Intrinsic value of Huttig Building Products, Inc. - HBP

Previous Close

$2.29

  Intrinsic Value

$0.27

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  Rating & Target

str. sell

-88%

Previous close

$2.29

 
Intrinsic value

$0.27

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of HBP 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 0.1

 

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, %
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
Revenue, $m
  920
  1,003
  1,090
  1,180
  1,274
  1,371
  1,473
  1,578
  1,688
  1,801
  1,920
  2,043
  2,171
  2,304
  2,443
  2,588
  2,739
  2,896
  3,061
  3,232
  3,412
  3,599
  3,795
  4,000
  4,214
  4,439
  4,674
  4,919
  5,177
  5,447
Variable operating expenses, $m
  919
  1,002
  1,089
  1,179
  1,272
  1,369
  1,470
  1,575
  1,684
  1,798
  1,912
  2,035
  2,162
  2,295
  2,434
  2,578
  2,728
  2,885
  3,049
  3,220
  3,398
  3,585
  3,780
  3,984
  4,198
  4,421
  4,655
  4,900
  5,157
  5,425
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
  919
  1,002
  1,089
  1,179
  1,272
  1,369
  1,470
  1,575
  1,684
  1,798
  1,912
  2,035
  2,162
  2,295
  2,434
  2,578
  2,728
  2,885
  3,049
  3,220
  3,398
  3,585
  3,780
  3,984
  4,198
  4,421
  4,655
  4,900
  5,157
  5,425
Operating income, $m
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
EBITDA, $m
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  36
  38
  40
  43
  45
  47
  50
  52
Interest expense (income), $m
  2
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
  51
  54
  57
  61
  64
  68
Earnings before tax, $m
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
Tax expense, $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
Net income, $m
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46

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
  304
  332
  361
  390
  422
  454
  487
  522
  558
  596
  635
  676
  718
  762
  808
  856
  906
  958
  1,013
  1,070
  1,129
  1,191
  1,256
  1,324
  1,395
  1,469
  1,546
  1,628
  1,713
  1,802
Adjusted assets (=assets-cash), $m
  304
  332
  361
  390
  422
  454
  487
  522
  558
  596
  635
  676
  718
  762
  808
  856
  906
  958
  1,013
  1,070
  1,129
  1,191
  1,256
  1,324
  1,395
  1,469
  1,546
  1,628
  1,713
  1,802
Revenue / Adjusted assets
  3.026
  3.021
  3.019
  3.026
  3.019
  3.020
  3.025
  3.023
  3.025
  3.022
  3.024
  3.022
  3.024
  3.024
  3.024
  3.023
  3.023
  3.023
  3.022
  3.021
  3.022
  3.022
  3.021
  3.021
  3.021
  3.022
  3.023
  3.021
  3.022
  3.023
Average production assets, $m
  40
  43
  47
  51
  55
  59
  63
  68
  73
  77
  83
  88
  93
  99
  105
  111
  118
  125
  132
  139
  147
  155
  163
  172
  181
  191
  201
  212
  223
  234
Working capital, $m
  156
  171
  185
  201
  217
  233
  250
  268
  287
  306
  326
  347
  369
  392
  415
  440
  466
  492
  520
  550
  580
  612
  645
  680
  716
  755
  794
  836
  880
  926
Total debt, $m
  159
  181
  203
  226
  250
  275
  302
  329
  357
  386
  416
  448
  481
  515
  551
  588
  627
  668
  710
  754
  800
  848
  899
  951
  1,006
  1,064
  1,125
  1,188
  1,254
  1,323
Total liabilities, $m
  236
  258
  280
  303
  328
  353
  379
  406
  434
  463
  494
  525
  558
  592
  628
  665
  704
  745
  787
  831
  877
  925
  976
  1,028
  1,084
  1,141
  1,202
  1,265
  1,331
  1,400
Total equity, $m
  68
  74
  80
  87
  94
  101
  109
  116
  125
  133
  142
  151
  160
  170
  180
  191
  202
  214
  226
  239
  252
  266
  280
  295
  311
  328
  345
  363
  382
  402
Total liabilities and equity, $m
  304
  332
  360
  390
  422
  454
  488
  522
  559
  596
  636
  676
  718
  762
  808
  856
  906
  959
  1,013
  1,070
  1,129
  1,191
  1,256
  1,323
  1,395
  1,469
  1,547
  1,628
  1,713
  1,802
Debt-to-equity ratio
  2.350
  2.440
  2.530
  2.600
  2.660
  2.720
  2.770
  2.820
  2.870
  2.900
  2.940
  2.970
  3.000
  3.030
  3.060
  3.080
  3.100
  3.120
  3.140
  3.160
  3.180
  3.190
  3.210
  3.220
  3.240
  3.250
  3.260
  3.270
  3.280
  3.290
Adjusted equity ratio
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
Depreciation, amort., depletion, $m
  9
  9
  9
  10
  11
  11
  12
  12
  13
  13
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
Funds from operations, $m
  1
  1
  1
  0
  0
  0
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -15
Change in working capital, $m
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
Cash from operations, $m
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
Maintenance CAPEX, $m
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
New CAPEX, $m
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Cash from investing activities, $m
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -34
  -35
  -37
  -39
  -41
Free cash flow, $m
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -97
  -102
Issuance/(repayment) of debt, $m
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
Issuance/(repurchase) of shares, $m
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
  53
  56
  60
  63
  66
Cash from financing (excl. dividends), $m  
  33
  35
  37
  39
  41
  44
  46
  48
  50
  53
  52
  56
  58
  61
  64
  67
  71
  74
  78
  82
  87
  91
  95
  101
  106
  111
  116
  123
  129
  135
Total cash flow (excl. dividends), $m
  13
  14
  14
  14
  15
  15
  16
  16
  17
  17
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
Retained Cash Flow (-), $m
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -51
  -53
  -56
  -60
  -63
  -66
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
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
Discount rate, %
  11.60
  12.18
  12.79
  13.43
  14.10
  14.80
  15.55
  16.32
  17.14
  18.00
  18.90
  19.84
  20.83
  21.87
  22.97
  24.12
  25.32
  26.59
  27.92
  29.31
  30.78
  32.32
  33.93
  35.63
  37.41
  39.28
  41.25
  43.31
  45.47
  47.75
PV of cash for distribution, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  82.3
  67.8
  56.0
  46.4
  38.5
  32.0
  26.6
  22.2
  18.5
  15.5
  13.3
  11.3
  9.7
  8.3
  7.0
  6.0
  5.1
  4.4
  3.7
  3.2
  2.7
  2.3
  2.0
  1.7
  1.4
  1.2
  1.0
  0.9
  0.7
  0.6

