Intrinsic value of Hurco Companies, Inc. - HURC

Previous Close

$35.82

  Intrinsic Value

$48.67

stock screener

  Rating & Target

buy

+36%

Previous close

$35.82

 
Intrinsic value

$48.67

 
Up/down potential

+36%

 
Rating

buy

We calculate the intrinsic value of HURC 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, %
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
Revenue, $m
  326
  353
  380
  408
  438
  469
  500
  534
  568
  604
  641
  680
  721
  763
  807
  853
  901
  951
  1,004
  1,059
  1,116
  1,176
  1,239
  1,304
  1,373
  1,445
  1,520
  1,599
  1,682
  1,769
Variable operating expenses, $m
  251
  272
  293
  314
  337
  361
  385
  410
  437
  464
  492
  522
  553
  585
  619
  654
  691
  729
  770
  812
  856
  901
  950
  1,000
  1,053
  1,108
  1,166
  1,226
  1,290
  1,356
Fixed operating expenses, $m
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  70
  71
Total operating expenses, $m
  289
  311
  332
  354
  378
  403
  428
  454
  482
  510
  539
  570
  602
  635
  670
  706
  745
  784
  826
  869
  914
  961
  1,011
  1,062
  1,117
  1,173
  1,233
  1,294
  1,360
  1,427
Operating income, $m
  37
  42
  48
  54
  60
  66
  72
  79
  86
  94
  103
  111
  119
  128
  137
  147
  157
  167
  178
  190
  202
  215
  228
  242
  257
  272
  288
  305
  323
  342
EBITDA, $m
  41
  47
  53
  59
  65
  72
  79
  86
  93
  101
  109
  117
  126
  135
  145
  155
  165
  176
  188
  200
  213
  226
  240
  255
  270
  286
  303
  321
  339
  359
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
Earnings before tax, $m
  37
  42
  47
  52
  57
  63
  69
  75
  81
  88
  96
  103
  111
  119
  127
  136
  145
  155
  165
  175
  186
  198
  210
  222
  236
  250
  264
  280
  296
  313
Tax expense, $m
  10
  11
  13
  14
  15
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  57
  60
  64
  67
  71
  75
  80
  84
Net income, $m
  27
  30
  34
  38
  42
  46
  50
  55
  59
  64
  70
  76
  81
  87
  93
  99
  106
  113
  120
  128
  136
  144
  153
  162
  172
  182
  193
  204
  216
  228

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
  342
  370
  398
  428
  459
  491
  525
  559
  595
  633
  672
  713
  756
  800
  846
  894
  945
  997
  1,052
  1,110
  1,170
  1,233
  1,298
  1,367
  1,439
  1,515
  1,594
  1,677
  1,763
  1,854
Adjusted assets (=assets-cash), $m
  342
  370
  398
  428
  459
  491
  525
  559
  595
  633
  672
  713
  756
  800
  846
  894
  945
  997
  1,052
  1,110
  1,170
  1,233
  1,298
  1,367
  1,439
  1,515
  1,594
  1,677
  1,763
  1,854
Revenue / Adjusted assets
  0.953
  0.954
  0.955
  0.953
  0.954
  0.955
  0.952
  0.955
  0.955
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.953
  0.954
  0.954
  0.954
  0.954
  0.954
  0.955
  0.954
  0.954
  0.954
  0.954
  0.953
  0.954
  0.954
Average production assets, $m
  19
  21
  22
  24
  26
  28
  30
  31
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
  99
  104
Working capital, $m
  126
  136
  146
  157
  169
  180
  193
  205
  219
  233
  247
  262
  278
  294
  311
  328
  347
  366
  386
  408
  430
  453
  477
  502
  529
  556
  585
  616
  648
  681
Total debt, $m
  9
  17
  26
  34
  43
  53
  63
  73
  83
  94
  106
  118
  130
  143
  157
  171
  186
  201
  217
  234
  252
  270
  289
  309
  331
  353
  376
  400
  426
  452
Total liabilities, $m
  100
  108
  117
  125
  134
  144
  154
  164
  174
  185
  197
  209
  221
  234
  248
  262
  277
  292
  308
  325
  343
  361
  380
  401
  422
  444
  467
  491
  517
  543
Total equity, $m
  242
  261
  282
  303
  324
  347
  371
  395
  421
  448
  475
  504
  534
  565
  598
  632
  668
  705
  744
  784
  827
  871
  918
  967
  1,017
  1,071
  1,127
  1,185
  1,247
  1,311
Total liabilities and equity, $m
  342
  369
  399
  428
  458
  491
  525
  559
  595
  633
  672
  713
  755
  799
  846
  894
  945
  997
  1,052
  1,109
  1,170
  1,232
  1,298
  1,368
  1,439
  1,515
  1,594
  1,676
  1,764
  1,854
Debt-to-equity ratio
  0.040
  0.070
  0.090
  0.110
  0.130
  0.150
  0.170
  0.180
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
Adjusted equity ratio
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707
  0.707

