Intrinsic value of FutureFuel Corp. - FF

Previous Close

$10.83

  Intrinsic Value

$10.99

stock screener

  Rating & Target

hold

+1%

Previous close

$10.83

 
Intrinsic value

$10.99

 
Up/down potential

+1%

 
Rating

hold

We calculate the intrinsic value of FF 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 0.5

 

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, %
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  5.00
Revenue, $m
  288
  303
  318
  333
  350
  367
  385
  404
  424
  445
  467
  490
  515
  540
  567
  596
  625
  656
  689
  724
  760
  798
  837
  879
  923
  969
  1,018
  1,068
  1,122
  1,178
Variable operating expenses, $m
  248
  260
  272
  286
  300
  315
  330
  347
  364
  382
  401
  421
  442
  464
  487
  511
  536
  563
  591
  621
  652
  684
  718
  754
  792
  831
  873
  916
  962
  1,010
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
  248
  260
  272
  286
  300
  315
  330
  347
  364
  382
  401
  421
  442
  464
  487
  511
  536
  563
  591
  621
  652
  684
  718
  754
  792
  831
  873
  916
  962
  1,010
Operating income, $m
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  67
  70
  73
  77
  81
  85
  89
  93
  98
  103
  108
  114
  119
  125
  131
  138
  145
  152
  160
  168
EBITDA, $m
  53
  56
  59
  61
  64
  68
  71
  75
  78
  82
  86
  90
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  179
  188
  197
  207
  217
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
Earnings before tax, $m
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  84
  88
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
Tax expense, $m
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
  38
  40
  42
Net income, $m
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  90
  94
  98
  103
  108
  113

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
  237
  248
  260
  273
  287
  301
  316
  332
  348
  365
  383
  402
  422
  443
  465
  489
  513
  539
  565
  594
  623
  654
  687
  721
  757
  795
  835
  876
  920
  966
Adjusted assets (=assets-cash), $m
  237
  248
  260
  273
  287
  301
  316
  332
  348
  365
  383
  402
  422
  443
  465
  489
  513
  539
  565
  594
  623
  654
  687
  721
  757
  795
  835
  876
  920
  966
Revenue / Adjusted assets
  1.215
  1.222
  1.223
  1.220
  1.220
  1.219
  1.218
  1.217
  1.218
  1.219
  1.219
  1.219
  1.220
  1.219
  1.219
  1.219
  1.218
  1.217
  1.219
  1.219
  1.220
  1.220
  1.218
  1.219
  1.219
  1.219
  1.219
  1.219
  1.220
  1.219
Average production assets, $m
  120
  126
  132
  139
  146
  153
  161
  169
  177
  186
  195
  205
  215
  225
  237
  248
  261
  274
  287
  302
  317
  333
  349
  367
  385
  404
  424
  446
  468
  491
Working capital, $m
  42
  44
  46
  48
  51
  53
  56
  59
  61
  65
  68
  71
  75
  78
  82
  86
  91
  95
  100
  105
  110
  116
  121
  127
  134
  141
  148
  155
  163
  171
Total debt, $m
  4
  7
  11
  16
  20
  25
  30
  35
  40
  46
  52
  58
  65
  71
  79
  86
  94
  103
  111
  121
  130
  141
  151
  163
  174
  187
  200
  213
  228
  243
Total liabilities, $m
  78
  81
  85
  90
  94
  99
  104
  109
  114
  120
  126
  132
  139
  145
  153
  160
  168
  177
  185
  195
  204
  215
  225
  237
  248
  261
  274
  287
  302
  317
Total equity, $m
  159
  167
  175
  184
  193
  202
  212
  223
  234
  245
  258
  270
  284
  298
  313
  328
  345
  362
  380
  399
  419
  440
  462
  485
  509
  534
  561
  589
  618
  649
Total liabilities and equity, $m
  237
  248
  260
  274
  287
  301
  316
  332
  348
  365
  384
  402
  423
  443
  466
  488
  513
  539
  565
  594
  623
  655
  687
  722
  757
  795
  835
  876
  920
  966
Debt-to-equity ratio
  0.020
  0.040
  0.070
  0.090
  0.100
  0.120
  0.140
  0.160
  0.170
  0.190
  0.200
  0.210
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
Adjusted equity ratio
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672
  0.672

