Intrinsic value of Innophos Holdings - IPHS

Previous Close

$49.05

  Intrinsic Value

$20.34

stock screener

  Rating & Target

str. sell

-59%

  Value-price divergence*

-36%

Previous close

$49.05

 
Intrinsic value

$20.34

 
Up/down potential

-59%

 
Rating

str. sell

 
Value-price divergence*

-36%

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

We calculate the intrinsic value of IPHS 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 1.0

 

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, %
  -8.11
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  725
  740
  757
  776
  798
  822
  849
  877
  909
  942
  979
  1,017
  1,059
  1,102
  1,149
  1,199
  1,251
  1,307
  1,366
  1,428
  1,493
  1,563
  1,636
  1,713
  1,794
  1,879
  1,969
  2,064
  2,163
  2,268
  2,378
Variable operating expenses, $m
 
  691
  707
  725
  745
  767
  792
  819
  847
  879
  912
  939
  977
  1,018
  1,061
  1,107
  1,155
  1,207
  1,261
  1,319
  1,379
  1,443
  1,510
  1,581
  1,656
  1,735
  1,818
  1,906
  1,998
  2,094
  2,196
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
  646
  691
  707
  725
  745
  767
  792
  819
  847
  879
  912
  939
  977
  1,018
  1,061
  1,107
  1,155
  1,207
  1,261
  1,319
  1,379
  1,443
  1,510
  1,581
  1,656
  1,735
  1,818
  1,906
  1,998
  2,094
  2,196
Operating income, $m
  79
  48
  50
  51
  53
  55
  57
  59
  61
  64
  67
  78
  81
  84
  88
  92
  96
  100
  105
  109
  114
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
EBITDA, $m
  116
  85
  87
  89
  92
  94
  97
  101
  104
  108
  112
  117
  121
  126
  132
  138
  144
  150
  157
  164
  171
  179
  188
  196
  206
  216
  226
  237
  248
  260
  273
Interest expense (income), $m
  0
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
Earnings before tax, $m
  70
  42
  43
  44
  45
  47
  49
  51
  53
  55
  57
  68
  70
  73
  76
  79
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
Tax expense, $m
  22
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
Net income, $m
  48
  30
  31
  32
  33
  34
  36
  37
  38
  40
  42
  49
  51
  53
  56
  58
  60
  63
  66
  68
  71
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  53
  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
  643
  602
  616
  631
  649
  669
  690
  714
  739
  767
  796
  828
  861
  897
  935
  975
  1,018
  1,063
  1,111
  1,162
  1,215
  1,272
  1,331
  1,394
  1,459
  1,529
  1,602
  1,679
  1,760
  1,845
  1,935
Adjusted assets (=assets-cash), $m
  590
  602
  616
  631
  649
  669
  690
  714
  739
  767
  796
  828
  861
  897
  935
  975
  1,018
  1,063
  1,111
  1,162
  1,215
  1,272
  1,331
  1,394
  1,459
  1,529
  1,602
  1,679
  1,760
  1,845
  1,935
Revenue / Adjusted assets
  1.229
  1.229
  1.229
  1.230
  1.230
  1.229
  1.230
  1.228
  1.230
  1.228
  1.230
  1.228
  1.230
  1.229
  1.229
  1.230
  1.229
  1.230
  1.230
  1.229
  1.229
  1.229
  1.229
  1.229
  1.230
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
Average production assets, $m
  252
  257
  263
  269
  277
  285
  294
  304
  315
  327
  340
  353
  367
  383
  399
  416
  434
  453
  474
  495
  518
  542
  568
  594
  622
  652
  683
  716
  751
  787
  825
Working capital, $m
  188
  138
  141
  144
  148
  153
  158
  163
  169
  175
  182
  189
  197
  205
  214
  223
  233
  243
  254
  266
  278
  291
  304
  319
  334
  350
  366
  384
  402
  422
  442
Total debt, $m
  185
  191
  198
  206
  215
  225
  236
  247
  260
  274
  289
  305
  321
  339
  358
  379
  400
  423
  447
  472
  499
  527
  557
  589
  622
  657
  693
  732
  773
  815
  860
Total liabilities, $m
  296
  302
  309
  317
  326
  336
  347
  358
  371
  385
  400
  416
  432
  450
  469
  490
  511
  534
  558
  583
  610
  638
  668
  700
  733
  768
  804
  843
  884
  926
  971
Total equity, $m
  347
  300
  307
  314
  323
  333
  344
  356
  368
  382
  397
  412
  429
  447
  466
  486
  507
  530
  553
  579
  605
  633
  663
  694
  727
  761
  798
  836
  877
  919
  964
Total liabilities and equity, $m
  643
  602
  616
  631
  649
  669
  691
  714
  739
  767
  797
  828
  861
  897
  935
  976
  1,018
  1,064
  1,111
  1,162
  1,215
  1,271
  1,331
  1,394
  1,460
  1,529
  1,602
  1,679
  1,761
  1,845
  1,935
Debt-to-equity ratio
  0.533
  0.640
  0.650
  0.660
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.820
  0.830
  0.840
  0.850
  0.860
  0.860
  0.870
  0.880
  0.880
  0.890
  0.890
Adjusted equity ratio
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48
  30
  31
  32
  33
  34
  36
  37
  38
  40
  42
  49
  51
  53
  56
  58
  60
  63
  66
  68
  71
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
Depreciation, amort., depletion, $m
  37
  37
  37
  38
  39
  40
  41
  42
  43
  44
  46
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  68
  72
  75
  79
  82
  86
  91
Funds from operations, $m
  180
  67
  69
  70
  72
  74
  76
  79
  81
  84
  87
  88
  92
  95
  99
  104
  108
  113
  118
  123
  128
  134
  140
  147
  154
  161
  168
  176
  185
  194
  203
Change in working capital, $m
  41
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  19
  20
Cash from operations, $m
  139
  64
  65
  67
  68
  70
  71
  73
  76
  78
  81
  81
  84
  87
  91
  94
  98
  102
  107
  111
  116
  121
  127
  133
  139
  145
  152
  159
  166
  174
  182
Maintenance CAPEX, $m
  0
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -68
  -72
  -75
  -79
  -82
  -86
New CAPEX, $m
  -37
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
Cash from investing activities, $m
  -37
  -33
  -34
  -36
  -38
  -38
  -40
  -42
  -44
  -47
  -49
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -114
  -118
  -124
Free cash flow, $m
  102
  32
  31
  31
  31
  31
  31
  31
  31
  32
  32
  30
  31
  32
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
Issuance/(repayment) of debt, $m
  -28
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
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  
  -30
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
Total cash flow (excl. dividends), $m
  73
  38
  38
  39
  40
  41
  42
  43
  44
  45
  47
  46
  48
  50
  52
  54
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  89
  94
  98
  103
Retained Cash Flow (-), $m
  -14
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -45
Prev. year cash balance distribution, $m
 
