Intrinsic value of Huntsman Corporation - HUN

Previous Close

$24.79

  Intrinsic Value

$39.73

stock screener

  Rating & Target

str. buy

+60%

Previous close

$24.79

 
Intrinsic value

$39.73

 
Up/down potential

+60%

 
Rating

str. buy

We calculate the intrinsic value of HUN 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 5.8

 

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
  9,567
  9,787
  10,038
  10,320
  10,633
  10,977
  11,351
  11,755
  12,191
  12,659
  13,160
  13,694
  14,262
  14,867
  15,508
  16,188
  16,907
  17,668
  18,472
  19,320
  20,216
  21,160
  22,156
  23,205
  24,309
  25,472
  26,697
  27,985
  29,340
  30,766
Variable operating expenses, $m
  7,758
  7,935
  8,137
  8,365
  8,617
  8,894
  9,195
  9,521
  9,872
  10,249
  10,603
  11,033
  11,492
  11,979
  12,495
  13,043
  13,622
  14,235
  14,883
  15,567
  16,289
  17,049
  17,852
  18,697
  19,587
  20,524
  21,510
  22,548
  23,640
  24,789
Fixed operating expenses, $m
  768
  784
  802
  819
  837
  856
  875
  894
  913
  934
  954
  975
  997
  1,018
  1,041
  1,064
  1,087
  1,111
  1,136
  1,161
  1,186
  1,212
  1,239
  1,266
  1,294
  1,322
  1,351
  1,381
  1,412
  1,443
Total operating expenses, $m
  8,526
  8,719
  8,939
  9,184
  9,454
  9,750
  10,070
  10,415
  10,785
  11,183
  11,557
  12,008
  12,489
  12,997
  13,536
  14,107
  14,709
  15,346
  16,019
  16,728
  17,475
  18,261
  19,091
  19,963
  20,881
  21,846
  22,861
  23,929
  25,052
  26,232
Operating income, $m
  1,042
  1,067
  1,099
  1,136
  1,179
  1,227
  1,281
  1,340
  1,405
  1,476
  1,602
  1,685
  1,774
  1,870
  1,972
  2,081
  2,197
  2,321
  2,453
  2,593
  2,741
  2,899
  3,065
  3,242
  3,429
  3,626
  3,835
  4,055
  4,288
  4,534
EBITDA, $m
  1,420
  1,453
  1,493
  1,540
  1,594
  1,654
  1,720
  1,794
  1,874
  1,961
  2,054
  2,156
  2,264
  2,380
  2,505
  2,637
  2,778
  2,928
  3,087
  3,257
  3,436
  3,626
  3,826
  4,039
  4,264
  4,501
  4,752
  5,017
  5,296
  5,591
Interest expense (income), $m
  205
  125
  131
  138
  146
  155
  165
  175
  187
  200
  213
  228
  244
  260
  278
  297
  317
  338
  361
  385
  410
  436
  464
  494
  525
  558
  592
  629
  667
  707
  750
Earnings before tax, $m
  916
  936
  961
  990
  1,024
  1,063
  1,106
  1,153
  1,206
  1,263
  1,374
  1,442
  1,514
  1,592
  1,675
  1,764
  1,859
  1,960
  2,068
  2,183
  2,305
  2,434
  2,571
  2,717
  2,871
  3,034
  3,206
  3,388
  3,581
  3,784
Tax expense, $m
  247
  253
  259
  267
  277
  287
  299
  311
  326
  341
  371
  389
  409
  430
  452
  476
  502
  529
  558
  589
  622
  657
  694
  734
  775
  819
  866
  915
  967
  1,022
Net income, $m
  669
  683
  702
  723
  748
  776
  807
  842
  880
  922
  1,003
  1,052
  1,105
  1,162
  1,223
  1,288
  1,357
  1,431
  1,510
  1,594
  1,683
  1,777
  1,877
  1,983
  2,096
  2,215
  2,340
  2,473
  2,614
  2,763

