Intrinsic value of Continental Materials - CUO

Previous Close

$13.46

  Intrinsic Value

$6.93

stock screener

  Rating & Target

sell

-48%

Previous close

$13.46

 
Intrinsic value

$6.93

 
Up/down potential

-48%

 
Rating

sell

We calculate the intrinsic value of CUO 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 0.0

 

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, %
  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
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
Revenue, $m
  165
  178
  191
  205
  220
  235
  250
  267
  284
  301
  319
  338
  358
  379
  401
  423
  447
  472
  497
  524
  553
  582
  613
  645
  679
  715
  752
  791
  831
  874
Variable operating expenses, $m
  159
  171
  184
  197
  211
  225
  240
  256
  272
  289
  305
  324
  343
  363
  383
  405
  427
  451
  476
  501
  528
  557
  586
  617
  649
  683
  719
  756
  795
  836
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
  159
  171
  184
  197
  211
  225
  240
  256
  272
  289
  305
  324
  343
  363
  383
  405
  427
  451
  476
  501
  528
  557
  586
  617
  649
  683
  719
  756
  795
  836
Operating income, $m
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
EBITDA, $m
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
Interest expense (income), $m
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
Earnings before tax, $m
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
Tax expense, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
Net income, $m
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15

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
  89
  96
  103
  111
  118
  127
  135
  144
  153
  162
  172
  182
  193
  204
  216
  228
  241
  254
  268
  283
  298
  314
  330
  348
  366
  385
  405
  426
  448
  471
Adjusted assets (=assets-cash), $m
  89
  96
  103
  111
  118
  127
  135
  144
  153
  162
  172
  182
  193
  204
  216
  228
  241
  254
  268
  283
  298
  314
  330
  348
  366
  385
  405
  426
  448
  471
Revenue / Adjusted assets
  1.854
  1.854
  1.854
  1.847
  1.864
  1.850
  1.852
  1.854
  1.856
  1.858
  1.855
  1.857
  1.855
  1.858
  1.856
  1.855
  1.855
  1.858
  1.854
  1.852
  1.856
  1.854
  1.858
  1.853
  1.855
  1.857
  1.857
  1.857
  1.855
  1.856
Average production assets, $m
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  69
  72
  76
  81
  85
  90
  94
  99
  105
  110
  116
  122
  128
  135
  142
Working capital, $m
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  78
  82
  87
  92
  96
  102
  107
  113
  119
  125
  131
  138
  145
  153
  161
Total debt, $m
  6
  8
  11
  13
  16
  18
  21
  24
  27
  31
  34
  38
  41
  45
  49
  53
  57
  62
  67
  72
  77
  82
  88
  94
  100
  107
  114
  121
  128
  136
Total liabilities, $m
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  78
  82
  87
  91
  96
  102
  107
  113
  119
  125
  131
  138
  145
  153
  161
Total equity, $m
  59
  63
  68
  73
  78
  83
  89
  95
  101
  107
  113
  120
  127
  135
  142
  150
  159
  168
  177
  186
  196
  207
  218
  229
  241
  254
  267
  281
  295
  311
Total liabilities and equity, $m
  89
  96
  103
  111
  118
  126
  135
  144
  153
  162
  172
  182
  193
  205
  216
  228
  241
  255
  268
  282
  298
  314
  331
  348
  366
  385
  405
  426
  448
  472
Debt-to-equity ratio
  0.100
  0.130
  0.150
  0.180
  0.200
  0.220
  0.240
  0.260
  0.270
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.430
  0.440
Adjusted equity ratio
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
Funds from operations, $m
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
Change in working capital, $m
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from investing activities, $m
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -10
  -10
  -10
  -11
  -11
  -11
  -13
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -19
  -19
Free cash flow, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Issuance/(repayment) of debt, $m
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
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  
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Total cash flow (excl. dividends), $m
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
Retained Cash Flow (-), $m
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
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
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
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
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -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, %
  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

Continental Materials Corporation operates within two industry groups: heating, ventilation and air conditioning (HVAC), and construction products. The Company operates through two segments in each of the two industry groups: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group, and the Concrete, Aggregates and Construction Supplies (CACS) segment and the Door segment in the Construction Products industry group. The Heating and Cooling segment primarily produces and sells gas-fired wall furnaces, console heaters and fan coils. The Evaporative Cooling segment produces and sells primarily evaporative coolers. The Door segment sells hollow metal doors, door frames and related hardware, wood doors, lavatory fixtures and electronic access and security systems. The Company makes sales to general and sub-contractors, government entities and individuals. Concrete, aggregates and construction supplies are also offered from various locations.

FINANCIAL RATIOS  of  Continental Materials (CUO)

Valuation Ratios
P/E Ratio 5.6
Price to Sales 0.1
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 5.6
Growth Rates
Sales Growth Rate 10.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 3.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. -0.1%
Return On Total Capital 7.4%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 8%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 2
Profitability Ratios
Gross Margin 20.4%
Gross Margin - 3 Yr. Avg. 17.9%
EBITDA Margin 5.3%
EBITDA Margin - 3 Yr. Avg. 1.2%
Operating Margin 3.9%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. -0.5%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. -0.1%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 42.6%
Payout Ratio 0%

CUO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CUO stock intrinsic value calculation we used $152.81 million for the last fiscal year's total revenue generated by Continental Materials. The default revenue input number comes from 0001 income statement of Continental Materials. 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 CUO stock valuation model: a) initial revenue growth rate of 8.1% 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 CUO is calculated based on our internal credit rating of Continental Materials, 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 Continental Materials.
    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 CUO stock the variable cost ratio is equal to 96.1%.

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 CUO 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 13.3% for Continental Materials.

Corporate tax rate of 27% is the nominal tax rate for Continental Materials. 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 CUO 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 CUO are equal to 16.2%.

Life of production assets of 11.1 years is the average useful life of capital assets used in Continental Materials 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 CUO is equal to 18.4%. 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 - $54.322 million for Continental Materials - 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 1.698 million for Continental Materials 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 Continental Materials at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
LII Lennox Interna 215.20 105.34  str.sell
AAON AAON 40.96 14.66  str.sell
AOS A.O. Smith 46.25 63.96  hold
IR Ingersoll-Rand 103.72 156.32  str.buy

COMPANY NEWS

▶ Miami Dade EG Roofing Nail Listing Change - Update 2   [Mar-28-16 10:46AM  at noodls]
▶ 10-Q for Continental Materials Corp.   [Aug-17  08:13PM  at Company Spotlight]
▶ 10-Q for Continental Materials Corp.   [May-21  08:09PM  at Company Spotlight]
▶ 10-K for Continental Materials Corp.   [Apr-24  08:12PM  at Company Spotlight]
▶ Continental Materials (CUO) Downgraded From Hold to Sell   [Dec-13  08:30AM  at TheStreet]
▶ 10-Q for Continental Materials Corp.   [Nov-19  07:07PM  Company Spotlight]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.