Intrinsic value of Innophos Holdings - IPHS

Previous Close

$49.15

  Intrinsic Value

$31.51

stock screener

  Rating & Target

sell

-36%

Previous close

$49.15

 
Intrinsic value

$31.51

 
Up/down potential

-36%

 
Rating

sell

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 2017), $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 0.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  736
  753
  773
  794
  819
  845
  874
  905
  938
  974
  1,013
  1,054
  1,098
  1,144
  1,194
  1,246
  1,302
  1,360
  1,422
  1,487
  1,556
  1,629
  1,706
  1,786
  1,871
  1,961
  2,055
  2,154
  2,259
  2,368
Variable operating expenses, $m
  656
  670
  687
  705
  726
  748
  773
  800
  828
  859
  865
  900
  938
  978
  1,020
  1,064
  1,112
  1,162
  1,215
  1,270
  1,329
  1,391
  1,457
  1,526
  1,598
  1,675
  1,755
  1,840
  1,929
  2,023
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
  656
  670
  687
  705
  726
  748
  773
  800
  828
  859
  865
  900
  938
  978
  1,020
  1,064
  1,112
  1,162
  1,215
  1,270
  1,329
  1,391
  1,457
  1,526
  1,598
  1,675
  1,755
  1,840
  1,929
  2,023
Operating income, $m
  81
  83
  86
  89
  93
  97
  101
  105
  110
  116
  148
  154
  160
  167
  174
  182
  190
  198
  207
  217
  227
  238
  249
  261
  273
  286
  300
  314
  329
  345
EBITDA, $m
  150
  154
  158
  162
  167
  173
  179
  185
  192
  199
  207
  215
  224
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  365
  382
  401
  420
  440
  462
  484
Interest expense (income), $m
  0
  17
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56
  59
  62
  65
  69
Earnings before tax, $m
  64
  66
  68
  71
  74
  77
  80
  84
  87
  91
  122
  127
  132
  137
  143
  149
  155
  162
  169
  177
  184
  193
  201
  211
  220
  230
  241
  252
  264
  277
Tax expense, $m
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
Net income, $m
  47
  48
  50
  52
  54
  56
  58
  61
  64
  67
  89
  93
  96
  100
  104
  109
  113
  118
  123
  129
  135
  141
  147
  154
  161
  168
  176
  184
  193
  202

