Intrinsic value of Hawkins, Inc. - HWKN

Previous Close

$40.20

  Intrinsic Value

$25.20

stock screener

  Rating & Target

sell

-37%

Previous close

$40.20

 
Intrinsic value

$25.20

 
Up/down potential

-37%

 
Rating

sell

We calculate the intrinsic value of HWKN 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 0.4

 

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, %
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  547
  592
  639
  688
  739
  791
  846
  903
  962
  1,024
  1,088
  1,154
  1,224
  1,296
  1,372
  1,450
  1,533
  1,618
  1,708
  1,802
  1,900
  2,002
  2,109
  2,222
  2,339
  2,462
  2,591
  2,726
  2,867
  3,016
Variable operating expenses, $m
  503
  543
  586
  629
  675
  722
  771
  822
  875
  930
  975
  1,035
  1,097
  1,162
  1,230
  1,300
  1,374
  1,451
  1,531
  1,615
  1,703
  1,795
  1,891
  1,992
  2,097
  2,207
  2,323
  2,444
  2,570
  2,703
Fixed operating expenses, $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 operating expenses, $m
  503
  543
  586
  629
  675
  722
  771
  822
  875
  930
  975
  1,035
  1,097
  1,162
  1,230
  1,300
  1,374
  1,451
  1,531
  1,615
  1,703
  1,795
  1,891
  1,992
  2,097
  2,207
  2,323
  2,444
  2,570
  2,703
Operating income, $m
  44
  49
  54
  59
  64
  70
  75
  81
  87
  94
  113
  120
  127
  134
  142
  150
  159
  168
  177
  187
  197
  207
  219
  230
  242
  255
  268
  282
  297
  312
EBITDA, $m
  74
  80
  87
  93
  100
  107
  115
  122
  130
  139
  148
  157
  166
  176
  186
  197
  208
  220
  232
  244
  258
  272
  286
  301
  317
  334
  351
  370
  389
  409
Interest expense (income), $m
  2
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
Earnings before tax, $m
  39
  43
  47
  51
  55
  59
  64
  69
  74
  79
  97
  102
  108
  114
  121
  127
  134
  141
  149
  157
  165
  174
  183
  192
  202
  213
  223
  235
  247
  259
Tax expense, $m
  10
  12
  13
  14
  15
  16
  17
  19
  20
  21
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
  57
  60
  63
  67
  70
Net income, $m
  28
  31
  34
  37
  40
  43
  47
  50
  54
  58
  71
  75
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  133
  140
  148
  155
  163
  171
  180
  189

