Intrinsic value of Acuity Brands - AYI

Previous Close

$166.72

  Intrinsic Value

$149.00

stock screener

  Rating & Target

hold

-11%

Previous close

$166.72

 
Intrinsic value

$149.00

 
Up/down potential

-11%

 
Rating

hold

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

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

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
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.50
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  3,505
  3,631
  3,767
  3,913
  4,068
  4,234
  4,411
  4,599
  4,798
  5,009
  5,232
  5,468
  5,718
  5,981
  6,259
  6,552
  6,860
  7,186
  7,528
  7,889
  8,268
  8,667
  9,088
  9,529
  9,994
  10,483
  10,996
  11,536
  12,103
  12,700
  13,326
Variable operating expenses, $m
 
  2,880
  2,984
  3,096
  3,216
  3,343
  3,479
  3,623
  3,776
  3,938
  4,110
  4,201
  4,393
  4,595
  4,809
  5,034
  5,271
  5,521
  5,784
  6,061
  6,352
  6,659
  6,982
  7,321
  7,678
  8,054
  8,448
  8,863
  9,299
  9,757
  10,239
Fixed operating expenses, $m
 
  212
  217
  223
  228
  234
  240
  246
  252
  259
  265
  272
  278
  285
  292
  300
  307
  315
  323
  331
  339
  348
  356
  365
  374
  384
  393
  403
  413
  424
  434
Total operating expenses, $m
  2,986
  3,092
  3,201
  3,319
  3,444
  3,577
  3,719
  3,869
  4,028
  4,197
  4,375
  4,473
  4,671
  4,880
  5,101
  5,334
  5,578
  5,836
  6,107
  6,392
  6,691
  7,007
  7,338
  7,686
  8,052
  8,438
  8,841
  9,266
  9,712
  10,181
  10,673
Operating income, $m
  519
  539
  565
  594
  624
  657
  692
  729
  769
  812
  857
  995
  1,046
  1,100
  1,158
  1,218
  1,282
  1,350
  1,421
  1,497
  1,577
  1,661
  1,749
  1,843
  1,941
  2,045
  2,155
  2,270
  2,391
  2,519
  2,654
EBITDA, $m
  594
  662
  690
  720
  751
  786
  822
  862
  903
  948
  995
  1,046
  1,099
  1,155
  1,215
  1,278
  1,345
  1,416
  1,490
  1,569
  1,652
  1,740
  1,833
  1,930
  2,033
  2,141
  2,255
  2,376
  2,502
  2,635
  2,776
Interest expense (income), $m
  34
  34
  39
  43
  48
  53
  59
  65
  71
  78
  85
  93
  101
  109
  118
  127
  137
  148
  159
  170
  183
  195
  209
  223
  238
  254
  270
  288
  306
  325
  345
Earnings before tax, $m
  493
  505
  527
  550
  576
  603
  633
  664
  698
  734
  772
  903
  946
  991
  1,040
  1,091
  1,145
  1,202
  1,263
  1,327
  1,394
  1,465
  1,540
  1,620
  1,703
  1,791
  1,884
  1,982
  2,085
  2,194
  2,308
Tax expense, $m
  171
  136
  142
  149
  156
  163
  171
  179
  188
  198
  208
  244
  255
  268
  281
  295
  309
  325
  341
  358
  376
  396
  416
  437
  460
  484
  509
  535
  563
  592
  623
Net income, $m
  322
  369
  384
  402
  420
  441
  462
  485
  510
  536
  564
  659
  690
  724
  759
  796
  836
  878
  922
  968
  1,018
  1,070
  1,124
  1,182
  1,243
  1,308
  1,375
  1,447
  1,522
  1,602
  1,685

