Intrinsic value of Crane Co. - CR

Previous Close

$82.14

  Intrinsic Value

$207.55

stock screener

  Rating & Target

str. buy

+153%

Previous close

$82.14

 
Intrinsic value

$207.55

 
Up/down potential

+153%

 
Rating

str. buy

We calculate the intrinsic value of CR 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 4.9

 

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, %
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
  5.59
Revenue, $m
  3,935
  4,578
  5,274
  6,022
  6,821
  7,670
  8,567
  9,511
  10,503
  11,541
  12,625
  13,755
  14,932
  16,157
  17,431
  18,754
  20,130
  21,559
  23,045
  24,590
  26,196
  27,867
  29,606
  31,417
  33,303
  35,270
  37,320
  39,460
  41,693
  44,025
Variable operating expenses, $m
  3,355
  3,872
  4,432
  5,034
  5,677
  6,360
  7,082
  7,842
  8,639
  9,474
  10,158
  11,068
  12,015
  13,001
  14,025
  15,090
  16,197
  17,347
  18,543
  19,786
  21,078
  22,423
  23,822
  25,279
  26,797
  28,379
  30,029
  31,751
  33,548
  35,424
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
  3,355
  3,872
  4,432
  5,034
  5,677
  6,360
  7,082
  7,842
  8,639
  9,474
  10,158
  11,068
  12,015
  13,001
  14,025
  15,090
  16,197
  17,347
  18,543
  19,786
  21,078
  22,423
  23,822
  25,279
  26,797
  28,379
  30,029
  31,751
  33,548
  35,424
Operating income, $m
  580
  706
  842
  988
  1,144
  1,310
  1,485
  1,670
  1,863
  2,066
  2,466
  2,687
  2,917
  3,157
  3,405
  3,664
  3,933
  4,212
  4,502
  4,804
  5,118
  5,444
  5,784
  6,138
  6,506
  6,891
  7,291
  7,709
  8,145
  8,601
EBITDA, $m
  854
  993
  1,144
  1,307
  1,480
  1,664
  1,859
  2,064
  2,279
  2,504
  2,740
  2,985
  3,240
  3,506
  3,783
  4,070
  4,368
  4,678
  5,001
  5,336
  5,685
  6,047
  6,425
  6,818
  7,227
  7,654
  8,099
  8,563
  9,048
  9,554
Interest expense (income), $m
  37
  57
  83
  113
  144
  178
  214
  252
  293
  335
  380
  427
  476
  527
  580
  635
  693
  753
  815
  879
  946
  1,016
  1,088
  1,164
  1,242
  1,324
  1,409
  1,498
  1,591
  1,687
  1,788
Earnings before tax, $m
  523
  622
  729
  844
  966
  1,096
  1,233
  1,377
  1,528
  1,686
  2,040
  2,211
  2,390
  2,577
  2,770
  2,971
  3,180
  3,397
  3,623
  3,858
  4,102
  4,356
  4,620
  4,895
  5,182
  5,481
  5,793
  6,118
  6,458
  6,813
Tax expense, $m
  141
  168
  197
  228
  261
  296
  333
  372
  413
  455
  551
  597
  645
  696
  748
  802
  859
  917
  978
  1,042
  1,107
  1,176
  1,247
  1,322
  1,399
  1,480
  1,564
  1,652
  1,744
  1,839
Net income, $m
  382
  454
  532
  616
  705
  800
  900
  1,005
  1,115
  1,231
  1,489
  1,614
  1,745
  1,881
  2,022
  2,169
  2,322
  2,480
  2,645
  2,816
  2,994
  3,180
  3,373
  3,574
  3,783
  4,001
  4,229
  4,466
  4,714
  4,973

