Intrinsic value of Ferro Corporation - FOE

Previous Close

$18.89

  Intrinsic Value

$15.18

stock screener

  Rating & Target

hold

-20%

Previous close

$18.89

 
Intrinsic value

$15.18

 
Up/down potential

-20%

 
Rating

hold

We calculate the intrinsic value of FOE 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 1.6

 

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, %
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
Revenue, $m
  1,688
  1,768
  1,852
  1,940
  2,033
  2,131
  2,235
  2,343
  2,457
  2,577
  2,703
  2,836
  2,976
  3,122
  3,276
  3,438
  3,608
  3,786
  3,974
  4,171
  4,378
  4,596
  4,824
  5,064
  5,316
  5,580
  5,858
  6,150
  6,457
  6,779
Variable operating expenses, $m
  1,495
  1,564
  1,636
  1,713
  1,793
  1,878
  1,967
  2,060
  2,159
  2,262
  2,331
  2,445
  2,565
  2,692
  2,824
  2,964
  3,110
  3,264
  3,426
  3,596
  3,774
  3,962
  4,159
  4,366
  4,583
  4,811
  5,051
  5,302
  5,567
  5,844
Fixed operating expenses, $m
  18
  19
  19
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
Total operating expenses, $m
  1,513
  1,583
  1,655
  1,733
  1,813
  1,899
  1,988
  2,081
  2,181
  2,284
  2,354
  2,468
  2,589
  2,716
  2,849
  2,989
  3,136
  3,291
  3,453
  3,624
  3,802
  3,991
  4,189
  4,396
  4,614
  4,843
  5,083
  5,335
  5,601
  5,879
Operating income, $m
  174
  185
  196
  208
  220
  233
  247
  262
  277
  293
  350
  368
  386
  406
  427
  448
  471
  495
  521
  547
  575
  605
  635
  668
  702
  738
  775
  815
  856
  900
EBITDA, $m
  256
  268
  282
  296
  310
  326
  342
  359
  377
  396
  416
  438
  460
  483
  507
  533
  560
  589
  619
  650
  683
  718
  754
  793
  833
  875
  920
  966
  1,015
  1,067
Interest expense (income), $m
  17
  44
  48
  52
  56
  60
  65
  69
  74
  80
  85
  91
  97
  103
  110
  117
  124
  132
  140
  149
  158
  167
  177
  188
  199
  210
  223
  235
  249
  263
  277
Earnings before tax, $m
  130
  137
  144
  152
  160
  169
  178
  187
  197
  208
  259
  271
  283
  296
  310
  324
  339
  355
  372
  389
  408
  427
  448
  469
  491
  515
  540
  566
  594
  623
Tax expense, $m
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  70
  73
  76
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
  160
  168
Net income, $m
  95
  100
  105
  111
  117
  123
  130
  137
  144
  152
  189
  198
  207
  216
  226
  237
  248
  259
  271
  284
  298
  312
  327
  342
  359
  376
  394
  413
  433
  455

