Intrinsic value of Houston Wire&Cable - HWCC

Previous Close

$7.45

  Intrinsic Value

$15.88

stock screener

  Rating & Target

str. buy

+113%

Previous close

$7.45

 
Intrinsic value

$15.88

 
Up/down potential

+113%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of HWCC 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Houston Wire&Cable (HWCC) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -14.94
  24.60
  22.64
  20.88
  19.29
  17.86
  16.57
  15.42
  14.37
  13.44
  12.59
  11.83
  11.15
  10.54
  9.98
  9.48
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.14
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
Revenue, $m
  262
  326
  400
  484
  577
  680
  793
  915
  1,047
  1,188
  1,337
  1,496
  1,662
  1,837
  2,021
  2,212
  2,412
  2,621
  2,837
  3,063
  3,297
  3,540
  3,793
  4,056
  4,329
  4,614
  4,909
  5,217
  5,537
  5,871
  6,218
Variable operating expenses, $m
 
  241
  295
  356
  424
  500
  582
  672
  768
  871
  980
  1,094
  1,216
  1,344
  1,478
  1,618
  1,764
  1,916
  2,075
  2,239
  2,411
  2,589
  2,774
  2,966
  3,166
  3,374
  3,590
  3,815
  4,049
  4,293
  4,547
Fixed operating expenses, $m
 
  78
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
  107
  110
  113
  116
  119
  121
  125
  128
  131
  134
  137
  141
  144
  148
  152
  156
  159
Total operating expenses, $m
  268
  319
  375
  438
  508
  586
  670
  762
  861
  966
  1,077
  1,194
  1,318
  1,449
  1,585
  1,728
  1,877
  2,032
  2,194
  2,360
  2,536
  2,717
  2,905
  3,100
  3,303
  3,515
  3,734
  3,963
  4,201
  4,449
  4,706
Operating income, $m
  -7
  8
  25
  46
  69
  95
  123
  153
  187
  222
  260
  302
  345
  389
  436
  485
  536
  589
  644
  702
  762
  824
  889
  956
  1,026
  1,099
  1,175
  1,254
  1,337
  1,422
  1,512
EBITDA, $m
  -4
  12
  30
  51
  75
  101
  130
  161
  195
  231
  270
  311
  355
  400
  448
  498
  550
  604
  661
  720
  781
  845
  912
  980
  1,052
  1,127
  1,205
  1,285
  1,370
  1,458
  1,549
Interest expense (income), $m
  1
  2
  3
  4
  5
  6
  7
  8
  10
  11
  13
  15
  16
  18
  20
  22
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
Earnings before tax, $m
  -7
  5
  22
  42
  64
  89
  116
  145
  177
  211
  247
  288
  328
  371
  415
  462
  511
  562
  615
  670
  727
  787
  849
  913
  980
  1,050
  1,123
  1,198
  1,277
  1,360
  1,445
Tax expense, $m
  -1
  1
  6
  11
  17
  24
  31
  39
  48
  57
  67
  78
  89
  100
  112
  125
  138
  152
  166
  181
  196
  212
  229
  247
  265
  284
  303
  324
  345
  367
  390
Net income, $m
  -6
  4
  16
  31
  47
  65
  84
  106
  129
  154
  180
  210
  240
  271
  303
  337
  373
  410
  449
  489
  531
  574
  620
  667
  716
  767
  820
  875
  932
  992
  1,055

