Intrinsic value of Briggs & Stratton Corporation - BGG

Previous Close

$9.86

  Intrinsic Value

$7.26

stock screener

  Rating & Target

sell

-26%

Previous close

$9.86

 
Intrinsic value

$7.26

 
Up/down potential

-26%

 
Rating

sell

We calculate the intrinsic value of BGG 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 0.4

 

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, %
  13.20
  12.38
  11.64
  10.98
  10.38
  9.84
  9.36
  8.92
  8.53
  8.18
  7.86
  7.57
  7.32
  7.08
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
  5.43
  5.39
Revenue, $m
  2,129
  2,393
  2,671
  2,965
  3,272
  3,595
  3,931
  4,282
  4,647
  5,027
  5,422
  5,833
  6,259
  6,703
  7,164
  7,643
  8,141
  8,659
  9,199
  9,761
  10,346
  10,956
  11,592
  12,256
  12,949
  13,673
  14,429
  15,219
  16,046
  16,910
Variable operating expenses, $m
  2,024
  2,271
  2,532
  2,808
  3,096
  3,398
  3,714
  4,043
  4,386
  4,742
  5,087
  5,472
  5,873
  6,289
  6,721
  7,171
  7,638
  8,124
  8,631
  9,158
  9,707
  10,279
  10,876
  11,499
  12,149
  12,828
  13,538
  14,279
  15,054
  15,865
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
  2,024
  2,271
  2,532
  2,808
  3,096
  3,398
  3,714
  4,043
  4,386
  4,742
  5,087
  5,472
  5,873
  6,289
  6,721
  7,171
  7,638
  8,124
  8,631
  9,158
  9,707
  10,279
  10,876
  11,499
  12,149
  12,828
  13,538
  14,279
  15,054
  15,865
Operating income, $m
  106
  122
  139
  157
  176
  196
  217
  239
  261
  285
  335
  360
  387
  414
  442
  472
  503
  535
  568
  603
  639
  677
  716
  757
  800
  845
  891
  940
  991
  1,045
EBITDA, $m
  184
  207
  231
  257
  283
  311
  340
  371
  402
  435
  469
  505
  542
  580
  620
  662
  705
  750
  797
  845
  896
  949
  1,004
  1,061
  1,121
  1,184
  1,249
  1,318
  1,389
  1,464
Interest expense (income), $m
  19
  27
  39
  52
  66
  81
  97
  113
  130
  147
  165
  185
  204
  225
  246
  269
  292
  316
  341
  367
  394
  422
  451
  482
  514
  547
  582
  618
  656
  696
  737
Earnings before tax, $m
  79
  83
  87
  91
  95
  100
  104
  109
  114
  119
  150
  156
  162
  168
  174
  180
  187
  194
  202
  209
  217
  226
  234
  243
  253
  263
  273
  284
  295
  307
Tax expense, $m
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  41
  42
  44
  45
  47
  49
  51
  52
  54
  56
  59
  61
  63
  66
  68
  71
  74
  77
  80
  83
Net income, $m
  58
  60
  63
  66
  69
  73
  76
  80
  83
  87
  110
  114
  118
  122
  127
  132
  137
  142
  147
  153
  159
  165
  171
  178
  185
  192
  199
  207
  216
  224

