Intrinsic value of Kadant Inc - KAI

Previous Close

$88.99

  Intrinsic Value

$145.81

stock screener

  Rating & Target

str. buy

+64%

Previous close

$88.99

 
Intrinsic value

$145.81

 
Up/down potential

+64%

 
Rating

str. buy

We calculate the intrinsic value of KAI 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 1.0

 

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, %
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
Revenue, $m
  697
  762
  831
  902
  976
  1,053
  1,133
  1,216
  1,303
  1,393
  1,486
  1,583
  1,684
  1,790
  1,899
  2,013
  2,132
  2,256
  2,386
  2,521
  2,662
  2,809
  2,963
  3,124
  3,292
  3,469
  3,653
  3,846
  4,048
  4,260
Variable operating expenses, $m
  543
  590
  640
  691
  745
  801
  859
  919
  982
  1,047
  1,078
  1,148
  1,222
  1,298
  1,377
  1,460
  1,546
  1,636
  1,730
  1,828
  1,931
  2,037
  2,149
  2,266
  2,388
  2,516
  2,650
  2,790
  2,936
  3,090
Fixed operating expenses, $m
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
  71
  72
  74
  75
  77
  79
  81
  82
  84
  86
  88
  90
  92
  94
  96
  98
Total operating expenses, $m
  595
  643
  694
  747
  802
  859
  918
  980
  1,044
  1,110
  1,143
  1,214
  1,290
  1,367
  1,448
  1,532
  1,620
  1,711
  1,807
  1,907
  2,012
  2,119
  2,233
  2,352
  2,476
  2,606
  2,742
  2,884
  3,032
  3,188
Operating income, $m
  102
  119
  137
  155
  174
  194
  215
  236
  259
  282
  343
  369
  395
  422
  451
  481
  512
  544
  578
  614
  651
  689
  730
  772
  816
  863
  912
  963
  1,016
  1,072
EBITDA, $m
  154
  173
  192
  212
  232
  254
  277
  300
  324
  349
  376
  403
  432
  461
  492
  525
  558
  593
  630
  668
  708
  750
  794
  840
  888
  938
  991
  1,046
  1,104
  1,165
Interest expense (income), $m
  1
  9
  11
  13
  15
  18
  20
  22
  24
  27
  30
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  95
  100
  106
  112
Earnings before tax, $m
  93
  108
  123
  140
  156
  174
  193
  212
  232
  252
  311
  334
  357
  381
  407
  433
  461
  490
  520
  551
  584
  619
  655
  693
  732
  774
  817
  863
  910
  960
Tax expense, $m
  25
  29
  33
  38
  42
  47
  52
  57
  63
  68
  84
  90
  96
  103
  110
  117
  124
  132
  140
  149
  158
  167
  177
  187
  198
  209
  221
  233
  246
  259
Net income, $m
  68
  79
  90
  102
  114
  127
  141
  155
  169
  184
  227
  244
  261
  278
  297
  316
  336
  358
  380
  403
  427
  452
  478
  506
  535
  565
  596
  630
  664
  701

