Intrinsic value of Axalta Coating Systems Ltd. - AXTA

Previous Close

$26.11

  Intrinsic Value

$15.21

stock screener

  Rating & Target

sell

-42%

Previous close

$26.11

 
Intrinsic value

$15.21

 
Up/down potential

-42%

 
Rating

sell

We calculate the intrinsic value of AXTA 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 6.1

 

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
  4,790
  4,900
  5,026
  5,167
  5,324
  5,496
  5,683
  5,886
  6,104
  6,338
  6,589
  6,856
  7,141
  7,444
  7,765
  8,105
  8,465
  8,846
  9,249
  9,674
  10,122
  10,595
  11,093
  11,618
  12,171
  12,754
  13,367
  14,012
  14,690
  15,404
Variable operating expenses, $m
  3,606
  3,683
  3,771
  3,870
  3,980
  4,100
  4,231
  4,373
  4,525
  4,689
  4,606
  4,793
  4,992
  5,204
  5,428
  5,666
  5,918
  6,184
  6,465
  6,763
  7,076
  7,407
  7,755
  8,122
  8,509
  8,916
  9,344
  9,795
  10,270
  10,769
Fixed operating expenses, $m
  744
  760
  777
  794
  812
  830
  848
  866
  886
  905
  925
  945
  966
  987
  1,009
  1,031
  1,054
  1,077
  1,101
  1,125
  1,150
  1,175
  1,201
  1,227
  1,254
  1,282
  1,310
  1,339
  1,368
  1,398
Total operating expenses, $m
  4,350
  4,443
  4,548
  4,664
  4,792
  4,930
  5,079
  5,239
  5,411
  5,594
  5,531
  5,738
  5,958
  6,191
  6,437
  6,697
  6,972
  7,261
  7,566
  7,888
  8,226
  8,582
  8,956
  9,349
  9,763
  10,198
  10,654
  11,134
  11,638
  12,167
Operating income, $m
  439
  456
  477
  503
  533
  566
  604
  647
  693
  744
  1,058
  1,118
  1,183
  1,253
  1,328
  1,408
  1,493
  1,585
  1,682
  1,786
  1,896
  2,013
  2,137
  2,269
  2,408
  2,556
  2,712
  2,878
  3,052
  3,237
EBITDA, $m
  949
  971
  999
  1,032
  1,070
  1,113
  1,161
  1,214
  1,272
  1,335
  1,404
  1,478
  1,558
  1,643
  1,735
  1,833
  1,938
  2,049
  2,168
  2,294
  2,428
  2,569
  2,720
  2,879
  3,047
  3,226
  3,414
  3,613
  3,823
  4,046
Interest expense (income), $m
  169
  209
  215
  222
  229
  238
  248
  259
  271
  284
  297
  312
  328
  345
  362
  382
  402
  423
  446
  470
  495
  522
  550
  580
  611
  644
  679
  716
  754
  795
  837
Earnings before tax, $m
  231
  242
  256
  273
  294
  318
  345
  376
  410
  447
  746
  790
  838
  890
  946
  1,006
  1,070
  1,139
  1,213
  1,291
  1,374
  1,463
  1,558
  1,658
  1,764
  1,877
  1,997
  2,123
  2,258
  2,400
Tax expense, $m
  62
  65
  69
  74
  79
  86
  93
  102
  111
  121
  201
  213
  226
  240
  255
  272
  289
  308
  327
  349
  371
  395
  421
  448
  476
  507
  539
  573
  610
  648
Net income, $m
  168
  176
  187
  200
  215
  232
  252
  274
  299
  326
  544
  577
  612
  650
  691
  734
  781
  832
  885
  942
  1,003
  1,068
  1,137
  1,210
  1,288
  1,370
  1,458
  1,550
  1,648
  1,752