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
  1,634
  1,836
  2,050
  2,275
  2,512
  2,759
  3,017
  3,286
  3,566
  3,858
  4,161
  4,476
  4,804
  5,144
  5,498
  5,865
  6,248
  6,646
  7,060
  7,491
  7,940
  8,408
  8,897
  9,406
  9,938
  10,493
  11,074
  11,680
  12,314
  12,978
Adjusted assets (=assets-cash), $m
  1,634
  1,836
  2,050
  2,275
  2,512
  2,759
  3,017
  3,286
  3,566
  3,858
  4,161
  4,476
  4,804
  5,144
  5,498
  5,865
  6,248
  6,646
  7,060
  7,491
  7,940
  8,408
  8,897
  9,406
  9,938
  10,493
  11,074
  11,680
  12,314
  12,978
Revenue / Adjusted assets
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
  1.303
Average production assets, $m
  592
  665
  743
  824
  910
  999
  1,093
  1,190
  1,292
  1,397
  1,507
  1,621
  1,740
  1,863
  1,991
  2,125
  2,263
  2,407
  2,557
  2,713
  2,876
  3,046
  3,223
  3,407
  3,600
  3,801
  4,011
  4,231
  4,461
  4,701
Working capital, $m
  339
  380
  425
  471
  520
  572
  625
  681
  739
  799
  862
  927
  995
  1,066
  1,139
  1,215
  1,294
  1,377
  1,463
  1,552
  1,645
  1,742
  1,843
  1,949
  2,059
  2,174
  2,294
  2,420
  2,551
  2,689
Total debt, $m
  363
  486
  615
  751
  894
  1,043
  1,200
  1,362
  1,532
  1,708
  1,892
  2,083
  2,281
  2,487
  2,701
  2,923
  3,154
  3,395
  3,646
  3,906
  4,178
  4,462
  4,757
  5,065
  5,387
  5,723
  6,074
  6,441
  6,825
  7,226
Total liabilities, $m
  989
  1,111
  1,240
  1,377
  1,519
  1,669
  1,825
  1,988
  2,158
  2,334
  2,517
  2,708
  2,906
  3,112
  3,326
  3,549
  3,780
  4,021
  4,271
  4,532
  4,804
  5,087
  5,383
  5,691
  6,013
  6,349
  6,700
  7,067
  7,450
  7,851
Total equity, $m
  645
  725
  810
  899
  992
  1,090
  1,192
  1,298
  1,409
  1,524
  1,644
  1,768
  1,897
  2,032
  2,172
  2,317
  2,468
  2,625
  2,789
  2,959
  3,136
  3,321
  3,514
  3,715
  3,926
  4,145
  4,374
  4,614
  4,864
  5,126
Total liabilities and equity, $m
  1,634
  1,836
  2,050
  2,276
  2,511
  2,759
  3,017
  3,286
  3,567
  3,858
  4,161
  4,476
  4,803
  5,144
  5,498
  5,866
  6,248
  6,646
  7,060
  7,491
  7,940
  8,408
  8,897
  9,406
  9,939
  10,494
  11,074
  11,681
  12,314
  12,977
Debt-to-equity ratio
  0.560
  0.670
  0.760
  0.840
  0.900
  0.960
  1.010
  1.050
  1.090
  1.120
  1.150
  1.180
  1.200
  1.220
  1.240
  1.260
  1.280
  1.290
  1.310
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.400
  1.410
Adjusted equity ratio
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  58
  60
  63
  66
  69
  73
  76
  80
  83
  87
  110
  114
  118
  122
  127
  132
  137
  142
  147
  153
  159
  165
  171
  178
  185
  192
  199
  207
  216
  224
Depreciation, amort., depletion, $m
  79
  85
  92
  99
  107
  115
  123
  132
  141
  151
  135
  145
  155
  166
  178
  190
  202
  215
  228
  242
  257
  272
  288
  304
  321
  339
  358
  378
  398
  420
Funds from operations, $m
  136
  146
  155
  166
  177
  188
  200
  212
  224
  238
  244
  259
  273
  289
  305
  321
  339
  357
  375
  395
  415
  437
  459
  482
  506
  531
  558
  585
  614
  644
Change in working capital, $m
  39
  42
  44
  47
  49
  51
  53
  56
  58
  60
  63
  65
  68
  71
  73
  76
  79
  82
  86
  89
  93
  97
  101
  106
  110
  115
  120
  126
  131
  137
Cash from operations, $m
  97
  104
  111
  119
  128
  137
  146
  156
  166
  177
  182
  193
  206
  218
  232
  245
  259
  274
  290
  306
  322
  340
  358
  376
  396
  416
  437
  459
  483
  507
Maintenance CAPEX, $m
  -47
  -53
  -59
  -66
  -74
  -81
  -89
  -98
  -106
  -115
  -125
  -135
  -145
  -155
  -166
  -178
  -190
  -202
  -215
  -228
  -242
  -257
  -272
  -288
  -304
  -321
  -339
  -358
  -378
  -398
New CAPEX, $m
  -68
  -73
  -77
  -82
  -86
  -90
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -123
  -128
  -133
  -139
  -144
  -150
  -156
  -163
  -170
  -177
  -185
  -193
  -201
  -210
  -220
  -230
  -240
Cash from investing activities, $m
  -115
  -126
  -136
  -148
  -160
  -171
  -183
  -196
  -208
  -221
  -235
  -249
  -264
  -278
  -294
  -311
  -329
  -346
  -365
  -384
  -405
  -427
  -449
  -473
  -497
  -522
  -549
  -578
  -608
  -638
Free cash flow, $m
  -18
  -22
  -26
  -29
  -32
  -34
  -37
  -39
  -41
  -44
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -96
  -101
  -106
  -112
  -118
  -125
  -132
Issuance/(repayment) of debt, $m
  115
  122
  129
  136
  143
  150
  156
  163
  170
  176
  183
  191
  198
  206
  214
  222
  231
  241
  251
  261
  272
  283
  295
  308
  322
  336
  351
  367
  384
  401
Issuance/(repurchase) of shares, $m
  18
  20
  21
  23
  24
  25
  26
  27
  28
  28
  10
  11
  11
  12
  13
  14
  14
  15
  16
  18
  19
  20
  22
  24
  26
  28
  30
  32
  35
  38
Cash from financing (excl. dividends), $m  
  133
  142
  150
  159
  167
  175
  182
  190
  198
  204
  193
  202
  209
  218
  227
  236
  245
  256
  267
  279
  291
  303
  317
  332
  348
  364
  381
  399
  419
  439
Total cash flow (excl. dividends), $m
  115
  120
  125
  130
  135
  140
  145
  151
  156
  161
  140
  146
  152
  158
  164
  170
  177
  184
  192
  200
  208
  217
  226
  236
  246
  257
  269
  281
  294
  307
Retained Cash Flow (-), $m
  -75
  -80
  -84
  -89
  -93
  -98
  -102
  -106
  -111
  -115
  -120
  -124
  -129
  -134
  -140
  -145
  -151
  -157
  -164
  -170
  -177
  -185
  -193
  -201
  -210
  -219
  -229
  -240
  -250
  -262
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
  39
  40
  40
  41
  42
  43
  43
  44
  45
  46
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  38
  36
  35
  33
  32
  30
  29
  27
  25
  23
  9
  9
  8
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  96.0
  92.1
  88.6
  85.3
  82.3
  79.6
  77.0
  74.7
  72.6
  70.7
  70.0
  69.4
  68.8
  68.2
  67.6
  67.1
  66.5
  65.9
  65.4
  64.8
  64.2
  63.7
  63.1
  62.5
  61.9
  61.4
  60.8
  60.1
  59.5
  58.9

