Intrinsic value of Ceco Environmental - CECE

Previous Close

$8.01

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$8.01

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of CECE 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 0.3

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  352
  360
  369
  380
  391
  404
  418
  432
  449
  466
  484
  504
  525
  547
  571
  596
  622
  650
  680
  711
  744
  778
  815
  854
  894
  937
  982
  1,030
  1,079
  1,132
Variable operating expenses, $m
  373
  381
  390
  400
  412
  424
  438
  453
  469
  486
  480
  500
  521
  543
  566
  591
  617
  645
  674
  705
  738
  773
  809
  847
  888
  930
  975
  1,022
  1,071
  1,123
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
  373
  381
  390
  400
  412
  424
  438
  453
  469
  486
  480
  500
  521
  543
  566
  591
  617
  645
  674
  705
  738
  773
  809
  847
  888
  930
  975
  1,022
  1,071
  1,123
Operating income, $m
  -21
  -21
  -21
  -21
  -21
  -21
  -20
  -20
  -20
  -20
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
EBITDA, $m
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
Interest expense (income), $m
  7
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  35
Earnings before tax, $m
  -27
  -28
  -28
  -28
  -29
  -29
  -29
  -30
  -30
  -31
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -27
Tax expense, $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
Net income, $m
  -27
  -28
  -28
  -28
  -29
  -29
  -29
  -30
  -30
  -31
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -27

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
  447
  457
  469
  482
  497
  513
  531
  550
  570
  592
  615
  640
  667
  695
  725
  757
  790
  826
  863
  903
  945
  989
  1,036
  1,085
  1,136
  1,191
  1,248
  1,308
  1,372
  1,438
Adjusted assets (=assets-cash), $m
  447
  457
  469
  482
  497
  513
  531
  550
  570
  592
  615
  640
  667
  695
  725
  757
  790
  826
  863
  903
  945
  989
  1,036
  1,085
  1,136
  1,191
  1,248
  1,308
  1,372
  1,438
Revenue / Adjusted assets
  0.787
  0.788
  0.787
  0.788
  0.787
  0.788
  0.787
  0.785
  0.788
  0.787
  0.787
  0.788
  0.787
  0.787
  0.788
  0.787
  0.787
  0.787
  0.788
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.786
  0.787
Average production assets, $m
  151
  154
  158
  163
  167
  173
  179
  185
  192
  199
  207
  216
  225
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  365
  383
  401
  420
  441
  462
  484
Working capital, $m
  53
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  142
  148
  155
  163
  171
Total debt, $m
  125
  131
  138
  146
  154
  163
  173
  184
  196
  208
  222
  236
  252
  268
  285
  303
  323
  343
  365
  387
  412
  437
  464
  492
  522
  553
  586
  620
  657
  695
Total liabilities, $m
  257
  263
  270
  277
  286
  295
  305
  316
  328
  340
  354
  368
  383
  400
  417
  435
  454
  475
  497
  519
  543
  569
  596
  624
  653
  685
  718
  752
  789
  827
Total equity, $m
  190
  194
  199
  205
  211
  218
  226
  234
  242
  252
  261
  272
  283
  295
  308
  322
  336
  351
  367
  384
  402
  420
  440
  461
  483
  506
  530
  556
  583
  611
Total liabilities and equity, $m
  447
  457
  469
  482
  497
  513
  531
  550
  570
  592
  615
  640
  666
  695
  725
  757
  790
  826
  864
  903
  945
  989
  1,036
  1,085
  1,136
  1,191
  1,248
  1,308
  1,372
  1,438
Debt-to-equity ratio
  0.660
  0.670
  0.690
  0.710
  0.730
  0.750
  0.770
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.940
  0.960
  0.980
  0.990
  1.010
  1.020
  1.040
  1.050
  1.070
  1.080
  1.090
  1.100
  1.120
  1.130
  1.140
Adjusted equity ratio
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -27
  -28
  -28
  -28
  -29
  -29
  -29
  -30
  -30
  -31
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -27
Depreciation, amort., depletion, $m
  33
  33
  33
  33
  34
  34
  34
  35
  35
  36
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
Funds from operations, $m
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  3
  3
  2
  2
  2
Change in working capital, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
Cash from operations, $m
  4
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
Maintenance CAPEX, $m
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -23
  -24
  -26
  -26
  -28
  -30
  -30
  -32
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
Free cash flow, $m
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
Issuance/(repayment) of debt, $m
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
Issuance/(repurchase) of shares, $m
  31
  32
  33
  34
  35
  36
  37
  38
  39
  40
  18
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
Cash from financing (excl. dividends), $m  
  36
  38
  40
  42
  43
  45
  47
  49
  51
  53
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  64
  67
  72
  75
  80
  84
  88
  93
Total cash flow (excl. dividends), $m
  29
  29
  30
  31
  32
  33
  34
  34
  35
  36
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
Retained Cash Flow (-), $m
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39
  -40
  -18
  -19
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -55
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
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -18
Discount rate, %
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  90.0
  80.9
  72.7
  65.3
  58.7
  52.7
  47.4
  42.6
  38.4
  34.6
  33.0
  31.5
  30.0
  28.6
  27.2
  25.8
  24.5
  23.2
  22.0
  20.8
  19.7
  18.6
  17.6
  16.6
  15.6
  14.7
  13.9
  13.1
  12.3
  11.6