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
  425
  460
  496
  534
  573
  614
  656
  701
  746
  794
  844
  896
  949
  1,006
  1,064
  1,125
  1,189
  1,256
  1,325
  1,398
  1,474
  1,553
  1,637
  1,724
  1,815
  1,910
  2,010
  2,115
  2,225
  2,340
Adjusted assets (=assets-cash), $m
  425
  460
  496
  534
  573
  614
  656
  701
  746
  794
  844
  896
  949
  1,006
  1,064
  1,125
  1,189
  1,256
  1,325
  1,398
  1,474
  1,553
  1,637
  1,724
  1,815
  1,910
  2,010
  2,115
  2,225
  2,340
Revenue / Adjusted assets
  1.287
  1.287
  1.288
  1.288
  1.290
  1.288
  1.290
  1.288
  1.290
  1.290
  1.289
  1.288
  1.290
  1.288
  1.289
  1.289
  1.289
  1.288
  1.289
  1.289
  1.289
  1.289
  1.288
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
  1.289
Average production assets, $m
  216
  233
  252
  271
  291
  312
  333
  356
  379
  403
  429
  455
  482
  511
  540
  571
  604
  638
  673
  710
  749
  789
  831
  875
  922
  970
  1,021
  1,074
  1,130
  1,188
Working capital, $m
  86
  93
  100
  108
  116
  124
  133
  142
  151
  161
  171
  181
  192
  204
  215
  228
  241
  254
  268
  283
  298
  314
  331
  349
  367
  387
  407
  428
  450
  473
Total debt, $m
  117
  134
  151
  170
  189
  208
  229
  250
  272
  295
  319
  344
  370
  398
  426
  455
  486
  518
  552
  587
  624
  662
  702
  744
  788
  834
  883
  933
  986
  1,042
Total liabilities, $m
  205
  222
  240
  258
  277
  297
  317
  338
  361
  384
  408
  433
  459
  486
  514
  543
  574
  606
  640
  675
  712
  750
  790
  832
  877
  923
  971
  1,021
  1,074
  1,130
Total equity, $m
  220
  238
  256
  276
  296
  317
  339
  362
  386
  411
  436
  463
  491
  520
  550
  582
  615
  649
  685
  723
  762
  803
  846
  891
  938
  988
  1,039
  1,093
  1,150
  1,210
Total liabilities and equity, $m
  425
  460
  496
  534
  573
  614
  656
  700
  747
  795
  844
  896
  950
  1,006
  1,064
  1,125
  1,189
  1,255
  1,325
  1,398
  1,474
  1,553
  1,636
  1,723
  1,815
  1,911
  2,010
  2,114
  2,224
  2,340
Debt-to-equity ratio
  0.530
  0.560
  0.590
  0.610
  0.640
  0.660
  0.670
  0.690
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.840
  0.840
  0.850
  0.850
  0.850
  0.860
  0.860
Adjusted equity ratio
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  31
  34
  37
  40
  43
  47
  50
  54
  58
  71
  75
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  133
  140
  148
  155
  163
  171
  180
  189
Depreciation, amort., depletion, $m
  30
  31
  33
  34
  36
  38
  40
  41
  43
  45
  35
  37
  39
  42
  44
  46
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  97
Funds from operations, $m
  58
  63
  67
  71
  76
  81
  86
  92
  97
  103
  105
  112
  118
  125
  132
  139
  147
  155
  163
  172
  181
  191
  201
  212
  222
  234
  246
  259
  272
  286
Change in working capital, $m
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
Cash from operations, $m
  52
  55
  60
  64
  68
  73
  78
  83
  88
  93
  95
  101
  107
  114
  120
  127
  134
  142
  149
  158
  166
  175
  184
  194
  204
  215
  226
  237
  250
  263
Maintenance CAPEX, $m
  -16
  -18
  -19
  -20
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
New CAPEX, $m
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
Cash from investing activities, $m
  -33
  -36
  -37
  -39
  -42
  -45
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -72
  -75
  -78
  -83
  -87
  -92
  -97
  -101
  -106
  -112
  -117
  -123
  -130
  -136
  -143
  -150
Free cash flow, $m
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  37
  40
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  78
  82
  87
  91
  96
  101
  107
  112
Issuance/(repayment) of debt, $m
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
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  
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Total cash flow (excl. dividends), $m
  35
  37
  40
  42
  45
  48
  51
  54
  58
  61
  61
  65
  69
  73
  77
  82
  86
  91
  96
  101
  106
  112
  118
  124
  131
  137
  144
  152
  160
  168
Retained Cash Flow (-), $m
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
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
  17
  19
  21
  23
  25
  27
  29
  32
  34
  36
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  103
  108
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  17
  17
  17
  18
  18
  18
  17
  17
  16
  15
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
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
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Hawkins, Inc. distributes, blends and manufactures chemicals and specialty ingredients for its customers in a range of industries. The Company conducts its business in three segments: Industrial, Water Treatment, and Health and Nutrition. Its Industrial segment is engaged in providing industrial chemicals, products and services to various industries, such as agriculture, chemical processing, electronics and energy. Its Water Treatment segment is engaged in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water. The Health and Nutrition segment is engaged in providing ingredient distribution, processing and formulation solutions to manufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritional food, and health and wellness products.

FINANCIAL RATIOS  of  Hawkins, Inc. (HWKN)

Valuation Ratios
P/E Ratio 18.5
Price to Sales 0.9
Price to Book 2
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 18.5
Growth Rates
Sales Growth Rate 16.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.3%
Cap. Spend. - 3 Yr. Gr. Rate 12.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 43.6%
Total Debt to Equity 47.2%
Interest Coverage 19
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 20.2%
Gross Margin - 3 Yr. Avg. 19.2%
EBITDA Margin 12.2%
EBITDA Margin - 3 Yr. Avg. 11.8%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 7.9%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 7.6%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 36.1%
Eff/ Tax Rate - 3 Yr. Avg. 37.6%
Payout Ratio 39.1%

HWKN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HWKN stock intrinsic value calculation we used $504 million for the last fiscal year's total revenue generated by Hawkins, Inc.. The default revenue input number comes from 0001 income statement of Hawkins, 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 HWKN stock valuation model: a) initial revenue growth rate of 8.6% 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 5.8%, whose default value for HWKN is calculated based on our internal credit rating of Hawkins, 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 Hawkins, 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 HWKN stock the variable cost ratio is equal to 92.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for HWKN 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 Hawkins, Inc..

Corporate tax rate of 27% is the nominal tax rate for Hawkins, 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 HWKN 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 HWKN are equal to 39.4%.

Life of production assets of 12.3 years is the average useful life of capital assets used in Hawkins, 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 HWKN is equal to 15.7%. 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 - $202.247 million for Hawkins, 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 10.682 million for Hawkins, 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 Hawkins, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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