Intrinsic value of Hyster-Yale Materials Handling - HY

Previous Close

$83.49

  Intrinsic Value

$54.06

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  Rating & Target

sell

-35%

Previous close

$83.49

 
Intrinsic value

$54.06

 
Up/down potential

-35%

 
Rating

sell

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

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 2016), $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 1.4

 

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, %
  -0.31
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
  5.57
  5.52
  5.46
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
Revenue, $m
  2,570
  2,729
  2,895
  3,068
  3,248
  3,436
  3,633
  3,837
  4,051
  4,275
  4,508
  4,753
  5,008
  5,276
  5,555
  5,849
  6,155
  6,477
  6,814
  7,167
  7,537
  7,924
  8,331
  8,757
  9,205
  9,674
  10,166
  10,682
  11,223
  11,792
  12,388
Variable operating expenses, $m
 
  2,620
  2,779
  2,944
  3,117
  3,297
  3,485
  3,681
  3,886
  4,100
  4,324
  4,553
  4,798
  5,054
  5,322
  5,603
  5,897
  6,205
  6,528
  6,866
  7,220
  7,592
  7,981
  8,390
  8,818
  9,267
  9,739
  10,233
  10,752
  11,296
  11,868
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
  2,535
  2,620
  2,779
  2,944
  3,117
  3,297
  3,485
  3,681
  3,886
  4,100
  4,324
  4,553
  4,798
  5,054
  5,322
  5,603
  5,897
  6,205
  6,528
  6,866
  7,220
  7,592
  7,981
  8,390
  8,818
  9,267
  9,739
  10,233
  10,752
  11,296
  11,868
Operating income, $m
  35
  109
  116
  124
  131
  139
  147
  156
  165
  174
  184
  200
  210
  221
  233
  246
  258
  272
  286
  301
  316
  333
  350
  368
  386
  406
  427
  448
  471
  495
  520
EBITDA, $m
  74
  152
  161
  171
  181
  191
  202
  214
  225
  238
  251
  264
  279
  294
  309
  325
  343
  360
  379
  399
  419
  441
  464
  487
  512
  538
  566
  594
  625
  656
  689
Interest expense (income), $m
  2
  6
  8
  9
  11
  13
  15
  17
  19
  22
  24
  26
  29
  32
  35
  38
  41
  44
  47
  51
  55
  59
  63
  67
  72
  76
  81
  87
  92
  98
  104
Earnings before tax, $m
  38
  104
  109
  114
  120
  126
  132
  139
  146
  153
  160
  173
  181
  190
  199
  208
  218
  228
  239
  250
  262
  274
  287
  301
  315
  330
  345
  362
  379
  397
  416
Tax expense, $m
  -4
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  47
  49
  51
  54
  56
  59
  62
  64
  67
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
  112
Net income, $m
  43
  76
  79
  83
  88
  92
  97
  101
  106
  112
  117
  126
  132
  138
  145
  152
  159
  166
  174
  182
  191
  200
  210
  219
  230
  241
  252
  264
  277
  290
  304

