Intrinsic value of Anixter International Inc. - AXE

Previous Close

$58.43

  Intrinsic Value

$77.86

stock screener

  Rating & Target

buy

+33%

Previous close

$58.43

 
Intrinsic value

$77.86

 
Up/down potential

+33%

 
Rating

buy

We calculate the intrinsic value of AXE 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 2.0

 

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, %
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  8,837
  9,295
  9,774
  10,277
  10,805
  11,358
  11,938
  12,546
  13,184
  13,853
  14,556
  15,293
  16,066
  16,877
  17,729
  18,623
  19,561
  20,545
  21,579
  22,664
  23,802
  24,998
  26,252
  27,570
  28,952
  30,404
  31,928
  33,529
  35,208
  36,972
Variable operating expenses, $m
  8,477
  8,910
  9,363
  9,839
  10,337
  10,860
  11,409
  11,984
  12,587
  13,220
  13,761
  14,458
  15,189
  15,956
  16,761
  17,606
  18,493
  19,424
  20,401
  21,426
  22,503
  23,633
  24,819
  26,065
  27,372
  28,745
  30,186
  31,698
  33,287
  34,954
Fixed operating expenses, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Total operating expenses, $m
  8,476
  8,909
  9,362
  9,838
  10,336
  10,859
  11,408
  11,983
  12,586
  13,219
  13,760
  14,457
  15,188
  15,955
  16,760
  17,605
  18,492
  19,423
  20,399
  21,424
  22,501
  23,631
  24,817
  26,063
  27,370
  28,743
  30,184
  31,696
  33,285
  34,952
Operating income, $m
  361
  386
  412
  440
  468
  499
  530
  563
  598
  635
  796
  836
  878
  923
  969
  1,018
  1,069
  1,123
  1,179
  1,239
  1,301
  1,366
  1,435
  1,507
  1,582
  1,661
  1,745
  1,832
  1,924
  2,020
EBITDA, $m
  524
  551
  579
  609
  640
  673
  708
  744
  781
  821
  863
  906
  952
  1,000
  1,051
  1,103
  1,159
  1,217
  1,278
  1,343
  1,410
  1,481
  1,555
  1,633
  1,715
  1,801
  1,891
  1,986
  2,085
  2,190
Interest expense (income), $m
  76
  76
  86
  97
  107
  119
  130
  143
  156
  169
  184
  199
  214
  231
  248
  266
  286
  306
  327
  349
  372
  396
  422
  448
  477
  506
  537
  570
  604
  640
  677
Earnings before tax, $m
  285
  300
  316
  332
  350
  368
  387
  408
  429
  451
  597
  622
  647
  674
  703
  732
  764
  796
  831
  867
  905
  944
  986
  1,030
  1,076
  1,124
  1,175
  1,228
  1,284
  1,343
Tax expense, $m
  77
  81
  85
  90
  94
  99
  105
  110
  116
  122
  161
  168
  175
  182
  190
  198
  206
  215
  224
  234
  244
  255
  266
  278
  291
  304
  317
  332
  347
  363
Net income, $m
  208
  219
  230
  243
  255
  269
  283
  298
  313
  329
  436
  454
  473
  492
  513
  535
  557
  581
  606
  633
  660
  689
  720
  752
  785
  821
  858
  897
  937
  980

