Intrinsic value of Acuity Brands, Inc. - AYI

Previous Close

$134.17

  Intrinsic Value

$197.28

stock screener

  Rating & Target

buy

+47%

Previous close

$134.17

 
Intrinsic value

$197.28

 
Up/down potential

+47%

 
Rating

buy

We calculate the intrinsic value of AYI 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 5.4

 

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, %
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
Revenue, $m
  4,074
  4,486
  4,918
  5,368
  5,837
  6,326
  6,834
  7,362
  7,910
  8,480
  9,073
  9,689
  10,329
  10,995
  11,689
  12,410
  13,162
  13,945
  14,762
  15,613
  16,502
  17,430
  18,400
  19,412
  20,471
  21,579
  22,737
  23,949
  25,218
  26,547
Variable operating expenses, $m
  3,455
  3,790
  4,141
  4,506
  4,887
  5,284
  5,696
  6,125
  6,571
  7,034
  7,368
  7,868
  8,388
  8,929
  9,492
  10,078
  10,688
  11,324
  11,988
  12,679
  13,401
  14,155
  14,942
  15,765
  16,624
  17,524
  18,464
  19,449
  20,479
  21,558
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
  3,455
  3,790
  4,141
  4,506
  4,887
  5,284
  5,696
  6,125
  6,571
  7,034
  7,368
  7,868
  8,388
  8,929
  9,492
  10,078
  10,688
  11,324
  11,988
  12,679
  13,401
  14,155
  14,942
  15,765
  16,624
  17,524
  18,464
  19,449
  20,479
  21,558
Operating income, $m
  619
  696
  777
  862
  950
  1,042
  1,137
  1,236
  1,340
  1,447
  1,705
  1,821
  1,941
  2,066
  2,197
  2,332
  2,473
  2,621
  2,774
  2,934
  3,101
  3,275
  3,458
  3,648
  3,847
  4,055
  4,273
  4,501
  4,739
  4,989
EBITDA, $m
  818
  900
  987
  1,077
  1,172
  1,270
  1,372
  1,478
  1,588
  1,702
  1,821
  1,945
  2,073
  2,207
  2,346
  2,491
  2,642
  2,799
  2,963
  3,134
  3,312
  3,498
  3,693
  3,896
  4,109
  4,331
  4,564
  4,807
  5,062
  5,328
Interest expense (income), $m
  34
  34
  46
  60
  74
  89
  104
  120
  136
  153
  171
  190
  209
  229
  250
  272
  294
  318
  342
  368
  394
  422
  451
  481
  513
  545
  580
  616
  654
  693
  734
Earnings before tax, $m
  585
  650
  717
  788
  861
  938
  1,018
  1,100
  1,186
  1,275
  1,515
  1,612
  1,712
  1,816
  1,925
  2,038
  2,156
  2,278
  2,406
  2,540
  2,679
  2,825
  2,977
  3,135
  3,301
  3,475
  3,657
  3,847
  4,046
  4,254
Tax expense, $m
  158
  175
  194
  213
  233
  253
  275
  297
  320
  344
  409
  435
  462
  490
  520
  550
  582
  615
  650
  686
  723
  763
  804
  847
  891
  938
  987
  1,039
  1,092
  1,149
Net income, $m
  427
  474
  524
  575
  629
  685
  743
  803
  866
  931
  1,106
  1,176
  1,250
  1,326
  1,405
  1,488
  1,574
  1,663
  1,757
  1,854
  1,956
  2,062
  2,173
  2,289
  2,410
  2,537
  2,669
  2,808
  2,954
  3,106

