Intrinsic value of Fuel Tech, Inc. - FTEK

Previous Close

$1.31

  Intrinsic Value

$20.20

stock screener

  Rating & Target

str. buy

+999%

Previous close

$1.31

 
Intrinsic value

$20.20

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of FTEK 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, %
  18.20
  16.88
  15.69
  14.62
  13.66
  12.79
  12.02
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
Revenue, $m
  67
  79
  91
  104
  119
  134
  150
  167
  185
  203
  223
  243
  265
  287
  310
  334
  358
  384
  411
  439
  468
  498
  530
  562
  596
  632
  669
  707
  747
  789
Variable operating expenses, $m
  24
  27
  32
  36
  41
  46
  52
  57
  64
  70
  76
  83
  90
  98
  105
  114
  122
  131
  140
  149
  159
  170
  180
  191
  203
  215
  228
  241
  254
  269
Fixed operating expenses, $m
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  70
  71
Total operating expenses, $m
  62
  66
  71
  76
  82
  88
  95
  101
  109
  116
  123
  131
  139
  148
  156
  166
  176
  186
  196
  206
  217
  230
  241
  253
  267
  280
  295
  309
  324
  340
Operating income, $m
  6
  13
  20
  28
  36
  46
  55
  65
  76
  88
  100
  112
  125
  139
  153
  168
  183
  199
  215
  232
  250
  269
  288
  308
  329
  351
  374
  398
  423
  450
EBITDA, $m
  7
  14
  22
  30
  38
  48
  58
  68
  79
  91
  103
  115
  129
  142
  157
  172
  187
  203
  220
  238
  256
  275
  295
  315
  337
  359
  382
  407
  432
  459
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
Earnings before tax, $m
  6
  13
  20
  27
  36
  45
  54
  64
  74
  85
  98
  110
  122
  135
  149
  163
  178
  194
  210
  226
  244
  262
  281
  300
  321
  342
  365
  388
  413
  438
Tax expense, $m
  2
  3
  5
  7
  10
  12
  15
  17
  20
  23
  26
  30
  33
  37
  40
  44
  48
  52
  57
  61
  66
  71
  76
  81
  87
  92
  98
  105
  111
  118
Net income, $m
  4
  9
  14
  20
  26
  32
  39
  47
  54
  62
  71
  80
  89
  99
  109
  119
  130
  141
  153
  165
  178
  191
  205
  219
  234
  250
  266
  283
  301
  320

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
  60
  70
  81
  93
  106
  119
  134
  149
  165
  181
  199
  217
  236
  256
  276
  297
  319
  342
  366
  391
  417
  444
  472
  501
  531
  563
  596
  630
  666
  704
Adjusted assets (=assets-cash), $m
  60
  70
  81
  93
  106
  119
  134
  149
  165
  181
  199
  217
  236
  256
  276
  297
  319
  342
  366
  391
  417
  444
  472
  501
  531
  563
  596
  630
  666
  704
Revenue / Adjusted assets
  1.117
  1.129
  1.123
  1.118
  1.123
  1.126
  1.119
  1.121
  1.121
  1.122
  1.121
  1.120
  1.123
  1.121
  1.123
  1.125
  1.122
  1.123
  1.123
  1.123
  1.122
  1.122
  1.123
  1.122
  1.122
  1.123
  1.122
  1.122
  1.122
  1.121
Average production assets, $m
  9
  11
  13
  14
  16
  18
  21
  23
  25
  28
  31
  34
  37
  40
  43
  46
  49
  53
  57
  61
  65
  69
  73
  78
  82
  87
  92
  98
  103
  109
Working capital, $m
  6
  8
  9
  10
  11
  13
  14
  16
  18
  20
  21
  23
  25
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
Total debt, $m
  3
  7
  11
  15
  19
  24
  29
  34
  40
  45
  51
  58
  64
  71
  78
  86
  94
  102
  110
  118
  127
  137
  147
  157
  167
  178
  190
  202
  214
  227
Total liabilities, $m
  21
  24
  28
  32
  37
  42
  47
  52
  57
  63
  69
  75
  82
  89
  96
  103
  111
  119
  128
  136
  145
  155
  164
  174
  185
  196
  207
  219
  232
  245
Total equity, $m
  39
  46
  53
  61
  69
  78
  87
  97
  107
  118
  130
  141
  154
  167
  180
  194
  208
  223
  239
  255
  272
  289
  308
  327
  346
  367
  389
  411
  434
  459
Total liabilities and equity, $m
  60
  70
  81
  93
  106
  120
  134
  149
  164
  181
  199
  216
  236
  256
  276
  297
  319
  342
  367
  391
  417
  444
  472
  501
  531
  563
  596
  630
  666
  704
Debt-to-equity ratio
  0.080
  0.150
  0.200
  0.240
  0.280
  0.310
  0.330
  0.350
  0.370
  0.380
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.500
Adjusted equity ratio
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  9
  14
  20
  26
  32
  39
  47
  54
  62
  71
  80
  89
  99
  109
  119
  130
  141
  153
  165
  178
  191
  205
  219
  234
  250
  266
  283
  301
  320
Depreciation, amort., depletion, $m
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
Funds from operations, $m
  6
  11
  16
  22
  28
  35
  42
  49
  57
  65
  74
  83
  92
  102
  113
  123
  134
  146
  158
  171
  184
  197
  211
  226
  242
  258
  274
  292
  310
  329
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Cash from operations, $m
  5
  10
  15
  21
  27
  33
  40
  48
  55
  64
  72
  81
  90
  100
  110
  121
  132
  144
  155
  168
  181
  194
  208
  223
  238
  254
  271
  288
  306
  325
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
New CAPEX, $m
  -1
  -2
  -2
  -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
Cash from investing activities, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -15
  -15
Free cash flow, $m
  3
  7
  12
  18
  23
  30
  36
  43
  51
  59
  67
  76
  85
  94
  104
  114
  125
  136
  147
  159
  172
  185
  198
  212
  227
  242
  258
  275
  292
  310
Issuance/(repayment) of debt, $m
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
Issuance/(repurchase) of shares, $m
  2
  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  
  5
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
Total cash flow (excl. dividends), $m
  7
  11
  16
  22
  28
  34
  41
  49
  56
  65
  73
  82
  91
  101
  111
  121
  132
  144
  155
  168
  181
  194
  208
  222
  237
  253
  270
  287
  305
  323
Retained Cash Flow (-), $m
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
Prev. year cash balance distribution, $m
  1
  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
  2
  4
  9
  14
  20
  26
  32
  39
  46
  54
  62
  70
  79
  88
  98
  107
  118
  129
  140
  152
  164
  176
  190
  203
  218
  232
  248
  264
  281
  299
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
  2
  4
  8
  12
  15
  19
  22
  24
  26
  28
  29
  30
  30
  30
  29
  27
  26
  24
  22
  19
  17
  15
  12
  10
  8
  7
  5
  4
  3
  2
Current shareholders' claim on cash, %
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1