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
  8,114
  8,301
  8,514
  8,754
  9,019
  9,310
  9,627
  9,970
  10,340
  10,737
  11,162
  11,615
  12,097
  12,610
  13,153
  13,730
  14,340
  14,985
  15,667
  16,387
  17,147
  17,948
  18,792
  19,682
  20,619
  21,605
  22,643
  23,736
  24,886
  26,095
Adjusted assets (=assets-cash), $m
  8,114
  8,301
  8,514
  8,754
  9,019
  9,310
  9,627
  9,970
  10,340
  10,737
  11,162
  11,615
  12,097
  12,610
  13,153
  13,730
  14,340
  14,985
  15,667
  16,387
  17,147
  17,948
  18,792
  19,682
  20,619
  21,605
  22,643
  23,736
  24,886
  26,095
Revenue / Adjusted assets
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
Average production assets, $m
  3,320
  3,396
  3,483
  3,581
  3,690
  3,809
  3,939
  4,079
  4,230
  4,393
  4,566
  4,752
  4,949
  5,159
  5,381
  5,617
  5,867
  6,131
  6,410
  6,704
  7,015
  7,343
  7,688
  8,052
  8,435
  8,839
  9,264
  9,711
  10,181
  10,676
Working capital, $m
  1,129
  1,155
  1,184
  1,218
  1,255
  1,295
  1,339
  1,387
  1,439
  1,494
  1,553
  1,616
  1,683
  1,754
  1,830
  1,910
  1,995
  2,085
  2,180
  2,280
  2,385
  2,497
  2,614
  2,738
  2,868
  3,006
  3,150
  3,302
  3,462
  3,630
Total debt, $m
  2,429
  2,556
  2,702
  2,866
  3,047
  3,246
  3,462
  3,697
  3,949
  4,220
  4,510
  4,820
  5,149
  5,499
  5,871
  6,265
  6,681
  7,122
  7,588
  8,079
  8,598
  9,145
  9,722
  10,330
  10,969
  11,643
  12,352
  13,099
  13,884
  14,710
Total liabilities, $m
  5,542
  5,669
  5,815
  5,979
  6,160
  6,359
  6,575
  6,810
  7,062
  7,333
  7,623
  7,933
  8,262
  8,612
  8,984
  9,378
  9,794
  10,235
  10,701
  11,192
  11,711
  12,258
  12,835
  13,443
  14,082
  14,756
  15,465
  16,212
  16,997
  17,823
Total equity, $m
  2,572
  2,631
  2,699
  2,775
  2,859
  2,951
  3,052
  3,161
  3,278
  3,404
  3,538
  3,682
  3,835
  3,997
  4,170
  4,352
  4,546
  4,750
  4,966
  5,195
  5,435
  5,689
  5,957
  6,239
  6,536
  6,849
  7,178
  7,524
  7,889
  8,272
Total liabilities and equity, $m
  8,114
  8,300
  8,514
  8,754
  9,019
  9,310
  9,627
  9,971
  10,340
  10,737
  11,161
  11,615
  12,097
  12,609
  13,154
  13,730
  14,340
  14,985
  15,667
  16,387
  17,146
  17,947
  18,792
  19,682
  20,618
  21,605
  22,643
  23,736
  24,886
  26,095
Debt-to-equity ratio
  0.940
  0.970
  1.000
  1.030
  1.070
  1.100
  1.130
  1.170
  1.200
  1.240
  1.270
  1.310
  1.340
  1.380
  1.410
  1.440
  1.470
  1.500
  1.530
  1.560
  1.580
  1.610
  1.630
  1.660
  1.680
  1.700
  1.720
  1.740
  1.760
  1.780
Adjusted equity ratio
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  669
  683
  702
  723
  748
  776
  807
  842
  880
  922
  1,003
  1,052
  1,105
  1,162
  1,223
  1,288
  1,357
  1,431
  1,510
  1,594
  1,683
  1,777
  1,877
  1,983
  2,096
  2,215
  2,340
  2,473
  2,614
  2,763
Depreciation, amort., depletion, $m
  378
  386
  394
  404
  415
  427
  439
  453
  468
  484
  452
  470
  490
  511
  533
  556
  581
  607
  635
  664
  695
  727
  761
  797
  835
  875
  917
  961
  1,008
  1,057
Funds from operations, $m
  1,047
  1,069
  1,096
  1,127
  1,162
  1,202
  1,247
  1,295
  1,348
  1,406
  1,455
  1,523
  1,595
  1,673
  1,755
  1,844
  1,938
  2,038
  2,144
  2,257
  2,377
  2,504
  2,638
  2,781
  2,931
  3,090
  3,258
  3,435
  3,622
  3,820
Change in working capital, $m
  22
  26
  30
  33
  37
  41
  44
  48
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  100
  106
  111
  117
  124
  130
  137
  144
  152
  160
  168
Cash from operations, $m
  1,025
  1,043
  1,066
  1,094
  1,126
  1,162
  1,202
  1,248
  1,297
  1,351
  1,396
  1,460
  1,528
  1,601
  1,680
  1,764
  1,853
  1,948
  2,050
  2,157
  2,271
  2,393
  2,521
  2,657
  2,800
  2,952
  3,113
  3,283
  3,462
  3,651
Maintenance CAPEX, $m
  -322
  -329
  -336
  -345
  -355
  -365
  -377
  -390
  -404
  -419
  -435
  -452
  -470
  -490
  -511
  -533
  -556
  -581
  -607
  -635
  -664
  -695
  -727
  -761
  -797
  -835
  -875
  -917
  -961
  -1,008
New CAPEX, $m
  -66
  -76
  -87
  -98
  -109
  -119
  -130
  -140
  -151
  -162
  -174
  -185
  -197
  -210
  -223
  -236
  -250
  -264
  -279
  -295
  -311
  -328
  -345
  -364
  -383
  -404
  -425
  -447
  -470
  -495
Cash from investing activities, $m
  -388
  -405
  -423
  -443
  -464
  -484
  -507
  -530
  -555
  -581
  -609
  -637
  -667
  -700
  -734
  -769
  -806
  -845
  -886
  -930
  -975
  -1,023
  -1,072
  -1,125
  -1,180
  -1,239
  -1,300
  -1,364
  -1,431
  -1,503
Free cash flow, $m
  637
  638
  643
  651
  662
  677
  696
  717
  742
  770
  788
  822
  860
  902
  946
  995
  1,047
  1,103
  1,164
  1,228
  1,297
  1,370
  1,448
  1,532
  1,620
  1,714
  1,813
  1,919
  2,030
  2,149
Issuance/(repayment) of debt, $m
  109
  127
  146
  164
  181
  199
  217
  234
  253
  271
  290
  309
  329
  350
  372
  394
  417
  441
  466
  492
  519
  547
  577
  608
  640
  674
  709
  746
  785
  826
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  
  109
  127
  146
  164
  181
  199
  217
  234
  253
  271
  290
  309
  329
  350
  372
  394
  417
  441
  466
  492
  519
  547
  577
  608
  640
  674
  709
  746
  785
  826
Total cash flow (excl. dividends), $m
  746
  766
  788
  814
  844
  876
  912
  952
  994
  1,041
  1,078
  1,132
  1,190
  1,252
  1,318
  1,389
  1,464
  1,544
  1,629
  1,720
  1,816
  1,917
  2,025
  2,139
  2,260
  2,388
  2,522
  2,665
  2,816
  2,975
Retained Cash Flow (-), $m
  -52
  -59
  -68
  -76
  -84
  -92
  -101
  -109
  -117
  -126
  -135
  -144
  -153
  -162
  -172
  -183
  -193
  -205
  -216
  -228
  -241
  -254
  -268
  -282
  -297
  -313
  -329
  -346
  -364
  -383
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
  693
  706
  721
  738
  759
  784
  812
  843
  877
  915
  943
  988
  1,037
  1,089
  1,146
  1,206
  1,271
  1,340
  1,413
  1,492
  1,575
  1,663
  1,757
  1,857
  1,963
  2,075
  2,193
  2,319
  2,451
  2,591
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  663
  643
  621
  600
  579
  557
  534
  510
  485
  459
  426
  398
  369
  340
  310
  280
  250
  220
  192
  165
  140
  117
  96
  78
  62
  48
  37
  27
  20
  14
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

