Intrinsic value of Hillenbrand Inc - HI

Previous Close

$42.33

  Intrinsic Value

$57.54

stock screener

  Rating & Target

buy

+36%

Previous close

$42.33

 
Intrinsic value

$57.54

 
Up/down potential

+36%

 
Rating

buy

We calculate the intrinsic value of HI 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 2.7

 

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, %
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
Revenue, $m
  1,828
  1,892
  1,960
  2,034
  2,113
  2,198
  2,288
  2,383
  2,485
  2,593
  2,707
  2,828
  2,956
  3,091
  3,234
  3,384
  3,543
  3,710
  3,886
  4,071
  4,266
  4,471
  4,688
  4,915
  5,154
  5,405
  5,670
  5,948
  6,240
  6,547
Variable operating expenses, $m
  1,574
  1,625
  1,680
  1,739
  1,803
  1,871
  1,943
  2,020
  2,101
  2,188
  2,173
  2,270
  2,373
  2,481
  2,595
  2,716
  2,843
  2,977
  3,119
  3,267
  3,424
  3,589
  3,762
  3,945
  4,137
  4,338
  4,551
  4,774
  5,008
  5,254
Fixed operating expenses, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Total operating expenses, $m
  1,573
  1,624
  1,679
  1,738
  1,802
  1,870
  1,942
  2,019
  2,100
  2,187
  2,172
  2,269
  2,372
  2,480
  2,594
  2,715
  2,842
  2,976
  3,117
  3,265
  3,422
  3,587
  3,760
  3,943
  4,135
  4,336
  4,549
  4,772
  5,006
  5,252
Operating income, $m
  255
  268
  281
  296
  311
  328
  346
  365
  385
  406
  536
  560
  585
  612
  640
  669
  701
  734
  769
  805
  844
  884
  927
  972
  1,019
  1,069
  1,121
  1,176
  1,234
  1,294
EBITDA, $m
  395
  408
  423
  439
  456
  474
  493
  514
  536
  559
  584
  610
  637
  667
  697
  730
  764
  800
  838
  878
  920
  964
  1,010
  1,059
  1,111
  1,165
  1,222
  1,282
  1,345
  1,411
Interest expense (income), $m
  20
  20
  22
  25
  27
  30
  33
  36
  39
  43
  47
  51
  55
  59
  64
  69
  74
  80
  86
  92
  99
  106
  113
  120
  128
  137
  146
  155
  165
  175
  186
Earnings before tax, $m
  235
  245
  257
  269
  282
  295
  310
  326
  342
  360
  485
  505
  525
  547
  571
  595
  621
  648
  676
  707
  738
  771
  807
  843
  882
  923
  966
  1,011
  1,058
  1,108
Tax expense, $m
  63
  66
  69
  73
  76
  80
  84
  88
  92
  97
  131
  136
  142
  148
  154
  161
  168
  175
  183
  191
  199
  208
  218
  228
  238
  249
  261
  273
  286
  299
Net income, $m
  172
  179
  187
  196
  206
  216
  226
  238
  250
  263
  354
  368
  384
  400
  417
  434
  453
  473
  494
  516
  539
  563
  589
  616
  644
  674
  705
  738
  773
  809