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
  0
Total assets, $m
  176
  219
  269
  325
  388
  457
  533
  615
  703
  798
  898
  1,004
  1,116
  1,234
  1,357
  1,486
  1,620
  1,760
  1,906
  2,057
  2,214
  2,378
  2,547
  2,724
  2,908
  3,098
  3,297
  3,504
  3,719
  3,943
  4,176
Adjusted assets (=assets-cash), $m
  176
  219
  269
  325
  388
  457
  533
  615
  703
  798
  898
  1,004
  1,116
  1,234
  1,357
  1,486
  1,620
  1,760
  1,906
  2,057
  2,214
  2,378
  2,547
  2,724
  2,908
  3,098
  3,297
  3,504
  3,719
  3,943
  4,176
Revenue / Adjusted assets
  1.489
  1.489
  1.487
  1.489
  1.487
  1.488
  1.488
  1.488
  1.489
  1.489
  1.489
  1.490
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
  1.488
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
  1.489
Average production assets, $m
  21
  26
  32
  39
  46
  54
  63
  73
  84
  95
  107
  120
  133
  147
  162
  177
  193
  210
  227
  245
  264
  283
  303
  324
  346
  369
  393
  417
  443
  470
  497
Working capital, $m
  102
  131
  161
  194
  231
  273
  318
  367
  420
  476
  536
  600
  667
  737
  810
  887
  967
  1,051
  1,138
  1,228
  1,322
  1,420
  1,521
  1,626
  1,736
  1,850
  1,969
  2,092
  2,220
  2,354
  2,494
Total debt, $m
  64
  85
  109
  137
  168
  201
  238
  279
  322
  368
  417
  469
  524
  581
  642
  705
  770
  839
  910
  984
  1,061
  1,141
  1,224
  1,310
  1,400
  1,493
  1,590
  1,691
  1,796
  1,906
  2,020
Total liabilities, $m
  86
  107
  131
  159
  190
  223
  260
  301
  344
  390
  439
  491
  546
  603
  664
  727
  792
  861
  932
  1,006
  1,083
  1,163
  1,246
  1,332
  1,422
  1,515
  1,612
  1,713
  1,818
  1,928
  2,042
Total equity, $m
  90
  112
  137
  166
  198
  233
  272
  314
  359
  408
  459
  513
  570
  631
  694
  759
  828
  899
  974
  1,051
  1,131
  1,215
  1,302
  1,392
  1,486
  1,583
  1,685
  1,790
  1,900
  2,015
  2,134
Total liabilities and equity, $m
  176
  219
  268
  325
  388
  456
  532
  615
  703
  798
  898
  1,004
  1,116
  1,234
  1,358
  1,486
  1,620
  1,760
  1,906
  2,057
  2,214
  2,378
  2,548
  2,724
  2,908
  3,098
  3,297
  3,503
  3,718
  3,943
  4,176
Debt-to-equity ratio
  0.711
  0.760
  0.800
  0.820
  0.850
  0.860
  0.880
  0.890
  0.900
  0.900
  0.910
  0.910
  0.920
  0.920
  0.930
  0.930
  0.930
  0.930
  0.930
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.950
  0.950
  0.950
Adjusted equity ratio
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  4
  16
  31
  47
  65
  84
  106
  129
  154
  180
  210
  240
  271
  303
  337
  373
  410
  449
  489
  531
  574
  620
  667
  716
  767
  820
  875
  932
  992
  1,055
Depreciation, amort., depletion, $m
  3
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  37
Funds from operations, $m
  34
  8
  21
  36
  53
  71
  92
  114
  138
  163
  191
  219
  250
  282
  315
  351
  387
  426
  466
  507
  551
  596
  642
  691
  742
  794
  849
  906
  966
  1,028
  1,092
Change in working capital, $m
  17
  26
  30
  34
  37
  41
  45
  49
  53
  56
  60
  63
  67
  70
  74
  77
  80
  84
  87
  90
  94
  98
  101
  105
  110
  114
  119
  123
  128
  134
  139
Cash from operations, $m
  17
  -18
  -9
  2
  15
  30
  46
  65
  85
  107
  131
  156
  183
  211
  242
  274
  307
  342
  379
  417
  457
  498
  541
  586
  632
  680
  731
  783
  837
  894
  953
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -31
  -33
  -35
New CAPEX, $m
  -1
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
Cash from investing activities, $m
  -34
  -7
  -8
  -9
  -10
  -11
  -13
  -15
  -17
  -17
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -32
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -57
  -60
  -63
Free cash flow, $m
  -17
  -24
  -16
  -7
  5
  18
  33
  50
  69
  89
  112
  135
  160
  187
  216
  246
  278
  311
  346
  382
  420
  459
  499
  542
  586
  632
  679
  729
  780
  834
  890
Issuance/(repayment) of debt, $m
  21
  21
  24
  27
  31
  34
  37
  40
  43
  46
  49
  52
  55
  58
  60
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  110
  114
Issuance/(repurchase) of shares, $m
  -2
  18
  9
  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
  39
  33
  27
  31
  34
  37
  40
  43
  46
  49
  52
  55
  58
  60
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  110
  114
Total cash flow (excl. dividends), $m
  3
  15
  17
  21
  35
  52
  70
  90
  112
  136
  161
  187
  215
  245
  276
  309
  344
  380
  417
  456
  496
  539
  583
  628
  676
  725
  776
  830
  885
  944
  1,004
Retained Cash Flow (-), $m
  10
  -22
  -25
  -29
  -32
  -35
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -71
  -74
  -77
  -80
  -84
  -87
  -90
  -94
  -98
  -101
  -106
  -110
  -115
  -119
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
 