Fuel Tech, Inc. is a technology company. The Company is engaged in the development, commercialization and application of technologies for air pollution control, process optimization, combustion efficiency and engineering services. It operates through three segments: Air Pollution Control technology, FUEL CHEM technology and Fuel Conversion. The Air Pollution Control technology segment includes technologies to manage nitrogen oxides (NOx) emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion sources. The FUEL CHEM technology segment uses chemical processes in combination with computational fluid dynamics (CFD) and chemical kinetics modeling (CKM) boiler modeling, for the control of slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in furnaces and boilers through the addition of chemicals into the furnace. The Fuel Conversion segment represents the CARBONITE fuel conversion process and technology.

FINANCIAL RATIOS  of  Fuel Tech, Inc. (FTEK)

Valuation Ratios
P/E Ratio -1.8
Price to Sales 0.6
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow -10.2
Price to Free Cash Flow -7.7
Growth Rates
Sales Growth Rate -25.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.4
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -25.4%
Ret/ On Assets - 3 Yr. Avg. -19.2%
Return On Total Capital -33.3%
Ret/ On T. Cap. - 3 Yr. Avg. -24.4%
Return On Equity -33.3%
Return On Equity - 3 Yr. Avg. -24.7%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 34.5%
Gross Margin - 3 Yr. Avg. 39.3%
EBITDA Margin -21.8%
EBITDA Margin - 3 Yr. Avg. -18.8%
Operating Margin -27.3%
Oper. Margin - 3 Yr. Avg. -23.2%
Pre-Tax Margin -29.1%
Pre-Tax Margin - 3 Yr. Avg. -24.7%
Net Profit Margin -30.9%
Net Profit Margin - 3 Yr. Avg. -23.3%
Effective Tax Rate -6.3%
Eff/ Tax Rate - 3 Yr. Avg. -2.9%
Payout Ratio 0%

FTEK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FTEK stock intrinsic value calculation we used $57 million for the last fiscal year's total revenue generated by Fuel Tech, Inc.. The default revenue input number comes from 0001 income statement of Fuel Tech, 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 FTEK stock valuation model: a) initial revenue growth rate of 18.2% 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 FTEK is calculated based on our internal credit rating of Fuel Tech, 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 Fuel Tech, 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 FTEK stock the variable cost ratio is equal to 35.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $37 million in the base year in the intrinsic value calculation for FTEK 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 Fuel Tech, Inc..

Corporate tax rate of 27% is the nominal tax rate for Fuel Tech, 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 FTEK 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 FTEK are equal to 13.8%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Fuel Tech, 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 FTEK is equal to 9.6%. 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 - $34.052 million for Fuel Tech, 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 24.170 million for Fuel Tech, 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 Fuel Tech, Inc. at the current share price and the inputted number of shares is $0.0 billion.

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