Intrinsic value of Balchem Corporation - BCPC

Previous Close

$94.58

  Intrinsic Value

$25.52

stock screener

  Rating & Target

str. sell

-73%

Previous close

$94.58

 
Intrinsic value

$25.52

 
Up/down potential

-73%

 
Rating

str. sell

We calculate the intrinsic value of BCPC 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 3.1

 

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, %
  2.70
  2.93
  3.14
  3.32
  3.49
  3.64
  3.78
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
Revenue, $m
  661
  681
  702
  725
  751
  778
  808
  839
  873
  909
  947
  987
  1,030
  1,076
  1,124
  1,175
  1,228
  1,285
  1,345
  1,408
  1,474
  1,544
  1,618
  1,696
  1,777
  1,863
  1,954
  2,049
  2,149
  2,254
Variable operating expenses, $m
  515
  530
  546
  563
  582
  603
  625
  649
  674
  701
  710
  740
  772
  807
  843
  881
  921
  964
  1,008
  1,056
  1,106
  1,158
  1,213
  1,272
  1,333
  1,397
  1,465
  1,536
  1,611
  1,690
Fixed operating expenses, $m
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  44
  45
  46
  47
  49
  50
  51
  52
  53
  54
  55
  56
  58
  59
  60
  62
  63
  64
  66
  67
Total operating expenses, $m
  551
  567
  583
  601
  621
  643
  666
  691
  717
  745
  754
  785
  818
  854
  892
  931
  972
  1,016
  1,061
  1,110
  1,161
  1,214
  1,271
  1,331
  1,393
  1,459
  1,528
  1,600
  1,677
  1,757
Operating income, $m
  110
  114
  119
  124
  129
  135
  142
  149
  156
  164
  192
  201
  211
  222
  233
  244
  257
  270
  283
  298
  313
  330
  347
  365
  384
  404
  426
  448
  472
  496
EBITDA, $m
  158
  163
  169
  175
  181
  189
  196
  205
  214
  223
  233
  244
  256
  268
  281
  295
  310
  325
  342
  359
  378
  397
  417
  439
  461
  485
  511
  537
  565
  594
Interest expense (income), $m
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
Earnings before tax, $m
  102
  105
  110
  114
  119
  124
  130
  136
  143
  150
  177
  186
  194
  204
  214
  224
  235
  247
  259
  273
  287
  301
  317
  333
  350
  368
  388
  408
  429
  452
Tax expense, $m
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  77
  81
  86
  90
  95
  99
  105
  110
  116
  122
Net income, $m
  74
  77
  80
  83
  87
  91
  95
  100
  104
  110
  130
  136
  142
  149
  156
  164
  172
  180
  189
  199
  209
  220
  231
  243
  256
  269
  283
  298
  313
  330