  53
  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
 
  85
  31
  31
  31
  31
  31
  31
  31
  32
  32
  30
  31
  32
  33
  33
  34
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  56
  58
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
 
  82
  29
  27
  25
  24
  22
  21
  20
  18
  17
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
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
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  100.0
  100.0

Innophos Holdings, Inc. is a producer of nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical, oral care and industrial end markets. The Company also provides bioactive mineral and nutritional ingredients. The Company's segments include Specialty Phosphates US & Canada, Specialty Phosphates Mexico, and Granular Triple Super Phosphate (GTSP) & Other. The Company has four principal product lines: Specialty Ingredients; Food and Technical Grade Purified Phosphoric Acid (PPA); Technical Grade Sodium Tripolyphosphate (STPP), & Detergent Grade PPA, and GTSP & Other. The Company's bioactive mineral ingredients are mineral-based ingredients for food, beverage and dietary supplement end markets that are manufactured to be readily digestible. The Company has its manufacturing facilities located throughout the United States, Canada, Mexico and China.

FINANCIAL RATIOS  of  Innophos Holdings (IPHS)

Valuation Ratios
P/E Ratio 19.9
Price to Sales 1.3
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate -8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.6%
Cap. Spend. - 3 Yr. Gr. Rate 2.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 53.3%
Total Debt to Equity 53.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 8.9%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 14.1%
Return On Equity - 3 Yr. Avg. 11.5%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 20.7%
Gross Margin - 3 Yr. Avg. 20.4%
EBITDA Margin 14.8%
EBITDA Margin - 3 Yr. Avg. 13.8%
Operating Margin 10.9%
Oper. Margin - 3 Yr. Avg. 10%
Pre-Tax Margin 9.7%
Pre-Tax Margin - 3 Yr. Avg. 8.8%
Net Profit Margin 6.6%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.5%
Payout Ratio 77.1%

IPHS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IPHS stock intrinsic value calculation we used $725 million for the last fiscal year's total revenue generated by Innophos Holdings. The default revenue input number comes from 2016 income statement of Innophos Holdings. 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 IPHS stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for IPHS is calculated based on our internal credit rating of Innophos Holdings, 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 Innophos Holdings.
    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 IPHS stock the variable cost ratio is equal to 93.5%.

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 IPHS 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 Innophos Holdings.

Corporate tax rate of 27% is the nominal tax rate for Innophos Holdings. 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 IPHS 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 IPHS are equal to 34.7%.

Life of production assets of 9.1 years is the average useful life of capital assets used in Innophos Holdings 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 IPHS is equal to 18.6%. 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 - $347 million for Innophos Holdings - 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 19.636 million for Innophos Holdings 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 Innophos Holdings at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ Innophos Recognized for Excellence in Board Diversity   [Sep-19-17 10:00AM  PR Newswire]
▶ New Strong Buy Stocks for September 1st   [Sep-01-17 09:58AM  Zacks]
▶ New Strong Buy Stocks for August 30th   [Aug-30-17 09:11AM  Zacks]
▶ New Strong Buy Stocks for August 23rd   [Aug-23-17 10:56AM  Zacks]
▶ New Strong Buy Stocks for August 11th   [Aug-11-17 06:51AM  Zacks]
▶ Innophos posts 2Q profit   [Aug-01-17 09:31PM  Associated Press]
▶ Innophos Holdings, Inc. Declares Quarterly Dividend   [May-02-17 02:15PM  PR Newswire]
▶ Innophos posts 1Q profit   [May-01-17 04:20PM  Associated Press]
▶ Innophos 2017 Investor Day Rescheduled For April 5th   [Mar-17-17 01:00PM  PR Newswire]
▶ Innophos Holdings, Inc. Announces Annual Meeting   [Feb-17-17 03:00PM  PR Newswire]
▶ Is Innophos Holdings, Inc. (IPHS) A Good Stock To Buy?   [Dec-06-16 10:01AM  at Insider Monkey]
Financial statements of IPHS
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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