Intrinsic value of Hyster-Yale Materials Handling - HY

Previous Close

$63.23

  Intrinsic Value

$255.53

stock screener

  Rating & Target

str. buy

+304%

Previous close

$63.23

 
Intrinsic value

$255.53

 
Up/down potential

+304%

 
Rating

str. buy

We calculate the intrinsic value of HY 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 0.8

 

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, %
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  3,223
  3,578
  3,951
  4,342
  4,750
  5,175
  5,618
  6,079
  6,559
  7,057
  7,574
  8,112
  8,672
  9,253
  9,857
  10,486
  11,141
  11,822
  12,532
  13,272
  14,044
  14,849
  15,689
  16,567
  17,484
  18,442
  19,444
  20,492
  21,589
  22,736
Variable operating expenses, $m
  2,802
  3,110
  3,433
  3,772
  4,125
  4,493
  4,877
  5,276
  5,691
  6,123
  6,560
  7,025
  7,510
  8,013
  8,536
  9,081
  9,648
  10,238
  10,853
  11,494
  12,162
  12,859
  13,587
  14,347
  15,141
  15,971
  16,839
  17,746
  18,696
  19,690
Fixed operating expenses, $m
  313
  320
  327
  334
  341
  349
  356
  364
  372
  380
  389
  397
  406
  415
  424
  433
  443
  453
  463
  473
  483
  494
  505
  516
  527
  539
  551
  563
  575
  588
Total operating expenses, $m
  3,115
  3,430
  3,760
  4,106
  4,466
  4,842
  5,233
  5,640
  6,063
  6,503
  6,949
  7,422
  7,916
  8,428
  8,960
  9,514
  10,091
  10,691
  11,316
  11,967
  12,645
  13,353
  14,092
  14,863
  15,668
  16,510
  17,390
  18,309
  19,271
  20,278
Operating income, $m
  108
  148
  191
  236
  284
  333
  385
  439
  495
  554
  626
  690
  756
  825
  897
  972
  1,050
  1,131
  1,217
  1,306
  1,399
  1,496
  1,598
  1,704
  1,816
  1,932
  2,055
  2,183
  2,318
  2,459
EBITDA, $m
  159
  205
  252
  302
  355
  410
  467
  527
  589
  654
  721
  791
  865
  941
  1,020
  1,103
  1,189
  1,279
  1,374
  1,472
  1,574
  1,682
  1,794
  1,912
  2,035
  2,163
  2,298
  2,440
  2,588
  2,744
Interest expense (income), $m
  2
  17
  24
  32
  40
  49
  57
  67
  76
  86
  97
  108
  119
  131
  143
  155
  169
  182
  197
  211
  227
  243
  260
  277
  296
  315
  335
  355
  377
  400
  424
Earnings before tax, $m
  91
  124
  159
  196
  235
  276
  318
  363
  409
  457
  519
  571
  625
  682
  741
  803
  867
  935
  1,005
  1,079
  1,156
  1,236
  1,320
  1,408
  1,501
  1,598
  1,699
  1,806
  1,918
  2,035
Tax expense, $m
  24
  34
  43
  53
  63
  74
  86
  98
  110
  123
  140
  154
  169
  184
  200
  217
  234
  252
  271
  291
  312
  334
  356
  380
  405
  431
  459
  488
  518
  549
Net income, $m
  66
  91
  116
  143
  172
  201
  232
  265
  298
  333
  379
  417
  456
  498
  541
  586
  633
  682
  734
  787
  844
  902
  964
  1,028
  1,096
  1,166
  1,240
  1,318
  1,400
  1,485