Huntsman Corporation is a manufacturer of differentiated organic chemical products and of inorganic chemical products. The Company operates all of its businesses through its subsidiary, Huntsman International LLC (Huntsman International). The Company operates through five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects, and Pigments and Additives. Its Polyurethanes, Performance Products, Advanced Materials and Textile Effects segments produce differentiated organic chemical products and its Pigments and Additives segment produces inorganic chemical products. The Company's products are used in a range of applications, including those in the adhesives, aerospace, automotive, construction products, personal care and hygiene, durable and non-durable consumer products, digital inks, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals and dye industries.

FINANCIAL RATIOS  of  Huntsman Corporation (HUN)

Valuation Ratios
P/E Ratio 18
Price to Sales 0.6
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 8.8
Growth Rates
Sales Growth Rate -6.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.5%
Cap. Spend. - 3 Yr. Gr. Rate -2.2%
Financial Strength
Quick Ratio 8
Current Ratio 0.6
LT Debt to Equity 320.4%
Total Debt to Equity 324.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 5.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4%
Return On Equity 23.9%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 17.4%
Gross Margin - 3 Yr. Avg. 17.3%
EBITDA Margin 11.2%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin 6.7%
Oper. Margin - 3 Yr. Avg. 5.2%
Pre-Tax Margin 4.6%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate 19.4%
Eff/ Tax Rate - 3 Yr. Avg. 19.4%
Payout Ratio 36.8%

HUN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HUN stock intrinsic value calculation we used $9379 million for the last fiscal year's total revenue generated by Huntsman Corporation. The default revenue input number comes from 0001 income statement of Huntsman 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 HUN 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 4.6%, whose default value for HUN is calculated based on our internal credit rating of Huntsman 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 Huntsman 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 HUN stock the variable cost ratio is equal to 81.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $751 million in the base year in the intrinsic value calculation for HUN 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 Huntsman Corporation.

Corporate tax rate of 27% is the nominal tax rate for Huntsman 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 HUN 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 HUN are equal to 34.7%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Huntsman 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 HUN is equal to 11.8%. 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 - $2520 million for Huntsman 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 233.362 million for Huntsman 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 Huntsman Corporation at the current share price and the inputted number of shares is $5.8 billion.

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