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
  4,896
  5,149
  5,415
  5,694
  5,986
  6,292
  6,614
  6,951
  7,304
  7,675
  8,064
  8,472
  8,901
  9,350
  9,822
  10,317
  10,837
  11,382
  11,955
  12,556
  13,187
  13,849
  14,544
  15,274
  16,040
  16,844
  17,689
  18,575
  19,506
  20,483
Adjusted assets (=assets-cash), $m
  4,896
  5,149
  5,415
  5,694
  5,986
  6,292
  6,614
  6,951
  7,304
  7,675
  8,064
  8,472
  8,901
  9,350
  9,822
  10,317
  10,837
  11,382
  11,955
  12,556
  13,187
  13,849
  14,544
  15,274
  16,040
  16,844
  17,689
  18,575
  19,506
  20,483
Revenue / Adjusted assets
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
  1.805
Average production assets, $m
  795
  837
  880
  925
  972
  1,022
  1,074
  1,129
  1,187
  1,247
  1,310
  1,376
  1,446
  1,519
  1,596
  1,676
  1,760
  1,849
  1,942
  2,040
  2,142
  2,250
  2,363
  2,481
  2,606
  2,736
  2,874
  3,018
  3,169
  3,328
Working capital, $m
  1,538
  1,617
  1,701
  1,788
  1,880
  1,976
  2,077
  2,183
  2,294
  2,410
  2,533
  2,661
  2,795
  2,937
  3,085
  3,240
  3,404
  3,575
  3,755
  3,943
  4,142
  4,350
  4,568
  4,797
  5,038
  5,290
  5,556
  5,834
  6,126
  6,433
Total debt, $m
  1,415
  1,583
  1,759
  1,944
  2,138
  2,341
  2,554
  2,777
  3,012
  3,258
  3,516
  3,786
  4,070
  4,368
  4,681
  5,009
  5,354
  5,716
  6,095
  6,494
  6,912
  7,351
  7,812
  8,296
  8,804
  9,337
  9,897
  10,485
  11,102
  11,749
Total liabilities, $m
  3,246
  3,414
  3,590
  3,775
  3,969
  4,172
  4,385
  4,608
  4,843
  5,089
  5,347
  5,617
  5,901
  6,199
  6,512
  6,840
  7,185
  7,547
  7,926
  8,325
  8,743
  9,182
  9,643
  10,127
  10,635
  11,168
  11,728
  12,315
  12,933
  13,580
Total equity, $m
  1,650
  1,735
  1,825
  1,919
  2,017
  2,121
  2,229
  2,342
  2,461
  2,586
  2,718
  2,855
  3,000
  3,151
  3,310
  3,477
  3,652
  3,836
  4,029
  4,231
  4,444
  4,667
  4,901
  5,147
  5,406
  5,677
  5,961
  6,260
  6,574
  6,903
Total liabilities and equity, $m
  4,896
  5,149
  5,415
  5,694
  5,986
  6,293
  6,614
  6,950
  7,304
  7,675
  8,065
  8,472
  8,901
  9,350
  9,822
  10,317
  10,837
  11,383
  11,955
  12,556
  13,187
  13,849
  14,544
  15,274
  16,041
  16,845
  17,689
  18,575
  19,507
  20,483
Debt-to-equity ratio
  0.860
  0.910
  0.960
  1.010
  1.060
  1.100
  1.150
  1.190
  1.220
  1.260
  1.290
  1.330
  1.360
  1.390
  1.410
  1.440
  1.470
  1.490
  1.510
  1.530
  1.560
  1.580
  1.590
  1.610
  1.630
  1.640
  1.660
  1.670
  1.690
  1.700
Adjusted equity ratio
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337
  0.337

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  208
  219
  230
  243
  255
  269
  283
  298
  313
  329
  436
  454
  473
  492
  513
  535
  557
  581
  606
  633
  660
  689
  720
  752
  785
  821
  858
  897
  937
  980
Depreciation, amort., depletion, $m
  163
  165
  167
  170
  172
  175
  177
  180
  183
  186
  67
  70
  74
  77
  81
  86
  90
  94
  99
  104
  109
  115
  121
  127
  133
  140
  147
  154
  162
  170
Funds from operations, $m
  371
  384
  398
  412
  427
  443
  460
  478
  496
  515
  503
  524
  546
  570
  594
  620
  647
  676
  705
  737
  770
  804
  840
  878
  918
  960
  1,004
  1,051
  1,099
  1,150
Change in working capital, $m
  76
  80
  83
  88
  92
  96
  101
  106
  111
  116
  122
  128
  135
  141
  148
  156
  163
  171
  180
  189
  198
  208
  218
  229
  241
  253
  265
  278
  292
  307
Cash from operations, $m
  295
  304
  314
  325
  336
  347
  359
  372
  385
  399
  380
  396
  412
  429
  446
  465
  484
  504
  526
  548
  572
  596
  622
  649
  678
  708
  739
  772
  807
  843
Maintenance CAPEX, $m
  -38
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -86
  -90
  -94
  -99
  -104
  -109
  -115
  -121
  -127
  -133
  -140
  -147
  -154
  -162
New CAPEX, $m
  -41
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -89
  -93
  -98
  -102
  -108
  -113
  -119
  -124
  -131
  -137
  -144
  -151
  -159
Cash from investing activities, $m
  -79
  -82
  -86
  -90
  -94
  -100
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
  -161
  -170
  -179
  -187
  -197
  -206
  -217
  -228
  -240
  -251
  -264
  -277
  -291
  -305
  -321
Free cash flow, $m
  215
  222
  228
  235
  241
  248
  255
  262
  270
  278
  254
  263
  272
  282
  292
  303
  314
  326
  338
  351
  365
  379
  394
  410
  427
  444
  462
  482
  502
  523
Issuance/(repayment) of debt, $m
  163
  168
  176
  185
  194
  203
  213
  223
  234
  246
  258
  271
  284
  298
  313
  328
  345
  362
  380
  398
  418
  439
  461
  484
  508
  533
  560
  588
  617
  648
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  
  163
  168
  176
  185
  194
  203
  213
  223
  234
  246
  258
  271
  284
  298
  313
  328
  345
  362
  380
  398
  418
  439
  461
  484
  508
  533
  560
  588
  617
  648
Total cash flow (excl. dividends), $m
  378
  391
  405
  419
  435
  451
  468
  486
  504
  524
  512
  533
  556
  580
  605
  631
  659
  688
  718
  750
  783
  818
  855
  894
  935
  977
  1,022
  1,069
  1,119
  1,171
Retained Cash Flow (-), $m
  -79
  -85
  -90
  -94
  -98
  -103
  -108
  -114
  -119
  -125
  -131
  -138
  -144
  -152
  -159
  -167
  -175
  -184
  -193
  -203
  -213
  -223
  -234
  -246
  -258
  -271
  -285
  -299
  -314
  -329
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
  299
  305
  315
  325
  336
  348
  360
  372
  385
  399
  381
  396
  412
  428
  446
  464
  483
  504
  525
  547
  571
  595
  621
  648
  677
  706
  738
  771
  805
  841
Discount rate, %
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
  278
  261
  247
  231
  215
  198
  181
  163
  146
  129
  104
  90
  76
  64
  53
  43
  34
  27
  21
  16
  12
  8
  6
  4
  3
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  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
  100.0

