Intrinsic value of HNI Corporation - HNI

Previous Close

$33.97

  Intrinsic Value

$64.69

stock screener

  Rating & Target

str. buy

+90%

Previous close

$33.97

 
Intrinsic value

$64.69

 
Up/down potential

+90%

 
Rating

str. buy

We calculate the intrinsic value of HNI 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 1.5

 

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, %
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  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
Revenue, $m
  2,312
  2,374
  2,442
  2,518
  2,601
  2,691
  2,789
  2,893
  3,006
  3,126
  3,254
  3,390
  3,534
  3,688
  3,850
  4,022
  4,204
  4,396
  4,598
  4,812
  5,038
  5,275
  5,525
  5,789
  6,066
  6,358
  6,666
  6,989
  7,329
  7,686
Variable operating expenses, $m
  859
  881
  905
  931
  961
  992
  1,027
  1,063
  1,103
  1,145
  1,144
  1,192
  1,242
  1,296
  1,353
  1,414
  1,478
  1,545
  1,616
  1,691
  1,771
  1,854
  1,942
  2,035
  2,132
  2,235
  2,343
  2,457
  2,576
  2,702
Fixed operating expenses, $m
  1,347
  1,377
  1,407
  1,438
  1,470
  1,502
  1,535
  1,569
  1,603
  1,638
  1,674
  1,711
  1,749
  1,787
  1,827
  1,867
  1,908
  1,950
  1,993
  2,037
  2,082
  2,127
  2,174
  2,222
  2,271
  2,321
  2,372
  2,424
  2,477
  2,532
Total operating expenses, $m
  2,206
  2,258
  2,312
  2,369
  2,431
  2,494
  2,562
  2,632
  2,706
  2,783
  2,818
  2,903
  2,991
  3,083
  3,180
  3,281
  3,386
  3,495
  3,609
  3,728
  3,853
  3,981
  4,116
  4,257
  4,403
  4,556
  4,715
  4,881
  5,053
  5,234
Operating income, $m
  106
  116
  131
  149
  171
  197
  227
  261
  300
  342
  436
  487
  543
  604
  670
  741
  818
  901
  989
  1,084
  1,185
  1,294
  1,409
  1,532
  1,663
  1,803
  1,951
  2,108
  2,275
  2,453
EBITDA, $m
  208
  219
  235
  255
  279
  308
  340
  377
  418
  463
  513
  568
  628
  692
  762
  837
  919
  1,006
  1,099
  1,199
  1,306
  1,420
  1,541
  1,670
  1,808
  1,954
  2,110
  2,275
  2,450
  2,636
Interest expense (income), $m
  7
  14
  15
  16
  17
  19
  21
  22
  24
  26
  29
  31
  34
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  74
  79
  84
  90
  96
  102
  109
  115
Earnings before tax, $m
  92
  102
  115
  131
  152
  177
  205
  237
  273
  314
  404
  453
  507
  565
  628
  696
  769
  848
  933
  1,023
  1,120
  1,224
  1,335
  1,453
  1,579
  1,713
  1,855
  2,006
  2,167
  2,337
Tax expense, $m
  25
  27
  31
  36
  41
  48
  55
  64
  74
  85
  109
  122
  137
  152
  169
  188
  208
  229
  252
  276
  303
  331
  360
  392
  426
  462
  501
  542
  585
  631
Net income, $m
  67
  74
  84
  96
  111
  129
  150
  173
  200
  229
  295
  331
  370
  412
  458
  508
  561
  619
  681
  747
  818
  894
  975
  1,061
  1,152
  1,250
  1,354
  1,465
  1,582
  1,706