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  90
  94
  98
  103
  108
  113
Depreciation, amort., depletion, $m
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  47
  50
Funds from operations, $m
  42
  44
  46
  48
  50
  53
  55
  58
  61
  63
  66
  70
  73
  76
  80
  84
  88
  92
  97
  101
  106
  111
  117
  122
  128
  135
  141
  148
  155
  163
Change in working capital, $m
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
  141
  148
  155
Maintenance CAPEX, $m
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -42
  -43
  -45
  -48
  -51
  -52
  -55
  -58
  -61
  -64
  -67
  -70
Free cash flow, $m
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
Issuance/(repayment) of debt, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
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  
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Total cash flow (excl. dividends), $m
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  71
  75
  79
  82
  86
  90
  95
  99
Retained Cash Flow (-), $m
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
Prev. year cash balance distribution, $m
  200
  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
  219
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  68
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
  210
  18
  18
  18
  17
  17
  17
  16
  15
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
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

FutureFuel Corp. is the holding company of FutureFuel Chemical Company. FutureFuel Chemical Company manufactures diversified chemical products, bio-based products consisting of biofuels, and bio-based specialty chemical products. FutureFuel Chemical Company conducts its operations through two segments: chemicals and biofuels. The chemicals segment manufactures a diversified listing of chemical products that are sold to third-party customers. The biofuels segment primarily produces and sells biodiesel and petrodiesel blends to its customers. The biofuels segment also involves the buying, selling and shipping of refined petroleum products on common carrier pipelines. Custom chemicals manufacturing involves producing various products for strategic customers, generally under long-term contracts. Its products also include a family of acetal-based solvents, including diethoxymethane, dimethoxymethane, dibutoxymethane, glycerol formal and phenol sulfonic acid.

FINANCIAL RATIOS  of  FutureFuel Corp. (FF)

Valuation Ratios
P/E Ratio 8.5
Price to Sales 1.9
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 5.2
Price to Free Cash Flow 5.5
Growth Rates
Sales Growth Rate -15.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.6%
Cap. Spend. - 3 Yr. Gr. Rate -23.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 14.3%
Return On Equity 15.4%
Return On Equity - 3 Yr. Avg. 14.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 18.6%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin 20.6%
EBITDA Margin - 3 Yr. Avg. 21.1%
Operating Margin 14.2%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 16.2%
Pre-Tax Margin - 3 Yr. Avg. 17.7%
Net Profit Margin 22.1%
Net Profit Margin - 3 Yr. Avg. 17.7%
Effective Tax Rate -36.6%
Eff/ Tax Rate - 3 Yr. Avg. -1.4%
Payout Ratio 17.9%

FF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FF stock intrinsic value calculation we used $275 million for the last fiscal year's total revenue generated by FutureFuel Corp.. The default revenue input number comes from 0001 income statement of FutureFuel Corp.. 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 FF stock valuation model: a) initial revenue growth rate of 4.9% 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 FF is calculated based on our internal credit rating of FutureFuel Corp., 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 FutureFuel Corp..
    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 FF stock the variable cost ratio is equal to 85.8%.

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 FF 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 FutureFuel Corp..

Corporate tax rate of 27% is the nominal tax rate for FutureFuel Corp.. 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 FF 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 FF are equal to 41.7%.

Life of production assets of 9.9 years is the average useful life of capital assets used in FutureFuel Corp. 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 FF is equal to 14.5%. 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 - $351.596 million for FutureFuel Corp. - 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 43.743 million for FutureFuel Corp. 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 FutureFuel Corp. at the current share price and the inputted number of shares is $0.5 billion.

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