Intrinsic value of American Axle & Manufacturing Holdings, - AXL

Previous Close

$7.71

  Intrinsic Value

$39.83

stock screener

  Rating & Target

str. buy

+417%

Previous close

$7.71

 
Intrinsic value

$39.83

 
Up/down potential

+417%

 
Rating

str. buy

We calculate the intrinsic value of AXL 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 0.9

 

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, %
  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
  7,415
  7,586
  7,781
  8,000
  8,242
  8,508
  8,798
  9,112
  9,450
  9,812
  10,200
  10,614
  11,055
  11,524
  12,021
  12,548
  13,105
  13,695
  14,318
  14,976
  15,670
  16,402
  17,174
  17,987
  18,843
  19,745
  20,694
  21,692
  22,743
  23,848
Variable operating expenses, $m
  6,766
  6,916
  7,088
  7,281
  7,495
  7,730
  7,985
  8,262
  8,560
  8,880
  8,997
  9,362
  9,751
  10,164
  10,602
  11,067
  11,559
  12,079
  12,629
  13,209
  13,821
  14,467
  15,147
  15,864
  16,620
  17,415
  18,252
  19,133
  20,059
  21,034
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
  6,766
  6,916
  7,088
  7,281
  7,495
  7,730
  7,985
  8,262
  8,560
  8,880
  8,997
  9,362
  9,751
  10,164
  10,602
  11,067
  11,559
  12,079
  12,629
  13,209
  13,821
  14,467
  15,147
  15,864
  16,620
  17,415
  18,252
  19,133
  20,059
  21,034
Operating income, $m
  650
  670
  693
  719
  747
  779
  813
  850
  890
  932
  1,204
  1,252
  1,304
  1,360
  1,418
  1,480
  1,546
  1,616
  1,689
  1,767
  1,849
  1,935
  2,026
  2,122
  2,223
  2,330
  2,442
  2,559
  2,683
  2,814
EBITDA, $m
  1,276
  1,306
  1,339
  1,377
  1,418
  1,464
  1,514
  1,568
  1,626
  1,689
  1,755
  1,827
  1,903
  1,983
  2,069
  2,159
  2,255
  2,357
  2,464
  2,577
  2,697
  2,823
  2,956
  3,095
  3,243
  3,398
  3,561
  3,733
  3,914
  4,104
Interest expense (income), $m
  87
  213
  220
  228
  237
  247
  258
  271
  284
  299
  314
  331
  349
  368
  389
  410
  433
  458
  484
  511
  540
  571
  603
  637
  673
  710
  750
  792
  836
  882
  931
Earnings before tax, $m
  436
  450
  465
  482
  500
  520
  542
  566
  591
  618
  873
  903
  936
  971
  1,008
  1,047
  1,088
  1,132
  1,178
  1,227
  1,278
  1,332
  1,390
  1,450
  1,513
  1,580
  1,650
  1,724
  1,801
  1,883
Tax expense, $m
  118
  121
  126
  130
  135
  141
  146
  153
  160
  167
  236
  244
  253
  262
  272
  283
  294
  306
  318
  331
  345
  360
  375
  391
  409
  427
  445
  465
  486
  508
Net income, $m
  319
  328
  339
  352
  365
  380
  396
  413
  432
  451
  637
  659
  683
  709
  736
  764
  794
  826
  860
  896
  933
  973
  1,014
  1,058
  1,104
  1,153
  1,204
  1,258
  1,315
  1,374