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
  1,841
  2,044
  2,257
  2,480
  2,713
  2,956
  3,209
  3,472
  3,746
  4,030
  4,326
  4,633
  4,952
  5,284
  5,630
  5,989
  6,362
  6,752
  7,157
  7,580
  8,020
  8,480
  8,960
  9,461
  9,985
  10,532
  11,105
  11,703
  12,329
  12,985
Adjusted assets (=assets-cash), $m
  1,841
  2,044
  2,257
  2,480
  2,713
  2,956
  3,209
  3,472
  3,746
  4,030
  4,326
  4,633
  4,952
  5,284
  5,630
  5,989
  6,362
  6,752
  7,157
  7,580
  8,020
  8,480
  8,960
  9,461
  9,985
  10,532
  11,105
  11,703
  12,329
  12,985
Revenue / Adjusted assets
  1.751
  1.750
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
  1.751
Average production assets, $m
  351
  390
  431
  473
  518
  564
  612
  663
  715
  769
  826
  884
  945
  1,009
  1,074
  1,143
  1,214
  1,289
  1,366
  1,447
  1,531
  1,619
  1,710
  1,806
  1,906
  2,010
  2,119
  2,234
  2,353
  2,478
Working capital, $m
  329
  365
  403
  443
  484
  528
  573
  620
  669
  720
  773
  827
  884
  944
  1,005
  1,070
  1,136
  1,206
  1,278
  1,354
  1,432
  1,515
  1,600
  1,690
  1,783
  1,881
  1,983
  2,090
  2,202
  2,319
Total debt, $m
  418
  551
  691
  837
  991
  1,150
  1,316
  1,489
  1,669
  1,856
  2,050
  2,252
  2,462
  2,680
  2,907
  3,143
  3,388
  3,644
  3,911
  4,188
  4,478
  4,780
  5,095
  5,424
  5,769
  6,128
  6,504
  6,897
  7,309
  7,739
Total liabilities, $m
  1,209
  1,343
  1,483
  1,629
  1,782
  1,942
  2,108
  2,281
  2,461
  2,648
  2,842
  3,044
  3,254
  3,472
  3,699
  3,935
  4,180
  4,436
  4,702
  4,980
  5,269
  5,572
  5,887
  6,216
  6,560
  6,920
  7,296
  7,689
  8,100
  8,531
Total equity, $m
  631
  701
  774
  851
  930
  1,014
  1,101
  1,191
  1,285
  1,382
  1,484
  1,589
  1,699
  1,813
  1,931
  2,054
  2,182
  2,316
  2,455
  2,600
  2,751
  2,909
  3,073
  3,245
  3,425
  3,613
  3,809
  4,014
  4,229
  4,454
Total liabilities and equity, $m
  1,840
  2,044
  2,257
  2,480
  2,712
  2,956
  3,209
  3,472
  3,746
  4,030
  4,326
  4,633
  4,953
  5,285
  5,630
  5,989
  6,362
  6,752
  7,157
  7,580
  8,020
  8,481
  8,960
  9,461
  9,985
  10,533
  11,105
  11,703
  12,329
  12,985
Debt-to-equity ratio
  0.660
  0.790
  0.890
  0.980
  1.060
  1.130
  1.200
  1.250
  1.300
  1.340
  1.380
  1.420
  1.450
  1.480
  1.510
  1.530
  1.550
  1.570
  1.590
  1.610
  1.630
  1.640
  1.660
  1.670
  1.680
  1.700
  1.710
  1.720
  1.730
  1.740
Adjusted equity ratio
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  66
  91
  116
  143
  172
  201
  232
  265
  298
  333
  379
  417
  456
  498
  541
  586
  633
  682
  734
  787
  844
  902
  964
  1,028
  1,096
  1,166
  1,240
  1,318
  1,400
  1,485
Depreciation, amort., depletion, $m
  52
  56
  61
  66
  71
  76
  82
  88
  94
  100
  95
  102
  109
  116
  123
  131
  140
  148
  157
  166
  176
  186
  197
  208
  219
  231
  244
  257
  270
  285
Funds from operations, $m
  118
  147
  177
  209
  243
  278
  314
  352
  392
  433
  473
  518
  565
  614
  665
  718
  773
  831
  891
  954
  1,020
  1,088
  1,160
  1,236
  1,315
  1,397
  1,484
  1,575
  1,670
  1,770
Change in working capital, $m
  34
  36
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  72
  75
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
Cash from operations, $m
  84
  111
  139
  169
  201
  234
  269
  305
  343
  383
  421
  463
  508
  555
  603
  653
  706
  761
  818
  878
  941
  1,006
  1,075
  1,146
  1,221
  1,300
  1,382
  1,468
  1,558
  1,653
Maintenance CAPEX, $m
  -36
  -40
  -45
  -50
  -54
  -60
  -65
  -70
  -76
  -82
  -88
  -95
  -102
  -109
  -116
  -123
  -131
  -140
  -148
  -157
  -166
  -176
  -186
  -197
  -208
  -219
  -231
  -244
  -257
  -270
New CAPEX, $m
  -36
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -100
  -104
  -109
  -114
  -120
  -125
Cash from investing activities, $m
  -72
  -79
  -86
  -93
  -98
  -106
  -113
  -120
  -128
  -136
  -144
  -154
  -163
  -172
  -182
  -192
  -202
  -214
  -225
  -238
  -250
  -264
  -278
  -293
  -308
  -323
  -340
  -358
  -377
  -395
Free cash flow, $m
  12
  32
  54
  77
  102
  128
  156
  185
  215
  246
  276
  310
  345
  383
  421
  461
  503
  547
  593
  641
  690
  743
  797
  854
  914
  976
  1,042
  1,110
  1,182
  1,258
Issuance/(repayment) of debt, $m
  127
  133
  140
  147
  153
  160
  166
  173
  180
  187
  194
  202
  210
  218
  227
  236
  246
  256
  266
  278
  290
  302
  315
  329
  344
  360
  376
  393
  411
  431
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  
  127
  133
  140
  147
  153
  160
  166
  173
  180
  187
  194
  202
  210
  218
  227
  236
  246
  256
  266
  278
  290
  302
  315
  329
  344
  360
  376
  393
  411
  431
Total cash flow (excl. dividends), $m
  139
  165
  194
  224
  255
  288
  322
  358
  395
  433
  470
  512
  555
  601
  648
  697
  749
  803
  859
  918
  980
  1,045
  1,112
  1,183
  1,258
  1,336
  1,418
  1,503
  1,594
  1,688
Retained Cash Flow (-), $m
  -66
  -70
  -73
  -77
  -80
  -83
  -87
  -90
  -94
  -98
  -101
  -105
  -110
  -114
  -118
  -123
  -128
  -133
  -139
  -145
  -151
  -158
  -165
  -172
  -180
  -188
  -196
  -205
  -215
  -225
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
  73
  95
  121
  147
  175
  205
  235
  267
  301
  335
  369
  406
  446
  487
  530
  574
  621
  669
  720
  773
  829
  887
  948
  1,011
  1,078
  1,148
  1,221
  1,298
  1,379
  1,463
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
  70
  87
  105
  121
  136
  149
  159
  167
  173
  176
  175
  173
  169
  163
  155
  146
  135
  123
  111
  98
  86
  74
  62
  52
  42
  33
  26
  20
  15
  11
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