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  27
  30
  34
  38
  42
  46
  50
  55
  59
  64
  70
  76
  81
  87
  93
  99
  106
  113
  120
  128
  136
  144
  153
  162
  172
  182
  193
  204
  216
  228
Depreciation, amort., depletion, $m
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
Funds from operations, $m
  31
  35
  39
  43
  47
  52
  56
  61
  66
  71
  76
  82
  88
  94
  101
  108
  115
  122
  130
  138
  147
  156
  165
  175
  185
  196
  208
  220
  232
  245
Change in working capital, $m
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
Cash from operations, $m
  22
  25
  29
  32
  36
  40
  44
  48
  53
  58
  62
  67
  72
  78
  84
  90
  96
  103
  110
  117
  125
  132
  141
  150
  159
  168
  179
  189
  200
  212
Maintenance CAPEX, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from investing activities, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -17
  -17
  -18
  -20
  -20
  -21
Free cash flow, $m
  17
  20
  24
  27
  30
  34
  38
  42
  46
  50
  54
  59
  63
  69
  74
  79
  85
  91
  97
  104
  111
  118
  126
  134
  142
  151
  160
  170
  180
  191
Issuance/(repayment) of debt, $m
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
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  
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
Total cash flow (excl. dividends), $m
  25
  28
  32
  36
  39
  43
  47
  52
  56
  61
  65
  71
  76
  81
  87
  93
  100
  106
  113
  121
  128
  137
  145
  154
  163
  173
  183
  194
  205
  217
Retained Cash Flow (-), $m
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -61
  -64
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
  6
  9
  12
  14
  17
  21
  24
  27
  31
  34
  38
  42
  46
  50
  55
  59
  64
  69
  75
  80
  86
  92
  99
  105
  112
  120
  127
  135
  144
  153
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
  6
  8
  10
  12
  14
  15
  16
  17
  18
  18
  18
  18
  17
  17
  16
  15
  14
  13
  11
  10
  9
  8
  6
  5
  4
  3
  3
  2
  2
  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

Hurco Companies, Inc. is an industrial technology company. The Company designs, manufactures and sells computerized (Computer Numeric Control (CNC)) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry. It operates in the industrial automation equipment segment. It provides software options, control upgrades, accessories and replacement parts for its products, as well as customer service and training support, and applications support. Its computerized machine tools are equipped with an integrated interactive computer control system that features its WinMax software. Its control systems are available in versions, including the Series 8200-B for tool room products and the Series 9000 offered on its vertical machining centers and bridge mills. Its Takumi machine tools models include drill and tap machines and three-axis vertical machining centers with linear guides.

FINANCIAL RATIOS  of  Hurco Companies, Inc. (HURC)

Valuation Ratios
P/E Ratio 18.1
Price to Sales 1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -33.6
Price to Free Cash Flow -21.4
Growth Rates
Sales Growth Rate 3.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 41
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8.6%
Return On Equity 7.2%
Return On Equity - 3 Yr. Avg. 8.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 30.8%
Gross Margin - 3 Yr. Avg. 31.1%
EBITDA Margin 10.1%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. 9.6%
Pre-Tax Margin 8.4%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 6.6%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.2%
Payout Ratio 15.4%

HURC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HURC stock intrinsic value calculation we used $301 million for the last fiscal year's total revenue generated by Hurco Companies, Inc.. The default revenue input number comes from 0001 income statement of Hurco Companies, 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 HURC stock valuation model: a) initial revenue growth rate of 8.4% 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 HURC is calculated based on our internal credit rating of Hurco Companies, 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 Hurco Companies, 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 HURC stock the variable cost ratio is equal to 77.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $37 million in the base year in the intrinsic value calculation for HURC 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 6.8% for Hurco Companies, Inc..

Corporate tax rate of 27% is the nominal tax rate for Hurco Companies, 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 HURC 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 HURC are equal to 5.9%.

Life of production assets of 6.1 years is the average useful life of capital assets used in Hurco Companies, 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 HURC is equal to 38.5%. 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 - $222.853 million for Hurco Companies, 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 6.758 million for Hurco Companies, 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 Hurco Companies, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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