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
  800
  819
  840
  864
  890
  918
  950
  984
  1,020
  1,059
  1,101
  1,146
  1,193
  1,244
  1,298
  1,354
  1,415
  1,478
  1,546
  1,617
  1,692
  1,771
  1,854
  1,942
  2,034
  2,131
  2,234
  2,342
  2,455
  2,574
Adjusted assets (=assets-cash), $m
  800
  819
  840
  864
  890
  918
  950
  984
  1,020
  1,059
  1,101
  1,146
  1,193
  1,244
  1,298
  1,354
  1,415
  1,478
  1,546
  1,617
  1,692
  1,771
  1,854
  1,942
  2,034
  2,131
  2,234
  2,342
  2,455
  2,574
Revenue / Adjusted assets
  0.920
  0.919
  0.920
  0.919
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
Average production assets, $m
  431
  441
  452
  465
  479
  494
  511
  529
  549
  570
  593
  617
  642
  669
  698
  729
  761
  796
  832
  870
  910
  953
  998
  1,045
  1,095
  1,147
  1,202
  1,260
  1,321
  1,385
Working capital, $m
  77
  78
  80
  83
  85
  88
  91
  94
  98
  101
  105
  110
  114
  119
  124
  130
  135
  141
  148
  155
  162
  169
  177
  186
  195
  204
  214
  224
  235
  246
Total debt, $m
  319
  330
  342
  355
  370
  387
  405
  424
  445
  468
  492
  518
  545
  574
  605
  638
  672
  709
  748
  788
  831
  877
  925
  975
  1,028
  1,084
  1,143
  1,205
  1,270
  1,339
Total liabilities, $m
  460
  471
  483
  497
  512
  528
  546
  566
  587
  609
  633
  659
  686
  715
  746
  779
  813
  850
  889
  930
  973
  1,018
  1,066
  1,116
  1,170
  1,226
  1,284
  1,346
  1,412
  1,480
Total equity, $m
  340
  348
  357
  367
  378
  390
  404
  418
  434
  450
  468
  487
  507
  529
  551
  576
  601
  628
  657
  687
  719
  752
  788
  825
  864
  906
  949
  995
  1,043
  1,094
Total liabilities and equity, $m
  800
  819
  840
  864
  890
  918
  950
  984
  1,021
  1,059
  1,101
  1,146
  1,193
  1,244
  1,297
  1,355
  1,414
  1,478
  1,546
  1,617
  1,692
  1,770
  1,854
  1,941
  2,034
  2,132
  2,233
  2,341
  2,455
  2,574
Debt-to-equity ratio
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
  1.170
  1.180
  1.190
  1.200
  1.200
  1.210
  1.220
  1.220
Adjusted equity ratio
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  47
  48
  50
  52
  54
  56
  58
  61
  64
  67
  89
  93
  96
  100
  104
  109
  113
  118
  123
  129
  135
  141
  147
  154
  161
  168
  176
  184
  193
  202
Depreciation, amort., depletion, $m
  70
  71
  72
  73
  74
  76
  78
  80
  82
  84
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
  115
  120
  126
  132
  139
Funds from operations, $m
  116
  119
  122
  125
  128
  132
  136
  140
  145
  150
  149
  155
  161
  167
  174
  182
  190
  198
  207
  216
  226
  236
  247
  258
  270
  283
  296
  310
  325
  341
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Cash from operations, $m
  115
  117
  120
  123
  126
  129
  133
  137
  142
  147
  145
  150
  156
  162
  169
  176
  184
  192
  200
  209
  218
  228
  239
  250
  261
  274
  286
  300
  314
  329
Maintenance CAPEX, $m
  -42
  -43
  -44
  -45
  -46
  -48
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -100
  -104
  -109
  -115
  -120
  -126
  -132
New CAPEX, $m
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
Cash from investing activities, $m
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -88
  -91
  -96
  -101
  -105
  -110
  -116
  -121
  -127
  -134
  -140
  -147
  -154
  -161
  -170
  -178
  -187
  -196
Free cash flow, $m
  64
  64
  64
  65
  65
  66
  67
  68
  69
  71
  65
  67
  69
  71
  73
  76
  79
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
Issuance/(repayment) of debt, $m
  9
  11
  12
  14
  15
  17
  18
  19
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
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  
  9
  11
  12
  14
  15
  17
  18
  19
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
Total cash flow (excl. dividends), $m
  73
  75
  76
  78
  80
  82
  85
  87
  90
  93
  89
  93
  96
  100
  104
  109
  113
  118
  123
  129
  134
  140
  147
  153
  160
  168
  176
  184
  192
  201
Retained Cash Flow (-), $m
  -6
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
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
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
Cash available for distribution, $m
  67
  67
  67
  68
  69
  70
  72
  73
  75
  77
  71
  74
  76
  79
  81
  84
  88
  91
  95
  98
  102
  107
  111
  116
  121
  126
  132
  138
  144
  151
Discount rate, %
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
  63
  59
  55
  51
  47
  44
  40
  36
  33
  29
  24
  21
  18
  16
  13
  11
  9
  7
  6
  5
  4
  3
  2
  1
  1
  1
  0
  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
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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 $722 million for the last fiscal year's total revenue generated by Innophos Holdings. The default revenue input number comes from 2017 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 6.5%, 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 89.1%.

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 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 5.4% 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 0.5%.

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 58.5%.

Life of production assets of 10 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 10.4%. 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 - $334 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 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 $0.9 billion.

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COMPANY NEWS

▶ Top NasdaqGS Materials Dividend Picks For The Day   [May-06-18 02:02PM  Simply Wall St.]
▶ Innophos Holdings, Inc. Declares Quarterly Dividend   [May-01-18 02:15PM  Business Wire]
▶ Innophos: 1Q Earnings Snapshot   [08:51AM  Associated Press]
▶ April Dividend Stock Picks   [Apr-30-18 09:02AM  Simply Wall St.]
▶ Value-Adding Materials Dividend Stocks To Buy Now   [Apr-01-18 02:02PM  Simply Wall St.]
▶ February Materials Dividend Stocks To Look Out For   [Feb-25-18 01:02PM  Simply Wall St.]
▶ Innophos Holdings, Inc. Declares Quarterly Dividend   [Feb-21-18 02:15PM  Business Wire]
▶ Innophos reports 4Q loss   [08:13AM  Associated Press]
▶ Innophos Holdings, Inc. Announces Annual Meeting   [Feb-16-18 11:00AM  PR Newswire]
▶ Top NYSE Stocks   [06:02AM  Simply Wall St.]
▶ January Materials Dividend Stocks To Look Out For   [Jan-21-18 01:02PM  Simply Wall St.]
▶ Top Dividend Paying Stocks   [Jan-18-18 08:02AM  Simply Wall St.]
▶ NasdaqGS Top Dividend Paying Stocks   [Dec-09-17 08:02AM  Simply Wall St.]
▶ Innophos Holdings, Inc. Declares Quarterly Dividend   [Oct-31-17 02:15PM  PR Newswire]
▶ Innophos posts 3Q profit   [07:48AM  Associated Press]
▶ 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]
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