Intrinsic value of Barnes Group, Inc. - B

Previous Close

$53.94

  Intrinsic Value

$56.39

stock screener

  Rating & Target

hold

+5%

Previous close

$53.94

 
Intrinsic value

$56.39

 
Up/down potential

+5%

 
Rating

hold

We calculate the intrinsic value of B 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 2.8

 

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, %
  3.00
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
Revenue, $m
  1,541
  1,590
  1,644
  1,702
  1,765
  1,832
  1,904
  1,981
  2,064
  2,151
  2,243
  2,341
  2,445
  2,555
  2,671
  2,794
  2,923
  3,059
  3,203
  3,355
  3,514
  3,682
  3,859
  4,045
  4,241
  4,447
  4,664
  4,891
  5,131
  5,382
Variable operating expenses, $m
  878
  901
  926
  953
  983
  1,014
  1,048
  1,084
  1,122
  1,163
  1,047
  1,092
  1,141
  1,192
  1,246
  1,303
  1,364
  1,427
  1,495
  1,565
  1,640
  1,718
  1,801
  1,887
  1,979
  2,075
  2,176
  2,282
  2,394
  2,511
Fixed operating expenses, $m
  425
  435
  444
  454
  464
  474
  484
  495
  506
  517
  529
  540
  552
  564
  577
  589
  602
  615
  629
  643
  657
  671
  686
  701
  717
  733
  749
  765
  782
  799
Total operating expenses, $m
  1,303
  1,336
  1,370
  1,407
  1,447
  1,488
  1,532
  1,579
  1,628
  1,680
  1,576
  1,632
  1,693
  1,756
  1,823
  1,892
  1,966
  2,042
  2,124
  2,208
  2,297
  2,389
  2,487
  2,588
  2,696
  2,808
  2,925
  3,047
  3,176
  3,310
Operating income, $m
  238
  255
  274
  295
  318
  344
  372
  403
  436
  471
  668
  709
  752
  799
  848
  901
  957
  1,016
  1,080
  1,147
  1,218
  1,293
  1,372
  1,456
  1,545
  1,640
  1,739
  1,844
  1,955
  2,072
EBITDA, $m
  455
  474
  495
  519
  545
  573
  604
  637
  673
  712
  753
  798
  845
  896
  950
  1,007
  1,068
  1,133
  1,201
  1,274
  1,351
  1,432
  1,519
  1,610
  1,706
  1,808
  1,916
  2,030
  2,150
  2,276
Interest expense (income), $m
  11
  51
  54
  56
  60
  63
  67
  70
  75
  79
  84
  89
  94
  100
  106
  112
  119
  126
  134
  142
  150
  159
  168
  178
  188
  199
  210
  222
  235
  248
  262
Earnings before tax, $m
  187
  201
  217
  235
  256
  278
  302
  328
  356
  387
  579
  615
  652
  693
  736
  782
  831
  883
  938
  997
  1,059
  1,125
  1,195
  1,269
  1,347
  1,430
  1,517
  1,609
  1,707
  1,810
Tax expense, $m
  50
  54
  59
  64
  69
  75
  81
  89
  96
  105
  156
  166
  176
  187
  199
  211
  224
  238
  253
  269
  286
  304
  323
  343
  364
  386
  410
  435
  461
  489
Net income, $m
  136
  147
  159
  172
  187
  203
  220
  239
  260
  283
  423
  449
  476
  506
  537
  571
  606
  644
  685
  728
  773
  821
  872
  926
  983
  1,044
  1,107
  1,175
  1,246
  1,322

