Intrinsic value of H. B. Fuller Company - FUL

Previous Close

$50.75

  Intrinsic Value

$80.19

stock screener

  Rating & Target

str. buy

+58%

Previous close

$50.75

 
Intrinsic value

$80.19

 
Up/down potential

+58%

 
Rating

str. buy

We calculate the intrinsic value of FUL 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 2.6

 

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, %
  13.30
  12.47
  11.72
  11.05
  10.45
  9.90
  9.41
  8.97
  8.57
  8.22
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
Revenue, $m
  3,445
  3,875
  4,329
  4,808
  5,310
  5,836
  6,385
  6,958
  7,554
  8,175
  8,820
  9,491
  10,188
  10,912
  11,665
  12,448
  13,261
  14,108
  14,989
  15,907
  16,863
  17,859
  18,898
  19,982
  21,113
  22,294
  23,529
  24,819
  26,168
  27,578
Variable operating expenses, $m
  2,823
  3,148
  3,491
  3,852
  4,232
  4,629
  5,043
  5,476
  5,926
  6,395
  6,661
  7,168
  7,694
  8,241
  8,810
  9,401
  10,015
  10,655
  11,320
  12,013
  12,735
  13,487
  14,272
  15,091
  15,945
  16,837
  17,770
  18,744
  19,762
  20,828
Fixed operating expenses, $m
  282
  288
  295
  301
  308
  314
  321
  328
  336
  343
  351
  358
  366
  374
  383
  391
  400
  408
  417
  427
  436
  445
  455
  465
  476
  486
  497
  508
  519
  530
Total operating expenses, $m
  3,105
  3,436
  3,786
  4,153
  4,540
  4,943
  5,364
  5,804
  6,262
  6,738
  7,012
  7,526
  8,060
  8,615
  9,193
  9,792
  10,415
  11,063
  11,737
  12,440
  13,171
  13,932
  14,727
  15,556
  16,421
  17,323
  18,267
  19,252
  20,281
  21,358
Operating income, $m
  340
  439
  544
  654
  771
  893
  1,020
  1,153
  1,292
  1,437
  1,808
  1,965
  2,127
  2,297
  2,473
  2,656
  2,846
  3,045
  3,252
  3,467
  3,692
  3,926
  4,170
  4,426
  4,692
  4,971
  5,262
  5,567
  5,886
  6,220
EBITDA, $m
  662
  773
  891
  1,016
  1,147
  1,284
  1,428
  1,577
  1,734
  1,896
  2,065
  2,241
  2,425
  2,615
  2,813
  3,019
  3,233
  3,456
  3,689
  3,931
  4,183
  4,447
  4,721
  5,008
  5,308
  5,621
  5,949
  6,291
  6,649
  7,024
Interest expense (income), $m
  30
  121
  143
  166
  191
  216
  243
  271
  301
  332
  364
  397
  432
  468
  505
  544
  585
  627
  670
  716
  763
  812
  864
  917
  973
  1,031
  1,092
  1,155
  1,222
  1,291
  1,363
Earnings before tax, $m
  219
  296
  378
  464
  554
  649
  749
  852
  960
  1,073
  1,411
  1,533
  1,660
  1,791
  1,929
  2,071
  2,220
  2,375
  2,536
  2,704
  2,879
  3,062
  3,253
  3,453
  3,661
  3,879
  4,107
  4,346
  4,595
  4,857
Tax expense, $m
  59
  80
  102
  125
  150
  175
  202
  230
  259
  290
  381
  414
  448
  484
  521
  559
  599
  641
  685
  730
  777
  827
  878
  932
  989
  1,047
  1,109
  1,173
  1,241
  1,311
Net income, $m
  160
  216
  276
  339
  405
  474
  547
  622
  701
  783
  1,030
  1,119
  1,212
  1,308
  1,408
  1,512
  1,621
  1,733
  1,851
  1,974
  2,102
  2,235
  2,375
  2,520
  2,673
  2,832
  2,998
  3,172
  3,355
  3,545