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
  1,008
  1,038
  1,070
  1,106
  1,144
  1,186
  1,231
  1,279
  1,330
  1,385
  1,443
  1,505
  1,570
  1,640
  1,713
  1,790
  1,872
  1,959
  2,050
  2,146
  2,247
  2,354
  2,467
  2,585
  2,709
  2,840
  2,978
  3,123
  3,275
  3,436
Adjusted assets (=assets-cash), $m
  1,008
  1,038
  1,070
  1,106
  1,144
  1,186
  1,231
  1,279
  1,330
  1,385
  1,443
  1,505
  1,570
  1,640
  1,713
  1,790
  1,872
  1,959
  2,050
  2,146
  2,247
  2,354
  2,467
  2,585
  2,709
  2,840
  2,978
  3,123
  3,275
  3,436
Revenue / Adjusted assets
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
Average production assets, $m
  485
  500
  515
  532
  551
  571
  593
  616
  641
  667
  695
  725
  756
  789
  825
  862
  902
  943
  987
  1,033
  1,082
  1,134
  1,188
  1,245
  1,305
  1,368
  1,434
  1,504
  1,577
  1,654
Working capital, $m
  93
  95
  98
  102
  105
  109
  113
  117
  122
  127
  133
  138
  144
  151
  157
  164
  172
  180
  188
  197
  206
  216
  227
  237
  249
  261
  274
  287
  301
  316
Total debt, $m
  164
  172
  182
  192
  204
  216
  229
  244
  259
  275
  292
  310
  329
  350
  372
  394
  419
  444
  471
  499
  529
  561
  594
  629
  666
  704
  745
  788
  833
  880
Total liabilities, $m
  297
  306
  316
  326
  338
  350
  363
  377
  392
  409
  426
  444
  463
  484
  505
  528
  552
  578
  605
  633
  663
  694
  728
  763
  799
  838
  879
  921
  966
  1,014
Total equity, $m
  711
  732
  755
  780
  807
  836
  868
  902
  938
  976
  1,017
  1,061
  1,107
  1,156
  1,208
  1,262
  1,320
  1,381
  1,445
  1,513
  1,584
  1,660
  1,739
  1,822
  1,910
  2,002
  2,100
  2,202
  2,309
  2,422
Total liabilities and equity, $m
  1,008
  1,038
  1,071
  1,106
  1,145
  1,186
  1,231
  1,279
  1,330
  1,385
  1,443
  1,505
  1,570
  1,640
  1,713
  1,790
  1,872
  1,959
  2,050
  2,146
  2,247
  2,354
  2,467
  2,585
  2,709
  2,840
  2,979
  3,123
  3,275
  3,436
Debt-to-equity ratio
  0.230
  0.240
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
Adjusted equity ratio
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  74
  77
  80
  83
  87
  91
  95
  100
  104
  110
  130
  136
  142
  149
  156
  164
  172
  180
  189
  199
  209
  220
  231
  243
  256
  269
  283
  298
  313
  330
Depreciation, amort., depletion, $m
  48
  49
  50
  51
  52
  53
  54
  56
  57
  59
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
Funds from operations, $m
  122
  126
  130
  134
  139
  144
  149
  155
  162
  169
  171
  178
  187
  195
  205
  215
  225
  236
  248
  260
  273
  287
  301
  317
  333
  350
  368
  387
  407
  428
Change in working capital, $m
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  120
  123
  127
  131
  135
  140
  145
  151
  157
  164
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
  264
  277
  291
  306
  321
  338
  355
  373
  393
  413
Maintenance CAPEX, $m
  -28
  -29
  -30
  -30
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
New CAPEX, $m
  -13
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
Cash from investing activities, $m
  -41
  -43
  -46
  -47
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -75
  -78
  -82
  -86
  -90
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -134
  -140
  -147
  -155
  -162
  -170
Free cash flow, $m
  80
  80
  82
  83
  85
  87
  90
  93
  96
  99
  98
  102
  106
  111
  116
  121
  127
  133
  140
  147
  154
  162
  170
  179
  188
  198
  208
  219
  230
  242
Issuance/(repayment) of debt, $m
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
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  
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
Total cash flow (excl. dividends), $m
  87
  89
  91
  94
  97
  100
  103
  107
  111
  116
  115
  120
  126
  131
  138
  144
  151
  159
  167
  175
  184
  193
  203
  214
  225
  236
  249
  262
  275
  290
Retained Cash Flow (-), $m
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -113
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
  68
  68
  68
  69
  69
  70
  72
  73
  75
  77
  74
  77
  79
  83
  86
  90
  94
  98
  102
  107
  112
  118
  124
  130
  137
  144
  151
  159
  168
  177
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
  65
  62
  59
  57
  54
  51
  48
  46
  43
  40
  35
  33
  30
  28
  25
  23
  20
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  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
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Balchem Corporation is engaged in the development, manufacture and marketing of specialty performance ingredients and products for the food, nutritional, feed, pharmaceutical, medical sterilization and industrial markets. The Company operates in four segments: Human Nutrition & Health, Animal Nutrition & Health, Specialty Products and Industrial Products. The Human Nutrition & Health segment supplies ingredients in the food and beverage industry, providing solutions in powder, solid and liquid flavor delivery systems, spray dried emulsified powder systems and cereal systems. The Animal Nutrition & Health segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to basic choline chloride. The Specialty Products segment sells ethylene oxide as a sterilant gas primarily for use in the healthcare industry. The Industrial Products segment includes the manufacture and sale of methylamines.

FINANCIAL RATIOS  of  Balchem Corporation (BCPC)

Valuation Ratios
P/E Ratio 53.6
Price to Sales 5.4
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 27.8
Price to Free Cash Flow 35.8
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -42.9%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 47%
Total Debt to Equity 53.7%
Interest Coverage 13
Management Effectiveness
Return On Assets 6.6%
Ret/ On Assets - 3 Yr. Avg. 7.7%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8.4%
Return On Equity 11.4%
Return On Equity - 3 Yr. Avg. 13.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 32.7%
Gross Margin - 3 Yr. Avg. 29.9%
EBITDA Margin 24.6%
EBITDA Margin - 3 Yr. Avg. 23.2%
Operating Margin 16.5%
Oper. Margin - 3 Yr. Avg. 16.2%
Pre-Tax Margin 15%
Pre-Tax Margin - 3 Yr. Avg. 15%
Net Profit Margin 10.1%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate 32.5%
Eff/ Tax Rate - 3 Yr. Avg. 31.6%
Payout Ratio 19.6%

BCPC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BCPC stock intrinsic value calculation we used $644 million for the last fiscal year's total revenue generated by Balchem Corporation. The default revenue input number comes from 0001 income statement of Balchem Corporation. 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 BCPC stock valuation model: a) initial revenue growth rate of 2.7% 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 BCPC is calculated based on our internal credit rating of Balchem Corporation, 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 Balchem Corporation.
    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 BCPC stock the variable cost ratio is equal to 78%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $35 million in the base year in the intrinsic value calculation for BCPC 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 Balchem Corporation.

Corporate tax rate of 27% is the nominal tax rate for Balchem Corporation. 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 BCPC 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 BCPC are equal to 73.4%.

Life of production assets of 16.9 years is the average useful life of capital assets used in Balchem Corporation 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 BCPC is equal to 14%. 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 - $691.618 million for Balchem Corporation - 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 32.321 million for Balchem Corporation 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 Balchem Corporation at the current share price and the inputted number of shares is $3.1 billion.

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