Intrinsic value of Hamilton Beach Brands Holding Company - HBB

Previous Close

$20.47

  Intrinsic Value

$22.15

stock screener

  Rating & Target

hold

+8%

Previous close

$20.47

 
Intrinsic value

$22.15

 
Up/down potential

+8%

 
Rating

hold

We calculate the intrinsic value of HBB 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 0.3

 

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, %
  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
  758
  775
  795
  818
  842
  870
  899
  931
  966
  1,003
  1,042
  1,085
  1,130
  1,178
  1,229
  1,282
  1,339
  1,400
  1,463
  1,531
  1,601
  1,676
  1,755
  1,838
  1,926
  2,018
  2,115
  2,217
  2,324
  2,437
Variable operating expenses, $m
  719
  736
  755
  776
  799
  825
  853
  883
  916
  951
  988
  1,028
  1,071
  1,116
  1,164
  1,215
  1,269
  1,326
  1,387
  1,450
  1,517
  1,588
  1,663
  1,742
  1,825
  1,912
  2,004
  2,101
  2,202
  2,309
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
  719
  736
  755
  776
  799
  825
  853
  883
  916
  951
  988
  1,028
  1,071
  1,116
  1,164
  1,215
  1,269
  1,326
  1,387
  1,450
  1,517
  1,588
  1,663
  1,742
  1,825
  1,912
  2,004
  2,101
  2,202
  2,309
Operating income, $m
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
EBITDA, $m
  44
  45
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  136
  142
Interest expense (income), $m
  0
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  34
  36
  38
  41
Earnings before tax, $m
  36
  36
  37
  37
  38
  39
  40
  41
  42
  43
  45
  47
  48
  49
  51
  53
  54
  56
  58
  60
  62
  64
  67
  69
  72
  75
  77
  80
  84
  87
Tax expense, $m
  10
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  23
Net income, $m
  26
  26
  27
  27
  28
  28
  29
  30
  31
  31
  33
  34
  35
  36
  37
  38
  40
  41
  42
  44
  45
  47
  49
  50
  52
  54
  57
  59
  61
  64

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
  337
  345
  354
  364
  375
  387
  400
  414
  429
  446
  464
  482
  502
  524
  546
  570
  596
  622
  651
  681
  712
  745
  780
  817
  856
  897
  940
  986
  1,033
  1,084
Adjusted assets (=assets-cash), $m
  337
  345
  354
  364
  375
  387
  400
  414
  429
  446
  464
  482
  502
  524
  546
  570
  596
  622
  651
  681
  712
  745
  780
  817
  856
  897
  940
  986
  1,033
  1,084
Revenue / Adjusted assets
  2.249
  2.246
  2.246
  2.247
  2.245
  2.248
  2.248
  2.249
  2.252
  2.249
  2.246
  2.251
  2.251
  2.248
  2.251
  2.249
  2.247
  2.251
  2.247
  2.248
  2.249
  2.250
  2.250
  2.250
  2.250
  2.250
  2.250
  2.248
  2.250
  2.248
Average production assets, $m
  27
  28
  29
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
Working capital, $m
  78
  80
  82
  84
  87
  90
  93
  96
  99
  103
  107
  112
  116
  121
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
Total debt, $m
  52
  58
  65
  73
  82
  92
  102
  114
  126
  139
  153
  168
  185
  202
  220
  239
  259
  281
  303
  327
  353
  379
  408
  437
  468
  501
  536
  572
  610
  651
Total liabilities, $m
  270
  276
  284
  292
  300
  310
  321
  332
  344
  358
  372
  387
  403
  420
  438
  457
  478
  499
  522
  546
  571
  598
  626
  656
  687
  720
  754
  791
  829
  869
Total equity, $m
  67
  68
  70
  72
  74
  77
  79
  82
  85
  88
  92
  96
  99
  104
  108
  113
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  205
  215
Total liabilities and equity, $m
  337
  344
  354
  364
  374
  387
  400
  414
  429
  446
  464
  483
  502
  524
  546
  570
  596
  622
  651
  681
  712
  746
  781
  818
  857
  898
  940
  986
  1,034
  1,084
Debt-to-equity ratio
  0.780
  0.850
  0.930
  1.020
  1.110
  1.200
  1.290
  1.390
  1.480
  1.580
  1.670
  1.760
  1.860
  1.940
  2.030
  2.120
  2.200
  2.280
  2.360
  2.430
  2.500
  2.570
  2.640
  2.700
  2.760
  2.820
  2.880
  2.930
  2.980
  3.030
Adjusted equity ratio
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  26
  26
  27
  27
  28
  28
  29
  30
  31
  31
  33
  34
  35
  36
  37
  38
  40
  41
  42
  44
  45
  47
  49
  50
  52
  54
  57
  59
  61
  64
Depreciation, amort., depletion, $m
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Funds from operations, $m
  32
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  42
  43
  44
  46
  48
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
Cash from operations, $m
  30
  30
  31
  31
  31
  32
  33
  33
  34
  35
  35
  36
  37
  38
  39
  40
  42
  43
  44
  46
  47
  49
  51
  53
  55
  57
  59
  61
  64
  66
Maintenance CAPEX, $m
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Cash from investing activities, $m
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -18
Free cash flow, $m
  25
  25
  25
  25
  26
  26
  26
  27
  27
  28
  28
  28
  29
  30
  30
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  48
Issuance/(repayment) of debt, $m
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
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  
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
Total cash flow (excl. dividends), $m
  30
  31
  32
  33
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  50
  52
  54
  57
  59
  61
  64
  66
  69
  72
  75
  78
  82
  85
  89
Retained Cash Flow (-), $m
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
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
  29
  30
  31
  31
  32
  33
  34
  35
  36
  38
  38
  40
  41
  43
  44
  46
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  27
  26
  25
  24
  23
  21
  20
  18
  17
  15
  14
  12
  11
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  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