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  311
  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
  2,900
  2,682
  2,782
  2,890
  3,005
  3,127
  3,258
  3,396
  3,544
  3,699
  3,864
  4,039
  4,223
  4,417
  4,622
  4,839
  5,067
  5,307
  5,560
  5,826
  6,106
  6,401
  6,712
  7,038
  7,381
  7,742
  8,121
  8,520
  8,939
  9,379
  9,842
Adjusted assets (=assets-cash), $m
  2,589
  2,682
  2,782
  2,890
  3,005
  3,127
  3,258
  3,396
  3,544
  3,699
  3,864
  4,039
  4,223
  4,417
  4,622
  4,839
  5,067
  5,307
  5,560
  5,826
  6,106
  6,401
  6,712
  7,038
  7,381
  7,742
  8,121
  8,520
  8,939
  9,379
  9,842
Revenue / Adjusted assets
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
  1.354
Average production assets, $m
  694
  719
  746
  775
  806
  838
  873
  911
  950
  992
  1,036
  1,083
  1,132
  1,184
  1,239
  1,297
  1,358
  1,423
  1,491
  1,562
  1,637
  1,716
  1,799
  1,887
  1,979
  2,076
  2,177
  2,284
  2,396
  2,515
  2,639
Working capital, $m
  645
  345
  358
  372
  386
  402
  419
  437
  456
  476
  497
  519
  543
  568
  595
  622
  652
  683
  715
  749
  785
  823
  863
  905
  949
  996
  1,045
  1,096
  1,150
  1,206
  1,266
Total debt, $m
  357
  402
  450
  501
  556
  615
  677
  743
  813
  888
  966
  1,049
  1,137
  1,230
  1,328
  1,431
  1,540
  1,654
  1,775
  1,902
  2,036
  2,176
  2,324
  2,480
  2,644
  2,816
  2,997
  3,187
  3,387
  3,597
  3,818
Total liabilities, $m
  1,234
  1,279
  1,327
  1,378
  1,433
  1,492
  1,554
  1,620
  1,690
  1,765
  1,843
  1,926
  2,014
  2,107
  2,205
  2,308
  2,417
  2,531
  2,652
  2,779
  2,913
  3,053
  3,201
  3,357
  3,521
  3,693
  3,874
  4,064
  4,264
  4,474
  4,695
Total equity, $m
  1,666
  1,403
  1,455
  1,511
  1,571
  1,636
  1,704
  1,776
  1,853
  1,935
  2,021
  2,112
  2,209
  2,310
  2,418
  2,531
  2,650
  2,776
  2,908
  3,047
  3,194
  3,348
  3,510
  3,681
  3,860
  4,049
  4,247
  4,456
  4,675
  4,905
  5,147
Total liabilities and equity, $m
  2,900
  2,682
  2,782
  2,889
  3,004
  3,128
  3,258
  3,396
  3,543
  3,700
  3,864
  4,038
  4,223
  4,417
  4,623
  4,839
  5,067
  5,307
  5,560
  5,826
  6,107
  6,401
  6,711
  7,038
  7,381
  7,742
  8,121
  8,520
  8,939
  9,379
  9,842
Debt-to-equity ratio
  0.214
  0.290
  0.310
  0.330
  0.350
  0.380
  0.400
  0.420
  0.440
  0.460
  0.480
  0.500
  0.510
  0.530
  0.550
  0.570
  0.580
  0.600
  0.610
  0.620
  0.640
  0.650
  0.660
  0.670
  0.680
  0.700
  0.710
  0.720
  0.720
  0.730
  0.740
Adjusted equity ratio
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  322
  369
  384
  402
  420
  441
  462
  485
  510
  536
  564
  659
  690
  724
  759
  796
  836
  878
  922
  968
  1,018
  1,070
  1,124
  1,182
  1,243
  1,308
  1,375
  1,447
  1,522
  1,602
  1,685
Depreciation, amort., depletion, $m
  75
  123
  125
  126
  127
  129
  131
  132
  134
  136
  138
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  92
  96
  101
  106
  111
  116
  122
Funds from operations, $m
  224
  492
  509
  528
  548
  569
  593
  617
  644
  672
  702
  709
  743
  778
  816
  856
  899
  943
  991
  1,041
  1,093
  1,149
  1,208
  1,270
  1,335
  1,404
  1,476
  1,553
  1,633
  1,718
  1,807
Change in working capital, $m
  -92
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
Cash from operations, $m
  316
  480
  496
  514
  533
  554
  576
  599
  625
  652
  680
  687
  719
  753
  790
  828
  869
  913
  958
  1,006
  1,057
  1,111
  1,168
  1,228
  1,291
  1,357
  1,427
  1,501
  1,579
  1,661
  1,748
Maintenance CAPEX, $m
  0
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -111
  -116
New CAPEX, $m
  -67
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
  -107
  -112
  -118
  -124
Cash from investing activities, $m
  -49
  -57
  -60
  -64
  -67
  -70
  -74
  -77
  -81
  -86
  -90
  -95
  -99
  -104
  -110
  -115
  -121
  -127
  -134
  -140
  -147
  -155
  -162
  -170
  -179
  -189
  -198
  -208
  -218
  -229
  -240
Free cash flow, $m
  267
  422
  436
  451
  466
  483
  502
  522
  543
  566
  590
  592
  620
  649
  680
  713
  748
  785
  824
  866
  910
  956
  1,005
  1,057
  1,111
  1,169
  1,230
  1,294
  1,361
  1,432
  1,507
Issuance/(repayment) of debt, $m
  1
  45
  48
  51
  55
  58
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
  221
Issuance/(repurchase) of shares, $m
  -355
  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  
  -348
  45
  48
  51
  55
  58
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
  221
Total cash flow (excl. dividends), $m
  -79
  468
  484
  502
  521
  542
  564
  588
  613
  640
  669
  675
  707
  742
  778
  816
  857
  900
  945
  993
  1,044
  1,097
  1,153
  1,213
  1,275
  1,341
  1,411
  1,484
  1,561
  1,642
  1,728
Retained Cash Flow (-), $m
  -6
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -77
  -81
  -86
  -91
  -96
  -102
  -107
  -113
  -119
  -126
  -132
  -139
  -147
  -154
  -162
  -171
  -179
  -189
  -198
  -209
  -219
  -230
  -242
Prev. year cash balance distribution, $m
 
