Intrinsic value of American Vanguard Corporation - AVD

Previous Close

$18.18

  Intrinsic Value

$9.89

stock screener

  Rating & Target

sell

-46%

Previous close

$18.18

 
Intrinsic value

$9.89

 
Up/down potential

-46%

 
Rating

sell

We calculate the intrinsic value of AVD 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, %
  12.70
  11.93
  11.24
  10.61
  10.05
  9.55
  9.09
  8.68
  8.31
  7.98
  7.68
  7.42
  7.17
  6.96
  6.76
  6.59
  6.43
  6.28
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
Revenue, $m
  512
  573
  637
  705
  775
  850
  927
  1,007
  1,091
  1,178
  1,269
  1,363
  1,460
  1,562
  1,668
  1,778
  1,892
  2,011
  2,134
  2,263
  2,398
  2,538
  2,684
  2,836
  2,996
  3,162
  3,336
  3,518
  3,708
  3,906
Variable operating expenses, $m
  447
  498
  551
  608
  667
  728
  793
  860
  929
  1,002
  1,056
  1,134
  1,216
  1,300
  1,388
  1,479
  1,575
  1,673
  1,776
  1,884
  1,996
  2,112
  2,234
  2,361
  2,493
  2,632
  2,776
  2,928
  3,086
  3,251
Fixed operating expenses, $m
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
  29
  30
  31
Total operating expenses, $m
  463
  515
  568
  625
  685
  746
  812
  879
  948
  1,022
  1,076
  1,155
  1,237
  1,322
  1,410
  1,502
  1,598
  1,697
  1,800
  1,909
  2,021
  2,138
  2,260
  2,388
  2,521
  2,660
  2,805
  2,957
  3,116
  3,282
Operating income, $m
  48
  58
  69
  80
  91
  103
  116
  129
  142
  156
  192
  208
  224
  240
  257
  275
  294
  314
  334
  355
  377
  400
  424
  449
  475
  502
  531
  560
  592
  624
EBITDA, $m
  82
  94
  106
  118
  131
  145
  160
  175
  191
  207
  224
  242
  260
  279
  299
  319
  341
  363
  387
  411
  436
  463
  490
  519
  549
  580
  613
  648
  684
  721
Interest expense (income), $m
  2
  5
  7
  9
  11
  13
  15
  18
  20
  23
  25
  28
  31
  34
  37
  40
  43
  47
  50
  54
  58
  62
  66
  71
  75
  80
  85
  90
  96
  101
  107
Earnings before tax, $m
  43
  51
  60
  69
  78
  88
  98
  109
  120
  131
  164
  177
  190
  203
  217
  232
  247
  263
  280
  297
  315
  333
  353
  373
  395
  417
  440
  465
  490
  517
Tax expense, $m
  12
  14
  16
  19
  21
  24
  26
  29
  32
  35
  44
  48
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  107
  113
  119
  125
  132
  140
Net income, $m
  31
  37
  44
  50
  57
  64
  72
  79
  87
  96
  120
  129
  139
  149
  159
  169
  181
  192
  204
  217
  230
  243
  258
  273
  288
  304
  321
  339
  358
  377