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
  4,752
  5,529
  6,370
  7,273
  8,238
  9,263
  10,346
  11,487
  12,684
  13,938
  15,247
  16,612
  18,034
  19,513
  21,051
  22,650
  24,312
  26,038
  27,832
  29,698
  31,637
  33,655
  35,756
  37,943
  40,221
  42,596
  45,073
  47,657
  50,354
  53,170
Adjusted assets (=assets-cash), $m
  4,752
  5,529
  6,370
  7,273
  8,238
  9,263
  10,346
  11,487
  12,684
  13,938
  15,247
  16,612
  18,034
  19,513
  21,051
  22,650
  24,312
  26,038
  27,832
  29,698
  31,637
  33,655
  35,756
  37,943
  40,221
  42,596
  45,073
  47,657
  50,354
  53,170
Revenue / Adjusted assets
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
  0.828
Average production assets, $m
  1,507
  1,753
  2,020
  2,306
  2,612
  2,937
  3,281
  3,643
  4,023
  4,420
  4,835
  5,268
  5,719
  6,188
  6,676
  7,183
  7,710
  8,257
  8,826
  9,418
  10,033
  10,673
  11,339
  12,033
  12,755
  13,508
  14,294
  15,113
  15,968
  16,862
Working capital, $m
  338
  394
  454
  518
  587
  660
  737
  818
  903
  992
  1,086
  1,183
  1,284
  1,390
  1,499
  1,613
  1,731
  1,854
  1,982
  2,115
  2,253
  2,397
  2,546
  2,702
  2,864
  3,033
  3,210
  3,394
  3,586
  3,786
Total debt, $m
  1,391
  1,875
  2,399
  2,962
  3,563
  4,201
  4,876
  5,587
  6,333
  7,114
  7,930
  8,780
  9,666
  10,588
  11,546
  12,542
  13,577
  14,652
  15,770
  16,932
  18,141
  19,398
  20,707
  22,069
  23,489
  24,968
  26,511
  28,121
  29,801
  31,556
Total liabilities, $m
  2,961
  3,444
  3,968
  4,531
  5,132
  5,771
  6,446
  7,156
  7,902
  8,683
  9,499
  10,349
  11,235
  12,157
  13,115
  14,111
  15,146
  16,222
  17,340
  18,502
  19,710
  20,967
  22,276
  23,638
  25,058
  26,538
  28,080
  29,690
  31,370
  33,125
Total equity, $m
  1,792
  2,084
  2,401
  2,742
  3,106
  3,492
  3,901
  4,331
  4,782
  5,255
  5,748
  6,263
  6,799
  7,357
  7,936
  8,539
  9,165
  9,816
  10,493
  11,196
  11,927
  12,688
  13,480
  14,304
  15,163
  16,059
  16,992
  17,967
  18,983
  20,045
Total liabilities and equity, $m
  4,753
  5,528
  6,369
  7,273
  8,238
  9,263
  10,347
  11,487
  12,684
  13,938
  15,247
  16,612
  18,034
  19,514
  21,051
  22,650
  24,311
  26,038
  27,833
  29,698
  31,637
  33,655
  35,756
  37,942
  40,221
  42,597
  45,072
  47,657
  50,353
  53,170
Debt-to-equity ratio
  0.780
  0.900
  1.000
  1.080
  1.150
  1.200
  1.250
  1.290
  1.320
  1.350
  1.380
  1.400
  1.420
  1.440
  1.450
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.540
  1.550
  1.550
  1.560
  1.570
  1.570
  1.570
Adjusted equity ratio
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  382
  454
  532
  616
  705
  800
  900
  1,005
  1,115
  1,231
  1,489
  1,614
  1,745
  1,881
  2,022
  2,169
  2,322
  2,480
  2,645
  2,816
  2,994
  3,180
  3,373
  3,574
  3,783
  4,001
  4,229
  4,466
  4,714
  4,973
Depreciation, amort., depletion, $m
  274
  288
  303
  319
  336
  355
  374
  394
  416
  438
  273
  298
  323
  350
  377
  406
  436
  467
  499
  532
  567
  603
  641
  680
  721
  763
  808
  854
  902
  953
Funds from operations, $m
  656
  742
  835
  935
  1,042
  1,155
  1,274
  1,400
  1,531
  1,669
  1,762
  1,912
  2,068
  2,231
  2,399
  2,575
  2,757
  2,947
  3,144
  3,348
  3,561
  3,783
  4,013
  4,253
  4,504
  4,764
  5,036
  5,320
  5,617
  5,926
Change in working capital, $m
  51
  55
  60
  64
  69
  73
  77
  81
  85
  89
  93
  97
  101
  105
  110
  114
  118
  123
  128
  133
  138
  144
  150
  156
  162
  169
  176
  184
  192
  201
Cash from operations, $m
  605
  687
  775
  871
  973
  1,082
  1,197
  1,318
  1,446
  1,580
  1,669
  1,815
  1,967
  2,125
  2,290
  2,461
  2,639
  2,824
  3,016
  3,215
  3,423
  3,639
  3,864
  4,098
  4,341
  4,595
  4,860
  5,136
  5,425
  5,726
Maintenance CAPEX, $m
  -72
  -85
  -99
  -114
  -130
  -148
  -166
  -185
  -206
  -227
  -250
  -273
  -298
  -323
  -350
  -377
  -406
  -436
  -467
  -499
  -532
  -567
  -603
  -641
  -680
  -721
  -763
  -808
  -854
  -902
New CAPEX, $m
  -224
  -246
  -267
  -287
  -306
  -325
  -344
  -362
  -380
  -397
  -415
  -433
  -451
  -469
  -488
  -507
  -527
  -547
  -569
  -592
  -615
  -640
  -666
  -694
  -723
  -753
  -785
  -819
  -855
  -893
Cash from investing activities, $m
  -296
  -331
  -366
  -401
  -436
  -473
  -510
  -547
  -586
  -624
  -665
  -706
  -749
  -792
  -838
  -884
  -933
  -983
  -1,036
  -1,091
  -1,147
  -1,207
  -1,269
  -1,335
  -1,403
  -1,474
  -1,548
  -1,627
  -1,709
  -1,795
Free cash flow, $m
  309
  355
  410
  470
  537
  609
  687
  771
  861
  955
  1,004
  1,109
  1,218
  1,333
  1,452
  1,577
  1,706
  1,841
  1,980
  2,125
  2,276
  2,432
  2,595
  2,763
  2,939
  3,122
  3,312
  3,509
  3,715
  3,930
Issuance/(repayment) of debt, $m
  442
  484
  524
  563
  601
  638
  675
  711
  746
  781
  816
  851
  886
  922
  958
  996
  1,035
  1,076
  1,118
  1,162
  1,209
  1,257
  1,309
  1,363
  1,420
  1,480
  1,543
  1,610
  1,680
  1,755
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  
  442
  484
  524
  563
  601
  638
  675
  711
  746
  781
  816
  851
  886
  922
  958
  996
  1,035
  1,076
  1,118
  1,162
  1,209
  1,257
  1,309
  1,363
  1,420
  1,480
  1,543
  1,610
  1,680
  1,755
Total cash flow (excl. dividends), $m
  751
  839
  933
  1,033
  1,138
  1,248
  1,362
  1,482
  1,607
  1,736
  1,820
  1,959
  2,104
  2,255
  2,411
  2,573
  2,741
  2,916
  3,098
  3,287
  3,484
  3,689
  3,903
  4,126
  4,359
  4,601
  4,854
  5,119
  5,396
  5,685
Retained Cash Flow (-), $m
  -267
  -293
  -317
  -341
  -364
  -386
  -408
  -430
  -451
  -473
  -494
  -515
  -536
  -558
  -580
  -603
  -626
  -651
  -676
  -703
  -731
  -761
  -792
  -825
  -859
  -895
  -934
  -974
  -1,017
  -1,062
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
  483
  546
  616
  692
  774
  861
  954
  1,052
  1,155
  1,263
  1,326
  1,445
  1,568
  1,697
  1,831
  1,970
  2,115
  2,265
  2,422
  2,584
  2,753
  2,929
  3,111
  3,302
  3,500
  3,706
  3,921
  4,145
  4,379
  4,623
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
  463
  500
  536
  570
  600
  625
  644
  657
  664
  662
  630
  616
  596
  570
  537
  501
  460
  417
  373
  328
  285
  243
  204
  168
  136
  108
  84
  64
  48
  35
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