Anixter International Inc. is engaged in the distribution of enterprise cabling and security solutions, electrical and electronic wire and cable products and utility power solutions. The Company operates through three segments: Network & Security Solutions (NSS), Electrical & Electronic Solutions (EES), and Utility Power Solutions (UPS). The NSS segment's product portfolio includes access control, power, cable management, wireless, professional audio/video, voice and networking switches, and other ancillary products. The EES segment's product portfolio includes electrical and electronic wire and cable, shipboard cable, support and supply products, low-voltage cable, instrumentation cable, industrial communication and control products, security cable, connectors, industrial Ethernet switches, and voice and data cable. The UPS segment supplies electrical transmission and distribution products, power plant maintenance, repair and operations supplies, and smart-grid products.

FINANCIAL RATIOS  of  Anixter International Inc. (AXE)

Valuation Ratios
P/E Ratio 16.1
Price to Sales 0.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow 7.9
Growth Rates
Sales Growth Rate 23.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 13.8%
Cap. Spend. - 3 Yr. Gr. Rate 0.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 106.7%
Total Debt to Equity 106.7%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.2%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 13%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 20.3%
Gross Margin - 3 Yr. Avg. 21.5%
EBITDA Margin 4.5%
EBITDA Margin - 3 Yr. Avg. 5%
Operating Margin 3.7%
Oper. Margin - 3 Yr. Avg. 4.6%
Pre-Tax Margin 2.6%
Pre-Tax Margin - 3 Yr. Avg. 3.4%
Net Profit Margin 1.6%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate 38.9%
Eff/ Tax Rate - 3 Yr. Avg. 40.2%
Payout Ratio 0%

AXE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AXE stock intrinsic value calculation we used $8400 million for the last fiscal year's total revenue generated by Anixter International Inc.. The default revenue input number comes from 0001 income statement of Anixter International Inc.. 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 AXE stock valuation model: a) initial revenue growth rate of 5.2% 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 7.7%, whose default value for AXE is calculated based on our internal credit rating of Anixter International Inc., 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 Anixter International Inc..
    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 AXE stock the variable cost ratio is equal to 96%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $-1 million in the base year in the intrinsic value calculation for AXE 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 6.1% for Anixter International Inc..

Corporate tax rate of 27% is the nominal tax rate for Anixter International Inc.. 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 AXE 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 AXE are equal to 9%.

Life of production assets of 19.6 years is the average useful life of capital assets used in Anixter International Inc. 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 AXE is equal to 17.4%. 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 - $1570.4 million for Anixter International Inc. - 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 33.570 million for Anixter International Inc. 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 Anixter International Inc. at the current share price and the inputted number of shares is $2.0 billion.

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