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
  2,891
  2,983
  3,084
  3,194
  3,311
  3,438
  3,573
  3,718
  3,871
  4,035
  4,209
  4,393
  4,588
  4,794
  5,011
  5,241
  5,484
  5,740
  6,010
  6,294
  6,593
  6,908
  7,240
  7,589
  7,957
  8,343
  8,750
  9,177
  9,626
  10,098
Adjusted assets (=assets-cash), $m
  2,891
  2,983
  3,084
  3,194
  3,311
  3,438
  3,573
  3,718
  3,871
  4,035
  4,209
  4,393
  4,588
  4,794
  5,011
  5,241
  5,484
  5,740
  6,010
  6,294
  6,593
  6,908
  7,240
  7,589
  7,957
  8,343
  8,750
  9,177
  9,626
  10,098
Revenue / Adjusted assets
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
Average production assets, $m
  1,094
  1,129
  1,167
  1,209
  1,253
  1,301
  1,352
  1,407
  1,465
  1,527
  1,593
  1,662
  1,736
  1,814
  1,896
  1,983
  2,075
  2,172
  2,274
  2,382
  2,495
  2,614
  2,740
  2,872
  3,011
  3,157
  3,311
  3,473
  3,643
  3,822
Working capital, $m
  365
  377
  390
  403
  418
  434
  451
  470
  489
  510
  532
  555
  580
  606
  633
  662
  693
  725
  759
  795
  833
  873
  915
  959
  1,005
  1,054
  1,105
  1,159
  1,216
  1,276
Total debt, $m
  992
  1,045
  1,102
  1,165
  1,232
  1,305
  1,382
  1,465
  1,553
  1,646
  1,745
  1,851
  1,962
  2,080
  2,205
  2,336
  2,475
  2,621
  2,776
  2,938
  3,109
  3,290
  3,480
  3,679
  3,889
  4,110
  4,343
  4,587
  4,844
  5,114
Total liabilities, $m
  1,654
  1,707
  1,764
  1,827
  1,894
  1,966
  2,044
  2,126
  2,214
  2,308
  2,407
  2,513
  2,624
  2,742
  2,866
  2,998
  3,137
  3,283
  3,437
  3,600
  3,771
  3,952
  4,141
  4,341
  4,551
  4,772
  5,005
  5,249
  5,506
  5,776
Total equity, $m
  1,237
  1,277
  1,320
  1,367
  1,417
  1,471
  1,529
  1,591
  1,657
  1,727
  1,801
  1,880
  1,963
  2,052
  2,145
  2,243
  2,347
  2,457
  2,572
  2,694
  2,822
  2,957
  3,099
  3,248
  3,405
  3,571
  3,745
  3,928
  4,120
  4,322
Total liabilities and equity, $m
  2,891
  2,984
  3,084
  3,194
  3,311
  3,437
  3,573
  3,717
  3,871
  4,035
  4,208
  4,393
  4,587
  4,794
  5,011
  5,241
  5,484
  5,740
  6,009
  6,294
  6,593
  6,909
  7,240
  7,589
  7,956
  8,343
  8,750
  9,177
  9,626
  10,098
Debt-to-equity ratio
  0.800
  0.820
  0.840
  0.850
  0.870
  0.890
  0.900
  0.920
  0.940
  0.950
  0.970
  0.980
  1.000
  1.010
  1.030
  1.040
  1.050
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.180
Adjusted equity ratio
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  136
  147
  159
  172
  187
  203
  220
  239
  260
  283
  423
  449
  476
  506
  537
  571
  606
  644
  685
  728
  773
  821
  872
  926
  983
  1,044
  1,107
  1,175
  1,246
  1,322
Depreciation, amort., depletion, $m
  218
  220
  222
  224
  226
  229
  232
  234
  238
  241
  85
  89
  93
  97
  101
  106
  111
  116
  122
  127
  133
  140
  147
  154
  161
  169
  177
  186
  195
  204
Funds from operations, $m
  354
  366
  380
  396
  413
  431
  452
  474
  498
  523
  508
  537
  569
  603
  639
  677
  717
  761
  806
  855
  906
  961
  1,019
  1,080
  1,144
  1,212
  1,284
  1,361
  1,441
  1,526
Change in working capital, $m
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
Cash from operations, $m
  343
  355
  367
  382
  398
  415
  435
  456
  478
  503
  486
  514
  544
  577
  611
  648
  687
  728
  772
  819
  869
  921
  977
  1,036
  1,098
  1,164
  1,233
  1,307
  1,384
  1,466
Maintenance CAPEX, $m
  -57
  -59
  -60
  -62
  -65
  -67
  -70
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -122
  -127
  -133
  -140
  -147
  -154
  -161
  -169
  -177
  -186
  -195
New CAPEX, $m
  -32
  -35
  -38
  -41
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -102
  -108
  -113
  -119
  -126
  -132
  -139
  -146
  -154
  -162
  -170
  -179
Cash from investing activities, $m
  -89
  -94
  -98
  -103
  -110
  -115
  -121
  -127
  -133
  -140
  -148
  -155
  -163
  -171
  -179
  -188
  -198
  -208
  -218
  -230
  -240
  -252
  -266
  -279
  -293
  -307
  -323
  -339
  -356
  -374
Free cash flow, $m
  255
  261
  269
  278
  289
  301
  314
  329
  345
  362
  339
  359
  382
  406
  432
  459
  489
  520
  554
  590
  628
  668
  711
  757
  805
  856
  911
  968
  1,029
  1,093
Issuance/(repayment) of debt, $m
  48
  53
  58
  62
  67
  72
  77
  83
  88
  94
  99
  105
  111
  118
  125
  132
  139
  146
  154
  163
  171
  180
  190
  200
  210
  221
  232
  244
  257
  270
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  
  48
  53
  58
  62
  67
  72
  77
  83
  88
  94
  99
  105
  111
  118
  125
  132
  139
  146
  154
  163
  171
  180
  190
  200
  210
  221
  232
  244
  257
  270
Total cash flow (excl. dividends), $m
  302
  314
  327
  341
  356
  373
  391
  411
  433
  456
  438
  465
  493
  524
  556
  591
  628
  667
  708
  752
  799
  849
  901
  957
  1,015
  1,077
  1,143
  1,212
  1,286
  1,363
Retained Cash Flow (-), $m
  -34
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -70
  -74
  -79
  -83
  -88
  -93
  -98
  -104
  -110
  -115
  -122
  -128
  -135
  -142
  -149
  -157
  -165
  -174
  -183
  -192
  -202
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
  268
  274
  283
  294
  306
  319
  333
  349
  367
  386
  364
  386
  410
  436
  463
  492
  524
  557
  593
  631
  671
  714
  759
  807
  858
  912
  969
  1,029
  1,093
  1,161
Discount rate, %
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
  252
  241
  232
  222
  211
  200
  189
  177
  165
  152
  124
  113
  102
  90
  79
  69
  59
  49
  41
  33
  26
  20
  16
  12
  8
  6
  4
  3
  2
  1
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