Hyster-Yale Materials Handling, Inc. is a lift truck manufacturer. The Company designs, engineers, manufactures, sells and services a line of lift trucks, attachments and aftermarket parts marketed globally under the Hyster and Yale brand names, mainly to independent Hyster and Yale retail dealerships. The Company operates through five segments: the Americas, EMEA, JAPIC, Bolzoni and Nuvera. The Company offers a range of solutions, including attachments and hydrogen fuel cell power products, telematics, automation and fleet management services, as well as an array of other power options for its lift trucks. The Company's segments for the lift truck business include three management units: the Americas, EMEA and JAPIC. Americas includes operations in the United States, Canada, Mexico, Brazil, Latin America and its corporate headquarters. EMEA includes operations in Europe, the Middle East and Africa. JAPIC includes operations in the Asia and Pacific regions including China.

FINANCIAL RATIOS  of  Hyster-Yale Materials Handling (HY)

Valuation Ratios
P/E Ratio 24.1
Price to Sales 0.4
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow -21.1
Price to Free Cash Flow -11.3
Growth Rates
Sales Growth Rate -0.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.5%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 17.7%
Total Debt to Equity 45.5%
Interest Coverage 20
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 6.7%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 14.7%
Return On Equity 9.3%
Return On Equity - 3 Yr. Avg. 16.7%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 16.7%
Gross Margin - 3 Yr. Avg. 16.5%
EBITDA Margin 3.1%
EBITDA Margin - 3 Yr. Avg. 4.9%
Operating Margin 1.4%
Oper. Margin - 3 Yr. Avg. 3.6%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 3.7%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate -10.5%
Eff/ Tax Rate - 3 Yr. Avg. 14.9%
Payout Ratio 44.2%

HY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HY stock intrinsic value calculation we used $2885.2 million for the last fiscal year's total revenue generated by Hyster-Yale Materials Handling. The default revenue input number comes from 0001 income statement of Hyster-Yale Materials Handling. 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 HY stock valuation model: a) initial revenue growth rate of 11.7% 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 HY is calculated based on our internal credit rating of Hyster-Yale Materials Handling, 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 Hyster-Yale Materials Handling.
    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 HY stock the variable cost ratio is equal to 87%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $306 million in the base year in the intrinsic value calculation for HY 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 5.8% for Hyster-Yale Materials Handling.

Corporate tax rate of 27% is the nominal tax rate for Hyster-Yale Materials Handling. 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 HY 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 HY are equal to 10.9%.

Life of production assets of 8.7 years is the average useful life of capital assets used in Hyster-Yale Materials Handling 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 HY is equal to 10.2%. 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 - $565.5 million for Hyster-Yale Materials Handling - 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 12.668 million for Hyster-Yale Materials Handling 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 Hyster-Yale Materials Handling at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Hyster-Yale Materials: 3Q Earnings Snapshot   [Oct-30-18 07:09PM  Associated Press]
▶ Weekly Top Insider Buys Highlight for the Week of Oct. 5   [Oct-07-18 11:34AM  GuruFocus.com]
▶ Weekly Top Insider Buys Highlight for the Week of Sept. 28   [Sep-29-18 09:10PM  GuruFocus.com]
▶ Hyster-Yale Materials: 2Q Earnings Snapshot   [Jul-31-18 07:36PM  Associated Press]
▶ This Troubling Trend Held Back Hyster-Yale   [May-02-18 10:15AM  Motley Fool]
▶ Hyster-Yale Materials: 1Q Earnings Snapshot   [May-01-18 07:21PM  Associated Press]
▶ Hyster-Yale Materials reports 4Q loss   [05:04AM  Associated Press]
▶ Hyster-Yale Materials posts 3Q profit   [06:45AM  Associated Press]
▶ Hyster-Yale Gets a Big Bottom-Line Lift   [07:09AM  Motley Fool]
▶ Hyster-Yale Materials posts 2Q profit   [12:45AM  Associated Press]

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