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
  1,927
  1,994
  2,066
  2,143
  2,227
  2,316
  2,411
  2,511
  2,619
  2,732
  2,853
  2,980
  3,115
  3,257
  3,407
  3,566
  3,733
  3,909
  4,094
  4,290
  4,495
  4,712
  4,939
  5,179
  5,431
  5,696
  5,974
  6,267
  6,575
  6,898
Adjusted assets (=assets-cash), $m
  1,927
  1,994
  2,066
  2,143
  2,227
  2,316
  2,411
  2,511
  2,619
  2,732
  2,853
  2,980
  3,115
  3,257
  3,407
  3,566
  3,733
  3,909
  4,094
  4,290
  4,495
  4,712
  4,939
  5,179
  5,431
  5,696
  5,974
  6,267
  6,575
  6,898
Revenue / Adjusted assets
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
Average production assets, $m
  730
  755
  782
  812
  843
  877
  913
  951
  992
  1,035
  1,080
  1,128
  1,179
  1,233
  1,290
  1,350
  1,413
  1,480
  1,550
  1,624
  1,702
  1,784
  1,870
  1,961
  2,056
  2,157
  2,262
  2,373
  2,490
  2,612
Working capital, $m
  24
  25
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
Total debt, $m
  383
  423
  467
  514
  565
  619
  677
  738
  803
  872
  946
  1,023
  1,105
  1,191
  1,283
  1,379
  1,481
  1,588
  1,701
  1,819
  1,944
  2,076
  2,214
  2,360
  2,513
  2,674
  2,844
  3,022
  3,209
  3,405
Total liabilities, $m
  1,171
  1,212
  1,256
  1,303
  1,354
  1,408
  1,466
  1,527
  1,592
  1,661
  1,734
  1,812
  1,894
  1,980
  2,072
  2,168
  2,270
  2,377
  2,489
  2,608
  2,733
  2,865
  3,003
  3,149
  3,302
  3,463
  3,632
  3,810
  3,998
  4,194
Total equity, $m
  755
  781
  810
  840
  873
  908
  945
  984
  1,027
  1,071
  1,118
  1,168
  1,221
  1,277
  1,336
  1,398
  1,463
  1,532
  1,605
  1,682
  1,762
  1,847
  1,936
  2,030
  2,129
  2,233
  2,342
  2,457
  2,577
  2,704
Total liabilities and equity, $m
  1,926
  1,993
  2,066
  2,143
  2,227
  2,316
  2,411
  2,511
  2,619
  2,732
  2,852
  2,980
  3,115
  3,257
  3,408
  3,566
  3,733
  3,909
  4,094
  4,290
  4,495
  4,712
  4,939
  5,179
  5,431
  5,696
  5,974
  6,267
  6,575
  6,898
Debt-to-equity ratio
  0.510
  0.540
  0.580
  0.610
  0.650
  0.680
  0.720
  0.750
  0.780
  0.810
  0.850
  0.880
  0.900
  0.930
  0.960
  0.990
  1.010
  1.040
  1.060
  1.080
  1.100
  1.120
  1.140
  1.160
  1.180
  1.200
  1.210
  1.230
  1.240
  1.260
Adjusted equity ratio
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  172
  179
  187
  196
  206
  216
  226
  238
  250
  263
  354
  368
  384
  400
  417
  434
  453
  473
  494
  516
  539
  563
  589
  616
  644
  674
  705
  738
  773
  809
Depreciation, amort., depletion, $m
  139
  141
  142
  143
  145
  146
  148
  149
  151
  153
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  83
  88
  92
  96
  101
  106
  111
  117
Funds from operations, $m
  311
  320
  329
  339
  350
  362
  374
  387
  401
  416
  402
  419
  436
  455
  474
  495
  516
  539
  563
  588
  615
  643
  672
  703
  736
  770
  806
  844
  884
  926
Change in working capital, $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 operations, $m
  310
  319
  328
  338
  349
  360
  373
  386
  400
  414
  401
  417
  435
  453
  472
  493
  514
  537
  561
  586
  612
  640
  669
  700
  733
  767
  803
  840
  880
  922
Maintenance CAPEX, $m
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -88
  -92
  -96
  -101
  -106
  -111
New CAPEX, $m
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
  -95
  -100
  -105
  -111
  -117
  -122
Cash from investing activities, $m
  -55
  -58
  -61
  -64
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -107
  -112
  -118
  -123
  -130
  -136
  -143
  -151
  -158
  -166
  -174
  -183
  -192
  -201
  -212
  -223
  -233
Free cash flow, $m
  256
  261
  267
  274
  281
  289
  298
  307
  317
  327
  309
  321
  333
  346
  360
  375
  391
  407
  424
  443
  462
  482
  504
  526
  550
  575
  601
  628
  657
  688
Issuance/(repayment) of debt, $m
  38
  41
  44
  47
  51
  54
  58
  61
  65
  69
  73
  77
  82
  87
  91
  96
  102
  107
  113
  119
  125
  132
  138
  146
  153
  161
  169
  178
  187
  197
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  
  38
  41
  44
  47
  51
  54
  58
  61
  65
  69
  73
  77
  82
  87
  91
  96
  102
  107
  113
  119
  125
  132
  138
  146
  153
  161
  169
  178
  187
  197
Total cash flow (excl. dividends), $m
  293
  302
  311
  321
  332
  343
  355
  368
  382
  396
  382
  398
  415
  433
  452
  471
  492
  514
  537
  561
  587
  614
  642
  672
  703
  736
  770
  806
  845
  885
Retained Cash Flow (-), $m
  -24
  -26
  -28
  -30
  -33
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
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
  269
  275
  283
  291
  299
  308
  318
  329
  340
  351
  335
  348
  362
  377
  393
  409
  427
  445
  464
  485
  506
  529
  553
  578
  604
  632
  661
  692
  724
  758
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
  258
  252
  246
  239
  232
  224
  215
  205
  195
  184
  159
  149
  138
  127
  115
  104
  93
  82
  72
  62
  52
  44
  36
  29
  24
  18
  14
  11
  8
  6
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

