Intrinsic value of Haynes International - HAYN

Previous Close

$39.02

  Intrinsic Value

$6.73

stock screener

  Rating & Target

str. sell

-83%

Previous close

$39.02

 
Intrinsic value

$6.73

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of HAYN 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 2017), $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
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  403
  412
  423
  435
  448
  462
  478
  495
  513
  533
  554
  577
  601
  626
  653
  682
  712
  744
  778
  814
  851
  891
  933
  977
  1,024
  1,073
  1,124
  1,179
  1,236
  1,296
Variable operating expenses, $m
  398
  408
  418
  430
  443
  457
  473
  489
  507
  527
  547
  569
  592
  617
  644
  672
  702
  734
  767
  802
  840
  879
  920
  964
  1,010
  1,058
  1,109
  1,162
  1,219
  1,278
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
  398
  408
  418
  430
  443
  457
  473
  489
  507
  527
  547
  569
  592
  617
  644
  672
  702
  734
  767
  802
  840
  879
  920
  964
  1,010
  1,058
  1,109
  1,162
  1,219
  1,278
Operating income, $m
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
EBITDA, $m
  27
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
Interest expense (income), $m
  1
  1
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  43
  46
  50
  54
  58
  62
  66
Earnings before tax, $m
  4
  3
  3
  2
  1
  0
  -1
  -2
  -3
  -4
  -4
  -5
  -7
  -8
  -10
  -12
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -45
  -48
Tax expense, $m
  1
  1
  1
  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
Net income, $m
  3
  2
  2
  1
  1
  0
  -1
  -2
  -3
  -4
  -4
  -5
  -7
  -8
  -10
  -12
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -45
  -48

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
  633
  648
  665
  683
  704
  727
  752
  778
  807
  838
  871
  907
  944
  984
  1,027
  1,072
  1,120
  1,170
  1,223
  1,279
  1,339
  1,401
  1,467
  1,537
  1,610
  1,687
  1,768
  1,853
  1,943
  2,037
Adjusted assets (=assets-cash), $m
  633
  648
  665
  683
  704
  727
  752
  778
  807
  838
  871
  907
  944
  984
  1,027
  1,072
  1,120
  1,170
  1,223
  1,279
  1,339
  1,401
  1,467
  1,537
  1,610
  1,687
  1,768
  1,853
  1,943
  2,037
Revenue / Adjusted assets
  0.637
  0.636
  0.636
  0.637
  0.636
  0.635
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.637
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
Average production assets, $m
  211
  216
  222
  228
  235
  242
  250
  259
  269
  279
  290
  302
  315
  328
  342
  357
  373
  390
  408
  426
  446
  467
  489
  512
  536
  562
  589
  618
  647
  679
Working capital, $m
  201
  206
  211
  217
  224
  231
  239
  248
  257
  267
  277
  288
  300
  313
  327
  341
  356
  372
  389
  407
  426
  446
  467
  489
  512
  536
  562
  589
  618
  648
Total debt, $m
  13
  20
  28
  36
  46
  57
  68
  80
  94
  108
  124
  140
  157
  176
  196
  216
  238
  262
  286
  312
  340
  369
  399
  432
  465
  501
  539
  578
  620
  663
Total liabilities, $m
  293
  300
  308
  316
  326
  337
  348
  360
  374
  388
  403
  420
  437
  456
  475
  496
  518
  542
  566
  592
  620
  649
  679
  711
  745
  781
  819
  858
  900
  943
Total equity, $m
  340
  348
  357
  367
  378
  390
  404
  418
  434
  450
  468
  487
  507
  529
  551
  576
  601
  628
  657
  687
  719
  752
  788
  825
  864
  906
  949
  995
  1,043
  1,094
Total liabilities and equity, $m
  633
  648
  665
  683
  704
  727
  752
  778
  808
  838
  871
  907
  944
  985
  1,026
  1,072
  1,119
  1,170
  1,223
  1,279
  1,339
  1,401
  1,467
  1,536
  1,609
  1,687
  1,768
  1,853
  1,943
  2,037
Debt-to-equity ratio
  0.040
  0.060
  0.080
  0.100
  0.120
  0.150
  0.170
  0.190
  0.220
  0.240
  0.260
  0.290
  0.310
  0.330
  0.350
  0.380
  0.400
  0.420
  0.440
  0.450
  0.470
  0.490
  0.510
  0.520
  0.540
  0.550
  0.570
  0.580
  0.590
  0.610
Adjusted equity ratio
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  2
  2
  1
  1
  0
  -1
  -2
  -3
  -4
  -4
  -5
  -7
  -8
  -10
  -12
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -45
  -48
Depreciation, amort., depletion, $m
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
Funds from operations, $m
  25
  25
  25
  25
  25
  26
  26
  25
  25
  25
  25
  25
  25
  25
  24
  24
  24
  24
  23
  23
  23
  23
  22
  22
  22
  21
  21
  20
  20
  19
Change in working capital, $m
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
Cash from operations, $m
  21
  20
  20
  19
  19
  18
  18
  17
  16
  15
  15
  14
  13
  12
  11
  10
  9
  8
  7
  5
  4
  3
  1
  0
  -2
  -3
  -5
  -7
  -9
  -11
Maintenance CAPEX, $m
  -21
  -21
  -22
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
New CAPEX, $m
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
Cash from investing activities, $m
  -25
  -26
  -28
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -80
  -83
  -87
  -92
  -96
Free cash flow, $m
  -4
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -30
  -33
  -36
  -39
  -43
  -46
  -50
  -54
  -58
  -63
  -67
  -72
  -77
  -83
  -88
  -94
  -100
  -107
Issuance/(repayment) of debt, $m
  5
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  39
  42
  44
Issuance/(repurchase) of shares, $m
  4
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  27
  30
  33
  36
  39
  42
  46
  50
  54
  58
  62
  67
  71
  76
  82
  87
  93
  99
Cash from financing (excl. dividends), $m  
  9
  13
  15
  18
  20
  23
  25
  28
  31
  34
  37
  40
  44
  49
  53
  57
  61
  65
  71
  76
  81
  87
  93
  99
  105
  112
  120
  126
  135
  143
Total cash flow (excl. dividends), $m
  5
  7
  7
  8
  9
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  33
  34
  36
Retained Cash Flow (-), $m
  -6
  -8
  -9
  -10
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
  -30
  -33
  -36
  -39
  -42
  -46
  -50
  -54
  -58
  -62
  -67
  -71
  -76
  -82
  -87
  -93
  -99
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
  2
  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
  6
  6
  6
Cash available for distribution, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -5
  -6
  -7
  -9
  -11
  -13
  -14
  -16
  -18
  -21
  -23
  -26
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -51
  -55
  -59
  -63
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
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  99.2
  98.1
  96.7
  95.1
  93.2
  91.2
  88.9
  86.5
  83.9
  81.1
  78.4
  75.6
  72.8
  69.9
  66.9
  64.0
  61.0
  58.1
  55.2
  52.4
  49.6
  47.0
  44.3
  41.8
  39.4
  37.1
  34.8
  32.7
  30.6
  28.7