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  43
  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
  1,287
  1,321
  1,401
  1,485
  1,572
  1,663
  1,758
  1,857
  1,961
  2,069
  2,182
  2,300
  2,424
  2,554
  2,689
  2,831
  2,979
  3,135
  3,298
  3,469
  3,648
  3,836
  4,032
  4,239
  4,455
  4,682
  4,920
  5,170
  5,432
  5,707
  5,996
Adjusted assets (=assets-cash), $m
  1,244
  1,321
  1,401
  1,485
  1,572
  1,663
  1,758
  1,857
  1,961
  2,069
  2,182
  2,300
  2,424
  2,554
  2,689
  2,831
  2,979
  3,135
  3,298
  3,469
  3,648
  3,836
  4,032
  4,239
  4,455
  4,682
  4,920
  5,170
  5,432
  5,707
  5,996
Revenue / Adjusted assets
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.067
  2.066
  2.066
  2.066
  2.066
  2.067
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
  2.066
Average production assets, $m
  250
  265
  281
  298
  315
  333
  352
  372
  393
  415
  437
  461
  486
  512
  539
  567
  597
  628
  661
  695
  731
  769
  808
  849
  893
  938
  986
  1,036
  1,089
  1,144
  1,202
Working capital, $m
  233
  338
  359
  380
  403
  426
  450
  476
  502
  530
  559
  589
  621
  654
  689
  725
  763
  803
  845
  889
  935
  983
  1,033
  1,086
  1,141
  1,200
  1,261
  1,325
  1,392
  1,462
  1,536
Total debt, $m
  211
  216
  267
  319
  374
  431
  490
  553
  618
  685
  756
  830
  908
  989
  1,074
  1,163
  1,256
  1,354
  1,456
  1,563
  1,675
  1,793
  1,916
  2,046
  2,181
  2,324
  2,473
  2,630
  2,794
  2,967
  3,148
Total liabilities, $m
  823
  828
  879
  931
  986
  1,043
  1,102
  1,165
  1,230
  1,297
  1,368
  1,442
  1,520
  1,601
  1,686
  1,775
  1,868
  1,966
  2,068
  2,175
  2,287
  2,405
  2,528
  2,658
  2,793
  2,936
  3,085
  3,242
  3,406
  3,579
  3,760
Total equity, $m
  464
  493
  523
  554
  586
  620
  656
  693
  731
  772
  814
  858
  904
  952
  1,003
  1,056
  1,111
  1,169
  1,230
  1,294
  1,361
  1,431
  1,504
  1,581
  1,662
  1,746
  1,835
  1,929
  2,026
  2,129
  2,237
Total liabilities and equity, $m
  1,287
  1,321
  1,402
  1,485
  1,572
  1,663
  1,758
  1,858
  1,961
  2,069
  2,182
  2,300
  2,424
  2,553
  2,689
  2,831
  2,979
  3,135
  3,298
  3,469
  3,648
  3,836
  4,032
  4,239
  4,455
  4,682
  4,920
  5,171
  5,432
  5,708
  5,997
Debt-to-equity ratio
  0.455
  0.440
  0.510
  0.580
  0.640
  0.690
  0.750
  0.800
  0.840
  0.890
  0.930
  0.970
  1.000
  1.040
  1.070
  1.100
  1.130
  1.160
  1.180
  1.210
  1.230
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.360
  1.380
  1.390
  1.410
Adjusted equity ratio
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  43
  76
  79
  83
  88
  92
  97
  101
  106
  112
  117
  126
  132
  138
  145
  152
  159
  166
  174
  182
  191
  200
  210
  219
  230
  241
  252
  264
  277
  290
  304
Depreciation, amort., depletion, $m
  39
  42
  45
  47
  49
  52
  55
  58
  60
  64
  67
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  114
  120
  126
  132
  139
  146
  153
  161
  169
Funds from operations, $m
  -157
  118
  124
  131
  137
  144
  151
  159
  167
  175
  184
  191
  201
  211
  221
  232
  243
  255
  267
  280
  294
  308
  323
  339
  356
  373
  391
  410
  430
  451
  473
Change in working capital, $m
  -108
  20
  21
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
Cash from operations, $m
  -49
  98
  104
  109
  115
  121
  127
  133
  140
  147
  155
  161
  169
  177
  186
  195
  205
  215
  226
  237
  248
  260
  273
  286
  300
  315
  330
  346
  363
  381
  399
Maintenance CAPEX, $m
  0
  -35
  -37
  -40
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -62
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
  -126
  -132
  -139
  -146
  -153
  -161
New CAPEX, $m
  -43
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -58
Cash from investing activities, $m
  -145
  -50
  -53
  -57
  -59
  -62
  -66
  -70
  -73
  -77
  -81
  -86
  -90
  -94
  -99
  -104
  -110
  -115
  -121
  -127
  -134
  -141
  -147
  -155
  -163
  -171
  -180
  -189
  -199
  -208
  -219
Free cash flow, $m
  -194
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  76
  79
  83
  87
  91
  95
  100
  104
  109
  114
  120
  125
  131
  137
  143
  150
  157
  165
  172
  180
Issuance/(repayment) of debt, $m
  -16
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  136
  142
  149
  157
  164
  172
  181
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
  0
Cash from financing (excl. dividends), $m  
  97
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  136
  142
  149
  157
  164
  172
  181
Total cash flow (excl. dividends), $m
  -93
  97
  101
  105
  110
  115
  121
  126
  132
  138
  145
  150
  157
  164
  172
  180
  188
  197
  207
  216
  227
  237
  249
  260
  273
  286
  299
  314
  329
  345
  361
Retained Cash Flow (-), $m
  -3
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
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
 
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  167
  175
  183
  192
  201
  211
  221
  231
  242
  254
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
 
  64
  63
  62
  61
  59
  57
  55
  53
  50
  46
  43
  39
  36
  32
  28
  25
  22
  19
  16
  13
  11
  8
  7
  5
  4
  3
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  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 31.8
Price to Sales 0.5
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow -27.9
Price to Free Cash Flow -14.9
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 $2570 million for the last fiscal year's total revenue generated by Hyster-Yale Materials Handling. The default revenue input number comes from 2016 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 6.2% 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 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 96%.

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 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 3.5% 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 9.7%.

Life of production assets of 7.1 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 12.4%. 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 - $464 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 16.414 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 $1.4 billion.

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COMPANY NEWS

▶ 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]
▶ Hyster-Yale Starts 2017 Strong   [08:36AM  Motley Fool]
▶ Hyster-Yale Materials posts 1Q profit   [06:45AM  Associated Press]
▶ Yale Expands Driven by Balyo Robotic Lift Truck Lineup   [Mar-09-17 08:05AM  Marketwired]
▶ Hyster-Yale Loses Its Lift -- for Now   [Feb-28-17 06:57PM  Motley Fool]
▶ Hyster-Yale Loses Its Lift -- for Now   [06:57PM  at Motley Fool]
▶ Hyster-Yale Materials posts 4Q profit   [06:07PM  Associated Press]
Financial statements of HY
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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