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
  4,733
  5,323
  5,947
  6,604
  7,294
  8,016
  8,771
  9,557
  10,377
  11,229
  12,116
  13,037
  13,994
  14,989
  16,023
  17,098
  18,216
  19,379
  20,590
  21,850
  23,163
  24,531
  25,958
  27,447
  29,001
  30,624
  32,320
  34,092
  35,944
  37,882
Adjusted assets (=assets-cash), $m
  4,733
  5,323
  5,947
  6,604
  7,294
  8,016
  8,771
  9,557
  10,377
  11,229
  12,116
  13,037
  13,994
  14,989
  16,023
  17,098
  18,216
  19,379
  20,590
  21,850
  23,163
  24,531
  25,958
  27,447
  29,001
  30,624
  32,320
  34,092
  35,944
  37,882
Revenue / Adjusted assets
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
Average production assets, $m
  2,029
  2,282
  2,550
  2,832
  3,128
  3,437
  3,761
  4,098
  4,449
  4,815
  5,195
  5,590
  6,001
  6,427
  6,871
  7,332
  7,811
  8,310
  8,829
  9,369
  9,932
  10,519
  11,131
  11,769
  12,436
  13,131
  13,858
  14,618
  15,413
  16,244
Working capital, $m
  562
  632
  706
  784
  866
  951
  1,041
  1,134
  1,231
  1,332
  1,438
  1,547
  1,661
  1,779
  1,901
  2,029
  2,162
  2,300
  2,443
  2,593
  2,749
  2,911
  3,080
  3,257
  3,441
  3,634
  3,835
  4,045
  4,265
  4,495
Total debt, $m
  2,651
  3,078
  3,530
  4,005
  4,505
  5,028
  5,574
  6,143
  6,737
  7,354
  7,996
  8,663
  9,356
  10,076
  10,825
  11,603
  12,413
  13,255
  14,131
  15,043
  15,994
  16,985
  18,018
  19,096
  20,221
  21,396
  22,624
  23,906
  25,248
  26,651
Total liabilities, $m
  3,427
  3,854
  4,306
  4,781
  5,281
  5,804
  6,350
  6,919
  7,513
  8,130
  8,772
  9,439
  10,132
  10,852
  11,601
  12,379
  13,189
  14,031
  14,907
  15,819
  16,770
  17,761
  18,794
  19,872
  20,997
  22,172
  23,399
  24,682
  26,024
  27,427
Total equity, $m
  1,306
  1,469
  1,641
  1,823
  2,013
  2,212
  2,421
  2,638
  2,864
  3,099
  3,344
  3,598
  3,862
  4,137
  4,422
  4,719
  5,028
  5,349
  5,683
  6,031
  6,393
  6,771
  7,165
  7,575
  8,004
  8,452
  8,920
  9,409
  9,921
  10,455
Total liabilities and equity, $m
  4,733
  5,323
  5,947
  6,604
  7,294
  8,016
  8,771
  9,557
  10,377
  11,229
  12,116
  13,037
  13,994
  14,989
  16,023
  17,098
  18,217
  19,380
  20,590
  21,850
  23,163
  24,532
  25,959
  27,447
  29,001
  30,624
  32,319
  34,091
  35,945
  37,882
Debt-to-equity ratio
  2.030
  2.100
  2.150
  2.200
  2.240
  2.270
  2.300
  2.330
  2.350
  2.370
  2.390
  2.410
  2.420
  2.440
  2.450
  2.460
  2.470
  2.480
  2.490
  2.490
  2.500
  2.510
  2.510
  2.520
  2.530
  2.530
  2.540
  2.540
  2.540
  2.550
Adjusted equity ratio
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  160
  216
  276
  339
  405
  474
  547
  622
  701
  783
  1,030
  1,119
  1,212
  1,308
  1,408
  1,512
  1,621
  1,733
  1,851
  1,974
  2,102
  2,235
  2,375
  2,520
  2,673
  2,832
  2,998
  3,172
  3,355
  3,545
Depreciation, amort., depletion, $m
  322
  334
  348
  361
  376
  391
  407
  424
  442
  460
  257
  277
  297
  318
  340
  363
  387
  411
  437
  464
  492
  521
  551
  583
  616
  650
  686
  724
  763
  804
Funds from operations, $m
  481
  550
  623
  700
  781
  866
  954
  1,046
  1,143
  1,243
  1,287
  1,396
  1,509
  1,626
  1,748
  1,875
  2,007
  2,145
  2,288
  2,438
  2,594
  2,756
  2,926
  3,103
  3,288
  3,482
  3,684
  3,896
  4,118
  4,350
Change in working capital, $m
  66
  70
  74
  78
  82
  86
  90
  93
  97
  101
  105
  109
  114
  118
  123
  128
  133
  138
  144
  150
  156
  162
  169
  177
  184
  193
  201
  210
  220
  230
Cash from operations, $m
  415
  480
  549
  622
  699
  780
  864
  953
  1,045
  1,142
  1,182
  1,286
  1,395
  1,508
  1,625
  1,747
  1,875
  2,007
  2,145
  2,288
  2,438
  2,594
  2,757
  2,926
  3,104
  3,289
  3,483
  3,686
  3,898
  4,120
Maintenance CAPEX, $m
  -89
  -100
  -113
  -126
  -140
  -155
  -170
  -186
  -203
  -220
  -238
  -257
  -277
  -297
  -318
  -340
  -363
  -387
  -411
  -437
  -464
  -492
  -521
  -551
  -583
  -616
  -650
  -686
  -724
  -763
New CAPEX, $m
  -238
  -253
  -268
  -282
  -296
  -310
  -323
  -337
  -351
  -366
  -380
  -395
  -411
  -427
  -443
  -461
  -479
  -499
  -519
  -540
  -563
  -587
  -612
  -638
  -666
  -696
  -727
  -760
  -794
  -831
Cash from investing activities, $m
  -327
  -353
  -381
  -408
  -436
  -465
  -493
  -523
  -554
  -586
  -618
  -652
  -688
  -724
  -761
  -801
  -842
  -886
  -930
  -977
  -1,027
  -1,079
  -1,133
  -1,189
  -1,249
  -1,312
  -1,377
  -1,446
  -1,518
  -1,594
Free cash flow, $m
  89
  127
  169
  214
  263
  315
  371
  429
  491
  556
  564
  634
  708
  784
  864
  946
  1,032
  1,121
  1,214
  1,311
  1,411
  1,515
  1,624
  1,737
  1,855
  1,978
  2,106
  2,240
  2,380
  2,526
Issuance/(repayment) of debt, $m
  403
  427
  452
  476
  499
  523
  546
  570
  593
  617
  642
  667
  693
  720
  749
  778
  809
  842
  876
  912
  951
  991
  1,033
  1,078
  1,125
  1,175
  1,228
  1,283
  1,341
  1,403
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  
  403
  427
  452
  476
  499
  523
  546
  570
  593
  617
  642
  667
  693
  720
  749
  778
  809
  842
  876
  912
  951
  991
  1,033
  1,078
  1,125
  1,175
  1,228
  1,283
  1,341
  1,403
Total cash flow (excl. dividends), $m
  492
  554
  620
  690
  762
  838
  917
  999
  1,084
  1,173
  1,205
  1,301
  1,401
  1,505
  1,612
  1,725
  1,842
  1,963
  2,091
  2,223
  2,362
  2,506
  2,657
  2,815
  2,980
  3,153
  3,334
  3,523
  3,721
  3,929
Retained Cash Flow (-), $m
  -154
  -163
  -172
  -181
  -190
  -199
  -208
  -217
  -226
  -235
  -245
  -254
  -264
  -275
  -285
  -297
  -309
  -321
  -334
  -348
  -362
  -378
  -394
  -411
  -429
  -448
  -468
  -489
  -511
  -535
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
  337
  391
  448
  508
  572
  639
  709
  782
  858
  938
  961
  1,047
  1,137
  1,230
  1,327
  1,428
  1,533
  1,643
  1,756
  1,875
  1,999
  2,128
  2,263
  2,404
  2,551
  2,705
  2,866
  3,034
  3,210
  3,394
Discount rate, %
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
  308
  323
  332
  335
  331
  322
  306
  287
  263
  237
  197
  172
  147
  122
  100
  80
  62
  47
  35
  25
  18
  12
  8
  5
  3
  2
  1
  1
  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

