106
  109
  113
  117
  121
  125
  130
  135
  141
  147
  153
  160
  167
  174
  182
  190
  199
  208
  218
  228
  239
  250
  262
  275
  288
  302
  317
Total liabilities and equity, $m
  1,164
  984
  1,007
  1,033
  1,062
  1,094
  1,130
  1,168
  1,210
  1,254
  1,302
  1,354
  1,409
  1,468
  1,530
  1,596
  1,666
  1,740
  1,818
  1,901
  1,988
  2,080
  2,178
  2,280
  2,388
  2,501
  2,621
  2,747
  2,880
  3,019
  3,166
Debt-to-equity ratio
  2.451
  6.180
  6.240
  6.310
  6.380
  6.460
  6.540
  6.620
  6.700
  6.780
  6.870
  6.950
  7.030
  7.110
  7.180
  7.260
  7.330
  7.400
  7.470
  7.540
  7.600
  7.660
  7.720
  7.780
  7.840
  7.890
  7.940
  7.990
  8.030
  8.080
  8.120
Adjusted equity ratio
  0.059
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  59
  -15
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -6
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -37
  -39
  -42
Depreciation, amort., depletion, $m
  55
  57
  58
  59
  60
  62
  64
  65
  67
  69
  72
  62
  65
  68
  70
  73
  77
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  126
  133
  139
  146
Funds from operations, $m
  170
  42
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  59
  61
  62
  64
  66
  68
  70
  73
  75
  78
  80
  83
  86
  89
  93
  96
  100
  103
Change in working capital, $m
  13
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
Cash from operations, $m
  157
  39
  42
  42
  42
  43
  43
  44
  44
  45
  45
  46
  47
  48
  49
  50
  51
  52
  54
  55
  56
  58
  60
  61
  63
  65
  67
  69
  71
  74
  76
Maintenance CAPEX, $m
  0
  -44
  -45
  -46
  -48
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -68
  -70
  -73
  -77
  -80
  -84
  -87
  -92
  -96
  -100
  -105
  -110
  -115
  -121
  -126
  -133
  -139
New CAPEX, $m
  -17
  -10
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -59
  -63
  -66
  -69
  -73
Cash from investing activities, $m
  -13
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -89
  -94
  -99
  -103
  -108
  -114
  -119
  -125
  -130
  -138
  -144
  -151
  -159
  -167
  -174
  -184
  -192
  -202
  -212
Free cash flow, $m
  144
  -16
  -15
  -17
  -20
  -22
  -25
  -28
  -30
  -33
  -36
  -39
  -43
  -46
  -49
  -53
  -57
  -61
  -65
  -70
  -74
  -79
  -85
  -90
  -96
  -101
  -108
  -114
  -121
  -128
  -136
Issuance/(repayment) of debt, $m
  -24
  -21
  20
  23
  26
  29
  32
  35
  37
  40
  43
  46
  49
  53
  56
  59
  63
  67
  70
  74
  79
  83
  87
  92
  97
  102
  108
  113
  119
  126
  132
Issuance/(repurchase) of shares, $m
  0
  55
  14
  15
  16
  17
  17
  18
  20
  21
  22
  12
  13
  14
  16
  18
  19
  21
  23
  25
  28
  30
  32
  35
  38
  40
  43
  47
  50
  53
  57
Cash from financing (excl. dividends), $m  
  -24
  34
  34
  38
  42
  46
  49
  53
  57
  61
  65
  58
  62
  67
  72
  77
  82
  88
  93
  99
  107
  113
  119
  127
  135
  142
  151
  160
  169
  179
  189
Total cash flow (excl. dividends), $m
  120
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
Retained Cash Flow (-), $m
  -101
  -55
  -14
  -15
  -16
  -17
  -17
  -18
  -20
  -21
  -22
  -12
  -13
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -35
  -38
  -40
  -43
  -47
  -50
  -53
  -57
Prev. year cash balance distribution, $m
 
  199
  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
 
  162
  6
  6
  6
  7
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  6
  5
  5
  4
  4
  3
  2
  2
  1
  0
  -1
  -2
  -3
  -4
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  152
  5
  5
  5
  5
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  84.7
  82.4
  80.1
  77.9
  75.6
  73.4
  71.2
  69.0
  66.8
  64.7
  63.6
  62.4
  61.2
  60.0
  58.7
  57.3
  56.0
  54.6
  53.2
  51.7
  50.3
  48.9
  47.4
  46.0
  44.5
  43.1
  41.7
  40.3
  38.9
  37.6

Atkore International Group Inc. is a manufacturer of electrical raceway products. The Company's products are primarily offered for non-residential construction and renovation markets, and mechanical products and solutions (MP&S) for the construction and industrial markets. The Company operates in two segments: Electrical Raceway and MP&S. Through the electrical raceway segment, it manufactures products that deploy, isolate and protect a structure's electrical circuitry from the original power source to the final outlet. The Company's electrical raceway segment products include electrical conduit, armored cable, cable trays, mounting systems and fittings. Through the MP&S segment, it provides products and services that frame, support and secure component parts in a range of structures, equipment and systems in electrical, industrial and construction applications. The Company's MP&S segment products include metal framing products and in-line galvanized mechanical tube.

FINANCIAL RATIOS  of  Atkore International Group (ATKR)

Valuation Ratios
P/E Ratio 22.3
Price to Sales 0.9
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate -11.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37%
Cap. Spend. - 3 Yr. Gr. Rate 2.5%
Financial Strength
Quick Ratio 200
Current Ratio 0
LT Debt to Equity 244.7%
Total Debt to Equity 245.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 8.2%
Ret/ On Assets - 3 Yr. Avg. 0.8%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. -3.6%
Return On Equity 28.6%
Return On Equity - 3 Yr. Avg. -19.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 24.2%
Gross Margin - 3 Yr. Avg. 17.8%
EBITDA Margin 12.6%
EBITDA Margin - 3 Yr. Avg. 5.9%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. -0.3%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 32.2%
Eff/ Tax Rate - 3 Yr. Avg. 33.5%
Payout Ratio 0%

ATKR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATKR stock intrinsic value calculation we used $1523 million for the last fiscal year's total revenue generated by Atkore International Group. The default revenue input number comes from 2016 income statement of Atkore International Group. 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 ATKR 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 6.8%, whose default value for ATKR is calculated based on our internal credit rating of Atkore International Group, 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 Atkore International Group.
    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 ATKR stock the variable cost ratio is equal to 97.8%.

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 ATKR 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 7.8% for Atkore International Group.

Corporate tax rate of 27% is the nominal tax rate for Atkore International Group. 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 ATKR 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 ATKR are equal to 31.5%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Atkore International Group 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 ATKR is equal to 11.8%. 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 - $257 million for Atkore International Group - 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 64 million for Atkore International Group 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 Atkore International Group at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Atkore International Group Inc. Acquires Flexicon Limited   [Sep-05-17 05:00AM  Business Wire]
▶ Atkore International Inc. Acquires Marco Cable Management   [May-22-17 02:43PM  Business Wire]
▶ New Strong Buy Stocks for March 13th   [Mar-13-17 07:29AM  Zacks]
▶ Is Atkore International Group Inc (ATKR) a Good Stock to Buy?   [Dec-12-16 06:04PM  at Insider Monkey]
Financial statements of ATKR
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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