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
  6,814
  6,970
  7,149
  7,351
  7,573
  7,818
  8,084
  8,372
  8,683
  9,016
  9,373
  9,753
  10,158
  10,588
  11,045
  11,529
  12,042
  12,583
  13,156
  13,760
  14,398
  15,071
  15,780
  16,527
  17,314
  18,142
  19,014
  19,931
  20,897
  21,912
Adjusted assets (=assets-cash), $m
  6,814
  6,970
  7,149
  7,351
  7,573
  7,818
  8,084
  8,372
  8,683
  9,016
  9,373
  9,753
  10,158
  10,588
  11,045
  11,529
  12,042
  12,583
  13,156
  13,760
  14,398
  15,071
  15,780
  16,527
  17,314
  18,142
  19,014
  19,931
  20,897
  21,912
Revenue / Adjusted assets
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
Average production assets, $m
  2,716
  2,778
  2,850
  2,930
  3,019
  3,116
  3,222
  3,337
  3,461
  3,594
  3,736
  3,888
  4,049
  4,221
  4,403
  4,596
  4,800
  5,016
  5,244
  5,485
  5,739
  6,007
  6,290
  6,588
  6,901
  7,231
  7,579
  7,945
  8,329
  8,734
Working capital, $m
  627
  642
  658
  677
  697
  720
  744
  771
  800
  830
  863
  898
  935
  975
  1,017
  1,062
  1,109
  1,159
  1,212
  1,267
  1,326
  1,388
  1,453
  1,522
  1,594
  1,671
  1,751
  1,836
  1,924
  2,018
Total debt, $m
  3,974
  4,102
  4,249
  4,413
  4,596
  4,796
  5,014
  5,250
  5,505
  5,778
  6,069
  6,381
  6,713
  7,065
  7,439
  7,836
  8,255
  8,699
  9,168
  9,663
  10,185
  10,736
  11,317
  11,929
  12,573
  13,252
  13,966
  14,717
  15,508
  16,339
Total liabilities, $m
  5,580
  5,709
  5,855
  6,020
  6,203
  6,403
  6,621
  6,857
  7,111
  7,384
  7,676
  7,988
  8,319
  8,672
  9,046
  9,442
  9,862
  10,306
  10,775
  11,270
  11,792
  12,343
  12,924
  13,535
  14,180
  14,858
  15,572
  16,324
  17,114
  17,946
Total equity, $m
  1,233
  1,262
  1,294
  1,330
  1,371
  1,415
  1,463
  1,515
  1,572
  1,632
  1,696
  1,765
  1,839
  1,916
  1,999
  2,087
  2,180
  2,278
  2,381
  2,491
  2,606
  2,728
  2,856
  2,991
  3,134
  3,284
  3,442
  3,608
  3,782
  3,966
Total liabilities and equity, $m
  6,813
  6,971
  7,149
  7,350
  7,574
  7,818
  8,084
  8,372
  8,683
  9,016
  9,372
  9,753
  10,158
  10,588
  11,045
  11,529
  12,042
  12,584
  13,156
  13,761
  14,398
  15,071
  15,780
  16,526
  17,314
  18,142
  19,014
  19,932
  20,896
  21,912
Debt-to-equity ratio
  3.220
  3.250
  3.280
  3.320
  3.350
  3.390
  3.430
  3.460
  3.500
  3.540
  3.580
  3.610
  3.650
  3.690
  3.720
  3.750
  3.790
  3.820
  3.850
  3.880
  3.910
  3.940
  3.960
  3.990
  4.010
  4.040
  4.060
  4.080
  4.100
  4.120
Adjusted equity ratio
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181
  0.181

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  168
  176
  187
  200
  215
  232
  252
  274
  299
  326
  544
  577
  612
  650
  691
  734
  781
  832
  885
  942
  1,003
  1,068
  1,137
  1,210
  1,288
  1,370
  1,458
  1,550
  1,648
  1,752
Depreciation, amort., depletion, $m
  509
  515
  522
  529
  537
  546
  556
  567
  578
  591
  346
  360
  375
  391
  408
  426
  444
  464
  486
  508
  531
  556
  582
  610
  639
  670
  702
  736
  771
  809
Funds from operations, $m
  678
  692
  709
  729
  752
  779
  808
  841
  878
  917
  890
  937
  987
  1,041
  1,098
  1,160
  1,226
  1,296
  1,371
  1,450
  1,535
  1,624
  1,719
  1,820
  1,927
  2,040
  2,159
  2,286
  2,419
  2,560
Change in working capital, $m
  12
  14
  16
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  89
  94
Cash from operations, $m
  666
  677
  692
  710
  732
  756
  784
  815
  849
  886
  858
  902
  950
  1,001
  1,056
  1,115
  1,179
  1,246
  1,318
  1,395
  1,476
  1,562
  1,654
  1,751
  1,854
  1,964
  2,079
  2,201
  2,330
  2,467
Maintenance CAPEX, $m
  -247
  -251
  -257
  -264
  -271
  -280
  -289
  -298
  -309
  -320
  -333
  -346
  -360
  -375
  -391
  -408
  -426
  -444
  -464
  -486
  -508
  -531
  -556
  -582
  -610
  -639
  -670
  -702
  -736
  -771
New CAPEX, $m
  -53
  -62
  -71
  -80
  -89
  -97
  -106
  -115
  -124
  -133
  -142
  -152
  -161
  -172
  -182
  -193
  -204
  -216
  -228
  -241
  -254
  -268
  -283
  -298
  -314
  -330
  -348
  -366
  -385
  -405
Cash from investing activities, $m
  -300
  -313
  -328
  -344
  -360
  -377
  -395
  -413
  -433
  -453
  -475
  -498
  -521
  -547
  -573
  -601
  -630
  -660
  -692
  -727
  -762
  -799
  -839
  -880
  -924
  -969
  -1,018
  -1,068
  -1,121
  -1,176
Free cash flow, $m
  366
  363
  363
  366
  372
  379
  389
  402
  416
  433
  383
  404
  428
  454
  483
  515
  549
  586
  625
  668
  714
  763
  815
  871
  931
  994
  1,062
  1,134
  1,210
  1,291
Issuance/(repayment) of debt, $m
  110
  128
  147
  165
  183
  200
  218
  236
  254
  273
  292
  312
  332
  353
  374
  396
  420
  444
  469
  495
  522
  551
  581
  612
  644
  678
  714
  751
  791
  832
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  
  110
  128
  147
  165
  183
  200
  218
  236
  254
  273
  292
  312
  332
  353
  374
  396
  420
  444
  469
  495
  522
  551
  581
  612
  644
  678
  714
  751
  791
  832
Total cash flow (excl. dividends), $m
  476
  492
  510
  531
  554
  579
  607
  638
  671
  706
  675
  716
  760
  807
  857
  911
  968
  1,029
  1,094
  1,163
  1,236
  1,314
  1,396
  1,483
  1,575
  1,673
  1,776
  1,885
  2,001
  2,122
Retained Cash Flow (-), $m
  -28
  -28
  -32
  -36
  -40
  -44
  -48
  -52
  -56
  -60
  -65
  -69
  -73
  -78
  -83
  -88
  -93
  -98
  -104
  -109
  -115
  -122
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -184
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
  448
  463
  478
  495
  514
  535
  559
  585
  614
  646
  610
  647
  687
  729
  775
  824
  876
  931
  991
  1,054
  1,121
  1,192
  1,268
  1,348
  1,433
  1,523
  1,618
  1,719
  1,826
  1,939
Discount rate, %
  9.20
  9.66
  10.14
  10.65
  11.18
  11.74
  12.33
  12.95
  13.59
  14.27
  14.99
  15.74
  16.52
  17.35
  18.22
  19.13
  20.08
  21.09
  22.14
  23.25
  24.41
  25.63
  26.91
  28.26
  29.67
  31.15
  32.71
  34.35
  36.07
  37.87
PV of cash for distribution, $m
  410
  385
  358
  330
  302
  275
  248
  221
  195
  170
  131
  112
  94
  78
  63
  50
  39
  30
  22
  16
  11
  8
  5
  3
  2
  1
  1
  0
  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