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
  1,898
  1,988
  2,083
  2,182
  2,287
  2,398
  2,514
  2,636
  2,764
  2,899
  3,041
  3,190
  3,347
  3,512
  3,685
  3,867
  4,058
  4,259
  4,470
  4,692
  4,925
  5,169
  5,426
  5,696
  5,980
  6,277
  6,590
  6,918
  7,263
  7,625
Adjusted assets (=assets-cash), $m
  1,898
  1,988
  2,083
  2,182
  2,287
  2,398
  2,514
  2,636
  2,764
  2,899
  3,041
  3,190
  3,347
  3,512
  3,685
  3,867
  4,058
  4,259
  4,470
  4,692
  4,925
  5,169
  5,426
  5,696
  5,980
  6,277
  6,590
  6,918
  7,263
  7,625
Revenue / Adjusted assets
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
  0.889
Average production assets, $m
  574
  601
  630
  660
  691
  725
  760
  797
  835
  876
  919
  964
  1,012
  1,061
  1,114
  1,169
  1,227
  1,287
  1,351
  1,418
  1,489
  1,562
  1,640
  1,722
  1,807
  1,897
  1,992
  2,091
  2,195
  2,305
Working capital, $m
  424
  444
  465
  487
  510
  535
  561
  588
  617
  647
  679
  712
  747
  784
  822
  863
  906
  950
  997
  1,047
  1,099
  1,153
  1,211
  1,271
  1,334
  1,401
  1,470
  1,544
  1,621
  1,701
Total debt, $m
  889
  960
  1,035
  1,114
  1,197
  1,284
  1,376
  1,473
  1,575
  1,682
  1,794
  1,912
  2,036
  2,167
  2,304
  2,448
  2,600
  2,759
  2,926
  3,101
  3,286
  3,480
  3,683
  3,897
  4,121
  4,357
  4,605
  4,865
  5,138
  5,425
Total liabilities, $m
  1,504
  1,575
  1,650
  1,729
  1,812
  1,899
  1,991
  2,088
  2,189
  2,296
  2,409
  2,527
  2,651
  2,781
  2,919
  3,063
  3,214
  3,373
  3,540
  3,716
  3,900
  4,094
  4,298
  4,511
  4,736
  4,972
  5,219
  5,479
  5,752
  6,039
Total equity, $m
  395
  414
  433
  454
  476
  499
  523
  548
  575
  603
  633
  664
  696
  730
  766
  804
  844
  886
  930
  976
  1,024
  1,075
  1,129
  1,185
  1,244
  1,306
  1,371
  1,439
  1,511
  1,586
Total liabilities and equity, $m
  1,899
  1,989
  2,083
  2,183
  2,288
  2,398
  2,514
  2,636
  2,764
  2,899
  3,042
  3,191
  3,347
  3,511
  3,685
  3,867
  4,058
  4,259
  4,470
  4,692
  4,924
  5,169
  5,427
  5,696
  5,980
  6,278
  6,590
  6,918
  7,263
  7,625
Debt-to-equity ratio
  2.250
  2.320
  2.390
  2.450
  2.520
  2.580
  2.630
  2.690
  2.740
  2.790
  2.840
  2.880
  2.930
  2.970
  3.010
  3.040
  3.080
  3.110
  3.150
  3.180
  3.210
  3.240
  3.260
  3.290
  3.310
  3.340
  3.360
  3.380
  3.400
  3.420
Adjusted equity ratio
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  95
  100
  105
  111
  117
  123
  130
  137
  144
  152
  189
  198
  207
  216
  226
  237
  248
  259
  271
  284
  298
  312
  327
  342
  359
  376
  394
  413
  433
  455
Depreciation, amort., depletion, $m
  82
  84
  86
  88
  90
  93
  95
  98
  101
  104
  67
  70
  73
  77
  81
  85
  89
  93
  98
  103
  108
  113
  119
  125
  131
  137
  144
  152
  159
  167
Funds from operations, $m
  176
  184
  191
  199
  207
  216
  225
  235
  245
  255
  256
  268
  280
  293
  307
  321
  336
  352
  369
  387
  406
  425
  446
  467
  490
  514
  539
  565
  592
  622
Change in working capital, $m
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
Cash from operations, $m
  157
  163
  170
  177
  184
  191
  199
  207
  216
  225
  224
  234
  245
  256
  268
  281
  294
  308
  322
  337
  354
  370
  388
  407
  427
  447
  469
  492
  516
  541
Maintenance CAPEX, $m
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -63
  -67
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -152
  -159
New CAPEX, $m
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -95
  -99
  -104
  -109
Cash from investing activities, $m
  -66
  -69
  -73
  -76
  -80
  -83
  -88
  -92
  -97
  -102
  -106
  -112
  -117
  -123
  -129
  -136
  -143
  -150
  -157
  -165
  -173
  -182
  -191
  -201
  -211
  -221
  -232
  -243
  -256
  -268
Free cash flow, $m
  92
  95
  98
  101
  104
  108
  111
  115
  119
  124
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  180
  189
  197
  206
  216
  226
  237
  248
  260
  272
Issuance/(repayment) of debt, $m
  68
  71
  75
  79
  83
  87
  92
  97
  102
  107
  112
  118
  124
  131
  137
  144
  151
  159
  167
  176
  184
  194
  203
  214
  224
  236
  248
  260
  273
  287
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  
  68
  71
  75
  79
  83
  87
  92
  97
  102
  107
  112
  118
  124
  131
  137
  144
  151
  159
  167
  176
  184
  194
  203
  214
  224
  236
  248
  260
  273
  287
Total cash flow (excl. dividends), $m
  159
  166
  173
  180
  187
  195
  203
  212
  221
  231
  230
  241
  252
  264
  276
  289
  303
  317
  332
  348
  365
  382
  401
  420
  441
  462
  484
  508
  533
  559
Retained Cash Flow (-), $m
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
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
  141
  147
  153
  159
  165
  172
  179
  187
  194
  203
  201
  210
  219
  229
  240
  251
  263
  275
  288
  302
  316
  331
  347
  364
  382
  400
  419
  440
  461
  484
Discount rate, %
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
  131
  125
  118
  111
  103
  95
  87
  79
  70
  62
  51
  44
  38
  31
  26
  21
  17
  13
  10
  7
  5
  4
  3
  2
  1
  1
  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

