Intrinsic value of Houston Wire & Cable Company - HWCC

Previous Close

$5.08

  Intrinsic Value

$4.28

stock screener

  Rating & Target

hold

-16%

Previous close

$5.08

 
Intrinsic value

$4.28

 
Up/down potential

-16%

 
Rating

hold

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.

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 0.1

 

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, %
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
Revenue, $m
  353
  389
  427
  467
  508
  551
  596
  643
  691
  742
  794
  848
  905
  964
  1,025
  1,089
  1,155
  1,224
  1,296
  1,371
  1,450
  1,531
  1,617
  1,706
  1,800
  1,897
  1,999
  2,106
  2,218
  2,335
Variable operating expenses, $m
  281
  309
  340
  371
  404
  438
  474
  511
  549
  589
  629
  672
  717
  764
  812
  863
  915
  970
  1,027
  1,087
  1,149
  1,214
  1,281
  1,352
  1,426
  1,504
  1,585
  1,669
  1,758
  1,851
Fixed operating expenses, $m
  61
  63
  64
  65
  67
  68
  70
  71
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
  108
  110
  113
  115
Total operating expenses, $m
  342
  372
  404
  436
  471
  506
  544
  582
  622
  664
  705
  750
  797
  845
  895
  948
  1,002
  1,059
  1,118
  1,180
  1,244
  1,311
  1,380
  1,453
  1,529
  1,610
  1,693
  1,779
  1,871
  1,966
Operating income, $m
  11
  17
  23
  30
  37
  45
  53
  61
  69
  78
  88
  98
  108
  119
  129
  141
  153
  165
  178
  192
  206
  221
  236
  253
  270
  288
  307
  327
  347
  369
EBITDA, $m
  14
  20
  27
  34
  41
  49
  57
  65
  74
  83
  93
  103
  113
  124
  135
  147
  159
  172
  185
  199
  214
  229
  245
  262
  280
  298
  318
  338
  359
  382
Interest expense (income), $m
  1
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  34
  35
  37
Earnings before tax, $m
  7
  12
  18
  24
  31
  37
  44
  52
  60
  67
  77
  86
  95
  104
  114
  124
  135
  146
  158
  170
  183
  197
  211
  226
  242
  258
  275
  293
  312
  332
Tax expense, $m
  2
  3
  5
  7
  8
  10
  12
  14
  16
  18
  21
  23
  26
  28
  31
  34
  36
  40
  43
  46
  50
  53
  57
  61
  65
  70
  74
  79
  84
  90
Net income, $m
  5
  9
  13
  18
  22
  27
  32
  38
  43
  49
  56
  63
  69
  76
  83
  91
  99
  107
  115
  124
  134
  144
  154
  165
  176
  188
  201
  214
  228
  242