  311
  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
 
  731
  431
  446
  461
  478
  496
  515
  536
  559
  583
  584
  611
  640
  671
  703
  738
  774
  813
  854
  897
  943
  991
  1,042
  1,096
  1,152
  1,212
  1,275
  1,342
  1,412
  1,486
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
 
  701
  395
  388
  380
  370
  360
  348
  335
  321
  306
  277
  261
  243
  225
  206
  187
  168
  150
  131
  114
  98
  82
  68
  56
  45
  35
  27
  21
  15
  11
Current shareholders' claim on cash, %
  100
  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 (AYI)

Valuation Ratios
P/E Ratio 21.7
Price to Sales 2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 22.1
Price to Free Cash Flow 28
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 $3505 million for the last fiscal year's total revenue generated by Acuity Brands. The default revenue input number comes from 2017 income statement of Acuity Brands. 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 3.6% 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, 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.
    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 79.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $207 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 9.6% for Acuity Brands.

Corporate tax rate of 27% is the nominal tax rate for Acuity Brands. 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 19.8%.

Life of production assets of 21.6 years is the average useful life of capital assets used in Acuity Brands 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 9.5%. 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 - $1666 million for Acuity Brands - 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 42.614 million for Acuity Brands 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 at the current share price and the inputted number of shares is $7.1 billion.

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COMPANY NEWS

▶ Dimmer View for Acuity Brands?   [06:10PM  Barrons.com]
▶ Target and Kodak rise while Big 5, Acuity tumble   [04:34PM  Associated Press]
▶ Acuity Brands misses Street 1Q forecasts   [08:59AM  Associated Press]
▶ Acuity Brands, Inc. Declares Quarterly Dividend   [Jan-05-18 04:17PM  GlobeNewswire]
▶ Nucor and Acuity Brands Fell on December 14   [Dec-19-17 10:30AM  Market Realist]
▶ Mylan: S&P 500s Top Gainer on October 4   [10:40AM  Market Realist]
▶ Acuity Brands tops 4Q profit forecasts   [08:42AM  Associated Press]
Financial statements of AYI
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