CECO Environmental Corp. is a provider of engineered technologies to the environmental, energy, and fluid handling and filtration industrial segments. The Company is focused on engineering, designing, building and installing systems that capture, clean and destroy airborne contaminants from industrial facilities, as well as equipment that controls emissions from such facilities, and fluid handling and filtration systems. Its Environmental segment is engaged in the design and manufacture of product recovery and air pollution control technologies that enable its customers to meet compliance targets for toxic emissions, fumes, volatile organic compounds, process and industrial odors. Its Energy segment provides customized solutions for the power and petrochemical industry. Its Fluid Handling and Filtration segment provides the design and manufacture of pump, filtration and fume exhaust solutions.

FINANCIAL RATIOS  of  Ceco Environmental (CECE)

Valuation Ratios
P/E Ratio -7.2
Price to Sales 0.7
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow 4
Growth Rates
Sales Growth Rate 13.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 60%
Total Debt to Equity 67.4%
Interest Coverage -4
Management Effectiveness
Return On Assets -5.5%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital -10.4%
Ret/ On T. Cap. - 3 Yr. Avg. -2.5%
Return On Equity -17.7%
Return On Equity - 3 Yr. Avg. -4.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 32.4%
Gross Margin - 3 Yr. Avg. 31.6%
EBITDA Margin -1.7%
EBITDA Margin - 3 Yr. Avg. 5%
Operating Margin -6.2%
Oper. Margin - 3 Yr. Avg. 1%
Pre-Tax Margin -7.9%
Pre-Tax Margin - 3 Yr. Avg. -0.9%
Net Profit Margin -9.1%
Net Profit Margin - 3 Yr. Avg. -1.9%
Effective Tax Rate -15.2%
Eff/ Tax Rate - 3 Yr. Avg. -32.1%
Payout Ratio -23.7%

CECE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CECE stock intrinsic value calculation we used $345.051 million for the last fiscal year's total revenue generated by Ceco Environmental. The default revenue input number comes from 0001 income statement of Ceco Environmental. 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 CECE stock valuation model: a) initial revenue growth rate of 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 7%, whose default value for CECE is calculated based on our internal credit rating of Ceco Environmental, 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 Ceco Environmental.
    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 CECE stock the variable cost ratio is equal to 106.1%.

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 CECE 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 Ceco Environmental.

Corporate tax rate of 27% is the nominal tax rate for Ceco Environmental. 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 CECE 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 CECE are equal to 42.8%.

Life of production assets of 16.8 years is the average useful life of capital assets used in Ceco Environmental 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 CECE is equal to 15.1%. 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 - $186.569 million for Ceco Environmental - 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 34.911 million for Ceco Environmental 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 Ceco Environmental at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ CECO: 3Q Earnings Snapshot   [10:27AM  Associated Press]
▶ CECO: 2Q Earnings Snapshot   [07:47AM  Associated Press]
▶ Is It Too Late To Buy CECO Environmental Corp (NASDAQ:CECE)?   [Jun-24-18 10:22AM  Simply Wall St.]
▶ New Strong Sell Stocks for April 18th   [Apr-18-18 06:27AM  Zacks]
▶ CECO Environmental Announces the Sale of Strobic   [Apr-02-18 09:15AM  PR Newswire]
▶ New Strong Sell Stocks for March 23rd   [Mar-23-18 08:29AM  Zacks]
▶ CECO reports 4Q loss   [Mar-08-18 09:03AM  Associated Press]
▶ CECO Environmental Announces The Sale Of Keystone Filter   [Mar-01-18 07:00AM  PR Newswire]
▶ CECO posts 3Q profit   [07:35AM  Associated Press]
▶ CECO misses Street 2Q forecasts   [Aug-09-17 10:24PM  Associated Press]
▶ New Strong Sell Stocks for June 13th   [Jun-13-17 09:57AM  Zacks]
▶ One of Greater Cincinnatis largest public companies names new CEO   [07:05AM  American City Business Journals]
▶ CECO Environmental Names Dennis Sadlowski As CEO   [Jun-12-17 08:30AM  PR Newswire]
▶ New Strong Sell Stocks for May 12th   [May-12-17 11:02AM  Zacks]
▶ CECO beats 1Q profit forecasts   [07:20AM  Associated Press]
▶ CECO reports 4Q loss   [Mar-09-17 08:14AM  Associated Press]

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