Briggs & Stratton Corporation is a producer of gasoline engines for outdoor power equipment. The Company designs, manufactures, markets, sells and services the various products for original equipment manufacturers (OEMs) around the world. It also markets and sells related service parts and accessories for its engines. Its subsidiary is a marketer of pressure washers, and it is a designer, manufacturer and marketer of power generation, lawn and garden, turf care and job site products through its Simplicity, Snapper, Snapper Pro, Ferris, PowerBoss, Allmand, Billy Goat, Murray, Branco and Victa brands. It operates in over 100 countries on six continents. It operates through two segments: Engines and Products. Its Engines segment sells engines around the world, primarily to OEMs of lawn and garden equipment and other gasoline engine-powered equipment. Its Products segment designs, manufactures and markets a range of outdoor power equipment, job site products and related accessories.

FINANCIAL RATIOS  of  Briggs & Stratton Corporation (BGG)

Valuation Ratios
P/E Ratio 7.4
Price to Sales 0.2
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow 60.3
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.7%
Cap. Spend. - 3 Yr. Gr. Rate 6.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 39.7%
Total Debt to Equity 39.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 7.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.5%
Return On Equity 10.8%
Return On Equity - 3 Yr. Avg. 7.8%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 21.5%
Gross Margin - 3 Yr. Avg. 20.7%
EBITDA Margin 8.7%
EBITDA Margin - 3 Yr. Avg. 7.1%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. 3.8%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 3.1%
Net Profit Margin 3.2%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate 28.8%
Eff/ Tax Rate - 3 Yr. Avg. 23.6%
Payout Ratio 42.1%

BGG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BGG stock intrinsic value calculation we used $1881 million for the last fiscal year's total revenue generated by Briggs & Stratton Corporation. The default revenue input number comes from 0001 income statement of Briggs & Stratton 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 BGG stock valuation model: a) initial revenue growth rate of 13.2% 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 4.6%, whose default value for BGG is calculated based on our internal credit rating of Briggs & Stratton 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 Briggs & Stratton 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 BGG stock the variable cost ratio is equal to 95.2%.

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 BGG 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 10.8% for Briggs & Stratton Corporation.

Corporate tax rate of 27% is the nominal tax rate for Briggs & Stratton 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 BGG 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 BGG are equal to 27.8%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Briggs & Stratton 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 BGG is equal to 15.9%. 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 - $570.424 million for Briggs & Stratton 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 42.105 million for Briggs & Stratton 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 Briggs & Stratton Corporation at the current share price and the inputted number of shares is $0.4 billion.

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