Intrinsic value of CSW Industrials, Inc. - CSWI

Previous Close

$54.85

  Intrinsic Value

$74.50

stock screener

  Rating & Target

buy

+36%

Previous close

$54.85

 
Intrinsic value

$74.50

 
Up/down potential

+36%

 
Rating

buy

We calculate the intrinsic value of CSWI 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 0.8

 

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, %
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
  5.34
Revenue, $m
  366
  408
  452
  498
  547
  597
  650
  705
  762
  821
  883
  947
  1,014
  1,083
  1,155
  1,230
  1,308
  1,389
  1,473
  1,561
  1,653
  1,749
  1,848
  1,953
  2,062
  2,175
  2,294
  2,418
  2,549
  2,685
Variable operating expenses, $m
  200
  223
  246
  271
  296
  323
  351
  381
  411
  443
  470
  504
  540
  577
  615
  655
  696
  739
  784
  831
  880
  931
  984
  1,040
  1,098
  1,158
  1,221
  1,288
  1,357
  1,429
Fixed operating expenses, $m
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  125
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
  169
  173
  176
  180
  184
  188
Total operating expenses, $m
  300
  325
  351
  378
  405
  435
  465
  498
  530
  565
  595
  631
  670
  710
  751
  794
  838
  884
  932
  982
  1,035
  1,089
  1,146
  1,205
  1,267
  1,331
  1,397
  1,468
  1,541
  1,617
Operating income, $m
  65
  83
  101
  121
  141
  162
  184
  208
  232
  257
  288
  316
  344
  373
  404
  436
  470
  504
  541
  579
  618
  659
  703
  748
  795
  845
  896
  951
  1,007
  1,067
EBITDA, $m
  82
  100
  120
  141
  163
  185
  209
  234
  260
  287
  315
  344
  374
  406
  438
  473
  508
  545
  584
  625
  667
  711
  757
  806
  856
  909
  964
  1,022
  1,083
  1,146
Interest expense (income), $m
  3
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  13
  14
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
Earnings before tax, $m
  64
  81
  99
  118
  138
  158
  180
  202
  226
  250
  281
  307
  335
  364
  393
  425
  457
  491
  526
  563
  601
  642
  684
  728
  774
  822
  872
  925
  980
  1,038
Tax expense, $m
  17
  22
  27
  32
  37
  43
  49
  55
  61
  68
  76
  83
  90
  98
  106
  115
  123
  133
  142
  152
  162
  173
  185
  196
  209
  222
  235
  250
  265
  280
Net income, $m
  47
  59
  72
  86
  100
  115
  131
  148
  165
  183
  205
  224
  245
  265
  287
  310
  334
  358
  384
  411
  439
  468
  499
  531
  565
  600
  637
  675
  715
  758