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
  669
  749
  833
  921
  1,014
  1,111
  1,211
  1,317
  1,426
  1,540
  1,658
  1,781
  1,909
  2,042
  2,180
  2,324
  2,473
  2,628
  2,790
  2,959
  3,134
  3,317
  3,508
  3,708
  3,916
  4,133
  4,361
  4,598
  4,847
  5,106
Adjusted assets (=assets-cash), $m
  669
  749
  833
  921
  1,014
  1,111
  1,211
  1,317
  1,426
  1,540
  1,658
  1,781
  1,909
  2,042
  2,180
  2,324
  2,473
  2,628
  2,790
  2,959
  3,134
  3,317
  3,508
  3,708
  3,916
  4,133
  4,361
  4,598
  4,847
  5,106
Revenue / Adjusted assets
  0.765
  0.765
  0.765
  0.765
  0.764
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
Average production assets, $m
  172
  193
  215
  237
  261
  286
  312
  339
  368
  397
  428
  459
  492
  526
  562
  599
  638
  678
  719
  763
  808
  855
  904
  956
  1,010
  1,066
  1,124
  1,185
  1,249
  1,316
Working capital, $m
  179
  200
  222
  246
  271
  296
  323
  352
  381
  411
  443
  476
  510
  545
  582
  620
  660
  702
  745
  790
  837
  886
  937
  990
  1,045
  1,104
  1,164
  1,228
  1,294
  1,363
Total debt, $m
  130
  165
  203
  242
  283
  326
  371
  418
  467
  518
  570
  625
  682
  741
  802
  866
  933
  1,002
  1,074
  1,149
  1,227
  1,309
  1,394
  1,482
  1,575
  1,672
  1,773
  1,878
  1,989
  2,105
Total liabilities, $m
  298
  333
  371
  410
  451
  494
  539
  586
  635
  685
  738
  793
  850
  909
  970
  1,034
  1,100
  1,170
  1,242
  1,317
  1,395
  1,476
  1,561
  1,650
  1,743
  1,839
  1,940
  2,046
  2,157
  2,272
Total equity, $m
  371
  415
  462
  511
  563
  616
  672
  731
  792
  855
  920
  989
  1,060
  1,133
  1,210
  1,290
  1,372
  1,459
  1,549
  1,642
  1,740
  1,841
  1,947
  2,058
  2,173
  2,294
  2,420
  2,552
  2,690
  2,834
Total liabilities and equity, $m
  669
  748
  833
  921
  1,014
  1,110
  1,211
  1,317
  1,427
  1,540
  1,658
  1,782
  1,910
  2,042
  2,180
  2,324
  2,472
  2,629
  2,791
  2,959
  3,135
  3,317
  3,508
  3,708
  3,916
  4,133
  4,360
  4,598
  4,847
  5,106
Debt-to-equity ratio
  0.350
  0.400
  0.440
  0.470
  0.500
  0.530
  0.550
  0.570
  0.590
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.680
  0.690
  0.690
  0.700
  0.710
  0.710
  0.720
  0.720
  0.720
  0.730
  0.730
  0.740
  0.740
  0.740
Adjusted equity ratio
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  37
  44
  50
  57
  64
  72
  79
  87
  96
  120
  129
  139
  149
  159
  169
  181
  192
  204
  217
  230
  243
  258
  273
  288
  304
  321
  339
  358
  377
Depreciation, amort., depletion, $m
  34
  35
  37
  39
  40
  42
  44
  46
  48
  50
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  63
  67
  70
  74
  78
  83
  87
  92
  97
Funds from operations, $m
  65
  73
  81
  89
  97
  106
  116
  125
  136
  146
  151
  163
  175
  187
  200
  213
  227
  242
  257
  273
  289
  306
  324
  343
  362
  383
  404
  426
  450
  474
Change in working capital, $m
  20
  21
  22
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
Cash from operations, $m
  45
  51
  58
  65
  73
  80
  89
  97
  106
  116
  120
  130
  141
  152
  163
  175
  188
  200
  214
  228
  242
  257
  273
  290
  307
  325
  343
  363
  383
  405
Maintenance CAPEX, $m
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -92
New CAPEX, $m
  -19
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
Cash from investing activities, $m
  -30
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -75
  -78
  -82
  -87
  -92
  -96
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
Free cash flow, $m
  15
  18
  22
  27
  31
  36
  42
  47
  53
  59
  60
  67
  74
  81
  89
  97
  105
  113
  122
  131
  141
  151
  161
  172
  183
  194
  207
  219
  232
  246
Issuance/(repayment) of debt, $m
  33
  36
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
Issuance/(repurchase) of shares, $m
  11
  7
  3
  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  
  44
  43
  40
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
Total cash flow (excl. dividends), $m
  58
  61
  63
  66
  72
  79
  87
  94
  102
  110
  113
  122
  131
  140
  150
  161
  171
  183
  194
  206
  219
  232
  246
  260
  276
  291
  308
  325
  343
  362
Retained Cash Flow (-), $m
  -42
  -44
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -97
  -102
  -106
  -111
  -116
  -121
  -126
  -132
  -138
  -144
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
  17
  16
  16
  17
  21
  26
  31
  36
  41
  47
  47
  53
  60
  67
  74
  81
  89
  96
  104
  113
  122
  131
  140
  150
  160
  171
  182
  193
  205
  217
Discount rate, %
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
  16
  14
  13
  13
  15
  16
  18
  18
  19
  19
  17
  16
  16
  15
  13
  12
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  98.1
  97.0
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5

American Vanguard Corporation operates as a holding company. The Company conducts its business through its subsidiaries, AMVAC Chemical Corporation (AMVAC), GemChem, Inc. (GemChem), 2110 Davie Corporation (DAVIE), Quimica Amvac de Mexico S.A. de C.V. (AMVAC M), AMVAC Mexico Sociedad de Responsabilidad Limitada (AMVAC M Srl), AMVAC de Costa Rica Sociedad de Responsabilidad Limitada (AMVAC CR Srl), AMVAC Switzerland GmbH (AMVAC S), AMVAC do Brasil Representacoes Ltda (AMVAC B), AMVAC C.V. (AMVAC CV), AMVAC Netherlands BV (AMVAC BV), Envance Technologies, LLC (Envance), AMVAC Singapore Pte, Ltd (AMVAC Sgpr) and Huifeng AMVAC Innovation Co. Limited (Hong Kong JV). AMVAC is a specialty chemical manufacturer that develops and markets products for agricultural, commercial and consumer uses. It manufactures and formulates chemicals, such as insecticides, fungicides, herbicides, molluscicides and soil fumigants for crops, turf and ornamental plants, and human and animal health protection.

FINANCIAL RATIOS  of  American Vanguard Corporation (AVD)

Valuation Ratios
P/E Ratio 41.1
Price to Sales 1.7
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 15.3
Growth Rates
Sales Growth Rate 8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -75%
Cap. Spend. - 3 Yr. Gr. Rate -6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 14.5%
Total Debt to Equity 14.5%
Interest Coverage 11
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. 3.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 41%
Gross Margin - 3 Yr. Avg. 39.4%
EBITDA Margin 11.9%
EBITDA Margin - 3 Yr. Avg. 9.6%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin 6.1%
Pre-Tax Margin - 3 Yr. Avg. 3.5%
Net Profit Margin 4.2%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 17.9%
Payout Ratio 7.7%

AVD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVD stock intrinsic value calculation we used $454 million for the last fiscal year's total revenue generated by American Vanguard Corporation. The default revenue input number comes from 0001 income statement of American Vanguard 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 AVD stock valuation model: a) initial revenue growth rate of 12.7% 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 6.1%, whose default value for AVD is calculated based on our internal credit rating of American Vanguard 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 Vanguard 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 AVD stock the variable cost ratio is equal to 87.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $16 million in the base year in the intrinsic value calculation for AVD 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 Vanguard Corporation.

Corporate tax rate of 27% is the nominal tax rate for American Vanguard 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 AVD 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 AVD are equal to 33.7%.

Life of production assets of 13.6 years is the average useful life of capital assets used in American Vanguard 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 AVD is equal to 34.9%. 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 - $329.23 million for American Vanguard 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 29.690 million for American Vanguard 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 Vanguard Corporation at the current share price and the inputted number of shares is $0.5 billion.

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