Huttig Building Products, Inc. is a domestic distributor of millwork, building materials and wood products used principally in residential construction and in home improvement, remodeling and repair work. The Company purchases from manufacturers and distributes its products through approximately 26 wholesale distribution centers serving over 41 states. The Company's distribution centers sell principally to building materials dealers, national buying groups, home centers and industrial users, including makers of manufactured homes. The Company's products are organized into three categories: millwork, which includes doors, windows, molding, stair parts and columns; general building products, which include composite decking, connectors, fasteners, house wrap, roofing products and insulation, and wood products, which include engineered wood products, such as floor systems, as well as wood panels and lumber.

FINANCIAL RATIOS  of  Huttig Building Products, Inc. (HBP)

Valuation Ratios
P/E Ratio 3.7
Price to Sales 0.1
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 3.5
Price to Free Cash Flow 4.5
Growth Rates
Sales Growth Rate 8.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 77.5%
Total Debt to Equity 78.9%
Interest Coverage 12
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 10%
Return On Total Capital 14%
Ret/ On T. Cap. - 3 Yr. Avg. 14.4%
Return On Equity 25.8%
Return On Equity - 3 Yr. Avg. 33.3%
Asset Turnover 3.8
Profitability Ratios
Gross Margin 21.1%
Gross Margin - 3 Yr. Avg. 20.3%
EBITDA Margin 3.8%
EBITDA Margin - 3 Yr. Avg. 2.7%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 2.2%
Effective Tax Rate 38.1%
Eff/ Tax Rate - 3 Yr. Avg. -34.5%
Payout Ratio 0%

HBP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HBP stock intrinsic value calculation we used $840 million for the last fiscal year's total revenue generated by Huttig Building Products, Inc.. The default revenue input number comes from 0001 income statement of Huttig Building Products, 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 HBP stock valuation model: a) initial revenue growth rate of 9.5% 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 11.6%, whose default value for HBP is calculated based on our internal credit rating of Huttig Building Products, 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 Huttig Building Products, 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 HBP stock the variable cost ratio is equal to 100%.

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 HBP 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 Huttig Building Products, Inc..

Corporate tax rate of 27% is the nominal tax rate for Huttig Building Products, 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 HBP 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 HBP are equal to 4.3%.

Life of production assets of 7.6 years is the average useful life of capital assets used in Huttig Building Products, 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 HBP is equal to 17%. 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 - $62 million for Huttig Building Products, 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 26.430 million for Huttig Building Products, 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 Huttig Building Products, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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