Intrinsic value of Hexcel Corporation - HXL

Previous Close

$69.87

  Intrinsic Value

$25.46

stock screener

  Rating & Target

str. sell

-64%

Previous close

$69.87

 
Intrinsic value

$25.46

 
Up/down potential

-64%

 
Rating

str. sell

We calculate the intrinsic value of HXL 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 5.9

 

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, %
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  2,399
  2,618
  2,847
  3,085
  3,332
  3,589
  3,856
  4,134
  4,423
  4,723
  5,034
  5,359
  5,696
  6,048
  6,414
  6,795
  7,193
  7,608
  8,041
  8,493
  8,965
  9,458
  9,974
  10,513
  11,078
  11,668
  12,286
  12,933
  13,611
  14,321
Variable operating expenses, $m
  1,971
  2,150
  2,336
  2,530
  2,732
  2,941
  3,159
  3,386
  3,621
  3,865
  4,106
  4,370
  4,645
  4,932
  5,231
  5,542
  5,866
  6,204
  6,557
  6,926
  7,311
  7,713
  8,134
  8,574
  9,034
  9,515
  10,019
  10,547
  11,100
  11,679
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
  1,971
  2,150
  2,336
  2,530
  2,732
  2,941
  3,159
  3,386
  3,621
  3,865
  4,106
  4,370
  4,645
  4,932
  5,231
  5,542
  5,866
  6,204
  6,557
  6,926
  7,311
  7,713
  8,134
  8,574
  9,034
  9,515
  10,019
  10,547
  11,100
  11,679
Operating income, $m
  428
  469
  511
  555
  601
  648
  697
  748
  802
  857
  929
  989
  1,051
  1,116
  1,183
  1,254
  1,327
  1,404
  1,483
  1,567
  1,654
  1,745
  1,840
  1,940
  2,044
  2,153
  2,267
  2,386
  2,511
  2,642
EBITDA, $m
  573
  625
  679
  736
  795
  856
  920
  987
  1,055
  1,127
  1,201
  1,279
  1,359
  1,443
  1,531
  1,622
  1,716
  1,815
  1,919
  2,027
  2,139
  2,257
  2,380
  2,509
  2,643
  2,784
  2,932
  3,086
  3,248
  3,417
Interest expense (income), $m
  0
  52
  59
  68
  76
  85
  94
  104
  114
  124
  134
  146
  157
  169
  182
  195
  208
  222
  237
  253
  269
  285
  303
  321
  340
  360
  381
  403
  426
  450
  475
Earnings before tax, $m
  377
  409
  443
  479
  516
  554
  594
  635
  678
  723
  783
  831
  882
  934
  989
  1,045
  1,105
  1,166
  1,231
  1,298
  1,369
  1,442
  1,519
  1,599
  1,683
  1,771
  1,864
  1,960
  2,061
  2,167
Tax expense, $m
  102
  111
  120
  129
  139
  150
  160
  171
  183
  195
  211
  224
  238
  252
  267
  282
  298
  315
  332
  351
  370
  389
  410
  432
  455
  478
  503
  529
  556
  585
Net income, $m
  275
  299
  324
  350
  376
  404
  433
  464
  495
  527
  572
  607
  644
  682
  722
  763
  806
  851
  899
  948
  999
  1,053
  1,109
  1,167
  1,229
  1,293
  1,360
  1,431
  1,505
  1,582