Ferro Corporation (Ferro) produces specialty materials that are sold to a range of manufacturers. The Company's segments include Performance Coatings (metal and ceramic coatings), Performance Colors and Glass (glass coatings), and Color Solutions. Its Performance Coatings segment includes Tile Coating Systems and Porcelain Enamel. Its manufacturers make products for various end-use markets. The Company's products fall into two general categories: functional coatings, which perform specific functions in the manufacturing processes and end products of its customers, and color solutions, which provide aesthetic and performance characteristics to its customers' products. Its products are used in a range of product applications in markets, including appliances, automobiles, building and renovation, electronics, household furnishings, industrial products and packaging.

FINANCIAL RATIOS  of  Ferro Corporation (FOE)

Valuation Ratios
P/E Ratio -75
Price to Sales 1.4
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow 25
Price to Free Cash Flow 41.5
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -41.9%
Cap. Spend. - 3 Yr. Gr. Rate -6%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 225.5%
Total Debt to Equity 232.4%
Interest Coverage 5
Management Effectiveness
Return On Assets -0.7%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital -2.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.9%
Return On Equity -7.5%
Return On Equity - 3 Yr. Avg. 14%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 30.7%
Gross Margin - 3 Yr. Avg. 28.1%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 4.3%
Pre-Tax Margin 5.4%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin -1.8%
Net Profit Margin - 3 Yr. Avg. 4%
Effective Tax Rate 27.4%
Eff/ Tax Rate - 3 Yr. Avg. 8.2%
Payout Ratio 0%

FOE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FOE stock intrinsic value calculation we used $1612 million for the last fiscal year's total revenue generated by Ferro Corporation. The default revenue input number comes from 0001 income statement of Ferro Corporation. 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 FOE stock valuation model: a) initial revenue growth rate of 4.7% 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 8.1%, whose default value for FOE is calculated based on our internal credit rating of Ferro Corporation, 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 Ferro Corporation.
    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 FOE stock the variable cost ratio is equal to 88.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $18 million in the base year in the intrinsic value calculation for FOE 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 Ferro Corporation.

Corporate tax rate of 27% is the nominal tax rate for Ferro Corporation. 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 FOE 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 FOE are equal to 34%.

Life of production assets of 13.8 years is the average useful life of capital assets used in Ferro Corporation 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 FOE is equal to 25.1%. 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 - $376.631 million for Ferro Corporation - 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 82.711 million for Ferro Corporation 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 Ferro Corporation at the current share price and the inputted number of shares is $1.6 billion.

RELATED COMPANIES Price Int.Val. Rating
AXTA Axalta Coating 26.11 19.49  sell
NTIC Northern Techn 29.20 2.86  str.sell

CONTACT US       ASSET ALLOCATION

About X-FIN       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2019. All rigths reserved.