Intrinsic value of American Vanguard - AVD

Previous Close

$22.20

  Intrinsic Value

$10.09

stock screener

  Rating & Target

str. sell

-55%

Previous close

$22.20

 
Intrinsic value

$10.09

 
Up/down potential

-55%

 
Rating

str. sell

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

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  7.96
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  312
  343
  375
  408
  442
  479
  516
  555
  595
  638
  681
  727
  774
  823
  874
  928
  983
  1,041
  1,102
  1,165
  1,230
  1,299
  1,371
  1,446
  1,524
  1,606
  1,692
  1,782
  1,876
  1,975
  2,078
Variable operating expenses, $m
 
  209
  228
  248
  269
  291
  314
  338
  363
  388
  415
  443
  471
  501
  533
  565
  599
  634
  671
  709
  749
  791
  835
  881
  928
  978
  1,031
  1,085
  1,143
  1,203
  1,265
Fixed operating expenses, $m
 
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
  181
  185
  190
  195
  200
  205
  210
  215
  220
Total operating expenses, $m
  292
  317
  338
  361
  385
  410
  436
  463
  491
  519
  549
  581
  612
  646
  681
  717
  755
  794
  835
  877
  921
  967
  1,016
  1,066
  1,118
  1,173
  1,231
  1,290
  1,353
  1,418
  1,485
Operating income, $m
  21
  26
  36
  46
  57
  68
  80
  92
  105
  118
  132
  146
  161
  177
  194
  211
  229
  247
  267
  287
  309
  332
  355
  380
  406
  433
  462
  492
  524
  557
  592
EBITDA, $m
  37
  44
  55
  67
  80
  93
  106
  121
  135
  151
  167
  184
  201
  219
  238
  258
  279
  301
  323
  347
  372
  398
  426
  454
  484
  516
  549
  584
  620
  658
  699
Interest expense (income), $m
  2
  2
  2
  3
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
Earnings before tax, $m
  19
  25
  34
  44
  54
  64
  76
  87
  99
  112
  125
  138
  153
  167
  183
  199
  216
  234
  253
  272
  293
  314
  336
  360
  385
  411
  438
  466
  497
  528
  561
Tax expense, $m
  6
  7
  9
  12
  15
  17
  20
  24
  27
  30
  34
  37
  41
  45
  49
  54
  58
  63
  68
  73
  79
  85
  91
  97
  104
  111
  118
  126
  134
  143
  152
Net income, $m
  13
  18
  25
  32
  39
  47
  55
  64
  72
  81
  91
  101
  111
  122
  134
  145
  158
  171
  184
  199
  214
  229
  246
  263
  281
  300
  320
  341
  363
  386
  410

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  430
  464
  507
  552
  599
  648
  698
  751
  806
  863
  922
  983
  1,047
  1,114
  1,183
  1,255
  1,331
  1,409
  1,491
  1,576
  1,665
  1,758
  1,855
  1,957
  2,063
  2,174
  2,290
  2,411
  2,539
  2,672
  2,812
Adjusted assets (=assets-cash), $m
  422
  464
  507
  552
  599
  648
  698
  751
  806
  863
  922
  983
  1,047
  1,114
  1,183
  1,255
  1,331
  1,409
  1,491
  1,576
  1,665
  1,758
  1,855
  1,957
  2,063
  2,174
  2,290
  2,411
  2,539
  2,672
  2,812
Revenue / Adjusted assets
  0.739
  0.739
  0.740
  0.739
  0.738
  0.739
  0.739
  0.739
  0.738
  0.739
  0.739
  0.740
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
Average production assets, $m
  175
  191
  209
  228
  247
  267
  288
  310
  333
  356
  381
  406
  433
  460
  489
  519
  550
  582
  616
  651
  688
  726
  766
  808
  852
  898
  946
  996
  1,049
  1,104
  1,162
Working capital, $m
  130
  134
  146
  159
  173
  187
  202
  217
  233
  249
  266
  284
  303
  322
  342
  363
  384
  407
  431
  455
  481
  508
  536
  565
  596
  628
  662
  697
  734
  772
  812
Total debt, $m
  41
  56
  71
  87
  103
  120
  138
  157
  176
  196
  217
  238
  261
  284
  308
  334
  360
  388
  416
  446
  477
  510
  544
  580
  617
  656
  697
  739
  784
  831
  880
Total liabilities, $m
  148
  163
  178
  194
  210
  227
  245
  264
  283
  303
  324
  345
  368
  391
  415
  441
  467
  495
  523
  553
  584
  617
  651
  687
  724
  763
  804
  846
  891
  938
  987
Total equity, $m
  282
  301
  329
  358
  389
  420
  453
  487
  523
  560
  598
  638
  680
  723
  768
  815
  864
  914
  967
  1,023
  1,081
  1,141
  1,204
  1,270
  1,339
  1,411
  1,486
  1,565
  1,648
  1,734
  1,825
Total liabilities and equity, $m
  430
  464
  507
  552
  599
  647
  698
  751
  806
  863
  922
  983
  1,048
  1,114
  1,183
  1,256
  1,331
  1,409
  1,490
  1,576
  1,665
  1,758
  1,855
  1,957
  2,063
  2,174
  2,290
  2,411
  2,539
  2,672
  2,812
Debt-to-equity ratio
  0.145
  0.190
  0.220
  0.240
  0.270
  0.290
  0.300
  0.320
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.420
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
Adjusted equity ratio
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  18
  25
  32
  39
  47
  55
  64
  72
  81
  91
  101
  111
  122
  134
  145
  158
  171
  184
  199
  214
  229
  246
  263
  281
  300
  320
  341
  363
  386
  410
Depreciation, amort., depletion, $m
  16
  18
  19
  21
  23
  25
  26
  28
  31
  33
  35
  37
  40
  42
  45
  48
  50
  53
  56
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  101
  107
Funds from operations, $m
  55
  36
  44
  53
  62
  72
  82
  92
  103
  114
  126
  138
  151
  164
  178
  193
  208
  224
  241
  258
  277
  296
  316
  337
  359
  382
  406
  432
  459
  487
  516
Change in working capital, $m
  9
  12
  12
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
Cash from operations, $m
  46
  24
  32
  40
  48
  58
  67
  77
  87
  98
  109
  120
  133
  145
  158
  172
  187
  202
  217
  234
  251
  269
  288
  308
  328
  350
  373
  397
  422
  448
  476
Maintenance CAPEX, $m
  0
  -16
  -18
  -19
  -21
  -23
  -25
  -26
  -28
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
New CAPEX, $m
  -11
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
Cash from investing activities, $m
  -14
  -33
  -36
  -38
  -40
  -43
  -46
  -48
  -51
  -55
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -82
  -87
  -91
  -97
  -101
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
Free cash flow, $m
  32
  -9
  -4
  2
  8
  15
  21
  29
  36
  44
  52
  60
  69
  78
  88
  98
  108
  119
  130
  142
  154
  167
  181
  195
  210
  226
  242
  260
  278
  297
  317
Issuance/(repayment) of debt, $m
  -28
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
Issuance/(repurchase) of shares, $m
  0
  9
  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
  0
Cash from financing (excl. dividends), $m  
  -28
  24
  18
  16
  16
  17
  18
  19
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
Total cash flow (excl. dividends), $m
  3
  14
  15
  18
  25
  32
  39
  47
  55
  64
  73
  82
  91
  101
  112
  123
  134
  146
  159
  172
  186
  200
  215
  231
  248
  265
  283
  302
  323
  344
  366
Retained Cash Flow (-), $m
  -14
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
Prev. year cash balance distribution, $m
 