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
  1,435
  1,473
  1,516
  1,563
  1,615
  1,671
  1,731
  1,796
  1,866
  1,940
  2,020
  2,104
  2,194
  2,289
  2,390
  2,497
  2,609
  2,729
  2,854
  2,987
  3,127
  3,274
  3,430
  3,593
  3,766
  3,947
  4,138
  4,338
  4,549
  4,771
Adjusted assets (=assets-cash), $m
  1,435
  1,473
  1,516
  1,563
  1,615
  1,671
  1,731
  1,796
  1,866
  1,940
  2,020
  2,104
  2,194
  2,289
  2,390
  2,497
  2,609
  2,729
  2,854
  2,987
  3,127
  3,274
  3,430
  3,593
  3,766
  3,947
  4,138
  4,338
  4,549
  4,771
Revenue / Adjusted assets
  1.611
  1.612
  1.611
  1.611
  1.611
  1.610
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
  1.611
Average production assets, $m
  640
  658
  677
  698
  721
  745
  772
  801
  833
  866
  901
  939
  979
  1,022
  1,067
  1,114
  1,164
  1,218
  1,274
  1,333
  1,395
  1,461
  1,531
  1,604
  1,680
  1,761
  1,846
  1,936
  2,030
  2,129
Working capital, $m
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  81
  85
Total debt, $m
  274
  297
  322
  351
  381
  415
  451
  490
  532
  576
  624
  674
  728
  785
  845
  909
  976
  1,048
  1,123
  1,202
  1,286
  1,374
  1,467
  1,565
  1,668
  1,776
  1,890
  2,010
  2,136
  2,269
Total liabilities, $m
  858
  881
  907
  935
  966
  999
  1,035
  1,074
  1,116
  1,160
  1,208
  1,258
  1,312
  1,369
  1,429
  1,493
  1,560
  1,632
  1,707
  1,786
  1,870
  1,958
  2,051
  2,149
  2,252
  2,360
  2,474
  2,594
  2,720
  2,853
Total equity, $m
  577
  592
  609
  628
  649
  672
  696
  722
  750
  780
  812
  846
  882
  920
  961
  1,004
  1,049
  1,097
  1,147
  1,201
  1,257
  1,316
  1,379
  1,445
  1,514
  1,587
  1,663
  1,744
  1,829
  1,918
Total liabilities and equity, $m
  1,435
  1,473
  1,516
  1,563
  1,615
  1,671
  1,731
  1,796
  1,866
  1,940
  2,020
  2,104
  2,194
  2,289
  2,390
  2,497
  2,609
  2,729
  2,854
  2,987
  3,127
  3,274
  3,430
  3,594
  3,766
  3,947
  4,137
  4,338
  4,549
  4,771
Debt-to-equity ratio
  0.480
  0.500
  0.530
  0.560
  0.590
  0.620
  0.650
  0.680
  0.710
  0.740
  0.770
  0.800
  0.830
  0.850
  0.880
  0.910
  0.930
  0.960
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.140
  1.150
  1.170
  1.180
Adjusted equity ratio
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  67
  74
  84
  96
  111
  129
  150
  173
  200
  229
  295
  331
  370
  412
  458
  508
  561
  619
  681
  747
  818
  894
  975
  1,061
  1,152
  1,250
  1,354
  1,465
  1,582
  1,706
Depreciation, amort., depletion, $m
  102
  103
  105
  106
  108
  111
  113
  115
  118
  121
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  184
Funds from operations, $m
  169
  177
  188
  202
  219
  239
  262
  288
  318
  350
  373
  412
  454
  500
  550
  604
  662
  724
  791
  862
  938
  1,020
  1,106
  1,199
  1,297
  1,402
  1,513
  1,631
  1,757
  1,890
Change in working capital, $m
  1
  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
  4
  4
  4
Cash from operations, $m
  168
  176
  188
  202
  219
  238
  261
  287
  316
  349
  372
  410
  453
  499
  548
  602
  660
  722
  788
  860
  936
  1,017
  1,104
  1,196
  1,294
  1,399
  1,510
  1,628
  1,753
  1,886
Maintenance CAPEX, $m
  -54
  -55
  -57
  -58
  -60
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -145
  -152
  -159
  -167
  -175
New CAPEX, $m
  -14
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
Cash from investing activities, $m
  -68
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -116
  -121
  -126
  -133
  -140
  -146
  -153
  -161
  -169
  -177
  -186
  -195
  -205
  -215
  -226
  -237
  -249
  -261
  -274
Free cash flow, $m
  100
  104
  112
  122
  135
  151
  170
  192
  216
  244
  261
  295
  332
  372
  415
  463
  513
  568
  627
  691
  758
  831
  908
  991
  1,079
  1,173
  1,273
  1,379
  1,492
  1,612
Issuance/(repayment) of debt, $m
  19
  23
  25
  28
  31
  33
  36
  39
  42
  45
  47
  51
  54
  57
  60
  64
  67
  71
  75
  79
  84
  88
  93
  98
  103
  108
  114
  120
  126
  133
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  
  19
  23
  25
  28
  31
  33
  36
  39
  42
  45
  47
  51
  54
  57
  60
  64
  67
  71
  75
  79
  84
  88
  93
  98
  103
  108
  114
  120
  126
  133
Total cash flow (excl. dividends), $m
  119
  127
  137
  150
  166
  185
  206
  231
  258
  288
  309
  346
  385
  429
  476
  526
  581
  640
  703
  770
  842
  919
  1,001
  1,089
  1,182
  1,281
  1,387
  1,499
  1,618
  1,745
Retained Cash Flow (-), $m
  -14
  -15
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -89
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
  105
  112
  120
  131
  146
  162
  182
  204
  230
  258
  277
  312
  349
  390
  435
  483
  536
  592
  652
  717
  786
  860
  939
  1,023
  1,113
  1,209
  1,310
  1,418
  1,533
  1,655
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
  101
  102
  105
  108
  113
  118
  123
  128
  132
  135
  132
  133
  133
  131
  128
  123
  117
  109
  100
  91
  81
  71
  62
  52
  43
  35
  28
  22
  17
  12
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