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
  7,661
  7,837
  8,038
  8,264
  8,515
  8,790
  9,089
  9,413
  9,762
  10,137
  10,538
  10,965
  11,421
  11,905
  12,418
  12,962
  13,538
  14,148
  14,791
  15,471
  16,188
  16,944
  17,741
  18,581
  19,466
  20,397
  21,378
  22,409
  23,494
  24,636
Adjusted assets (=assets-cash), $m
  7,661
  7,837
  8,038
  8,264
  8,515
  8,790
  9,089
  9,413
  9,762
  10,137
  10,538
  10,965
  11,421
  11,905
  12,418
  12,962
  13,538
  14,148
  14,791
  15,471
  16,188
  16,944
  17,741
  18,581
  19,466
  20,397
  21,378
  22,409
  23,494
  24,636
Revenue / Adjusted assets
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
Average production assets, $m
  3,812
  3,899
  3,999
  4,112
  4,237
  4,373
  4,522
  4,683
  4,857
  5,044
  5,243
  5,456
  5,682
  5,923
  6,179
  6,449
  6,736
  7,039
  7,359
  7,698
  8,054
  8,431
  8,827
  9,245
  9,685
  10,149
  10,636
  11,150
  11,690
  12,258
Working capital, $m
  326
  334
  342
  352
  363
  374
  387
  401
  416
  432
  449
  467
  486
  507
  529
  552
  577
  603
  630
  659
  689
  722
  756
  791
  829
  869
  911
  954
  1,001
  1,049
Total debt, $m
  3,925
  4,067
  4,228
  4,410
  4,610
  4,831
  5,071
  5,331
  5,611
  5,911
  6,233
  6,576
  6,941
  7,329
  7,741
  8,177
  8,639
  9,128
  9,644
  10,189
  10,764
  11,371
  12,010
  12,684
  13,393
  14,140
  14,926
  15,754
  16,624
  17,540
Total liabilities, $m
  6,144
  6,285
  6,447
  6,628
  6,829
  7,049
  7,289
  7,549
  7,829
  8,130
  8,451
  8,794
  9,159
  9,547
  9,959
  10,396
  10,858
  11,346
  11,863
  12,408
  12,983
  13,589
  14,229
  14,902
  15,612
  16,359
  17,145
  17,972
  18,843
  19,758
Total equity, $m
  1,517
  1,552
  1,592
  1,636
  1,686
  1,740
  1,800
  1,864
  1,933
  2,007
  2,086
  2,171
  2,261
  2,357
  2,459
  2,567
  2,681
  2,801
  2,929
  3,063
  3,205
  3,355
  3,513
  3,679
  3,854
  4,039
  4,233
  4,437
  4,652
  4,878
Total liabilities and equity, $m
  7,661
  7,837
  8,039
  8,264
  8,515
  8,789
  9,089
  9,413
  9,762
  10,137
  10,537
  10,965
  11,420
  11,904
  12,418
  12,963
  13,539
  14,147
  14,792
  15,471
  16,188
  16,944
  17,742
  18,581
  19,466
  20,398
  21,378
  22,409
  23,495
  24,636
Debt-to-equity ratio
  2.590
  2.620
  2.660
  2.690
  2.730
  2.780
  2.820
  2.860
  2.900
  2.950
  2.990
  3.030
  3.070
  3.110
  3.150
  3.190
  3.220
  3.260
  3.290
  3.330
  3.360
  3.390
  3.420
  3.450
  3.470
  3.500
  3.530
  3.550
  3.570
  3.600
Adjusted equity ratio
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  319
  328
  339
  352
  365
  380
  396
  413
  432
  451
  637
  659
  683
  709
  736
  764
  794
  826
  860
  896
  933
  973
  1,014
  1,058
  1,104
  1,153
  1,204
  1,258
  1,315
  1,374
Depreciation, amort., depletion, $m
  627
  636
  646
  658
  671
  686
  701
  718
  737
  756
  552
  574
  598
  623
  650
  679
  709
  741
  775
  810
  848
  887
  929
  973
  1,020
  1,068
  1,120
  1,174
  1,230
  1,290
Funds from operations, $m
  945
  964
  986
  1,010
  1,036
  1,066
  1,097
  1,131
  1,168
  1,208
  1,189
  1,234
  1,282
  1,332
  1,386
  1,443
  1,504
  1,567
  1,635
  1,706
  1,781
  1,860
  1,944
  2,031
  2,124
  2,221
  2,324
  2,432
  2,545
  2,665
Change in working capital, $m
  6
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
Cash from operations, $m
  939
  957
  977
  1,000
  1,026
  1,054
  1,084
  1,118
  1,153
  1,192
  1,172
  1,216
  1,262
  1,312
  1,364
  1,420
  1,479
  1,541
  1,607
  1,677
  1,750
  1,828
  1,910
  1,996
  2,086
  2,182
  2,282
  2,388
  2,499
  2,616
Maintenance CAPEX, $m
  -394
  -401
  -410
  -421
  -433
  -446
  -460
  -476
  -493
  -511
  -531
  -552
  -574
  -598
  -623
  -650
  -679
  -709
  -741
  -775
  -810
  -848
  -887
  -929
  -973
  -1,020
  -1,068
  -1,120
  -1,174
  -1,230
New CAPEX, $m
  -73
  -88
  -100
  -113
  -125
  -137
  -149
  -161
  -174
  -186
  -199
  -213
  -227
  -241
  -256
  -271
  -287
  -303
  -320
  -338
  -357
  -376
  -397
  -418
  -440
  -463
  -488
  -513
  -540
  -568
Cash from investing activities, $m
  -467
  -489
  -510
  -534
  -558
  -583
  -609
  -637
  -667
  -697
  -730
  -765
  -801
  -839
  -879
  -921
  -966
  -1,012
  -1,061
  -1,113
  -1,167
  -1,224
  -1,284
  -1,347
  -1,413
  -1,483
  -1,556
  -1,633
  -1,714
  -1,798
Free cash flow, $m
  472
  468
  467
  467
  468
  471
  475
  480
  487
  494
  441
  451
  461
  473
  485
  499
  514
  529
  546
  564
  583
  604
  626
  649
  673
  699
  726
  755
  786
  818
Issuance/(repayment) of debt, $m
  117
  141
  162
  181
  201
  220
  240
  260
  280
  300
  321
  343
  365
  388
  412
  436
  462
  489
  516
  545
  575
  607
  639
  674
  709
  747
  786
  827
  870
  916
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  
  117
  141
  162
  181
  201
  220
  240
  260
  280
  300
  321
  343
  365
  388
  412
  436
  462
  489
  516
  545
  575
  607
  639
  674
  709
  747
  786
  827
  870
  916
Total cash flow (excl. dividends), $m
  589
  609
  628
  648
  669
  692
  715
  740
  767
  794
  763
  794
  826
  861
  897
  935
  976
  1,018
  1,062
  1,109
  1,159
  1,210
  1,265
  1,322
  1,382
  1,446
  1,512
  1,582
  1,656
  1,733
Retained Cash Flow (-), $m
  -33
  -35
  -40
  -45
  -50
  -54
  -59
  -64
  -69
  -74
  -79
  -85
  -90
  -96
  -102
  -108
  -114
  -121
  -127
  -135
  -142
  -150
  -158
  -166
  -175
  -184
  -194
  -204
  -215
  -226
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
  556
  574
  588
  603
  620
  637
  656
  676
  697
  720
  684
  709
  736
  765
  795
  828
  861
  897
  935
  975
  1,017
  1,061
  1,107
  1,156
  1,207
  1,261
  1,318
  1,378
  1,441
  1,507
Discount rate, %
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
  513
  484
  450
  414
  379
  343
  308
  274
  240
  209
  164
  139
  116
  95
  77
  61
  48
  36
  27
  20
  14
  10
  7
  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