Hamilton Beach Brands Holding Company is a holding company for two separate businesses: consumer, commercial and specialty small appliances and specialty retail. The Company is a designer, marketer, and distributor of branded small electric household and specialty housewares appliances as well as commercial products for restaurants, bars and hotels. The Company also engaged in retailer of kitchen and related products in outlet malls throughout the United States. The Company markets such products under numerous brand names, including the Hamilton Beach, Proctor Silex, and Weston brands. The Company sells products under licensed brands such as Wolf Gourmet and CHI. The Company’s brands, including Weston and Hamilton Beach professional, are focused on fast-growing food trends such as farm-to-table, field-to-table and countertop kitchen appliances with professional-grade components designed to deliver performance and durability for the serious home cook.

FINANCIAL RATIOS  of  Hamilton Beach Brands Holding Company (HBB)

Valuation Ratios
P/E Ratio 10.8
Price to Sales 0.4
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 4.4
Price to Free Cash Flow 4.9
Growth Rates
Sales Growth Rate -3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 40%
Total Debt to Equity 60%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.4%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 21.2%
Ret/ On T. Cap. - 3 Yr. Avg. 16.5%
Return On Equity 35.1%
Return On Equity - 3 Yr. Avg. 27.8%
Asset Turnover 2.4
Profitability Ratios
Gross Margin 26%
Gross Margin - 3 Yr. Avg. 17%
EBITDA Margin 6.3%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 5.8%
Oper. Margin - 3 Yr. Avg. 3.5%
Pre-Tax Margin 5.5%
Pre-Tax Margin - 3 Yr. Avg. 3.2%
Net Profit Margin 3.5%
Net Profit Margin - 3 Yr. Avg. 2%
Effective Tax Rate 36.6%
Eff/ Tax Rate - 3 Yr. Avg. 24.7%
Payout Ratio 161.5%

HBB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HBB stock intrinsic value calculation we used $743 million for the last fiscal year's total revenue generated by Hamilton Beach Brands Holding Company. The default revenue input number comes from 0001 income statement of Hamilton Beach Brands Holding 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 HBB 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 6%, whose default value for HBB is calculated based on our internal credit rating of Hamilton Beach Brands Holding 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 Hamilton Beach Brands Holding 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 HBB stock the variable cost ratio is equal to 94.9%.

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 HBB 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 6.7% for Hamilton Beach Brands Holding Company.

Corporate tax rate of 27% is the nominal tax rate for Hamilton Beach Brands Holding 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 HBB 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 HBB are equal to 3.6%.

Life of production assets of 6.1 years is the average useful life of capital assets used in Hamilton Beach Brands Holding 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 HBB is equal to 10.3%. 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 - $65.438 million for Hamilton Beach Brands Holding 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 13.842 million for Hamilton Beach Brands Holding 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 Hamilton Beach Brands Holding Company at the current share price and the inputted number of shares is $0.3 billion.

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