  8
  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
 
  -5
  -14
  -11
  -6
  0
  6
  13
  20
  27
  34
  42
  50
  58
  67
  76
  86
  95
  106
  117
  128
  140
  152
  165
  179
  193
  208
  224
  240
  257
  276
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
 
  -4
  -12
  -10
  -5
  0
  5
  9
  12
  15
  18
  20
  21
  22
  22
  22
  22
  21
  19
  18
  16
  14
  13
  11
  9
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  98.7
  98.2
  98.2
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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 (AVD)

Valuation Ratios
P/E Ratio 50.2
Price to Sales 2.1
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 14.2
Price to Free Cash Flow 18.6
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 $312 million for the last fiscal year's total revenue generated by American Vanguard. The default revenue input number comes from 2016 income statement of American Vanguard. 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 9.8% 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 AVD is calculated based on our internal credit rating of American Vanguard, 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.
    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 60.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $105 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 3.7% for American Vanguard.

Corporate tax rate of 27% is the nominal tax rate for American Vanguard. 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 55.9%.

Life of production assets of 10.9 years is the average useful life of capital assets used in American Vanguard 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 39.1%. 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 - $282 million for American Vanguard - 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 30.174 million for American Vanguard 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 at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ American Vanguard Declares Quarterly Dividend   [Dec-12-17 09:00AM  Business Wire]
▶ American Vanguard misses 3Q profit forecasts   [Nov-02-17 06:46PM  Associated Press]
▶ American Vanguard Completes Acquisition of Grupo Agricenter   [Oct-30-17 09:00AM  Business Wire]
▶ American Vanguard Completes Acquisition of OHP, Inc.   [Oct-03-17 09:00AM  Business Wire]
▶ American Vanguard Declares Quarterly Dividend   [Sep-18-17 04:15PM  Business Wire]
▶ American Vanguard beats 2Q profit forecasts   [Jul-31-17 09:33PM  Associated Press]
▶ Who are Monsanto's main competitors?   [Jun-27-17 10:39AM  Investopedia]
▶ American Vanguard Declares Quarterly Dividend   [Jun-08-17 09:00AM  Business Wire]
▶ American Vanguard meets 1Q profit forecasts   [May-04-17 06:08PM  Associated Press]
▶ US, EU clear Chinese takeover of Syngenta   [06:00AM  Associated Press]
▶ American Vanguard Announces New Head of Regulatory Affairs   [Mar-21-17 04:05PM  Business Wire]
▶ American Vanguard meets 4Q profit forecasts   [Mar-06-17 04:33PM  Associated Press]
▶ Deere: A Bummer of an Upgrade   [Nov-28-16 11:55AM  at Barrons.com]
▶ [$$] American Vanguard Plants a Comeback   [Nov-12-16 12:01AM  at Barrons.com]
Financial statements of AVD
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