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
  3,096
  3,379
  3,673
  3,980
  4,299
  4,631
  4,976
  5,334
  5,707
  6,094
  6,496
  6,915
  7,350
  7,804
  8,276
  8,768
  9,281
  9,816
  10,375
  10,958
  11,568
  12,204
  12,870
  13,566
  14,294
  15,055
  15,853
  16,688
  17,563
  18,479
Adjusted assets (=assets-cash), $m
  3,096
  3,379
  3,673
  3,980
  4,299
  4,631
  4,976
  5,334
  5,707
  6,094
  6,496
  6,915
  7,350
  7,804
  8,276
  8,768
  9,281
  9,816
  10,375
  10,958
  11,568
  12,204
  12,870
  13,566
  14,294
  15,055
  15,853
  16,688
  17,563
  18,479
Revenue / Adjusted assets
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
Average production assets, $m
  2,130
  2,325
  2,528
  2,739
  2,959
  3,187
  3,424
  3,671
  3,927
  4,194
  4,471
  4,759
  5,058
  5,370
  5,695
  6,034
  6,387
  6,756
  7,140
  7,542
  7,961
  8,399
  8,857
  9,336
  9,837
  10,361
  10,910
  11,485
  12,087
  12,717
Working capital, $m
  357
  390
  424
  460
  496
  535
  575
  616
  659
  704
  750
  798
  849
  901
  956
  1,012
  1,072
  1,134
  1,198
  1,265
  1,336
  1,409
  1,486
  1,566
  1,651
  1,739
  1,831
  1,927
  2,028
  2,134
Total debt, $m
  1,102
  1,252
  1,409
  1,572
  1,742
  1,918
  2,102
  2,293
  2,491
  2,696
  2,911
  3,133
  3,365
  3,606
  3,857
  4,119
  4,392
  4,677
  4,974
  5,285
  5,609
  5,947
  6,301
  6,672
  7,059
  7,464
  7,888
  8,333
  8,798
  9,285
Total liabilities, $m
  1,647
  1,797
  1,954
  2,118
  2,287
  2,464
  2,647
  2,838
  3,036
  3,242
  3,456
  3,679
  3,910
  4,152
  4,403
  4,665
  4,938
  5,222
  5,520
  5,830
  6,154
  6,493
  6,847
  7,217
  7,604
  8,010
  8,434
  8,878
  9,343
  9,831
Total equity, $m
  1,449
  1,581
  1,719
  1,863
  2,012
  2,167
  2,329
  2,496
  2,671
  2,852
  3,040
  3,236
  3,440
  3,652
  3,873
  4,103
  4,344
  4,594
  4,856
  5,128
  5,414
  5,712
  6,023
  6,349
  6,689
  7,046
  7,419
  7,810
  8,219
  8,648
Total liabilities and equity, $m
  3,096
  3,378
  3,673
  3,981
  4,299
  4,631
  4,976
  5,334
  5,707
  6,094
  6,496
  6,915
  7,350
  7,804
  8,276
  8,768
  9,282
  9,816
  10,376
  10,958
  11,568
  12,205
  12,870
  13,566
  14,293
  15,056
  15,853
  16,688
  17,562
  18,479
Debt-to-equity ratio
  0.760
  0.790
  0.820
  0.840
  0.870
  0.890
  0.900
  0.920
  0.930
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.020
  1.020
  1.030
  1.040
  1.040
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
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
  275
  299
  324
  350
  376
  404
  433
  464
  495
  527
  572
  607
  644
  682
  722
  763
  806
  851
  899
  948
  999
  1,053
  1,109
  1,167
  1,229
  1,293
  1,360
  1,431
  1,505
  1,582
Depreciation, amort., depletion, $m
  144
  156
  168
  181
  195
  209
  223
  238
  254
  270
  273
  290
  308
  327
  347
  368
  389
  412
  435
  460
  485
  512
  540
  569
  600
  632
  665
  700
  737
  775
Funds from operations, $m
  419
  455
  492
  531
  571
  613
  656
  702
  749
  797
  844
  897
  952
  1,009
  1,069
  1,131
  1,196
  1,263
  1,334
  1,408
  1,484
  1,565
  1,649
  1,737
  1,829
  1,925
  2,026
  2,131
  2,242
  2,357
Change in working capital, $m
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  65
  67
  70
  74
  77
  80
  84
  88
  92
  96
  101
  106
Cash from operations, $m
  388
  422
  458
  495
  534
  575
  617
  660
  706
  753
  798
  849
  902
  957
  1,014
  1,074
  1,137
  1,202
  1,269
  1,340
  1,414
  1,491
  1,572
  1,656
  1,745
  1,837
  1,934
  2,035
  2,141
  2,252
Maintenance CAPEX, $m
  -119
  -130
  -142
  -154
  -167
  -180
  -194
  -209
  -224
  -239
  -256
  -273
  -290
  -308
  -327
  -347
  -368
  -389
  -412
  -435
  -460
  -485
  -512
  -540
  -569
  -600
  -632
  -665
  -700
  -737
New CAPEX, $m
  -186
  -195
  -203
  -211
  -220
  -228
  -237
  -247
  -256
  -266
  -277
  -288
  -300
  -312
  -325
  -339
  -353
  -368
  -384
  -401
  -419
  -438
  -458
  -479
  -501
  -524
  -549
  -575
  -602
  -631
Cash from investing activities, $m
  -305
  -325
  -345
  -365
  -387
  -408
  -431
  -456
  -480
  -505
  -533
  -561
  -590
  -620
  -652
  -686
  -721
  -757
  -796
  -836
  -879
  -923
  -970
  -1,019
  -1,070
  -1,124
  -1,181
  -1,240
  -1,302
  -1,368
Free cash flow, $m
  83
  98
  113
  130
  148
  166
  185
  205
  225
  247
  265
  288
  312
  336
  362
  388
  415
  444
  473
  503
  535
  568
  602
  637
  674
  713
  753
  795
  838
  884
Issuance/(repayment) of debt, $m
  145
  151
  157
  163
  170
  176
  183
  191
  198
  206
  214
  223
  232
  241
  251
  262
  273
  285
  297
  310
  324
  339
  354
  370
  387
  405
  424
  444
  465
  487
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  
  145
  151
  157
  163
  170
  176
  183
  191
  198
  206
  214
  223
  232
  241
  251
  262
  273
  285
  297
  310
  324
  339
  354
  370
  387
  405
  424
  444
  465
  487
Total cash flow (excl. dividends), $m
  228
  248
  270
  293
  317
  342
  368
  395
  424
  453
  479
  511
  544
  578
  613
  650
  688
  728
  770
  814
  859
  906
  956
  1,008
  1,062
  1,118
  1,177
  1,239
  1,304
  1,371
Retained Cash Flow (-), $m
  -127
  -132
  -138
  -144
  -149
  -155
  -161
  -168
  -174
  -181
  -188
  -196
  -204
  -212
  -221
  -230
  -240
  -251
  -261
  -273
  -285
  -298
  -311
  -326
  -341
  -357
  -373
  -391
  -409
  -429
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
  101
  116
  132
  150
  168
  187
  207
  228
  249
  272
  291
  315
  340
  365
  392
  420
  448
  478
  509
  541
  574
  609
  644
  682
  721
  762
  804
  848
  894
  943
Discount rate, %
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
  96
  104
  111
  118
  123
  126
  128
  128
  126
  123
  117
  111
  104
  96
  88
  79
  70
  61
  52
  44
  36
  29
  23
  18
  14
  10
  8
  5
  4
  3
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