American Axle & Manufacturing Holdings, Inc. (AAM) manufactures, engineers, designs and validates driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles, crossover vehicles, passenger cars and commercial vehicles. Its driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Its driveline, drivetrain and related products include axles, driveheads, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, transmission parts, electric drive systems and metal-formed products. The Company's subsidiary, e-AAM Driveline Systems AB (e-AAM), engineers and develops battery electric and hybrid driveline systems to be commercialized for crossover vehicles and passenger cars. As of April 6, 2017, it operated in 17 countries and had approximately 90 manufacturing, engineering and business office facilities around the world.

FINANCIAL RATIOS  of  American Axle & Manufacturing Holdings, (AXL)

Valuation Ratios
P/E Ratio 2.4
Price to Sales 0.1
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 1.4
Price to Free Cash Flow 3.3
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.5%
Cap. Spend. - 3 Yr. Gr. Rate -2%
Financial Strength
Quick Ratio 160
Current Ratio 0
LT Debt to Equity 276.9%
Total Debt to Equity 277.5%
Interest Coverage 4
Management Effectiveness
Return On Assets 9.4%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 13.4%
Ret/ On T. Cap. - 3 Yr. Avg. 12.2%
Return On Equity 59.7%
Return On Equity - 3 Yr. Avg. 119.7%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 18.4%
Gross Margin - 3 Yr. Avg. 16.3%
EBITDA Margin 14.9%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 9.7%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 19.4%
Eff/ Tax Rate - 3 Yr. Avg. 17.4%
Payout Ratio 0%

AXL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AXL stock intrinsic value calculation we used $7270 million for the last fiscal year's total revenue generated by American Axle & Manufacturing Holdings, . The default revenue input number comes from 0001 income statement of American Axle & Manufacturing Holdings, . 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 AXL 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 8.5%, whose default value for AXL is calculated based on our internal credit rating of American Axle & Manufacturing Holdings, , 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 Axle & Manufacturing Holdings, .
    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 AXL stock the variable cost ratio is equal to 91.3%.

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 AXL 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 5.6% for American Axle & Manufacturing Holdings, .

Corporate tax rate of 27% is the nominal tax rate for American Axle & Manufacturing Holdings, . 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 AXL 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 AXL are equal to 51.4%.

Life of production assets of 9.5 years is the average useful life of capital assets used in American Axle & Manufacturing Holdings, 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 AXL is equal to 4.4%. 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 - $1483.9 million for American Axle & Manufacturing Holdings, - 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 111.506 million for American Axle & Manufacturing Holdings, 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 Axle & Manufacturing Holdings, at the current share price and the inputted number of shares is $0.9 billion.

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