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
  382
  426
  472
  521
  571
  624
  679
  737
  796
  858
  923
  990
  1,059
  1,132
  1,207
  1,285
  1,366
  1,451
  1,539
  1,631
  1,727
  1,827
  1,932
  2,040
  2,154
  2,273
  2,397
  2,527
  2,663
  2,805
Adjusted assets (=assets-cash), $m
  382
  426
  472
  521
  571
  624
  679
  737
  796
  858
  923
  990
  1,059
  1,132
  1,207
  1,285
  1,366
  1,451
  1,539
  1,631
  1,727
  1,827
  1,932
  2,040
  2,154
  2,273
  2,397
  2,527
  2,663
  2,805
Revenue / Adjusted assets
  0.958
  0.958
  0.958
  0.956
  0.958
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.958
  0.957
  0.957
  0.957
  0.958
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
  0.957
Average production assets, $m
  140
  156
  173
  190
  209
  228
  248
  269
  291
  314
  337
  362
  387
  414
  441
  470
  500
  531
  563
  596
  631
  668
  706
  746
  788
  831
  876
  924
  974
  1,026
Working capital, $m
  80
  90
  99
  110
  120
  131
  143
  155
  168
  181
  194
  208
  223
  238
  254
  271
  288
  306
  324
  343
  364
  385
  407
  430
  454
  479
  505
  532
  561
  591
Total debt, $m
  33
  43
  53
  64
  75
  86
  98
  111
  124
  138
  152
  167
  182
  198
  214
  232
  250
  268
  288
  308
  329
  351
  374
  398
  423
  449
  476
  505
  535
  566
Total liabilities, $m
  84
  94
  104
  115
  126
  137
  149
  162
  175
  189
  203
  218
  233
  249
  266
  283
  301
  319
  339
  359
  380
  402
  425
  449
  474
  500
  527
  556
  586
  617
Total equity, $m
  298
  332
  368
  406
  446
  487
  530
  575
  621
  669
  720
  772
  826
  883
  941
  1,002
  1,066
  1,132
  1,201
  1,272
  1,347
  1,425
  1,507
  1,592
  1,680
  1,773
  1,870
  1,971
  2,077
  2,188
Total liabilities and equity, $m
  382
  426
  472
  521
  572
  624
  679
  737
  796
  858
  923
  990
  1,059
  1,132
  1,207
  1,285
  1,367
  1,451
  1,540
  1,631
  1,727
  1,827
  1,932
  2,041
  2,154
  2,273
  2,397
  2,527
  2,663
  2,805
Debt-to-equity ratio
  0.110
  0.130
  0.140
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
Adjusted equity ratio
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  47
  59
  72
  86
  100
  115
  131
  148
  165
  183
  205
  224
  245
  265
  287
  310
  334
  358
  384
  411
  439
  468
  499
  531
  565
  600
  637
  675
  715
  758
Depreciation, amort., depletion, $m
  16
  17
  19
  20
  22
  23
  25
  26
  28
  30
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
  72
  75
  79
Funds from operations, $m
  63
  77
  91
  106
  122
  139
  156
  174
  193
  212
  231
  252
  275
  298
  321
  346
  372
  399
  428
  457
  488
  520
  554
  589
  626
  664
  705
  747
  791
  837
Change in working capital, $m
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Cash from operations, $m
  54
  67
  81
  96
  111
  127
  144
  162
  180
  199
  218
  238
  260
  282
  306
  330
  355
  382
  409
  438
  468
  499
  532
  566
  602
  639
  678
  719
  762
  807
Maintenance CAPEX, $m
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -72
  -75
New CAPEX, $m
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
Cash from investing activities, $m
  -25
  -27
  -29
  -31
  -34
  -35
  -38
  -40
  -43
  -46
  -48
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -78
  -81
  -86
  -90
  -95
  -100
  -104
  -109
  -115
  -122
  -127
Free cash flow, $m
  29
  41
  52
  65
  78
  92
  106
  122
  137
  154
  170
  188
  206
  226
  246
  267
  289
  312
  336
  361
  387
  414
  442
  471
  502
  535
  569
  604
  641
  680
Issuance/(repayment) of debt, $m
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
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  
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
Total cash flow (excl. dividends), $m
  38
  50
  63
  76
  89
  104
  119
  134
  151
  168
  184
  202
  222
  242
  263
  284
  307
  331
  355
  381
  408
  436
  465
  495
  527
  561
  596
  633
  671
  711
Retained Cash Flow (-), $m
  -32
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -101
  -106
  -111
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
  6
  16
  27
  38
  50
  62
  76
  89
  104
  119
  134
  150
  167
  185
  204
  223
  243
  264
  286
  309
  333
  358
  384
  411
  439
  468
  499
  531
  565
  600
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
  6
  15
  23
  31
  39
  45
  51
  56
  60
  63
  63
  64
  64
  62
  60
  57
  53
  49
  44
  39
  34
  30
  25
  21
  17
  14
  11
  8
  6
  5
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
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CSW Industrials, Inc. (CSWI) is a diversified industrial growth company. The Company operates through three segments: Industrial Products; Coatings, Sealants & Adhesives, and Specialty Chemicals. The Industrial Products segment consists of specialty mechanical products; fire and smoke protection products; architecturally specified building products, and storage, filtration and application equipment. The Coatings, Sealants & Adhesives segment comprises coatings and penetrants, pipe thread sealants, firestopping sealants, and caulks and adhesives/solvent cements. The Specialty Chemicals segment manufactures and supplies specialized consumables that impart or enhance properties, such as lubricity, anti-seize qualities, friction and heat control. Markets that it serves include HVAC, industrial, rail, plumbing, architecturally specified building products, energy, mining and other general industrial markets.

FINANCIAL RATIOS  of  CSW Industrials, Inc. (CSWI)

Valuation Ratios
P/E Ratio 79
Price to Sales 2.7
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 22.3
Price to Free Cash Flow 29
Growth Rates
Sales Growth Rate 2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.2%
Cap. Spend. - 3 Yr. Gr. Rate -9.7%
Financial Strength
Quick Ratio 23
Current Ratio 0.1
LT Debt to Equity 26.5%
Total Debt to Equity 26.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 7.3%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8.2%
Return On Equity 4.2%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 41%
Gross Margin - 3 Yr. Avg. 45.1%
EBITDA Margin 12.5%
EBITDA Margin - 3 Yr. Avg. 17.8%
Operating Margin 6.7%
Oper. Margin - 3 Yr. Avg. 12.8%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 7.5%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 42.2%
Payout Ratio 0%

CSWI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSWI stock intrinsic value calculation we used $326 million for the last fiscal year's total revenue generated by CSW Industrials, Inc.. The default revenue input number comes from 0001 income statement of CSW Industrials, 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 CSWI stock valuation model: a) initial revenue growth rate of 12.2% 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 4.3%, whose default value for CSWI is calculated based on our internal credit rating of CSW Industrials, 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 CSW Industrials, 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 CSWI stock the variable cost ratio is equal to 54.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $98 million in the base year in the intrinsic value calculation for CSWI 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 CSW Industrials, Inc..

Corporate tax rate of 27% is the nominal tax rate for CSW Industrials, 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 CSWI 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 CSWI are equal to 38.2%.

Life of production assets of 12.9 years is the average useful life of capital assets used in CSW Industrials, 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 CSWI is equal to 22%. 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 - $265.765 million for CSW Industrials, 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 15.072 million for CSW Industrials, 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 CSW Industrials, Inc. at the current share price and the inputted number of shares is $0.8 billion.

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