  -7
  -9
  -8
  3
  17
  32
  48
  67
  87
  109
  132
  158
  185
  213
  243
  275
  308
  343
  379
  416
  455
  496
  538
  582
  627
  675
  724
  776
  829
  885
Discount rate, %
 
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
 
  -6
  -7
  -6
  2
  10
  16
  22
  26
  28
  30
  29
  28
  26
  24
  21
  18
  15
  12
  9
  7
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  87.1
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3
  82.3

Houston Wire & Cable Company is a holding company. The Company is engaged in provision of electrical and mechanical wire and cable, hardware and related services. It operates through sales of wire and cable, hardware and related services segment in the United States market. Its cable management program includes purchasing and storing inventory for product availability. The Company offers products in categories of wire and cable, including continuous and interlocked armor cable; control and power cable; electronic wire and cable; flexible and portable cord; instrumentation and thermocouple cable; lead and high temperature cable; medium voltage cable; premise and category wire and cable; primary and secondary aluminum distribution cable, and synthetic fiber rope slings, chain, shackles, and other related hardware. The Company also offers private branded products, including its brand LifeGuard, a low smoke zero halogen (LSZH) cable. Its products are used in repair and replacement work.

FINANCIAL RATIOS  of  Houston Wire&Cable (HWCC)

Valuation Ratios
P/E Ratio -20.4
Price to Sales 0.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 7.7
Growth Rates
Sales Growth Rate -14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 67.8%
Total Debt to Equity 71.1%
Interest Coverage -6
Management Effectiveness
Return On Assets -3.1%
Ret/ On Assets - 3 Yr. Avg. 2.1%
Return On Total Capital -4%
Ret/ On T. Cap. - 3 Yr. Avg. 2.1%
Return On Equity -6.3%
Return On Equity - 3 Yr. Avg. 3%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 20.2%
Gross Margin - 3 Yr. Avg. 21.2%
EBITDA Margin -1.1%
EBITDA Margin - 3 Yr. Avg. 3%
Operating Margin -2.3%
Oper. Margin - 3 Yr. Avg. 2%
Pre-Tax Margin -2.7%
Pre-Tax Margin - 3 Yr. Avg. 1.7%
Net Profit Margin -2.3%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 37.3%
Payout Ratio -50%

HWCC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HWCC stock intrinsic value calculation we used $262 million for the last fiscal year's total revenue generated by Houston Wire&Cable. The default revenue input number comes from 2016 income statement of Houston Wire&Cable. 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 HWCC stock valuation model: a) initial revenue growth rate of 24.6% 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 9%, whose default value for HWCC is calculated based on our internal credit rating of Houston Wire&Cable, 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 Houston Wire&Cable.
    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 HWCC stock the variable cost ratio is equal to 74%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $76 million in the base year in the intrinsic value calculation for HWCC 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 3.5% for Houston Wire&Cable.

Corporate tax rate of 27% is the nominal tax rate for Houston Wire&Cable. 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 HWCC 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 HWCC are equal to 8%.

Life of production assets of 13.3 years is the average useful life of capital assets used in Houston Wire&Cable 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 HWCC is equal to 40.1%. 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 - $90 million for Houston Wire&Cable - 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 16.506 million for Houston Wire&Cable 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 Houston Wire&Cable at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
WCC Wesco Internat 64.00 333.25  str.buy
AXE Anixter Intern 77.60 69.80  hold
GWW W.W. Grainger 266.68 177.65  sell
HDS HD Supply Hold 36.24 31.55  sell
GPC Genuine Parts 99.83 89.07  hold

COMPANY NEWS

▶ David Nierenberg: Informational Advantages   [Jan-09-18 03:44PM  GuruFocus.com]
▶ Houston Wire reports 3Q loss   [08:03AM  Associated Press]
▶ Houston Wire posts 2Q loss   [Aug-09-17 10:31PM  Associated Press]
▶ Jacob Boyd Joins HWC as the New Chicago Regional Manager   [Jun-22-17 12:00PM  GlobeNewswire]
▶ Houston Wire reports 1Q loss   [07:54AM  Associated Press]
▶ Houston Wire reports 4Q loss   [07:44AM  Associated Press]
Financial statements of HWCC
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.