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
  797
  872
  950
  1,032
  1,117
  1,205
  1,296
  1,392
  1,491
  1,593
  1,700
  1,812
  1,927
  2,048
  2,173
  2,303
  2,439
  2,581
  2,729
  2,884
  3,045
  3,214
  3,390
  3,574
  3,767
  3,969
  4,180
  4,401
  4,632
  4,874
Adjusted assets (=assets-cash), $m
  797
  872
  950
  1,032
  1,117
  1,205
  1,296
  1,392
  1,491
  1,593
  1,700
  1,812
  1,927
  2,048
  2,173
  2,303
  2,439
  2,581
  2,729
  2,884
  3,045
  3,214
  3,390
  3,574
  3,767
  3,969
  4,180
  4,401
  4,632
  4,874
Revenue / Adjusted assets
  0.875
  0.874
  0.875
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
  0.874
Average production assets, $m
  300
  329
  358
  389
  421
  454
  488
  524
  562
  600
  641
  682
  726
  771
  818
  868
  919
  972
  1,028
  1,086
  1,147
  1,211
  1,277
  1,346
  1,419
  1,495
  1,574
  1,658
  1,745
  1,836
Working capital, $m
  87
  95
  104
  113
  122
  132
  142
  152
  163
  174
  186
  198
  211
  224
  237
  252
  267
  282
  298
  315
  333
  351
  370
  391
  412
  434
  457
  481
  506
  533
Total debt, $m
  210
  247
  285
  325
  366
  409
  453
  499
  547
  597
  649
  703
  760
  818
  879
  942
  1,009
  1,078
  1,150
  1,225
  1,303
  1,385
  1,471
  1,560
  1,654
  1,752
  1,854
  1,962
  2,074
  2,192
Total liabilities, $m
  387
  424
  462
  502
  543
  586
  630
  676
  724
  774
  826
  880
  937
  995
  1,056
  1,119
  1,186
  1,255
  1,327
  1,402
  1,480
  1,562
  1,648
  1,737
  1,831
  1,929
  2,031
  2,139
  2,251
  2,369
Total equity, $m
  410
  448
  489
  530
  574
  619
  666
  715
  766
  819
  874
  931
  991
  1,052
  1,117
  1,184
  1,254
  1,327
  1,403
  1,482
  1,565
  1,652
  1,743
  1,837
  1,936
  2,040
  2,148
  2,262
  2,381
  2,505
Total liabilities and equity, $m
  797
  872
  951
  1,032
  1,117
  1,205
  1,296
  1,391
  1,490
  1,593
  1,700
  1,811
  1,928
  2,047
  2,173
  2,303
  2,440
  2,582
  2,730
  2,884
  3,045
  3,214
  3,391
  3,574
  3,767
  3,969
  4,179
  4,401
  4,632
  4,874
Debt-to-equity ratio
  0.510
  0.550
  0.580
  0.610
  0.640
  0.660
  0.680
  0.700
  0.710
  0.730
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.840
  0.850
  0.850
  0.860
  0.860
  0.870
  0.870
  0.870
Adjusted equity ratio
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  68
  79
  90
  102
  114
  127
  141
  155
  169
  184
  227
  244
  261
  278
  297
  316
  336
  358
  380
  403
  427
  452
  478
  506
  535
  565
  596
  630
  664
  701
Depreciation, amort., depletion, $m
  52
  54
  55
  57
  58
  60
  62
  64
  66
  68
  32
  34
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
  72
  76
  80
  84
  88
  93
Funds from operations, $m
  120
  132
  145
  159
  173
  187
  202
  218
  235
  252
  259
  278
  297
  317
  338
  360
  383
  407
  431
  457
  485
  513
  543
  574
  606
  640
  676
  713
  753
  794
Change in working capital, $m
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
Cash from operations, $m
  112
  124
  137
  150
  163
  178
  192
  208
  224
  241
  248
  266
  285
  304
  325
  346
  368
  391
  415
  441
  467
  495
  523
  554
  585
  618
  653
  689
  727
  767
Maintenance CAPEX, $m
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -88
New CAPEX, $m
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -66
  -69
  -73
  -76
  -79
  -83
  -87
  -91
Cash from investing activities, $m
  -41
  -43
  -46
  -49
  -52
  -54
  -58
  -61
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -95
  -99
  -105
  -110
  -116
  -122
  -127
  -133
  -141
  -148
  -155
  -163
  -171
  -179
Free cash flow, $m
  71
  81
  91
  101
  112
  123
  135
  147
  160
  173
  177
  192
  207
  222
  238
  255
  273
  291
  310
  330
  351
  373
  396
  420
  445
  471
  498
  526
  556
  588
Issuance/(repayment) of debt, $m
  35
  36
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  107
  112
  118
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  
  35
  36
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  107
  112
  118
Total cash flow (excl. dividends), $m
  106
  117
  129
  141
  153
  166
  180
  194
  208
  223
  229
  246
  263
  281
  299
  319
  339
  360
  382
  406
  430
  455
  481
  509
  538
  569
  600
  634
  669
  706
Retained Cash Flow (-), $m
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -99
  -104
  -108
  -114
  -119
  -125
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
  69
  79
  88
  99
  109
  121
  132
  145
  157
  171
  174
  189
  203
  219
  235
  252
  269
  287
  306
  326
  347
  368
  391
  414
  439
  465
  492
  520
  550
  581
Discount rate, %
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  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
PV of cash for distribution, $m
  66
  72
  77
  81
  84
  87
  89
  89
  89
  88
  81
  79
  76
  72
  67
  62
  57
  51
  45
  40
  34
  29
  24
  20
  16
  13
  10
  7
  5
  4
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

Kadant Inc. is a supplier of equipment and components used in process industries. In addition, the Company manufactures granules made from papermaking by-products. Its segments include Papermaking Systems and Wood Processing Systems. The Company has a customer base, which includes paper and oriented strand board (OSB) manufacturers. Papermaking Systems segment is engaged in developing, manufacturing, and marketing equipment for the global papermaking and paper recycling industries. Its Papermaking Systems segment consists of product lines, including Stock-Preparation; Doctoring, Cleaning, & Filtration, and Fluid-Handling. The Company develops, manufactures and markets stranders and related equipment used in the production of OSB.

FINANCIAL RATIOS  of  Kadant Inc (KAI)

Valuation Ratios
P/E Ratio 30.4
Price to Sales 2.4
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 19.1
Price to Free Cash Flow 21.6
Growth Rates
Sales Growth Rate 6.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 71
Current Ratio 0.1
LT Debt to Equity 23%
Total Debt to Equity 23.3%
Interest Coverage 46
Management Effectiveness
Return On Assets 7.4%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 9.9%
Ret/ On T. Cap. - 3 Yr. Avg. 10.4%
Return On Equity 11.6%
Return On Equity - 3 Yr. Avg. 11.8%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 45.4%
Gross Margin - 3 Yr. Avg. 45.3%
EBITDA Margin 14.5%
EBITDA Margin - 3 Yr. Avg. 14.5%
Operating Margin 10.9%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 10.9%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 28.9%
Eff/ Tax Rate - 3 Yr. Avg. 29.5%
Payout Ratio 25%

KAI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KAI stock intrinsic value calculation we used $634 million for the last fiscal year's total revenue generated by Kadant Inc. The default revenue input number comes from 0001 income statement of Kadant Inc. 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 KAI stock valuation model: a) initial revenue growth rate of 9.9% 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 4.4%, whose default value for KAI is calculated based on our internal credit rating of Kadant Inc, 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 Kadant Inc.
    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 KAI stock the variable cost ratio is equal to 78.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $51 million in the base year in the intrinsic value calculation for KAI 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 Kadant Inc.

Corporate tax rate of 27% is the nominal tax rate for Kadant Inc. 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 KAI 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 KAI are equal to 43.1%.

Life of production assets of 19.8 years is the average useful life of capital assets used in Kadant Inc 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 KAI is equal to 12.5%. 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 - $372.968 million for Kadant Inc - 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 11.121 million for Kadant Inc 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 Kadant Inc at the current share price and the inputted number of shares is $1.0 billion.

RELATED COMPANIES Price Int.Val. Rating
AIN Albany Interna 81.10 78.09  hold
KRNT Kornit Digital 31.02 1.03  str.sell
MCRN Milacron Holdi 16.75 15.82  hold

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.