Hexcel Corporation is a composites company. The Company develops, manufactures, and markets lightweight, structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, engineered honeycomb and structures, for use in Commercial Aerospace, Space and Defense and Industrial markets. It operates in two segments: Composite Materials and Engineered Products. The Composite Materials segment consists of its carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, and honeycomb core product lines. The Engineered Products segment consists of lightweight structures, molded components, engineered core and honeycomb products with added functionality. Its products are used in a range of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, and recreational products.

FINANCIAL RATIOS  of  Hexcel Corporation (HXL)

Valuation Ratios
P/E Ratio 25.5
Price to Sales 3.2
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 15.9
Price to Free Cash Flow 87.5
Growth Rates
Sales Growth Rate 7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.5%
Cap. Spend. - 3 Yr. Gr. Rate 11%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 55%
Total Debt to Equity 55.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 11%
Return On Total Capital 13.5%
Ret/ On T. Cap. - 3 Yr. Avg. 13.9%
Return On Equity 20.6%
Return On Equity - 3 Yr. Avg. 19.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 28.2%
Gross Margin - 3 Yr. Avg. 28.1%
EBITDA Margin 21.5%
EBITDA Margin - 3 Yr. Avg. 20.8%
Operating Margin 18%
Oper. Margin - 3 Yr. Avg. 17.4%
Pre-Tax Margin 16.9%
Pre-Tax Margin - 3 Yr. Avg. 16.7%
Net Profit Margin 12.5%
Net Profit Margin - 3 Yr. Avg. 12.2%
Effective Tax Rate 26.9%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 16%

HXL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HXL stock intrinsic value calculation we used $2189 million for the last fiscal year's total revenue generated by Hexcel Corporation. The default revenue input number comes from 0001 income statement of Hexcel 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 HXL stock valuation model: a) initial revenue growth rate of 9.6% 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 5.3%, whose default value for HXL is calculated based on our internal credit rating of Hexcel 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 Hexcel 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 HXL stock the variable cost ratio is equal to 82.2%.

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 HXL 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 Hexcel Corporation.

Corporate tax rate of 27% is the nominal tax rate for Hexcel 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 HXL 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 HXL are equal to 88.8%.

Life of production assets of 16.4 years is the average useful life of capital assets used in Hexcel 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 HXL is equal to 14.9%. 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 - $1322 million for Hexcel 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 84.863 million for Hexcel 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 Hexcel Corporation at the current share price and the inputted number of shares is $5.9 billion.

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