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
  3,309
  3,645
  3,995
  4,361
  4,742
  5,139
  5,551
  5,980
  6,426
  6,889
  7,370
  7,871
  8,391
  8,932
  9,495
  10,081
  10,692
  11,328
  11,992
  12,683
  13,406
  14,159
  14,947
  15,770
  16,630
  17,529
  18,470
  19,455
  20,486
  21,565
Adjusted assets (=assets-cash), $m
  3,309
  3,645
  3,995
  4,361
  4,742
  5,139
  5,551
  5,980
  6,426
  6,889
  7,370
  7,871
  8,391
  8,932
  9,495
  10,081
  10,692
  11,328
  11,992
  12,683
  13,406
  14,159
  14,947
  15,770
  16,630
  17,529
  18,470
  19,455
  20,486
  21,565
Revenue / Adjusted assets
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
Average production assets, $m
  1,100
  1,211
  1,328
  1,449
  1,576
  1,708
  1,845
  1,988
  2,136
  2,290
  2,450
  2,616
  2,789
  2,969
  3,156
  3,351
  3,554
  3,765
  3,986
  4,216
  4,456
  4,706
  4,968
  5,241
  5,527
  5,826
  6,139
  6,466
  6,809
  7,168
Working capital, $m
  444
  489
  536
  585
  636
  689
  745
  802
  862
  924
  989
  1,056
  1,126
  1,199
  1,274
  1,353
  1,435
  1,520
  1,609
  1,702
  1,799
  1,900
  2,006
  2,116
  2,231
  2,352
  2,478
  2,610
  2,749
  2,894
Total debt, $m
  495
  637
  787
  942
  1,105
  1,274
  1,450
  1,632
  1,822
  2,020
  2,225
  2,438
  2,659
  2,890
  3,130
  3,379
  3,640
  3,911
  4,193
  4,488
  4,796
  5,117
  5,452
  5,803
  6,169
  6,552
  6,953
  7,373
  7,812
  8,272
Total liabilities, $m
  1,410
  1,553
  1,702
  1,858
  2,020
  2,189
  2,365
  2,548
  2,737
  2,935
  3,140
  3,353
  3,575
  3,805
  4,045
  4,295
  4,555
  4,826
  5,108
  5,403
  5,711
  6,032
  6,367
  6,718
  7,084
  7,468
  7,868
  8,288
  8,727
  9,187
Total equity, $m
  1,900
  2,092
  2,293
  2,503
  2,722
  2,950
  3,186
  3,433
  3,688
  3,954
  4,231
  4,518
  4,816
  5,127
  5,450
  5,787
  6,137
  6,502
  6,883
  7,280
  7,695
  8,127
  8,579
  9,052
  9,546
  10,062
  10,602
  11,167
  11,759
  12,378
Total liabilities and equity, $m
  3,310
  3,645
  3,995
  4,361
  4,742
  5,139
  5,551
  5,981
  6,425
  6,889
  7,371
  7,871
  8,391
  8,932
  9,495
  10,082
  10,692
  11,328
  11,991
  12,683
  13,406
  14,159
  14,946
  15,770
  16,630
  17,530
  18,470
  19,455
  20,486
  21,565
Debt-to-equity ratio
  0.260
  0.300
  0.340
  0.380
  0.410
  0.430
  0.450
  0.480
  0.490
  0.510
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.660
  0.670
Adjusted equity ratio
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  427
  474
  524
  575
  629
  685
  743
  803
  866
  931
  1,106
  1,176
  1,250
  1,326
  1,405
  1,488
  1,574
  1,663
  1,757
  1,854
  1,956
  2,062
  2,173
  2,289
  2,410
  2,537
  2,669
  2,808
  2,954
  3,106
Depreciation, amort., depletion, $m
  199
  204
  210
  216
  222
  228
  234
  241
  248
  255
  116
  124
  132
  141
  150
  159
  168
  178
  189
  200
  211
  223
  235
  248
  262
  276
  291
  306
  323
  340
Funds from operations, $m
  626
  679
  733
  791
  850
  913
  977
  1,044
  1,114
  1,186
  1,222
  1,300
  1,382
  1,467
  1,555
  1,646
  1,742
  1,842
  1,946
  2,054
  2,167
  2,285
  2,408
  2,537
  2,672
  2,813
  2,960
  3,115
  3,276
  3,445
Change in working capital, $m
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  106
  110
  115
  121
  126
  132
  138
  145
Cash from operations, $m
  583
  634
  686
  742
  799
  859
  922
  987
  1,054
  1,124
  1,158
  1,233
  1,312
  1,394
  1,479
  1,568
  1,660
  1,756
  1,857
  1,961
  2,070
  2,184
  2,303
  2,427
  2,557
  2,692
  2,834
  2,983
  3,138
  3,301
Maintenance CAPEX, $m
  -47
  -52
  -57
  -63
  -69
  -75
  -81
  -87
  -94
  -101
  -109
  -116
  -124
  -132
  -141
  -150
  -159
  -168
  -178
  -189
  -200
  -211
  -223
  -235
  -248
  -262
  -276
  -291
  -306
  -323
New CAPEX, $m
  -108
  -111
  -116
  -122
  -127
  -132
  -137
  -143
  -148
  -154
  -160
  -166
  -173
  -180
  -187
  -195
  -203
  -211
  -220
  -230
  -240
  -251
  -262
  -273
  -286
  -299
  -313
  -327
  -343
  -359
Cash from investing activities, $m
  -155
  -163
  -173
  -185
  -196
  -207
  -218
  -230
  -242
  -255
  -269
  -282
  -297
  -312
  -328
  -345
  -362
  -379
  -398
  -419
  -440
  -462
  -485
  -508
  -534
  -561
  -589
  -618
  -649
  -682
Free cash flow, $m
  428
  470
  513
  557
  604
  653
  704
  757
  812
  869
  889
  951
  1,015
  1,082
  1,151
  1,223
  1,298
  1,376
  1,458
  1,542
  1,630
  1,722
  1,818
  1,918
  2,022
  2,131
  2,245
  2,364
  2,489
  2,619
Issuance/(repayment) of debt, $m
  138
  143
  149
  156
  162
  169
  176
  183
  190
  197
  205
  213
  222
  231
  240
  250
  260
  271
  283
  295
  308
  321
  335
  351
  366
  383
  401
  420
  439
  460
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  
  138
  143
  149
  156
  162
  169
  176
  183
  190
  197
  205
  213
  222
  231
  240
  250
  260
  271
  283
  295
  308
  321
  335
  351
  366
  383
  401
  420
  439
  460
Total cash flow (excl. dividends), $m
  566
  613
  662
  713
  766
  822
  879
  939
  1,002
  1,066
  1,094
  1,164
  1,237
  1,312
  1,391
  1,473
  1,559
  1,647
  1,740
  1,837
  1,938
  2,043
  2,153
  2,268
  2,389
  2,515
  2,646
  2,784
  2,928
  3,079
Retained Cash Flow (-), $m
  -183
  -192
  -201
  -210
  -219
  -228
  -237
  -246
  -256
  -266
  -276
  -287
  -299
  -311
  -323
  -336
  -350
  -365
  -381
  -397
  -414
  -433
  -452
  -472
  -494
  -516
  -540
  -565
  -592
  -620
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
  383
  420
  461
  503
  548
  594
  643
  693
  746
  801
  818
  877
  938
  1,002
  1,068
  1,137
  1,208
  1,282
  1,359
  1,440
  1,523
  1,611
  1,701
  1,796
  1,895
  1,998
  2,106
  2,219
  2,336
  2,459
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
  367
  385
  401
  414
  424
  431
  434
  433
  428
  420
  388
  374
  357
  336
  314
  289
  263
  236
  209
  183
  158
  134
  112
  91
  74
  58
  45
  34
  26
  19
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