H.B. Fuller Company is a formulator, manufacturer and marketer of adhesives, sealants and other specialty chemical products. The Company's segments include Americas Adhesives, Europe, India, Middle East and Africa (EIMEA), Asia Pacific, Construction Products and Engineering Adhesives. The Americas Adhesives, EIMEA and Asia Pacific operating segments produce and supply industrial adhesives products for applications in various markets, including durable assembly, nonwoven and hygiene, and textile. The Construction Products operating segment includes products used for tile setting and heating, ventilation and air conditioning and insulation applications. The Engineering Adhesives operating segment produces and supplies industrial adhesives to the transportation, appliance and heavy machinery markets, among others. As of December 3, 2016, its sales operations spanned 38 countries in North America, Europe, Latin America, the Asia Pacific region, India, the Middle East and Africa.

FINANCIAL RATIOS  of  H. B. Fuller Company (FUL)

Valuation Ratios
P/E Ratio 20.5
Price to Sales 1.2
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 19.1
Growth Rates
Sales Growth Rate 0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 6.8%
Cap. Spend. - 3 Yr. Gr. Rate -12.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 62.5%
Total Debt to Equity 74.9%
Interest Coverage 7
Management Effectiveness
Return On Assets 7.1%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 5.6%
Return On Equity 13.7%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 29.1%
Gross Margin - 3 Yr. Avg. 27.2%
EBITDA Margin 13.1%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin 9.7%
Oper. Margin - 3 Yr. Avg. 7.4%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 29.9%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio 22.6%

FUL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FUL stock intrinsic value calculation we used $3041 million for the last fiscal year's total revenue generated by H. B. Fuller Company. The default revenue input number comes from 0001 income statement of H. B. Fuller Company. 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 FUL stock valuation model: a) initial revenue growth rate of 13.3% 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 9.5%, whose default value for FUL is calculated based on our internal credit rating of H. B. Fuller Company, 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 H. B. Fuller Company.
    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 FUL stock the variable cost ratio is equal to 82.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $276 million in the base year in the intrinsic value calculation for FUL 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 H. B. Fuller Company.

Corporate tax rate of 27% is the nominal tax rate for H. B. Fuller Company. 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 FUL 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 FUL are equal to 58.9%.

Life of production assets of 20.2 years is the average useful life of capital assets used in H. B. Fuller Company 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 FUL is equal to 16.3%. 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 - $1151.767 million for H. B. Fuller Company - 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 50.926 million for H. B. Fuller Company 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 H. B. Fuller Company at the current share price and the inputted number of shares is $2.6 billion.

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