Haynes International, Inc. (Haynes) is a producer of nickel- and cobalt-based alloys in flat product forms, such as sheet, coil and plate forms. The Company also produces its products as seamless and welded tubulars, and in slab, bar, billet and wire forms. It focuses on developing, manufacturing, marketing and distributing alloys, which are sold in the aerospace, chemical processing and industrial gas turbine industries. Its products consist of high-temperature resistant alloys (HTA) products and corrosion-resistant alloys (CRA) products. Its HTA products are used in manufacturing components for the hot sections of gas turbine engines. Its CRA products are used in a range of applications, such as chemical processing, power plant emissions control, hazardous waste treatment, sour gas production and pharmaceutical vessels. The Company has a four-high Steckel rolling mill used in hot rolling high-performance alloys. The Company has operations in the United States, Europe and China.

FINANCIAL RATIOS  of  Haynes International (HAYN)

Valuation Ratios
P/E Ratio -48.8
Price to Sales 1.2
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 37.5
Price to Free Cash Flow -244.1
Growth Rates
Sales Growth Rate -2.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -53.1%
Cap. Spend. - 3 Yr. Gr. Rate -17.8%
Financial Strength
Quick Ratio 46
Current Ratio 0.1
LT Debt to Equity 2.4%
Total Debt to Equity 2.7%
Interest Coverage -16
Management Effectiveness
Return On Assets -1.5%
Ret/ On Assets - 3 Yr. Avg. 1.4%
Return On Total Capital -3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity -3.1%
Return On Equity - 3 Yr. Avg. 2.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 7.6%
Gross Margin - 3 Yr. Avg. 12.9%
EBITDA Margin 1.8%
EBITDA Margin - 3 Yr. Avg. 7.3%
Operating Margin -4.3%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin -4.3%
Pre-Tax Margin - 3 Yr. Avg. 2.1%
Net Profit Margin -2.5%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 41.2%
Eff/ Tax Rate - 3 Yr. Avg. 17.4%
Payout Ratio -110%

HAYN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HAYN stock intrinsic value calculation we used $395 million for the last fiscal year's total revenue generated by Haynes International. The default revenue input number comes from 2017 income statement of Haynes International. 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 HAYN stock valuation model: a) initial revenue growth rate of 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 HAYN is calculated based on our internal credit rating of Haynes International, 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 Haynes International.
    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 HAYN stock the variable cost ratio is equal to 98.9%.

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 HAYN 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 10.7% for Haynes International.

Corporate tax rate of 27% is the nominal tax rate for Haynes International. 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 HAYN stock is equal to 0.5%.

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 HAYN are equal to 52.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Haynes International 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 HAYN is equal to 50%. 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 - $334 million for Haynes International - 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 12 million for Haynes International 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 Haynes International at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Gabelli & Companys Aerospace & Defense Conference   [Aug-07-18 07:30AM  Business Wire]
▶ Haynes International, Inc. Announces Leadership Change   [May-29-18 08:56AM  GlobeNewswire]
▶ Haynes International, Inc. to Host Earnings Call   [May-04-18 07:00AM  ACCESSWIRE]
▶ 3 Best Stocks to Buy for Solid Earnings Acceleration   [Apr-26-18 12:25PM  InvestorPlace]
▶ Haynes International, Inc. Announces Price Increase   [Feb-07-18 04:15PM  GlobeNewswire]
▶ Haynes International reports 1Q loss   [Feb-01-18 05:37PM  Associated Press]
▶ Haynes International, Inc. Reports on Tax Cuts and Jobs Act   [Jan-22-18 04:15PM  GlobeNewswire]
▶ Haynes International reports 4Q loss   [Nov-16-17 05:03PM  Associated Press]
▶ Haynes International reports 3Q loss   [Aug-05-17 01:10AM  Associated Press]
▶ Story Stocks from Briefing.com   [May-15-17 12:41PM  Briefing.com]
▶ Haynes International reports 2Q loss   [May-05-17 05:02AM  Associated Press]
▶ 5 Material Stocks Ready To Jump On Earnings   [Apr-28-17 11:24AM  Benzinga]
▶ Haynes International reports 1Q loss   [Feb-02-17 06:14PM  Associated Press]
▶ Hedge Funds Are Crazy About Haynes International, Inc. (HAYN)   [Dec-12-16 04:26AM  at Insider Monkey]
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