Acuity Brands, Inc. is a provider of lighting solutions for commercial, institutional, industrial, infrastructure and residential applications throughout North America and other international markets. The Company operates through North American segment. The Company offers a portfolio of indoor and outdoor lighting and building management solutions for commercial, institutional, industrial, infrastructure and residential applications. The portfolio of lighting solutions include lighting products utilizing fluorescent, light emitting diode (LED), organic LED (OLED), high intensity discharge, metal halide, and incandescent light sources to illuminate a number of applications. The solutions portfolio of the Company also includes modular wiring, LED drivers, sensors, glass and inverters sold primarily to original equipment manufacturers (OEMs). Its lighting and building management solutions are marketed under various brand names, including Lithonia Lighting and Holophane.

FINANCIAL RATIOS  of  Acuity Brands, Inc. (AYI)

Valuation Ratios
P/E Ratio 17.4
Price to Sales 1.6
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 17.8
Price to Free Cash Flow 22.6
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20.2%
Cap. Spend. - 3 Yr. Gr. Rate 13.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 21.4%
Total Debt to Equity 21.4%
Interest Coverage 16
Management Effectiveness
Return On Assets 11.8%
Ret/ On Assets - 3 Yr. Avg. 11.4%
Return On Total Capital 15.9%
Ret/ On T. Cap. - 3 Yr. Avg. 15.1%
Return On Equity 19.4%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 42.3%
Gross Margin - 3 Yr. Avg. 42.7%
EBITDA Margin 17.2%
EBITDA Margin - 3 Yr. Avg. 16.4%
Operating Margin 14.8%
Oper. Margin - 3 Yr. Avg. 14.4%
Pre-Tax Margin 14.1%
Pre-Tax Margin - 3 Yr. Avg. 13.4%
Net Profit Margin 9.2%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 34.7%
Eff/ Tax Rate - 3 Yr. Avg. 34.9%
Payout Ratio 7.1%

AYI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AYI stock intrinsic value calculation we used $3680 million for the last fiscal year's total revenue generated by Acuity Brands, Inc.. The default revenue input number comes from 0001 income statement of Acuity Brands, 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 AYI stock valuation model: a) initial revenue growth rate of 10.7% 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 4.3%, whose default value for AYI is calculated based on our internal credit rating of Acuity Brands, 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 Acuity Brands, 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 AYI stock the variable cost ratio is equal to 85.2%.

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 AYI 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 9.4% for Acuity Brands, Inc..

Corporate tax rate of 27% is the nominal tax rate for Acuity Brands, 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 AYI 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 AYI are equal to 27%.

Life of production assets of 21.1 years is the average useful life of capital assets used in Acuity Brands, 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 AYI is equal to 10.9%. 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 - $1716.8 million for Acuity Brands, 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 39.924 million for Acuity Brands, 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 Acuity Brands, Inc. at the current share price and the inputted number of shares is $5.4 billion.

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