Barnes Group Inc. is an industrial and aerospace manufacturer and service provider, serving a range of end markets and customers. The Company's engineered products, industrial technologies, and solutions are used in applications that provide transportation, manufacturing, healthcare products and technology to the world. Its segments include Industrial and Aerospace. The Industrial segment is engaged in the manufacturing of precision parts, products and systems for applications serving a customer base in end-markets, such as transportation, industrial equipment, consumer products, packaging, electronics, medical devices and energy. The Industrial segment includes the Molding Solutions, Nitrogen Gas Products and Engineered Components business units. The Aerospace segment includes the original equipment manufacturer (OEM) business and the aftermarket business, which includes maintenance repair and overhaul services and the manufacture and delivery of aerospace aftermarket spare parts.

FINANCIAL RATIOS  of  Barnes Group, Inc. (B)

Valuation Ratios
P/E Ratio 21.3
Price to Sales 2.4
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 13.3
Price to Free Cash Flow 17.1
Growth Rates
Sales Growth Rate 3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.3%
Cap. Spend. - 3 Yr. Gr. Rate -3.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 40.1%
Total Debt to Equity 42.9%
Interest Coverage 18
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 6.4%
Return On Total Capital 8.2%
Ret/ On T. Cap. - 3 Yr. Avg. 7.6%
Return On Equity 11.8%
Return On Equity - 3 Yr. Avg. 11%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 35.7%
Gross Margin - 3 Yr. Avg. 34.8%
EBITDA Margin 22.3%
EBITDA Margin - 3 Yr. Avg. 21.1%
Operating Margin 15.6%
Oper. Margin - 3 Yr. Avg. 14.6%
Pre-Tax Margin 14.9%
Pre-Tax Margin - 3 Yr. Avg. 13.8%
Net Profit Margin 11%
Net Profit Margin - 3 Yr. Avg. 10.2%
Effective Tax Rate 25.7%
Eff/ Tax Rate - 3 Yr. Avg. 25.5%
Payout Ratio 19.9%

B stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the B stock intrinsic value calculation we used $1496 million for the last fiscal year's total revenue generated by Barnes Group, Inc.. The default revenue input number comes from 0001 income statement of Barnes Group, 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 B stock valuation model: a) initial revenue growth rate of 3% 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 6.3%, whose default value for B is calculated based on our internal credit rating of Barnes Group, 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 Barnes Group, 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 B stock the variable cost ratio is equal to 57.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $416 million in the base year in the intrinsic value calculation for B 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 Barnes Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Barnes Group, 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 B 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 B are equal to 71%.

Life of production assets of 18.7 years is the average useful life of capital assets used in Barnes Group, 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 B is equal to 23.7%. 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 - $1203.056 million for Barnes Group, 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 51.426 million for Barnes Group, 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 Barnes Group, Inc. at the current share price and the inputted number of shares is $2.8 billion.

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