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
  215
  237
  261
  285
  310
  336
  364
  392
  422
  452
  484
  518
  552
  588
  625
  664
  705
  747
  791
  837
  884
  934
  987
  1,041
  1,098
  1,158
  1,220
  1,285
  1,353
  1,425
Adjusted assets (=assets-cash), $m
  215
  237
  261
  285
  310
  336
  364
  392
  422
  452
  484
  518
  552
  588
  625
  664
  705
  747
  791
  837
  884
  934
  987
  1,041
  1,098
  1,158
  1,220
  1,285
  1,353
  1,425
Revenue / Adjusted assets
  1.642
  1.641
  1.636
  1.639
  1.639
  1.640
  1.637
  1.640
  1.637
  1.642
  1.640
  1.637
  1.639
  1.639
  1.640
  1.640
  1.638
  1.639
  1.638
  1.638
  1.640
  1.639
  1.638
  1.639
  1.639
  1.638
  1.639
  1.639
  1.639
  1.639
Average production assets, $m
  32
  35
  39
  42
  46
  50
  54
  58
  63
  67
  72
  77
  82
  88
  93
  99
  105
  111
  118
  125
  132
  139
  147
  155
  164
  173
  182
  192
  202
  212
Working capital, $m
  136
  150
  165
  180
  196
  213
  230
  248
  267
  286
  306
  327
  349
  372
  396
  420
  446
  472
  500
  529
  560
  591
  624
  659
  695
  732
  772
  813
  856
  901
Total debt, $m
  88
  100
  112
  125
  138
  152
  167
  182
  198
  214
  231
  249
  267
  286
  306
  327
  348
  371
  394
  418
  444
  470
  498
  527
  557
  589
  622
  657
  693
  731
Total liabilities, $m
  114
  126
  139
  152
  165
  179
  194
  209
  224
  241
  258
  275
  294
  313
  333
  353
  375
  397
  421
  445
  471
  497
  525
  554
  584
  616
  649
  684
  720
  758
Total equity, $m
  101
  111
  122
  133
  145
  157
  170
  184
  197
  212
  227
  242
  258
  275
  293
  311
  330
  350
  370
  392
  414
  437
  462
  487
  514
  542
  571
  601
  633
  667
Total liabilities and equity, $m
  215
  237
  261
  285
  310
  336
  364
  393
  421
  453
  485
  517
  552
  588
  626
  664
  705
  747
  791
  837
  885
  934
  987
  1,041
  1,098
  1,158
  1,220
  1,285
  1,353
  1,425
Debt-to-equity ratio
  0.870
  0.900
  0.920
  0.940
  0.950
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.030
  1.040
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
  1.080
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
  1.090
  1.100
Adjusted equity ratio
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  9
  13
  18
  22
  27
  32
  38
  43
  49
  56
  63
  69
  76
  83
  91
  99
  107
  115
  124
  134
  144
  154
  165
  176
  188
  201
  214
  228
  242
Depreciation, amort., depletion, $m
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
Funds from operations, $m
  8
  12
  17
  21
  26
  31
  37
  42
  48
  54
  60
  67
  74
  81
  89
  97
  105
  113
  122
  132
  142
  152
  163
  174
  186
  198
  212
  225
  240
  255
Change in working capital, $m
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
Cash from operations, $m
  -6
  -2
  2
  6
  10
  15
  19
  24
  30
  35
  40
  46
  52
  59
  65
  72
  79
  87
  95
  103
  111
  120
  130
  140
  150
  161
  172
  184
  197
  210
Maintenance CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
New CAPEX, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from investing activities, $m
  -5
  -5
  -5
  -6
  -7
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -12
  -14
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -21
  -21
  -23
Free cash flow, $m
  -10
  -7
  -4
  0
  4
  8
  12
  17
  22
  27
  31
  37
  42
  48
  54
  61
  67
  74
  81
  89
  97
  105
  114
  123
  132
  142
  153
  163
  175
  187
Issuance/(repayment) of debt, $m
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
Issuance/(repurchase) of shares, $m
  5
  1
  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  
  16
  13
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
Total cash flow (excl. dividends), $m
  6
  6
  9
  13
  17
  22
  27
  32
  37
  43
  48
  55
  61
  67
  74
  81
  89
  97
  105
  113
  122
  132
  142
  152
  163
  174
  186
  198
  211
  225
Retained Cash Flow (-), $m
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -33
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
  -4
  -4
  -2
  2
  6
  10
  14
  19
  24
  29
  34
  39
  45
  51
  57
  63
  70
  77
  84
  92
  100
  108
  117
  126
  136
  146
  157
  168
  179
  192
Discount rate, %
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
  -4
  -4
  -2
  1
  3
  5
  6
  7
  8
  8
  7
  7
  6
  6
  5
  4
  3
  3
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  94.2
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8
  92.8

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 Company (HWCC)

Valuation Ratios
P/E Ratio -13.9
Price to Sales 0.3
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 4.9
Price to Free Cash Flow 5.2
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 $318 million for the last fiscal year's total revenue generated by Houston Wire & Cable Company. The default revenue input number comes from 0001 income statement of Houston Wire & Cable Company. 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 10.9% 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 9.1%, whose default value for HWCC is calculated based on our internal credit rating of Houston Wire & Cable Company, 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 Company.
    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 79.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $60 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 5.4% for Houston Wire & Cable Company.

Corporate tax rate of 27% is the nominal tax rate for Houston Wire & Cable Company. 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 9.1%.

Life of production assets of 16.8 years is the average useful life of capital assets used in Houston Wire & Cable Company 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 38.6%. 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 - $90.744 million for Houston Wire & Cable Company - 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 16.524 million for Houston Wire & Cable Company 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 Company at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
AXE Anixter Intern 58.43 90.20  str.buy
HDS HD Supply Hold 40.58 69.13  str.buy
GPC Genuine Parts 105.41 121.67  hold

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.