Intrinsic value of Hamilton Beach Brands Holding Cl A - HBB

Previous Close

$23.55

  Intrinsic Value

$56.79

stock screener

  Rating & Target

str. buy

+141%

Previous close

$23.55

 
Intrinsic value

$56.79

 
Up/down potential

+141%

 
Rating

str. buy

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 0.2

 

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, %
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  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
Revenue, $m
  764
  790
  818
  848
  881
  916
  953
  992
  1,034
  1,078
  1,126
  1,175
  1,228
  1,284
  1,343
  1,405
  1,471
  1,540
  1,613
  1,689
  1,770
  1,855
  1,945
  2,039
  2,138
  2,242
  2,351
  2,466
  2,587
  2,715
Variable operating expenses, $m
  720
  744
  771
  799
  830
  862
  897
  934
  973
  1,015
  1,058
  1,105
  1,155
  1,207
  1,263
  1,321
  1,383
  1,448
  1,516
  1,589
  1,665
  1,745
  1,829
  1,917
  2,010
  2,108
  2,211
  2,319
  2,433
  2,553
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
  720
  744
  771
  799
  830
  862
  897
  934
  973
  1,015
  1,058
  1,105
  1,155
  1,207
  1,263
  1,321
  1,383
  1,448
  1,516
  1,589
  1,665
  1,745
  1,829
  1,917
  2,010
  2,108
  2,211
  2,319
  2,433
  2,553
Operating income, $m
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
  134
  140
  147
  154
  162
EBITDA, $m
  50
  52
  54
  56
  58
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
  170
  178
Interest expense (income), $m
  0
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  36
  38
  40
Earnings before tax, $m
  42
  43
  44
  45
  46
  48
  49
  51
  53
  54
  57
  59
  62
  64
  66
  69
  71
  74
  77
  80
  83
  87
  90
  94
  98
  102
  107
  111
  116
  121
Tax expense, $m
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
  31
  33
Net income, $m
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  42
  43
  45
  47
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89

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
  348
  360
  374
  388
  403
  419
  437
  455
  475
  496
  518
  541
  565
  591
  619
  648
  678
  710
  744
  779
  817
  856
  898
  941
  987
  1,035
  1,086
  1,139
  1,195
Adjusted assets (=assets-cash), $m
  337
  348
  360
  374
  388
  403
  419
  437
  455
  475
  496
  518
  541
  565
  591
  619
  648
  678
  710
  744
  779
  817
  856
  898
  941
  987
  1,035
  1,086
  1,139
  1,195
Revenue / Adjusted assets
  2.267
  2.270
  2.272
  2.267
  2.271
  2.273
  2.274
  2.270
  2.273
  2.269
  2.270
  2.268
  2.270
  2.273
  2.272
  2.270
  2.270
  2.271
  2.272
  2.270
  2.272
  2.271
  2.272
  2.271
  2.272
  2.272
  2.271
  2.271
  2.271
  2.272
Average production assets, $m
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  83
  87
Working capital, $m
  60
  62
  64
  66
  69
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
  202
  212
Total debt, $m
  60
  70
  81
  92
  104
  117
  131
  146
  162
  179
  197
  216
  236
  257
  279
  302
  327
  353
  381
  410
  440
  472
  506
  542
  579
  619
  660
  703
  749
  797
Total liabilities, $m
  289
  299
  309
  321
  333
  346
  360
  375
  391
  407
  425
  444
  464
  485
  507
  531
  556
  582
  609
  638
  669
  701
  735
  770
  808
  847
  888
  932
  978
  1,026
Total equity, $m
  48
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
  134
  140
  147
  154
  162
  170
Total liabilities and equity, $m
  337
  348
  360
  374
  388
  403
  420
  437
  456
  474
  495
  517
  541
  565
  591
  619
  648
  678
  710
  744
  780
  817
  857
  897
  942
  987
  1,035
  1,086
  1,140
  1,196
Debt-to-equity ratio
  1.260
  1.420
  1.580
  1.740
  1.890
  2.050
  2.210
  2.360
  2.510
  2.650
  2.800
  2.930
  3.070
  3.200
  3.320
  3.440
  3.560
  3.670
  3.780
  3.880
  3.980
  4.070
  4.160
  4.250
  4.330
  4.410
  4.490
  4.560
  4.630
  4.700
Adjusted equity ratio
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  42
  43
  45
  47
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
Depreciation, amort., depletion, $m
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
Funds from operations, $m
  36
  37
  38
  39
  40
  42
  43
  44
  46
  47
  49
  50
  52
  54
  56
  59
  61
  63
  66
  69
  71
  74
  78
  81
  84
  88
  92
  96
  100
  105
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
Cash from operations, $m
  34
  35
  36
  37
  38
  39
  40
  41
  42
  44
  45
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  83
  87
  91
  95
Maintenance CAPEX, $m
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
Free cash flow, $m
  29
  30
  30
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  61
  64
  67
  69
  72
  75
Issuance/(repayment) of debt, $m
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
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  
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
Total cash flow (excl. dividends), $m
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  123
Retained Cash Flow (-), $m
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
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
  37
  38
  39
  40
  42
  43
  45
  47
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  110
  116
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
  35
  35
  34
  33
  32
  31
  30
  29
  28
  26
  25
  23
  21
  20
  18
  16
  14
  13
  11
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
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 Cl A (HBB)

Valuation Ratios
P/E Ratio 12.4
Price to Sales 0.4
Price to Book 5
Price to Tangible Book
Price to Cash Flow 5.1
Price to Free Cash Flow 5.6
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 $740.749 million for the last fiscal year's total revenue generated by Hamilton Beach Brands Holding Cl A. The default revenue input number comes from 0001 income statement of Hamilton Beach Brands Holding Cl A. 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 3.2% 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 HBB is calculated based on our internal credit rating of Hamilton Beach Brands Holding Cl A, 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 Cl A.
    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 94.2%.

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 5.4% for Hamilton Beach Brands Holding Cl A.

Corporate tax rate of 27% is the nominal tax rate for Hamilton Beach Brands Holding Cl A. 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 3.2%.

Life of production assets of 5.4 years is the average useful life of capital assets used in Hamilton Beach Brands Holding Cl A 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 7.8%. 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 - $46.408 million for Hamilton Beach Brands Holding Cl A - 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 9.23 million for Hamilton Beach Brands Holding Cl A 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 Cl A at the current share price and the inputted number of shares is $0.2 billion.

COMPANY NEWS

▶ Hamilton Beach: 3Q Earnings Snapshot   [Oct-30-18 07:13PM  Associated Press]
▶ 7 Spinoff Stocks to Buy   [Sep-25-18 04:04PM  InvestorPlace]
▶ Hamilton Beach: 2Q Earnings Snapshot   [05:12AM  Associated Press]
▶ 5 Spinoff Stocks That Outperform Their Parents   [Jul-09-18 10:39AM  InvestorPlace]
▶ Hamilton Beach: 1Q Earnings Snapshot   [May-03-18 05:07AM  Associated Press]
▶ Hamilton Beach posts 4Q profit   [Mar-07-18 07:03PM  Associated Press]

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