Hillenbrand, Inc. is a diversified industrial company with multiple brands that serve a range of industries across the globe. The Company operates in two segments: the Process Equipment Group and Batesville. The Process Equipment Group businesses design, develop, manufacture and service engineered industrial equipment throughout the world. The Process Equipment Group segment is a provider of compounding, extrusion and material handling; size reduction; screening and separating, and flow control products and services for a range of manufacturing and other industrial processes. It offers equipment for industries, including plastics, chemicals, fertilizers and mining. Its Batesville segment operates in the North American death care industry, and manufactures and sells funeral service products, including burial caskets, cremation caskets, containers and urns, selection room display fixtures, other personalization and memorialization products, and Web-based technology applications.

FINANCIAL RATIOS  of  Hillenbrand Inc (HI)

Valuation Ratios
P/E Ratio 21.2
Price to Sales 1.7
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 10.9
Price to Free Cash Flow 11.9
Growth Rates
Sales Growth Rate 3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.8%
Cap. Spend. - 3 Yr. Gr. Rate -1.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 59.5%
Total Debt to Equity 62.1%
Interest Coverage 10
Management Effectiveness
Return On Assets 7.1%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 9.9%
Return On Equity 18.2%
Return On Equity - 3 Yr. Avg. 18.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 37.5%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin 16.7%
EBITDA Margin - 3 Yr. Avg. 15.8%
Operating Margin 13.6%
Oper. Margin - 3 Yr. Avg. 12.7%
Pre-Tax Margin 11.8%
Pre-Tax Margin - 3 Yr. Avg. 10.9%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 31.9%
Eff/ Tax Rate - 3 Yr. Avg. 30.3%
Payout Ratio 41.3%

HI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HI stock intrinsic value calculation we used $1770 million for the last fiscal year's total revenue generated by Hillenbrand Inc. The default revenue input number comes from 0001 income statement of Hillenbrand 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 HI stock valuation model: a) initial revenue growth rate of 3.3% 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 4.3%, whose default value for HI is calculated based on our internal credit rating of Hillenbrand 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 Hillenbrand 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 HI stock the variable cost ratio is equal to 86.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $-1 million in the base year in the intrinsic value calculation for HI 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 5.8% for Hillenbrand Inc.

Corporate tax rate of 27% is the nominal tax rate for Hillenbrand 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 HI 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 HI are equal to 39.9%.

Life of production assets of 22.4 years is the average useful life of capital assets used in Hillenbrand 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 HI is equal to 1.3%. 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 - $731.1 million for Hillenbrand 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 62.645 million for Hillenbrand 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 Hillenbrand Inc at the current share price and the inputted number of shares is $2.7 billion.

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