Axalta Coating Systems Ltd. is a holding company. The Company is a manufacturer, marketer and distributor of coatings systems primarily serving the transportation industry. The Company's segments include Performance Coatings and Transportation Coatings. Through its Performance Coatings segment, the Company provides liquid and powder coatings solutions to a fragmented and local customer base. Through its Transportation Coatings segment, the Company provides coating technologies to original equipment manufacturers (OEMs) of light and commercial vehicles. The Performance Coatings segment serves various end markets, including refinish and industrial. The Company develops, markets and supplies a portfolio of coatings systems and color matching technologies. The Company also develops and supplies an array of coatings systems for a range of commercial applications, including heavy-duty truck (HDT), bus, rail and agricultural construction equipment (ACE).

FINANCIAL RATIOS  of  Axalta Coating Systems Ltd. (AXTA)

Valuation Ratios
P/E Ratio 149.5
Price to Sales 1.5
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 14.8
Growth Rates
Sales Growth Rate -0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.4%
Cap. Spend. - 3 Yr. Gr. Rate 4.9%
Financial Strength
Quick Ratio 19
Current Ratio 0
LT Debt to Equity 287.6%
Total Debt to Equity 290.1%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 0.9%
Ret/ On T. Cap. - 3 Yr. Avg. 1.2%
Return On Equity 3.8%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 38.3%
Gross Margin - 3 Yr. Avg. 36.4%
EBITDA Margin 14.1%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 12.6%
Oper. Margin - 3 Yr. Avg. 10.5%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. 2.3%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 44.8%
Eff/ Tax Rate - 3 Yr. Avg. 29.8%
Payout Ratio 0%

AXTA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AXTA stock intrinsic value calculation we used $4696 million for the last fiscal year's total revenue generated by Axalta Coating Systems Ltd.. The default revenue input number comes from 0001 income statement of Axalta Coating Systems Ltd.. 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 AXTA 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 9.2%, whose default value for AXTA is calculated based on our internal credit rating of Axalta Coating Systems Ltd., 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 Axalta Coating Systems Ltd..
    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 AXTA stock the variable cost ratio is equal to 75.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $728 million in the base year in the intrinsic value calculation for AXTA 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 Axalta Coating Systems Ltd..

Corporate tax rate of 27% is the nominal tax rate for Axalta Coating Systems Ltd.. 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 AXTA 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 AXTA are equal to 56.7%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Axalta Coating Systems Ltd. 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 AXTA is equal to 13.1%. 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 - $1205.1 million for Axalta Coating Systems Ltd. - 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 234.206 million for Axalta Coating Systems Ltd. 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 Axalta Coating Systems Ltd. at the current share price and the inputted number of shares is $6.1 billion.

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