HNI Corporation is a provider of office furniture and hearth products. The Company's office furniture products include panel-based and freestanding furniture systems, seating, storage and tables. The Company's segments include office furniture and hearth products. The office furniture segment manufactures and markets a line of metal and wood commercial and home office furniture, which includes storage products, desks, credenzas, chairs, tables, bookcases, freestanding office partitions, and panel systems and other related products. The hearth products segment manufactures and markets a line of gas, electric, wood and biomass burning fireplaces, inserts, stoves, facings and accessories, principally for the home. It offers hearth products under various brands, such as Heatilator, Heat & Glo, Majestic, Monessen, Quadra-Fire, Harman Stove, Vermont Castings and PelPro. Its office furniture products are sold under various brands, such as HON, OFM, basyx by HON, Lamex and ERGO.

FINANCIAL RATIOS  of  HNI Corporation (HNI)

Valuation Ratios
P/E Ratio 17.4
Price to Sales 0.7
Price to Book 3
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 14.5
Growth Rates
Sales Growth Rate -4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.3%
Cap. Spend. - 3 Yr. Gr. Rate 8.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 35.9%
Total Debt to Equity 42.7%
Interest Coverage 19
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 12.4%
Ret/ On T. Cap. - 3 Yr. Avg. 13%
Return On Equity 17.6%
Return On Equity - 3 Yr. Avg. 18.5%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 37.9%
Gross Margin - 3 Yr. Avg. 36.6%
EBITDA Margin 9.3%
EBITDA Margin - 3 Yr. Avg. 8.9%
Operating Margin 6%
Oper. Margin - 3 Yr. Avg. 6.1%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.1%
Payout Ratio 55.8%

HNI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HNI stock intrinsic value calculation we used $2258 million for the last fiscal year's total revenue generated by HNI Corporation. The default revenue input number comes from 0001 income statement of HNI Corporation. 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 HNI stock valuation model: a) initial revenue growth rate of 2.4% 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 HNI is calculated based on our internal credit rating of HNI Corporation, 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 HNI Corporation.
    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 HNI stock the variable cost ratio is equal to 37.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1318 million in the base year in the intrinsic value calculation for HNI 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 HNI Corporation.

Corporate tax rate of 27% is the nominal tax rate for HNI Corporation. 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 HNI 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 HNI are equal to 27.7%.

Life of production assets of 11.6 years is the average useful life of capital assets used in HNI Corporation 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 HNI is equal to 1.1%. 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 - $562.933 million for HNI Corporation - 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 43.478 million for HNI Corporation 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 HNI Corporation at the current share price and the inputted number of shares is $1.5 billion.

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