Crane Co. (Crane) is a manufacturer of engineered industrial products. The Company operates through four segments, including Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics, and Engineered Materials. The Fluid Handling segment is a provider of engineered fluid handling equipment, including Process Valves and Related Products, Commercial Valves and Other Products. The Payment & Merchandising Technologies segment includes Crane Payment Innovations (CPI) and Merchandising Systems. The Aerospace & Electronics segment supplies various components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace and military aerospace, and defense markets. The Engineered Materials segment manufactures fiberglass-reinforced plastic (FRP) panels and coils, primarily for use in the manufacturing of recreational vehicles (RVs), truck bodies, truck trailers, with additional applications in commercial and industrial buildings.

FINANCIAL RATIOS  of  Crane Co. (CR)

Valuation Ratios
P/E Ratio 39.4
Price to Sales 1.8
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 15.2
Price to Free Cash Flow 18.2
Growth Rates
Sales Growth Rate 0.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30%
Cap. Spend. - 3 Yr. Gr. Rate 12.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 65.7%
Total Debt to Equity 65.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 6.1%
Return On Total Capital 6.5%
Ret/ On T. Cap. - 3 Yr. Avg. 9.3%
Return On Equity 10.8%
Return On Equity - 3 Yr. Avg. 16.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 36%
Gross Margin - 3 Yr. Avg. 35.2%
EBITDA Margin 9.8%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 7.3%
Oper. Margin - 3 Yr. Avg. 10.6%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. 9.3%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate 24.4%
Eff/ Tax Rate - 3 Yr. Avg. 29%
Payout Ratio 62.6%

CR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CR stock intrinsic value calculation we used $3346 million for the last fiscal year's total revenue generated by Crane Co.. The default revenue input number comes from 0001 income statement of Crane Co.. 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 CR stock valuation model: a) initial revenue growth rate of 17.6% 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 CR is calculated based on our internal credit rating of Crane Co., 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 Crane Co..
    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 CR stock the variable cost ratio is equal to 86.1%.

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 CR 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 6% for Crane Co..

Corporate tax rate of 27% is the nominal tax rate for Crane Co.. 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 CR 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 CR are equal to 38.3%.

Life of production assets of 17.7 years is the average useful life of capital assets used in Crane Co. 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 CR is equal to 8.6%. 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 - $1524.2 million for Crane Co. - 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 59.739 million for Crane Co. 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 Crane Co. at the current share price and the inputted number of shares is $4.9 billion.

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